Natural Resources Committee on March 7th, 2017

[TJ Harvey, Liberal, Tobique—Mactaquac, NB]

You mentioned during your opening remarks about the collaborative relationship that you've had with SDTC and the important role that it played in allowing MEG to explore and grow that technology to the point where you are today. I was just wondering if both you and SDTC would like to offer some comments on the importance of having that type of funding arm through the federal government to allow the development of new technologies, and the importance of that role in that development, and ways that it could be improved upon.

[Mikaela McQuade]

As I mentioned, coordination is a big part of it. We work with a number of provincial organizations, be it Emissions Reductions Alberta, which was formerly CCEMC, or Alberta Innovates. We've had huge success with all of our partners in that regard. We will voice our strong support for those programs repeatedly, as often and as loudly as we need to, because they've been able to help us cross those critical investment gaps that we find ourselves in.

Obviously they're capital-intensive efforts. Obviously our industry is facing some pretty difficult circumstances with respect to commodity pricing. Those are the programs with further coordination, with further investment, with dedicated large-scale, long-term funding for these projects. These are what will continue to help us change the face of the in situ sector and how we develop these resources and contribute to not only Alberta's economy but also to the Canadian economy as a whole, and the social and economic benefits that come with that.

[Leah Lawrence]

Thank you for the question. Over the past 18 months, we've been thinking a lot about how we coordinate as federal and provincial agencies like the ones Mikaela just mentioned to provide a one-window application, to provide a shared federal-provincial approach to due diligence and contracting so that we can free up time and effort for companies like MEG to get busy on their technology demonstration and deployment. We've made significant strides in that regard and shortened our processes.

We're looking at being more proactive. In that regard, I think the agencies, both federally and provincially, work.... That was with Alberta. We also have a relationship with Ontario that's similar, and in one in Atlantic Canada as well, through Innovacorp, and we are just looking at ones in B.C. and Quebec.

I think a big part of what the public agencies and departments can do is look at how we can support the companies, make it easier for them to accelerate what they're doing and get it deployed more quickly, while obviously still holding them to milestones of delivery, because that's what we all want to see. It's really about trying to be a facilitator in that regard.

[The Chair, Liberal, James Maloney]

Thank you.

That takes us to the end of our time, so thank you all very much for joining us this afternoon and providing very helpful information to our committee for our study. It will prove very valuable going down the road.

We will suspend for two minutes, and then we'll resume at 4:46 p.m.

[The Chair, Liberal, James Maloney]

We'll get started again with this second hour. Thank you, everybody, for being so quick to get back in your seats.

This hour we are joined by the Canadian Solar Industries Association. We have Mr. Bateman with us. From BFH Corp. we have Cal Broder and not Mr. Popko, I understand. By video conference, we have Clean Energy Canada's Sarah Petrevan. Can you hear us okay?

[Sarah Petrevan, Senior Policy Advisor, Clean Energy Canada]

Yes, I can. Can you hear me?

[The Chair, Liberal, James Maloney]

Perfectly.

I'm going to give each group up to 10 minutes to do their presentation, and then we're going to open the floor to questions. You will be asked questions in French and English. You're welcome to provide answers in either official language. You have translation devices available to you, and I encourage you to use them.

I will turn the floor over to Mr. Bateman.

[Patrick Bateman, Policy and Research Advisor, Canadian Solar Industries Association]

Good afternoon, Mr. Chair and committee members. First, I want to thank you for inviting me to speak here today.

I also want to thank the clerk for his excellent work.

My name is Patrick Bateman, and I'm the director of policy and market development at the Canadian Solar Industries Association, or CanSIA.

I have worked with CanSIA for almost eight years. Prior to joining CanSIA, I worked in the clean technology sector in Europe. I am very pleased to be speaking with you all today about the role of solar energy technology in our natural resources sectors.

To begin with, Canada's pan-Canadian framework on climate change and clean growth charts our national course to reduce our greenhouse gas emissions by 30% by 2030, and by 80% by 2050. These are ambitious targets. They are consistent with the level of effort that is required to meet our obligations under the Paris agreement.

Numerous analyses have demonstrated that emissions reductions of this scale can be achieved only through the decarbonization of the electricity system and the subsequent use of that electricity to replace fossil fuels across a wide variety of end uses, including transportation, buildings, and industrial processes. In other words, deep decarbonization requires deep electrification and fuel switching. Furthermore, if we are to expand economic activity in emissions-intensive sectors, we will need to decarbonize, electrify, and fuel-switch even more across our economy to balance our national carbon budget.

The industry whose focus includes the clean technologies that decarbonize, electrify, and fuel-switch is Canada's first new industry of the 21st century. These companies directly employ over 55,000 people in almost 800 firms. It's a highly competitive and innovation-led industry. These companies are at a stage where they plow back revenues into hiring Canadians to build competitive positions in a fast-growing global market. These companies are creating, commercializing, and deploying technologies that protect our environment while growing and diversifying our economy.

Clean technologies that harness solar energy to produce electricity or heat or that integrate that energy into broader energy systems are among the fastest-growing in the clean technology space. The opportunity to position Canada for clean growth with these technologies is massive, as evidenced by the current global marketplace.

Globally, the solar energy industry employed three million people last year, more than any other renewable energy sector. In recent years, Canada's solar industry has been approaching 10,000 jobs, with plenty of potential for growth.

Globally, the solar energy industry also attracts more investment than any other electricity generation space. Solar energy captures the lion's share of that, about $300 billion annually, which for the last several years has been consistently twice that of investment in fossil fuel electricity generation.

In recent years, the solar industry in Canada has been making capital investments of about $1 billion per year. As this investment soars, our prices continue to decline. Estimates place the cost of producing solar electricity in Canada having decreased four or fivefold in the last five years, and continued price declines are not only expected but inevitable with the innovation and progress that's being made.

Despite our impressive progress in recent years and the growth in our clean technology industry, it has been stalling. We need to rise to several challenges to ensure the opportunity to grow and diversify our economy and meet our commitments under the Paris agreement. For this reason, we commend the committee for undertaking this study.

The remainder of my remarks will focus on several areas where regulation and investment from the federal government would support Canada in claiming a position in the leading pack globally.

The federal regulatory framework that will guide Canada's long-term transition toward an increasingly lower carbon energy future at the federal level is under development. Starting in 2018, there will be a financial cost attributed to atmospheric pollution throughout Canada. By 2025, alongside our G7 counterparts, we will have eliminated inefficient fossil fuel subsidies. By 2030, we have a goal of having 90% of our electricity produced from non-emitting sources, due largely to the federally mandated coal phase-out. Currently, there are also consultations under way on performance standards for natural gas electricity generation, and also to lower the emissions intensity of all fuels in transport, buildings, and industrial processes.

Each of these measures is tremendously important for the medium and long term. We laud the federal government's approach and encourage continued action on all of these files.

However, in order to attract the private sector investment that's needed in the short term to create the clean growth that the federal government is seeking, additional investment is going to be required from the federal government, and I will present a small number of areas through which this investment could be channelled.

First of all, the commitment to becoming 100% renewably powered by 2025 demonstrates strong leadership from the federal government that's consistent with the types of commitments that are being made around the world by other national and subnational governments, as well as by many major multinationals, including household names such as Google, IKEA, Coca-Cola, and many more.

Fulfilling this commitment from new renewable electricity generation facilities would lead to new private sector investment, new jobs, new emissions displacement, and support of each of the provinces' targets and goals. The experience of the federal government in achieving this goal could also be used as teachings for other major power consumers that also want to become either more renewable or 100% renewable, as the case may be, in Canada.

The pan-Canadian framework on clean growth and climate change identifies both the green infrastructure initiative and the Low Carbon Economy Trust as opportunities to support the deployment of renewable energy. We are engaging with the relevant departments to explore prioritization and implementation on those fronts.

On tax policy, Minister Carr's mandate letter includes the priority, working with the Minister of Finance, to explore opportunities to enhance existing tax measures to generate more clean technology investments and to engage with the provinces and territories to make Canada the world's most competitive tax jurisdiction.

CanSIA has submitted some comprehensive recommendations to the Standing Committee on Finance as well, including identification of a 30% investment tax credit, which is a mechanism that's demonstrated significant impact and success in the United States, and the absence of which places Canada at a significant competitive disadvantage in North America.

Finally, as previously mentioned, expansion in emissions-intensive natural resources sectors will lead to a need for additional decarbonization, electrification, and fuel switching in other sectors. We would encourage the necessary flexibility in alternative compliance mechanisms that would permit large emitters from one natural resource sector to achieve regulatory compliance by purchasing credits from other renewable energy generators. This is an area where there will need to be a lot of cohesion between federal and provincial policy and regulatory development.

This concludes my remarks.

Again, thank you for giving me the opportunity to speak before the committee.

I look forward to any questions that you may have.

[The Chair, Liberal, James Maloney]

Thank you very much, Mr. Bateman.

Please go ahead, Mr. Broder.

[Cal Broder, Chairman, BFH Corp.]

Thank you, Mr. Chair.

Good evening, ladies and gentlemen.

My name is Cal Broder. I represent a company I have called BFH Corporation. I struggled with coming here today, not in the sense that it's not an honour to be here but in the sense of what to talk about, because it's such a broad area. What was presented to me was to look for ways to de-risk.

First of all I'm a businessman, but I'm also an innovator and an inventor, as was pointed out previously by SDTC. They're different. I'm also a risk-taker, and risk-takers are kind of unique for the resource industry, because they're de-risking and de-risking. They're not risk-takers anymore. There is nothing wrong with that; it's just an evolution.

What I'm looking to do is to show that we can do things differently through innovation. One of the things that we do is show that we can transport our crude oil. I'll pass it around. This is bitumen, if anyone hasn't seen it before. Bitumen is not a conventional crude oil. It's unconventional. It's not meant to be in a pipeline, quite ironically. It's meant to be a solid.

The point is to move an unconventional crude oil in a pipeline, and I have no problem with doing that, but there is a safer, better, more cost-effective way, and that's as a solid.

When we look at innovation, the challenge we have as innovators involves three things, in my mind.

One is that we have a difficult time getting through the doors of the users, of the producers, of the suppliers, of the customers.

Second, we have a problem with technology. We've talked briefly about that, and I've heard the previous conversations. An innovator wants to protect his technology. A producer and a user want to be able to use it. I've had numerous discussions and disagreements on how we would move forward with technology, because there is incongruence. They want me to share technology openly; I can't possibly share technology openly, because that would release all the proprietary information.

As a result, we have step two, which are the challenges of dealing with that confidentiality. Confidentiality is the key part, because I can sometimes get through the door, but if I can't get through confidentiality, I'm finished, and we're stuck, and that's where we've been for some time.

Step three is the demonstration.

Just to give you some background with the industry, I need to go out and find somebody from industry, one of the producers, to say, “I've got a new way to do it”, but I have to find a way to get through that door first and I have to find a way to get through the legal complications of that. Then, once I finally do that—and we've done that with some—we can finally look at a demonstration. However, we have a new technology, a new process that nobody understands. Now the law will get in, the human resources, and everybody gets in, and it again complicates and compounds everything.

What I'm trying to get across is that it's not a simple process to ask how we can de-risk the industry. How can we de-risk any innovator? You have the facilities, you have the programs, and you have the institutions in place. In my opinion, from my perspective, they might just not be that congruent to get through.

I'll give you a couple of examples. Western Economic Diversification says that we can apply for funding, and we can, but when we applied in the past, we would have to set aside money at the time of the application and wait almost18 months. SDTC is much the same. The programs are designed in such a way that they exclude a small firm, small innovators, because we have to set aside the funds at the beginning and wait 16 to 18 months in order to get approval to be able to then start our project.

We have a number of these challenges out there, but the greatest challenge is that we have a product, a service in Alberta, a product that is unique, and it's not solid oil. We've done some testing with solid oil. Even the product in the bag we've had subjected to what we call an LC50 test. We take that oil, put it into a fish tank, and see what the mortality rate is. If you do that with crude oil, any crude oil, you have great mortality, almost 100% in most cases, very quickly. When we had it done, there was no mortality, so we're looking at a safe way to move it, a safe product. We have the same product in the end; it's just a different way to move it.

The issues I see may be slightly different from what others see, and that's probably why we have the process we have. We have a patented process that shows we can move this product in a very safe way, but it is more than that. It allows us to transition from being an exporter of a crude oil to being an exporter of refined products, because our process, our technology, is a refining process that is scalable.

Earlier Mr. Thorsen from MEG said their costs to get oil out of the ground, their capital costs, are about $30,000 per flowing barrel. The cost to Suncor, which has that new Fort Hills mine, is about $84,000 a flowing barrel. It costs a lot of money.

We also look at the issue of transportation to a market. Everybody thinks the pipeline is the way to go, but our product isn't made for that. We can actually move product to the gulf coast in this format cheaper than pipeline, because for every barrel they have to ship by pipeline, they have to add half a barrel in the summertime. That adds huge costs.

Also, when we look at the landed cost of Alberta's heavy oil to the gulf coast, we see it's being landed in the refineries for very close to world prices, plus or minus 5%. That tells me we're not being shorted. It's our transportation costs that are causing the problem.

There are a lot of issues. That's why, when I came here, I didn't know where to focus, but I wanted to just throw out some points to you, because it is a very complicated process of extraction. I think what you're tasked with may be even more difficult. It sounds as though we're trying to de-risk something that we haven't been able to define, and we haven't defined what it is we want as a result. We want to be able to help the industry, but are we truly helping them the way it is, or do we look at doing different things?

[The Chair, Liberal, James Maloney]

Thank you, Mr. Broder.

Go ahead, Ms. Petrevan.

[Sarah Petrevan]

Good afternoon. Thank you to members of the committee for inviting me to present today. Thank you for letting me do this remotely.

I'm Sarah Petrevan. I'm a senior policy adviser for Clean Energy Canada, which is a climate and energy think tank based out of the Centre for Dialogue at Simon Fraser University.

While we view clean energy as that which is derived from renewable sources, we view clean technology as having a much broader application. It's equally relevant and can provide many benefits to the natural resource sector.

As the committee studies how to de-risk technology adoption in the natural resources sector, I would like to begin my comments by saying that I believe that Canada is starting this conversation from a position of strength.

First, we have a notable clean technology sector, with more than 700 companies employing greater than 55,000 people, and with revenue estimated at $11.5 billion in 2014 alone, we find opportunity not just for new innovations such as energy storage and solar panels, but for the industries that supply the inputs required to make and/or manufacture those technologies—for example, mining and forestry.

The second point I would like to make is that Canada is an export-driven economy. It makes up more than 30% of our global domestic product, which is good news, given that the international clean technology export market is valued at more than $1 trillion.

Canada has started down the right path by putting a price on carbon. In doing so, we've joined close to half of the world's economy, which is either pricing carbon or is committed to pricing it. Now we need to focus on the necessary second step, which is unlocking our technology potential so that we can play a role in an increasingly competitive global marketplace. One of the ways we can do this is by taking a strategic approach to procurement, one that focuses us in on the solution we want, which is building a prosperous economy based on clean growth.

Governments are major economic actors. For example, public procurement expenditures amount to a minimum of 13% of OECD countries' gross domestic products, and Canada is no exception. Government procurement of goods and services is worth $16 billion every year, or close to 10% of our national GDP. Governments can therefore leverage this economic heft to stimulate markets to meet economic and social objectives, effectively pulling innovative solutions into the marketplace. It is in this way that procurement can be a powerful tool to de-risk and support the adoption of clean technologies.

This approach is different from what we're used to. Typically in the past we have relied on tax credits and grant programs to stimulate the development of new approaches. While that has provided numerous benefits, it also comes with challenges. First, it's difficult to sustain consistent levels of funding over the long term. Second, what we produce isn't necessarily linked to the needs of the marketplace. While funding multiple projects can help foster many great ideas, historically this approach hasn't always considered the commercialization potential of grantee projects. In the most extreme example, this approach has eliminated our ability to export our innovations because we supplied too much funding and made the technology too heavily subsidized. These are lessons we should keep in mind as we move forward, but they can also be remedied through a considered approach.

Leveraging procurement to drive innovation isn't new. The OECD is a supportive resource, having conducted substantial research and provided education on the subject, while countries such as Finland, Australia, the U.S., and the U.K. and emerging economies such as China and Brazil have all been looking at more targeted policies to support innovation by using procurement to meet the needs of the growing market.

We've also talked about this idea in Canada. A recent report from the federal Minister of Finance's advisory council on economic growth, which was led by Dominic Barton, recommended that strategic procurement be used in Canada to support innovation and help small companies scale up and gain credibility to become integrated in global supply chains.

Further, a 2010 expert review panel on research and development also strongly recommended the use of procurement to support business innovation, looking at the Department of Defence as a good place to start.

At an introductory level, a strategic approach to procurement to leverage Canadian innovations includes the following.

First, it focuses on solutions. The role of government should be to broadly define a problem and award contracts based on a proponent's ability to meet or exceed defined program outcomes, rather than simply awarding a contract to a proponent for their ability to accomplish tasks on a list. By not predetermining the outcome, governments create opportunity for innovators to respond to tenders and allow new technologies and services to be deployed.

Second, it adopts best practices from the private sector and seeks to apply comprehensive life-cycle costing to all projects, including the long-term implications of carbon. Leading private sector firms have adopted procurement policies to support low-carbon goals with direct impacts across the supply chain. For example, Walmart was able to reduce GHG emissions from its global supply chain by 28.2 million metric tons by the end of 2015. Other multinationals, including IBM and Procter & Gamble, have introduced their own supplier assessment tools and standards, featuring requirements for energy conservation and GHG monitoring and reductions.

The third recommendation is to encourage the creation of jobs and economic activity by creating a role for SMEs in procurement. According to the Business Development Bank of Canada, 99.8% of businesses in Canada qualify as being SMEs—that is, small to medium-sized enterprises that comprise 500 or fewer employees. Not surprisingly, the overwhelming majority of Canada's clean tech companies are also SMEs.

The U.S. is the international leader in SME procurement. The U.S. federal government allocates 23% of all of its contracts to SMEs, and many U.S. state governments have procurement policies that support SMEs. By supporting a level playing field for these companies to engage, they are also providing support for domestic jobs, investment, and innovation.

The final point is to always consider commercialization. It's vital that the government acknowledge that clean technology is an export-oriented sector, with more than 87% of companies self-identifying as export-focused. Oftentimes in the past there was a tendency to provide additional funds or to pay more for an innovation to get it off the ground. While financial resources are certainly important and can play a role at the right time in getting a project off the ground, we need to be mindful of our goal and not do anything to undermine it, including paying too much for too long, because doing so greatly reduces a technology's export potential.

In conclusion, new federal procurement policies that focus on the solution, consider the true cost of a project, and encourage the participation of Canada's SMEs would deliver significant benefits to our country. These benefits include job creation, both in the clean tech sector and in the industries and services those companies use, including mining, agriculture, financial services, and others; increased export potential, as other jurisdictions gain the opportunity to witness technology applied in a real-world setting; support for Canadian innovations by pulling new technologies into the marketplace; and spurring the commercialization of clean technologies as demand for them increases.

I want to thank you for your time. I would be pleased to answer questions should the committee choose to pose them.

[The Chair, Liberal, James Maloney]

I would like to thank all three of you. You kept well within the time limits, and we're grateful for that.

Mr. Tan, you're first up.

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

Thank you, Mr. Chair.

Mr. Bateman, the solar industry relies heavily on significant government subsidies. What can the industry do or what plans does the industry have to reduce the industry's reliance on subsidies? There might be a scenario in which solar technology is clean and renewable but the industry itself is no longer sustainable.

[Patrick Bateman]

Thank you, Mr. Tan.

I think the crux of the answer is the rate at which our costs are declining, and as a result of that there will be reduced need for subsidies in the future. In 2009, when Canada began with the utility-scale solar, for example, prices were in excess of $400 per megawatt hour. Last year Canada held its first competitive procurement for utility-scale solar, and the prices that were realized were approximately $150 per megawatt hour, almost three times less.

In Alberta and Saskatchewan later this year there will be competitive procurements, and we expect to see those costs possibly hitting double digits per megawatt hour. I'd say there was a fourfold decline in five years. We expect the decline to continue, though perhaps not at the same rate, and we're rapidly achieving cost competitiveness.

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

Okay.

Where are those solar panels manufactured? Are they made in Canada or imported from other countries?

[Patrick Bateman]

Canada has three of the most highly automated module manufacturers in North America. The United States also has several, and then Asia and Germany would make up the remainder of the module manufacturing. Canada's manufacturers are very high quality and display a number of competitive advantages that aren't present with other markets in the world.

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

Where are the major ones located?

[Patrick Bateman]

They are in Ontario at this time.

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

Okay, they are in Ontario. Once the panels have reached the end of their lifespan or have become worn out, what happens to them? Are those panels recycled or stored, or are you going to ship them to somewhere in Canada or outside?

[Patrick Bateman]

It's a very important question that the industry is dealing with globally. Germany is one of the key markets that's been installing at scale for many years, and it's beginning to come to a stage where there are large volumes of modules being decommissioned. In Canada we expect it won't be until 17 or 18 years from now before there is a large volume of modules to be dealt with.

The good news is that the majority of materials that go into a module are recyclable, and when you have a waste stream of scale, a profitable business model can be created around it. Our industry is committed to working toward having all of the recycling in place. It's not there now, and we would welcome partnership from the federal government and the provinces as well to ensure it is done responsibly in future.

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

I guess some of the material in solar panels is polluted or even toxic to human beings. In your opinion, how big is this impact to the environment or to local people?

[Patrick Bateman]

There are some materials that are hazardous. It depends on the module type used. For most modules, it's not negligible—because it's important that we deal with this appropriately—but it is quite insignificant. Some types of modules, for instance, use cadmium telluride. It is important that we deal with those appropriately. I would say that if we have responsible measures in place, it's not a major issue, but it's something that is important nonetheless.

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

Okay. Thank you.

I have another question for Mr. Broder.

It is very innovative for your company to change the state of crude oil or bitumen from liquid into a solid form and then change it back to liquid before processing it or refining it, but I'm sure there is a cost associated with changing it from a liquid—for evaporating or whatever—into a solid, and there should be energy needed to make this change.

How do you compare your technology and the conventional technology in terms of the extra cost or the environmental impact because of the extra use of energy?

[Cal Broder]

Thank you, Mr. Tan.

Yes, with every process there are going to be extra costs. Just to give you a bit of background on myself, I was an accountant in a previous career for 20 years, so I looked at numbers day in and day out. Going into this process, I looked at the numbers, because if it didn't make sense economically, I wasn't going to waste my time or spend my time on it.

We have two components to our process that are unique. One is that when we run our process, it's strictly 100% electricity with no emissions. That allows us to do two things. We can utilize the process on our heavy oil in Canada, while we can't on anybody else's in the world. At the same time, when we process it with this....

The only way you can do it is by heating it and distilling it and pulling off light ends. Industry has focused on using and burning fossil fuels. We have focused on being electricity-driven, which is a very efficient way to do it, although the industry doesn't believe it because they've used other forms of electricity. That's the extensiveness of our patent. It uses an energy source that becomes much cleaner, and we don't have emissions from it. If we were to run a process, a modified version of this, and become a refining process, which it is capable of doing, it would be the first refinery in the world that would have zero emissions on its production. It would have emissions from the source, which is, say, hydroelectric dams. It could be coal. It doesn't matter. It's the source that's causing the emissions, not our process, so that's the uniqueness.

When I looked at the cost structure and I looked at what industry's is—because I like to look at numbers, obviously—the numbers we can show are substantially lower than what the industry currently has. We're prepared to share those numbers because we're not looking to protect the numbers; we're looking to protect our technology.