Evidence of meeting #65 for Natural Resources in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was technology.
A recording is available from Parliament.
3:35 p.m.
Conservative
The Chair Conservative Leon Benoit
Good afternoon, everyone.
We have two orders of business today. The first is the election of the second vice-chair for our committee.
Mr. Calkins.
3:35 p.m.
Conservative
3:35 p.m.
Conservative
The Chair Conservative Leon Benoit
I'll actually turn this over to the clerk to handle the election here.
3:35 p.m.
The Clerk of the Committee Mr. Rémi Bourgault
Pursuant to Standing Order 106(2), the second vice-chair must be a member of an opposition party other than the official opposition. We received a motion from Mr. Calkins to nominate Mr. Hsu.
Is there any other motion?
3:35 p.m.
Rémi Bourgault
Is it the pleasure of the committee to adopt the motion?
3:35 p.m.
The Clerk
No, I cannot enter into any comments during the election of a vice-chair or any points of order.
3:35 p.m.
NDP
Peter Julian NDP Burnaby—New Westminster, BC
I wanted to second the nomination and welcome him to the committee.
3:35 p.m.
The Clerk
Is it the pleasure of the committee to adopt the motion?
The motion is carried.
Mr. Ted Hsu is the duly elected second vice-chair of the committee.
3:35 p.m.
Conservative
The Chair Conservative Leon Benoit
Good choice, great choice.
Thank you very much.
Now we move on to the second part of our agenda for today, the continuation of our study on innovation in the energy sector. This is our first meeting on the transmission portion of that.
We have four groups of witnesses here today.
The first two by video conference from Calgary are, from the Canadian Energy Pipeline Association, Brenda Kenny, president and chief executive officer; and from the Canadian Geothermal Energy Association, Timothy Thompson, chief executive officer of Borealis GeoPower Inc.
Welcome to both of you.
By video conference from Edmonton, Alberta, from TransAlta Corporation, we have Donald Wharton, vice-president, policy and sustainability.
Welcome to you, Mr. Wharton.
By video conference from Toronto, from SmartGrid Canada, we have Alex Bettencourt, managing director.
Welcome to you, sir.
Normally we go in the order on the agenda but, Mr. Bettencourt, are you ready to go? If you're ready to go, could you make your presentation for the committee in case you have to leave? I understand that could happen. We'll go ahead just in case.
Go ahead, please.
3:35 p.m.
Alex Bettencourt Managing Director, SmartGrid Canada
I appreciate the opportunity. I'm expecting a baby any moment now. There was a false alarm yesterday. I have an eye on the phone just in case.
3:35 p.m.
Managing Director, SmartGrid Canada
Thank you.
I want to thank the committee for the opportunity to speak today.
My name is Alex Bettencourt. I'm the managing director of SmartGrid Canada. We're a national organization made up of the full spectrum of the power industry. Our members include utilities, key industry players, and academic institutions. We're proud to have Hydro-Québec, Hydro One, IBM, and the University of British Columbia, amongst others, as our members.
Many of you are probably asking, “What is a smart grid?” Simply put, a smart grid is bringing 21st-century technology to a 20th-century grid. There's a great anecdote about Alexander Graham Bell and Thomas Edison that we use in our industry in explaining the relative differences in the evolution of our industries. If Alexander Graham Bell were to see the telephone system today, he wouldn't recognize it, with all its computers and fibre optics, but if Thomas Edison were to come back and see the electricity system today, not only would he recognize it, but he would probably be able to fix it.
We find ourselves with an electricity system that has not evolved very much in the last 30 years. It has missed out on some of the opportunities of the new telecommunications and computing technologies. The smart grid will upgrade our electricity system with the latest technology, making it more efficient, resilient, and flexible.
A question that usually gets asked is, “Why do you need this smart grid and what is it going to do?” In Canada, one of the big drivers is reliability. This is a great week to talk about reliability because we've had such a good example recently. For 34 minutes on Sunday, millions of Canadians, more than seven million of them, waited for the power to come back on as they watched the Super Bowl south of the border. While we haven't isolated the cause of that outage, a smart grid could have prevented that outage entirely by rerouting power automatically from another feeder within milliseconds. If it weren't able to do that, it would have at least shortened the restoration time by providing more information more quickly to operators and engineers.
In 2011 Canadians experienced five hours of outages, on average, and these outages cost Canadian business and industry billions of dollars. When an average medium-sized business experiences one hour of outage, it usually costs them about $12,000 on average.
Another key driver of the smart grid is efficiency. About 10% of the power that's generated is lost on its way to the end customers, due to heat and other factors, and a smart grid can reduce these losses in energy that occur along the transmission and distribution systems. It can also help us isolate and identify energy theft so that Canadians are not paying for criminal activities through their hydro bills. Moreover, and specific to the mandate of this committee, it sets the foundation for our future needs in our electricity system.
Many Canadian provinces are blessed with hydroelectricity. However, some parts of Canada still rely on fossil fuel and nuclear power, and provincial governments are looking to reduce our dependency on these sources of power. They're increasingly turning towards renewables. As we cannot control when the wind blows or the sun shines, using these renewables on the grid requires much more intelligence and flexibility than our current one-way distribution system was engineered for.
The other major feature that the electricity system needs to prepare itself for is the electric vehicle. Now, there is a debate as to how quickly electric vehicles will be adopted, but we know that the cost of running an electric vehicle can be as little as one-tenth of the cost of running a gas-powered vehicle, especially in jurisdictions of Canada where electricity is inexpensive.
As technology and batteries get better and cars get cheaper, we will see more electric vehicles on the road, and although we don't represent the electric vehicle industry, we represent the utilities that are going to need to provide the electricity for them. We need to start being prepared for that. Charging an electric vehicle in your home can be equivalent to doubling your electricity demand. We're going to need a smart and flexible system that allows us to absorb all of this extra demand without doubling the size of our distribution system, which would be very costly.
There are also great economic opportunities from the smart grid in Canada, and great job prospects. Recently I had the opportunity to visit Brazil and meet with their utilities. I went to Rio and met with the local utility there, Light. It is a very large utility. Light serves the city and region of Rio de Janeiro, and it's going to be the utility that will serve power to the 2016 Olympics.
They took me to their boardroom, which is called the Sale Canadense, or the Canadian Room. It was Canadians who founded Light more than a hundred years ago. These Brazilians at this utility were very proud of the Canadian heritage they have at their company, and they had pictures there of all the Canadian leaders who were the initial leaders of the utility.
There was a time when Canada was leading in electricity technology in the world. There was a time when Niagara Falls was one of the biggest infrastructure projects. Canada is again being seen as a leader around the world and a model to emulate when it comes to the smart grid. We have delegations from China, Brazil, and Europe coming to Canada to meet with our leading utilities and companies to learn from our experience with smart meters and integrating renewable energy into our distribution systems.
There are many examples of new jobs being created through the smart grid. There's a small start-up company in British Columbia called Awesense Wireless that's making energy theft detection software and selling it into Brazil. There's a medium-sized manufacturing company in Quebec named Vizimax that's selling the new smart grid technologies into China and India. Another one of our members, General Electric, just completed its Grid IQ centre outside Toronto, and it's where they're focusing their smart grid engineering and manufacturing. All these companies are creating jobs in the smart grid sector for Canadians, and it's a great opportunity for Canada.
How can we get a smart grid? The building of the smart grid is primarily driven by utilities, and most utilities in Canada are owned by provincial governments and are regulated. The utilities themselves are facing a bow wave of assets that were built in the 1950s and 1960s, when we went through a round of economic expansion. These assets have reached the end of their lives, and it is now time for us to renew our infrastructure. The renewal of our infrastructure will take decades to accomplish and will cause electricity rates to go up as we invest all these new assets into our system.
We can replace them with the same old equipment, or we can take the opportunity, spend a little more money, and equip them with smart grid technology that will serve us for the next 30 years. Consumers will be provided more choice. Consumers will have more choice in how and when they consume electricity. Consumers and businesses will have the choice to produce some of their own electricity and sell it back to the grid. Consumers will have the choice to buy an electric vehicle and charge it at home or at work. Consumers will benefit from the higher reliability and the more efficient electricity system that comes from a smart grid.
All of these benefits will improve the lives of Canadians and set us as a leader in the world.
Many countries in the world are using smart grids to further their policy goals, be they national energy security, economic growth, or environmental targets. However, the burden of these policy goals is being placed on the ratepayer, when it was traditionally placed on the taxpayer. People are paying for it on their electricity bills. Although they're the same people, the taxpayer and the ratepayer, it makes utility business cases very hard to get past regulators to meet the economic policy goals of the governments.
While electricity is firmly within provincial jurisdiction, there is a role for the federal government to play. In the U.S., Korea, Europe, and around the world, governments are endorsing smart grids with official policies and plans. Korea has set out a plan where they will enable smart grids in all their cities by 2020 and across the whole country by 2030. It's a very ambitious plan. They've marshalled the entire industry and the government agencies around that goal. Now, I don't think we have the same type of economy that Korea does, but it's an example for us to learn from.
The Canadian government can provide leadership by setting a national vision. Many other countries have commissioned studies on the economic, national security, and social benefits of a smart grid, and we would like the support of this committee to coordinate a similar effort in Canada. We would like to bring together NRCan, the CEA, the provincial ministries of energy, utilities, regulators, and industry to create a national vision and bring it back to this committee for your consideration.
To accelerate investments in smart grids, the federal government can also improve the economics of the business case through tax policy, switching some of the burden from the ratepayers to the taxpayers. This can be accomplished in a few ways. One is accelerated depreciation classes for smart grid investments that utilities make, which has proven to be successful in the United States and India. Another is tax incentives for consumers who are looking to install smart grid appliances in their homes, things such as smart thermostats and controls for their air conditioning.
Lastly, we can use the resources of the federal government to promote Canada and its industry abroad, branding Canada not only as an energy leader, but as an energy technology leader for this century.
Thank you for your time. I'm happy to take any questions you have, now or later.
3:45 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Bettencourt.
We do hear from all of the witnesses before we go to questions and comments.
We now go to the top of the agenda again. From the Canadian Energy Pipeline Association, we have Brenda Kenny, president and chief executive officer.
Go ahead, please, Ms. Kenny, with your presentation, for around seven minutes.
3:45 p.m.
Dr. Brenda Kenny President and Chief Executive Officer, Canadian Energy Pipeline Association
Thank you very much for having me here today. It's a pleasure to appear before you.
For those of you who are not familiar with the Canadian Energy Pipeline Association, we represent all of the major transmission pipeline companies in Canada. Together every day they ship more than 97% of all the oil and natural gas used across the country as well as for export, and together they operate over 110,000 kilometres of pipeline.
As we transition to support new sources of energy and smarter approaches to the conservation of energy such as those mentioned by our last presenter, pipelines will remain an integral part of the creation of reliable energy systems for Canadians, both enabling quality of life that we enjoy and tying our country together. Pipelines are fundamental to safe, reliable, and affordable energy today, and by most reasonable expectations will be required for many decades to come.
We make important contributions to the economy and to quality of life for Canadians. There are over $20 billion worth of investments currently planned, but that's just the tip of the iceberg, because in fact since we provide transport for the majority of energy produced and used, we actually are the enablers for vast numbers of further investments worth hundreds of billions of dollars.
On top of that, every day fully one-quarter of Canada's mercantile exports move through Canadian pipelines. One in four export dollars is thanks to pipelines. So we take this very seriously as a duty to Canadians. We recognize this type of infrastructure has a very high profile. Our performance is fundamental. We accept and welcome the scrutiny and are absolutely committed to more transparency and continuous improvement. We take great pride in our safety record, and in fact the Transportation Safety Board of Canada statistics indicate unequivocally that the frequency of accidents in pipelines is far lower than for any other mode of transportation. In fact, our industry is over 99.99% reliable, but we will not rest until we get to zero incidents.
I open with these comments today because the link to your study is our industry's ongoing commitment to continuously improve that service to Canadians, and safety is the first priority. So let's talk about innovation, because for us it covers technology; it covers knowledge sharing; and it covers system. I want to provide you with a view from a technology perspective first.
When you think about the life cycle of a pipeline, there are many services, contractors, and types of expertise brought to bear from outside pipeline companies themselves. In pulling them together, the first step in safety is to have advanced design, quality of construction, quality materials, and everything from welding to field testing. Getting it right at the beginning is very important. Across Canada, the technology innovation around these many services and sector components is very impressive.
Next comes prevention of any incidents during operations. The big technology news there is in-line inspection. Much in the way MRIs or CAT scans have had a revolutionary impact on health, we use in-line inspection technologies to detect any problems before they develop into major safety issues. We work with partners in advanced technology sectors to achieve that, and that is one of the largest commitments and largest investment areas.
Next, if there is a leak, we need to detect it quickly. Again, technology plays a big role there in the response, in terms of the types of science and techniques to unequivocally respond quickly and to fully and completely remediate any environmental issues that might have occurred as a result of that spill. I will say for the record that with today's technology, on average we're seeing cleanup rates in excess of 95% recovery, with environmental sign-offs by regulators within the course of no more than a couple of years, generally speaking. We want that to be even better, but that is a part of technology.
Exchanging knowledge and operating practices is something that Canadians require us to do. There are collective and collaborative efforts. Although our industry is a competitive one, I can tell you from the seat I'm in, in assisting with that collaboration, that there is firm recognition by the CEOs and others across this industry that anybody's incident is everybody's incident. This is no longer a space for competition.
Collaboration in safety is fundamental, and our association provides a very important vehicle in that.
We also work through groups like the Pipeline Research Council International, the Canadian Standards Association, and a variety of other industry groups with regard to various best practices.
One example that I want to highlight, where technology and innovation have had a very positive impact and where Canada has been in the lead, is with respect to something called “stress corrosion cracking”. This was an unknown phenomenon until the early nineties and mid-nineties. It was through Canadian efforts that the metallurgical challenge was well understood, the technology was advanced, and the best practices to manage it directly were improved.
The second example is with regard to knowledge sharing. We host in Canada every second year the International Pipeline Conference, and I can tell you, having travelled in Asia and Australia, that this is seen as the go-to conference for pipeline safety and innovation. Last year's conference, held in Calgary, had representatives from over 45 countries, with over 350 technical papers provided in the sharing of knowledge.
Finally, just briefly, systems are important. As you would have seen in innovation across many other sectors, a systematic approach to understanding where to move next and what to develop and push forward is fundamental. These management systems have been a backbone for chemicals, in Responsible Care, and for forests in forestry practices. The pipeline sector is committed to our own program, called CEPA Integrity First. This brings together leadership across the industry. The members of our board of directors, all executives from across the pipeline industry in Canada, are absolutely committed to this.
One other system I would point to is damage prevention. We will do everything in our power to advance technologies and improve safety records. At the end of the day, one of the growing concerns we have is that an excavator might inadvertently hit a pipe. The stats tell us that our near misses are increasing.
Fortunately, we've gone for decades without a single death in the public. Despite this massive industry under the ground in Canada—110,000 kilometres—we've had not a single public death. But we want to keep it that way. In damage prevention, regulation and innovation across the country are fundamental.
I'll close simply by restating that we take our social contract to Canadians extremely seriously. We are here to serve Canadian interests. If we weren't doing this with private dollars, we would probably be doing it with public dollars. This kind of infrastructure, handling over a quarter of our mercantile exports, is fundamental. Reliability and safety are embedded in technology and innovation as we move forward.
I look forward to your questions. Thank you.
3:50 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you very much, Ms. Kenny.
We go now to Timothy Thompson, the representative of the Canadian Geothermal Energy Association. He's also chief executive officer of Borealis GeoPower Incorporated.
Welcome to you. Go ahead with your presentation.
3:50 p.m.
Timothy Thompson Representative, Chief Executive Officer, Borealis GeoPower Inc., Canadian Geothermal Energy Association
On behalf of the Canadian Geothermal Energy Association or CanGEA, I would like to thank the chair and the committee for the opportunity to address this issue before them today. As noted, my name is Tim Thompson. I am the CEO of Borealis GeoPower, one of the few geothermal companies operating in Canada and a founding member of CanGEA.
My intent is to directly address the questions put forward by the committee on behalf of CanGEA and the geothermal industry in general. I'm noting with a slight smile that I used to be in the pipeline business with TransCanada PipeLines, so there's an old connection here, but we have a very different situation in the geothermal industry relative to what we see with CEPA.
What is the current status of research, innovation, and technology development in the geothermal sector? Geothermal innovation and technology development in Canada are at this point insignificant. Some small initiatives are currently under way. With government assistance, CanGEA is pursuing some preliminary resource maps for western regions of Canada and also putting together a technology road map with respect to what might materially improve the delivery of geothermal projects in Canada.
My company, Borealis, is currently in discussions with the government over potentially funding a novel geothermal exploration methodology that would significantly change the risk-return profile associated with geothermal exploration. The total current government commitment to these initiatives is $100,000. This support stands in contrast to the situation in the United States where in fiscal 2012-13 the U.S. Department of Energy is spending $102 million on geothermal technologies and has invested in excess of $1.7 billion over the last 25 years for undeveloped resources that are markedly poorer in quality than those currently seen in Canada. The point is even more stark when we examine the commitment at the provincial and territorial level where the four jurisdictions with the greatest of the resources—those being B.C., the Northwest Territories, Yukon, and Alberta—are spending quite literally nothing to advance their development.
Our perspective is that this is unfortunate, not because of the limited budgets but because Canada is squandering our unique position of having significant geothermal resources and world-leading subsurface capabilities, especially when it comes to thermal reservoirs.
This brings me to the committee's second question: How does it compare to that of other countries, and in which areas is Canada a leader, and in which areas can it improve?
The first part of the question is on how the status of research in Canada compares to that of other countries. As Canada has both abundant resources and uniquely strong capabilities for developing them, the continued absence of any geothermal energy development puts Canada at the very bottom of the list when compared to other nations. There is simply no nation on earth with a worse record of development than Canada. To some degree, this stems from a wealth of good options. Historically, we've enjoyed a large supply of hydro and hydrocarbon options that most nations simply do not have access to and would envy. However, as those halcyon days are behind us, Canada's continued dormancy is to some degree inexcusable.
The second half of the question is about in which areas Canada is a leader and in which areas can Canada improve. Paradoxically, we have the opportunity to become a global leader in geothermal technology development. As one of the world's largest mineral and hydrocarbon producers, we have internal capabilities regarding subsurface exploitation that few nations can match. Further, our experience in the oil sands in situ production has provided a wealth of significant learning with respect to thermal operations and thermal reservoirs that would provide a unique capability and advantage if it were repurposed to deliver geothermal energy.
It is our view that Canada could quickly improve from worst to first in the areas of geothermal exploration, thermal reservoir mapping and modelling, thermal field management, and geothermal drilling and completions. Further, given our inherently cold winters, we would also expect to see leadership around the constructive use of byproduct heat generated by any geothermal power plants.
The committee's third question was what the most promising innovative technologies that could be implemented in the near future are. Our view is that there is a gamut of existing technologies that could be repurposed into geothermal applications. This does not mean that we have market-ready solutions but rather that we have technologies that we have demonstrated as having value for hydrocarbon applications, which, with some work and relevant field trials, could materially change the economics related to geothermal resource exploitation.
As noted earlier, Borealis is currently engaged with various arms of the government in demonstrating one such technology. However, the opportunity is broader than our single project and covers a wide swath of subsurface activities including subsurface imaging and processing, exploration methods, reservoir modelling software, field management algorithms, well bore designs, completion designs, and drilling technologies.
What are the main challenges or barriers to innovation development and deployment of new technologies in the respective energy sectors? In Canada and in the geothermal sector, there are a number of challenges holding up innovation and development. First is clear resource rights, and I'm speaking directly, if you will, to the national resources component of this committee. British Columbia is the only jurisdiction with legislation recognizing geothermal rights. However, in this context when and if permits are obtained, they are typically issued in a form that is not actionable, i.e., all first nations claims are not resolved with respect to resource development. This means that a developer with a permit cannot move their project forward but first must address relevant first nations claims in the area. The only other jurisdictions that have recognized geothermal rights in any form are the Northwest Territories, which has developed a framework for granting one-off permits through the Mackenzie Valley Land and Water Board, and Saskatchewan, which is about to allow a geothermal demonstration project to proceed outside of Estevan, Saskatchewan.
The second barrier is the risk-return ratio that we see on investment. A geothermal energy project can be the low-cost energy producer in many regions; however, the risk-return profile of the sequence development steps usually identifies a chasm that equity investors are predominantly reluctant to bridge. As development timelines are often unclear, mostly as a result of permitting issues, any heat sales contracts are added post factum, meaning that the project must stand alone on its power sales, despite the fact that it could often deliver anywhere from six to 10 times this volume of energy as additional and often very valuable low-grade heat.
From a technology perspective, current geothermal exploration methods do not represent the best available option. When this fact is played against the potential returns from sales into a power market, which has very different return levels from those of hydrocarbon markets, we find that the early risks are not warranted by future returns. The upshot is that funding for geothermal exploration is virtually unavailable in today's investment climate. However, it's not as if there isn't a market for funding subsurface exploration. With the right technological advances, we believe the risk-reward opportunity could be broadly engaged by Canada's financial markets.
The third barrier is the development timeline. Geothermal energy projects take longer to develop than natural gas, diesel, wind, or solar projects do. Their average development timeline is six to seven years. In a context where large crown corporations or individual projects offer up blocks of power for bid on a three- to four-year development timeline, geothermal never gets an opportunity to secure an EPA or a PPA. As these agreements represent the fundamental bankability of any project, i.e., its ability to obtain financing, this virtually precludes geothermal from participating in Canada's western energy markets, unless a direct bilateral deal could be negotiated, and the latter is often precluded on the basis of fair procurement practices.
The last significant barrier is entrenched perspectives. While it is difficult to quantify, there's a clear bias to developing what you know, even when the facts clearly demonstrate that better alternatives exist. The most glaring example of this is Site C in northeast British Columbia, the last big dam for BC Hydro. BC Hydro stated that this is the best long-term development option for delivering low-cost power in British Columbia. However, northeast British Columbia is home to some of the best geothermal resources in Canada—and, by the way, the best in the world—and we strongly dispute their claim.
Site C currently has a capacity of about 900 megawatts, and would be developed at a capital intensity just shy of $9 million per megawatt. According to BC Hydro, with a load factor of 51%, it will have an average cost per megawatt hour of $87 to $95, and it has a large environmental impact.
The hydrothermal and geothermal options existing in northeast B.C. have a capacity of 1,500 megawatts, at a capital intensity range of between $5.5 million and $6 million per megawatt, with load factors greater than 95%, delivering power at an average cost of $67 to $75 per megawatt hour, with a minimal environmental impact. In every important metric, geothermal is a superior option to hydro, but it is not even being addressed in B.C.
The last question was on the role the federal government can play in strengthening the foundation of energy innovation in Canada, in particular in the geothermal sector.
We at CanGEA would recommend that the Government of Canada adequately support CanGEA's efforts to map Canadian geothermal resources and prepare a technology road map and implementation plan. The American experience has shown that investment in clearly identifying the resources and relevant new technologies is of net benefit to the state. CanGEA proposes a similar model for developing our own geothermal resources.
We also recommend that the Government of Canada directly invest in exploring and developing geothermal resources, and specifically construct the first geothermal power plant in each significant resource, and do so with each significant geothermal technique. Geothermal resources are not homogeneous; they differ quite extensively in quality and kind.
As such, there is a distinct set of techniques that address the exploitation of heat in each of the different reservoirs.
The demonstration of the reserves and the technology and its potential to materially impact power and heat markets would be a bellwether for follow-on private investment. We are advocating direct investment, as the various public and private partnering models lack the sufficient wherewithal to overcome relevant institutional barriers related to being the “first of” application of a technology that’s new to Canada.
The industry, and I have some personal experience in this, has shown that these models are insufficient to move projects ahead. Against this backdrop, we comprehend the need for the federal government to manage the public purse in a fiscally prudent fashion. Accordingly, we would advocate for purely federally owned plant developments, which the government would commit to sell in the private market after their fifth year of operation. In this way, the government could seed the market, exit appropriately, and likely make a decent return on the public investment.
In summary, CanGEA has identified that at current market pricing we have approximately 5,000 megawatts of immediately developable geothermal power generation in Canada. In turn, this implies approximately 15,000 megawatts, at a minimum, of usable geothermal heat. This is 100% green, no greenhouse gas emissions, baseload energy with extremely high availability, which, when managed properly, is renewable on a geologic time scale.
Further, recent work by the Geological Survey of Canada suggests that geothermal energy could become the largest single source of green energy in this nation. It is our view that all that's lacking is the serious commitment from various levels of government that this is a prize worth reaching for.
Our request is that the Government of Canada commit to developing its geothermal resources on a par with other commitments made to new developments in the Canadian hydrocarbon, mining, or even green energy markets.
Thank you for your time.
4:05 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you, Mr. Thompson.
We go to our final witness for today. We have by video conference from Edmonton from TransAlta Corporation, Donald Wharton, vice-president, policy and sustainability.
Welcome to you, Mr. Wharton. Go ahead with your presentation, please.
4:05 p.m.
Donald Wharton Vice-President, Policy and Sustainability, TransAlta Corporation
Good afternoon, Mr. Chairman, and honourable committee members. Thank you for the opportunity to talk to you today.
In addition to speaking on behalf of TransAlta Corporation, I'd also like to speak in a second role that I hold, which is the chair of the Canadian Clean Power Coalition in Canada, an industry-government group focused on developing new technologies for clean use of fossil fuels in the generation of electricity.
TransAlta is Canada's largest investor-owned electricity company, with a broad portfolio of fuels, both renewable and non-renewable. We do business in five provinces in Canada as well as the U.S. and Australia.
I'd like to focus my remarks today on the innovation in the generation of electricity as a key part of our business. Let me begin with the observation that the electricity sector has historically been slow to innovate. Historically, we construct large, purpose-built capital stock, largely determined by the region in which we're operating, and often driven by regulation which requires us to ensure the lowest cost power to consumers.
However, this paradigm is changing for several reasons.
First, the cost and performance of various generation technologies are converging. This is a function of newer technologies providing better performance and, in some cases, lower capital costs per megawatt installed. Generation companies like ours now have tougher decisions to make in selecting a technology and a fuel type that we will live with for the next 30 to 50 years.
Second, externalities introduced by governments in response to public demands have become much more important in the selection of generation technologies. I'm thinking specifically about environmental requirements and objectives to build more renewable energy.
These are admirable goals, but they do change the historic practice of utility companies, which has historically been focused on selecting the lowest cost near-term technology for consumers.
Finally, a factor of change is the introduction of new innovative generation technologies, which is accelerating in pace and complexity. Examples are long, but include things like high-pressure combustion, oxy firing, biomass torrefaction, gasification, underground production of syngases for power production, hydrogen-fired turbines, high-performance wind turbines, new run-of-river turbines, and tidal power, not to mention emerging thermal and PV solar technologies.
Let me note at this point that most companies in the electricity sector in Canada are not in the business of developing new generation technologies. In fact, the companies that do so are large international companies often much bigger in scale than utility companies here in Canada or for that matter in the United States.
What our companies do is focus on the adoption and cost-effective employment of these technologies. Let me give you some examples from TransAlta's perspective of how this might work to give you a sense of context.
We don't develop mercury capture technology, but through intensive experimentation, we have learned how to optimize its performance in terms of the use of catalysts and additives that result in lower costs and better performance.
We don't develop monitoring equipment for wind machines, but over the past two years, we developed, installed, and operationalized smart wind monitoring systems that have allowed predictive analysis on maintenance requirements, meaning less downtime, fewer major equipment issues, and a great ability to be able to predict problems before they occur.
We don't develop carbon capture technology, but we did lead extensive design work to explore and aggregate components, carbon capture, and pipeline sequestration; and enhanced oil recovery in order to understand the technical and financial aspects of carbon capture and storage.
We don't build coal-fired boilers, but we did develop a new device using digital radiography technology that dramatically changes our ability to check for boiler leaks during shutdowns, resulting in our ability to view not 100 pictures from radiology today but somewhere in the order of 17,000 pictures per day, and allowing us to again avoid potential future leakages and downtime.
That perhaps gives an idea of how many utility companies in Canada actually look at innovation and technology more as deployment as opposed to development.
Let me also talk about some of the work we are doing through the Canadian Clean Power Coalition. This coalition involves joint RD and D work, which also, by the way, has a partner, through the Natural Resources Canada CANMET laboratories. That is becoming a great partnership.
This organization, which I chair, is looking at things like biomass coal-firing, being able to reduce emissions associated with power generation in conjunction with other fossil fuels; and coal beneficiation, in order to improve coal, for example, before it's combusted, such that impurities are removed, emissions are reduced, and that sort of thing. Underground coal gasification is another area of study with this industry-government group, which has proven, remarkably, to be of interest to many of the members, in terms of being able to produce synthetic gas underground prior to production and use that synthetic gas as fuel for power generation. I believe that's a model for us to continue to look at new developments, in a joint and leveraged fashion, in the electricity sector.
Let me make a couple of points about things that drive innovation in our sector, or perhaps that sometimes don't drive them. The first is to know that, almost without exception, new generation costs more than existing generation on a megawatt-hour basis. This is important because utilities' traditional responsibility to keep electricity prices low creates an interesting dynamic as to whether to maintain and extend the lives of existing generation units and technologies as opposed to investing in new generation technologies that would perform better but at a higher cost.
This is not an issue to be taken lightly. In many jurisdictions in Canada, our sector is regulated by governments that are also the owners of the utility. Whether utility companies in these regions can adopt new, more expensive, generation is largely a factor of whether their governments will allow these costs to be added to the rate base. In more competitive markets, such as Alberta, and to some extent Ontario, this issue is slightly different. There, the markets determine the price and therefore the economics of alternative forms of generation of power based on supply and demand. Choice of generation fuels and technologies is made on forecasts of future power prices; the costs of fuel; and trade-offs between low-capital, high-operating technologies like natural gas, or high-capital, low-operating technologies like hydro.
Let me close by talking briefly about what we see as the role of government in supporting innovation in the electricity generation sector. I think there are some very clear areas where the government is already performing, and perhaps continued emphasis in these areas would be beneficial.
First of all, I would ask that the government continue to support participation in international trade and technology dialogues with other countries that develop generation technologies. I'm thinking particularly of the U.S., Japan, Korea, and Germany. Those have proven extremely useful to industry, in terms of maintaining an active dialogue about new generation technology; to us, as users and deployers in a cost-efficient way; and to those countries as developers of these technologies.
Second, I would encourage the government to continue support for the leading work being done by the CANMET laboratory of Natural Resources Canada. They are truly a world-class organization and are doing some brilliant work in terms of developing and exploring and researching new generations. I believe that work needs to continue.
Finally, I would ask that the government continue to support joint industry-government collaboration in specific areas of development, such as carbon capture and storage, wind technology, and through associations like the one I chair, the Canadian Clean Power Coalition.
I think there's also a role to ensure that our energy policy and strategy for the nation is consistent with and cognizant of environmental policies that we wish to install within the country.
We believe it's extremely important to make sure those things are done hand in hand as opposed to separate streams.
With that I'd like to close and I look forward to your questions.
Thank you very much.
4:15 p.m.
Conservative
The Chair Conservative Leon Benoit
Thank you very much, Mr. Wharton.
We go now to questions and comments.
We have Mr. Leef, Mr. Julian, Mr. Nicholls, and Mr. Hsu in the seven-minute round.
We'll start with Mr. Leef; you have up to seven minutes. Go ahead, please.
4:15 p.m.
Conservative
Ryan Leef Conservative Yukon, YT
Thank you to all of our witnesses today.
My first bit of questioning is for Mr. Thompson. I'm keeping in mind a couple of the points that I picked up from Mr. Wharton in terms of new generation costs being more than those of existing technologies, an issue not to be taken lightly in terms of determining where the government and where even individual industries invest in what they do. My question will eventually round back to his assessment of hydro being high capital and low operating. I'm just wondering if that will be a similar reality for geothermal.
In the Yukon right now, the interest in geothermal has primarily been focused on heat pump systems. I can think of the town of Mayo as an example for the Na-Cho Nyak Dun First Nation. An investment of about $3 million is going into a project that's going to provide housing energy and efficient, sustainable, low-cost central heating for the houses there.
Currently I know the city of Whitehorse uses low-grade geothermal resources as does Mayo to heat their pipes in the winter to keep them from freezing. There's been an investment in the exploration of an artesian well in Haines Junction for geothermal exploration. Certainly we've been familiar with geothermal energy in the Yukon for a long time with the Takhini Hot Springs and there it is right in front of you. This heat energy is used to heat the buildings but hasn't really exploded, although there's been significant investment by the Canadian government and the territorial government in some geothermal projects in Mayo and Haines Junction.
When you look at the studies, and I'm not sure if you know these well, Mr. Thompson, but the Yukon is estimated to have around 500 to 1,500 megawatts of geothermal energy available for electricity production, which is substantial.
Without straying too far from our innovation aspect of this study, I'm wondering what the future looks like in terms of innovation that may bring down those capital costs. Is that what it will take or is it, in your assessment, purely a political and social drive to move to that geothermal technology that exists there? Or are we going to see some positive innovative shifts that might have the territory move in that direction to maximize those 500 to 1,500 megawatts to take advantage of the approximately 13 geothermal wells right in the Yukon, eight in northern B.C. along the border, and another 18 that are close to the Northwest Territories/Yukon border?
I guess that's all combined with the reality that mining is really exploding up there, an opportunity. So they're looking for more affordable, greener, cleaner ways of providing energy to the mines. It seems like an opportunity that would be ripe for private investment. I know there's not a really specific comment there. This is not a specific question, but I'm wondering if you have any comments on that? Where do you think we go from here?
4:20 p.m.
Representative, Chief Executive Officer, Borealis GeoPower Inc., Canadian Geothermal Energy Association
Mr. Leef, thank you. It's almost as if you've planted the witness.
I've done a geothermal study for the Takhini Hot Springs for David Morrison of the Yukon Energy Corporation. I've also been retained by the Na-Cho Nyak Dun to examine the geothermal potential of Mayo.
I can unequivocally state that using current technologies, the supply side for electrical power in those regions using geothermal ranges between 11¢ and 13¢ per kilowatt hour, depending upon the development scenario. That is using what we would call fairly standard development packages from a technological perspective.
Our belief is that with some innovative exploration techniques you can reduce the number of basically dry wells, which is the only removable expense, and to some degree with some new materials you can have more efficient heat exchange. Our expectation of the upside would be something on the 3¢ to 4¢ range, say 10 years from today. So I would expect the geothermal resources in your region would be able to produce in the 7¢ to 9¢ range all in.
Now the issue we have with regard to the market in Whitehorse—and this is an issue that Mr. Morrison is struggling with—is both on the demand side, which of those mining projects are going to show up, and where, because geothermal is a very resource-based activity, so to some degree we're beholden to paying attention to where it is. Also there are a few very low-cost hydro options that are in the 7¢ to 8¢ range that he might be pursuing, but with differential environmental impacts.
So trying to address the strategic thrust of your question—whether this is motivated by a move to green—I don't think so. I think geothermal needs to be cost-competitive with all forms of supply, and if it can't be all in, it shouldn't be entertained. However, there are many places in the Yukon where it is the most cost-competitive form of supply, and we're currently in discussions with Yukon Energy Corporation.
In terms of the sidebar with regard to private investment in the Yukon and the Yukon power sector, that's somewhat problematic because it's run by a crown corporation. So until that mandate is relieved or adjusted or negotiated away by the Government of the Yukon, we are not permitted to invest in energy facilities in the Yukon.
Does that answer your question?
4:20 p.m.
Conservative
Ryan Leef Conservative Yukon, YT
Yes, that does. Thank you for that. That's helpful.
I have a little bit of time, one minute, so I'll make this fast.
Ms. Kenny, I'm glad you noted the response rate's being about 95% recovery when we're talking about spills. The safety record is one thing, and then people think you can have a 99.9% safety record, but what happens to that 0.1%? How great an impact is that?
I just wonder if there are technological differences between land recovery, water recovery, or different environmental recovery statistics that you could provide us a little insight on.
February 7th, 2013 / 4:20 p.m.
President and Chief Executive Officer, Canadian Energy Pipeline Association
That's a great question.
Yes, when it comes to emergency response you need to be very clear about where it is happening. Is it on land, is it on water, what type of water, what type of land? There are technologies well suited to each type.
I can tell you that for the large transition pipeline companies, their emergency response plans take all of that into account. Their stashes of specialized equipment, their training of staff, their collaboration of training with other emergency responders in the areas affiliated with the potential for any kind of leak or a spill take all of that into account. They are heavily regulated and checked. The exercises are done routinely.
What's interesting is to see where we can go next. I do think we are continuing to press forward on various remediation techniques and knowledge. It was only 20 years ago that I remember some very large pipeline companies creating their own bioremediation sites. In simple terms, that is taking oily soil and putting it into a well-controlled, contained compost heap and monitoring it until the microbes have done their job in breaking down long-chain hydrocarbons.
The substance and the science of it is well known. The practice of advancing those within the field and making sure that they get continuously better is something we're paying close attention to.
