Natural Resources Committee on Feb. 28th, 2013

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

My time is running down, and Mr. Truckenbrodt also needs to have some time.

[Philip Petsinis]

Yes.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Thank you.

[Philip Petsinis]

So they're all applicable. I think the biggest opportunity for the Canadian government is to provide support, because the one limiting factor in all these technologies is availability of the infrastructure. CNG is cheap today, but the infrastructure for consumers to access CNG or biofuels or hydrogen is extremely limited.

[Bradley Trost, Conservative, Saskatoon—Humboldt, SK]

Mr. Truckenbrodt.

[Dr. Andreas Truckenbrodt]

I agree pretty much with what my colleague from General Motors said. I'd just like to add one or two elements.

I think you're right that natural gas can be an attractive fuel. Actually, we've had natural gas vehicles in the market for a few years. The limiting factor, and this also was just mentioned, is really infrastructure. We do not see the natural gas infrastructure just being there and not necessarily developing.

It's different for heavy-duty vehicles. We see natural gas certainly more in trucks, for instance. There is one technological difference, of course. Both battery-electric and hydrogen fuel cell-electric are the only technologies that give you really zero emission from tank to wheel, and give you the ultimate efficiency benefit from well to wheel. That's something that the combustion engines—and natural gas is still a combustion engine—cannot give you.

Of course, for us what is important is that the customer will decide, at the end of the day, which technology will be successful. That's why we have seen with natural gas not really the breakthrough that you might have wanted.

[The Chair, Conservative, Leon Benoit]

Thank you, and thank you, Mr. Trost.

We go now to Mr. Julian for up to seven minutes.

Go ahead, please, sir.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thanks to all our witnesses for very interesting presentations.

Mr. Truckenbrodt, I'd like to start with you. I'd like to thank you for the warm reception we've had every time we've visited the cooperative. It's been very interesting. We're very proud that Burnaby, as you say, is arguably a global centre of excellence in fuel cell technology.

I was struck in your presentation by the following comments. On federal government support, you said: ...it has waned to dangerously low levels...it feels like the current federal government has “given up” on the technology. Evidence of this is clear either with the lack of a clear strategy, cancellation of programs, cuts to overall funding for supportive clean technology funds or even the last minute removal of funds to R&D projects already committed to.

Yours is not the only sector that's feeling this. Canada is last in the industrialized world in terms of public investment in R and D. The last six years have been absolutely disastrous for the development of new technologies.

You mentioned that you have powerful partners such as Daimler and Ford, and now Nissan, and yet the federal government doesn't seem to be there as a partner. I guess my first question would be, what do you think that neglect will do to the development of fuel cell technology if the federal government continues its current practice of “dangerously low” levels of support and with the evidence of it having given up on the technology? Do you think Canada will continue to play a leading role in the development of this technology?

[Dr. Andreas Truckenbrodt]

That's exactly the point I was raising. I think Canada is at risk of losing that leading role. Why are Daimler, Ford, and Nissan coming to Vancouver? It is not because the weather is so nice; right now it's raining again. It is because there is the level of expertise and there are universities and similar companies here that really allow us to develop that technology in the best way.

If the support goes away—and by “support” I mean not only financial support but all the support in making it clear that this technology is important to us in Canada—it's just natural that the efforts and the activities sooner or later will move somewhere else where there is more support. With regard to my comment that globally it's fiercely competitive, some other nations, such as Korea, Germany, and Japan, are more supportive. They have a clearer strategy in this arena, so the risk is definitely there.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you for that. I do want to note I'm taking a flight out to Burnaby this evening and in my garden the tulips are already coming up, so it may be raining, but the conditions are much better than in Ottawa.

You referenced three critical technology areas. There is the understanding of fuel cell materials. There is the fuel cell stack manufacturing technology, and we've certainly seen what's in place in Burnaby, but it's to the extent of machine tooling so that it can be done in a mass distribution process and lower the costs. Most important is the whole question of hydrogen fuelling infrastructure, that being a key role, which was also raised by Mr. Petsinis. Could you elaborate a bit on each of those three areas and particularly on the issue of the fuelling infrastructure, which is a key obstacle right now to the development of this technology being used by consumers in any mass way in Canada?

[Dr. Andreas Truckenbrodt]

Yes, if I may, I can start with this. The infrastructure has a few technical issues on production and distribution that we have to tackle. There are many ways to generate hydrogen, which are in general known, but you really have to perfect these so they work for regular customers. With our cars being out there in California or Germany, for instance, we have the issue that customers cannot fill the car because a station is down. There is a station, but the station is down because of technical issues. That's one part where we need more research and more work going into it.

The other one, of course—

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Could you address the federal government's role in providing incentives to put in place that infrastructure?

[Dr. Andreas Truckenbrodt]

That is the second element. Do we have infrastructure? Do we get infrastructure?

The point is made that hydrogen infrastructure is so expensive that this might be a showstopper. There are many studies out there for Germany, California, and other markets that say yes, it costs money, of course, but ultimately this is not more money than needs to be invested in electrical infrastructure distribution, and it is a necessary prerequisite for vehicles showing up because there will be no vehicles without someplace to fill them. That is where incentives and support by the federal government would help to make this attractive.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you.

And then there's the issue of the manufacturing technology and fuel cell materials.

[Dr. Andreas Truckenbrodt]

The automotive industry has been extremely well positioned for over 125 years in all kinds of metal machining. We are perfect in grinding, cutting, and stamping.

We have no experience and nothing has been done in dealing with thin membranes, putting black ink on top of all that, and that's an area where it's not only about having a machine and adapting the machine to higher volumes, but also about working on the processes of how you apply that black ink.

For us this is really an ideal area where academics working in those kinds of areas together with industry, if they have support, can help get a breakthrough in these technologies, because that's something that hasn't been done before.

[Peter Julian, NDP, Burnaby—New Westminster, BC]

Thank you for that.

Mr. Petsinis, on the same question of the fueling infrastructure, you did very clearly raise the role of government. You talked about the U.S. Department of Energy providing those supports for alternative fueling stations. We don't have a fueling infrastructure in Canada.

What role can the federal government play to start playing catch-up, given the disastrous last six years on research and development, so we can start bringing these new technologies to Canadians who are interested in having alternative fuels and buying green cars?

[The Chair, Conservative, Leon Benoit]

Could I have a brief answer, please, sir?

[Philip Petsinis]

I referenced the U.S. IRS for a property credit. I'd say that's the key thing that's been cited as the reason for the success in the U.S. over the last 10 years. They have over 20,000 alternative fuel stations as a result of it. The really critical benefits of the way that program is structured is that it's a credit provided to any retailer or fuel or producer of infrastructure and it does not select the technology. It is applicable to ethanol, biodiesel, electricity, hydrogen, CNG, LPG and provides a level of support to allow the marketplace to decide if it's commercially viable.

An infrastructure program of that nature could be very useful. As an example they have over 2,500 E85 stations dispensing ethanol. In Canada we probably have two retail stations. General Motors alone has produced and sold over half a million E85 ethanol flex fuel vehicles in Canada. The reality is that it's no longer a chicken and egg situation. We've put the vehicles out there; there's no fuelling infrastructure.

So it's a combination of broad infrastructure support and letting the marketplace find the economies to do it. Fuel price support is also important, because you can't expect some of these new fuels at very low volumes to compete against a fuel that's been in the marketplace for a hundred years and has been mass commercialized to the nth degree. In that transition period we feel that some support on both the fuel costs to get consumers attracted to the fuel as an alternative, as well as to offset some of the infrastructure costs. That has been well demonstrated in the U.S. to be successful.

[The Chair, Conservative, Leon Benoit]

Thank you.

Thank you, Mr. Julian.

Mr. Hsu, for up to seven minutes, please. Go ahead, sir.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Thank you, Mr. Chair, and I thank the witnesses for coming here today.

I'd like to start with Mr. Petsinis on that same issue, the fuel price support measures at the retail level. For example, you proposed eliminating the federal fuel excise tax on alternative renewable fuels.

Renewable fuels currently are a small percentage of the total motor fuels we consume. It seems to me that if we eliminated that tax—perhaps in order to keep Jim Flaherty off our back—we could make it revenue neutral, and it wouldn't take too much. We could increase the excise tax on regular fuels a bit, because if you look at the percentage of renewable fuels versus conventional fuels....

Would you support this revenue neutral way of eliminating the excise tax on renewable fuels to keep the finance minister off our backs?

[Philip Petsinis]

I'd like to highlight the reality that all of these other alternative fuels would represent a very small percentage of the total fuel that would be used in Canada. So forgoing that 10¢ per litre on those types of fuels would probably be almost a rounding error.

In the near term the offset may not be necessary.

[Ted Hsu, Liberal, Kingston and the Islands, ON]

You'd agree that the offset would be very, very small for regular—

[Philip Petsinis]

The lost revenue for not collecting excise tax on alternative fuels such ethanol would be very small, and it's really only required in the early stages to help in the commercialization.

I'd also like to add that the whole issue of excise tax on fuel needs to be revisited. The fact is that it is assessed on the basis of per litre. It was fine when 99% of the fuel sold for transportation was gasoline because it was all consistent. The reality is that all these other alternative fuels have generally lower energy density and are in various gaseous forms, so this per litre is inappropriate.

As an example today, the excise tax on ethanol, E85, actually charges 33% more per unit of fuel energy by doing it on a per litre basis in Canada than—

[Ted Hsu, Liberal, Kingston and the Islands, ON]

Yes, I understand. You really want the excise tax to be per unit of energy.

[Philip Petsinis]

The reality is you're overcharging excise tax currently on a greener fuel that has 40% lower greenhouse gases, etc. In the near term, I think it would be a very low-cost measure. It would help reduce the cost of these fuels in the early stages so consumers—