Natural Resources Committee on Nov. 8th, 2018

[Shannon Stubbs, Conservative, Lakeland, AB]

Yes. Nova Scotia increasingly uses heavy oil and heating oil. They're having trouble adopting greater usage of natural gas because of the massive price differences in the region of $100 per MMBtu for natural gas versus $9 for heating oil.

That's a major challenge where government could take action, but probably through reducing costs, removing taxes and unlocking barriers to local natural gas generation. That would actually achieve real emissions reduction. Thanks for highlighting that.

[The Chair, Liberal, James Maloney]

We're going to have to stop there.

Ms. Warren, Mr. MacDonald and Mr. Finet, thank you very much for joining us this morning. We appreciate the opportunity to hear from you and to ask you questions, but unfortunately, we don't have enough time and we're going to have to stop there.

We'll suspend for a few minutes and get our next panel ready.

[The Chair, Liberal, James Maloney]

Welcome back, everybody. We're going to get started. We're starting a bit late; I apologize.

Thank you to our witnesses for joining us for this hour.

From Loblaw Companies Limited, we have Mark Schembri, vice-president. Thank you very much, sir, for joining us.

From the Department of Industry, we have Andrew Noseworthy and Gemma LeGresley.

I understand we have a deck from Loblaw. We don't have enough English copies to go around.

Do we have consent to use the French only? It will be translated to English.

[Some hon. members]

Agreed.

[The Chair, Liberal, James Maloney]

It's the first time I've been able to say that. It's usually the other way around.

Each group will be given up to 10 minutes to make a presentation, and then the floor will be open to questions from members around the table.

Mr. Schembri, why don't you start us off.

[Mark Schembri, Vice-President, National Maintenance, Loblaw Companies Limited]

Thank you.

Good afternoon. My name is Mark Schembri. I head up technical services and store maintenance for Loblaw Companies.

ln my role, I oversee electricity, waste and refrigeration operations within our stores. I'm a member of our company's carbon steering committee and my team focuses a great deal of its efforts on reducing electricity consumption and reducing our carbon footprint.

Thank you for the opportunity to speak with you today. I hope you'll find what we've been doing of interest.

First off, I'll tell you a bit about Loblaw. Loblaw is Canada's largest food and pharmacy retailer. We employ over 200,000 Canadians in our corporate and independently operated stores across the country.

We are a multi-banner format. We trade under such names as Real Canadian Superstore, No Frills, Provigo, Maxi and Shoppers Drug Mart.

Loblaw occupies over 90 million square feet of retail space across the country, with over 2,500 retail stores. Due to our size, the scale of our footprint and emissions is significant and my group focuses on improving that.

In terms of our energy profile, as a business that sells and stores perishable products as its core function, we rely heavily on refrigeration equipment. The operation of our refrigeration equipment constitutes about 50% of our total electricity consumption. Loblaw's national electricity consumption is about three terawatt hours. This represents half of one-tenth of all the electricity generated in Canada. Our annual electricity bill is greater than $300 million a year.

In 2011, we established our baseline carbon footprint. Then in 2016, we worked to establish targets on reducing that footprint. We have set public targets of a 20% reduction by 2020 and a 30% reduction by 2030. In 2011, 50% of our carbon footprint was attributed to the electricity that we consume in our stores.

In terms of big data, we have been installing digital interval meters in our stores in various regions across the country. These meters allow us to track and benchmark electricity consumption on an hourly basis in real time. We've implemented key performance indicators that enunciate utility consumption variances to our business. When these issues are identified, we dispatch our control technicians to investigate and repair the issues in our stores.

We have been investing in energy efficiency. In the area of lighting, the retail lighting business is going through a transformation. We are moving from filament arc and gas lamp platforms to digital ones. lt's a very exciting time to be in the lighting business and we've been very actively converting our stores. We started with our refrigerated case lighting, followed by our exterior parking lot lighting, store ambient lighting and task lighting.

Another area we are focusing on is converting our open refrigerated cases to closed-door cases. We support a retail business with an extensive focus on perishable food. Our merchants' first instinct in putting a barrier between our customers and the product is that it would be an impediment to sales. This, thankfully, is an emotional debate that we are finally starting to win. The reality of it is that putting doors on our refrigerated cases has a substantial environmental and energy benefit. We've been very active in this space. We've converted our open frozen cases to doors. We are in the final stages of converting our dairy cases to doors and we remain active in this area.

On building energy management, we've been installing energy management systems in our stores for decades. We have over 50,000 active sensors pushing real-time temperature readings to a Loblaw control call centre. We can remotely monitor and change set points associated with our store lighting, HVAC and refrigeration through our national maintenance help desk. As these control strategies and systems became more complex, we recognized as a business the need to make supermarket energy management a core competency of our business. We developed refrigeration technicians who were already employed by Loblaws and developed their expertise in the area of controls throughout the country. These individuals ensure our control systems are optimized and operating consistently to drive the most efficient operation in our stores.

Our in-house controls experts and remote monitoring capabilities allowed us to launch in 2017 a nationwide recommissioning program in our stores' building energy management systems. We leveraged our own people and third party contractors to survey every store in the network and recalibrate the control system set points within the stores and make modifications and identify issues where we need to upgrade.

In the area of demand response, we are actively working with a number of electricity utilities across the country. We have installed systems that allow us to instantaneously reduce lighting and HVAC loads in multiple facilities. We work with utilities to reduce our electricity demand during system peak periods, and many of the utilities are advancing in this area.

In the area of renewable energy, we have installed over 70,000 photovoltaic panels on the roofs of our stores and warehouses. We continue to work in various regions throughout the country to investigate opportunities to advance renewable energy initiatives.

In the area of electrical vehicles, we believe that electrification of the transportation sector is coming. We recently hosted the installation of 10 level 3 EV charging stations in British Columbia. These chargers will have a place in the future. They are fast chargers and they are surprisingly electricity intensive. As these expansions and rollouts begin, we think it's very important that the system operators understand the electrical intensity of these charging stations, and that they look towards controlling them to ensure they do not become an impediment on the entire electricity system.

We are seeing the benefits. Since 2011, which was our baseline year, we have recognized 26 quarters of year-over-year electricity intensity reductions. We have reduced our absolute electricity consumption for our network of corporate stores by 21%, which translates to about 400 gigawatt hours.

What's next? We continue to work with our merchants on the adoption of refrigerated doors on cases. We're very hopeful that all of our refrigerated product will ultimately be stored at retail stores behind doors.

In the area of machine learning and the Internet of things, the next steps in the evolution of building energy management control systems, in our opinion, are to leverage variables from the external environment to recognize patterns with respect to energy consumption to control energy-consuming devices. Variables such as power demand, electricity pricing and temperature could be applied and improved upon on an ongoing basis. These tools can then modify and adjust equipment operation to balance energy consumption over the entire day. The machine learning can also take advantage of opportunities in the external environment variables, such as low electricity prices, system demand and low ambient temperatures.

These systems would trigger equipment to consume energy during more opportune times and remain idle when the electricity demand is high. This could be done in the area of cooling and heating.

We are actively testing energy storage initiatives. We have a store that has installed the lithium ion battery system, and we are working with an organization that is developing a thermal storage application, which we're very excited about putting into our stores.

In conclusion, seldom can we identify initiatives where we believe everyone benefits. Investment in energy efficiency generates high-skilled jobs, has a positive impact on the environment and reduces utility costs. If the utilities manage these resources properly, they will improve the effectiveness of the utility systems throughout the country.

Thank you for your time. I would be happy to take any questions, if and when it's appropriate.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Noseworthy or Ms. LeGresley.

[Andrew Noseworthy, Assistant Deputy Minister, Clean Technology, Department of Industry]

Thank you, Chair.

My name is Andrew Noseworthy, and I am the assistant deputy minister responsible for clean technology with lndustry, Science and Economic Development Canada. With me today is Gemma LeGresley, acting director of the clean growth hub.

We are here today because energy represents the largest input cost for most companies and industries in Canada; therefore, energy efficiency is important to economic and industrial development.

Our comments today will differ somewhat in their context from those of Mr. Schembri, because our specific interest in coming here to talk about energy efficiency is not around energy as an input to industry. Rather, we'd like to talk about what our office does, which is to work specifically to support technology firms that are advancing new products and services related to energy efficiency.

Energy efficiency is part of a group of technologies commonly known as clean technology, which also includes technologies that reduce carbon emissions and improve air and water quality. Over the past several years, the government has placed great priority on the rapid scale-up and commercialization of clean tech, and it has provided a number of supports to businesses pursuing projects in this area.

Global demand for clean tech is rapidly growing, and the global market for clean tech is expected to grow to $2.5 trillion by 2025. Globally, successive studies have shown that clean-tech sales are growing faster than world economic growth, with double-digit growth in many key markets. The International Energy Agency, or IEA, estimates that the global market for energy-efficiency products is about $231 billion, or about 10% of this amount, and it's also growing.

ln this context, budget 2017 allocated $2.3 billion to support clean-technology development, with funds principally targeted to support commercialization and scale-up. Tied to this, the Business Development Bank, or BDC, and Export Development Canada, or EDC, were given a mandate and new resources to strengthen their work in this area, and Sustainable Development Technology Canada, or SDTC, had its core programs recapitalized. New funding was also provided for specific programs in NRCan and other federal departments, which I understand have been or will be witnesses before you.

The government has also created a new office, called the clean growth hub, as a whole-of-government focal point to help clean-technology companies and projects access federal programs and services. The clean growth hub consists of a physical office, which in fact is just across the street from here, and a virtual connection that is co-hosted by ISED and NRCan and in which the staff of 16 federal departments and agencies are collocated. We have assembled what is in effect a large, multidisciplinary federal clean-tech team. While staff are collocated, they remain employees of their home organization, and our objective is to leverage existing knowledge, expertise and working relationships across the federal system, not duplicate them.

The specific purpose of the hub is to act as an easy access point, or no wrong door, for clean-technology companies seeking to navigate federal programs and services. The idea of the hub was proposed by the First Ministers Working Group on Clean Technology, Innovation and Jobs, which held extensive consultations with industry. The hub in fact engages very closely with provincial governments as part of its work.

We opened the hub's doors on January 18 of this year. Since that time, we have had direct engagement with over 670 clients, and our website has had over 19,000 hits. We are seeing both clients and interest from all across the country, from all aspects of industry, and from tech companies in all stages of development. Companies with a specific focus on energy efficiency are one of our largest client groups, representing about 17% of the people we've seen through the doors to date. This noted, we're also seeing many other clients who have projects or technologies that improve energy efficiency, but who do not codify their work as energy efficiency.

For example, Westport is a Vancouver-based engine technology company that converts diesel fleet engines to natural gas under a joint venture with Volvo. The company's technology can save 30% to 40% of fuel costs over the life of a vehicle, but Westport wouldn't see itself as an energy-efficiency company. In fact, it would identify itself as a transportation technology company.

Similarly, Rockport Networks Inc. is developing a technology called autonomous networking with support from SDTC. While some may see this project as aligned with the digital technologies sector, it is projected that this technology could reduce power consumption by data centres by 33%, a third, which is a significant innovation given that data centres are projected to be consuming nearly 5% of the world's total electricity by 2025.

These projects I think demonstrate the importance of taking a broad view on energy efficiency in the design and implementation of federal supports to business. While it's still very early days in the life of the hub, our early experiences with clients have yielded a few observations that may be helpful to you.

First, our experience is that access to capital is a critical and pervasive issue for virtually every company that we see. Consistently, companies tell us that they continue to face challenges in obtaining project financing from private sources, and that is happening in all sectors, in all parts of the country. In this context, they see government support for commercialization and scale-up as quite important.

Secondly, we are seeing an increasing number of clients who are looking for assistance in other areas, like help with market development strategies or regulatory issues.

In this context, some of you may be aware of the work of the economic strategy tables which were established by government last year. These tables were chaired by and comprised of industry leaders. They were challenged to set ambitious growth targets, identify sector-specific challenges or bottlenecks and lay out actionable road maps to achieve growth.

One of these six tables was specifically dedicated to clean tech. It, along with the other tables, delivered its final report to Minister Bains in September. The clean-technology economic strategy table, or CTEST, as it became known, provided a detailed diagnostique on clean-tech industries in Canada, and made a number of proposals on what is needed to further strengthen Canada's capacity in this area.

While the table's work was focused broadly on clean technology, much of its commentary, I suspect, may be of value to those looking specifically at energy efficiency technologies.

The work of CTEST and the other tables is quite insightful, thought provoking and, in some cases, provocative. The government is currently studying the reports and the related recommendations. This body of work might also prove useful to this committee as it continues its deliberations.

I hope my observations have been helpful to you, and we'd be pleased to answer any questions you may have.

Thank you.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Tan, you're going to go first.

[Geng Tan, Liberal, Don Valley North, ON]

Thank you, Chair.

My question is for the Department of Industry.

From the report I'm reading right now, I found there are almost 300,000 Canadians working in the sustainable energy area, mostly in the clean-technology or clean energy area.

The transition to clean technology is a great opportunity for Canada to build an innovative governing economy, with increased employment, and to also make healthy communities.

As ADM, do you believe that Canada is capable of developing a world-class, advanced energy system with the best use of Canadian technology or clean energy?

[Andrew Noseworthy]

Certainly, sir, I believe we're already on the path of seeking to do that.

With regard to my background, I've been in various governments throughout my entire career. I've focused most of my career on energy development issues, and I've worked specifically in clean tech for two years. In the time that I've worked in clean tech, I've probably seen about 400 companies. I'm shocked every day, in an inspirational way, by the stuff that I see coming in the door.

These are people who are doing things in an extremely novel, interesting way, who have products that have significant potential to be transformative of what's happening in the sector. Not only am I seeing technologies that are unique and focused on environmental outcomes, but I'm seeing things happen in our traditional resource sectors, including the petroleum sector, related to energy efficiency that are truly impressive.

[Geng Tan, Liberal, Don Valley North, ON]

Recently the government launched Efficiency Canada, and some witnesses have mentioned that already. By 2025, Efficiency Canada envisions a country where energy efficiency is improving by at least 2% per year, which is a very ambitious goal.

In your opinion, what actions are needed by the government, together with other Canadians and also international partners, to make Canada a global leader in this energy-efficiency agenda to achieve that goal?

Are there other good examples of the best practices in energy-efficiency policy internationally?

[Andrew Noseworthy]

As an industry department, we tend to look at things from the perspective of commercial outcomes. Our view is that achieving commercial outcomes is critical to the success in policy areas like energy efficiency and the reduction of carbon emissions.

When I take a look at the challenges that I've seen facing companies coming through the door on the technology side—and I appreciate this committee may be more focused around issues related to technology adoption, and I respect that, and that is not my forte—my sense is, sir, that catalyzing those companies to grow not only to meet Canadian market demand, but global market demand, is quite critical. There's a shocking consistency in what we're seeing in the needs of those companies. Not surprisingly, they need access to capital.

In this particular area around clean technology, energy efficiency being a part of that, generally speaking, private sector investment has been more limited than we've seen in other technology sectors, like the information technology sector, largely because the timeline to return for clean technology is longer than it would be in, say, the IT sector. Access to capital is always an issue in this space.

There is no question that skills development and skills capacity is an issue in this space. Again, as an industry department, we tend to look at that issue from two perspectives. Clearly there's a need for STEM skills and capacity in engineering in that space, but increasingly, sir, we're seeing the importance of making sure that our companies have good business skills, that companies have a CFO who actually knows how to grow the company when you get to that point when you're about to hit international markets.

Market penetration is important. Having a thoughtful approach to market development in this space is extremely important. Out of all of the companies that I've seen in the course of my time in this work, I can't recall one company that was completely dependent on the Canadian market space. In fact, virtually every company that I see and deal with is export oriented. Helping those companies access markets, recognizing some of the real challenges around IP protection and access in key markets, is really important.

[Geng Tan, Liberal, Don Valley North, ON]

Thank you.

This question is for Loblaw.

Your company has a plan to reduce your carbon footprint by 30% by 2030. This is a great goal and is also very good for your company's profit. It is a great contribution to our effort to address climate change.

When we talk about energy efficiency, we try to think globally but act locally. Is it possible for Loblaw to help Canadian municipalities, especially the small cities where you have stores, to use their resources more efficiently, and even to reduce their carbon footprint? How can you transfer your experience and your know-how to help the local community and the municipalities?

[Mark Schembri]

Our experience is specific to the area of supermarkets. We're in the heat removal business. As part of the refrigeration process, we're rejecting heat from our stores, and generally it's rejected outside. We've worked with various developers on concepts where we would have a small district energy project where the heat we would be rejecting from our stores would be hosted in a larger development. That was one way we've looked at it.

We also look at the carbon intensity of the various regions where the electricity is consumed. We try to focus on those areas where we will see the greatest impact on carbon reductions as a result of the composition of the electricity generation supporting that region.

[Geng Tan, Liberal, Don Valley North, ON]

Okay.

How's my time?

[The Chair, Liberal, James Maloney]

Yes, you're done.

Next is Mr. Schmale.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Thank you very much, Chair.

Thank you, witnesses, for coming forward. We do appreciate the time you have given us.

My friend from Loblaw, just out of curiosity, do you know the difference in your hydro bills from, say, the province of Ontario compared to others? How does that add up?

[Mark Schembri]

Ontario has the most expensive electricity rate structure of the provinces. Ontario class B accounts, which is the majority of our accounts, is around 15¢ a kilowatt hour, and in the flanking provinces, like Quebec, it would be about half of that. Alberta was a region that deregulated its electricity system around the same time as Ontario did. They stayed the course and our prices in Alberta have dropped. They're coming up of late. But, generally speaking, Ontario is by far the most expensive electricity rate class when you're a class B consumer.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

I'm from Ontario. Absolutely, I know the pain.

Those costs that you are incurring through increased hydro, I'm guessing you'd pass along to consumers. You'd almost have to.

[Mark Schembri]

Generally speaking, the cost to our business would ultimately transfer to the cost of goods—

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

—which makes life more expensive.

[Mark Schembri]

—which makes the cost of goods higher.

[Jamie Schmale, Conservative, Haliburton—Kawartha Lakes—Brock, ON]

Just out of curiosity, would the carbon tax hurt you as well, and cause you to increase the cost of food that is trucked in?

[Mark Schembri]

We're not classified as a direct emitter, so I don't know if the cost would translate directly to us.

I believe that the government has to do something in the area of carbon reduction. What format the provincial and federal governments take...I don't know what's the best way to do it, but I do believe that as a country we should be looking toward a carbon reduction strategy.