Natural Resources Committee on Oct. 23rd, 2017

[John Matthiesen]

Absolutely. In fact, we're speaking at the moment with a gold mining company in Ontario that's considering some renewable energy technologies. The concern on the lender's side is that the mine would be their only offtaker. What would happen if that mine stopped, or if for whatever reason that commodity wasn't valuable anymore? Even though the projected life of the mine is sufficient for the loan on the asset, there's a risk there.

There's another risk, just generally, that.... In California, for example, if you're building a natural gas power plant, there's a high likelihood that the plant will not run long enough for the lender to get their money back. The penetration of renewables in California and the duck curve, for example, is making it more challenging to deploy fossil fuel technologies there. Coal plants have already gone. I believe one of their last nuclear reactors, Diablo Canyon, is scheduled to close in the not-too-distant future.

We do a lot of work for a number of clients in California. It's probably our largest power market in North America. The type of work we're providing is really shifting away from fossil fuel—either new builds, retrofits, or repowerings—and more to renewables, distributed energy, and battery storage solutions as that mix shifts from more fossil to more renewables.

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

Quickly, perhaps I can get your idea on what the mix of energy for transportation in Canada might look like, say by 2040, as we make this shift.

Is it going to be significantly different than it is today when we look at EVs versus ICEs?

[John Matthiesen]

The short answer is yes, it will look very different.

We haven't done an assessment specifically on the Canadian market, but more broadly speaking, the tipping point is projected to be when the price of an electric vehicle is comparable to the price of a fossil fuel vehicle, or even within 5% or 10%. At that point, economically it doesn't make any sense to buy a fossil fuel-powered vehicle in the same range. There's less maintenance, less fuel costs, less rotating components, less moving components generally speaking, in electric vehicles. It's actually to the benefit of the automobile manufacturer to sell an electric vehicle. They have less maintenance concerns. From the owner's perspective, the warranties are longer. Aside from your tires, you're not changing much all that often, except a new battery, I suppose, every seven or eight years.

Once that price differential within 5% or 10% is reached, I believe it's going to be a fast change. We've done some assessments in New Zealand on this working with the government there, and it's shifting.

Then, connected to electric vehicles—and I know this wasn't quite your question—is the autonomous element of ground transportation and how that will impact the industry. Broadly, infrastructure is going to be quite significant.

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

Thank you very much.

[The Chair, Liberal, James Maloney]

Mr. Serré.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you, Mr. Chair.

I see Mr. Stenclik is still here.

We've heard from other witnesses that Canada is in the top three in the world as far as green energy and that we should sell our energy at a premium.

I want your thoughts. Because of the worldwide implications of your companies, do you feel that's something we could do, and how can we go about that?

[Derek Stenclik]

I'll take this one first.

I appreciate the question, and I apologize. After this, I will have to drop off.

Canada has a long history of exporting electricity to the U.S. markets, most notably of the northeast United States getting imports from Quebec, Ontario, and the Maritimes.

Predominantly, historically, a lot of that has been hydro-based generation. One of the findings from the pan-Canadian wind integration study is that with much of the wind that was added to the pan-Canadian system, some of that was exported to the U.S. markets at a revenue for the Canadian provinces, even accounting for additional renewables being added to the U.S. I know that a lot of the proposed transmission projects from provinces to the U.S. are specific to the northeast and looking to sell renewable energy to those markets based on renewable energy requirements there.

It's definitely a possibility to not only look at increased interties between the provinces, but also to the U.S. markets, for exports specifically.

[Marc Serré, Liberal, Nickel Belt, ON]

Before Mr. Matthiesen answers, Mr. Stenclik, can you answer one more question quickly—in 30 seconds?

Earlier we talked about—and I know my colleague Mr. Schmale talks a lot about it—the Ontario pricing. In Ontario, there are no more blackouts, no more smog days, and there's no more coal. We've invested in the aging infrastructure, and our prices, in terms of kilowatts per hour, are still lower than Detroit, Boston, New York, and San Francisco.

I want to get your sense of the pricing structure and the benefits of Canada in that regard.

[Derek Stenclik]

I haven't looked at the comparative retail prices of electricity, so I can't necessarily speak specifically to the comparison between the different cities.

You brought up that there are often three priorities to power system planning more generally. One is price and the impact on the ratepayer. That's always a key consideration. You also have to factor in reliability and grid stability. Then, more and more, customers are asking for sustainable energy or clean energy technology. Typically we look at that as a three-pronged approach to system planning, and it's up to the final stakeholders and ratepayers to decide how they value the different requirements.

I hope that helps to answer your question.

I apologize. Thanks, everyone, for your time. I really appreciate being here. Please reach out if you have follow-up questions or need help in analyzing something further.

[The Chair, Liberal, James Maloney]

Thank you for extending your time.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

Mr. Matthiesen, do you have any comments on these two questions?

[John Matthiesen]

Yes. The fact that we generate a lot of clean energy is certainly beneficial. From a pricing perspective, I think that market pricing should really dictate how much we are paid.

There are other ways I feel we can benefit from or leverage the fact that we have such a green economy, from a generation perspective. We should be able to market that to industries and attract foreign investment, whether it's in petrochemicals, automotive, or mining. We already have a strong aerospace sector. Those industries are paying more attention to their carbon footprint right now, and the fact that the power they use would come from a clean source would benefit them, and us.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

You also mentioned a northern Ontario mining company. I'm assuming Goldcorp is the company you're dealing with, for batteries. You mentioned some of the risks of an all-battery mine, but can you expand on some of the benefits and your role there?

[John Matthiesen]

I can't really say specifically who our client is, but having an electric mine has numerous benefits. Let's look at underground mining in particular. A lot of the power consumption comes from running ventilation fans and from pumping the water from a depth up to the service to extract it. Ventilation, in particular, is there to make the air clean for the miners, primarily because of the diesel emissions from the equipment that is driving underground, whether it's doing the drilling or moving equipment, supplies, and people back and forth. For the most part, all of that runs on diesel. If those pieces of equipment were to run on electric, then you wouldn't have the ventilation demand requirements. As a result, you would need less power, and it would all be clean.

[Marc Serré, Liberal, Nickel Belt, ON]

I have about 50 seconds left.

You mentioned in your presentation that there were grants and funding for microsystems in various states, and you said that it would be a good thing to look at for the innovation aspect in Canada. Can you give some examples and expand a bit further here? Is it linked to interties? Just expand a bit on your comment there in your presentation.

[John Matthiesen]

Sure. For example, both the CEC in California, and the Massachusetts clean energy coalition have a lump sum of funds—I think it's in the $40-million or $50-million range—that they have made available to provide grants for microgrids. The typical parties that are looking to take advantage of these funds would be universities and commercial or industrial complexes. Connecticut, in particular, has a program in place that's community-focused. Smaller towns and villages within the state are looking for funding of up to $5 million per site to install systems that would provide microgrid-type services.

In different geographies, there are different benefits for it. In the northeast, for example, there is a resiliency concern following Hurricane Sandy. We are already speaking with clients in Florida and Texas, on the back of the recent hurricanes there, about building resiliency when storms come up. Grids go down, and if you can have individual communities or individual industrial sites that can self-generate and sustain themselves, the cost is.... Maybe it's a little more, but not in all cases. Sometimes it's cheaper to create that community microgrid, but in all cases it's the resiliency. It's resiliency, reliability, sustainability, and economics. All of the pieces have to come into play.

[Marc Serré, Liberal, Nickel Belt, ON]

Thank you.

[The Chair, Liberal, James Maloney]

We have five minutes over here, and then we'll finish with Mr. Tan for five minutes.

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

Thank you, Chair. I'll be very quick.

I want to mention that, according to CBC.ca—Marc, you probably knew this was coming—

[Marc Serré, Liberal, Nickel Belt, ON]

You listen to the CBC...?

[Voices]

Oh, oh!

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

I knew you'd like that, Marc.

This is from July 20, 2017: “The price of electricity grew significantly faster in Ontario than everywhere else in Canada over the past decade”. According to the study here, Statistics Canada “shows from 2008 to 2016 residential hydro costs in Ontario rose 71 per cent, while the average increase across Canada totalled 34 per cent.” It ended here....

[Marc Serré, Liberal, Nickel Belt, ON]

Is there a question coming?

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

Yes, there is a question, but this also says, “The study finds the hydro bill for a typical household grew 62 per cent in Toronto from 2010 to 2016, while rising [only] 36% in Vancouver”, so clearly we do have a problem.

Mr. Matthiesen, to follow up quickly on what we were talking about at the end of our question, you said that the current supply, you believe, will meet future demand for electric vehicles. Is that correct? Is that your belief?

[John Matthiesen]

I'm not sure about current generation supply. No. I'm sorry. I thought the question was more around the electrical interconnects.