Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 11 - Evidence - October 19, 2010
OTTAWA, Tuesday, October 19, 2010
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:06 p.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: I call this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources to order. Good evening, everyone. Colleagues, witnesses and viewers on CPAC and on the World Wide Web, my name is Senator David Angus. I am a senator from the Province of Quebec and I am privileged to be Chair of this committee of the Senate.
I would like to welcome my colleagues and to introduce them so that everyone will know who was with us this evening. To my immediate right is Senator Grant Mitchell from Alberta. Senator Mitchell is the Deputy Chair of the committee. To his right are staff researchers, Marc LeBlanc from the Library of Parliament, and our new assistant, Tomasz Kasprzycki. To his right we have Senator Larry Campbell, a visitor this evening. We are very proud to have you with us, Senator Campbell because when you visit our meetings you always enhance our deliberations. I am hoping to see more of you, as we just discussed. To Senator Campbell's right is another visiting senator, Senator Joan Fraser. This is not Senator Fraser's first time here, either. She happens to chair the Standing Senate Committee on Legal and Constitutional Affairs and performs her duties in brilliant fashion. Welcome, Senator Fraser. She is a fellow Montrealer. We also have Senator Elaine McCoy, who is a regular and very valued member of the committee. Senator McCoy hails from Alberta.
To my left is our wonderful clerk, Lynn Gordon. To her left is Senator Richard Neufeld from British Columbia; Senator Judith Seidman, from Montreal, Quebec; Senator Linda Frum from Toronto, Ontario; and Senator Paul Massicotte, from the Province of Quebec. We have Senator Bert Brown from Alberta and Senator Dan Lang from the Yukon.
In June 2010, this committee released an interim report on the study it is doing on the energy sector, generally, in our mission to develop a strategic framework for having sustainable and clean energy for Canada in the future. Our interim report was a discussion paper entitled Attention Canada! Preparing for our Energy Future, with the purpose of contributing to the current national energy conversations which we wish would take place and which are taking place in Canada. We call upon all Canadians to enter into an ongoing dialogue on this important subject.
The report concludes the first phase of our study and it contains no recommendations; rather, it identifies broadly the major issues and opportunities affecting Canada's energy systems, and poses overarching questions towards discussing Canadian energy goals moving forward. It was produced with the help of testimony from Canada's leading energy thinkers, research institutions and other stakeholders that share a concern about Canada's energy future.
In addition to that interim report, the committee has also developed and is about to launch live next Tuesday, a week from today, a dedicated website dealing with this particular study. We are very excited about this website. For all of those watching us on the webcast and/or on CPAC this evening, we are hoping that you will join with us in this form of social media. It will have facilities for twittering and all kinds of interactive media that we are excited about using in our dialogue with Canadians on this important subject.
We are now embarking on our second phase. We will use our interim report as a starting point for discussions as we invite government authorities, experts and stakeholders in specific energy and related sectors to explore key energy themes, with the goal of moving toward a broadly based sustainable energy strategy for Canada.
The first part of phase 2 will begin with Canada's energy supply sectors, including the production, refining, marketing, transmission and distribution of energy. It will be followed by an examination of energy demand issues, including energy use, energy efficiency and conservation in all provinces and territories of Canada. Finally, as Canada's energy future is shared among different regions of the country, the committee will be inviting federal, provincial, territorial, Aboriginal and municipal authorities to discuss their energy and environmental priorities and to identify areas where we can work together in building a secure, competitive and sustainable energy future for Canada.
In this respect, this evening it is our great pleasure to welcome Mr. Pierre Guimond, who is the president and chief executive officer of the Canadian Electricity Association. As president of the CEA, Mr. Guimond acts as spokesperson on issues of national concern to the electricity utility sector and industry. Prior to joining CEA, Mr. Guimond served as director, federal government liaison, for Ontario Power Generation Inc., OPG.
Mr. Guimond, I understand you will deliver opening remarks. I know you have colleagues with you. If at any time you would like to bring them to the table or have them participate, that will be your call. Perhaps in the question period which will follow your remarks, you may want to engage them.
Sir, we look forward to your comments.
Pierre Guimond, President and Chief Executive Officer, Canadian Electricity Association: Thank you very much. It is a pleasure to be here this evening to talk about my favourite topic, which is the future of electricity, especially the future of electricity in Canada.
Senator's should know that in the coming decades, the Canadian electricity industry must undergo a transformation. A growing population, economic recovery and growth and evolving expectations as to how Canadians want their energy needs delivered and met will necessitate fundamental changes in our electricity system. If the demands for reliable, affordable and sustainable electricity are to be met, significant investments in Canada's electricity infrastructure will be required.
As many of you around the table will know, and many people watching CPAC at home will know, Canada's bulk power system is built on a strong foundation, with roots dating back to the likes of Thomas Edison and George Westinghouse. The model that was developed early in our history marks the way we have developed our electricity system. It is generally characterized by regionally based, publicly owned assets and large central generating plants. It was all driven by the demand for a reliable and affordable electricity supply.
If you look around in North America, you will see that the old Ontario Hydro model, developed in 1913, was a vertically integrated monopoly that produced electricity and delivered it all the way to your meters — at the speed of light, I may add. That model was basically the cookie cutter model for many jurisdictions in North America, with the exception of Alberta, I think. Alberta developed its own way of producing and distributing electricity. Today that is still one of the distinctive features of the Canadian electricity system.
The Chair: I am sorry, sir, I did not get that. Alberta developed which way?
Mr. Guimond: Alberta's electricity system was based on a different premise. Whereas most provinces went with vertically integrated Crown corporations, Alberta chose another model. For example, it went with companies like TransAlta, which is celebrating its one hundredth anniversary this year. There is the Calgary Electric System that has evolved into ENMAX, Edmonton Power, as it used to be called, which is now EPCOR and Capital Power. The City of Medicine Hat has a large distribution utility as well. Alberta did things differently and also very well.
Senator McCoy: On that point, not to mislead members from other parts of the country, we did have major vertically integrated monopoly electricity generators that were privately owned. That covered most of the province.
The Chair: Sorry for that interruption, sir, and thank you Senator McCoy for that clarification. Please carry on.
Mr. Guimond: We know that the system in Canada has, over the last few decades — and I have a few slides that I will happily walk you through that demonstrate this —
The Chair: Are they in this?
Mr. Guimond: Yes, they are in the deck that was circulated and I will get to that very shortly.
Today major investments are needed in both generation and transmission, as well as in the distribution system. The expectations of Canadians have changed in the sense that the environmental aspect of electricity generation and distribution is very much a concern nowadays and the electricity industry has adapted to that change. The next projects that we build will reflect that concern; and presently, the projects we are building also reflect the concern for the environment, the concern for energy efficiency and the concern that has never really changed over time for reasonably and affordably priced electricity.
Reliability is another issue that the Canadian electricity system, because it is so integrated into the North America electricity system, must absolutely have. Reliable electricity means that when you flip the switch, the lights go on anytime, anywhere. That is a very high test that was left to us by the likes of Thomas Edison.
If senators wish to refer to the slide deck that was provided, slide 2 indicates the member companies that we have in the Canadian Electricity Association. I will tell you a bit about our history and mandate. The mandate is there on slide 3, but I should assure you that the CEA, the Canadian Electrical Association, as we were known for around 100 years, was founded in 1891. Next year we will be celebrating our one hundred and twentieth anniversary as an association.
We are the place where engineers went for 100 years to learn from each other how to build the electricity system. For most our existence, we were a platform for technological information and engineering information as to how to build an electrical system. Somewhere around 1993, our mandate changed and we became an advocacy organization for electricity.
You see from slide 2 the number of companies that we have there. I point out that it is a fairly complete roster of companies. They have been members of the CEA, in the case of some of them, right from their earliest beginnings.
Slide 4 is very similar to the slide that is contained in your interim report in that you map out what is provincial and territorial responsibility and what is federal government responsibility. Primarily, electricity generation is the jurisdiction of the provinces. The Constitution is remarkably clear on that point. For the longest time, electricity generation was the purview of the provinces and we did not bump into the federal government very much or very often. It is only in the last two decades where environmental concerns, which are assigned to the federal government in many ways, are bringing us into close contact with federal jurisdiction.
I will talk a little about the status of our electricity system and with whom we do commerce. For the longest time, when an electricity utility wanted to build a generating station, you sort of looked at demand increasing over year over year. In places in Canada in the 1960s, 1970s and 1980s, with 5 per cent demand growth every year, every now and then you had to build a new generating station just to meet load.
Therefore, while demand caught up to this new supply, you plugged into your closest neighbours for system stability because the physics of electricity requires that. Then we sold electricity until our own demand caught up to the supply, and then the process started over; we built whatever supply we had.
In many provinces, the supply that was close at hand was coal. In other places it was hydroelectricity. In other places like Ontario, where there was no local coal supply and very limited hydroelectric potential, other options were developed. I remind you that the northern part of Ontario does not look at all like the northern parts of Manitoba or Quebec. If you go to Moosonee and those places it is flat as a pancake and not very good for hydro development. Therefore, Ontario developed other options, including nuclear. I think you had one of our industry star witnesses here last time for your interim report; I believe Duncan Hawthorne spoke to the committee about nuclear energy.
In any case, the idea is that electricity in this country was developed on provincial boundaries, about utilities being mostly Crown owned corporations and fulfilling the mandate given to them by the provincial legislatures. We built very good systems and the models we had to organize ourselves were often replicated in other jurisdictions. I give you the example of the Tennessee Valley Authority and Bonneville Power Authority in the northwestern United States. Those were off takes of the Ontario Hydro organization model regarding how to do electricity properly. We have had a profound effect on others by the way we were organized to create the bulk power system that serves us so well today.
Slide 5 is a depiction of the Canadian landscape and it indicates how we have adapted to the North American reality. Canada is by and large open for business when it comes to electricity trade. We trade a little bit of electricity amongst the provinces. I say "a little bit of electricity" because the provinces are pretty far apart when you are talking about electricity systems. Often your closest neighbour is the United States and the United States had a similar demand pattern for increasing electricity load, and we were often able to sell electricity to our closest neighbour.
We are open-access compatible. As an industry, we follow the Federal Energy Regulatory Commission Orders in terms of ensuring that our systems are open for commerce. It is called "open access" and most of the country complies with the FERC regulations. Although they are not our direct regulator, we comply because we want to be able to participate in the commerce of electricity with our southern neighbours.
You see from slide 6 the way North America is organized. The point is that we are fully integrated with the United States in terms of the electricity grid; it is a North American grid.
Now let me talk a little about the demand and supply trade; economics, transmission and distribution; and environment and climate change, because those are all very important aspects of the electricity business in Canada.
Slide 8 conveys a great deal of information. However, I think the take-away from that bar chart is the fact that, for the longest time, electricity demand was rising. It was rising in all sectors in terms of residential, industrial and commercial. The need for electricity has been going up and up for the longest time, and it is one of the planning variables that we have traditionally counted on. In today's economy, following the recession in 2009, there are some people in North American utilities who think maybe demand growth is not a variable we can bank on anymore and that we will have to try to develop the next increment of the bulk power system without that particularly solid variable we have always known throughout our history.
There has been over the last three years some "demand destruction"; in other words, load that was always there before suddenly disappearing. That is usually attributable to the industrial and manufacturing sectors of our economy that are not producing as much. The clearest example I can give you is the wood products industry in Northern Ontario. Ontario Hydro built two coal-fired generating stations to service a load that was pulp and paper, wood and mining. The pulp and paper and wood part of it is down considerably. That is why you had the folks from Ontario Power Generation here a while back talking to you about using biomass in their coal-fired generating stations as a fuel for the future.
The Chair: Is that in lieu of coal?
Mr. Guimond: Yes, in lieu of coal.
The Chair: Biomass is a by-product of the pulp and paper industry that has fallen off.
Mr. Guimond: Exactly.
Slide 9 depicts that what Canadians often brag about is the fact that 75 per cent of our electricity generation is non- emitting. That comes from 60 per cent of our generation being hydroelectric, with very few emissions tied to that; a good 15 per cent from nuclear; and the rest of it is renewables in all forms, including tidal.
We are the envy of the world in many ways, because of our makeup here. As a country, we have coal-fired generation in specific regions that I will get to in the next slide.
The Chair: Just so we understand clearly, the percentage of non-emitting generating sources is a national percentage and it is 70 per cent.
Mr. Guimond: It is 75 per cent. It varies from province to province and I would be happy to walk you through the country and tell you how each region and province produces electricity.
The Chair: You know we have a very proud member of this committee who comes from a province where they are talking 90 per cent. He has a proprietary and abiding interest in that. We will be hearing no doubt from him later.
I want to associate the "75 per cent." Please put this into your comments as you go forward. We read about intentions to close down coal-fired generating plants. Where, when and how many there are would be helpful to this committee.
Mr. Guimond: Certainly.
If you look at slide 10, you will see our makeup; this is our DNA. Inexplicably, they are not ordered in the way they are laid out in Canada, but I wanted to take you from left to right here. As you can see, Alberta is mostly coal-fired generation. It is that way because, as the former president of TransAlta once told me, you remove 20 feet of overburden, find the coal, put it in your plant and it burns wonderfully and you produce reliable and very low-cost electricity for Alberta. That remains true today. There is an increasing amount of gas turbine use in Alberta and they are making use of natural gas as a fuel for electricity production.
The Chair: Is "conventional steam" the buzzword for coal fired?
Mr. Guimond: "Conventional steam" is NRCan-speak for coal. Nowhere else in the world would you find that term. It is a typically Canadian expression.
Senator Neufeld will note that British Columbia in the blue bars produces a large amount of hydro production of which we are all so proud. The same thing exists in Manitoba where almost all of the generating capacity is hydroelectricity.
New Brunswick is a bit of a surprise because you see a lot of red there — conventional steam. When the Point Lepreau Nuclear Generating Station is operating, there would be a lot more yellow in that. At least one third of the production in New Brunswick normally comes from the Point Lepreau generating station.
The Chair: The fact that Point Lepreau needs to be upgraded and overhauled, is it completely shut down?
Mr. Guimond: Yes, it is.
Next door in Newfoundland and Labrador, you see a goodly amount of hydro, which is indicative of the wonderful resources along the Churchill River. In Nova Scotia, you see the red in terms of conventional steam, which means coal- fired generation. Ontario gives you an indication of the mix I referred to earlier, where there is a limited amount of hydroelectricity. Some coal generation will shut down in 2014. The Ontario government has on many occasions said that date is firm and that will not change. You also see that Ontario uses at least 60 per cent nuclear to produce electricity.
The Chair: When those coal-fired generating plants in Ontario close down in 2014, will they be closed down, period, or will they be replaced by nuclear or hydro?
Mr. Guimond: All of those. We know that the policy pronouncements of the Government of Ontario are clear and firm. The 6,000 megawatts of coal-fired generation will close by 2014, to be replaced with other forms of electricity production. Ontario has invested a lot in gas-fired generation, using natural gas as a fuel. They have invested in refurbishments of hydroelectric facilities. There is a lot of work going on in terms of building a new tunnel to bring more water to the Sir Adam Beck Generating Stations in Niagara Falls, and there are also developments in northeastern and northwestern Ontario. In addition, the Government of Ontario is supporting a lot of wind generation.
For Prince Edward Island, there really is electricity there. They have a goodly amount of wind generation, but they do bring a lot of their electricity in from New Brunswick. Electricity in Prince Edward Island, we will see later, is probably among the most expensive in Canada.
In the Province of Quebec, somewhere around 96 per cent or 97 per cent of the generation is hydroelectric. They have one nuclear reactor and that explains the little yellow bar at the top.
In Saskatchewan, our last province here, it is mostly coal-fired generation. Saskatchewan is blessed with coal reserves and also some hydroelectricity. Increasingly, more natural gas is being used in Saskatchewan to produce electricity.
Senator Neufeld: When you refer to the red, are you referring to coal only?
Mr. Guimond: Yes, it is coal-fired generation. With a stretch, you could probably put oil in there as well.
Senator Neufeld: If you go to B.C., there is no coal at all.
Mr. Guimond: No, but there is gas.
Senator Neufeld: There is natural gas, so does the red include natural gas? Then you go to combustion turbine, so that is a little confusing in that chart.
Mr. Guimond: I agree.
Senator Neufeld: You have gone through the whole thing saying red is coal. There is zero coal in British Columbia, so the chart leads one to believe something different. I do not think there is any coal in Quebec either, but you have a bit of a red bar in Quebec.
Mr. Guimond: No, there is not. I think it is oil.
Senator Lang: Perhaps you could comment why Yukon and Northwest Territories and Nunavut are not included on your chart.
Mr. Guimond: The territories are not on the grid. They are not connected to the South and so they have their own generating systems. Yukon, Northwest Territories and Nunavut have their own.
The Chair: Do we know if they are coal?
Mr. Guimond: I do not think anyone has coal. Yukon is mostly hydro. A lot of diesel is used as well in the system because, until now, that has been the only option for many communities. It is one of the options that everyone would like to curtail, but at the moment there is no real substitute for diesel.
I believe I should clarify that red bar in British Columbia because there is no coal, although there is a lot of coal production.
Slide 11 is an indication of how we trade electricity with the United States. It is an open market. It is a market where we buy and sell. On any given year that may vary, depending on needs that become apparent.
The Chair: When you called our system an "open-access system," you meant that each province, which is the master of its own destiny, is engaged in buying and selling power.
Mr. Guimond: Yes; one or the other, they are. There are inter-ties between a province like Saskatchewan and other Canadian provinces. They go back to the idea that you plug into your neighbours for system stability, but Saskatchewan does not really export to the United States.
In Alberta, to export to the United States, you go through British Columbia, but British Columbia is well tied in with inter-ties to the American north or northwest. Ontario and Manitoba are well tied into the United States. Also Quebec, as we know, is well tied in. New Brunswick has also some tie lines into various markets in the United States.
Senator McCoy: On this question of an open-access system, you are saying it includes some interprovincial ties and Canada-U.S. ties, but does it also include wheeling privileges inside each jurisdiction?
Mr. Guimond: That is usually the purview of the province. The reference to the FERC open access orders refers to commerce between a Canadian entity and the United States.
Senator McCoy: Under Alberta, for example, you say "wholesale and retail open access."
Mr. Guimond: That means anybody who produces electricity can sell it on the market, send it, buy it, and move it around.
Senator McCoy: The transmission line is open; it is a public utility.
What does open access mean in Quebec, when you say wholesale open access?
Mr. Guimond: It means somebody like Brookfield Renewable Power, an investor-held company that has generating assets in the Province of Quebec can produce and sell electricity in the Quebec market.
Senator McCoy: They have internal access to the grid.
Mr. Guimond: Exactly.
The Chair: Are you okay with these little interruptions?
Mr. Guimond: I love them.
The Chair: This is a helpful deck, and we are able to show you that the senators are paying attention when they have you admit there are some errors.
Mr. Guimond: I agree.
Slide 12 shows the contribution that the electricity sector makes to GDP. We are a very big sector in Canada. We employ many people and we generate a great deal of investment. The trickle-down effect from a large project really boosts the economy. We have a very extensive supply chain. Not only do we use a lot of cement, steel, engineering services and everything else that you can imagine, we also drive a lot of curriculum at the universities because we are dealing with scientists and nuclear scientists. We are drawing on special trades and skills to build projects. In the end, the contribution to GDP is really quite amazing.
I contrast that with the fact that electricity is always an assumption; you assume that when you flick the switch, the lights will go on and everything will be normal. People do not really think about where electricity comes from until they do not have it anymore and then they get really upset and they count the minutes until the power is restored. Although it is sort of like a silent partner in the economy, electricity has a lot of impact on GDP.
The Chair: To make it very clear, the association you preside over used to be the sort of developer of the industry but is now an advocacy group, as you said. However, there is a diverse membership list on slide 2. Many of them are in competition with each other. In addition to advocating for electricity and all of its elements, generally, does the association participate in the development, say, of smart grid, or a smarter grid? We keep hearing an east-west and so on. Do you get into that, or are there other authorities that do that?
Mr. Guimond: We do but there are other authorities that are directly involved in some of this. I will give you the example of smart grid. At first we did not know that we had a dumb grid. Smart always meant different technology.
I will give the example. In the 1960s and the 1970s, when a hydro facility wanted to run the water through a turbine, some fellow went to the wall and flipped a massive switch and that opened a spillway. The water started to flow and the electricity got to the control centre and it was done.
Now, that switch has been replaced by a digital switch that is controlled from a control room that is perhaps 200 kilometres away. There are personnel in place to ensure everything works okay, but the signal for electricity production for the market to get the electricity at the right spot so that it can be used comes from far away.
The smart grid part comes from building that digital switch. All the relays of information about the electricity, water flows and everything else we need to know is information that moves along the system and is used. That is generally an example of what we consider to be smart grid.
The Chair: You have just given a definition of a smart grid. Some people think it is more. When you are comparing dumb versus smart, people think it is more efficient. We have taken a lot for granted and there is a lot of leakage. We have heard about that in this committee and some of us think that a smart grid gets more efficient and gets away from leakage. Is that correct?
Mr. Guimond: Yes, the technology helps us better control such things. I gave you an example of the generation part of the process. There is generation, transmission and distribution.
The generating part benefits from smarter equipment; digitized equipment; better computers, relays and systems and so on; as does the transmission system. We have always built transmission based on a certain set of engineering assumptions about temperature, distance, height of the wires and separation of the wires, and so on. Those were all assumptions developed by scientists and engineers over the course of 100 years. With better sensing equipment, we have better knowledge about how much electricity we can actually put through those wires. That makes the transmission and the relay systems smarter, better and safer, I would argue, as well.
Now we get to the hard part, which is the distribution. As you have noticed, electricity is a manufactured product. It comes out of a generating station and goes onto high-tension wires. Then there is a process of stepping down the voltage so it can go into the distribution net and into your homes. That process benefits from smarter equipment and better technology and tools to assess how we do things and how the information flows and what it is used for.
You have heard a lot about smart metres and about how the electricity goes from the distribution centre to a metre. You as the customer want to know more about the cost of that electricity; you want to be able to have an influence over how much that electricity costs you.
There is time of day use of electricity and there are metres to help you determine whether you want to turn on an appliance at a certain time when we are reaching peak during the day and electricity is more expensive. Those are all the things that customers want to know about. Increasingly, they are able to use that information being made available by smarter equipment.
For the better part of 100 years, the distribution grid was designed to be a one-way street. It was designed to handle the physics of electricity, which means that electricity is consumed when it is produced; supply and demand are in balance.
There is no getting around the physics; if you lose part of the physics, your system goes down and does not work anymore. The ruthless master of electricity is physics. The engineers and scientists who built this system have always respected that. When we go to smarter and different kinds of equipment, we still have to respect the ruthless physics of it all — the things that Thomas Edison and Westinghouse discovered for us and put into place.
As we get better at using this digitized and smarter equipment there is a responsibility that goes to the customer as to energy use and controlling your own costs in electricity by how you use the electricity once it is beyond the metres. Metres and other equipment that will be on the marketplace in the next few years will help customers make those decisions and change their energy use patterns accordingly.
We will go to slide 13. This is a remarkable story. Remember how I described to you how we built the bulk power system over a number of decades. Somewhere around 1993 is when the last big energy project went into the rate base, and that was the Darlington Nuclear Generating Station in Ontario. You will see that it is the first sort of large drop on that slide. We had overbuilt the system by that point; we had gone through a series of oil shocks and basically overbuilt the system. For a good 15 years, we waited until demand caught up to our supply. Another way of stating this is that the last investment decisions on building the system were made by my parents. So far in my career, I have had nothing to do with making investments in electricity. I am living off what my parents decided to pay for electricity. That is an indication that the general system in North America is aging because it was built all at the same time and it was built the same way because our engineers were talking to each other and we were discovering the best systems.
The fact is that there is a strong need now for investment in electricity and in the electricity infrastructure so that we can have a sound, reliable and affordable grid for the next generation of Canadians. They are a little bit more demanding, or a lot more demanding in terms of environmental impacts of electricity and also the price of electricity, just like previous generations. They do not want to pay too much for it but they want to be sure it is available for them to use at any time.
Therefore, 1993 is sort of a marker year. It indicates that we went away from being big construction companies, building projects and building generation and transmission, to being very good operators of the system. Now as we go back, and with the rise that you see in 2008-09, we have to rediscover how to build generating facilities, transmission facilities and upgrade the distribution net that I spoke about.
The Chair: Demand catches up with supply in or about 2002. Is that the next sort of star in the capital investment, which ramps up until you are at $16 billion last year?
Mr. Guimond: Demand caught up with supply somewhere around 2008.
The Chair: It was anticipated.
Mr. Guimond: Now we are really under the gun. We have to build. We have to invest and we have to renew the infrastructure. That is why when Mr. Hawthorne was here, he was talking about the refurbishment of nuclear reactors and the need to prolong their life for another 30 years. That is why we are investing in generating stations, hydro stations that were developed 60 years ago, and making them better performers to better use the water available to produce more electricity. Then there is always this need to build more transmission lines to bring new sources of electricity to market.
The Chair: Mr. Hawthorne did not tell us why he had to ship all these generators to Sweden to be upgraded. Will you do that?
Mr. Guimond: I would never go onto that turf without Mr. Hawthorne at my side.
I can tell you that the result of all this for the last 30 years has been remarkable electricity prices in Canada. This is illustrated on slide 14. The price of electricity has been going up slowly over the last few decades. If you look at slide 15, residential rates for electricity in Canada are reasonable and they are a lot less than what many European countries pay for electricity. It is right in there with what North Americans pay for electricity.
In many parts of the world there is a phenomenon going on. We are all investing in infrastructure in electricity at the same time. Japan has to build a number of nuclear reactors to meet demand and to renew its own infrastructure. China is growing by leaps and bounds and building all kinds of generating stations and having a powerful effect on the resources that go into electricity generation and transmission.
At the same time, Australia is renewing its own electricity system. Eastern Europe is in the same boat because when the curtain came down in 1989, those countries in Eastern Europe wanted to give themselves a modern electricity grid, so they have been building as well. Western Europe is also building at the same time because they have to renew their systems.
Over the next couple of decades, anywhere you look around the world there will be a lot of investment in electricity infrastructure. We will all be chasing the same scientists and engineers, the same basic products — steel, cement, copper, large transformers. We will all be chasing those made-to-measure expensive turbines used when you are building a hydro project, for example. Over the next two decades, electricity will be a very strong part of the economy, if and only if we invest in that electricity backbone that we need for our economy.
I call your attention to slide 17, which leads me into the discussion of east-west and north-south. You notice that for the most part in Canada, the lines run north-south. That is an indication of the fact that we were doing a lot of commerce with our southern neighbour and not so much with our Canadian provinces, who had their own electricity systems and who were generally, by mandate from the provincial legislatures, required to be self-sufficient in their electricity provisions.
We, as a country, developed with this idea that it was profitable to sell electricity North-South when you had it, and to buy electricity from your southern neighbours to help you bridge certain construction projects or certain bridging of electrical needs.
The next slide shows you the interconnections and the strengths of the interconnections that we have across the country. You will notice that British Columbia, Manitoba, Ontario, Quebec and New Brunswick have very strong interconnections with the United States.
The Chair: I think you said that electricity will be a very strong part of the economy, if and only if we invest in that electricity backbone that we need for our economy. The key word is "if."
Mr. Guimond: "If and only if." Honourable senators, I would be happy to talk about that. We have all noticed over the last while that the public has taken a strong "not in my backyard" position. Any project that comes forward will always have some opposition.
Fifty years ago when my parents and grandparents wanted to build an electricity generating project, the utility in question was armed with the strongest expropriation powers that the government could vest with that utility. They were given the green light to build it and they bulldozed their way through and got it done.
When we go back 50 years to those sites, we see that the engineering was top notch. The engineers at the time did their sums correctly and there is X amount of water available for electricity production and everything is shipshape in terms of the calculations. However, we see many community grievances.
Parliament addressed those grievances a number of years ago. We see it embodied in the Environmental Assessment Act and other pieces of legislation, where the electricity industry was told clearly that when you develop projects, thou shall consult with the community and mitigate environmental impacts. Our industry is ready and able to make those new laws work.
However, oftentimes, communities just do not want new projects or change. That is why I say "if and only if" we can bring investments to infrastructure for electricity will we have a sound, stable, reliable and affordable electricity system for future generations. The time is now to invest in electricity infrastructure. The system is aging. It is still very strong and robust but we need to get on with the job. That was my point, senator.
Slide 19 is there to let senators know just how much greenhouse gas the electricity sector produces. We are not that big of an emitter, but we are a very visible emitter. Moments ago, we spoke about Ontario wanting to close its coal- fired generation partly because coal emits greenhouse gases and other air pollutants. The industry is aware of that objection and progressing in terms of reducing all air emissions.
We have the most problem with CO2, a greenhouse gas. For the most part, that is a real game changer for electricity. There are some parts of the country where you have local coal and oil or gas resources. Now society is telling us they do not really want us to use those local resources if there is a large release of CO2 or greenhouse gases to the atmosphere.
That objection forces us into alternatives and the alternatives, so far, are the ones that we know. We know hydroelectricity, nuclear and some renewables. We are learning how to do wind generation properly. It is very fashionable but there are still many kinks to work out in terms of turning it into a reliable form of generation.
There are all kinds of other new technologies. I have run-of-river hydroelectricity in mind, as well as tidal power, which can be and is being harnessed in many parts of the world. Solar power is becoming more efficient and economic as each decade passes. We have all of the new technologies.
I was at a presentation by some industries that were promoting energy storage. Traditionally when you wanted to store electricity, you pumped water behind a dam and you used the water to generate electricity when you needed it. There are scientists working on alternatives to that procedure. They are saying, "If we could store wind generation, for example, until we have a sufficient quantity so that it can be dispatched and released to the system, that would greatly increase the value of that electricity to the grid." Quite frankly it would probably be a real positive development in terms of ensuring we have ample supply of electricity forever more.
All of these things are still on the drawing board. There are technologies that are in the early design stages that could be used in the next few decades. However, I think we have to invest in leading edge technology to ensure that future generations of Canadians can use that technology reliably, without impact on the environment and at a reasonable cost.
The Chair: Just to be clear, as the spokesperson for the industry you are saying that the industry recognizes there is an aversion to CO2 emissions. It recognizes that the system is old, aging, needs to be renewed and I believe you used the words "is adapting."
Is the industry going down these new routes kicking and screaming, or is the industry saying that it makes a lot of sense and is what we will do?
Mr. Guimond: We are not kicking and screaming. We recognize the need to move away from technologies that release greenhouse gases in large quantities into the environment. We want to address low-emitting technologies or non-emitting technologies to produce electricity.
If you scratch an electrical engineer, the immediate story that comes out is that Thomas Edison left us a model for electricity production. It is quite simple: You build electricity generation for peak, plus a reserve margin. That last top increment — peak plus a reserve margin — is the most expensive electricity you can find. If there was a way of having energy or electricity storage that would modify that basic Thomas Edison model, that would be a major leap forward for energy in this country and around the world.
There are people working on that, but I am told it is more difficult than sending a man to the moon. It is a hard proposition to figure out but there are people working on it. I am optimistic that the brains in this world will soon discover how to do that, and it will be economic and beneficial for the electricity system. If we could modify that basic Edison model, that would be progress.
The Chair: No pun intended but you have generated a lot of interest around this table.
Senator Mitchell: Mr. Guimond, I am very interested, and thank you. My first question relates to your industry's interest in reducing the amount of carbon emissions. That has all kinds of implications and is great to hear. Do you think we should price carbon and if so, how would you do it?
Mr. Guimond: Yes, we should price carbon. We need absolute certainty on that question because it is such a game changer for the electricity industry. There are two ways to price carbon that apparently work. You can either bring in a tax or do a cap-and-trade.
Senator Mitchell: Which system would be your choice?
Mr. Guimond: I am not sure.
Senator Mitchell: Good answer. Everyone else has said "tax," interestingly, which is quite surprising.
Mr. Guimond: I lean that way, too.
Senator Mitchell: When it comes to making the transition to lower emitting forms of energy, there are all kinds of possibilities. First, you mentioned nuclear. How significant do you see nuclear being in the future of electricity generation in Canada?
Mr. Guimond: For provinces like Ontario where there is a heavy investment in nuclear, there needs to be nuclear industry in the future. We have to refurbish the existing nuclear facilities when possible, and build more nuclear units.
Ontario, as I mentioned, had those three options: Nuclear, coal and hydroelectricity. Early on, it maxed out the hydroelectric potential. The remainder of the potential hydroelectric is far away, it is difficult to develop and it requires very long transmission lines to get that power to market.
There are some sites. What can be developed will be developed, I am sure of that. However, you are left with nuclear as a viable option. I am talking about a viable option for what is called baseload electricity. Baseload electricity is what is on all the time. The way the system works is that you have a baseload and when your demand peaks start to happen, one in the morning and one in the evening, the demand goes up.
In addition to your baseload that is always on, then you bring on intermediate power. In Ontario, for example, that has always been increments of hydroelectricity or of coal-fired generation. Then as you reach your peak during the day, you bring on your most expensive fuel. Once your peak has passed, we do what is called in the business "reverse order merit:" The most expensive stuff comes off first, then your intermediate and then you are back to the baseload that is on all the time.
Nuclear and hydroelectricity are baseload. That is why they are so important and that is why they are so reasonably priced. They are on 24-7.
Senator Mitchell: A key element of reducing emissions would be to transition from coal-fired electric plants. Do you see any movement toward jurisdictions saying they will not build any more coal-fired plants, or do you see that as being inevitable?
Mr. Guimond: We are in discussions with the Minister of the Environment. The minister made an announcement a few months ago, indicating that he wanted to limit coal-fired generation because of the emissions, and that the industry would agree to a process for doing that.
I think if you look around the Canadian electricity sector, you will see that the companies are for the most part either provincial Crown corporations or commercial corporations. These companies wish to move away from coal- fired generation because society says so, and are all sort of very positive and moving in that direction, all the while knowing that we need to have options other than coal. For options other than coal, we have to have approval processes for our projects that actually result in decisions. The Environmental Assessment Act, the Migratory Birds Convention Act and, more importantly for hydroelectricity, the Fisheries Act are very important pieces of legislation because they provide process and decision points that are often used to stop projects.
We need certainty around the price of carbon, because if you are not going to put certainty around the price of carbon, we do not know what to invest in. We need certainty around nuclear, because traditionally the Government of Canada has played a preponderant role in nuclear through the early legislation and also more recently through AECL and the Nuclear Safety Commission. We need to know on which foot to dance in terms of nuclear and how to invest.
We need to know about natural gas as well. Is natural gas going to have the same sort of story as coal? Are parliamentarians 10 years from now going to say, well, you got rid of coal, now you have to get rid of natural gas because it too has CO2 emissions, which are 50 per cent less than coal? If we are going to go to natural gas in the next while, we need to have policy certainty on that because, again, there are many investments tied to moving away from coal.
Senator Mitchell: It would be useful to see a chart that illustrates the comparative costs of each form of electrical energy. It is hard to get a hold of that information. What does it cost to do wind, solar, hydro or tidal? Do you have such a chart?
Mr. Guimond: There are estimates and best guesses, but generally, when you are talking about calculations; it is a best guess simply because we just do not know until we build something what exactly it will cost. I can give you an estimate of what a nuclear plant can cost, based on historical data that has been modified and added to. However, but until someone puts a shovel in the ground and actually builds one, we will not know the true costs.
Senator Mitchell: Do you have an inventory of the provincial subsidy programs for alternative energy?
Mr. Guimond: I do not, but I am sure that information is available. I could try to find that for you, if you want.
Senator Mitchell: It would be great if you could.
Mr. Guimond: Each province has a way of encouraging its own renewables, and you observe the same phenomenon at the state level in the United States.
Senator Mitchell: When you say "certainty in nuclear," do you mean cost certainty or regulatory review certainty?
Mr. Guimond: I mean regulatory review and the idea that the Government of Canada would be a willing partner in nuclear. Very few countries that have vibrant nuclear programs are without national government support.
Senator Mitchell: On the question of carbon capture and storage, does your industry have a general policy orientation or is this specific to different jurisdictions or different companies? What is being done in that regard?
Mr. Guimond: There are a number of projects being carried out by Canadian electricity companies. I am thinking of SaskPower and also TransAlta, which are at the forefront of developing carbon capture and storage. A good example of cooperative government is what the Government of Canada, the Government of Alberta and the Government of Saskatchewan have done to explore CCS and make a go of it.
I think the future of coal is tied to the workability and the costs around CCS. Alberta and Saskatchewan have the geology to do this and that is very important; and they have a high-quality large supply of coal readily available.
I believe that Canadian utilities, just like utilities everywhere else in the world, use the available fuel. That has been true everywhere all the time; it is a constant. I cannot believe that there is not a technology like CCS that can be made so that we can use coal without harming the environment for future generations.
Senator Mitchell: Often in the course of conversation with electrical companies or power companies, they will say whatever we do we have to have competition. Of course, many of them do not really have competition. Therefore, I come back and say if that were the case, I can buy Bullfrog Power in Edmonton, where I live, from Southern Alberta it finds its way onto the grid and comes into my house. It would be interesting if I could buy power from another province and buy from the cheapest producing province and create real competition. When I mention that, they say that is different. It would be way too expensive to build an east-west grid that would be required to create that kind of competition.
However, British Columbia produces cheaper power probably, et cetera. Is that a possibility in any way, shape or form? Would it create real competition among these companies and push prices down?
Mr. Guimond: The commerce of electricity among the players in the electricity industry is there. It should be encouraged. I hear notions of an East-West grid that remind me a lot of Pierre Berton's The National Dream. That, to me, does not fit. The reason we do not have an east-west grid is because it is impractical. You just cannot do that. The distances are so great and the provinces each gave their Crown corporations or their utilities the mandate to be self- sufficient within provincial boundaries.
The old expression in the industry is we do not let the trucks out of the service territory. That sort of tells you that the provinces have been the ones defining and paying for the development of the electricity grids. By and large, they have done a heck of a good job of that over the years.
Senator Mitchell: That pretty much finishes the east-west grid.
The Chair: Well it only goes as far as Ontario.
Senator Lang: I have been looking at your resumé. You have been involved in many things during your career. You have probably given some thought to the responsibility between the federal and provincial governments and what role they can play in the development and provision of electricity.
One area that we are searching for here is what is the role of the Canadian government? What could we recommend in respect of working with the provinces for a national energy framework in the years to come?
What should Canada do in the area of energy in a broad sense? What can we do legislatively and financially to put the energy grids and other aspects of our energy requirements in place for the country? Perhaps you could give us a general observation.
Mr. Guimond: The slide that shows the responsibilities of the provinces and the federal government can hold true for many more decades in this country. Increasingly, the role of the federal government in electric energy, as opposed to other forms of hydrocarbon energy — I will just talk about electron energy — is to ensure there is the right set of investment climate conditions that allow the industry to develop.
The traditional roles of the federal government in terms of electricity have been standards and research and development. Those are the areas where the federal government can invest and help. When I talked about developing systems for energy storage, I think the federal government's role is valuable in terms of research and development, and working with society and industry to develop standards so that the systems work better.
There is an additional role that says investment climate. In the old days, through various instruments that are made available through the constitutional powers to the provinces, the provinces would back ways and means to pay for electricity projects. Those were usually the provincial government bonds issued for Hydro-Québec, Ontario Hydro, SaskPower or BC Hydro. That instrument is probably not as useful as it once was, and other creative means for raising capital need to be found. It is the role of the federal government to try to find ways and means to bring that capital for long-term investment in projects. Those projects will be there for 80 years.
That is one role. The other role is something we talked a little about in the context of a smart grid. We talked about the interoperability standards with the Americans. The federal government could become involved in this valuable role. Our government could have federal discussions with the United States on how this system will roll out, how the standards will be developed and be applied. If we do not have these discussions, many resources could be wasted. We must have clear guidelines concerning this technology.
Finally, I would go back to one of the things I mentioned, which is about the approvals process. Federal laws, especially laws like the Environmental Assessment Act, the Migratory Birds Convention Act, the Fisheries Act and the Species at Risk Act, need to be clarified and upgraded so that they are indeed workable. They are often ways and means of either curtailing or stopping projects that are vitally important to society.
To answer your question in a less roundabout way, I believe that energy electricity will be a big part of the Canadian economy over the next few decades and I think oil, gas, and other hydrocarbons will be a big part of the economy. Canadians need to become comfortable with that; if we are to have that large contribution to our GDP coming from energy and energy development, Canadians need to support it.
I think the role of the federal government in bringing Canadians to support investment in energy will be important. That will be part of our wealth for the future. A big part of our economic success story will be energy and how we do energy.
I think the federal government has an overarching role to play in getting Canadians on the same page and to be supporters of all this.
Senator Lang: I want to talk about the projections. You have charts to 2009 but you do not have projections looking into the future. Do you have projections into the increase that will be required to meet our demands? Do you have an idea of what the costs will be from the point of view of the consumer if we need to meet those projections with today's costs?
Mr. Guimond: We look to a lot of agencies that are specialized in looking at projections. The International Energy Agency in Paris is one of those organizations and has postulated that energy demand will continue to grow at a certain rate. We look to the National Energy Board and its modelling in terms of future energy demand and for Canadian purposes; it is probably as good as it gets in terms of projections.
As each utility develops a project, it must look ahead to see what the future growth will be and if it can afford to build a project. Our assumption and the basic assumption is that demand will continue to grow and we will need to satisfy that demand by means that include, but are not limited to, what we have done in the past. We will have to bring new technologies and techniques to bear. That is part of the mix and the build-out of infrastructure that we have to do.
I also think there is a tremendous potential left in this country for energy projects. I think of your part of the world, senator, and I think of the huge potential of the Mackenzie River and other tributaries. Even Alberta and Saskatchewan have hydro projects that could be developed. In Northern Ontario and Quebec, transmission lines are being built to Connecticut to service that market. New Brunswick and Nova Scotia are talking about a new way of cooperating in terms of electricity production and an energy strategy, overall.
There are very positive signs everywhere in the country that energy is alive and well, and can grow and can be done as well as our parents did it, if not better, if we have the investments.
Senator Brown: I am fascinated by your charts and I think you have done a great job of showing us the problem. You said nuclear and hydro are the baseloads, which I fully understand. Unfortunately, it takes 12 to 14 years to build either one of them. If we get into a growth crunch where we immediately need more electricity generated, what happens? So far the wind farms are not turning out too well. They produce about 20 per cent of what they thought because wind is impossible to control as it is here, it is there, and it is gone. The other one with photovoltaic cells are still quite costly. They will come down, of course, as more and more of them are built.
Do you think we could use as a stopgap the gas turbines that Alberta has been using for a little while? We have one just outside of Calgary. It essentially is a gigantic jet engine. I went through that plant once. It is quite fascinating because it can go off stream with just turning off the gas. It is not like coal where you are burning 100,000 tonnes of coal a day, so you cannot shut it down. Even if coal was not a problem for the environment, you cannot afford to build coal things that produce more electricity than you can use. If you do, you just waste a lot of coal because you cannot shut coal-fired plant down for less than about four days, I believe.
Nuclear has a little bit of a problem too. You cannot just throw a switch and shut it off. However, the gas turbines could possibly be a stopgap until we can get better results out of solar and wind, and out of, as you said, turbines in rivers. We have heard about them but they are huge — 400 tonnes — to get one of them into a river.
Until we can do those things, would you agree that natural gas might be the thing that we try to get 50 per cent away from the coal pollution and go to more and more natural gas? We seem to be finding it a lot in North America. We found more in Alberta and B.C. We found more in Saskatchewan.
The Chair: Senator Brown, I know you have a question on the tip of your tongue. There is a big movement here to have you sworn in as a witness but I am resisting it.
Senator Brown: I have already asked the question. Do you think that is a stopgap for where we need to be if we have an increase in power?
Mr. Guimond: You are absolutely right. There is certainly every indication that there is a plentiful amount of natural gas available in North America and other parts of the world. Just a short five years ago we were all worrying about a shortage of natural gas and that has been completely eliminated by tight gas, shale gas and even the possibility of making conventional gas more productive through various techniques.
I agree with you. I think for electricity production we will call on natural gas as a bridge, probably, to the next generation of power supply. What that next generation will be, of course, is largely dependent on what we decide to do with the price of carbon. If the price of carbon continues to hang there without being a legal document or a legal impetus, I think we will dither a little in terms of investments in North America. As soon as we have certainty on that front, I think we will be able to line up on specific technologies and make the investments.
How much gas is there? I really do not know. Is it a bridge forever? Is it a bridge for a while? Again, could we have the assurance that what has befallen coal will not befall natural gas in terms of controls on CO2 emissions? That is an element of uncertainty that plays heavily in our investment decisions.
Senator Neufeld: I want to talk about Senator Mitchell's point concerning the east-west grid as some people see this as the answer to our problems.
The systems in British Columbia, Manitoba, and Quebec were built far larger than what was ever going to be consumed at that time in the late 1950s and 1960s in their respective provinces, but they had huge trading agreements with places south of the border.
I agree that that will stay that way. Those systems are in place. Those trading partners are there and you do not switch those overnight. If anyone thinks that would be easy they are dreaming in Technicolor. I can assume that those lines of transmission will continue.
Senator, you were in the smartest grid operation in North America when you were at British Columbia Transmission Corporation. We had a good look at what smart grid can start to be, along with smart metres.
There is new technology coming, and maybe you can help on the question of being able to transport electricity with almost zero loss, which is probably closer than what we realize. You probably know a little about this. When this occurs, the east-west grid will become a little more palatable. It will make more sense because you will be able to consider the time change; one peak in Saskatchewan is different from a peak in British Columbia, and so on further east.
Can you help me? Do you know a little about what is happening with the smart grid that is a not just what we know as smart grid today but real nanotechnology that is moving us to where we do not have any line loss at all or very little?
Mr. Guimond: I can help a little bit on the technology side. Most of the transmission lines that you would see from looking outside here are alternating current transmission lines. There is another technology that has been used in Quebec and Manitoba successfully called direct current. When the electricity is produced you convert to direct current and ship it along a line. There are fewer line losses involved. When it gets to the other end it is converted back to AC and away it goes along the normal distribution path.
Many more economical DC technologies are available and becoming available and being built in North America, and I believe those will have a very beneficial effect on transmission.
It is so difficult to have a transmission project approved and built in Canada. We have not seen transmission built in a long time. The technologies are better. The technologies help us become safer operators of systems but, again, the fundamental problem is that we need permission to build and we need to actually put the shovel in the ground and get on with it.
As far as the available technologies, some technologies for transmission are based on the use of ceramics that is different and new. There are some people who believe that the old copper and aluminum wires that we see everywhere in transmission systems can be read as the historical past of what was available and cheapest to build at the time. I am told that if you know your stuff you can probably divine the price of copper at various points in time by what was built and how it was used.
Technology will continue to evolve, and when it becomes economically feasible to use we will use that because that is in the best interests of everyone to have the best possible technology given the cost.
Senator Neufeld: I am fully aware of DC and AC. That has been around forever. A number of individuals have approached me concerning this new technology. I appreciate your comments on that subject.
Going to greenhouse gas emissions, it is always a big thing. Well, government, you tell me exactly what it is and sometimes that takes longer than what your industry or any other industry might want. I know in British Columbia we say if you are to generate with coal, sequester 100 per cent of the CO2. You know the cost. Otherwise you can offset for natural gas. Whatever the greenhouse gas emissions, you need an offset and you know what it is. Some can be easier that way.
It is a fact that we will use more natural gas in the future. TransAlta and Spectra Energy in British Columbia are working on many projects with sequestration or using CO2.
Are you aware of any companies working on using CO2 in a different way as a feed source that does not emit any GHGs?
Mr. Guimond: Some of the technology vendors who have been talking to us have been talking to you as well. They have been doing the rounds.
Some promising things are going around in certain circles in North America about what to do when you have extracted CO2 from the process and you are sitting with it. Some people have suggested to me that it is possible to reconstitute that CO2 into a fuel, and I think that is what you are talking about.
I do not know the technical feasibility or the scientific parameters, but it is certainly something I would want to know more about. I had the initial briefing and encounter, probably like you. I forget the name of the firms involved, but the point was that CO2 could have a purpose other than simply sequestering.
[Translation]
Senator Massicotte: When comparing Canada to Europe, we realize that effective rates are up to 200 per cent higher abroad, especially residential rates. In addition, effective rates in several countries are up to 50 per cent higher, at the industry level, than they are in Canada.
Based on your experience and knowledge, is energy efficiency taken more seriously in some European countries? Are consumers more careful with their energy consumption? Do they conserve more energy?
Does the fact that companies incur higher energy costs affect their competitiveness? How can they remain competitive?
Mr. Guimond: The price of electricity does have a strong effect on how energy-efficient businesses and consumers are. If we were in Denmark, paying 22 cents or 23 cents per kilowatt-hour for electricity, we would certainly consume it more wisely. In Canada, with the country-wide maximum rate being 10.5 cents per kilowatt-hour, we are efficient, but not as committed to efficiency as we would be if the price were 22 cents.
The fact remains that European companies and industries are always seeking to gain a competitive edge. Europeans have always had ways, methods, if you will, to balance out their costs and compensate for high energy prices.
I know that the European Commission is working extremely hard on balancing out energy costs in the new 25- member union. I also know how our Australian colleagues are planning to handle competition issues and electricity prices. In Australia, 96 per cent of electricity is coal-generated. Their industrial fleet is adapted to that reality. If they were to move from using coal to using something else to produce electricity, all kinds of problems would arise for their industry. A number of documents were produced by the Australian government on this issue.
Each country develops its own strategy. I think that tonight's discussion is part of our Canadian effort to compensate for the rise in energy prices, which will become inevitable once we decide to move away from using certain hydrocarbons that have long been staples of electricity production in Canada.
Senator Massicotte: This is interesting; everyone adapts to their circumstances. Energy consumers become more efficient to adapt to higher prices, which is a natural reaction. Incredibly enough, oil prices are much higher in Europe than here because of taxes, and the energy costs are much higher because of prevailing conditions. Nevertheless, their international companies remain competitive.
Canadian companies are saying that if we raise oil prices or introduce a carbon tax, they will become less competitive. However, I have a feeling that they might be exaggerating. There are still some very competitive large European businesses, despite the high energy costs. They adapt to the circumstances, as you pointed out.
I feel that our companies are exaggerating. Do you also think so?
Mr. Guimond: I have always thought that, when reading and rereading the European Commission's documents, I have to really focus on details to get the real story, as Europe has always been able to subsidize various things in a number of ways. I have always been of the opinion that Europeans are experts in compensating for the higher energy prices.
Senator Massicotte: So, do you think that your chart, which provides competitive costs, does not afford an idea of real costs?
Mr. Guimond: It is hard to say. Those are the figures countries provided us with. The chart in question was drawn up by Hydro-Quebec, and I am sure they took a very close look at the information provided by various countries to get a clean picture of energy costs.
Senator Fraser: I would like some clarifications, as I am new to this committee. Are the prices you quoted the average prices in 11 majors cities?
Mr. Guimond: Yes.
Senator Fraser: We know that the average price is far from telling the whole story. What is the spread between the lowest and the highest price in Canada?
Mr. Guimond: I would say that energy prices in Manitoba and Quebec are among the lowest in North America. I know that Oregon's Bonneville Power also has very low prices because it produces hydroelectricity. The highest prices are in Senator Lang's region of the country, in the Yukon, in the Northwest Territories and in Prince Edward Island.
Senator Fraser: I pay an electricity bill in Montreal and another one in Ottawa. I can tell you that the difference between the two is noticeable. It is actually very noticeable. But you do not have any figures.
Mr. Guimond: No, I do not have any figures on hand. Costs do vary from one province to the next, and electricity prices reflect that reality.
[English]
Senator McCoy: I would like to compliment you, Mr. Guimond, on presenting a very complex situation with a good general overview although it does cover a great deal of where we have come from. I am looking forward to more appearances from you or your members to talk about where we are going and where we would like to go. There is no point in building a strategy out of a rear view mirror. I also recognize it is now 6:50 p.m. and we have barely scratched the surface in our dialogue.
Regarding one of the questions — Senator Fraser has her finger on it — you say you do not have the specifics between the high and low in terms of residential numbers and therefore, we do not get the picture. I think you just said it. Whenever you read a European Commission report, you have to look at the details to get a real understanding of the situation. I think that is true in Canada because of the regional differences. With that preface, Senator Fraser, you may be new, but that was a key question so I do not have to ask that question.
I want to press you a little on looking at the energy system and the electricity share of that, or its role in Canada's region-by-region energy systems. We need to begin to consider what we need in terms of energy in Canada and how best to produce that and use it in the most productive way possible.
What are your members doing to improve the productive energy conversion factors from supply source, which could be water or coal, et cetera, to final use? I think the estimates right now are that it averages out at 6 per cent. By the time you turn the electric light on, you are getting 6 per cent of the energy that you started out with at the dam for hydro. From a systems point of view, that is very inefficient. What are your members doing to improve, at each step — production, transmission, distribution and use — the 6 per cent?
Mr. Guimond: Throughout its history the industry has always introduced equipment that did the job better. That was always contingent on it being allowed into the rate base as being prudent and reasonable, a cost that could be passed on to the ratepayers.
I do not see that changing as we go forward. We need better equipment, better systems, better systems control, and better engineers and scientists. That will be factored into the decisions that are made as we go forward and will be reflected in the price of electricity.
You talk about the overall system efficiency, the conversion efficiency. I agree with you; it is not a pretty situation when you start to think of it as a whole system. However, it is the best system that we have been able to develop, given what we have in terms of resources, equipment and technology.
As we go forward, we will probably do better every step of the way, from generation, to transmission and to distribution. We have some very old and reliable systems in place, and we have some very young and very flexible systems in other places in this country. We will have to be sharp.
For example, if we want to plug in electric cars, the size of that particular challenge for the electricity system is huge. We probably cannot handle that now; so that part of the reinvestment in the infrastructure means that, we have to start lining up and getting ready for the advent of plug-in electric cars in large numbers in urban centres. The challenges are tremendous, and we will have to be smarter and faster at bringing in those solutions.
Senator McCoy: Let me ask the question another way. Have you done a systems analysis to say whether we should, in fact, go to electric cars? Does it make sense? Given that we only get 6 per cent out of the original resource, why would we now want to power our cars with this energy? Oil is a far more efficient resource.
Mr. Guimond: The answer is greenhouse gas emissions. We do not want to have greenhouse gas emissions affecting the atmosphere, so we have to go with other technologies and other technologies in transportation.
Senator McCoy: Let me point out that Senator Massicotte and I were both at the World Energy Congress. We saw an impassioned presentation from the CEO of Peabody Energy, the biggest coal-fired electricity company, he said, at least in North America, certainly in Europe, but perhaps not when you compare it to China. He said that with supercritical and super-supercritical and clean-coal technology, he could produce, using coal as the major resource, zero-emission electricity.
Mr. Guimond: Assuming he said carbon capture and storage.
Senator McCoy: Have we done the analysis? I am asking the question, and I think the answer is no.
Mr. Guimond: No. I know there are many bright people doing analyses on all kinds of questions related to energy, and I participate in The Energy Collective. It is a blog. Every now and again, with some regularity, I try to express views on the topic. I am always fascinated by the other views that are expressed on The Energy Collective. Many people on that collective are also talking about the issues that you raised today.
Senator Dickson: Your side 11 shows that Canada is self-sufficient in electron generation; is that correct? I am looking at the slide entitled "Canada-U.S. Electricity Trade Volume 1990-2009."
Mr. Guimond: Yes.
Senator Dickson: Our market is the United States; correct?
Mr. Guimond: Our primary market is Canada, our own jurisdiction.
Senator Dickson: However, our export market is the United States?
Mr. Guimond: Yes.
Senator Dickson: Have you done projections as to the future rules, regulations and the potential export market in the United States? You say we will need all this investment in Canada. I can see it in existing facilities, but I question the extent to which we need investment in new facilities, especially with all the uncertainty in the United States.
Mr. Guimond: You are correct about the uncertainty in the United States. If there is a legal carbon constraint imposed in the United States by Congress, then they are short of electricity, because much of their electricity is produced by coal in various regions of the country and their dependency on coal is over 55 per cent for their electricity production. They have a big job in terms of moving to less-emitting technologies, and that will likely involve a lot of natural gas.
If there is not a carbon constraint, then they have plenty of electricity, because they have what looks to be an ample supply, given that demand has fallen off because of the recession. Certainty and clarity on carbon is one of the fundamental assumptions that one has to make and resolve to see the answer that you are asking of me in your question.
Senator Dickson: Do you see the U.S. moving to a carbon tax?
Mr. Guimond: I cannot think of what U.S. Congress would go for that one. They could do it other ways. The ways and means of the U.S. Congress are always amazing to me. Every time I go to Washington, I learn something new about their system of government, so I would not be surprised if something came out of the blue sometime in the future about constraining carbon.
Senator Dickson: You mentioned cooperation or proposed cooperation between New Brunswick and Nova Scotia insofar as interprovincial is concerned. Would you comment further as to who will pay and at the progress if any on their interprovincial cooperation?
Mr. Guimond: I would dare not speculate on those commercial transactions. I can tell you that I am one of the speakers at the energy summit on October 25 in St. John, where a number of those utilities will be on a panel discussing that topic. The newly elected premier of New Brunswick is one of the speakers at that conference.
Like the other speakers and those in the audience, I will be all ears to find out more. That is the sum total of the information we have on that topic at the moment.
The Chair: Is that November 20?
Mr. Guimond: No, it is actually next Tuesday.
Senator Dickson: In New Brunswick, the province owns the power corporation; in Nova Scotia, it is a public corporation.
Negotiations are happening between three or four entities, I think. In other words, they are happening between the Crown corporation in New Brunswick, the Province of New Brunswick, the Province of Nova Scotia and I am not sure if there is another. I am not certain how it will all work at the table, especially when you have a public corporation.
I would be interested in what the respective premiers have to say. There is a new premier in New Brunswick. The premier of Nova Scotia has been around for a year and a half; he has a good handle on the file. How will those negotiations go forward, especially if they will be looking for government assistance for that new transmission line?
Mr. Guimond: I will remember that question and I will see if I get an opportunity to put a question like that to the premier of New Brunswick, as well as the premier of Nova Scotia, who might be there.
Senator Dickson: It would be very interesting to have another entity own that new transmission line.
The Chair: Like Hydro-Québec.
Senator Dickson: I did not say that.
The Chair: I will now go to our friend and colleague, the mayor, Senator Larry Campbell. He will be the last questioner, but I will remind senators not to leave because we have an important matter to discuss.
Senator Campbell: I am not a permanent member of the committee so I am not up to snuff. However, I have a couple questions.
Are you saying there is a 94 per cent loss from the start of your transmission until it hits your home?
Mr. Guimond: No, no.
Senator Campbell: There is a 6 per cent loss, so all you are trying make up is the 6 per cent; is that correct?
Mr. Guimond: The 6 per cent was the senator's number; it was not my number. There are line losses in the process. I have heard it as high as 30 per cent, but experts argue on that point and have been for a number of decades.
Senator Campbell: That is a long way from 94 per cent.
Mr. Guimond: We are talking about the conversion efficiency.
Senator Campbell: Why would you expect a guarantee that natural gas will not be treated like coal in the future?
I must be living in some kind of a different world because the only things that are guaranteed in life are death and taxes. Why would you expect that would happen?
Mr. Guimond: We will be making some major investments in natural gas infrastructure that have payback periods of a number of decades. If halfway through that period, government's decree, "Thou shall not use natural gas to produce electricity because of the CO2 emissions," we would have invested in alternative technologies outside of natural gas if we were to know that now.
Senator Campbell: Would you not agree that we are talking about risk?
Mr. Guimond: Yes.
Senator Campbell: That is what we are talking about: How much will the risk cost?
There is no such thing as clean coal, clean diesel or clean natural gas. That does not mean there will not be some time in the future. You kept returning to this guarantee of building in the future. Would you agree with me that the world we live in is continually evolving? No one gets a guarantee. It is simply a matter of how much you will pay for risk.
Would you agree that part of that goes to you or to us as consumers, picking up that risk and getting a life when it comes to what we do with resources from electricity to water? It is our responsibility to pick up some of that risk. Do you agree?
Mr. Guimond: I would agree that we all pick up risk but I am aware that the Government of Canada and other governments around the world do reduce risk to zero in many aspects of our daily lives. The example that pops into mind is the UN commission in Vienna on nuclear that basically lays out a framework in a treaty to absolve nuclear liability around the world, from investing states. Canada here has the Nuclear Liability Act that I think this Senate has been asked three times to look at, and it never really got through. However, that is one example of where the Government of Canada takes the risk away and says it is now zero; operate on that basis.
Senator Campbell: I could give you a guarantee right now that we will never treat natural gas like coal. In 20 years, some politician will come along and tell you where to put that, and that is what the guarantee is worth. All I am saying is that I understand. I would love to have a guarantee too.
The Chair: I can guarantee you need more time at this committee.
Senator Campbell: I remember Three Mile Island. I never expected to see another nuclear reactor built ever, and yet we know we can move on from that.
Senator Lang: I want to follow up on Senator Campbell because I think he brings up a good point. Would it not be safe to say that the guarantee you have in the electricity business is when you go ahead and build a plant, no matter whether it be gas or coal, we the consumer are dependent on that particular plant for electricity and we will certainly not allow you to shut it off when I shut my lights off?
You probably have a 90 per cent guarantee, as long as you have demand out there, that it will proceed until the life of that particular plant comes to an end. Forget the politician who will outlaw gas. He or she will not outlaw gas when they turn the lights off. That is a pretty good guarantee.
Mr. Guimond: The lights will not go off. We will keep them on; that is what the law says and that is what we will do, and you will all pay.
The Chair: The word "guarantee" has not been used in the way the witness originally intended.
Sir, I think you can tell by the questions and our collective interest in what you have said that it has been a terrific session. I know your association stands ready to help us as we go forward with our study. Am I right in that?
Mr. Guimond: That is correct.
The Chair: We are pleased to have you as our first witness as we start our second phase. Your documentation was clear. As Senator McCoy said, it provides us with a very nice platform to understand the complexity of this subject and yet there is a light out there at the end of the tunnel.
Thank you very much, sir. I will ask senators to stay. The permanent members must, in any event, and I will suspend for now.
(The committee continued in camera.)
(The committee resumed in public.)
The Chair: We are back in session on the public record. I ask for a motion for the following: It was agreed that the following Special Study Supplementary Budget Application, Energy Sector, for the fiscal year ending March 31, 2011, be approved for submission to the Standing Senate Committee on Internal Economy, Budgets and Administration. The amount is $10,712 for this two-day affair relating to nuclear power, and all senators have seen the itinerary.
Moved by Senator Massicotte; seconded by Senator Neufeld. All in favour?
Hon. Senators: Agreed.
The Chair: Contrary minded? This motion has been carried unanimously. Thank you, colleagues. This meeting is now adjourned.
(The committee adjourned.)