Thank you, Mr. Chairman, for the opportunity to provide remarks related to your study on market diversification.
As you know, the Canadian Gas Association represents Canada's natural gas delivery industry. I put before you the map that you find on slide 2 in your package. This committee has seen it before, but let me present it again just to remind you of who our members are and how they fit into Canada's energy picture. We're the natural gas distribution and transmission companies that deliver energy solutions to more than 6.3 million homes, businesses, and institutions in communities right across Canada. CGA also represents about 50 equipment manufacturers and service providers.
Today I am going to focus my remarks on the role of natural gas in facilitating energy market diversification. I'm going to do this by answering four questions. First, what is energy used for? Second, how does natural gas meet those uses in Canada today? Third, how can product diversity in the use of natural gas be beneficial to Canadian consumers going forward? Fourth, how can governments facilitate product diversity in the energy sector, particularly in the use of natural gas?
I'm particularly pleased to have the opportunity to speak because often the energy discourse in Canada is focused on energy supply, or if the discussion is about energy use, the tendency is to focus on electricity. Natural gas use is a topic that rarely gets coverage despite the significant, and I would argue, growing economic value it represents to our country's well-being.
To understand why, let's start with the first question about what energy is used for. Let me focus your attention on the third slide in your package as it shows that energy is used for three core societal needs: heating and cooling, mobility, and electric power. You can also see that the bulk of energy use in Canada is actually for heat. This is followed by energy from mobility, and finally energy for generating electricity.
Now how does natural gas meet those needs? If you look at slide 4, we've laid out some specific examples for you, and just to remind you, natural gas currently meets over 32% of end use of energy in Canada. Again, this is predominantly for heat: the heating needs for industrial uses and for space and water heating in homes. A smaller amount is used to generate electricity, and thus far, a very small amount, less than 1%, although that's growing, is used as a transportation fuel. This is the current picture, but the affordability of natural gas is changing it fundamentally and society is looking at more and more ways to use this clean and abundant fuel.
How does the idea of more natural gas use support diversity? Let me remind you again of the value proposition of natural gas. According to Statistics Canada, the cost of using natural gas to heat homes has fallen by approximately 19% in just five years. By comparison, the cost of electricity during this same time has increased by over 12%, and the cost of fuel oil and other fuels has increased over 46%. So, as noted on slide 5, in reference to home space and water heating, natural gas continues to be an affordable energy choice, all the more important in difficult economic times. For all energy users, any reduction in energy costs, while enjoying the same level of comfort or maintaining the same level of client service or production output, means that savings are redirected to other uses or help maintain and strengthen competitiveness.
Affordable energy drives economic performance, enabling investors the freedom to do more with their capital to create more jobs and opportunity. The significance of this is being demonstrated in the U.S. in the natural gas sector as we speak as industrial facilities are relocating to take advantage of the natural gas opportunity.
The other advantage of natural gas is its versatility. It offers enormous opportunity for efficiency in its own applications, for instance, through ever better performing appliances. As well, it's a key supporter and partner for other technologies to improve their reliability and performance.
If natural gas already meets a fairly significant amount of the energy needs in Canada, how is using more of this fuel going to promote energy use diversity to the benefit of Canada going forward? I draw your attention to slide 6 to give you a few specific examples.
Using natural gas in combined heat and power applications is an efficient and affordable way to meet both heat and power needs, a well-tested technology application that abundant and affordable natural gas is making even more attractive. To date the focus has been on large CHP, combined heat and power, projects, but increasing opportunities for medium and even micro CHP applications, some potentially small enough for the home, are emerging. This represents more service choice for the consumer to meet end-use energy needs.
Natural gas is an ideal enabler for intermittent renewable energy sources such as wind and solar. The intermittency of these technologies obliges their promoters to have standby delivery systems using other fuels and technologies, and natural gas offers a particularly flexible option.
In addition, growing research on the idea of using the gas grid as an energy storage system promises even better utilization of renewable and other technologies.
Natural gas vehicle engine technology can offer an affordable and clean transportation fuel option when fleet operators currently have very limited choice in their fuels. Moreover, Canada is currently a leading driver of this technology through companies like Westport.
I have one final point on this topic. At CGA we have begun research exploring the idea that there is an opportunity to expand the natural gas delivery system to offer an affordable, innovative, and more efficient energy choice for customers, communities, and industry currently located off the existing distribution system in more remote areas in Canada's north using CNG, compressed natural gas, and LNG, liquid natural gas.
In sum, natural gas enables diversity by giving greater choice to the end user. Of course, the question that is often asked is whether we need to be concerned about supply not being able to meet demand. In the case of natural gas, I think it's fair to say that the short answer is no. Natural gas is in abundant supply thanks to significant conventional and unconventional resources that have been deemed economically recoverable in North America.
In addition, there is a significant supply of renewable natural gas and, as the most recent issue of The Atlantic magazine has highlighted, there's growing evidence of the opportunity for recovery of methane hydrates. Add to this the continuous innovation in technology and energy efficiency efforts over time—as you can see on slide 7 we document the per capita efficiency—that reduce per capita use, and we can use less fuel for more of our energy needs.
Let me conclude by answering the final question about the role of government in driving product diversity in the energy sector, particularly vis-à-vis natural gas. The distribution industry, through CGA and Energy Technology Innovation Canada, or ETIC, which is our technology demonstration and commercialization project, believes that government’s role here should be threefold.
First, government should drive innovation in partnership with industry. We continue as an association and as member companies to work with NRCan. We're pursuing relationships with Sustainable Development Technology Canada and with the National Research Council to identify opportunities to partner on the commercialization of market-ready technology that will provide more choice in the marketplace.
Second, government should drive efficiency in partnership with industry. The Government of Canada has a distinguished record as a promoter of energy efficiency. Most recently, with our industry, NRCan co-sponsored a significant project to test new highly efficient natural gas furnaces. Ninety-one units in homes across the country are part of the pilot and early results suggest efficiency gains in the order of 40% to 45%, a remarkable result that promises energy cost savings for the homeowner, and lower emissions. More such cooperative efforts can be pursued, and we welcome the opportunity to do so.
Third, government should ensure that policies, regulations, and programs don’t pick fuel favourites but again work to ensure that a range of fuel and technology options are available in the marketplace.
Mr. Chair, I'm going to stop there. I want to thank you again for the opportunity to present to the committee. I welcome any questions committee members might have.