Natural Resources Committee on Sept. 27th, 2017

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

This is very exciting for me. It's the first time I've ever spoken at this committee, so I thank you.

I'm going to ask a question, and then maybe each of you can contribute an answer in whatever way you feel is best. I don't want to take up all the time.

To my colleague who loves to talk about Ontario—and I'm from Ontario—I really want to focus on the national.... Every province has its own uniqueness and its own reality. I look at Prince Edward Island, and see that wind is their major source of generation. The interties that are happening on the east coast of Canada, particularly, are quite unique and quite substantive.

You mentioned Canada and the U.S., and that the U.S. really does control.... Jamie mentioned the IESO. I have toured that, and for those of you in Ontario who haven't, it really is quite fascinating, because you can see in real time the energy crossing the border—north, south, east, west—and what that energy is generated from. Whether it's coming from nuclear, what their load is, whether it's wind or solar, it's quite fascinating. I encourage you to do that. It puts this in context.

I guess I would like your thoughts on the interties, from a number of perspectives. One is in terms of energy security, both interprovincially and internationally with the U.S. We have a North American energy strategy and an MOU with the U.S. and Mexico, and we're really looking at how we can strengthen that. Your point about the U.S. controlling a lot of this is very true, but we rely on each other a lot. I lived through the blackout, as many of you did, a number of years ago.

I understand your point about solar, particularly—but it would apply to wind as well—that until there's more capacity within the system, the interties don't really play in. The goal is that they will.

Could you envision what those interties could do to increase our capacity to reach our goals under the Paris agreement, and also in terms of economic development for the regions that will be impacted by that?

[Malcolm Metcalfe]

First of all, I would point out that I have toured the IESO. I have worked with them a lot. They're wonderful people, and the control centre is really worth seeing. In the Ontario situation, the tie-lines to the U.S. are used heavily. One of the reasons that the comment has been made that we're selling power at cents on the dollar is because in the U.S. wind is subsidized, and the night price of wind often drops to -$15 per megawatt hour so you're paying people to take the power. The politicians in Ontario have blocked that. That's a problem.

We would be far better off to trade with Manitoba and with Quebec than to trade with someone who has subsidies applied that are allowing them to make money at -$15. I would argue that the tie-lines are doing a wonderful job now of improving security, because while you get many fewer outages than Quebec does, or than an isolated utility would, you do suffer when something really bad happens and the whole system goes down. I would say that overall, the interties do a great job for Ontario.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Thank you.

[Prof. Bryson Robertson]

I can't talk too much to the Ontario perspective.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

I want a national perspective.

[Prof. Bryson Robertson]

To come to the point, yes, renewables are heavily subsidized in the U.S., but that can create situations where you're getting cents on the dollar. It also can create situations when you have storage in which you are getting paid to store someone else's power.

In the British Columbia perspective, you have the same thing, but we are getting paid up to $500 per megawatt hour not to use power at night, so you get the benefit of being able to store that power behind a dam and you are getting paid.

It really depends. There is no silver bullet that is going to solve this problem. An intertie is not one of them, but it's a tool in your tool box, and it needs to be deployed in places where markets will help support it.

I've talked about B.C. and Alberta, but we also have to be very cognizant that the markets across the border are significantly different. You have BC Hydro, which is a vertically integrated crown utility, and you have an energy-only market. Trying to connect those two does have some sensitivities that need to be accounted for.

In terms of what it does for the resilience of our system and our interdependence from our dependency on the U.S., the point has been made that across the country we have the recurring pattern of hydro-dominated province, fossil fuel-dominated province, hydro-dominated province, fossil fuel-dominated province. If we can connect those two more closely, we will have a greater diversity of resources, we will have a greater diversity of when our load peaks out in the time of the day, and we will be able to manage it better. Then we will be somewhat less dependent on our neighbour while still being able to take advantage of that as a market.

[The Vice-Chair, Conservative, Shannon Stubbs]

Thank you.

Mr. Weir for three minutes.

[Erin Weir, NDP, Regina—Lewvan, SK]

Thank you very much.

I did want to just pick up where we left off on distributed solar power. My sense is that, even with current technology and the current prices, it's quite lucrative for people to install solar panels on their roofs. Part of the problem, though, is it requires this huge upfront cost and then an investment return over a long period of time.

But unlike, say, buying a house, there really isn't financing available for individuals to install solar panels. I wonder, first of all, if you would share that assessment, and second, if you would see a role for the federal government in providing some type of financing to allow distributed solar?

[Patrick Bateman]

The current situation is that the traditional capital markets are functioning very well for larger utility-scale projects that have contracted revenue streams. Typically, they have access to a very low cost of capital and, in combination with the lower capital costs, it means that renewables are now cheaper than they ever have been before.

But that same thing cannot be said for smaller projects or projects that do not have contracted revenue streams. For instance, if somebody installs solar on their home or their business, the real value stream is displaced future electricity costs or displaced future spendings. The same thing could be said about energy efficiency. You cannot easily monetize future energy you don't use, whereas there is a whole host of different benefits from that.

So size and the revenue streams are two reasons why it is very difficult to finance these smaller kinds of projects. But there is, however, an enormous opportunity from a technical, technological, and investment perspective within these projects.

We feel the Canada infrastructure bank could play a role. We have submitted a detailed submission to Infrastructure on that, and I would be pleased to share that with the committee for your consideration.

[Erin Weir, NDP, Regina—Lewvan, SK]

There are also these federal crown corporations in the financial sector that do different types of lending like Farm Credit Canada and the Business Development Bank of Canada. There are concerns out there about the infrastructure bank, but do you see a role for other federal entities, perhaps, to provide financing for solar?

[Patrick Bateman]

It's certainly an excellent suggestion and not one we have looked at in detail. Certainly, I think you have identified one of the key barriers to unlocking a lot of investment from residences, small businesses and so on.

If there were an opportunity for folks to get access to lower costs of capital, given that the projects have a different risk profile and a different value profile, like you have suggested, there are no solutions. If the federal government were to fit in this space, then, there is definitely a need and plenty of benefit to be had.

[The Vice-Chair, Conservative, Shannon Stubbs]

Thank you.

The meeting is scheduled to go until 5:30. Is there interest from members for further questions? If there is, I would put to the committee another equal-timed round for each party.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

I don't think so. I think the witnesses have been very generous with their time.

[The Vice-Chair, Conservative, Shannon Stubbs]

Okay, we're good.

Thank you to the witnesses for spending your time with us this afternoon. We appreciate your expertise, your insight, and your participation with this committee.

Thank you to all of our colleagues.

I don't think there is any further business for the committee.

Thank you to the witnesses and to all of my colleagues for supporting me today as chair. I hope that, despite the fact that we have differing personal views, I was able to conduct myself objectively and impartially, just as chairs of all committees can do.

This meeting is adjourned.