Natural Resources Committee on June 13th, 2024

[Dan Balaban]

You touched on a point that I made, which is the polarization around the energy discussion in this country.

I'm not trying to point fingers at any one side. Just to be clear in what I'm saying, I think it's polarized on both sides. On one side, we have those who think we can make a very rapid transition to an all-renewables system, which unfortunately is not technically feasible today. I think we can get more and more renewables and increase penetration over time, certainly, but to get to an all-renewables system today is unrealistic.

You then have those on the other side who say renewables are unreliable and expensive, and there are all sorts of false narratives there.

The truth is in the middle. What we really need to be doing is working beyond these polarizing sorts of narratives and working on the solutions that we need to get us to where we need to go.

As far as the industrial carbon tax goes, the industrial carbon regime that exists in Alberta specifically has been very effective in terms of incentivizing the right sorts of developments in infrastructure in Alberta around renewables. The retail carbon tax, though, has not had a direct impact on the work that we are doing.

[Mario Simard, Bloc, Jonquière, QC]

Mr. Balaban, please rest easy. I'm not asking you to point fingers. It's my job to point fingers unfairly.

Still, I would like you to tell the committee what we can do, politically, to promote investments in the renewable energy sector. Are there specific actions the government could take to promote investments in the renewables sector?

[Dan Balaban]

Is that follow-up for me?

[Mario Simard, Bloc, Jonquière, QC]

Yes, that's right.

[Dan Balaban]

Okay. Thank you.

There are some policies being put forward that are in place right now. The investment tax credits that were put forward are very critical in ensuring the further build-out of renewable technologies. They will ensure that Canada remains competitive with other global opportunities where capital can be deployed, specifically south of the border in the United States, which has its Inflation Reduction Act that has been very good for investment.

We need to respond, and we have done that with the investment tax credits. Things like the smart renewables and electrification pathways program, which has been deploying capital into various renewables projects across the country, have been very effective. Things like the Canada clean growth program, which has been providing assurances for long-term carbon revenues, have been very effective. Some of the work that the Canada Infrastructure Bank has been doing has been effective.

It's really a tool kit of things that we need to seize the opportunity, and it's important that we move relatively quickly on those opportunities so that we can remain globally competitive.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

I will end by asking each witness to answer, with a quick yes or no, whether they support carbon pricing to encourage the switch to electric.

[Catherine Hickson]

This is Cathy Hickson from Geothermal Canada. Yes.

[May Wong]

This is Capital Power. Yes.

[Paul West-Sells]

This is Western Copper and Gold. No, because I have no other alternative to using carbon at this point in time.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

[The Chair, Liberal, George Chahal]

Thank you, Monsieur Simard.

We'll now go to Mr. Angus for six minutes. The floor is yours.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you, Mr. Chair.

Thanks to our witnesses. This is a fascinating discussion.

I want to begin with you, Madam Wong, because you represent a company that has enormous expertise in power and diversified power. I'm interested because you recently walked away from the Genesee project near Edmonton, which was a big $2.4-billion carbon capture project. That really took everyone by surprise.

Some analysts suggested that you guys walked away because of financial and technical uncertainty around the project. Could you explain why the Genesee project was shelved?

[May Wong]

Thank you for the question.

I'm going to pass this question to be answered by my colleague Daniel Jurijew.

[Daniel Jurijew, Vice-President, Regulatory, Siting and Stakeholder Engagement, Capital Power]

Thank you, May.

Mr. Chair, I assume it's okay for me to proceed?

[The Chair, Liberal, George Chahal]

Yes, proceed.

[Daniel Jurijew]

Thank you.

In terms of the Genesee announcement, as we stated publicly at the time of the announcement, there were two parts to it.

We completed a front-end engineering and design study, which confirmed that the technology is viable and practical in the mode of operations we were envisioning, but at this time, it is not economically viable, taking into account a number of considerations. Therefore, the decision was made to step down on it for this time.

We also stated—and we stand by this—that we would definitely reassess it if economic circumstances and conditions changed. That relates to things such as the cost of the technology itself, commodity pricing and other factors.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you for that.

I'm interested because I was reading that the Business Council of Alberta had said it raised serious questions about the Canada Energy Regulator's performance standard for CCS. It said that technologically it is “currently unachievable”.

That report was done before the Genesee project was mothballed. Do you think the Business Council of Alberta is wrong in saying that the technology is currently unachievable at the rate that is required for CCS?

[Daniel Jurijew]

I haven't seen the business council report.

The technical work that we did identified the expected level of performance of the technology, given the mode of operations.

In the context of the discussions that are under way regarding the clean electricity standards, there is a discussion about whether the assumed standard that would be included in that reflects the capability of the technology. That may have been what the report was referring to.

There is a distinction between what the vendors have assured us the technology can achieve and what may or may not be reflected in any regulations.

[Charlie Angus, NDP, Timmins—James Bay, ON]

The regulation is 95% containment. There have been complaints that this is not technologically feasible.

I guess my concern is that the CER says that in order to meet our targets, there's going to have to be a 39-times increase in CCS from current levels. If it's not financially feasible for you—and you guys have crunched the math and are forefront in terms of power generation—what's it going to take? Is it going to have to be public subsidies to make CCS work, or is it financially just not doable?

[Daniel Jurijew]

At this time, it's not viable, given current costs, the commodity cost outlook and the suite of support mechanisms that are in place.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Certainly our Liberal friends keep telling us that this thing is going to take off and to deal with it, but you're dealing with it from a practical point of view. You say you've looked at the technology. You have a big project. This was $2.4 billion near Edmonton. You're saying it's not financially feasible.

Would you make suggestions for more public money to operate these plants, or is it just not doable?

[Daniel Jurijew]

It just reflected the economics for our project at this time. CCS and other sectors face different cost considerations. I can't speculate on what may or may not work for other projects of different sizes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

You're a natural gas plant. Wasn't it a natural gas plant?

[Daniel Jurijew]

We were proposing putting the carbon capture unit on the back end of the two new combined cycle units that are nearing completion at Genesee, as Ms. Wong noted.

[Charlie Angus, NDP, Timmins—James Bay, ON]

I guess my concern is that this would be hugely beneficial for continuing to use natural gas, which is coming under a lot of pressure for its fossil fuel use. If we had a new plant that used natural gas and we could capture 95% of it, that would make a huge difference in being able to sell that to the public.

If there's no financial case, then we're going to have to look at other options, are we not?