Natural Resources Committee on Sept. 25th, 2017

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

[The Chair, Liberal, James Maloney]

Mr. Serré.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair.

Once again, my thanks to the three witnesses for their presentations and for the research they have done in preparation for their testimony today.

The work that you are doing in your field is greatly appreciated.

Mr. Coupland, in your presentation—and thank you for it—you emphasized the fact that nuclear generation contributes to the reliability of the electricity grid in Ontario. You mentioned the problems that we no longer face and you gave as examples the 53 smog days that we no longer have, the German temporary workers, and total power outages. I appreciate the way in which you expressed it.

I am going to ask my first question in English.

Can you explain the difference between intermittent and reliable energy sources, and why it is important to diversify the grid along those lines?

[Steve Coupland]

Sure. Electricity right now is a product that we use on demand. One of the other folks has talked about storage, and we will get there, but we don't have a lot of storage right now so demand electricity essentially gets used when it's created. We don't have enough storage. The result is that you need to balance the demand and the supply. One of the challenges with some of the renewables, in particular wind and solar, is that the wind doesn't always blow and the sun doesn't always shine. Even when the wind does blow, it gusts, so you have different levels of supply. You need another source, usually some sort of baseload, to balance it out and create that steady draw so there is always a steady supply.

The gentleman in Alberta can probably tell you a bit about that as well because that will be one of the challenges as they move to a high level of renewables. That will be one of the things they'll need to balance out.

Just to that point, as we get more and more electrification of industry and other things, our transit, you can't have it be inconsistent. I hope that answers your question.

[Marc Serré, Liberal, Nickel Belt, ON]

Mr. Mossing, how can the federal government play a role to try to balance that load, balance the intermittent, and promote a bit more interconnectivity with the electrical system?

[Jerry Mossing]

For a minute I'll build on something Mr. Coupland said. When you have your renewable resources, as we do in Alberta, as most economically coming from wind and solar, and you have to deal with the variability but you want more energy from renewable electricity, the low-capacity factor—30% or 35% in the case of wind and up to 20% in the case of solar—means you are going to have to over-install capacity. When that over-installed capacity is producing, you are likely to have surplus.

There are really three possible ways to deal with the surplus. First is to curtail it, second is to store it, and third is to send it over to your neighbours. Again, that can be a mutual benefit over a wide geographic area. The two components where I think the federal government can help are in investing in infrastructure to make it happen and encouraging the co-operation between entities to make sure the transactions can occur and be expected to occur in an economic manner.

[Marc Serré, Liberal, Nickel Belt, ON]

Mr. Mossing, you indicated earlier that Alberta is one of the less interconnected jurisdictions in North America. Do you believe there's enough R and D dollars and interest in the province to get people to invest in the electricity grid? Is the R and D currently in the electricity transmission of high enough potential in the province to build that? Also, what can the federal government do to help stimulate that investment in R and D?

[Jerry Mossing]

The R and D question, I think, is interesting in the sense that there is a lot of R and D in smart grid and new technologies and investing in more efficient forms of generation from renewables across the world. Certainly Canada could have a role to play in that space.

However, in terms of general interest in Alberta, right now we are in the process of our first renewable electricity auction for 400 megawatts of capacity to be closed at the end of this year. We have 29 participants and 4,000 megawatts' worth of projects participating. This is private investment coming in. The interest is there and looks to be there in the long term.

In Alberta we have transmission capability to move the electricity from both wind and solar from the renewable resource-rich areas in the southern and eastern areas of the province to the load centres in Calgary, Edmonton, and some of the industrial areas. However, we don't have enough electrical transmission to make that happen to the full extent, that 30% target. Regulatory processes will help that along inside the province, funded by Alberta ratepayers. The structure is there.

Back to the R and D question, whether Canada can contribute a lot to it or not, I'm not as knowledgeable in those areas. Certainly there is a lot going on around the world, and that technology is all transferable to Canada.

[The Chair, Liberal, James Maloney]

Thank you.

Mr. Falk, it's over to you. I can give you about two minutes.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chairman.

Thank you to all our witnesses for your presentations here this afternoon.

Mr. Coupland, you made a comment that it wasn't economically feasible to transport electricity over any long distances. Can you tell me what distance makes it feasible?

[Steve Coupland]

I can't give you the magic number that it's feasible over. It depends upon the distance, the amount of electricity, what the geography is, how many different jurisdictions you have to go through, how many regions, and how many first nations or indigenous claims you have to go through. That all weighs into it. Obviously, it's easier to build something across a relatively flat prairie, let's say, than it is going across the shield or the mountains. Those are some of the challenges.

I don't really have a magic number. You also have to balance out what the other generation sources are that you'd be replacing.

[Ted Falk, Conservative, Provencher, MB]

Right. So the cost primarily is driven by the cost of the transmission lines themselves, of erecting those lines.

[Steve Coupland]

That would be a big part of it. The other part, of course, is that you have to be able to get the electricity from a particular jurisdiction. Is that jurisdiction able to provide the electricity at a price and volume that beats what the buying jurisdiction could produce it for?

[Ted Falk, Conservative, Provencher, MB]

There are a lot of variables.

[Steve Coupland]

Right. I mean, I'm not saying it doesn't make sense to do it in some cases. I'm just saying it's not a magic bullet. You have to look at all the different variables.

[The Chair, Liberal, James Maloney]

I have to stop you there, unfortunately.

Gentlemen, thank you very much for joining us today. We appreciate your contribution to our study.

We'll suspend for a few minutes and then start with our next set of witnesses.

Thank you.

[The Chair, Liberal, James Maloney]

Let's resume.

We have two witnesses in the second hour—Robert Hornung from the Canadian Wind Energy Association, and Keith Cronkhite from New Brunswick Power Corporation.

Gentlemen, thank you for joining us today. I think you were here earlier, so you heard the instructions. We'll give each of you up to 10 minutes. You have earpieces and microphones, and you can speak in either official language. You will be asked questions in both, I can assure you, so take advantage of it if you need to.

I was just told that you're supposed to go first, Mr. Hornung, so we'll open the floor to you.

[Robert Hornung, President, Canadian Wind Energy Association]

Thank you very much, Mr. Chair, and members. It's a pleasure to be here, and I appreciate the opportunity to speak to you on this issue of strategic electricity interties.

I'll take one second to tell you a bit about our organization, the Canadian Wind Energy Association. We are the national association for the wind energy industry in Canada. We represent a little over 200 companies who are involved in the industry: turbine manufacturers, component suppliers, wind energy project developers, owners, and operators, as well as a range of service providers to the industry.

Just to put wind in context these days in Canada, there's been more wind generation built in Canada in the last decade than any other form of electricity generation. Canada is now the eighth-largest producer of wind energy in the world, and we produce enough electricity from wind to meet about 6% of Canada's electricity demand today.

We think this issue is very important because of the commitments Canada has made with respect to climate change. Under the Paris accord, when we're looking to limit the increase in temperatures going forward, our long-term commitment really will require Canada to reduce greenhouse gas emissions by about 80% from current levels.

You will not find an analysis anywhere that says you'll be able to do that without a significant increase in the production and use of non-emitting and renewable electricity. In fact, Canada starts from a very positive position, because 79% of our electricity today is non-emitting. That puts us well ahead of most countries. The federal government has established a target of seeing that go up to 90% by 2030. We think that's a sensible target, and ultimately, by 2050, we will have to have a grid that's 100% non-emitting if we're hopeful about meeting our climate change objectives.

Not only will we have to have a non-emitting grid, but we'll have to be using that electricity in a number of other sectors, to substitute for fossil fuels in transportation, industry, and buildings. That will require increased electricity production going forward.

Meeting an objective of that scale is going to require increased collaboration and co-operation across jurisdictions, and indeed increased interconnection across jurisdictions, which is why this discussion is so important. Historically, and indeed constitutionally, electricity is largely an area of provincial responsibility. In Canada that has actually led to challenges, I would argue, in terms of interjurisdictional co-operation.

We do a very good job within the country of optimizing our electricity systems at a provincial level, but the one thing we know is that if we optimize 10 separate electricity systems at the provincial level, the one thing we can be sure of is that nationally and federally we have a suboptimal system, because we haven't explored the opportunities for co-operation, collaboration, and interconnection going forward.

That's changing now. Climate change considerations have led to an increased discussion and examination of opportunities to work together across the country with respect to electricity planning, electricity markets, and electricity infrastructure. This is going to be absolutely critical if we're going to respond successfully to climate change.

We're a strong supporter of electricity interties, both between Canadian provinces and between Canada and the United States, because we believe that well-designed interties can do a number of things that will help us to meet these climate change commitments. It can help us to enable the development of renewable energy resources in resource-rich areas by providing more transmission capacity that allows us to access and move that energy across the country.

It can improve the efficiency of renewable energy use in areas where we currently have transmission constraints and you're forced to curtail or cut back on renewable energy production.

Importantly, it can facilitate the integration of variable renewable energy, like wind and solar energy, because it provides you with an opportunity—if wind or solar energy production is going up or down—to have a broader range of options you can access to balance that. If you have greater interconnection, you have access to more generation, and you can do more to balance and manage that variability.

Interties can also provide increased access to non-greenhouse gas emitting options for jurisdictions where those are not as common, and I'm sure you will have heard—and will continue to hear throughout your hearings—talk about B.C. hydro going to Alberta, or Manitoba hydro going to Saskatchewan, or Quebec hydro going to Ontario. We have a tremendous diversity of renewable energy resources in Canada, but they're not distributed equally in geographical terms. Therefore, there's an opportunity through interties to use those resources more efficiently.

Finally, interties can help us open up new markets for the export of electricity, not only between jurisdictions in Canada but also between the United States and Canada.

Canada has the opportunity to really be the clean energy battery for North America in terms of helping the United States to address its carbon challenge within the electricity sector, a challenge that is much more significant than ours because the U.S. has much more coal and gas to start with than we do.

The pan-Canadian wind integration study was a study released last year and funded by NRCan. It looked at the possibility of moving to a situation where 35% of the electricity in Canada came from wind. That study was undertaken with a steering committee that involved system operators from across the country. It concluded, in the end, that there are no operational barriers to having 35% of our electricity from wind. It does require some strategic investment in interties.

What it found was that, from a system basis, the investment in those interties, their cost, was more than offset by the savings from no longer paying fuel costs for fossil fuels. Essentially, those reduced fuel costs more than offset the cost of building the intertie when it was done strategically in jurisdictions targeted at reducing greenhouse gas emissions.

Having said that, interties are expensive, they're long term, and we need to be thoughtful about how we'll proceed. There are a few considerations that we think need to be looked at when we're looking at intertie investment.

It's absolutely clear that the key objectives of an intertie must be clearly defined and well understood, and, we would argue, they have to be consistent with Canada's climate change commitments.

We think transmission interties have to demonstrate that they're actually a cost-effective means of achieving those objectives. It may be possible to reduce greenhouse gas emissions not through an intertie but by taking action within a jurisdiction. It may be possible to balance variable renewable energy not through an intertie but through building storage. In fact, there are exercises under way in both western and eastern Canada right now through the RECSI initiative to look at those different options to see which are most cost-effective.

It also makes sense to look at how we can use our existing transmission system more effectively. In the United States, we see a growing movement towards something called energy imbalance markets, which allow greater trading of electricity across interties on a more flexible basis, not through long-term contracts but in a way that is much more responsive to situations that allow them to reduce emissions.

Having said that, the scale of the challenge we're talking about and the emission reductions we're looking at mean that interties are going to be a key part of the agenda going forward. Interties have to, obviously, enhance the reliability and the resiliency of the grid. We wouldn't do it otherwise.

I would argue three last things. I think we want to make sure that new transmission interties actually facilitate opportunities for renewable energy development on both sides of the intertie. I mentioned that Canada is resource rich. We have ample solar and wind energy resources, for example, in every province of the country. We want to try to unlock the full potential, but more importantly, we want to ensure that interties provide an opportunity for economic development in both of the jurisdictions connected by the intertie to enable them to build out their capacities.

We want to ensure that there's open access to new transmission interties, that's there's a transparent, fair, and competitive process to gain access to those interties. We want to ensure that people are competing and actually using the most cost-effective power in that regard. We also want to ensure that we have a level playing field for people using interties. There are some challenges in Canada. We have different types of electricity markets, different types of structures, different types of players. Sometimes when crown corporations are competing with independent power producers, it's hard to make it a level playing field. Crown corporations can, for example, take some costs and transfer those onto the rate base. An independent power producer might not be able to do that. It's not an obstacle but it's a challenge, and it's something to be thoughtful about.

Finally, we can also build new transmission through a number of different players. Crown utilities and private sector actors can also build transmission. I think we need to be open to a range of different approaches, but we do need interties.

I would argue that if we're going to make the investment in interties, we want to make sure that we're building them the right size, that we're not building them just to deal with an immediate issue, that we're not looking only five or 10 years ahead. We have to recognize the long lifespan of these structures and the long-term challenge of the climate change issue that we're dealing with. We have to build these interties with a view to being able to expand our usage of them over time. We have to build for the future, as opposed to just building for the current situation.

Thank you. Those are my introductory remarks. I'll be happy to answer any questions.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Cronkhite, we'll now switch over to you.

[Keith Cronkhite, Senior Vice-President, Business Development and Strategic Planning, New Brunswick Power Corporation]

Thank you, Mr. Chair and committee members, for the opportunity to present before you today on an important subject.

Perhaps I'll start by giving you a little background on New Brunswick Power. We're a government-owned public utility. Our vision is to provide sustainable electricity for future generations with a mission to become our customers' partner of choice for energy solutions.

We have a very diverse generation mix. We range from hydro, biomass, and wind, to coal, oil, and nuclear. We pretty much have all the bases covered. That generation mix has served us very well over the last 100 years of our existence. Today, we're proud to say that, with that generation mix and with our interconnections, we are over 70% non-emitting. We have a target of 75% non-emitting by 2020 and we're confident we will achieve that.

New Brunswick Power is probably one of the most interconnected utilities in North America and I'll outline our interconnections for you. For New Brunswick to Quebec, we have 1,000 megawatts. For New Brunswick to New England and northern Maine, we have approximately 1,100 megawatts. For New Brunswick to Nova Scotia, we have 300 megawatts and for New Brunswick to Prince Edward Island, we have 300 megawatts. As you can see, our geography and geographical location has benefited us well over the last 50 years.

When we talk about regional electricity independence, we recognize that Canada is a very diverse country and with that diversity, our electricity production has similar characteristics. Some regions benefit from vast hydro resources, while others require more diverse supplies, such as ourselves with small hydro, wind, and imported hydrocarbons, as well as electricity imports.

Electricity is necessary to sustain an acceptable quality of life and it is critical for economic prosperity. We view electricity as a staple. You have to have it to exist. It needs to be reliable and economically priced.

Historically, electricity needs have been met by each province individually. They look after their needs first and foremost. Within the Maritimes and Atlantic Canada, Quebec and New England have had a long history of interties with 50 years of collaboration for the purchase and sale of electricity and capacity in the operation of the power system. This has benefited customers within New Brunswick, our surrounding neighbours, as well as those within New England.

When we look forward, with new developments such as Muskrat Falls, hydro development within Quebec, and the potential for a second nuclear reactor within New Brunswick, the regional collaboration envisions the participation of the four Atlantic provinces along with Quebec. As in the past, transmission interconnections are the key enabler to allow regional collaboration.

When we look forward to a low-carbon electricity distribution, recent experience has shown us that by adopting intermittent renewables, we're reaching our point of saturation certainly within the provinces and the balancing region of northern Maine and Prince Edward Island, so we need to look at new solutions for how we can integrate more renewables. This is why New Brunswick has embarked on an energy smart or, in other terms, a smart-grid initiative within the province to allow a more dynamic flow of electricity and allow greater integration of renewables.

As I mentioned before, each province has its own challenges with respect to their carbon footprints. To enable regions to reduce their carbon footprints strategic interties are necessary to facilitate the movement of renewable as well as non-emitting electricity across the broader region. When we look at Canada as a whole, we have strong interties typically north to south with our U.S. partners. On the east-west conversation, we are limited in other parts of Canada. Many regions are not able to have capacity exchange for electricity with their neighbours or to develop their interties as they should perhaps.

Over the last 50 years, as I mentioned, New Brunswick has benefited from strong interties with our neighbours. Last year, we had the opportunity to present in front of the Senate Standing Committee on Energy, the Environment and Natural Resources regarding the transition to a low-carbon economy. We recognized and stated during that opportunity that this is only made possible through the development and expansion of strong interties.

Optimizing the abundance of hydro, expanding renewable generation, and embracing new nuclear development allows for each region in Canada to meet its future electricity requirements in a safe, sustainable, and environmentally sustainable way.

As I mentioned before, when we look to the U.S. and our relationships with our partners in the U.S., Atlantic Canada has been a leader, along with Quebec, in developing these interties over the last 50 years. It has allowed both of us to benefit from lower and stable rates while maintaining reliability. Looking forward, Canada is well-positioned to benefit from these strong interconnections and new strategic interties with the U.S. The recent Massachusetts request for proposals that closed in July, requesting large quantities of renewable electricity, is a good example of these opportunities.

When we look at the North American free trade discussions that are ongoing currently, it's important we preserve electricity and ensure that it is not subject to any new duties or penalties that could jeopardize this commerce from occurring. When we look at employment and economic impacts, a cornerstone of New Brunswick Power's ability to provide reliable and competitively priced electricity is related to two things: our diverse generation mix and our strong interconnections.

New Brunswick is unique, and as I indicated earlier, there are many jurisdictions within the country that are unique. We have a very strong dependence on electricity. Our economy is very electric-intensive as a result of pulp and paper, mining, and petroleum refining. New Brunswick is one of the most electric-intensive economies in the world. Certainly, within Canada, it is second to Quebec, and within the broader spectrum, it is in the top five in the world as far as being one of the most electric-intensive economies. As such, we are acutely aware of the need for competitive, stable rates in order to sustain our economic growth. We're also very export dependent. As I mentioned earlier, with our pulp and paper, mining, and petroleum, our exports are very critical on a go-forward basis to make sure electricity is competitive.

Given New Brunswick's electric-intensive and competitive electricity rates, strong interconnections are critical on a go-forward basis, and that we maintain them and strategically expand them.

In conclusion, the utilities within the Maritimes, Quebec, and New England have a long history. As I mentioned, we've had 50 years of collaboration. This has been enabled through strategic interties. Canada's energy strategy and transition to a low-carbon economy is very dependent on strategic interties not only east to west but north to south.

As I indicated, our economy is very electric-intensive and export dependent. Competitive electricity rates to sustain our economy are essential. Finally, given our independence and uniqueness in each province, it will be important for the federal government to support and promote the development of strategic interties across provincial boundaries.

Thank you, and I welcome your questions.

[The Chair, Liberal, James Maloney]

Thank you very much.

Mr. Lemieux.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Thank you, Mr. Chair.

My thanks to our witnesses too.

As you know, I have worked on the construction of a number of hydroelectric power stations during my career as a mechanical engineer, mostly in northern Quebec, in James Bay, and in my beautiful Saguenay–Lac-Saint-Jean region. As a result, the subject we are discussing today interests me a great deal. It's funny: in my region, we have just finished building the biggest wind farm in Canada. So my questions mainly go to the Canadian Wind Energy Association.

Mr. Hornung, as we can see from your Association's website, Canada has the cleanest system of electricity generation among the G-7 countries. More than 75% of our electricity generation comes from renewable energy.

What concrete steps can the federal government take to increase that percentage, in terms of contributions to developing and implementing research in the field of wind energy?

[Robert Hornung]

Thank you very much for the question.

As I noted in the presentation, Canada has been a leader in building out wind, but we have tremendous untapped resources. We are really only scratching the surface of what is possible. In terms of what the federal government can do—and I'm speaking from an association perspective here—we feel that the federal government has laid in place some very important foundation measures. For example, the implementation of carbon pricing is something we think will continue to drive investment and innovation, particularly if carbon pricing continues to increase after 2022.

We've seen aggressive action, for example, on coal. The federal government is also considering putting in place standards for electricity emissions from natural gas and electricity generation. It will also be important to use those standards to send a signal that natural gas generation must continually improve performance going forward, from a greenhouse gas emissions perspective, to ensure it's consistent with Canada's long-term obligations. We are keen to see a standard that is essentially best in class today and continually pushing for improvement going forward.

Investments and interties, like the ones we're talking about today, are obviously very important in terms of providing that framework and structure, and the federal government has played a very important role. It has some limitations in what it can do, because electricity is a provincial jurisdiction, but I think it has moved very smartly in this area, for example, by serving a convenor function, to bring jurisdictions together to explore the options and to look at how we can move forward to reduce emissions.

There are a number of initiatives the federal government has taken, which it can build upon going forward, to ensure that renewable energy continues to grow in this country. For example, we have measures related to depreciation, accelerated capital cost allowance, that are in place, available in the renewable energy sector, and will be expiring in 2020. Given the commitment of the government to continue to reduce greenhouse gas emissions going forward, we think that's something that could be extended.

Fundamentally, Canada is in a strong position. If there is any country in the world that can move to a 100% non-emitting electricity system, it should be Canada. I think Canada has the opportunity to be a leader in this regard, and within the North American context as well. The federal government can play a good enabling and facilitating role in helping lead, and provincial governments will have an important role to play as well.

[Denis Lemieux, Liberal, Chicoutimi—Le Fjord, QC]

Thank you.

Despite the increase in electricity exports to the United States, we have seen prices on the American market drop in the last eight years.

Do you think that those price reductions will have an impact on the development of wind energy in Canada?

[Robert Hornung]

Prices are coming down here as well. Alberta and Saskatchewan both have very aggressive targets in place for new wind energy development. They both currently have competitive tenders under way to procure new wind energy. I am extremely confident that we will see the lowest prices we've ever seen for wind energy in Canada coming out of those procurement processes, which will be announced in December in Alberta, and in the spring in Saskatchewan.

Wind in the United States has had a historical advantage relative to wind in Canada, because there is a production tax credit in the United States, which supports wind energy development. We do not have a similar initiative in Canada at this time, but that will be expiring in 2020, and once it has expired and we have a fully level playing field, we are confident that Canada will be able to compete. Our wind resource is generally better than in many parts of the U.S. and generally, in a number of jurisdictions, we have had fewer challenges in terms of moving forward and permitting wind energy projects than we see in many American jurisdictions.

I am very confident that wind will be able to compete. My colleague, Keith, mentioned the Massachusetts RFP, which just recently occurred. On a megawatt basis, most of the proposals that came in to support Massachusetts actually came from Canada. There was a blended hydro and wind energy mix from Emera, which drew on resources in the Atlantic provinces. Hydro-Québec put in a proposal with a hydro-wind energy mix, and they also put in an independent hydro proposal. There were wind energy producers that put in just a wind energy proposal. We are confident that, if those proposals are successful, that will open up significant new opportunities for Canada.

New York has a commitment to move to 50% renewable electricity by 2030. Under any analysis that I have seen, it has no capacity of being able to do that simply within New York state. It is going to have to look for electricity to come from outside New York's borders, and Canada is very well positioned to provide that.