Evidence of meeting #37 for Transport, Infrastructure and Communities in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was trucks.
A recording is available from Parliament.
NDP
Vice-President, Global Market Development, Westport Innovations Inc.
The provincial government of Quebec, in their budget of 2010, introduced accelerated depreciation or accelerated capital cost allowance for the purchase of liquefied natural gas trucks. They also had a program targeted at reductions in greenhouse gas emissions in the transport sector, which provided additional incentives to Transport Robert.
Vice-President, Global Market Development, Westport Innovations Inc.
It provided a certain amount of financial incentives. It didn't completely defray the added cost of the liquefied natural gas trucks, but it certainly helped to pull the economics together.
NDP
Olivia Chow NDP Trinity—Spadina, ON
They're selling more natural gas, so I guess there's no payback period per se.
Are the British Columbia government and the Alberta government planning to do the same as what the Quebec government did, in terms of the tax credits and incentives?
Vice-President, Global Market Development, Westport Innovations Inc.
Both the Alberta and British Columbia governments have been very supportive of natural gas vehicles. Tied to British Columbia's climate action initiatives, it's a very good fit. They've been supportive in literature and in their natural gas strategy in British Columbia. The Alberta government has likewise been supportive. But at this point there is no specific legislation.
In British Columbia today, the purchaser of a natural gas automobile can receive a $2,500 cash credit towards the purchase of that vehicle. There are other programs that have been considered in British Columbia but not yet adopted.
NDP
Olivia Chow NDP Trinity—Spadina, ON
On the tax credit that was available in Quebec, is it a model that's being considered by other countries, such as the United States?
What is the net worth of the Quebec government's contribution?
Vice-President, Global Market Development, Westport Innovations Inc.
It can vary. It depends on the fleet's financial situation, the amortization schedule for the vehicle or fleet, and how they amortize the assets.
I think a good approximation of the value of the accelerated capital cost allowance is $20,000 per truck. The MTQ grant, I believe, is approximately $15,000 in additional incentives toward the purchase of the truck, for a total of approximately $35,000.
Vice-President, Global Market Development, Westport Innovations Inc.
That's correct.
NDP
Olivia Chow NDP Trinity—Spadina, ON
Is that something the industry is seeking from the Alberta and British Columbia governments? You said they were very supportive. Is that something that's being considered by the federal government? Does the United States government also have a similar program for their trucks?
Vice-President, Global Market Development, Westport Innovations Inc.
The U.S. government, during the recession, introduced a capital cost zero depreciation or accelerated depreciation to spur the purchase of all trucks, not just natural gas trucks. There's no advantage between a natural gas truck and a diesel truck in the U.S., but it did spur some investment in the trucking industry.
At this point I don't know if that accelerated capital cost allowance is being considered by British Columbia or Alberta. In the United States there are demands—at this point fiscally—for what they call “pay-fors” or corresponding compensation for any specific credit given to an industry. They are contemplating providing a tax credit—if you are profitable and paying taxes—against your taxes payable of up to $64,000 for a natural gas class 8 truck. That would be paid for through a levy put on the natural gas purchased by trucks. So a levy on liquefied natural gas is contemplated. It would be on a sliding scale, and it would slide over five years to zero. At the end of five years the levy would expire, as would the tax credit, once the industry was brought to a sustainable level.
The challenge right now for the industry, from a sales perspective, is that the volumes are very small compared to diesel vehicles. The costs are considerably higher for natural gas trucks than for diesel trucks because we aren't getting the volume of production that you get in the diesel industry. It's anticipated that by providing a five-year window of incentives in the United States, the industry can get significant enough volumes to be able to bring its costs down and become sustainable.
Conservative
Blake Richards Conservative Wild Rose, AB
Thank you, Mr. Chair.
I appreciate your being here today. It's been very informative and useful, and I appreciate that.
I'm always interested in finding ways that government can help set the stage for businesses to succeed. Often I find that things, like some of the trade deals our government has worked on, are often useful to companies like yours in terms of enabling you to prosper and expand and grow the economy and create jobs. I think that business is certainly where that often happens the best.
I know we've done a lot of work. The Prime Minister has had some trips to China, and we're working toward potential trade agreements.
I noted that one of your partners, Weichai Power, said in their recent annual report that they hold about 40% of the heavy-duty truck engine market there. It seems to me there is probably a lot of potential for growth, and obviously a lot of potential for this market.
Can you identify any barriers to expanding the opportunities you have with China that we could in some way help to remove, or anything in particular we could do to help find more room for growth for you and your market?
Vice-President, Global Market Development, Westport Innovations Inc.
First, I would say that we applaud the government's efforts in freeing up and removing some of the trade barriers. Whether it's with Asia or Europe, it's been a very important part of our success. We have partnerships, for example, in Korea and China, and with many European countries as well, and the removal of some of these trade barriers has been critical to making those succeed. We applaud that.
The one challenge we have as an organization is, how do we grow? How do we manage growth and grow the organization? With regard to how the government can help, certainly some of the trade missions have been very worthwhile. But we've now been in China long enough that we're pretty well established there. We have a large group of employees, both in Beijing and in Weifang, where Weichai is headquartered.
The efforts on the part of the government to remove barriers and also to improve cooperation between our large organizations can sometimes be helpful as well. That's certainly something we continue to support, and we will try to continue to be part of those discussions on an ongoing basis.
The biggest challenge we will face once the trade barriers are removed are some of the laws and codes and standards that exist, for example, between the United States and Canada. We have a great harmonization around greenhouse gas reduction in trucking. We have great harmonization around the emissions standards and whatnot, but the more we can do to further harmonize our standards with regard to a lot of the equipment manufacturing, the easier it is to get goods back and forth across the borders.
The less we have to do to certify a vehicle, for example, for British Columbia.... When we've done all of the work for the United States and we're covered in all 50 states, and all of a sudden we hit a wall when we have to meet certain criteria in Canada that may not make a lot of sense....
Conservative
Blake Richards Conservative Wild Rose, AB
I appreciate those comments. It certainly sounds to me as though you're appreciative and supportive of the efforts we're making as a government to remove some of those barriers and open up the markets. It's another example of where business can succeed when government sets the conditions under which you can do that. It's great to hear.
We'll focus back on North America now. A lot of the interest in natural gas powered vehicles recently is obviously as a result of the price of natural gas falling to a fairly low level right now. Obviously that's made it more economical at this point, but if we were to see a fairly significant increase in the price of natural gas in the future, I'm wondering how much of a cushion is built in with regard to that price and whether the industry can remain viable should there be a large increase.
Vice-President, Global Market Development, Westport Innovations Inc.
First, we think a lot of the evidence that exists out there today with regard to our supply scenario should mitigate many of the concerns you mentioned about a spike in prices. However, I think the industry thinks natural gas prices in North America are somewhat unsustainable at the moment because they are so low.
Importantly, as it relates to natural gas compared to petroleum-based products, natural gas as a commodity, as a percentage of the actual dispense price, which is the price of the fuel going into the tank of a vehicle, is much smaller than the percentage of petroleum in the price of a litre of gasoline or diesel. Effectively, natural gas prices could double, and the price of natural gas for a trucker or an automotive user would not double. It doesn't have the same corresponding relationship, because there's considerable energy put into getting the natural gas to the state in which you'll use it in a vehicle. That's where the bulk of the cost of natural gas dispensed into a vehicle is. So importantly, we could see natural gas go to four or five dollars, and we would not see a very significant rise in the price of natural gas for a trucker or an automotive user. That's just because of the total percentage of the commodity in the cost of the end-user asset or product.
NDP
Robert Aubin NDP Trois-Rivières, QC
Thank you, Mr. Chair.
Thank you for being here with us this morning, Mr. Burke. I would like to take advantage of your expertise for the few minutes I have.
A little earlier, in your presentation, you said that your group is a leader in alternative fuels. You mentioned electricity, natural gas and hydrogen. The discussion has focused on natural gas, obviously.
Could you enlighten me a little about hydrogen? Some people claim that hydrogen is really the energy of the future. My information is that you have even developed a technology that would make it possible for a motor to run on hydrogen.
Is my information correct? If so, when would the hydrogen motor be ready? Could you give me an estimate? Are we talking about 10 years, 20 years?
Vice-President, Global Market Development, Westport Innovations Inc.
Merci.
We have worked on hydrogen a considerable amount. We've done hydrogen-natural gas blends on buses in Vancouver, British Columbia. We've blended a certain amount of hydrogen into the natural gas to get improved combustion of the engine, but on a spark-ignited engine. We've also run hydrogen, in collaboration with BMW and Ford, in internal combustion engines—these are internal combustion engines, not fuel cells—with great success.
Our challenge with hydrogen has been infrastructure, supply of the fuel, and cost of the product. Today, it's not economically feasible, other than with hydrogen coming from waste or fugitive sources, to deploy hydrogen vehicles in significant numbers. That's what our evaluation tells us. But we think hydrogen has a bright future once we know how to produce it in sufficient quantities to support the automotive sector.
The benefit of natural gas today is that it is being produced in sufficient quantities to offset petroleum consumption. Hydrogen, in many instances, just doesn't have that advantage today, until we find economical and energy efficient ways to produce hydrogen. Today, hydrogen comes from two sources. It's either from the electrolysis of water or from basically splitting natural gas molecules, which is called “reforming”. Those two processes are quite energy intensive, and they come at a high cost.
We don't work on fuel cells. We work only on internal combustion engines. But we've had great success making injectors that can inject hydrogen effectively into an internal combustion engine, with great emissions results and great performance results.
NDP
Robert Aubin NDP Trois-Rivières, QC
You have not answered my question about the timeline. Could you tell me whether natural gas technology is the necessary interim step between the oil combustion we currently have and the production of hydrogen vehicles?
Vice-President, Global Market Development, Westport Innovations Inc.
It could be, but as far as the time, I'm not about to speculate. Hydrogen has been around for a considerable amount of time already. Yet it can't seem to get its market legs, so to speak, its ability to prove itself beyond small deployment projects. However, there could be a discovery, potentially at a Canadian university, of some better way of getting hydrogen to the marketplace and making it more cost-effective.
Certainly there have been tremendous inroads made by Canadian companies, such as Ballard Power and Hydrogenics, on getting the cost of fuel cells down and getting them to be very cost-competitive. The challenge now becomes putting it all together onto a vehicle such that the vehicle isn't so outrageously priced that it wouldn't be viable for a consumer.
NDP
Robert Aubin NDP Trois-Rivières, QC
In a future with a fleet of natural gas vehicles for the average person, how long do you think our natural gas reserves will last? Are we talking about conventional source natural gas, or do we also have to extract shale gas?
