Natural Resources Committee on Oct. 7th, 2024

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you very much, Chair.

I'd like to add my welcome to all our witnesses today.

I'll start my line of questioning with you, Mr. MacDougall. You wrote, “Canada’s draft Clean Electricity Regulations...released in August 2023 were a meaningful and ambitious effort by the federal government to balance the need to reduce emissions with an affordable and reliable clean grid”. Can you elaborate on that?

More specifically, for the analysts who will be putting together the recommendations, what aspects of those regulations do you think will be most effective in helping us achieve our goals and that we can perhaps even enhance and modify?

[Scott MacDougall]

Sure. Thank you for the question.

I'll just zoom out a tiny bit from the question for a second. Around clean electricity investments and progress towards a net-zero grid, I want to talk about the incentives for that. I think the primary incentives driving that shift will be coming from the carbon pricing systems, especially the credits trading that will be going on within those systems. That will do the lion's share of the work to drive the emission reductions. As well, the investment tax credits that are being brought forward, or are in place, will do a lot to drive those incentives.

Those won't create a lot of certainty about the timing of the investments around clean electricity. I think that's where the clean electricity regulations will come in. They provide some certainty around timing and end points in terms of emission performance for gas in the system. That really sends a strong signal, driving some certainty into investment.

Thank you.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you.

Mr. Dion, I guess I'll ask you the same question. I love what you said about bigger, cleaner, smarter. What are your thoughts on the clean electricity regulations that have been put forward?

What do you think will be the most interesting and impactful components that perhaps even need to be bona fide or enhanced?

[Jason Dion]

I would agree with Mr. MacDougall on that the fact that these regulations will provide certainty. It is certainly sorely needed. At the same time, I also want to underscore that they're designed to be flexible. A lot gets made out of the net-zero emissions from the sector by the 2035 target. This is a target shared with the rest of the G7. In the current and evolving design of the clean electricity regulations, the idea is very much that it's not a sort of drop-dead date for gas generation. There's a phase-out going on past that date, and gas can continue to operate in emergency circumstances, within limits, when it's most needed.

That level of flexibility, that recognition that reliability is paramount in the management of electricity systems, is certainly really important. At the same time, we want to be making the most economical and optimal use of gas-fired generation that we can. These regulations help incentivize greater reliance on renewable forms of electricity as well as other sources of flexibility outside gas generation. I think continuing to explore that flexibility in ways that balance the competing priorities that the regulations are after will be helpful.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you.

I have a different question for both of you. How important will carbon pricing be to bringing in that investment that we're going to need to see grow over the next five, 10 or 20 years? How important will carbon pricing be to that?

I guess I'll start with you, Mr. Dion. Then we'll turn it over to Mr. MacDougall.

[Jason Dion]

I think it is very important. That signal that comes in the form of carbon pricing, the excess credits that the sector can generate and sell to those that are regulated under those systems, provides a revenue stream. In Alberta it's been extremely helpful for securing finances. I think it is extremely important.

My organization has done some work on ways in which those systems could be strengthened to provide greater incentives and reduce uncertainty, but certainly the price incentive that carbon pricing provides is a really important complement to the regulations, as are the proposed investment tax credits that help defray some of the costs.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you.

I will turn it over to you, Mr. MacDougall, for your thoughts on that as well.

[Scott MacDougall]

Yes, I absolutely agree with Jason.

Having worked in Alberta's TIER system as well as its predecessor pricing systems, I would be the first to admit that some changes are going to be needed in there. They're going to need to strengthen that existing system.

I think some folks have probably seen some of the news articles lately about the very low credit prices right now in the TIER system. Doing some things to strengthen the stringency—I guess that's sort of the technical term—for that system is going to be critical to soak up some of the surplus supply of credits, especially as companies continue to invest in line with their net-zero goals. Demand for credits is going to continue to go down as emissions come down and generation of credits is going to go up. The systems are going to need to adapt in line with that to keep a bit of a market balance around those credits.

That's sort of the key change that's going to be needed. Thank you.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you.

Mr. Dion, you had said that your organization has done some research and work on this.

Can you share that with the committee, please, so we can use that information perhaps in our analysis in the report that we're going to put forward?

[Jason Dion]

Yes, absolutely. We have some research on large-emitter trading systems and how they can be managed and regulated in a way to shore up the market for credits in some of the ways Scott was talking about.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you very much.

The last question I have, if I have some time, Mr. Chair, is for Dr. Exner-Pirot.

You mentioned the situation in the winter when it was -35°C and below, where there was a crisis, essentially. We weren't sure whether or not we would have the electricity necessary to heat homes.

Are provinces making sufficient investments and supports for transmission and generation, or is this mostly driven right now by the federal government?

[The Chair, Liberal, George Chahal]

Mr. Schiefke, I'm sorry to interrupt. We are over time.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Mr. Chair, it was such a good question and Dr. Exner-Pirot looked so enthusiastic about answering it.

[The Chair, Liberal, George Chahal]

Give a very quick answer, if you could, Ms. Exner-Pirot.

[Dr. Heather Exner-Pirot]

I'll do a quick answer.

Of course, the electricity grid is not mostly the federal government's responsibility. That was, you know, the Alberta operator.

The good news is that we have had quite a bit more generation come online in Alberta, so we don't expect to see a crisis of that kind for many years.

[Peter Schiefke, Liberal, Vaudreuil—Soulanges, QC]

Thank you for your generosity, Mr. Chair.

Thank you, Dr. Exner-Pirot.

[The Chair, Liberal, George Chahal]

Thank you.

I will now go to Mr. Simard for six minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

My question is for Dr. Exner‑Pirot, from the Macdonald‑Laurier Institute.

I am a bit skeptical about the information you shared. You seem convinced that Hydro‑Québec has reached a breaking point when it comes to electricity production. I understand that for many projects there is an attempt to have blocks of energy in Quebec, but there is also considerable growth.

You may have already consulted Hydro‑Québec's 2050 plan. My region, Saguenay—Lac‑Saint‑Jean, already has wind farm projects. For Quebec as a whole, the plan is to produce more than 10,000 megawatts of new wind power capacities.

I am a bit skeptical when you say that Hydro‑Québec has reached a threshold with respect to its hydroelectricity production capacities. Can you tell us where you got that information?

[Dr. Heather Exner-Pirot]

Thank you, Mr. Simard.

Quebec's hydroelectricity resources are a jewel in the Canadian electricity grid. I don't mean to diminish it.

As you've acknowledged and as Hydro-Québec has acknowledged, it is reaching the end of its current capacity and needs to add, at great expense, some additional capacity. As far as I've read, the dollar figures are in the tens of billions of dollars to add greater capacity in the coming years. That will increase rates, certainly, for Quebec ratepayers. That will certainly be probably a deterrent to industrial users.

However, because Quebec's power is so cheap, perhaps there's still an advantage.

[Mario Simard, Bloc, Jonquière, QC]

I would like to reframe the discussion. Hydro‑Québec has a growth plan and is rejecting certain industry projects that want access to blocks of energy because there are too many projects. That adds a bit of nuance to what you said in your presentation.

You talked about what is going on in Europe, where industry projects that call for a lot of energy are being outsourced. Several heavy manufacturing companies, in Germany in particular, try to outsource their projects and are wanting to set up in Quebec because of its clean energy. Unfortunately, these companies are not looking to set up in Alberta. I find that odd.

Why do you think that the companies planning heavy manufacturing projects are not looking to set up in Alberta where there is energy and gas?

[Dr. Heather Exner-Pirot]

I guess we can make this into a Quebec-Alberta situation. For my part, I hope that Quebec has very competitive electricity rates and can attract heavy industry from Europe and elsewhere. On the Alberta side, there is some excess generation now, and there is, as I understand it, even five gigawatts in the interconnection queue of data centres. There are some problems to the clean electricity regulations that does cause uncertainty for creating more generation.

We have very cheap natural gas. All of Canada benefits from B.C.'s and Alberta's natural gas. It's pretty much the cheapest in the world. If we can turn that into power generation, we could probably attract a lot more data centres and power artificial intelligence. I hope that Quebec can also do that.

I guess the overall concern is that, if electricity across Canada, through things like the Canadian clean electricity regulations, are made more expensive, we will all be less competitive.

[Mario Simard, Bloc, Jonquière, QC]

Perhaps I was not clear. I apologize.

I simply wanted to shed light on something. Large companies that specialize in heavy industrial production in Europe are outsourcing because they are trying to access energy at a lower cost, which goes without saying. This is especially true when they want access to clean energy. That is what we are seeing today. Countries that can provide clean energy have a clear competitive advantage.

It annoys me when people talk about our power grids being risky in the winter. That is a not true.

I am not sure if you know, but the duration of peak demand in Quebec is estimated to be about 50 to 100 hours a year. Pressure on the network in Quebec intensifies during that period.

A country's entire energy structure cannot be designed around a period of 50 to 100 hours a year. Some companies are putting measures in place. For example, some paper mills are able to redirect some portions of their hydroelectricity to Hydro‑Québec to alleviate pressure during that peak demand period.

I would encourage you to be careful about suggesting that people may not be able to heat their homes during winter for lack of access to hydroelectricity. It is important to understand that these are very short periods and our energy structures are increasingly resilient. They are able to get people through these periods.

It seems like this type of rhetoric is being used to demonize clean energy a bit.

Do you agree?

[Dr. Heather Exner-Pirot]

Not to argue with you, sir, as a reply, it is clear to me, looking at Hydro‑Québec's plan, that electricity in Quebec will get more expensive in the coming years. Hopefully, we can maintain reliability.

Across the country, of course, there are differences. Quebec has exceptional resources that are clean and cheap. Not every province has those same resources, and the clean electricity regulations certainly impact different jurisdictions differently. I, for one, am hopeful that Quebec can maintain very cheap industrial electricity rates and continue to attract heavy industry.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Mr. Angus for six minutes.

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

Thank you.

I'll start with you, Mr. MacDougall.

Pembina Institute had a fascinating editorial in The Globe and Mail this past week about how much Alberta has lost out in its clean energy advantage since Danielle Smith sent the signal that this was not a province open for business.

In 2022, I was meeting with all manner of investors and people in the clean energy sector, and they were telling me that Alberta was globally unbeatable because of the highly trained workforce and its energy expertise. Also, the land itself was set for this revolution in clean energy.

Has Pembina tracked how much investment has been lost since the Conservatives made it clear that they did not want clean energy in Alberta?