Natural Resources Committee on Oct. 16th, 2017

[Lisa DeMarco]

Transportation is a very significant area. We should be facilitating electric vehicles and electric vehicle infrastructure, not just as a mode of transportation but also as a form of energy storage. Those batteries are in effect storage vehicles, so looking at optimizing vehicle fleets—buses, and particularly school buses—fits squarely within the context of exactly what you want. They're idle in the summer, so if they're electrified and have batteries, they could provide residual power when they're largely idle. They work in the morning, they work in the evening, and then they're idle for the bulk of the rest of the day. These are things we should really be enhancing in the near term.

Similarly, we should be looking to optimize building heating, ventilation, and cooling—not the elimination of a resource, not stranding assets, but optimizing the integration of gas and electricity in the building context, really avoiding dogma. Our mantra at the firm is ditch your dogma at the door and take a fact-based approach to getting to an outcome. We need to do that as a federal government, working in a co-operative relationship with provincial governments and in coordination with some of the best and brightest minds in industry in the country.

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

You mentioned labelling, and I wanted to address that in two ways. First, you talked about it being done in a trade deal. I forget your words, but they were along the lines that it would not be slapped with some American action, demanding made-in-America power or something.

The other was the domestic situation. In my riding I have a producer of very clean electricity who was approached by the City of Calgary, which wanted to use his electricity—his electrons—to run its buses and transit. He couldn't get an agreement with B.C. Hydro to move his electrons to Calgary from central British Columbia. They were going to charge him an inordinate amount of money, so it was just not feasible.

I just wondered what the solution to that is. It might be beyond the remit of the federal government, but we need to remedy those sorts of situations.

Either of you can jump in if you want.

[Chris Benedetti]

Maybe I'll just comment that one thing Canada lacks that the United States has is a federal electricity regulator in the sense of a FERC-type entity that can work with regional ISOs in helping to implement policies around the integration of markets, looking for lower-cost resources, and whatnot. These are mechanisms that have developed over time. In Canada we still organize our electrical markets very much along provincial boundaries, and many of the regulations—the rules that exist between those markets—are stuck in the 1900s. These are things that have been around for 100 years or so and haven't really adapted very well to this notion of the ability to move electricity across provincial jurisdictions.

Ironically, it wasn't always the case. We have hydroelectric power plants in Quebec that are tapped into Ottawa. Their original purpose was to support the pulp and paper industry that existed here at one time, and they were established for the resources that were going to be developed. It didn't matter so much that there was a political boundary between the two. Increasingly, it's something we should look at more carefully and think about how we modernize regulations. How can the federal government work with provincial system operators to help support the integration of markets and ease the flow of electricity across those markets, particularly if it's characteristic of the type of electricity that we believe is right: low-carbon electricity to meet our needs when we need them?

[The Chair, Liberal, James Maloney]

I'm going to have to stop you there, unfortunately.

Mr. Serré.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair, and thank you for your presentation and the time you took to come to present to us. I have a few questions.

Ms. DeMarco, in regard to your comment earlier about battery storage, how can the smart grid technology help us bridge the short-term concerns in regard to energy storage of intermittent supply sources of wind, solar, or tidal?

[Lisa DeMarco]

Certainly smart grid technology is the enabler that allows for two-way flow of electricity. We can look at the ability to use battery resources, whether they be community resources such as buses or a community battery program, or an intertie support or line support battery, or a flywheel. There's a flywheel in Ontario that's being used that way. The grid operator can use the data regarding line losses to know when to deploy that flywheel to either charge or load as the case may be. Anything in relation to a market signal that pushes for the need or support of an electricity storage resource is now within the clear capability of the system operators to deploy and/or load through an integrated grid.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

You talked about Canada being at the top-three level of clean energy in the world. I like your idea about exporting at a premium. How do we label that? That's something I think we have to work on.

I just want to understand a bit more about how we got there because you mentioned Ontario. I know our honourable colleagues across the way often reference Ontario and price. When I looked at a report from Hydro-Québec for North America, I saw that Ontario has a lower kilowatt-per-hour cost than many of the states.

I want to understand. With regard to the modernization we have done here in Ontario, from the blackouts we've had and a lot of the smog days, do you believe that other jurisdictions should be learning from the experience here in Ontario and moving forward?

[Chris Benedetti]

Without a doubt, but there's an important point. I think they quite often view that these attributes of moving to lower forms of generation and markets is done purely for environmental reasons.

What we've seen is that one of the greatest attributes of low-emitting resources is that the variable cost of generation is almost nothing, the marginal costs. The fuel cost is zero compared to conventional resources. When we develop gas assets, for example, typically we look at the capital costs required, the O and M costs, but also the fuel costs. These three components go into the cost of the assets. For storage, as well as for renewable assets, that isn't the case.

The one thing I will note about the reference to Quebec is that historically Quebec made the decision to build far greater than its own needs its ability to produce power, specifically from an economic development standpoint, to export to the eastern seaboard, and it has been very successful in doing so. B.C. has done that as well.

Ontario is like many markets that historically built to Ontario's needs. We used to refer to it as the “fortressed Ontario” approach. Increasingly recognizing the modernization and the value attributes of a low-emitting system, we're now seeing a movement towards greater use of interties, with an ability to export those resources to markets like PJM, for example, that still have a big carbon footprint but represent the largest electrical market in the world.

From a trading standpoint, harnessing the value of what has been invested in for the last many years to access markets, similar to how Quebec has managed its electricity resources in the last many decades, is something many markets are now looking at.

[Lisa DeMarco]

I just want to put some numbers on Chris' exact points, which I fully agree with. A 60-year-old hydro-generating plant has fully paid off the capital cost, can produce power for half a cent a kilowatt hour, and can export to U.S. markets that are paying 13¢ and 14¢ a kilowatt hour. I like those profit dynamics. They work.

How do you do that in a way that facilitates the premium of the greenness of that hydro asset?

To get back to Mr. Cannings question in relation to your question, there are opportunities—and I'm going to take you into the depths of trade law here—to have the customer distinguish between a plain old electron and a green electron. Once the customer does that, you're in a much better position from the likeness test under trade law—a much better position.

The more we can do to facilitate our customers south of the border in making that distinction, the much better off we'll all be from facilitating the export of our product.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you. I have about a minute.

You both talked about indigenous communities. In Ontario there are 130 first nations, and 100 are in northern Ontario. Recently, the provincial government added about 16 first nations to the power grid, but there are still many, many other first nations, when you look at a third of the land mass of Ontario, that don't have a power grid. Do you have any insight into what we could do better with indigenous communities, maybe with interties with Manitoba?

[Chris Benedetti]

We have a project that's near and dear to my heart that we've worked on for a few years now. It's called Wataynikaneyap Power. It's an indigenous-led, indigenous-owned entity of 22 first nation communities in the northwestern part of Ontario to connect 17 indigenous communities that are currently dependent on diesel generation. There is an absolute need for the federal government and the provincial government to work together to find ways to transition and build out that capital infrastructure. We're not there yet, but hopefully we'll get there soon.

That's an opportunity, quite frankly, that can be replicated not only in other communities in Ontario, for example, on the east side of Lake Nipigon, but also in other communities in Nunavut, in northern Manitoba, and in other places where there are significant opportunities to look within our own borders at communities that are not only heavily dependent on diesel generation, but suffer from significant outages, reliability issues, people who can't operate dialysis machines when the power goes out, and boiled water advisories.

Quite frankly, having been to some of those communities, I'd say it's a crisis of energy independence, but it's also something that is integral to the social fabric of these communities.

[The Chair, Liberal, James Maloney]

Thank you.

Ms. Stubbs has five minutes, and then Mr. Arseneault after that.

[Shannon Stubbs, Conservative, Lakeland, AB]

Thank you, Mr. Chair.

Thanks to both of you for spending your time with us this afternoon.

I come from Alberta. I just mention that because I think sometimes that shapes the way we view the issues we discuss in this committee in particular and probably our world view on priorities.

I wanted to recognize—and my colleague T.J. and I often get along on this issue—your point about co-operative federalism, respect for our constitutional division of powers, and celebrating regional energy diversity. I personally think that Canada's diverse energy mix is one of our greatest strengths.

Before my political career, I spent several years in the Government of Alberta in the department of energy, in the international offices and trade division, in economic development on policy and communications, business rules, and legislative development on oil sands and heavy oil development in Alberta, which I believe benefits every Canadian in every community across the country. It's certainly a source of major revenue that's shared across the country so that Canadians can enjoy roughly similar programs and services in their respective provinces.

Lisa, in your slide about innovation, you mentioned small modular reactors. You probably know that previously in this committee we did a study on the nuclear file, and it also came up a couple of times maybe in our clean-tech study on oil and gas, the potential applicability of SMRs in oil sands and oil and gas recovery. At that time, I think there was a discussion about partnerships but not about any pilots or anything happening at that point.

Do either of you have an update for us, or do you know any details about that applicability and the timelines?

[Lisa DeMarco]

My comments were particularly directed to very small reactors, and it goes to the first nations issue. I encourage you to look at the reference in the presentation where we indicate that evidence was led and confirmed before the Ontario Energy Board that there was 2,081% worse reliability in first nation communities. That's 20-plus times worse, yet they're paying among the highest rates. That's a problem.

I know that, last week or within the last two weeks, there have been associated meetings with the federal government to try to facilitate very small modular reactors to help solve the rural and remote and off-diesel challenges. We need to be open-minded around anything and everything that can help us solve the four key challenges that I think we're going after.

Yes, I believe, through natural resources and through the Canadian energy strategy dialogue, there were meetings among companies that had nuclear capability in relation to VSMRs—very small modular reactors—and small modular reactors to help solve the rural and remote and off-diesel challenges.

[Shannon Stubbs, Conservative, Lakeland, AB]

Okay.

Do you have anything to add, Chris?

[Chris Benedetti]

I might just add that I know Canadian Nuclear Labs, CNL, and the CANDU industry have been doing quite a bit of work on SMR development, particularly with the Chalk River lab. There's an extensive network of, particularly, Ontario nuclear expertise that is looking at SMR development.

The one things that perhaps is a bit unfortunate is that we know the Tennessee Valley power authority is working on a test site right now. There are other American companies, Westinghouse and others, that are looking at SMR development, and companies from Korea, China, Japan, Germany, and others.

This is a great opportunity to harness our Canadian scientific expertise and the Canadian nuclear expertise to see what might be developed from an SMR standpoint and a made-in-Canada solution. It's not just an Ontario story obviously; it's a Canadian story.

[Shannon Stubbs, Conservative, Lakeland, AB]

Right.

I think Canada is a world leader, not just on responsible energy production but also as an exporter of innovative and technological expertise. Legislators and policy-makers should aim to continue that trend.

I know that of the $2 billion invested in R and D across the natural resources sector, $1.5 billion of that came from oil and gas companies, in terms of the last stats that were compiled. It was a disappointment to see that they were excluded from the government's $950-million plan for superclusters.

I mention that, I guess, being mindful that we're talking about not pitting sectors against each other.

[The Chair, Liberal, James Maloney]

I'm going to have to stop you there.

Mr. Arseneault.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you, Mr. Chair.

I would like to thank our witnesses for being here today.

Since I'm not a regular member of the Standing Committee on Natural Resources, this isn't a topic I understand much about, but it's quite exciting to hear about green energy and everything that can be done in Canada, such as producing the greenest aluminum in the world in Quebec using hydroelectric power.

As for inter-ties, I understand that the goal is to facilitate access to electricity across the country. It might be beneficial and increase Canada's economic development. That is what I understood from your remarks.

I don't know who could answer my question. Perhaps Ms. DeMarco.

Do you see any regulatory barriers to moving electricity from one province to another, or even from Canada to the United States, which buys our electricity?

[Lisa DeMarco]

I will try to answer in French. I will say—

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

You can speak in English.

[Lisa DeMarco]

I was going to try to answer in French but my children tell me all the time, “Mom, when you speak French,

it hurts our ears.”

Certainly I will try to do a bit of both.

In particular, I think there are regulatory challenges in enhancing the maximal amount of export from Canada of the cleanest, greenest energy to the United States.

Between provinces, predominantly there are intertie constraints that are problematic, as well as differences in the intertie capabilities—AC versus DC—particularly between Ontario and Quebec. If you look at those dots on the map when you eventually get it, we want to go from small dot to big dot. Really, with the exception of Alberta and Saskatchewan, it looks like it's going north-south, and it should be going north-south.

What are some of the regulatory barriers?

In terms of how we schedule and connect our markets, there are a number of issues associated with what we call “uplift” charges and how that is applied and used in the context of exporting.

Number two is in relation to facilitating what we need when we need it to go south of the border. With our storage assets, we have this disconnect between being charged retail costs when we're loading and charging only wholesale costs when we're discharging. That's problematic.

Number three is not having the associated benefit of an overarching policy and integration between some of the IESOs, the IESO in Ontario in particular, and PJM. That is problematic. There are a number of rules that need to be harmonized between the FERC and the IESO. We've done a bit of this with FERC 686 historically. We have more work to do in that regard.

Those are a number of regulatory barriers that we really do need to address.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you very much.

[Chris Benedetti]

I think Canada has done a good job and needs to continue to do a good job in advocating to American markets, American states, to accept clean energy resources from Canada. We were concerned for a while that Massachusetts would not enable hydroelectric power exports from Canada to serve their market. They're going through a very large-scale, clean-power call today, and I think because of efforts both in Canada, as well as from industry, Massachusetts opened up and now we're seeing Hydro-Québec put a very significant bid into that market, as did Emera.

Those opportunities will continue to manifest themselves on the eastern seaboard, in the Midwest, and on the west coast, so we need to be prepared. I think the government can play a vital role in making sure that Americans remain open to receiving our energy exports.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you very much.

Do I have any time left, Mr. Chair?