Proceedings of the Standing Senate Committee on
Agriculture and Forestry
Issue 5 - Evidence - Meeting of May 11, 2010
OTTAWA, Tuesday, May 11, 2010
The Standing Senate Committee on Agriculture and Forestry met this day at 6:05 p.m. to study the current state and future of Canada's forest sector.
Senator Percy Mockler (Chair) in the chair.
[English]
The Chair: Honourable senators, I see we have a quorum and I declare the meeting in session.
[Translation]
I welcome you to this meeting of the Standing Senate Committee on Agriculture and Forestry.
[English]
Witnesses, thank you for accepting our invitation. I am Senator Percy Mockler from New Brunswick, chair of the committee. Before I ask senators to introduce themselves, I would like to bring to your attention that today, May 11, is, in the province of Quebec, the first ``Wood Day,'' a day that aims to promote the use of wood in construction and elsewhere.
I would now ask honourable senators to introduce themselves.
Senator Fairbairn: Senator Fairbairn, from Lethbridge, Alberta.
[Translation]
Senator Robichaud: Fernand Robichaud, from New Brunswick.
[English]
Senator Mahovlich: Senator Frank Mahovlich, Ontario.
Senator Finley: Senator Doug Finley from the self-proclaimed Ontario south coast.
Senator Plett: Senator Don Plett, Manitoba.
Senator Ogilvie: Kelvin Ogilvie, Nova Scotia.
[Translation]
Senator Rivard: Senator Michel Rivard, Quebec.
[English]
The Chair: Thank you.
The committee is continuing its study on the current state and future of Canada's forest sector.
Today we welcome you to the Standing Senate Committee on Agriculture and Forestry, namely the forestry side of the committee.
We have, honourable senators, Christopher Rees, Director for Ontario, from the Canadian Bioenergy Association; and Ms. Cara Clairman, Vice-President, Sustainable Development, Ontario Power Generation, representing the Canadian Electricity Association.
[Translation]
Thank you for accepting our invitation.
[English]
I have been told that the first presenter will be Ms. Clairman, followed by Mr. Rees.
Ms. Clairman, we ask you to make your presentation at this time.
Cara Clairman, Vice-President, Sustainable Development, Ontario Power Generation, Canadian Electricity Association: Thank you for having us here. Today I am here on behalf of the Canadian Electricity Association, CEA. I welcome this opportunity to talk to you about the tremendous potential of biomass from Canada's forest for both the electricity and the forest sectors.
The members of the CEA generate, transmit and distribute electrical energy to industrial, commercial, residential and institutional customers across the country every day. Our membership includes companies that operate coal plants, which do provide reliable and relatively low-cost electricity to Canadians.
Statistics Canada reports that in 2007 over 55 million tonnes of coal were burned in Canada to produce about 40 per cent of our thermal electricity. However, we do know that burning coal is one of Canada's largest contributors to greenhouse gas, GHG, emissions.
The CEA members are committed to managing greenhouse gas emissions. This is where we believe that biomass could play an important role if the right policies are adopted.
My key message in speaking with you today is about biomass. If biomass, sustainably harvested, is used to displace some of our coal that is used for generating electricity, it could be a big win for the environment and a big win for the forestry sector.
I will focus first on the benefits to the environment, which is my area of expertise, and talk to you a little about those benefits from biomass.
You may know that biomass is a renewable source of electricity because it comes from forest wood. I have some samples of wood pellets that I will pass around just to show you what we are talking about. We have two types of wood pellets from different Canadian sources.
You might wonder how this could be good for the environment. Of course, wood is renewable, can be sustainable and can reduce greenhouse gas emissions. It is renewable because if the forests are managed properly, the CO2 generated when it is burned is equal to the CO2 that gets taken up when the plants regrow. Basically, that is the assumption that you make, that you can make something a carbon benefit when you burn something that can be regrown. That works for agricultural biomass as well as forest biomass.
Some important considerations apply to how the forest is managed to ensure that it is sustainable. United Nations committees have created definitions of ``biomass'' to decide when it can be called sustainable and renewable. I have given you some of that information for background. I will not go through the definitions now, but the key is that the forest needs to be sustainably managed for it to be considered a sustainable forest product.
Although I am not an expert in forestry, it is my understanding that in Canada our forests are well managed. It is important for the health of our forests as well as for the reputation of electricity companies — whatever fuel we purchase from biomass — that we are confident that the forests are well managed and that we devote some research to advance the understanding of the forest ecosystem health and changes in the carbon content of the forest stock to enable this biomass process to go ahead.
One way to do that is through third-party certification of the forest, such as the process provided by the Forest Stewardship Council, FSC, the Sustainable Forestry Initiative, SFI, or the Canadian Standards Association, CSA, which are existing third-party certifications. That process would help electricity companies, CEA members and the public to know that the biomass comes from well-managed forests.
The technology of co-firing biomass with coal, which means mixing some biomass with coal, is a concept widely adopted in Europe to reduce greenhouse gas emissions. Without major modifications to coal-fired power plants, you can co-fire at rates of 10 per cent to 20 per cent in a conventional coal plant. Little modification is required. With a little investment, higher rates of co-firing could be achieved and a coal plant could be converted to 150 per cent biomass, which is a concept currently under consideration by Nova Scotia Power and Ontario Power Generation, OPG.
I will speak briefly to OPG. Earlier this year, we issued a request for indicative pricing to supply 90,000 tonnes of wood pellets per year to one of our co-fire stations — the Atikokan Generating Station — to convert that plant from coal to biomass. Engineering and logistical studies are under way for conversion at Atikokan and some of the generating units at OPG's other coal plants. In partnership with the Ontario Ministry of Agriculture, Food and Rural Affairs, OPG has launched a committee to consult the sector experts on commercialization of both agriculture biomass and forest biomass.
OPG continues to study carefully biomass repowering of our plants to ensure that we have all the knowledge on the potential costs and limitations of using biomass as a substitute for coal. OPG will proceed with plant conversions and final fuel and plant modifications only when power purchase agreements are in place and OPG's board and provincial governments have approved this conversion process.
I will speak to the environmental benefits. I have covered that it is renewable and can be sustainable if the forest is well managed, but I want to talk more about reducing greenhouse gas emissions. In figuring out how biomass can reduce greenhouse gas emissions, you need to take into effect the full life cycle of greenhouse gas emissions. That means looking at GHG emissions from the whole supply chain to determine whether there is a GHG benefit over coal when the emissions associated with forest management, wood pellet production and transportation are all taken into account. A paper published recently by the University of Toronto provides valuable information. If you are interested, I can provide you with this study.
The study compares the full life cycle of greenhouse gas emissions for two of Ontario's coal plants burning coal compared to natural gas and compared to co-firing with biomass and 100 per cent biomass. The results have shown that using wood pellets produced from a sustainably managed forest results in a significant greenhouse gas benefit. If you convert one of Ontario's coal plants to 100 per cent biomass, the plant produces over 90 per cent fewer GHG emissions when compared against coal. Similarly, if you co-fire at a rate of 10 per cent, you would still reduce greenhouse gases by about 9 per cent. Using wood pellets shows a significant benefit over gas firing. Another benefit is that it can be done relatively quickly compared to many other technologies that take much more time to put in place. That is particularly the case because existing coal-based infrastructure that exists in many of our provinces can be used.
The Dutch experience highlights how quickly you can get co-firing into your system and grow your renewable energy content. In just 10 years, the Dutch increased their renewables from zero to one quarter of the electricity generated in the Netherlands by using co-firing in their coal plants.
I have described the significant GHG benefits when biomass is used in co-firing with coal. I also said that it could be a win for the forest sector. We understand that 141 million cubic metres were reported used in 2008, which is the lowest amount that the forest sector has used in almost 20 years. Displacing merely 10 per cent of the coal burned in Canada with renewable biomass would increase the forest harvest by about 10 million cubic metres. Integrating sustainable harvesting practices, in particular, by using otherwise unsellable lower-value timber dedicated to wood pellets, can provide renewable biomass for the electricity sector that could be a significant stimulus to the forestry sector.
There are good opportunities for Canada's forest sector to assume a leadership position in technology development and adoption. For example, the black wood pellets are called ``torrefied pellets'' and come from a test facility in Quebec. Torrefied pellets are more durable and do not absorb water compared to traditional pellets. They can be stored outside and handled more like coal, thereby reducing a power plant's costs for co-firing. Several companies around the world are attempting to develop commercial-scale production of torrefied wood pellets. The successful players could be well positioned when greenhouse gas emissions from coal-fired facilities are regulated eventually. We expect some regulations later this year.
Finally, I will say a word about cost. Unless one has ready access to large quantities of low-priced wood waste, which is a rare circumstance, electricity produced from biomass is more expensive than electricity produced from coal or gas. However, if you compare it to other forms of renewable energy, biomass, in particular co-firing, can be very competitive. In a 2007 report from the U.K., biomass co-firing was among the least expensive forms of renewable energy production, with only landfill gas and sewage gas proving to be less expensive. Biomass also has significant added value to the electricity market because unlike solar and wind, which are intermittent in supply, biomass can be dispatched. It can be turned on and off at will, making it appealing to the electricity sector.
When biomass is used in Europe, it is a common means of reducing greenhouse gas emissions. However, to encourage its use, the policy-makers use one of two methods: They either subsidize the energy price with a feed-in tariff or some other form of subsidy; or they have a renewable portfolio standard, which states the percentage of renewables that must be in the mix. European utilities using biomass benefit from not having to purchase allowances or other offsets to comply with the European Union Emissions Trading System, EU ETS, by using biomass. It provides many benefits to European companies.
In Canada, forest biomass offers great potential as a means of managing the electricity sector's GHG emissions while, at the same time, helping the forest sector to diversify. Differing federal and provincial jurisdictions and lack of clarity on a national greenhouse gas management strategy means that the current policy path is not that clear. However, if forests are managed sustainably, we believe it has great potential to be a win for the environment and the forest sector.
I would be pleased to take any questions at this time.
The Chair: Thank you, Ms. Clairman. We will ask Mr. Rees to make his presentation, followed by questions from the senators.
Mr. Rees, please proceed.
Christopher Rees, Director for Ontario, Canadian Bioenergy Association: Thank you, honourable senators. I must admit that I had to do my homework before coming to this session. The Senate committee was an unknown entity for me. However, once I started reading some of the discussions and presentations of previous witnesses, I believe it is one of the best kept secrets in Canada. We spend so much time organizing conferences as the Canadian Bioenergy Association, yet I could see from the transcripts of your previous sessions that more dialogue that took place than at some of our conferences. Perhaps I can put a plug in here. If people are watching this at some time in the future on CPAC, perhaps they can invite 10 other friends to listen as well because it is a great source of information. I would like to compliment the analysts on the work that has been done so far by the committee.
The Canadian Bioenergy Association, CANBIO, is an entirely voluntary association across Canada. We are supported only by private enterprise. We have members from different governments and other associations, but we are entirely a private organization.
For us, bio-energy includes the production of heat from biomass; the production of power, as Ms. Clairman has mentioned, electricity; and the production of biofuels — for example, ethanol and biodiesel and also bio-products. At the end of the day, that is where everyone wants to go, to get to bio-products. That is the same as an oil refinery, except it is a bio-refinery. You will be able to produce, at some point in the future, all the same elements that you get right now from oil. By the way, if you went around the room, nearly all of our clothing material is from some sort of derivative of oil. There have been bio-energy fashion shows already where the product comes from a biodegradable bio-product. That is the promise of where we want to be.
I must be frank with you, however. The promise of bio-energy in Canada so far has been rather illusory. There has been more promise and less reality. In fact, the Canadian Bioenergy Association is organizing a conference here, June 15 to 17, on the issue of what makes a bio-energy project successful. Believe it or not, we are still looking to ensure that projects can move ahead successfully. That is the first day. The second day is to look at what policies need to be put in place.
We organize conferences and investment missions on a continuing basis. Right now, we are taking a mission to China for a number of bio-energy projects, one in Drayton Valley, Alberta, looking for Chinese investors. We have organized conferences to show private-sector entrepreneurs in Canada what happens in Europe. We took a mission to Italy and France recently to show them projects there. We have taken them to Northeastern United States. We are trying to move the ball forward in bio-energy projects.
I would like to speak to you today about a number of issues — five, in fact, that we have chosen into emphasize. First, we fully support the direction of your committee that any forest policy must strike the right balance among the economic, ecological and social roles of the forest. That is a mouthful; it is hard to do it. That is why we are constantly trying to move forward.
I know your committee is called ``agriculture and forestry,'' but bio-energy is a new industry. It can and does grow from agriculture and forestry, but to simply assume that the bio-energy business is an add-on of forestry or agriculture is not the reality. It is a new industry. However, we constantly hear people talk about bio-energy as being part of the forestry industry or part of the agricultural industry. In your deliberations, we would like to ensure that you understand that bio-energy includes both forestry and agriculture. Some of your presentations so far have emphasized that it is just forestry. Certainly, agriculture is just as important to us in terms of renewable energy.
Early in your process you had testimony from Bill Love, from the Canadian Wood Council. He was emphasizing how environmentally correct wood products are and how wood is the best environmentally sound product for building. Senators pointed out that while that may be the reality, the public does not necessarily believe it. I think you pointed out that much of the public does not like the idea of forest harvesting. We have the same issue in bio-energy. There is a disconnect between the reality, as Ms. Clairman has indicated, of the environmental benefit of using biomass for the production of bio-energy and the perception by the public that cutting trees is bad for building and bad for renewable energy.
We would like you to address this in your report and the need to provide public education about the environmental benefits of wood and agricultural products both for building and for bio-energy. It is a hard message to get across. From the Maritime provinces right now, it is a hot-potato issue. Many bio-energy projects are being held back because of this perception, that the public simply does not want any more forestry harvesting. That is the number one issue for us.
Another issue is the integration of bio-energy with existing industries. Certainly, our first choice is to support the forest industry and the forest companies that want to move into bio-energy. It is the same from the agricultural side. The uptake has been slow. We are seeing more progress in this last year for forest-product companies to move forward into bio- energy. I have encountered a handful of companies recently that have now created a bio-energy division within their forest-products company. That did not happen a year and a half or two years ago. A renewed interest is occurring, and the Forest Products Association of Canada, FPAC, came out with a report on bio-refineries. That is where the forest industry wants to be, namely, at the bio-refinery stage. They see that as the end point that would revitalize their industry and probably transform it from what it is today.
In CANBIO, we walk a tightrope. Many of our members are forest and agricultural companies, so we support building on the industrial base, but we also need to create room for maneuvre for new entries into the marketplace. That is the real problem right now. A number of provinces in Canada have been experimenting with a tenure system for Crown lands. Several weeks ago, Ontario announced a proposal to open up the tenure system. This is a hot potato. The forest product companies are used to having access to and harvesting Crown land for an extended period of time. Most provinces are going on a piecemeal basis and are asking to open 15 per cent or 20 per cent of the market. At the end of the day, though, we need a more stable system across Canada where the existing industry will benefit but where there is room for new entrants into the marketplace. It is a hot potato; I am not sure how it will be resolved. However, access to fibre for the bio-energy industry must be resolved for the industry to take off in Canada as it has in Europe.
Perhaps one of the most fundamental issues for us to move the whole bio-energy issue forward is to get value in carbon. That can be a difficult statement to make because everyone responds with, ``You mean a carbon tax?'' I am not sure how it will work, but we have to get a value on carbon. That is the official position of the Canadian Bioenergy Association.
You can mess around with markets and you can mess around with subsidies all you want. However, at the end of the day, the only solid basis to move forward on is that you have to place a value on carbon. I am sure the many creative minds around the table can figure out how to do that other than calling it a carbon tax because we know that does not sell.
Senator Mercer: That does not work.
Mr. Rees: It does not work. Anyway, I will leave it to your imagination as to how to get around that one.
I have a few smaller points. One is the issue of standards. We have the most advanced technological biomass boilers from Europe for heating in schools, offices and homes, but we cannot use them in Canada because they have to be certified to North American standards.
Presently, free trade negotiations are happening between Canada and the European Union. We have asked to have mutually recognized standards. Guess what? The European standards are way higher than what we require anyway, so why not simply accept them? We believe in promoting technology from Canada, but we also believe in using the best technologies available today. You cannot get the bio-energy market going until you look at supply and look at demand, as you have rightly done on your side.
You need that technology from Europe, and to get that in, we have highlighted two things here. First, right now, the ASME — American Society of Mechanical Engineers — boiler code is a real hindrance to moving forward. Second, everyone believes we are back in the last century, when if you had a steam boiler, you had to watch it every second otherwise it would blow up. That is not the case any longer. The regulations in Canada are all provincial regulations, so I am not sure how you handle this. However, the regulations require you to have a certified engineer there 24 hours a day, 7 days a week, just to watch the stupid boiler.
In Europe, it is all computerized. No one is sitting there watching the boiler. They come in one or two hours a day to check on things and make sure everything is working, but the technology works well. All we are saying is that if you want to move forward in the bio-energy business, you have to look at the standards and bring them up to today's realities.
The last point, incentives, I almost hesitate talking about because every time you talk about incentives, you have to mess up the market a little further. If we could go in and take out all the incentives that already exist for the existing energy producers, then I do not think we would be asking for incentives for bio-energy. The reality is, however, that until you have a value on carbon, you have to provide incentives for those companies trying to get into renewable energy and bio-energy. It is a horrible chicken-and-egg situation. As a private-sector economist, I do not like to be here saying that we need more incentives. I am sure you get that from every industry that comes before you.
In a nutshell, at CANBIO, we believe bio-energy has enormous potential, but that potential is being stymied by policy, the lack of carbon tax and the unharmonized situation of policies, and codes and regulations throughout Canada.
Honourable senators, that is the presentation of CANBIO.
[Translation]
Senator Robichaud: My first question is for Ms. Clairman.
[English]
You say in your presentation that co-firing rates of 10 per cent to 20 per cent biomass can be achieved without ``major modifications'' to power plants. What is a major modification?
Ms. Clairman: Some differences in the handling of the fuel need to be made for conveyers as well as storage. Those modifications need to be made. For the actual boiler itself, very little has to be done. The boilers can burn wood pellets just the same as they burn coal, in particular, certain types of boilers. That is not universally true.
For example, in our northern plants at Atikokan, they are designed to burn lignite coal, which is more similar to wood. It is a simpler conversion, whereas if certain boilers were designed to burn different types of coal, some modifications are required. Still, it is relatively simple to do compared to building a new plant, for example, a biomass- dedicated plant.
Senator Robichaud: This is for only 10 per cent to 20 per cent. Are major conversions necessary for more than that? Do we need to apply a new technology that only exists in Europe?
Ms. Clairman: No. Even for 100 per cent biomass, our Atikokan station requires relatively minor modifications. It does not change the boiler; it changes the handling and the monitoring. The fire risk is different, et cetera, at different temperatures, but overall the same infrastructure can be used.
Senator Robichaud: Where does the coal come from that is being used in Ontario now?
Ms. Clairman: It comes from a few places. Most of the coal that goes to our Nanticoke facility comes from the United States, from West Virginia. That is the bulk that goes to the Nanticoke plant that burns a different type of coal called PRB — Powder River Basin.
The coal that goes to Atikokan and Thunder Bay comes from Saskatchewan, I believe — it may come from Alberta. I know it is Canadian.
Mr. Rees: I have a quick point here. The rule of thumb is the bigger the boiler, the more diffuse fuel it can burn. If you have a small residential pellet boiler, the pellets have to be certified to a particular standard so that there is a low ash content. The bigger you go in the boiler, the more you can use many different materials in it. The boilers at the very large stage are easier to convert over to different types of fuel. That is the main point here. For some of the conversions, with a large boiler, it is much easier to do than with smaller projects.
Ms. Clairman: Typically in electrical, the boilers are very large.
Senator Finley: I am a visiting senator to this committee. I used to be on it full time. I have three questions; two I am sure are very simple, and one is perhaps a bit more global.
First, how do you torrefy pellets? Second, what is the level of residue with wood pellets compared to coal or other burning systems, if you like? What is the volume, and how do you get rid of it?
Ms. Clairman: With respect to torrefied wood pellets, they are heated and the moisture is roasted out of them basically. That is how I understand it. They become more impervious to water.
Senator Finley: Is there treatment? Is something added to the pellets?
Ms. Clairman: My understanding is that it is heat. There would be a little more energy, which means the greenhouse gas benefit would be a little less because you have to use some energy to do that process. That is my understanding.
Senator Fairbairn: Is that were the coal comes in again?
Ms. Clairman: You do not necessarily need coal for that process. It depends on the source, what they use to power that facility to heat it. They may use electricity, which of course comes back again from our plant.
Senator Finley: I come from Southwestern Ontario. We have, for example, the Nanticoke Generating Station. When Bruce Power was down recently, we were looking to convert part of Nanticoke to nuclear power. We have built the ugliest wind turbines that I have seen throughout some of the most beautiful parts of Southern Ontario. We have thousands of acres of farm land being converted to solar panels. We have a number of competing firms telling us about biomass. Some people tell us they use trees, of which we have many. Other people talk about growing prairie long grass to develop biomass. Then, some folks tell us that the way to do it is to burn municipal solid waste, of which we have a great deal. We have just about every range of energy production that you can possibly think of in our area.
This question makes reference to OPG. I am told that one of the major problems some smaller companies have is getting tapped into the grid. The slots to get on the grid are almost the same as a lottery. First, how accurate is that? Second, could you envision Nanticoke becoming or continuing to be a major energy producer with biomass and getting rid of the coal? Nanticoke is North America's second largest polluter. Tell me about the slots, how you get them and the evenness of the price of the slots.
Ms. Clairman: I will do my best. On the first question, it is a transmission issue. Ontario Power Generation is the generating company and Hydro One is the transmission company. Those companies were split off in 1999. It is a separate business, and I am no expert on it. I understand that there is difficulty getting on the grid because many of these wind and solar projects are distributed and in places where previously there were no transmission lines. These gaps are just one of the big issues around the government entering into these contracts. I cannot answer it in more detail than that because it is not our business.
Senator Finley: You are saying that as far as biomass is concerned, it would have to be set up near one of the existing grids or origins on the grid.
Ms. Clairman: It is certainly simpler where the infrastructure is in place. It can happen separately, but then you have the same issue of having to get hooked up. One of the advantages of burning biomass in an existing facility is the existing transmission lines to the grid.
Some generation will be required at Nanticoke because it plays a specific role in supporting the grid in the way the existing infrastructure is set up. It is well understood that something is required there, but it does not have to be as substantial or as large as it is currently. Our proposal is to put some biomass or co-firing with gas or gas alone. We think biomass is a good option because of the reduced greenhouse gas benefit. Of course, trees and agriculture waste can be used. We are not looking at municipal solid waste because our boilers would not be able to accept it. We are not behind the nuclear proposal; rather, that is Bruce Power's proposal for the area.
Senator Finley: Thank you.
Mr. Rees: I will add a few things from CANBIO's point of view. Certainly, the issue of getting tied into the grid for many small developers is a problem. Most developers, no matter at which province they are looking, have come to the realization that they need to follow the grid to where they can hook up. In Alberta, that is precisely what they have done for their wind power.
Senator Fairbairn: Is that a large part of the area?
Mr. Rees: It is in the south, yes. Compared to biomass, wind and solar do not require any feedstock. Once you use biomass, whether it is pellets or chips or anything else, you have to store it and move it around. You cannot use pellets at Nanticoke if they are not torrefied pellets because the storage places would have to be far too big.
By the way, take two different pellets and drop them in a glass of water. You will see that the light one will absorb the water within about an hour's time. The torrefied one can be left for a week and you will not notice any difference. That is the major benefit of the torrefied pellet.
The issue with biomass is that you have feedstock that requires storage and moving around. People in communities do not like too many trucks. Even in Northern Ontario where I live, there are certain limits to how many trucks we want on the road. As well, the pellets create dust. It is a more complicated thing to do than the other renewables such as solar and wind.
Currently, everyone is playing some angle of biomass. For Nanticoke, so much biomass would be required that you would have to use everything available out there. It would not be simply one source or another.
Senator Mercer: I was smiling when you talked about putting a wood pellet in a glass of water. We had such an example at a meeting the other night.
Dust on the roads from trucks on the roads and expensive electricity versus jobs in rural Canada, not in downtown Toronto or downtown Halifax, where we desperately need a way to diversify income. Rural Canadians are the most enterprising people, from farmers to those who work in the forest industry. It seems frustrating that we are missing the boat, given that we have so many trees and so much waste product from trees.
Ms. Clairman, you made reference to Nova Scotia Power in your comments. I would like to hear more about what you said, and I would like to go to your chart on the Atikokan Generating Station. You talked about greenhouse gas emissions and showed the differences from coal only to 100 per cent wood pellets. The differences are dramatic.
Ms. Clairman: That data took into account all the trucks and the full life cycle of the GHG emissions.
Senator Mercer: It is not just about the burning but includes the transportation of the pellets, et cetera.
Ms. Clairman: That is right.
Senator Mercer: Where are they on this scale, and what is the plan?
Ms. Clairman: At this time, the project is not in existence. This graph depicts a study done at the University of Toronto on GHG emissions and what they would be with the different sources. We have done a number of test burns, much research and pilots, but the actual conversion of Atikokan has not taken place. This is still awaiting provincial government approval. It is not a done deal at this point.
Senator Mercer: The province is spending a great deal of time talking about nuclear energy, which takes years and billions of dollars to build. I am not speaking against nuclear energy; I am in favour of it. However, if we only have to make small modifications to the boilers at Atikokan, we could be reducing greenhouse gas emissions plus putting people to work somewhere in the country making wood pellets, whether it be in Northern Ontario, Quebec or, even better, in the Maritimes.
Ms. Clairman: In this particular project, it would be from Ontario.
Senator Mercer: Did you not make reference to Nova Scotia Power?
Ms. Clairman: Yes. I am not an expert, and I am not from Nova Scotia Power, but I understand it is looking at some co-firing and doing some studies in terms of their own coal plants. They have a number of aging coal plants. They are looking at tests at 100 per cent as well. They have not decided which route to take, but they are doing a number of tests and research. They do not have an actual project on the ground of which I am aware.
Senator Mercer: None of Nova Scotia Power's coal is Canadian coal any longer, even though Nova Scotia is known to be a coal-producing province. It is not anymore. We import our coal from Venezuela and other parts of South America.
Mr. Rees, you said bio-energy is a new industry. I like that concept. You then tried to distance it from the forestry and agriculture sectors, when I see it as — I do not want to speak for my colleagues — an integral part of what will happen in rural Canada. We have farmers and people who work in the forestry sector, and somehow we have to find a way to plug them into this new industry that you talk about, bio-energy. You have obviously stated some of the things. However, is there an effort to work with the various agricultural organizations? You have talked about the people from forestry sector. What about the various agricultural organizations? Have you tried to integrate them into your process?
Mr. Rees: Yes. In fact, we have members at CANBIO from both the forest-products sector and the agricultural sector. Right now, the agricultural sector is very active when it comes to biofuels, whether it is crops or feedlots. Certainly, you have a great deal of biofuel development, again, in Alberta. Agriculture is where it plays, generally.
Agriculture can also produce pellets. However, so far, pellets produced from agricultural feedstock have a much higher ash content, so they burn less well. Certainly, when it comes to electricity generation, the large boilers, once again, can tolerate an agricultural pellet.
I had mentioned that the bio-energy industry is an industry in and of itself. A large portion can come from the agricultural sector and from the forest sector. To give you an example, we introduced a large Canadian-based chemical company to Northern Ontario. They wanted to develop the bio-energy business there. One of the major issues that they ran into was the concept that if they are in bio-energy and they wanted access to forest resources, they should have to manage those resources just the same as the forest companies. They said, ``We are not in that business. We want to produce bio-energy. We are not into forestry operations. We are not into harvesting. Therefore, whoever wants to do that can bring that feedstock to our doorstep so that we can produce both energy and electricity. That is the business we are in.''
Senator Mercer: If you are only harvesting, it will not balance off if you are not managing the woods properly. You have to regenerate.
Mr. Rees: You cannot assume that a bio-energy business has to be exactly the same as a forestry business. I agree that there should be vertical integration. You need to build on the existing base, but you also need to leave room for new players to come in to add further value to that base. The assumption that the bio-energy industry is only forestry and agriculture leads us in the wrong direction. That is 75 per cent but not 100 per cent of the business.
[Translation]
Senator Rivard: I would like to start with a comment. You said that the committee is perhaps the best kept secret in Canada. I can tell you that it is thanks to people like you who come and inform us about the benefits of biomass, for example. Last week, we had the pleasure to have here, among others, Mr. John Arsenault, from Lake Megantic, in Quebec, who demonstrated well the importance of the wood pellets industry and the market in development. We had the pleasure to have Mr. Guy Chevrette, former minister responsible for forestry in Quebec, who is now CEO of the Quebec Forest Industry Council. Like you, those people made us aware of the fact that there seems to be among the public a general lack of knowledge of the benefits both of the forest and the biomass. On our side, each of us must do his job so that people accept these products.
I make somewhat a parallel with the Alberta oil sands, where some people, because of a possible lack of knowledge, talk of ``dirty oil''. Without saying that oil sands are good for the environment, the damage they cause may be controlled. It is an industry which yields billions of dollars in economic fallout and thus maybe one day, we will have the same results with biomass. This was my comment. I now come to my question.
It would seem that 50 per cent of the emerging bio-economy companies have great difficulty in finding venture capital, even if there are two funds, the first being Sustainable Development Technology Canada and the second, NextGen Biofuels Fund. What would you have to suggest to enable those emerging companies to have easier access to venture capital?
[English]
Mr. Rees: It is certainly an interesting and important question. Basically, the reason why banks are hesitant to support new ventures into biomass is because those ventures cannot prove they have a long-term contract for the feedstock. By long-term contract, we are basically talking a minimum of 12 years, but better 20 years.
In British Columbia, they tried to open up the market somewhat to the traditional forest lands by offering the possibility for bio-energy companies to get part of these long-term contracts. It did not work out so well. That is the major hiccup right now, that to be financeable, you have to be able to show that you have a market for your product. Let us say it is pellets. You have to show you have a market for those pellets. The best way to show you have a market is to have a long-term contract for the sale in Europe. You have to show that you have all the feedstock necessary to produce your product.
It is really a Catch-22 situation for small, new entrants. If they cannot get normal bank financing, where will they get the financing? Who will take the risk? It can be a substantial risk.
Your suggestion in your interim report of what you call ``forest credit Canada'' is an idea worth pursuing. Certainly, it is a high-risk business. Bio-energy for small entrants is a high-risk business, whether it is energy production or whether it is heat.
In Ontario, you have the Feed-in-Tariff Program, or FIT Program. However, if you look at all the projects so far in Ontario that have been approved under that program for the production of electricity, we do not have any bio-energy ones other than the production of methane gas. In the ones announced in the first go-round of approximately 120 or 130, there are only two methane projects. The whole mechanics of getting a project to market in the existing situation, where you have difficulty improving your market and difficulty in guaranteeing that you have the feedstock available, is difficult to finance.
Something similar to a forest credit program, together with a push by governments to create those markets, is a way for provincial governments to do more to point out the benefits of bio-energy use, whether it is for heat or electricity in their own provinces. We are not seeing that across the country — I know Quebec has done a great deal of work on that already — and that is why I prefaced my remark earlier by saying that, so far in bio-energy, there is more promise than reality.
[Translation]
Senator Rivard: Beyond venture capital businesses or banks, do you believe that the federal government should get involved financially in pilot projects to demonstrate to potential customers the benefits for the economy, for the environmental economy, for CO2, et cetera?
[English]
Mr. Rees: I think pilot projects are useful, particularly if they are pilot projects that can be developed with the private sector. Therefore, in the last paragraph of my submission, I indicated a number of things there. First is to have capital investment tax credits of 30 per cent to incent investments and attract capital.
We have been around this a number of times, and 30 per cent is the magic number. If you only have 20 per cent it is not enough. If you want to give 40 per cent or 50 per cent, we will take it, but 30 per cent is really the level that you need. It will need some sort of revolving fund, but that could be forest credit Canada. Extend capital incentives in relation to biofuels beyond one plant.
The tradition we have in Canada is to do pilots and to fund projects that demonstrate a new technology once. Then if the company gets money for that one demonstration, they cannot get any more. If you look at the whole biofuel section right now you have to do two, three or four demonstration projects before you can actually work it out because there are different levels; different types of feedstock.
The federal government could do much more to provide incentives for the development of the bio-energy industry. The most important thing is to have policies in place that will be there for the long term. The ecoENERGY programs were good programs, but they are not good if they are only in place for four or five years and then are withdrawn. It is better to have less ambitious programs but to have them in place for a longer period of time.
I understand that the government does not have long pockets and cannot support programs all the time. However, it would be much better off to have programs in place for a longer period of time, such as they have in Europe, rather than to have stop-and-go programs depending on the flavour of the day in government.
Senator Plett: I have two questions and one may be more of an objection than a question. Last fall we were told that construction waste accounts for about 30 per cent to 40 per cent of all municipal waste. Of that amount, about 80 per cent is scrap wood.
How much of that scrap wood could be used for wood pellets? What are wood pellets? What do they primarily consist of? Is scrap wood something that we could be using for that?
Mr. Rees: Yes, you can use scrap wood if it is clean scrap wood. If it has been dragged over patches of oil or if it has impediments in it, you must be more careful. However, you can use scrap wood.
You can use many different sources of wood to produce pellets. There are standards that can be put in place. Europe has a standard and the U.S. has a standard for the production of pellets. Canada has no standard for the production of pellets. Once you put the standard in place, the market and the producers will figure out how to meet that standard using different sources, whether it can be softwood or hardwood, whether it can be admissible solid waste. You must have a standard in place because that is what they will have to produce to.
Senator Plett: I am not sure how we will get standards. I do not know which one has to come first. I agree with standards, but if there is no track record, it is difficult to set a standard.
Mr. Rees: You can borrow it from the U.S. or from Europe.
Senator Plett: Ms. Clairman, in your presentation you spoke about both cost savings and emissions created. I think you used all fuels that we are using now in saying that biomass would save us money. Perhaps I did not understand you correctly, but I think you included even natural gas.
Ms. Clairman: I can clarify that. On that study, comparing gas to co-firing to coal to 100 per cent biomass, that is the greenhouse gas reductions, not money saved.
Senator Plett: In that case, I will not ask the question.
Mr. Rees, you talked about bringing different heating plants over here and boilers from Europe. They are not approved here, however. I have spent my lifetime in the heating business and have purchased many what would be considered home-built boilers in Manitoba. Many of the Hutterite colonies are building different heating plants. I have personally gone out to get CSA approvals and ASME approvals and did not have that much difficulty.
Perhaps we should have someone from the Canadian Standards Association come in as a witness to talk to us about that.
Why are we having a difficult time if we are bringing approved equipment over? Personally, I cannot see where we would have a difficulty. I think we should be able to get approvals quite easily.
Mr. Rees: Right now the easiest place to get approvals is in Oregon; test labs in Oregon. Once they are approved, then they are good for the North American market, and not just Canada but Canada and the U.S. It tends to be costly, however, and it tends to take a long time. A number of boiler producers from Europe have gone through that but not that many, maybe three. One that comes to mind is a company called KOB. They have gone through it. A company from Ireland has gone through the process.
Our point is that the standards of these boilers are already well above what should be required for North America. We would like to see a mutual recognition of standards of boilers between North America and Europe. Between Europe and Canada would be a good starting point. That is why I mentioned that the bilateral trade negotiations are going on now. This is an issue that we flagged for those negotiations. That would make it possible for these boilers to be imported into Canada more easily than they are now.
Can you go through the process? Yes, you can. Depending on how different one line of boiler is from the next, you may have to do it once or twice. However, we think that the level of efficiency and the level of environmental benefit of the boilers that are already in existence in Europe should be recognized already without having to be retested again in Canada or the U.S.
Senator Plett: What regulations were you referring to that we can later expect to see? You were talking about regulation changes. Are they significant? Could you touch on that briefly?
Ms. Clairman: As you probably know, the federal government had a number of different proposals on the table to regulate greenhouse gas emissions over the years. We expect electricity to be one of the first sectors regulated. Recent meetings between Minister Prentice and the CEOs of electricity companies suggest that we will see regulations this year or next year to come into effect in 2015. That is our understanding. At this time, no official document is on the table, but we understand that we will see it soon.
Senator Plett: I would encourage us to consider bringing in a witness from the Canadian Standards Association.
The Chair: Yes, we will do that, Senator Plett. We must also be mindful of the provincial regulations that impact federal regulations or regulations that come forward.
Senator Duffy: Thank you both for excellent presentations. I echo the words of my colleague: It is the quality of the presentations that makes for compelling viewing on the part of our audience.
Ms. Clairman, Senator Mercer and other senators from Atlantic Canada raised the question about coal-fired electricity generation. It is big in Ontario, but it is huge in proportional terms in both Nova Scotia and Northern New Brunswick.
They bring train loads of coal from West Virginia and ship loads of coal from South America to produce electricity, yet you say in your brief that electricity produced from biomass is much more expensive than electricity produced from coal or natural gas. What is the price comparison with coal? It is mind boggling that given all the logistics involved with coal, to say nothing of its polluting qualities, and that we are surrounded by trees, it would be that much more expensive to produce with biomass.
Ms. Clairman: Perhaps Mr. Rees will be able to add to this. The biggest costs relate to the harvesting, collection and transportation, which is dispersed. It takes many trucks to do that collection and distribution whereas coal comes in one large ship or one train, which tends to be much more economical. My understanding is that the big difference is in the transportation costs. Mr. Rees, do you have anything to add?
Mr. Rees: For anyone, it is the delivered cost per tonne. I am not sure what the price of coal is these days, but pellets hover around $200 per tonne, which is probably three to four times as much as coal. The torrefied pellets are more expensive than the normal pellet. Compared with coal, biomass has a substantial premium on delivered cost per tonne.
Senator Duffy: Is that cost factor the main reason that we have not jumped into this sooner?
Ms. Clairman: I believe that is one of the main barriers. It is more expensive but has other benefits. A price on carbon would certainly even the playing field much more because that price would not affect the cost of biomass but would affect the price of coal.
Senator Mercer: Senator Duffy has a good point. However, you cannot factor in the transportation cost when you look at what else it is doing to the community and, in some cases, keeping communities alive. In some places, where some of these old coal-fired plants exist, you might be keeping the generating station going, period. If they do not clean up their act, they will be closed and off the grid. Then, the cost of electricity in provinces such as Nova Scotia and Prince Edward Island, where it is already extremely high, will be higher. Anything we can do to keep the price down will help.
Ms. Clairman: In addition, it is one thing when you compare the price of coal with biomass but a better comparison might be with other renewables. When you do that, the price is much more competitive.
Senator Duffy: Mr. Rees, you are a compelling spokesman for your association, however, as an evangelist for bio-energy, I salute you. In your brief, you say that you would urge the federal government to do more to illustrate the benefits of using wood and wood residues. We have had witnesses from concrete and from steel who have been quite open about how hard they work and how much effort they put into ensuring that architectural and engineering schools are aware of the latest technological developments.
I was a little disappointed with the attitude. Perhaps in an economic downturn, people tend to get defeatist, but the people from forest products struck me as not being energized to the same degree that you are. I salute you for your energy, and I hope that they learn from you that part of it is about going out and selling your options. Thank you both for coming here this evening.
Mr. Rees: Thank you, Senator Duffy. I work in the forest sector as well. In fact, recently, I did some work for the Canadian Wood Council. We have looked at why concrete and steel companies are much more effective at getting their message out. Those industries are much more concentrated. There are fewer large players, so it is easier to coral all the cats. The forest and wood products industry is so diverse, with big and small players right across North America. The industry knows that it needs to bring more power to bear on getting the message out.
The point that I was making is that if the Government of Canada is convinced that wood is the best environmental solution, then having the government partner with the forest industry would help the industry move ahead in leaps and bounds. This has happened in Europe, where the European community has come out and told the industry to build with wood because it is the best environmental solution. The industry must get its act together, but I was making a plea for more help from the federal government as well.
The Chair: Do you want to want to add anything, Ms. Clairman?
Ms. Clairman: I have nothing to add except to say thank you for having us come here to make these presentations.
The Chair: Before concluding, we have two other senators.
Senator Fairbairn: You started talking about the area that I am from, where coal has been forever. Would you be looking more in the area of the mountains, water and valleys around Lethbridge, Alberta, or would you be looking in the area of Medicine Hat, which has many rivers and gas resources. Do you stay in one area or do you do other areas?
Mr. Rees: Certainly, Alberta is an interesting point in case. The work that I was doing in Alberta related to all renewables, not just to biomass. In Alberta, there is a north-south divide. The north has a large amount of forestry, and the south has a large amount of agriculture, but not much water.
Senator Fairbairn: Quite a large amount of water comes from those mountains.
Mr. Rees: When it comes to bio-fuels, one of the issues is getting enough water for its continued production.
Senator Fairbairn: Would irrigation be part of that?
Mr. Rees: It might be a competing use. Wind power has developed substantially in Southern Alberta.
Senator Fairbairn: You can say that again.
Mr. Rees: If you look at a wind map of Canada, it is one of the best areas in wind development.
Alberta presents an interesting case because, particularly in electricity generation, it is a private market. It is not the same as Ontario. You do not need to convince every electricity generation plant to try co-firing with biomass. You only need one, and that one can take the lead. They have not bitten so far in Alberta, but I am optimistic that we will see bio-energy both for electricity production as well as heat production and that bio-refineries will emerge in Alberta perhaps faster than in some other provinces.
Senator Mahovlich: I want to thank the witnesses for coming to give us their advice on biomass.
I just got back from New Orleans. I was wondering about the risk in this business. Is there any risk to this biomass business? You have no idea what it will cost the American government for that spill in the Gulf of Mexico.
Mr. Rees: Are you talking about environmental risk?
Senator Mahovlich: I am talking about the cost of trying to stop the flow of oil.
Mr. Rees: No.
Ms. Clairman: Do you mean the environmental risk?
Senator Mahovlich: That is environmental risk also.
Mr. Rees: I do not think there is an environmental risk in bio-energy, other than having to marry the harvesting of the forest and agricultural resources in a way that manages it for the future. That is where you get the push-back from the public. They say that if we cut more and more trees, our forests will be destroyed. We have to get across the message that the forest must be managed in a sensible manner for the environment and that that is still the best way to do it to promote bio-energy. However, you do not have the environmental risks for bio-energy that you have for oil, for instance, or for natural gas or coal.
Ms. Clairman: As in any type of boiler, some safety risks have to be managed, just as for coal. Coal dust carries certain risks and wood dust will have similar yet slightly different risks. You have to manage the safety aspects for the workers.
Senator Mahovlich: They are minimal, though.
Ms. Clairman: They are manageable and similar to the risks that we have always had to deal with, explosive risks.
Senator Mahovlich: It is similar to atomic energy, although not catastrophic.
The Chair: Senator, do you have another question?
Senator Mahovlich: I did, but I lost my concentration.
[Translation]
Senator Robichaud: Mr. Rees, you talked about bio-products both on the forest and on the agriculture sides; you even looked at your jacket. When will we be able to have these products?
[English]
Mr. Rees: Bio-refineries exist to a certain extent already for the production of biofuels and where you get co- production of glycerin, for instance, and where you are using animal feedlots to provide the energy to run the ethanol plant.
To get to the stage where you are extracting chemicals, there is probably a mixed point of view on that one as to how far away it is. Some people say that it may only be three or four years; other people think probably 10 years. The breakthrough comes for lignocellulosic ethanol — that is, the production of ethanol from wood product rather than just corn and agricultural product. The extraction of chemicals then becomes much easier. The technology leapfrogs at that point. Many people are optimistic; a number of pilot projects are going ahead in the United States right now. A number of pulp and paper mills across Canada are particularly well suited to move into the bio-refinery business. Once again, your own province of Alberta is moving ahead nicely. There are opportunities for pulp and paper mills right across the country to move into that stream of bio-refineries. My guess is between five years and 10 years.
Senator Mahovlich: In the United States, most of the lumber properties are privately owned. Could they not manage their properties properly? Is it easier for them than for us? If our government owns most of the properties, would it be easier for the United States to take the lead on this issue?
Mr. Rees: Do you mean owning the wood?
Senator Mahovlich: I mean owning the wood or owning the biomass, the pellets; making the pellets.
Mr. Rees: In Ontario, you have both Crown lands and private lands. In Southern Ontario, most of the lands are private. In Northern Ontario, most of them are Crown land. It does not really make any difference to the equation as long as you can get the biomass either from Crown land through a forest company or through a woodlot owner.
Senator Mahovlich: The big problem we had with the Americans is that they were claiming that our forests were publicly owned and they were competing against the government.
Mr. Rees: You probably need a whole other hearing for that one.
Ms. Clairman: In terms of properly managing the forests, one of the ways that we talked about in our submission is a third-party certification system, which exists. You then have the confidence that someone external has taken a look, whether it is a private woodlot or a publicly owned woodlot, at the forest management practices and said that, yes, that is sustainable forest management. That will give you the confidence that the forests will not be destroyed by this process.
[Translation]
Senator Rivard: Mr. Rees, I see in your biography that you had an opportunity to work for several years for the Chamber of Commerce and that you were posted in Paris. Considering that the population of France is higher than ours and that the territory if seven times smaller, compared to Canada, how is the industry behaving? Is the wood pellet industry established? Is it more successful than here? Is it subsidized by the government?
[English]
Mr. Rees: The industry in France is moving ahead very well.
The one thing evident in Europe to date is that people can point to the fact that the forests are growing every year. They do not get so much push-back from the public on the development of bio-energy. That is probably true in Canada as well, but it is harder to demonstrate. In France, they can show statistically, and the public can see, that their forests are growing every year. We are uncertain if that will continue. However, that is what makes it easier to move forward, being able to show that the forests are growing. It is a huge benefit when the public can see that. They then understand that we can use the resource but are still maintaining our forests.
Senator Mahovlich: If this committee were to go over to Europe to see a successful biomass project, what country would you choose for us to visit?
Mr. Rees: Do you want me to set up an itinerary?
Senator Mahovlich: Yes, please.
The Chair: We might ask you questions.
Mr. Rees: I would suggest France, Austria and Germany, and then take in a couple of the Nordic countries: Sweden and Denmark.
Senator Mahovlich: What time of year would you suggest?
Mr. Rees: We can send you the invitation when CANBIO organizes a trip.
The Chair: Witnesses, thank you very much for your presentations and for answering our questions. I wish to remind you that we will present two official interim reports. I believe that you touched on everything. Because of the situation in forestry, we can now have all the players at the table to look at it. You are right when you talk about an education process. There is also sustainable development. We could follow up by sending you a letter if there is a need to have additional information from you professionals.
With that, thank you very much, on behalf of the committee.
(The committee adjourned.)