Evidence of meeting #23 for Natural Resources in the 43rd Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cost.
A recording is available from Parliament.
1:40 p.m.
Liberal
The Chair Liberal James Maloney
Thank you very much, Mr. Lloyd. You're right on time.
Mr. May, it's over to you for six minutes, please.
1:40 p.m.
Liberal
Bryan May Liberal Cambridge, ON
Thank you very much, Mr. Chair.
First of all I'd like to thank all of the witnesses. This is our second meeting on this study. I am incredibly impressed with the number of companies across Canada that are focusing on the need to transition and really move towards net zero and that are putting themselves in a position to succeed in that environment.
I am going to go back to Mr. Hutchens, just to give you a bit of a head's up.
I want to respond a little bit to the conversation we just heard. I want to push back a little bit. I don't think anybody here expects us to be able to get this all done in one year. I think the reason that we can't go to net zero all at once is those cost burdens. I think that's what we've been saying for quite some time. This is a transition. This is why it's going to be a gradual transition over as many as 30 years.
I just think that the 2000% numbers that we've been hearing just now are a little disingenuous. The more fuels that come online and are adopted, the more will be produced and the cheaper it's going to become over time—this year, in two years, in 10 years. I wanted—
April 30th, 2021 / 1:40 p.m.
Conservative
1:40 p.m.
Liberal
Bryan May Liberal Cambridge, ON
I wanted just to check to see if you could maybe comment on that.
Sorry.
1:40 p.m.
Conservative
Greg McLean Conservative Calgary Centre, AB
I think my colleague specifically referenced some real numbers that he pulled off the market. My colleague, Mr. May, seemed to indicate that it was disingenuous to put forward real numbers—to which Mr. Hutchens responded very well, I should add.
I'm curious about what “disingenuous” means, without getting into debate.
1:40 p.m.
Liberal
Bryan May Liberal Cambridge, ON
I hope this doesn't cut into my time, Mr. Chair.
I will explain. I just think that there was no explanation of how that number was derived. I think that if you look at the transition of what we're talking about—
1:40 p.m.
Conservative
1:40 p.m.
Liberal
The Chair Liberal James Maloney
I'm going to stop this right now.
Each of you is entitled to ask your questions and pose them based on whatever information you have at your fingertips. I think we can all agree it's not necessary to cast aspersions on one another.
Mr. May, please continue.
1:45 p.m.
Liberal
Bryan May Liberal Cambridge, ON
Thank you, Mr. Chair.
Again, Mr. Hutchens, given the numbers that we're hearing, we're not talking about this all being in one year.
Do you have some thoughts on that?
1:45 p.m.
President and Chief Executive Officer, Fortis Inc.
Just to clarify my earlier response and maybe tie a couple of those pieces together, when we were talking about the $2 and $20 numbers, that is for the commodity alone. I think I referenced the percentage of the bill that is. You have to look at the overall bill impact. You also have to look at how these costs can come down, and will come down over time. It's really trying to figure out what those costs look like.
Probably the most important point I could make today is the fact that we have no idea where or which process those costs are going to come down best and fastest. The thing we have to think about from a policy standpoint is not to throw out any options early on. You have to make sure that you have the infrastructure, so that if RNG or hydrogen becomes really cheap, if carbon capture and storage comes to light, if there are new technologies that come in on the electric or the gas side, we can shift and make sure that we're utilizing the best possible resource to have the climate impact that we're looking for and the cost impact that we're trying to avoid. It has to be that balance. If you throw away any of the options early on, then we won't be able to shift or use what's most beneficial for our customers.
To be clear, we are driven by what our customers and policy-makers want to do. At the end of the day, if that goal is for our customers to want to reduce their greenhouse gas impact and they want to buy and pay additional...which they do. With FortisBC they willingly buy renewable natural gas from us because of the lower environmental footprint it has. Our customers should be free to do that. If policy drives us in that direction then we must have all options on the table and know when to pull them off, but you can't pull them off too soon.
1:45 p.m.
Liberal
Bryan May Liberal Cambridge, ON
I appreciate that clarification, Mr. Hutchens.
I get discouraged at times that my friends across the aisle seem to never calculate the cost of doing nothing. I think, I hope, we can all get our heads wrapped around the fact that this is a transition that is absolutely necessary for us.
Again, Mr. Hutchens, can you speak a little more about how we can ensure the sustained and long-term reduction of your natural gas network's GHG emissions? How can we ensure the long-term reduction?
1:45 p.m.
President and Chief Executive Officer, Fortis Inc.
It is, again, about looking at that balance of options. It's finding the cheapest renewable natural gas sources we can. It's trying to get breakthroughs in technology on the hydrogen side of things.
Hydrogen is going to play a big role, but not necessarily within the current structure that we have. We're doing studies right now with the University of British Columbia in the Okanagan to figure out how much hydrogen we can put in our gas stream and still manage the burn rate, the customer effect and impact, that we need to and how that impacts our system.
At the end of the day, hydrogen doesn't transport in the same way that natural gas does. It's a less dense fuel and so it needs higher volumes. Also, it can cause operational issues, like hydrogen embrittlement within the existing pipe network that we currently have. We have to figure out solutions for that kind of stuff so that we can, again, figure out those paths. Is it hydrogen? Is it RMG? Is it carbon capture? Is it carbon capture at which end of the pipe? At the end of the day, you have to have the pipe, or you can't ever make that decision, and that's our main thesis: you have to have that pipe. You have to have the pipe, because it can transmit clean molecules just like electric transmission lines can transmit clean electrons.
As a point of clarity—
1:45 p.m.
President and Chief Executive Officer, Fortis Inc.
Fortis is 80% electric. I just want to be clear on that. We're 80% electric and 20% natural gas across North America. So we see both sides, and we want to make sure that both sides get it right.
1:45 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
Thank you, Mr. Chair.
I listened carefully to what Ms. Trudeau, Mr. Boies and Mr. Verlez said. Something I took away from all three presentations was the importance of a regulatory framework.
I believe Mr. Boies talked about clear regulations for low-carbon energies. When the committee was studying the forest industry, we had a similar discussion. Something struck me as important, and it may just be one of many considerations. If the government were to include a low carbon footprint requirement in its public tenders, it might be a good way to stimulate the market.
I'd like Mr. Boies and Mr. Verlez to explain what they mean by a regulatory framework. After that, I may have a question for Ms. Trudeau.
1:50 p.m.
Chief Executive Officer, Enerkem
I'm happy to attempt an initial response. Mr. Verlez can then take over.
Clearly, a regulatory framework encourages good behaviour. Let's take the example of a big oil company in the Netherlands or the United States investing in production assets like low-carbon biofuel. If they were to use the technology in our Varennes project, they would produce a carbon-negative fuel. These days, in fact, it costs less to produce that molecule than to not comply with the regulations. So as you can see, in creating what we unfortunately call a “stick”, we are encouraging the world's oil companies to invest in their production capacity, to increase their production, and therefore to behave properly until we get either to the level of compliance we want or to where we have to impose a cost on non-compliance.
Obviously, a framework like that provides an incentive to invest. Just compare the current price of methanol in the Netherlands to the price in Canada. In the Netherlands, it costs $1.37 Canadian per litre, while in Canada it costs 44¢ per litre. It's the same molecule with the same carbon intensity. The only reason for the gap is the regulatory environment, which forces a company like Shell, for example, to sell the molecule to the part of the world where it makes the most money and where the cost of non-compliance is the highest.
The unfortunate thing is that, because we have no regulations in Canada, even though we have production assets and we can produce low-carbon or carbon-negative ethanol—such as we were producing in Edmonton that was -20 carbon intensity in the British Columbia system—it's now more profitable to sell it in the U.S., in California, rather than in Canada. So California benefits from the reduced CO2 levels.
1:50 p.m.
Senior Vice-President, Business Development and Strategy, Evolugen
Mr. Boies answered the question very well.
I wholeheartedly agree with his arguments. For us, as a renewable electricity producer, a regulatory framework would be a way to ensure that we make competitively priced energy that is used to produce hydrogen, which is an input in all of these processes. A framework like that really would help us achieve some economic viability. I won't go into all the other details, but the framework would also cover the standard codes for transporting hydrogen by pipeline and the health and safety aspects related to hydrogen, among other things.
1:50 p.m.
Bloc
Mario Simard Bloc Jonquière, QC
I would like to come back to that, Mr. Verlez, and perhaps Ms. Trudeau can also join in the conversation.
I have a concern. Last week, we spoke with a deputy minister about Canada's hydrogen strategy, which seems to be largely focused on something called grey hydrogen.
In a regulatory framework, do you think we should categorize the different types of hydrogen?
Earlier, Mr. Verlez spoke about Evolugen's project to produce hydrogen from hydroelectricity. For one ton of hydrogen, we know that grey hydrogen produces outputs of about 10 to 11 tons of CO2.
If the government wanted to adopt a hydrogen strategy, should the regulatory framework include measures that would calculate the carbon footprint of hydrogen?
