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.