Natural Resources Committee on May 9th, 2024

[Mario Simard, Bloc, Jonquière, QC]

Thank you for that.

I fully understand that this falls under the Department of Finance, but I hope that Natural Resources Canada will be consulted on the implementation of the tax credit. I think you will find that, in the specific context of Quebec, what you are asking for is practically unworkable. I will spare you all the explanations about the fact that Quebec has different rates for businesses and individuals.

I want to bring something else to your attention. According to the budget, for a project to be eligible for the tax credit, at least 10% of the workers have to be from the red seal program. I don't see how Hydro‑Québec, which already has expertise, could separate its projects to identify the ones where red seal apprentices make up at least 10% of the workforce. I'm sure you know where I stand, but this intervention in an area of provincial jurisdiction makes no sense. It's micromanaging.

If the goal of the clean electricity investment tax credits is to generate more electricity, that becomes a barrier. Could you comment on that?

[Debbie Scharf]

Thank you for the question.

I don't have a whole lot more insights on that one either, because again that's one for our Department of Finance colleagues. I really can't comment on that, but your points are well noted.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

I think it would be entirely appropriate to add a tax credit component to our current study. When we drafted the purpose of this study, we had no idea what the federal government was going to do. If we want to be effective, we should add that aspect, which we could do by way of a motion.

Your answer leads me to believe that there are a lot of gaps when it comes to the tax credit announced by the Department of Finance. If we want to align this with the work of the Department of Natural Resources to make it efficient, I think we should examine the issue of tax credits as part of our study.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Simard.

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

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

Thank you, Mr. Chair, and thank you to the officials.

I look at what's happening in the rest of the world and how fast they are moving, and it seems that in Canada we have regulatory...and we have all the various provinces going in whatever direction, and I wonder how we're going to keep up.

Texas, in a single month, installed 50% of the solar that Canada has ever brought in. California, with a population as big as ours and a bigger industrial economy, is now able, for good parts of the day, to have 100% of its power from renewables. The battery capacity storage in the United States doubled in 2024, and yet, for example, provincially in Ontario, the Kathleen Wynne government partially privatized hydro, jacking up our prices. We got stuck with the debt. Then they signed their FIT contracts for their green economy. It sounded great, but we couldn't get any of the energy onto the grid. The grid couldn't take the capacity, so we were paying for solar and wind projects that went nowhere.

What is the role of the federal government in dealing with provinces that may not want to be part of the solution? How do we step in and say that we need to be looking at this in the light of what's happening globally and the dramatic shift in energy?

[Debbie Scharf]

Thank you for the question.

My general feeling, from our conversations with the provinces and territories, is that there's a general recognition across the board that moving to a clean electricity system is critical.

I was just looking at some of the stats, and I think that over three-quarters of the country is committed to net zero by 2050, including provinces like Saskatchewan and Alberta. There's also a growing recognition that to have a comparative advantage to attract foreign direct investment, you need to have a clean grid. That's how Ontario did it, that's how B.C. did it, and that's how Quebec is doing it.

I think those market trends are helping all jurisdictions understand the criticality of a clean grid.

Getting there has all sorts of challenges attached to it. At the federal level, we're taking advantage of the strength in our convening power, whether through the regional energy and resource tables or the Canada electricity advisory council, to be able to have those conversations around how we could help provinces and territories get to where they need to go and how to get the best advice we can from the experts to move us in that direction.

At the federal level, we're also able to provide tools and levers that could help motivate markets in the right direction, whether it's the $4.5 billion that has been put into the SREPs program, the $100 million in the renewed smart grid program, or the ITCs that help create the investment conditions that motivate investment in the grid. Those are some things the federal government is doing.

Without a doubt, the provinces do control their electricity systems and make those decisions, but the convening power in those conversations is absolutely moving in the right direction.

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

Okay. It's not just that we get to net zero, but there was and is a huge potential economically for us for even export of power. There was no place on the planet more ready than Alberta. If you talk to anybody in clean energy, they say that what you could produce out of southern Alberta would dwarf anything Germany could ever do.

In 2022, Alberta was responsible for a 75 % increase in domestic wind and solar power. They had 17% of the province's electricity coming from renewables. Then Danielle Smith brought in the moratorium. She claimed that the independent electricity grid operator—the Alberta Electric System Operator—had asked her to bring in this pause, because they were concerned.

Now we see from documents that this wasn't true. They were shocked that she made this decision. She lied publicly. They felt that it would “send a 'closed-for-business message.'” I'm concerned about this, because that stalled 118 projects—$33 billion in investments—that could have been used not just to power the grid in Alberta but also to set up Alberta as an export economy. That's not happening now because of this closed-for-business message.

How do you negotiate a clean energy plan with a premier who makes facts up about chasing business away from what should be the energy superpower of the country? I hope I'm not being political.

[Debbie Scharf]

Here's what I can say.

In every jurisdiction in this country, including Alberta—and, I would argue, Saskatchewan as well—there are areas of commonality between the federal and the provincial governments. In the case of the Province of Alberta, one area of commonality that's growing quickly is around nuclear. The federal government is working with the provinces in those areas of commonality. We're watching carefully how the province is adapting its electricity market—

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

I'm sorry to interrupt.

You're saying that you're working on nuclear with Alberta and Saskatchewan. Are you saying that the conversations, then, on the renewable projects aren't going ahead? There's a lot of industry that is ready to move on this.

[Debbie Scharf]

We have our federal tools that are there and available to projects that are being developed in any province in this country, including Alberta and Saskatchewan. In fact, if you look at some of the stats from the SREPS program, you see that quite a number of projects have been funded in Alberta, and I would expect that that's going to continue. The tools are there, and the private sector can take advantage of those, particularly in Alberta, where many of those decisions are being taken.

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

Thank you very much.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Angus.

We'll now move to our second round of questioning, which we'll start with Mr. Falk for five minutes.

[Ted Falk, Conservative, Provencher, MB]

Thank you, Mr. Chair.

Thank you, officials, for attending the committee here today.

Madam Scharf, in your opening comments, you indicated that we have moved rapidly to an 80% clean grid. If we apply the eighty-twenty rule to that, which seems to bear out in a lot of cases, getting to that 80% is a 20% cost. Will this next 20% mean an 80% investment?

[Debbie Scharf]

I won't comment directly on the clean electricity regulations and that part of decarbonizing the grid. I'll allow my colleague to do that. However, there may be one inflection point or distinction that I would like to make.

There are two challenges. The first one is to decarbonize the remainder of the grid. The second challenge, which I would argue is the more expensive one, is growing the grid to one and a half times to three times its size over the next 25 years.

There are a lot of studies that say that it's one and a half times to two times, two and a half times or three times. I think it's in that ballpark, and it's going to be those investments that will be very significant for the country.

There's a decarbonization challenge—you're right that we have the 20% left—but there's also the growth challenge, which will be significantly larger.

[Ted Falk, Conservative, Provencher, MB]

Right.

In your opening comments, you also said that a clean grid would attract business. Carolyn Rogers, from the Bank of Canada, stated back in March that we've had very weak business investment, which doesn't really coincide with having an 80% clean grid.

When we look at the Americans, who have a significantly less clean grid than we do—I think they're at 40%—yet have seen significant business investment, how do you reconcile that statement?

[Debbie Scharf]

There are a lot of factors that go into a private sector actor's decision around where to make their investments, but the one thing that I can say is that a clean grid is a very significant factor—along with labour supply, supply chain availability and investment climate.

There are many companies that simply don't have the social licence to operate unless they're getting their energy from clean sources. I named a few in my opening remarks. There certainly are others, including existing heavy industry, such as Algoma Steel and others, that are looking to produce green steel and green products. It is a major factor in those investment decisions and it can give you a comparative advantage, but it's certainly not the only factor that any individual company will make around where to site and make that FDI, that foreign direct investment.

[Ted Falk, Conservative, Provencher, MB]

Okay. Thank you.

Back in 2017, this committee did a study on electrical interties, and there were several recommendations that came out of that study. One of them was that the government should encourage electricity providers and intertie operators to work with indigenous and local communities to provide economic value.

Can you cite some examples where that has happened?

[Debbie Scharf]

I can actually cite a really good example with the SREPS program. The SREPS program has allocated $1.5 billion to date. It has $3 billion more that it will recapitalize. Fifty per cent of the projects have indigenous ownership. That represents $800 million of the $1.5 billion.

There is a general acceptance, an appetite and a desire on the part of power producers to see indigenous ownership in their projects. We're seeing it in nuclear now, whether it be in New Brunswick or at the Bruce site in Ontario.

I think this is the new norm. We have programs that are trying to enable that indigenous ownership. Of course, now we have the indigenous loan guarantee program, which will be another avenue, and the Canada Infrastructure Bank is making loans to indigenous communities. Now it's about having the instruments in place that enable that indigenous ownership to happen. Absolutely, it's happening almost across the board.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

In Manitoba, we recently completed the Keeyask project, which was a partnership of Manitoba Hydro with four indigenous communities. It cost $8.7 billion to build to produce 565 megawatts. The project was a seven-year build.

With today's regulations in place and the Impact Assessment Act, what is the likelihood of a project like that happening in seven years?

[Debbie Scharf]

I'm not sure that I can answer that question directly, except to say—

[Ted Falk, Conservative, Provencher, MB]

I'm wondering if you actually know the answer.

[Debbie Scharf]

On the question of getting projects built, I think there is absolutely a recognition that we have to move swiftly to get major infrastructure projects built, but they are complicated.

I have no doubt that you have seen some of the announcements in budget 2024 around the ministerial working group and some advancements that are going to be made around permitting, how the federal government works together in Crown coordination and permitting coordination, with the goal of looking to accelerate those decisions.

[Ted Falk, Conservative, Provencher, MB]

I need to correct. It was 695 megawatts.

[The Chair, Liberal, George Chahal]

Mr. Falk, the time's up. You can ask another question on another round, if you get the floor. Thank you for that.

We will now proceed to our next speaker.

Go ahead, Ms. Dabrusin, for five minutes.

[Julie Dabrusin, Liberal, Toronto—Danforth, ON]

Thank you.

Maybe I'll pick up a little bit from where the conversation has been with indigenous-led and indigenous-owned projects.

I was looking at SREPs, which I think you were just talking about. It looked like there had been 49 capacity-building projects. Twenty-seven of these projects have indigenous ownership, which represents close to $32 million in program contributions.

I'm wondering if you could tell me a little bit more about those projects.