Evidence of meeting #38 for Natural Resources in the 45th Parliament, 1st session. (The original version is on Parliament’s site, as are the minutes.) The winning word was quebec.
A video is available from Parliament.
Liberal
Corey Hogan Liberal Calgary Confederation, AB
I'm not a grad, not at U of C. I was the vice-president.
Liberal
The Chair Liberal Terry Duguid
Oh, all right. Well, I am a grad, so there you go. I'm going to give Professor Shaffer extra special treatment.
From HEC Montréal, we have Pierre-Olivier Pineau, professor, and the chair in energy sector management.
All witnesses have conducted a mandatory witness onboarding test, so they can participate virtually.
I'd like to make a few comments for the benefit of the new witnesses. Committee members may ask questions in either English or French. If you need interpretation, please take a moment now to prepare your earpiece and select the listening channel you need in order to take full advantage of the time allotted for questions and answers. This is a reminder that all comments should be addressed through the chair. Each of you will have five minutes for your opening remarks, after which we will open the floor to questions.
Mr. Mousseau, we're going to start with you. You have the floor for five minutes.
Normand Mousseau Scientific Director and Professor of Physics, Trottier Energy Institute, University of Montreal, As an Individual
Mr. Chair, members of Parliament, thank you for this invitation.
The issues involving this consultation are very broad, and I cannot touch on all of them in five minutes. I will therefore focus on one point: the electrification of energy services in Canada—namely, transportation, heat generation and so on.
This is not only a climate issue, but also—increasingly—an issue of productivity and competitiveness with the rest of the world. It must therefore be addressed head-on.
While Canada’s proportion of electricity use has stagnated at 17% to 18% of the total energy mix for more than 40 years, that of other Organisation for Economic Co-operation and Development, or OECD, countries has been growing for decades. China’s proportion, however, increased from 15% in 2005 to over 32% in 2025.
This progress has been accompanied by development, expertise, production and large-scale deployment of electrical technologies in all sectors. While these countries are inventing and using 21st-century energy technologies, Canada is settling for 20th- and even 19th-century technologies.
The national electricity strategy that was announced last week, which seeks to double Canada’s electricity generation, is a step in the right direction to close the technology and climate gap Canada is facing, but it is far from enough.
New generation must be deployed, and it is essential to ensure that most of it is used to replace fossil technologies and modernize our electricity use, rather than simply meeting new demands in data centres, for example. To do so, we need strategic approaches. We must shift from our climate approach—rather than focusing on short-term reduction targets, we should prioritize structural changes that will electrify our systems.
An asymmetric decarbonization strategy should be adopted, meaning that policies need to be tailored to the transition phase of each sector. Some sectors can transform rapidly, and we should accelerate the deployment of technologies in those areas. In other cases, we should support research and development and experimentation.
Support the new instead of punishing the old: Society will move away from fossil fuels when renewable technologies are superior. They are increasingly practical and less and less expensive. New policies should encourage the deployment of new technologies rather than targeting fossil energy.
Regardless, we must always pay attention to prices. In Canada, as we’ve seen, this is critical. However, we’ve observed that price fluctuations in the fossil fuel sector present opportunities that should be seized to decarbonize more quickly.
To move forward, we must adopt a planning and implementation approach that accelerates transformation while also ensuring greater benefits for Canada. It is not enough to review our approach from a high level—we need effective strategies for supporting and deploying technologies.
We must first envision a carbon-neutral economy and see how such an economy organizes heating and electricity transmission with net-zero emissions.
We must also identify the sequence of physical changes. We cannot electrify services if electricity is not available. We must ensure that we put things in place, together, to foster the adoption of new technologies and the development of innovations.
Finally, we must examine barriers, support catalysts and truly move forward by adopting appropriate regulatory measures as well as strategic support. We must measure progress and adapt quickly using key indicators updated in real time, or nearly so.
At the same time, innovation should be supported. Massive investments have been announced in electricity generation and distribution. We must also electrify end-use applications. All of this depends on significant investments. However, in Canada, there is a tendency not to believe that these investments can simultaneously foster innovation. We should therefore open markets. It is not simply a matter of supporting university research and basic research; we must also ensure that new products entering the market are integrated into reality through better-structured tenders and regulations. This will truly help establish a Canadian presence in these electric technologies, where our presence is currently lacking.
For a cautious country like Canada, faced with the risks of innovation, accelerating the pace—as we are doing now—without a genuine innovation policy risks pushing public services and contracting authorities toward well-established solutions, without importing innovation. It is absolutely essential to combine the two.
In conclusion, the massive electrification of our society is at the core of the transformation needed to achieve our climate goals, but also, and increasingly, to maintain the competitiveness of the Canadian economy. The announcement of the national electricity strategy is a step in the right direction. However, while deploying electricity generation infrastructure falls under provincial jurisdiction, the federal government must adopt a robust plan to electrify energy services, with a coherent strategic approach that ensures the modernization of our energy use while increasing the country's competitiveness. There is an urgent need to fill this void.
Thank you.
Liberal
The Chair Liberal Terry Duguid
Thank you, Mr. Mousseau.
We will move now to Professor Shaffer for five minutes.
Blake Shaffer Associate Professor, University of Calgary, As an Individual
Thank you.
Mr. Chair, ladies and gentlemen, and committee members, thank you for the invitation to appear today. My name is Blake Shaffer. I'm an associate professor of economics at the University of Calgary, where I co-founded the university's electricity centre. I also co-direct Canada's energy modelling hub and lead a new initiative, western transmission catalysts. I'm a frequent policy adviser to the governments of Alberta, British Columbia and Canada. Before academia, I spent 15 years in industry, trading electricity and natural gas.
Let me begin today with the big picture. The IEA has recently declared that we are entering “the age of electricity”. That phrase captures two simultaneous shifts. The first is cleaner supply, which means more wind, solar, nuclear, geothermal and hydro in the generation mix. The second is greater electrification, which means more of our vehicles, furnaces and factories running on electricity instead of fossil fuels. Canada has a strong starting point on both. Nationally, we are already over 80% clean, although that number differs greatly from province to province. We also have a flexibility advantage from our large hydro fleet that the rest of the world can only envy.
Other countries are moving faster on the second dimension, which is electrification. In the last 15 years, China has gone from electricity making up 15% of its final energy demand to over 30%. Over the same period, Canada has moved from 21% to only 24%. The world is electrifying. Canada has every natural advantage to lead, but we can also be left behind if we don't act.
Today I want to flag two areas, one macro and one micro, in which I see significant wins on the table if we seize them.
The first area is interprovincial transmission. Forty-three years ago, my father testified before a federal committee, much like this one, arguing for stronger interties between the western provinces. The case he made then is essentially the same one I will make today. Critically, much has changed to make this idea even more compelling. We now have far more variable renewables that benefit enormously from geographic diversity—for example, pairing BC Hydro's reservoirs with Alberta's abundant and cheap wind and solar. Similarly, Manitoba offers flexibility that can help enable Saskatchewan's nuclear ambitions. A surge in expected load growth, from data centres and broader electrification, means opportunities abound. These are opportunities we simply cannot capture working province by province.
Finally, our relationship with the United States has become more tenuous. Canada still trades more power with the U.S. than we do across our own provincial borders. That trade is valuable, but we should also look within to reduce our dependence and to strengthen our competitiveness. The political ambition to expand interprovincial transmission is here. What's missing is the “how”. This is where the western transmission catalysts project comes in. With the support of all four western provinces, and working with utilities, grid operators and first nations across the west, our team is tackling the long-standing commercial, regulatory and physical barriers that have kept stronger interprovincial transmission stuck on the drawing board. We will have more to share publicly on this initiative in the coming months, but I will tell you this: In 25 years in this sector, I have never seen a stronger likelihood of success.
The second big win is flexible demand. Consider electric vehicles: one million EVs in my home province of Alberta would add roughly 3% to 4% to annual electricity demand. That is manageable. However, one million EVs all charging at the same time would increase our province's peak capacity needs by 50%. That is not manageable.
We stand at a fork in the road. One path leads to the bad place: higher peaks, massive upgrades to our distribution networks and higher costs spread across everyone. It doesn't need to be that way. The other path is flexible demand: consumers shifting consumption away from peak periods, making fuller use of existing networks and spreading system costs over a larger base, resulting in lower average costs for all. Around the world, we're seeing the growth of time-varying rates and demand flexibility services as low-cost alternatives to expensive peaking supply.
Mr. Chair, Canada has an enviable starting position, and all the tools needed to succeed, but we must act. In the age of electricity, a robust and affordable electricity system will be a key competitive advantage. Interprovincial transmission and a concerted push on demand flexibility are two big wins on the table.
Thank you.
Liberal
The Chair Liberal Terry Duguid
Thank you, Professor Shaffer.
We'll now go to Mr. Pineau.
You have five minutes.
Pierre-Olivier Pineau Professor, Chair in Energy Sector Management, HEC Montréal
Thank you very much for the invitation. It's really a pleasure to be here.
I'm Pierre-Olivier Pineau. I'm the chair of energy sector management at HEC Montréal. I have published a report on the state of energy in Quebec every year for the last 12 years. For the last 30 years, I've been looking at, and have specialized in, energy and electricity policy.
It was with great pleasure that I heard the Canadian government recently mention its national electricity strategy with the key element of interprovincial trade and interconnections, as Blake mentioned. This is also a key aspect of the personal research I've been working on. I was extremely pleased to see that priority come in at the highest level—the federal level. I really think more interprovincial collaboration is key for the future of our country.
In 2013, I published a chapter called “Fragmented Markets: Canadian Electricity Sectors' Underperformance” to explain that we were underperforming in Canada because we were not better integrated due to our 10 different electricity markets. I strongly believe in integration.
In 2016, I published a paper that looked at Ontario and Quebec, one that exactly described what Blake was mentioning: the benefits of integrating a thermal jurisdiction with a hydro jurisdiction, by which you could reduce greenhouse gas emissions while creating welfare. In such cases, it pays to reduce greenhouse gases because you can substitute hydroelectricity and thermal generation to increase welfare, especially if you use marginal cost pricing in both jurisdictions. This is not the case in hydro jurisdictions, such as British Columbia, Manitoba and Quebec. We are using average cost pricing, which brings some inefficiencies to the market.
Interties are very important. I am a strong advocate of increasing interconnections among provinces. It's not only a matter of transmission lines but also a matter of how you design markets and how trade is settled. You really need to move pricing to a different level if you want to optimize our markets. That's an important point that I think the government needs to hear.
In the strategy presented by the federal government, doubling electricity production was emphasized. This is something we need to be extremely concerned about, because there is one aspect we don't pay enough attention to: Canada is suffering from energy obesity. We are using so much energy in Canada that it places us eighth in the world in terms of per capita energy consumption, between Oman and Saudi Arabia. Not only are we using a lot of energy in general, but we are using it extremely poorly. We are among the least-productive countries when it comes to energy productivity. We are in the same group as Kazakhstan and North Korea when it comes to energy productivity.
What is energy productivity? It's the amount of wealth or GDP we generate with one gigajoule, or unit, of energy. In Canada, we basically produce $146 for every gigajoule we consume. In the U.S., they produce $223. In Australia—a country we can compare with Canada because it has a strong natural resources basis to its economy—they produce $217 of GDP per gigajoule. We are not extracting as much wealth from every gigajoule we're using. That's for a good reason: We're blessed with an abundance of energy. We've never really paid attention to how much energy we're using to generate wealth. That has to change.
Both Blake and Normand, my esteemed colleagues, mentioned the low level of electricity in our final consumption in Canada—around 24%—but they omitted to mention that, on average, per capita, Canada uses 13,000 kilowatt hours per year, compared with China's 6,000 kilowatt hours per year. It is the same amount in Germany and France, or about the same.
We're already using twice the amount of electricity per capita as China, Germany or France is using. The goal is not to double electricity generation just for the sake of using even more electricity than what we're using now to generate very little wealth. The real goal to make Canada stronger and more productive is to use energy and electricity more efficiently and more wisely.
Our session's title is “Canada's Electrification, Energy Self-Sufficiency and Domestic Energy Security”. The energy security part has to be important. You don't become more secure by having bigger infrastructure. If you want to become more secure, you make sure that you're less vulnerable and less exposed, and you make sure that you use less energy while providing the same services so as not to overexpose yourself to the many different risks—geopolitics, climate risks and cybersecurity threats—that will come in the future.
I believe my time is over. I will stop here.
Liberal
The Chair Liberal Terry Duguid
Thank you, Professor Pineau.
Those were three very interesting presentations. I know that colleagues will have some good questions for you.
We are going to start with Mr. Tochor.
Conservative
Corey Tochor Conservative Saskatoon—University, SK
Thank you, Chair.
Thank you to our witnesses.
Mr. Shaffer, it is a very interesting personal story that your father was in front of a committee similar to this 43 years ago to talk about what we needed to do for interchanges between provinces.
Can you give a quick update on all the projects that have gone forward in the last 43 years that have achieved what your father testified about 43 years ago?
Associate Professor, University of Calgary, As an Individual
At the time, they were talking about a western power grid from Manitoba across to British Columbia, which was going to be fully integrated. That didn't come to fruition. Most of the provinces looked southward towards more trade with the United States.
We have seen, over that period, the expansion of the Alberta-British Columbia tie-line to its current state, which remains a relatively small share, I would say, of both provinces' expansion. We've seen some minor additions between Saskatchewan and Manitoba as well, but the broader idea of a more integrated western power grid never came to fruition.
Conservative
Corey Tochor Conservative Saskatoon—University, SK
If anything in this country, it's unfortunate that the past Liberal governments have made some decisions that have weakened us and made us more reliant on our neighbours.
You brought up the interchanges with America, and there are reports that, on the business side of things, we sell natural gas to the States. They create electricity, and then we buy it back. Can you unpack that a bit? How does that make sense?
Associate Professor, University of Calgary, As an Individual
I would say that, on electricity trade, there's one thing to keep in mind: Last year was quite a special year. If not net importers, we came very close to it, which is rare for our country. Normally we're a net exporter. The large reason for that was the droughts in the major hydro provinces—Quebec, Manitoba and B.C.
An important thing to note is that, while we were net importing in those provinces, we also continued to be a net importer of dollars. The benefit of hydro is that we're quite flexible. You can think of it as a large battery. We tend to export when prices are high and import when prices are low. That flexibility earns our provincial Crown corporations in those three places significant amounts of money.
All of those three provinces were net importers last year. I believe Quebec was almost break-even on dollars. Manitoba and British Columbia continue to earn net trade revenue on that. Our selectivity makes it quite advantageous for the hydro provinces to transact with their neighbours.
Conservative
Corey Tochor Conservative Saskatoon—University, SK
That's on hydro, but what about on natural gas? Are we shipping that much natural gas to the States to create electricity for us to buy back?
Associate Professor, University of Calgary, As an Individual
It's a good question. If I'm looking at Alberta natural gas, the stuff going to the Pacific northwest, there are limited natural gas resources in the Pacific northwest. We tend to buy from the Pacific northwest and the western system as a whole when the renewables are in abundance, because that's when prices are low. If you look at flows across the B.C. intertie, that tends to be when natural gas is not on the margin. Those are expensive time periods for the United States. We tend to be importing in the middle of the day when California has too much solar or when it's extremely windy.
Conservative
Corey Tochor Conservative Saskatoon—University, SK
Let's go back to the natural gas share of our grid right now. I understand there's a bit of a shifting of percentages. Renewables have a role to play, and using them is encouraged. However, we're hearing increasing concerns that the regulatory processes in the States make it much easier than up here to bring out a natural gas plant. Would you agree with that statement: that it's easier, on the regulatory and permitting side, to get one built in the States right now?
Associate Professor, University of Calgary, As an Individual
I can't say with definiteness, because I'm not a developer. However, I can say that currently one of the biggest impediments to natural gas power investment is equipment lead times. Right now, you can't buy a turbine for delivery before about 2032. We're at a point at which the supply chain is almost more of a limiter than any permitting process.
Conservative
Liberal
The Chair Liberal Terry Duguid
Thank you, Mr. Tochor.
Thank you, both of you.
Mr. Hogan, you have six minutes.
Liberal
Corey Hogan Liberal Calgary Confederation, AB
Thank you, Mr. Chair.
Thank you to all of our witnesses today.
Professor Schaffer, it's good to see you again, a former colleague of mine at the University of Calgary. The university, Alberta and Canada benefit from your knowledge, as we benefit from the knowledge of all of our witnesses today.
Canada has many grids. Canada has many energy clusters. It is a north-south continent, and integrations are often north-south rather than east-west. That's true of gas, oil and electricity. In some ways, that makes a great deal of sense. Geography and market size push us that way; they push us south. Economics drive us that way. There is easier terrain, and there are better customer bases in the sense that they're bigger customer bases. This study is looking at both energy security and opportunities in electricity at the same time, I think in part because we know our energy future is an electricity future.
Professor Schaffer and Professor Pineau, you both talked about flexible demand and interprovincial ties, and you underlined that these are not just technical challenges. I think about my home jurisdiction of Alberta and how very different the market design is between Alberta and B.C. in particular. Could you both expand on some of the considerations or hurdles for interprovincial interties—and maybe not even just interties, because that's a physical thing, but also the trading of electricity between markets, technical and otherwise?
Maybe we can start with you, Mr. Schaffer.
Associate Professor, University of Calgary, As an Individual
I can offer some of my professional background. I started my career at Powerex, the trading arm of BC Hydro, for seven years. I went to New York, and then I returned to Canada. I was head trader at TransAlta, which is Alberta's largest merchant. I'm well versed in the trading activity across the two.
There are many things that become an impediment beyond the physical act of linear infrastructure—simple things, such as scheduling timelines. In the western U.S., we schedule 60 minutes to the hour; in Alberta, schedules need to be in two hours before. We call them seams issues, and they make inefficiencies between the two. The biggest challenge for the B.C.-Alberta tie-up—as compared to, say, Saskatchewan-Manitoba, where our western transmission catalyst is already working—is market differences.
As Pierre-Olivier mentioned, in B.C. you have a Crown corporation and average cost pricing vertically integrated from generation all the way down to the retail level. In Alberta, we have a disaggregated market. We have competitive generation. We have regulated transmission and distribution and a competitive retail. That introduces a lot of complexity, because you're going to get elements of winners and losers, as in any trade, and you have a multitude of participants that you need to find some alignment on. This is in addition to the fact that you have what we call marginal cost pricing in Alberta and average cost pricing in British Columbia, and bridging that is challenging. However, that's exactly the type of thing that we're working on: those concrete details for commercial arrangements not to gloss over that really important issue.
I'll hand it over to Pierre-Olivier.
Professor, Chair in Energy Sector Management, HEC Montréal
We've seen different countries in the world trying to integrate their markets. I spent some years in Finland during my Ph.D., and I experienced how four different countries—Norway, Sweden, Finland and Denmark—converged and changed their market designs to adopt a similar market design and solve the issues Blake labelled extremely well and then presented very well.
In a way, it's really a pity that our 10 Canadian provinces—even two of these provinces—cannot converge towards a similar market design to make sure that they can trade and plan in a more integrated manner to basically save on so many aspects that I won't detail here. Every time the OECD reviews Canadian energy policies—it's not every year; it's every four or five years—it always mentions in its reports that Canadian provinces should better integrate and open up to trade and competition, because there are so many barriers between provinces.
Part of the problem is that we don't trade enough. Also, we have very different systems, 10 different systems. We really need to integrate at all the levels of planning, systems operation and dispatch.
Liberal
Corey Hogan Liberal Calgary Confederation, AB
Thank you.
When we think about trying to push the country as a government to think more east-west and less north-south to increase energy security as we move forward—as I've said, that's tied to electricity intrinsically—what should we be thinking about?
It seems to me that there are going to be trade-offs when we do that, not least of which is that many of our provinces work on commercial terms with the United States. They make a lot of money trading with the U.S., as has already been mentioned. Our interests are broader than that. We are trying to make sure that Canada can have a secure energy future.
What do we need to be thinking about, and what should be reflected in this report?
Associate Professor, University of Calgary, As an Individual
I can offer two quick things.
In my activity with the provinces, one thing that's become abundantly clear—not to be disrespectful to anyone in the federal government—is that the feds need to support and not lead. The provinces fiercely guard their provincial jurisdiction on this matter. They have the expertise, so we're really looking for support from the federal government. Of course, financial support is something no one turns down, but the real goal is coordinating and convening that support while leaving the leadership to the provinces.
The other thing, on an optimistic note, is that there's a broad recognition at this point that we aren't fighting over the division of the pie. That has held us back all the years I talked about, those intervening between my father's remarks and today. There really is an expanded pie of opportunities here, because of this looming large-load growth going on in electricity. The provinces are recognizing that they can't fully capture it without looking at co-operation. That's important to recognize.