Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 19 - Evidence - February 28, 2011 (morning meeting)
HALIFAX, Monday, February 28, 2011
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:36 a.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: Good morning everyone and welcome to the great province of Nova Scotia. Good morning to the premier, and welcome to our committee.
This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. Today we open our hearings here in beautiful Halifax, Nova Scotia, where we are starting our visit to Atlantic Canada, which will include also visits to New Brunswick, Prince Edward Island and Newfoundland and Labrador as we continue our study of the energy sector generally. It is a comprehensive study that is almost two years now into its work, a study that became, in our view at least, obviously needed for a country that has incredibly vast natural resources and energy resources but also a series of regional systems and a future that is ominous to say the least in terms of energy demands. Some experts have recently predicted that by 2050, the demand for energy will be triple what it was in 2000 and that the gap between regularly anticipated supply and anticipated demand will be the same amount as the whole energy supply was just 10 years ago.
These are daunting challenges, and we embarked on this comprehensive study with a view to seeing if we cannot come up with some guidelines and a framework for a strategic way forward. Not to our surprise, but to our interest, we found that more than 15 other groups in the land were carrying out similar studies, each of course from its own particular perspective. Recognizing of course that energy, the environment and natural resources are provincial matters, we felt that there is obviously a national oversight role and that as a catalyst, we, as an independent group from the Senate of Canada, could perhaps take the best ideas from these other studies and bring them all together. That is sort of the long range hope.
Our visit to Atlantic Canada today is I think very timely. The Honourable Darrell Dexter, Premier of Nova Scotia, is fittingly our first witness, and we have observed that energy is very much front and centre on the agenda here, as it is really almost globally these days. We note that the energy ministers of the four Atlantic provinces met here in this town less than a week ago, last Tuesday. After 35 years in the making, we understand that perhaps cooperation amongst the four provinces is back on the table with a view to bringing the energy supply and demand into focus and perhaps having a coordinated system here and perhaps even one operator.
Sir, we are hoping you will tell us what is happening here from your perspective and what you would like the rest of Canadians to hear about what is happening in Atlantic Canada.
Before we get started with your evidence, we thought it might be helpful if you knew who we are. I am David Angus. I am a senator from Quebec and the chair of the committee. To my immediate right is Senator Grant Mitchell, who is from Alberta. Beside Senator Mitchell are our very able people from the Library of Parliament, Marc LeBlanc and Sam Banks. To their right we have Senator Robert Peterson from Saskatchewan and Senator Bert Brown from Alberta. Then we have a local boy, a local hero, Senator Fred Dickson. We are delighted that he could be here with us. He has had some personal medical challenges that he is dealing with amazingly.
Senator Dickson, you have been very helpful in getting us down here and getting us to meet the right people. We will start with you as our questioner after each witness, as you can give us the guidance I know you are able to do.
To my immediate left is Lynn Gordon, the committee's wonderful clerk. To her left is Senator Richard Neufeld from British Columbia. He is a past minister of all things energetic and brings great knowledge to the committee. To his left is a big man from the Yukon, a former legislator there and a great advocate of the energy sector and how it affects people in the North, Senator Daniel Lang. To his left is another senator who has experience as a cabinet minister in the province of Alberta and who was one of the inspirations for our study, Senator Elaine McCoy from Alberta.
Without further ado, premier, do you have any questions at the outset? We are here to listen, and if you will accept questions, my people are not shy.
Hon. Darrell Dexter, Premier of Nova Scotia: Good morning, honourable senators, ladies and gentlemen. I will begin with the Maritime tradition this time of year, which is to say that I have a bit of a cold, so this may be a little more ponderous than usual, but I hope you will bear with me.
I want to thank you very much for the opportunity to be here to talk about the work we are doing in this province to transform our electricity sector and more broadly in the area of regional energy cooperation in Atlantic Canada.
For Atlantic Canadians, those words "regional energy cooperation" mean many things. For us it means excitement for the future; it means a sustainable economy and environment for our children and our grandchildren. Most important, it means working side by side to do our part to contribute to a stronger and more prosperous nation.
Atlantic Canada recognizes that we are stronger, more secure and more competitive when we work together. As the chair pointed out, that was not always the case. For many years our four provinces with small populations all facing many of the same economic and social issues worked for the most part independently of one another. Atlantic Canada had talked for years about regional cooperation, and I do not want to diminish it. Some strides were made in that direction. However, I believe, as do my colleagues in the other provinces, that the real catalyst for change is only now on our doorsteps, and that catalyst is energy.
When I was in Korea last year on a trade investment mission, I saw a billboard at the Daewoo Shipyards that really caught my attention because it said, "No change, no future." Those four short words I think summed up the challenges that are before us as a government, as a province, as a region, as a planet.
It is hard to think of a category where the need for change is more profound and more urgent than the area of energy. The pace of change is driven by both the need and the opportunity — the need to change how the world is powered and the opportunity to do it in a way that creates jobs and protects our environment.
As Canadians, we have a long tradition of tackling a harsh environment around us head-on and, through the force of our wills and innovation, turning it to our use, and I would like to think that we do that and make a profit at the same time. Here in the second decade of the 21st century, perhaps no other topic merits our attention so completely as the question of how we can apply that can-do attitude and spare the shared benefit to the very fuel of our futures, the energy around us, and that is exactly what Atlantic Canada is doing.
Let us begin by talking about the historic Lower Churchill agreement. The Lower Churchill hydroelectricity deal with Nova Scotia, Newfoundland and Labrador, Nalcor Energy and Emera is an agreement that I firmly believe is a game changer for Atlantic Canada.
The Chair: Mr. Premier, if you would excuse this interruption. It is not meant to be rude, but you have mentioned Nova Scotia Power and Emera, which are second nature to you all down here. We are a little confused when we see the word "Emera." Assume we know nothing.
Mr. Dexter: Nova Scotia Power is a subsidiary of Emera. Emera is a regional energy company, and Nova Scotia Power is specifically the regulated utility in Nova Scotia. It is a privately owned, regulated utility.
The Chair: It is privately owned by its parent, Emera. Is Emera a holding company?
Mr. Dexter: Yes, and there is a specific share structure for Nova Scotia Power that requires or sets out the manner in which shares can be held. I cannot go into the technical details of that, but it is to ensure of course that it remains a Nova Scotia company.
The Chair: The bottom line is that it is not a publicly owned utility, not a Crown corporation?
Mr. Dexter: No, it is not a Crown corporation.
The Chair: Neither Emera nor Nova Scotia Power?
Mr. Dexter: No. Nalcor Energy and Emera — this is, as I said, an exercise in nation building that will benefit the entire country. I would actually take this opportunity to recognize and congratulate Emera and Nova Scotia Power for their tremendous work on the Lower Churchill file. Their work with the governments of Nova Scotia and Newfoundland and Labrador and their counterparts in Nalcor Energy was truly instrumental in making sure that the Lower Churchill agreement became a reality.
Emera and Nalcor Energy are entering into a partnership to develop the Muskrat Falls site of the Lower Churchill energy project. As part of this project, a trans-provincial transmission system to carry that power through Newfoundland across the subsea cable link between our two provinces and into Nova Scotia will be constructed. Construction will be completed by 2016. This development will guarantee Nova Scotia and Atlantic Canada an abundant supply of clean, green hydroelectricity for more than three decades.
The size of this project is immense. Subject to regulatory approval, Nova Scotia Power has agreed to purchase a 20 per cent stake in the $6.2-billion Lower Churchill project in exchange for a guaranteed 170 megawatts of firm and flexible hydroelectricity over 35 years. The 170 megawatts of electricity will account for between 8 per cent and 10 per cent of Nova Scotia's total power needs when it starts flowing in 2017, and I believe this is just the beginning for the Lower Churchill development. If you have been following that development, you know that Muskrat Falls is actually the smaller of the two sites that when combined are one of the largest untapped sources of hydro power in the world.
A couple of years ago, when I first met Danny Williams, I made Nova Scotia's commitment to this project clear. I told him that the Lower Churchill project was as important to Nova Scotia as it was to Newfoundland and Labrador. I told him I wanted him to consider us a partner in making this project a reality. I had the full support of Premier Williams, and I am pleased to say that we have the full support of Newfoundland and Labrador's newest premier, Kathy Dunderdale. Premier Dunderdale is a friend of Nova Scotia and indeed of Atlantic Canada. She believes, like I do, that this project will have significant benefits for our provinces and as well the entire country.
The Lower Churchill project will stabilize energy prices for Nova Scotia families and businesses well into the future. That stability will grow the economy and make life more affordable. This idea lifts the notion of Atlantic cooperation off the page and puts it into action. It builds a more prosperous Canada.
The project will create income for labour and business of some $3.5 billion. The jobs and economic benefits will change the economic landscape of Atlantic Canada for the next generation. Some 21,000 person-years of employment are expected over the course of the project.
Less well known is that Quebec and Ontario will benefit as well from this project. Estimates put additional work related to the Lower Churchill project at 12,000 person-years for Quebec and 11,000 person-years for Ontario.
Nova Scotia is working with New Brunswick on a memorandum of understanding to strengthen the transmission links between Nova Scotia, New Brunswick and the Maine border. This means that there will be a much stronger connection with the New England grid.
Over the next decade, Atlantic Canada expects to invest billions of dollars in the kinds of infrastructure upgrades and structural changes that are essential to make the Atlantic region one interdependent energy market. For the first time, the Island of Newfoundland will be part of the North American grid. Nova Scotia will go from being at the end of the line from an electricity perspective to the centre of an efficient energy loop. Those two reasons are the reasons I have been referring to the Lower Churchill project as "Atlantic Canada's CPR."
Enhanced transmission capacity enables development of more intermittent renewable energy, including wind and tidal generation, and enhances the reliability of the electricity system in Atlantic Canada. It paves the way for Atlantic Canada to become an energy exporter and increases the capacity of Atlantic Canada to buy lower-cost peak power. Long-term stable prices for clean renewable energy are a public policy objective and will improve both the security and the competitiveness of the regional energy market while enabling future economic growth. A stronger Atlantic Canada turns the region into a more significant contributor to a prosperous Canada.
This project will make a significant contribution to national air quality targets, lowering greenhouse gas, GHG, emissions by 4.5 million tonnes per year and moving Canada much closer to the federal vision for a 90 per cent non-emitting electricity sector by 2020.
With Atlantic Canada becoming an even more renewable energy rich location, we have not only become part of Canada's solution to GHG reduction, but we have become part of the solution for the entire continent. Getting Newfoundland off of imported oil and cutting back on the amount of imported coal Nova Scotia burns for electricity generation is a benefit to the environment and to the economy. All that money that was being spent outside the country now stays in Canada, making for a better environment, better cost stability, better economy and better security of supply for Canada as well as for North America.
While its focus is in Atlantic Canada, there is no doubt that this project will benefit the country as a whole, and that is why we have been requesting federal support in the way of a loan guarantee, which of course means that no cash will actually be handed over. The loan guarantee will mean lower financing costs for the project and ultimately lower costs for the consumers. There is very limited risk for the federal government, but the benefits are plentiful.
Some people may argue that the federal guarantee for Lower Churchill would put other provinces at a disadvantage. I could not disagree more. In fact, this project will have economic benefits for the entire country. I have always recognized that when significant infrastructure projects get developed in other parts of the country, there are opportunities and economic benefits for all Canadians. In December, Prime Minister Harper announced federal support for the construction of a natural gas pipeline between Valleé-Jonction and Thetford Mines in Quebec. This is great news for Canada, and I am pleased that Quebec was able to secure funding from the Government of Canada for this project because it helps strengthen the economy of the country, just as the Lower Churchill project will. Federal government support is critical to helping reduce the rate impact of the project on consumers in the early years. Support will give consumers throughout Atlantic Canada lower rates on energy generated from Lower Churchill.
But make no mistake. This project will proceed on its own merits. At the announcement of this project in St. John's and Halifax on November 18, you could feel the excitement and optimism in the air. I think we all knew that we were making history, not just around the deal, which in and of itself is a triumph, but in launching a new age of interprovincial cooperation that has the potential to fundamentally change the economic and political landscape of our region. The relationships and shared vision that have manifested themselves over the course of negotiating this project specifically, and regional energy cooperation more generally, have built an appetite amongst us all. Nova Scotia is committed to that journey, and we are helping to lead the way.
In Nova Scotia, we have done that by instituting the first hard caps on GHG emissions in Canada and setting some of the most aggressive renewable electricity targets in the world. We began with a legislative standard of 25 per cent by 2015. In the spring, we plan to enact legislation that goes even further. By 2020, 40 per cent of all electricity consumed in Nova Scotia will come from renewable sources.
Let me be clear: Lower Churchill means that 40 per cent is now considered a minimum standard. These targets are particularly ambitious when you consider that when those goals were set, almost 90 per cent of Nova Scotia's electricity was generated by burning carbon-based fuels. Most of that is coal imported from the U.S. and South America. That left Nova Scotia vulnerable to volatile fuel costs, and there security of supply issues.
At the same time, Nova Scotia is blessed with a wealth of renewable energy resources in our own backyard, and we are using those resources in innovative ways. I need only look at Cape Breton University as an example of this. CBU is building its Centre for Sustainability in Energy and the Environment, CSEE, a project that has been spearheaded by Annette Verschuren. The centre will host leading-edge research and development in how to use both old and new energy resources in a greener world. The CSEE is focused on promising areas of research like underground coal gasification, and I am encouraged by the possibilities that this kind of technology presents.
The wind regime in Nova Scotia is also one of the strongest in North America. Tidal energy in the Bay of Fundy is arguably the most significant in the world. Each day 100 billion tonnes of seawater flows in and out of the Bay of Fundy during one tide cycle, more than all the rivers in the world. The forest, fields and even the algae on the water are all viable sources of biomass. In addition, we have a combination of relatively sparse population in the area where the bulk of these resources reside and a broadly distributed electrical grid. That means that Nova Scotia has both the room to build renewable electricity projects and the means to connect them to the rest of the system.
We have done our homework, and we set the bar high. I knew that the magnitude of change we were proposing to undertake would only succeed with the support of all Nova Scotians. We set out to design a plan that balanced encouraging investment with keeping rates affordable and involved everyone from individuals to communities and independent power producers but still left a central role for the province's regulated electrical utility.
I also knew that it was important to build momentum by moving quickly. The result was Nova Scotia's Renewable Electricity Plan supported by legislation and regulation. This plan put in place the very first community feed-in tariff in the world. It will ensure that Nova Scotia Power, the province's power utility, as well as communities and independent power producers are able to benefit from the rich renewable resources in Nova Scotia. A range of feed-in tariff rates will be set in the spring, and then we can begin reviewing applications for prospective projects.
As The Toronto Star put it in August, "Even California hasn't such ambition." However, ambition without a plan is just that, ambition. Our plan will turn ambition into reality for the benefit of all Nova Scotians.
Most of our 2015 renewable electricity targets will be met through wind and biomass, but we expect tidal will play a bigger role as we move toward 2020. The Bay of Fundy resource has an estimated capacity that is beyond our ability to use ourselves, and that is important news for our neighbours because of our proximity to the grid. Nova Scotia's demonstration project will be transmission connected this summer and as such will become the largest in-stream tidal infrastructure support system in the world.
As part of Nova Scotia's Renewable Electricity Plan, the province is adding a number of incentives to industry in the form of small and large-scale feed-in tariffs to encourage further research and development. At the same time, the province is consulting on specific marine renewable energy legislation that will chart the course for these demonstration projects to move to larger commercial developments as they are proven safe and economic.
I also want to commend the federal government for its investment announced by the Honourable Gary Goodyear here last year, the innovative work being done on algal biodiesel research at the National Research Council of Canada's Institute for Marine Biosciences lab in Ketch Harbour, Nova Scotia. I also want to highlight the breakthrough that a Nova Scotia company, Ocean Nutrition Canada, has had in discovering a naturally occurring heterotrophic algae strain that is 60 times more productive at making oils than other types of algae that rely on sunlight and CO2. This type of algae grows by eating carbon-based materials like sugars and does not require sunlight. Ocean Nutrition Canada has patented the unique organism, and thanks to the support they have received through Sustainable Development Technology Canada, they are moving forward with a four-year demonstration project to scale up the fermentation process that will allow for larger-scale production of algae jet fuel.
Serious efforts are under way throughout the world to develop algae biodiesel, and I am proud to say that some of the leading researchers in this rapidly evolving field are Nova Scotians. I think Nova Scotia is emerging as a world leader in the area of renewable energy, not only in what we do but in how we do it.
While we take pride in what we are doing at home, I think one of the most fascinating things about electricity is that you cannot wrap borders around it. By its nature, electrons are shared and commingled in such a way that you cannot separate one source from another. In fact, the more integrated an electricity supply and transmission system is with its neighbours, the more efficiently the system runs for everyone. Rest assured that Atlantic Canada is working to achieve that, not just for the people of Atlantic Canada, but for the entire country and the continent.
The Chair: Mr. Premier, thank you very much. That was a very optimistic outline, and I am looking forward to my colleagues' questions. As I said earlier, we will start with Senator Fred Dickson, our local native son.
Senator Dickson: I must say, Mr. Premier, as a Nova Scotian, I am very proud of your presentation and the optimism you have for the future.
I have a couple of quick questions. One relates to the export issue and the potential market in the Northeastern United States. Has your view changed of that potential market because of the vast quantity of shale gas that reportedly has been found in the United States?
Mr. Dexter: No, it has not changed. As you may know, the New England governors and the Atlantic Canadian premiers, in fact the Eastern Canadian premiers, meet every year. In my conversations with the New England governors, they are very anxious to see the continued development of renewables here in Atlantic Canada. They are looking for many different kinds of projects in the United States in order to meet the energy demands that they have. Certainly the shale gas and its relative abundance is helpful in their energy picture, but it is only one piece of it. There is a proposal for a project in the U.S. that would actually move wind power from as far out as Wyoming into the Northeast. You can see that the level of demand that exists in the Northeast will continue to create challenges for the northeastern part of the United States and therefore opportunities for us.
The Chair: Just before we continue, I notice you have two gentlemen with you at the table. Perhaps you could introduce them for the record.
Mr. Dexter: Yes, certainly. This is Murray Coolican, Deputy Minister of Energy. I am not sure whether he had a chance to meet with you earlier.
The Chair: We recognize him from many years ago. He is a man of great durability and sustainability. He does not need to be renewed.
Mr. Dexter: He is the walking picture of renewables.
The Chair: Exactly.
Mr. Dexter: This is Paul Black, and he is with my office.
The Chair: Thank you very much.
Senator Dickson: On the demand side in Atlantic Canada, have any studies been done out 35 year or more as to what the demand will be for electricity in Atlantic Canada, and more specifically if you want, since you have the deputy with you, in Nova Scotia? The supply side is more than adequately taken care of. Have there been any studies on the demand side?
Mr. Dexter: Not that I am aware of.
Senator Dickson: Does Emera have any studies that have been conducted from its perspective?
Mr. Dexter: I have not asked Emera that question directly. I am not sure whether you will have a chance to speak with Emera or with Nova Scotia Power later on, but certainly they would be able to answer that question. It is always in the interest of utilities to understand what their market will be in the future. I am not sure whether they would consider that to be proprietary or protected information, but my assumption is that they are doing their projections out in the short, medium and long term. Our experience with the utility here is that they have really looked to the long term and the future of where energy is going in this region. It has been part of the reason why they were successful in and committed to negotiating the Lower Churchill deal, because that is ultimately a long-term project. As I said, Muskrat Falls is the smaller part of that project. As we move to the second part, which is the Gull Island part of that project, it becomes an even larger and more dynamic project. My expectation — and the plan — is that they will also of course run that transmission grid right up to the Upper Churchill, which will eventually give them the capacity to wheel all of that power in the direction that would be most advantageous to Newfoundland and Labrador.
Senator Dickson: My last question relates to the transmission, the subsea line between Newfoundland and my favourite place, Cape Breton. As I understand it from the press and the stories that have been written, that will be owned by the subsidiary company, Nova Scotia Power. Am I correct in that assumption?
Mr. Dexter: That is right.
Senator Dickson: Will that investment have to be approved by the regulatory authority in Nova Scotia?
Mr. Dexter: Yes.
Senator Dickson: When will that application be made?
Mr. Dexter: Later this year.
Senator Dickson: How large will that project be, dollar-wise?
Mr. Dexter: It is $1.2 billion. That is the transmission line right up into Newfoundland.
Senator Dickson: That is from the mainland in Newfoundland? It does not include the transmission from Labrador down?
Mr. Dexter: No.
Senator Dickson: What will be the capacity of that transmission line from Newfoundland to Cape Breton?
Mr. Dexter: It will be 500 megawatts, and there are dual lines in order to give it a more robust signature.
Senator Dickson: As I understand it, you are promoting or you are having discussions with New Brunswick about a new transmission line between Nova Scotia and New Brunswick. Am I right on that?
Mr. Dexter: Yes, that is right.
Senator Dickson: That is a 500-megawatt line, as well?
Mr. Dexter: Yes.
Senator Dickson: Is federal government assistance required for that second line?
Mr. Dexter: There has been no request for that, no.
Senator Dickson: Is one contemplated?
Mr. Dexter: We are still working with New Brunswick on that particular project, and as we work through it, all those questions will be considered, but at this point it was seen as a project that was necessarily incidental to the Lower Churchill project for obvious reasons and one that made that whole question of an interdependent energy market complete. Our intention, and I think the intention of New Brunswick, is to try to find a way to ensure that we do this in a way that minimizes the impact on rates and maximizes our ability to wheel power.
Senator Dickson: My last question relates to a comparison of the Bay of Fundy tidal project and the Newfoundland Lower Churchill — we will say Muskrat Falls and Gull Island for a moment. Of the two, which would you say is more innovative and would have the most benefits for Nova Scotia?
Mr. Dexter: It is like trying to choose between children. The Lower Churchill project is a more traditional technology. It is a highly capital-intensive project, but it has known results. The Bay of Fundy project is a project of innovation, and as we found out already, it means Nova Scotia Power had one turbine in the Minas Basin; when the turbine came out of the water, the blades had actually been taken off the turbine by the force of the currents in the Bay of Fundy. You have to remember that this turbine was actually designed after considerable research on the power of the currents in there. It was already built to specifications that were anticipated in the Minas Passage. You might think that is terrible. In fact, it is the other way around. It means there is even more energy there than we anticipated. Of course, as that proponent goes back and reassesses what happened, they will design the next version and the next generation of that turbine to account for what is there.
Three other proponents will go in the water with different styles of technology. They include some of the most advanced, highly sophisticated technology companies in the world, including Lockheed Martin and Alstom. We are very pleased with the attention that the Bay of Fundy has attracted. They will go into those berths and will be looking — all of us will be looking — for the technology that will best adapt to what is a very rugged environment.
We look forward to this development, and that is why there is the Fundy Ocean Research Centre for Energy, FORCE. We see ultimately our ability to be able to harness that in a way that will be extraordinarily advantageous. I do not think we have to choose between the two. I think one is a more traditional project with known results; the other one is a project of innovation, and I believe we can bring that to reality.
Senator Dickson: I appreciate your answer very much, Mr. Premier, because I feel that the longer-term future is in innovation and technology. I am quite supportive of the Newfoundland hydro project, as you well know — I was in Newfoundland when the announcement was made in St. John's — but I also think there is a tremendous future for Fundy tidal power, and I am very pleased to know that you have that on your radar screen, as well, and I wish you well in pursuing that project.
Mr. Dexter: Bragging about the Bay of Fundy of course goes right back to the days of Joseph Howe. Whenever he went anywhere where people were bragging about their accomplishments, he would say, "Well, how high are your tides?"
The Chair: Mr. Premier, we have heard during our studies that, given the nature of things in this great country of ours, for a new hydro project to go from conception to operation takes about 25 years now; we have heard that time and time again. You have used the words "reality" and "anticipation." The announcement was in November 2010, and I think I heard you say that before 2020, the Muskrat Falls first phase will be up and running and the pipelines will be built. When you use the word "reality," is it really already a reality? I gather you do not have the financing in place, and we do not have the Aboriginal sign-offs or the environmental assessments. I am asking because I am new to this area, but we hear in the rest of the country that it is not quite so fast.
Mr. Dexter: First of all, much of this work was done in advance. Newfoundland and Labrador has been pursuing this project for a considerable period of time. They were always looking, as would be quite natural, to the way in which it would eventually take shape. When I was at Muskrat Falls, you could see that even some of the site work had already been done. Senator Dickson was in Newfoundland at the time; he would know that the Aboriginal interests were represented with us that day as we announced the agreement between all of the partners. I can tell you that Nalcor in Newfoundland and Labrador is absolutely committed to making it happen in the time frame that has been set out, as are we and Emera and Nova Scotia Power. In all the conversations I have had with the partners, they believe that this is a perfectly realistic timetable and that they can get it done in that time frame.
The Chair: I am delighted to hear that, sir.
Senator Mitchell: Mr. Premier, thank you very much. We are very grateful that you would spend this time with us, and it is short, so I will get to my point. One of the issues that hover over all of our deliberations is the question of climate change. You clearly understand that and clearly are addressing that. I am interested in your statement that you have established hard caps — the first hard cap regime in North America. First, could you give us an indication of how you are allocating those caps and to what sectors? Second, will you have a trade regime associated with that? Third, what would be the jurisdiction of that trade regime?
Mr. Dexter: Perhaps I should have been a little more specific. The hard caps that we established are specifically for the electricity sector.
With respect to the other pieces, we are very conscious of them and are looking at how those can be developed, but we are not there yet. The hard caps in the electricity sector are the first ones to be established, and of course the efforts we have made with the various types of renewables and the development of the Lower Churchill project all help us meet those.
Senator Mitchell: That leads to my second question. I think everyone is aware, perhaps no one more than you, of the political pressures with phasing out or diminishing the significance of coal-fired power production. Is it not true that if you are to meet your established targets for renewable as opposed to coal-fired production, you actually absolutely need to have the Churchill project? Otherwise, what would you do to replace 78 per cent of your power?
Mr. Dexter: It is a key piece of infrastructure for us to be able to meet those targets. As I pointed out, over the long term the Fundy project would be a very significant contributor, actually producing more power than we could use, but it is a longer-term project by the time they move through to the development of a commercial-scale project.
Senator Mitchell: Could you tell us the status of your negotiations with the federal government on the loan guarantee and what you think the prospects of that are? Ultimately, I guess the cost to the federal government would be if the loan had to be called or could not be fulfilled.
Mr. Dexter: We have asked for a loan guarantee. That is before the federal government. I talk about the loan guarantee, but we have not ruled out any kind of funding that the federal government might prefer. I just point out that in a loan guarantee, although it is very beneficial in terms of financing to lower the cost, there is no actual cash out of pocket for the federal government. As these projects are backstopped by the provinces and by very significant utilities, the risk to the federal government is, in my view, infinitesimal, but there is always some risk. However, I cannot imagine a scenario under which that would be called.
Senator Mitchell: Thank you very much.
Senator Neufeld: Thank you very much, Mr. Premier, for your presentation. It was very good, and I appreciate what you had to say. Thank you for taking the time out of what I am sure is a very busy life to be with us here this morning.
Those are some very tough targets to meet. You certainly set some tough targets in nine years to have 40 per cent of your electricity coming from renewable sources. You are to be commended on that. In response to Senator Mitchell, you said that would require the completion and the transmission completion from the Lower Churchill. Is it feasible to have all of that completed in nine years? As I understand, you have not started the environmental assessment.
Mr. Dexter: I think it is. As I have said before, the time frames that we set out were ones that we felt were reasonable in our anticipation of the process, both on the regulatory side and on the construction side. The scoping documents for the environmental approvals will be filed I think within weeks, and the construction timetable is literally being advanced as we are here today.
Senator Neufeld: I will use a small comparison from British Columbia. A 900-megawatt plant to be built on a river that has already got two dams on it has been four years in the process right now and just started the environmental process, which is estimated to take another three to four years, and construction of six years. When you add all those up, it is a bit out in the future. Maybe that tells me I had better bring some British Columbians here to learn from you how you go about building those things that fast, but I commend you for that.
What will happen to the coal plants? Coal provides about 78 per cent of your electricity now. Is it planned that those plants will be totally shut down in this period of time, within eight or nine years? Are they at the end of their life and will just be shut down? If they are not at the end of their life, how do you deal with the capital cost?
Mr. Dexter: The question of stranded capital costs associated with those plants is of course a tremendous concern for our utilities, but we are looking at a number of different things. We are looking at some of the plants that are moving toward the end of their life, but we are also in a position where in some cases the plant itself might not close. Maybe one part of the generating station will close and the rest of it will stay open in order to help meet those requirements. We are looking at how that will be managed over the next number of years.
As the federal government continues to look for the closure of coal-fired generating plants, some of these plants will eventually close. The question we have is how that is done with the least impact on our consumers, given that those costs will have to be recovered in some manner. For example, we have an older plant, and the federal government has been looking at this in terms of the age of the plants, wanting to close them down when they reach a certain age. However, we have some that have been refurbished; they are not new plants, but they have had considerable investment put in them and their life spans have been expanded. If it is simply a drop-dead date of a certain number of years, that does not quite work perhaps the way it should.
Senator Neufeld: To go from 10 per cent renewable now in electricity to 40 per cent renewable in nine years may not include the shutting down of the present coal plants that are in place.
Mr. Dexter: There will be some scaling down of those plants. Whether they are complete closures or partial shutdowns is really a question of what the best mix is across the province. Where those take place, I would rely on the technical expertise of the utility to do that in the manner that was both most efficient and of course most cost-effective for consumers.
Senator Neufeld: I will go on to fossil fuels. Too often, I think, people say, "If we generate all our electricity with clean sources, we have met all the targets we have to meet and are home free," and they do not dissociate the two because they are two totally different forms of energy, and you understand that, also. I see you have a refinery, and I know you have a fair amount of natural gas production. What things is Nova Scotia contemplating doing to reduce the greenhouse gas emissions from that industry?
The Chair: When you say "that industry," do you mean the transportation industry?
Senator Neufeld: No, not just the transportation industry. There is the production of natural gas. Natural gas is used for heating homes and in industry — all of those things.
Mr. Dexter: This region and Nova Scotia specifically have one of the highest percentages of homes fuelled with heating oil as opposed to electricity. Overall, we are looking at a more comprehensive strategy with respect to these sectors. We did a renewable electricity strategy early on. We are looking for a more comprehensive energy strategy, which the departments are working on with stakeholders and which we will release in the foreseeable future.
Fundamentally, one thing we can do is work on efficiency measures, and we have set up an independent efficiency organization known as Efficiency Nova Scotia. That organization will be developing programming designed to help conserve energy in the province. It is not yet up and running. I understand from my officials that completion is a month or two away. As you understand, when you set up a new organization, it must go through the administrative process of developing its programming, and Efficiency Nova Scotia will be filing this in the next couple of months.
We take the view, as I think many people do, that energy not spent — called "negajoules" — is the most effective way to reduce costs. Of course, as a result, we also reduce greenhouse gas emissions. We are putting a particular emphasis now on the whole question of energy efficiency and how we can drive that through this new Efficiency Nova Scotia. We did have a Crown-owned organization called Conserve Nova Scotia that had developed some programming on its own, but we have now moved this over to an arm's length organization whose funding comes through a levy on electricity costs through the Nova Scotia Utility and Review Board.
The Chair: It might be worth pointing out at this time that our witness at noon is Mr. Allan Crandlemire, the chief executive officer of Efficiency Nova Scotia.
Mr. Dexter: Yes.
Senator Neufeld: What are the total greenhouse gas emissions from Nova Scotia now, and what percentage of that is from electrical generation?
Mr. Dexter: Electrical generation is about 50 per cent of our greenhouse gas emissions. We can get you that information.
Senator Neufeld: Thank you.
Senator Lang: Thank you for being with us this morning, Mr. Premier. I want to commend Nova Scotia and Halifax and the other communities that were involved in hosting the Canada Winter Games. We hosted them in 2007 in Yukon, and I have to say it was a real boon to our part of the country, as I am sure it was for yours this time around.
I would like to refer to the federal government and its role in the energy field versus that of the provinces. One of the issues we are wrestling with here is to recognize the constitutional responsibility that you as a province have and also to recognize where the federal government's responsibility lies in helping the provinces and the country go ahead in the area of energy development.
I would like to turn to one area that Senator Neufeld referred to, and that is the question of the federal and provincial governments' responsibilities in environmental assessments. It seems to me that 10 years for some of these projects to get the go-ahead is not an exaggeration, given the various environmental regulatory bodies that are in place and the time it takes. Has your government put forward any proposals, perhaps in conjunction with your other provincial colleagues, in looking at the federal government's and the provinces' responsibilities, to see whether those could be streamlined so that we can do the same job in a much shorter period of time as opposed to with the duplication that happens now?
Mr. Dexter: We have worked very hard with our department here to try to make sure that the work that we are doing in Nova Scotia is in sync with the work that the federal government is doing. We have worked hard to build those relationships so that they understand the direction we are going in. This is for a number of reasons. First and foremost, simply, the federal government is developing a regulatory regime with respect to the reduction of the amount of coal-fired generation that takes place in the country, and we wanted to ensure that what we are doing here in this province is seen as equivalent to the measures the federal government is requiring other provinces to undertake. We may be doing things a little differently than they are, but we are accomplishing the same goal. It is important that the government understands and that we get credit, for lack of a better word, for the work that we are doing here. We have been working hard at that relationship.
We have some experience with joint regulatory bodies. For example, in our offshore, we looked at the Panuke project and its assessment through the regulatory process. We did a lot of that assessment work, which we then shared with the federal government in order to expedite the process. We are familiar with this, and certainly we will continue to work with the government to ensure that these matters are done in as expeditious a fashion as possible. I do not think there have been any specific proposals on the table that we have made, but we are certainly willing to do whatever we can to share any data or information that we might have with our federal counterparts in order to ensure these things are done efficiently.
Senator Lang: Yes, because it is definitely a concern across the country, and Senator Neufeld alluded to it a bit earlier, because of the time that it takes and the duplication in many cases that is taking place. I do think the province and the federal government should be looking at that very seriously.
I want to go back to the question of the federal government's responsibility or what you see as its responsibility when you talk about a loan guarantee. In requesting that loan guarantee, are you as a province prepared to take part of that guarantee, as well?
Mr. Dexter: Here is the thing: The federal government's borrowing rate is much lower than ours is. Our ability to generate a lower rate would not accomplish the aim that we are trying to accomplish, which is to lower financing costs. The federal government's ability to generate that financing benefit is the point of the application. It does not really benefit us or the utilities that ultimately will be assuming this debt to have us provide the guarantee. We can do it, but it does not generate the same benefit.
Senator Lang: I want to follow up on Senator Dickson and the question of tidal and the prospects that might hold for you. It sounds like it is unlimited, if one of these demonstration programs proves to be successful. What time frame are you looking at to see whether you will get a result at the end of the day from the experiments you have now?
Mr. Dexter: By September the demonstration projects that are in the water will be attached to the grid, so we will see almost immediately which of these projects are generating the kind of results that will be beneficial. However, commercialization is really part of the process that we are in. That is why we have the Fundy Ocean Research Centre for Energy. It is difficult on the front end of an innovation project to know exactly how many generations of a particular technology you will have or how long it will take you to get to a commercial stage. We are impressed and I think justifiably hopeful because of the tremendous technological expertise we have attracted with the various companies that are backstopping the various test technologies.
Senator Peterson: Thank you, Mr. Premier, for your presentation on your vision for Nova Scotia and Atlantic Canada. Is New Brunswick a major player in this initiative?
Mr. Dexter: The day after Newfoundland and Nova Scotia signed the Lower Churchill deal, I travelled immediately to meet with David Alward in New Brunswick, and we reaffirmed the memorandum of understanding that we had signed previously and expanded the efforts that we were making to accommodate the Lower Churchill project. I see New Brunswick as being absolutely essential to the success of regional energy cooperation. New Brunswick is geographically in the middle, and I think Premier Alward also sees the extraordinary potential and benefit of us ensuring that we have as efficient as possible an energy system.
Senator Peterson: Do you have any agreement now on the interconnection of the grids with New Brunswick?
Mr. Dexter: As you may know, a level of cooperation already takes place with respect to Nova Scotia and New Brunswick, simply because Emera does work in both provinces — and in fact in Maine and in other northeastern states, as well. We are not unfamiliar with each other's systems. The memorandum of understanding I mentioned earlier is a kind of working agreement, a working document that says we recognize the potential advantages of our continuing to integrate our systems. We also recognize that there are some differences in the manner in which we operate the systems. Down the road, certainly it is possible, maybe even likely, that we will want to see an integrated system operator for the system.
Senator Peterson: I think that is relevant right across the country, so I appreciate your efforts.
Senator McCoy: Thank you, Mr. Premier. It is always a pleasure, and I am as impressed with your commitment to sustainability as I was when we met last October.
I am struggling to get a systems view of energy in your province and in the Atlantic. We have heard only about electricity, which is a big story and a commendable story, and I am greatly heartened at the cooperation that is being shown amongst you all these days. What percentage is electricity of total energy use in Nova Scotia? Can you give us a thumbnail sketch? I am afraid I am the last speaker here, and maybe we should do this off-line, but I think we need a more robust understanding of the dynamics of energy, both domestic and export.
Mr. Dexter: I said earlier that electricity is about half of our GHG emissions. I am told that that is about 20 megatonnes. That was the question Senator Neufeld had earlier. The rest of the energy picture accounts for the rest of the greenhouse gas emissions, and we are of course looking for as many ways as possible to integrate alternatives to past energy production methods. We are expanding biomass; we are expanding our wind regimes. All of these efforts are designed in one way or another to provide ourselves with greater energy security or in some cases to reduce directly the amount of greenhouse emissions that we have. I have said for a long time that when it comes to the energy question, there is no silver bullet. I jokingly say that, if anything, it will be silver buckshot with many different kinds of projects taking a small piece of the picture. That is why I think it is incumbent upon us to pursue as many of these different opportunities as possible. I think biomass has a place in your energy regime; I think wind has a place in your regime; I think tidal has a place. I think eventually solar will have a place; technology needs to come along a little bit yet. All of these together will inevitably be the answer to how we will shape the energy picture for the future. We work very hard here not to limit our options, and that is why we are pursuing the algae biodiesel question and why we are fortunate to have some very good facilities here that are investigating that and researchers who are working on it.
I believe natural gas will play a big part in the energy future. As Senator Dickson pointed out, there seems to be a growing body of opinion that says that there is a fair amount of shale gas available for use. Some companies here are working on refining those gases to take even more carbon out of them and to make them more efficient. A lot of work is going on in a many different areas.
Senator McCoy: Have you undertaken any sort of cross-system studies to do your comparisons? I am not sure how to phrase the question. Maybe you boil it down to the highest and best use of energy: How do we use the energy and get the most out of the source of energy, and what sources of energy are we going to put into that particular use? You are nodding your head. That is one way of asking the question. I am wondering whether you have been doing any systemic research in your studies to that effect.
Mr. Dexter: The interesting thing of course is that generally speaking we are a pretty small province, and we have dedicated a great deal of our time and effort over the last few years to trying to take the resources we have, both departmentally and also in associated organizations through our universities and our research institutes, to try to get exactly that picture you are looking at. We have not said that we will not do anything until we have that picture. We have taken quite the opposite view. We know there are many things we can do, and we have been trying to proceed where the opportunity exists. We continue to try to put all the pieces of that puzzle together. For example, as Efficiency Nova Scotia comes on line — and you will have a chance to talk to Allan Crandlemire later — that is part of the picture.
How will we optimize the energy that we have, and how will we use it as efficiently as possible? I think that is the question for the future. We are as engaged in that as we can possibly be when you look at what we are doing on algal research and on tidal research. For a small province, we are putting a significant level of effort into trying to solve that question.
Senator McCoy: Small is beautiful. Sometimes you can see it better when you are small, so I was hoping you had solved it for us all. Thank you very much.
Senator Brown: Mr. Premier, I am very interested in the tidal projects. I understand you will have one in September. I realize there will not be an immense power output, but what are you looking at in the first demonstration of it?
Mr. Dexter: The devices themselves or the test ones each will be about one megawatt.
Senator Brown: I am fascinated by your comment about the silver buckshot, too, because I think there are many things out there that we will have to do before we can change from the energy system we have today to the energy system that we will have 20 years or 30 years down the road.
Mr. Dexter: Yes.
Senator Brown: We have to realize that Canada produces only a little less than 2 per cent of all the GHGs in the world, so we do not have to rush to judgment on this thing. The more of these different kinds of energies we try, the sooner we will be able to figure out which ones are efficient and which ones are not.
The Chair: Mr. Premier, we could go on all morning. It is a fascinating landscape that you have portrayed for us here. We certainly were very pleased to hear about it, and we will help spread the word. I just wanted to underline that we are not the federal government. We are part of the federal system, but we cannot do any grants for you. However, we are listening carefully. I think Deputy Minister Coolican understands the limitations.
Mr. Dexter: We are counting on your considerable influence and prestige, though.
The Chair: That is what these dialogues are all about, and it was great to have you here with the deputy minister and your chief of staff, Mr. Black. Thank you all.
Senators, our next witness is from Nova Scotia Power, which is an Emera company. Mr. Robb Bennett is President and CEO of Nova Scotia Power Inc.
You were in the room, sir, for the evidence from Premier Dexter, and we are anxious to hear what you have to say.
Robb Bennett, President and Chief Executive Officer, Nova Scotia Power Inc. (Emera): Thank you very much and good morning. It is a pleasure to be here this morning to speak with you. Premier Dexter and his team have already spoken about the strong public policy direction that we have here in Nova Scotia regarding renewable energy, and I want you to know that Nova Scotia Power is in lockstep with the government's direction on this. Government regulation is enabling the transformation of our company and all of the economic development and job opportunities that go along with it. Regulation, both provincial and federal, means that what we do is largely dependent on public policy. The government establishes what is expected of us as a utility, and then we determine how to best deliver those results in the most cost-effective manner for our customers.
We have provided a handout for you today; it is not my intention to go through the handout in detail, but it does describe in many aspects the transformation that is under way at Nova Scotia Power. Instead, I would like to give you a very high-level overview of our company and our activities. I know we are trying to get back on schedule here, so I will be as quick as I can.
The Chair: Take the time you need. We are very interested in understanding the corporate structure and the governance and the interaction between the parent and the sub.
Mr. Bennett: Absolutely. Let me tell you about Emera. Emera is an energy holding company. It is about a $6.5-billion company. It is headquartered here in Halifax, Nova Scotia, and it owns energy assets across the spectrum of energy — natural gas pipeline involvement, electric utilities, generating stations, both here in Atlantic Canada and in New England, the Caribbean and as far away as Lake Tahoe in California.
The Chair: Is it listed on the Toronto and New York stock exchanges?
Mr. Bennett: It is on the TSX under the symbol "EMA." It is a growing company. It is growing based on the capabilities and expertise of many of the people who have come from Nova Scotia who are part of building the company. The company is led by a Nova Scotian, Chris Huskilson, and as I said, it is a holding company that has a diverse portfolio of energy assets.
Nova Scotia Power, the vertically integrated utility here in this province, is one of those energy assets. Nova Scotia Power is about a $4-billion company. We provide nearly all of the electricity provided to customers in the province of Nova Scotia. There are some small pockets of independent operation, but primarily we are responsible for energy supply and security in this province.
I would like to say a few words about Canada for a moment. I know you have heard from my colleagues and others across the country about the enviable position that Canada holds in the world in terms of clean energy production. We really do lead the world from an electricity point of view in clean energy, and as an industry we are extraordinarily proud of that. However, we also recognize that across the country there is a lot of diversity in where that electrical energy comes from. Many parts of our country are blessed with abundant hydro resources, which is a wonderful solution to meet their energy needs, and other areas such as Nova Scotia have had to meet different challenges in terms of electricity production over time.
I will give you a bit of the history here in Nova Scotia. Thirty years ago, much of the energy that was produced here came from oil, imported oil that was burned in generating plants here in the province. During the oil crisis or the energy crisis of those days, decisions were made, and I think very strategic, logical decisions were made to transition away from oil as a primary energy source for electricity and to evolve to the use of domestic coals. We have an abundance of coal here in Nova Scotia, and at that time it made great sense from an economic development point of view and from an energy efficiency and cost-effectiveness point of view to use coal that came from mines here in Nova Scotia. Our industry was essentially built around that with the support of the federal government, provincial governments and business.
Of course, times have changed and we have evolved now to a world where coal as a primary energy resource is a much more challenging fuel to use, particularly the coals here in Nova Scotia that are high in sulphur and high in mercury. Effectively, at Nova Scotia Power we have transitioned away from local coals as a primary energy source, and most of our fuel is now imported from the Southern United States or Colombia because there are cleaner coals available that can help us meet the very stringent environmental emissions caps that we have in the province.
The Chair: Did you say Colombia, as well?
Mr. Bennett: Yes. We have been meeting those caps quite effectively. One way we have done that is through the use of cleaner coals. We have also modified the operation of our power plants significantly. We typically have some of the best performing power plants in the country. They have been modified to burn a different fuel, a cleaner fuel, and create fewer emissions. We have reduced our sulphur dioxide emissions dramatically. We have reduced our nitrogen oxide emissions by nearly 40 per cent. We have been very innovative in our capabilities to capture mercury from the burning of coal as a primary electricity fuel. We have come a long way to reducing our carbon dioxide emissions. This year our CO2 emissions will be the lowest they have been since 1999. We are very proud of that. We vary between nine and ten megatonnes of carbon dioxide emissions from the electricity sector in Nova Scotia each year, and we are on our way down.
The way we are doing that is transitioning more to the use of natural gas as a primary energy fuel and doing some innovative work there with waste heat recapture technologies and other investments that we are making, actually quite close here to Halifax at our Tufts Cove generating plant in Dartmouth. We are also deploying a lot of renewable energy in the province of Nova Scotia, and right now we lead the country in terms of the amount of installed wind capacity as a percentage of peak load.
Nova Scotia has gone from a very low level of investment really in new renewable technologies, like wind, to now leading the country in the deployment of that technology. I know the premier talked about the biomass work that we are doing to use indigenous fuel resources like waste wood from the pulp and paper industry to make energy, the work that we are doing in the Bay of Fundy. We are involved in investigation of carbon capture and storage opportunities. We have invested nearly $2 million with Dalhousie University in the investigation of the geology in Nova Scotia to determine whether there is an appropriate location to sequester carbon dioxide if it can be effectively extracted from the flue gas stream.
We realize that we are a small company in relation to many of the utilities in the world, so it is unlikely that we will lead the development of that type of technology, but we need to be ready and able to take advantage of it when someone does develop that technology.
The Chair: Did I hear that there is some subsea coal project in the making off Cape Breton?
Mr. Bennett: There are interesting opportunities in coal. Of course we have not yet figured out how to burn coal and capture the carbon dioxide, but when we do, and I believe we will, Nova Scotia will be well positioned because of the abundant coal resources that we have. Now a challenge in Nova Scotia is accessing those coal resources because to a large extent they lie underneath the Atlantic Ocean and are very difficult to mine. Yet even in that regard, new mining technologies are being developed. One technology that I am aware of is underground coal gasification, where the coal is melted underground through a thermal process and the gasses, which are very much like natural gas, are extracted through a refining system. It eliminates the need to go underground for mining and effectively brings the coal out in a different and cleaner format. There are many opportunities.
I loved the premier's silver buckshot term. I will use that again because that is exactly what we are doing in Nova Scotia. We are transforming. We have come a long way under the guidance of the provincial regulations, which are equivalent to the guidance that is being considered on a national level for the reduction of carbon dioxide. We have been well supported by the federal government. The ecoENERGY program has been a part of helping the transformation to renewable energy resources. It has helped our company and our customers, and it has helped other independent developers be successful with renewable projects, as well.
The decisions we make going forward will be important. From a federal perspective, I think it is widely recognized that while we are in a wonderful position as a country with our energy production capability, this regional difference that we all recognize means that federal regulations must take into account the challenges that exist in specific regions. Nova Scotia is quite unique and challenged in terms of coming up with, say, 90 per cent of our energy from a non-carbon based product. However, we are on our way. As the premier said, having 40 per cent of our energy coming from renewable resources by 2020 is a tremendous step forward. Our company is proud to be a part of that.
The point the premier made about silver buckshot could not be more appropriate for our approach. We believe in a portfolio approach to these challenges. We have tried not to put all of our eggs in one basket. We are using wind, biomass, coal, natural gas. We have the capability to use oil when it is economic. We will experiment in areas like tidal energy development, which are very promising with the Bay of Fundy resource in our backyard. There are many opportunities for us.
This portfolio approach also includes a regional interconnectedness, which is the focus of my message this morning. For us to truly realize the potential that Atlantic Canada has for energy production and to truly stabilize our economy in this part of the province, we need to take advantage of regional energy solutions. In the electricity business, to be able to take advantage of those regional solutions, we need to have stronger regional interconnections.
We spoke this morning about the work we are doing with NB Power. We have always worked closely with our neighbouring utility in New Brunswick. In fact, we were one of the first utilities in the country to institute a reserve sharing agreement, and for many years, since the early 1960s, I believe, we have been exchanging reserve capacity arrangements with New Brunswick on a daily basis. We have a close working relationship there. We are now also developing a very good project in relationship with our friends in Newfoundland, which will be critical to the transformation of the energy world here in Atlantic Canada. It will help Nova Scotia realize significant benefits in terms of renewable energy, but it will also bring about two terawatt hours of additional electrical energy into the markets in Nova Scotia. I believe that additional energy will be transformational in terms of stabilizing our costs here and helping us build on the energy resources that we have and the diversity that we can enjoy if we are connected together as a region.
I will close by saying thank you for the time this morning. We are building a more sustainable future here in Nova Scotia and Atlantic Canada. We are building a cleaner environment. We have tremendous opportunities for jobs and economic development that can be tied to energy infrastructure, particularly our regional interconnectedness, and we look to government for guidance and support as we make this important transformation away from being a company that is 90 per cent fossil fuels and an electrical industry that is 90 per cent fossil fuels to one that is much cleaner, much more stably priced and more sustainable for our customers into the future. Thank you.
The Chair: Thank you very much, sir. I think you have set the table quite well for Senator McCoy's question about a study of how all the buckshot comes together systemically in the long term.
Of course, Senator Dickson is our lead-off man today as this is his home turf.
Senator Dickson: Thank you, Mr. Bennett, for an excellent presentation and overview of the activities of Emera or Nova Scotia Power. Which were we talking about going down that road, or is it both you are representing today? I am a bit confused.
Mr. Bennett: I am representing Nova Scotia Power today, but to a degree I can speak on behalf of Emera.
Senator Dickson: I asked this question of the premier. It relates to the New England market. Have any studies been done by Nova Scotia Power or Emera regarding the potential for selling long-term power into that New England market? That is a general question, but more specifically, have any arrangements been made between Emera or Nova Scotia Power and the entity that you have an interest in, whether it be a controlling interest or you own it all, in Bangor? Is it Bangor Electricity or Bangor Power?
Mr. Bennett: Yes, Bangor Hydro.
The Chair: Do you have long-term contracts with them, future contracts to sell them energy?
Mr. Bennett: Regarding regional studies or market studies overall, yes we do look at long range planning. Within Nova Scotia Power we conduct an integrated resource planning exercise. It looks out about 30 years at energy markets and at the developing energy technologies and helps us make decisions because investments in the utility industry are typically long-term investments — 40-, 50-or 60-year assets that we put in place. Therefore, we need to think long term about the solutions we are pursuing. Part of the integrated resource planning exercise includes looking at the New England energy markets because on a daily basis we are buying or sometimes selling into those markets — whatever makes the most economic sense for customers to keep costs low here in Nova Scotia. We look at them. We use the standard forward curves that most financial and energy analysts use. However, it is difficult to get forward curves for things like gas prices out 30 years. They just do not do that work.
To some degree, we are as challenged as anyone else when it comes to predicting the future, and no one really knows, I think, what prices will look like 10 years from now in the New England markets. However, we do the work using industry standards to understand what the opportunities might look like. Nova Scotia Power does not have a specific plan for any type of energy export opportunity. We are really focused on supplying our customers here in Nova Scotia with the cleanest and most cost-effective energy product we can provide. Emera has some interest and supports others in the industry who may be interested in accessing New England markets.
I worked at Bangor Hydro for a number of years after our acquisition of that company in 2001. I spent about six and a half years in the U.S. working for Bangor Hydro. It is a wonderful company, but we do not sell energy directly to them. They buy their energy from the open markets in New England. While we have an operating relationship, and of course Emera owns the company wholly, we do not do many energy transactions with them. Certainly no energy transactions happen between Nova Scotia Power and Bangor Hydro. We support each other in other ways; for instance, during major storms and situations like that, we move our people back and forth to help restore power, but not on an energy basis.
Senator Dickson: My second question also relates to the Northeastern United States market. As I understand it from recent readings in the press, New Brunswick has a long-term contract for its nuclear power into the Northeast. Am I right or wrong on that assumption?
Mr. Bennett: I am afraid I do not know for sure what New Brunswick's contract positions are. In the past, New Brunswick has taken advantage of its proximity to the New England markets and has sold quite a bit of energy into the New England market, but I am not aware of the nature of the contract.
Senator Dickson: In the studies you have done, and say within the time frame that Muskrat Falls comes online in 2016 or 2017 or whenever it is, what percentage of that New England market do you feel would be available for energy from Atlantic Canada?
Mr. Bennett: It depends on price. I do not have a view of the New England market at that level because my focus is in providing solutions for Nova Scotian energy customers. What I can tell you about the Nalcor project is that it will produce hydro-based renewable energy that will be very competitively priced with any other form of renewable energy that exists. Depending on what regulations are in place in New England at the time, if there is a demand for carbon-free renewable-based energy solutions, then the Nalcor project should be well-positioned to compete in that market, as would any other project, wind project or tidal project that is positioned in Atlantic Canada.
Senator Dickson: Following up on the statement you made that you are very concerned about supplying the Nova Scotia market — naturally you would be — and that Nova Scotia Power and the consumer in Nova Scotia come first, what effect will it have on the rates? Will the rates to the consumer in Nova Scotia be less or more when the transaction with Nalcor is completed? I am assuming it will be. As a consumer, will I be paying more for my electricity in Nova Scotia, or will I be paying less?
Mr. Bennett: It is a difficult bet to make; looking to the future in a world where we are 90 per cent linked to volatile fossil fuels, I have no way to predict what the cost of energy will be in the future. However, I have a very strong expectation that because of escalating fossil fuel prices, the cost will be higher. A solution to that volatility is renewable energy, and Nalcor is a part of that. The costs from that project are quite predictable. They are more expensive than coal-fired generation today, but it is a different type of energy.
Senator Dickson: I appreciate that, but how much more? Just in simple terms, how much more will I be paying? Is it 2 per cent, 3 per cent? How much more will I be paying, because it will be more expensive.
Second, are you paying a firm price for the power that is coming from Muskrat Falls? I am just trying to understand it.
Mr. Bennett: In the analysis we have done, the renewable energy from Muskrat Falls is price-competitive with any other form of renewable energy that we have been able to find in our studies and the cost of that type of development. Our current renewables development program has an impact on consumer rates of about 2 per cent per year. We have been building out from 10 per cent renewables to 15 per cent to 25 per cent by 2015, and each step that we take down that renewables path increases costs by about 2 per cent per year. The Nalcor project will be in that same realm.
It is important to understand that what we are doing with Nalcor is trading an investment in the hard asset, the $1.2-billion undersea cable, for energy from the project. That results in a very attractive energy solution for Nova Scotians because it caps or levels the cost of that energy out over 30 years. In fact, because of the financing and the nature of these large capital projects, as they depreciate away over time, the real cost of that energy to Nova Scotian customers actually goes down over the period of the 30-year life of the cable project. It is a trade in hard assets for energy. It is also an opportunity for Nova Scotian customers to get in at the base level, not to be in a market buying energy that has gone through hands several times and been traded and marked up along the way; it is an opportunity for us to get in at the cost of capital, and that translates into real value for customers. It is the same as the loan guarantees that were spoken about this morning. The most important aspect of these loan guarantees is that the guarantee translates into lower costs for customers.
Senator Dickson: I would like to follow up on something the chairman mentioned earlier. The relationship between Emera and Nova Scotia Power fascinates me. I will not get into details; the chairman will get into the details with you on that. However, I am curious about who the contracting parties are here. What contract does Nova Scotia Power have besides that subsea line? Evidently they will be responsible for the subsea line from Newfoundland to Cape Breton, or at least that is what I read in the paper. Is that the whole extent of the involvement of Nova Scotia Power?
Mr. Bennett: That is the way it is framing up right now, yes. In exchange for our investment and involvement in the undersea cable, we will get energy from Nalcor; 20 per cent of the energy from the site, about a terawatt hour a year, will come from that site through the cable to Nova Scotia and end up supplying our customers here in Nova Scotia. Instead of buying the energy on a market like we might today, we will be trading our investment in that cable for a supply of energy.
Senator Mitchell: Mr. Bennett, could you give us an idea of what exactly the price per kilowatt hour will be for the Lower Churchill project's power versus your coal-fired power plant power?
Mr. Bennett: I am not able to give the exact price because we will not know until the project is done, but I can give you a range of prices. Coal-fired electrical energy today with current coal prices is about $45 a megawatt hour, compared to natural gas-fired electricity prices, which are about the same cost today because of the low cost of natural gas available in today's market, compared to wind energy today which is about $100 a megawatt hour, and future wind we believe out five to seven years from now will be somewhere around the $125 a megawatt hour. Those are the ranges, and the Nalcor project is in that range out six or seven years from now, comparable with other renewable energy alternatives.
Senator Mitchell: It would be $125?
Mr. Bennett: In about that range, yes, but again the project economics have not been completed yet, so we know generally where it will land but not exactly.
Senator Mitchell: That project will replace the much cheaper or apparently cheaper coal-fired power production at $45. Nova Scotia is fully aware that its rates are going up and it is doing that to save the environment?
Mr. Bennett: The coal-fired power production is cheaper today because coal is about $118 a tonne. Two years ago coal was $180 a tonne, just before the economic collapse. If coal prices go back to that pre-collapse level, then the cost of energy from coal will be quite comparable to the cost of energy from renewables. What we are trying to do is eliminate that volatility, and in doing so create a better energy product, a product that is cleaner, a product that is made more here at home and that allows us to keep more of our energy dollars in this economy by stopping the purchase of foreign fuels from Colombia and the U.S. Several hundreds of millions of dollars a year leave our Nova Scotian economy and go to those economies to buy coal; instead, we are trying to keep that here buying biomass fuels, investing in wind farms, improving the efficiency of our current plants and investing in longer-term energy solutions like the Nalcor project.
If you look long term at what renewable energy can mean and what the Nalcor project can mean, including even taking into account the impacts of natural gas, you can see in the longer-term thinking that yes, there is an opportunity for these projects to cause costs to go up if fossil fuel prices stayed low, which is highly unlikely, but they have a very significant mitigating impact against higher fossil fuel costs, and that is where the real advantage is. We are making an investment in future stability of energy prices.
Senator Mitchell: It is a very powerful vision, actually, and we do not hear all that often a jurisdiction like yours saying, "We are willing to confront the issue of extra costs for renewables because . . ." However, you have mitigated that impact in a couple of ways. One, you make the point about stability of pricing. The price of wind will not go up. The fuel will not increase. It is a very powerful thought to investment to business that needs to know, that wants stability perhaps even more than absolute rock-bottom prices.
This may be a moot point in a sense because you are way along in that thought process, but I ask practically everyone, so I will ask you, too: Do you believe that we absolutely need a price on carbon? You implicitly will have one, given the premier's statement about capping. If we do, is capping the way to do it, or would a carbon tax be more effective?
Mr. Bennett: The objective is to reduce carbon, and caps work to do that. In Nova Scotia we live under those caps today. In our industry, I have a declining carbon dioxide emissions target that I work to meet each year, and we have been meeting it. I am quite comfortable under the regulations in Nova Scotia now. It means a transformation; it means a lot of hard work; it means change. Historically, our company invested about $150 million a year in capital improvements in our utility in Nova Scotia. Last year we invested nearly $600 million, and the year before that, $270 million. The people in our company are working very hard to transform to meet this future world of carbon caps or a cost on carbon, whatever comes along. We need to be in a position where our customers are ready with different energy solutions than the only solution we have today, which is coal.
Senator Mitchell: What is the price of tidal in that comparative list? I do not think you mentioned tidal.
Mr. Bennett: It is about $450 per megawatt hour today.
Senator Mitchell: It is very expensive.
Mr. Bennett: Yes.
Senator Mitchell: Finally, just to emphasize, the way you will get to where you want to be, and the key element of this vision, is the hydroelectric power from Newfoundland. The premier is very bullish on it, and it is great to hear because it is essential, but what is between you and getting it absolutely done? Is the federal loan guarantee a deal breaker?
Mr. Bennett: It is a transformational opportunity for the region, and I know the premier speaks very passionately about this. I have spent 25 years in this industry; opportunities like this do not come along very often, and we are doing everything we can do to realize it, because I believe that 20 years from now my kids and other customers in Nova Scotia and in Atlantic Canada will thank us for the effort and the work that we go through today to make this a reality.
As for the loan guarantees, the ultimate beneficiary of a loan guarantee is the ratepayer, the customer. From a commercial point of view, our company does not stand to win or lose or gain anything from loan guarantees. Because of the regulated nature of our business, those lower interest costs flow directly to customers in the form of lower rates. It is an opportunity in the economy to create a lower-cost, cleaner energy alternative than might otherwise be available without the Nalcor project.
Senator Mitchell: Great. Thank you very much.
The Chair: On page 14 of your handout, you mentioned that Nova Scotia Power will be responsible for the undersea cable for transmission from Newfoundland over to Cape Breton for a consideration, which you have described. Do I understand also for the undersea cable from Labrador over to Newfoundland?
Mr. Bennett: No, sir. The Strait of Belle Isle will be crossed by Nalcor. Nalcor will do the cable work on that crossing.
The Chair: What is the alternative to a subsea cable? It sounds good in theory, but it is a very big project to build, and it is risky and expensive. Do I understand that there is a landline from Churchill Falls now? Forget about the dispute with Quebec about the cost and everything, but is there power coming into Nova Scotia from Churchill Falls now? How does it get here?
Mr. Bennett: The power from Churchill Falls that flows through Quebec today gets intermingled with all of the other energy in the network, and I do not know that any is coming to Nova Scotia right now.
The Chair: Is it going to Newfoundland?
Mr. Bennett: No. Newfoundland is completely isolated from the rest of the electrical network in North America. The Island of Newfoundland has no networking or connection at all. An important part of this transformation is actually making that part of our country a part of the national interconnection. That is one of the important objectives we have here.
The cable is 180 kilometres of high voltage undersea direct current cable. It may seem like a complicated approach to moving energy around, but I can assure you it is quite common. This is not new technology. The technology for undersea high voltage cable has evolved in the last ten years, even the last five years. It has become much more cost-effective, much more reliable, and that is the technology being deployed here. It is very similar to other projects that have been done in Europe. These are quite common; 180 kilometres is on the upper end of the length of cable that is effective and feasible, but it is certainly not breaking new ground at all. It is a cost-effective way of moving energy into quite small cables. We have two; if one fails, the other one can still carry half of the energy, so there are some reliability aspects. It is not dramatically different than the other communications cables in other networks — fibre optics cables, telephone lines — that are already laid between Nova Scotia and Newfoundland.
Senator Lang: I would like to follow up on this loan guarantee with the federal government and the fact that it gives a better interest rate than if the province or provinces were to take on that responsibility. What is the difference in the interest rate?
Mr. Bennett: I am afraid I do not know exactly, but I will guess it is between 100 and 200 basis points or a 1 per cent or 2 per cent difference in interest, which on a $6-billion project is a significant amount of interest expense that normally would be paid by customers in the rates they pay for this energy. Typically projects like this would be financed with 60 per cent debt; in this case for the Nalcor project, about $3.6 billion will be financed through a debt arrangement. In that support from the federal government, there is no direct cash outlay. It is using the balance sheet of the country to provide some security behind the bank loans, and that security allows the bank to give the best possible interest rate effectively to our customers. I do not have the figures directly of how much money that will save customers over time, but it will be substantial.
Senator Lang: In your opening remarks, you said Nova Scotia is unique. I think we can safely say that about all the regions of the country, and obviously we have commonalities and differences. However, you talked about federal regulation and the need for federal regulation to recognize that. What did you mean? What federal regulations are you referring to?
Mr. Bennett: Primarily the regulations that are under consideration today for the curtailment of carbon dioxide emissions. Those regulations reflect an objective for the entire country to reduce its carbon dioxide emissions, and different areas of the country obviously have different accountabilities in that regard. Our position as a utility in Nova Scotia has always been that we are happy and prepared to do our part to step up and make the changes that need to be made, and we have certainly moved well down that road. The provincial government is of the same mind, setting the only carbon cap requirements in the country and holding the utilities accountable to meet those requirements. We are well on our way. In fact, the provincial regulations are very likely to produce a carbon situation in Nova Scotia that is even better than the one anticipated under the federal guidelines. The complication is being prescriptive about how we get to where we are going to go. Everyone appreciates that we have a goal, and we certainly are aligned with the goal, but with regard to the step-by-step changes that we need to make to get to that goal, I believe it is important that the utility and businesses have some control over how we move down that path. It is in the best interests of our customers and ratepayers for us to do it in the most economic way possible.
Senator Lang: It is a question of rates. We all want to do these great, wonderful things in the energy field, but at the same time we want to keep our rates down to probably what they are today, which quite frankly I do not think is possible. With the numbers you gave us here, it looks to me like in a period of time we will see the rates for electrical generation here almost triple, if I understand these rates correctly, from $45 for coal-fired to between wind, solar and hydro, if the hydro project goes ahead. Is that not correct as a ball park figure?
Mr. Bennett: No. I did not do a very good job of providing the context for that math, but that is the busbar energy cost at the terminals of the generator. Even though that may double, it does not necessarily double the end cost to customers, because in the end cost to customers are included the other costs for the transmission network and the other components of the electric utility. As I said, the transformation to renewable energy is increasing costs by about 2 per cent per year, and you can extrapolate that out. You know that in 10 years, 20 per cent more cost is incurred because of renewable energy introduction. It certainly will not be tripling the price.
Senator Lang: One other area that perhaps you could expand a little more on is natural gas. It has been mentioned a couple of times, but it has not really been highlighted. You have that Sable Island gas, and I gather you have some generation in Nova Scotia now. Is there any thought of expanding the utilization of that natural gas?
Mr. Bennett: We are expanding. In fact, right now we are the anchor load for natural gas in Nova Scotia and in the Halifax area. The lateral that was constructed off the natural gas pipeline was built into Halifax at our facility in Tufts Cove, primarily to supply that generating station with gas. We use it every day. It is a very economic fuel for us right now, and we look to use more.
We are currently modifying two of our generators at that site. We have two 50-megawatt units called LM6000s, which are like jet engines, that drive a generator. We are spending about $90 million on a project there to capture the waste heat from those jet engines and convert it into electricity. In the past, those engines were vented directly into the atmosphere, but now we will channel that hot exhaust gas through a boiler system and make 25 megawatts of electricity effectively for no additional fuel cost.
We are doing things with natural gas here that are quite innovative and efficient and effective. We would like to use more. Natural gas availability from Sable is declining. Certainly the production from that field has gone down over the past couple of years. Deep Panuke is next in terms of development offshore Nova Scotia, and we look forward to that coming on. I believe the most recent forecast is for it to come online in November.
There is an opportunity for natural gas here, but it needs to be part of that balanced portfolio. We do not want to have all of our eggs in one basket. Having 20 per cent or 25 per cent of our energy needs being met by natural gas would make sense to us.
Senator Neufeld: I am glad Senator Lang expanded on the loan guarantee. I guess it would be great if every province could have the federal government underwrite its loans for electricity generation so it would save money for the ratepayers. I am not the federal government, but I have a little bit of a problem with that. It does add to the federal debt. I think if Nova Scotia is in this and believes that this is the right thing to do, Nova Scotia should be the one to underwrite that debt. That is just my opinion on that. I would love it if the feds came in to B.C. and underwrote all the debt and took the debt off our books and took it to the federal books. I guess that would be great.
I want to talk a little bit about the Lower Churchill. As I understand it from this morning, that would be a lot more power than what is needed in Nova Scotia. That is clean, renewable electricity. That is hydro. I understood to start with that it was to replace the coal, which is now 78 per cent, but after speaking to the premier, I am not sure that that is the case. I asked the premier whether those coal plants would be shut down, and he said he was not sure because there will be some stranded capital obviously someplace along the line. I guess you would be the person to answer that.
You also said you are spending $400 million or $600 million a year now in refurbishing these plants. It does not seem to me that within nine years those plants will be shut down. I almost think that you think they will still continue to run. Is the Churchill project actually for export and another source of electricity? Contrary to what Senator Mitchell talked about, that we are looking here at reducing greenhouse gases, if you will still continue to run the coal plants and have Upper Churchill, that does not seem to me to be reducing the greenhouse gases — other than what you are doing, which I commend you for. Could you help me here a bit as to what really is the plan?
Mr. Bennett: Let me first bring some clarity to where the hundreds of millions of dollars of investment is actually going. That money is being spent on renewable energy development, not in our existing power plants. It is being spent on the modifications to our Tufts Cove facility for the waste heat recovery project, which I just mentioned, wind farms, a biomass project in partnership with some of our largest customers in the province. We are trying to create a synergistic relationship between the utility and primarily the pulp and paper industry to realize energy opportunities that might exist there and drive efficiency in both of our businesses. That is where we are making these investments, not in our existing power plants.
Of course the existing plants need to be run safely and effectively. They are important economic contributors to the province, and we take good care of those assets. However, as more renewable energy comes online, as projects like the Nalcor project deliver clean, renewable energy to Nova Scotians, we will use less coal. It means that less coal will be burnt in all of our power plants. In some cases, it means that the most inefficient power plants, the highest-cost power plants will operate less and less until ultimately, and I think this is where the premier was going, we get to a point where those plants are no longer needed, but it is a phase-out over a period of time. There is no question that they will run less and that less coal will be used and less carbon dioxide will be emitted.
Senator Neufeld: The amount of hydroelectricity that would come from Churchill is more than you need in Nova Scotia. I guess you are saying that you will phase out those coal plants over a period of time. That is an absolute. That will happen. Can you tell me what period of time that is? You must have that figured into your rate base somehow. How many years will it take to actually shut those plants down once Churchill starts providing more electricity than what you need in Nova Scotia?
Mr. Bennett: Right. That falls out of the integrated resource planning studies we do and that 30-year time frame that we look at. From those studies, we see that as the renewable energy comes online in the 2017, 2018 time frame of Nalcor energy arriving here in Nova Scotia, several of our plants, since most of our plants are in Cape Breton, particularly at that end of the province will not be run as much as they are today. From 2018 to about 2035 is the phase of years where each of those plants is used less and less and eventually phased out.
Senator Neufeld: So 2035 is the magic number? That is the plan. I understand integrated electricity.
Mr. Bennett: Right. Again, these plans evolve over time, but it is all done in the interest of meeting our environmental obligations at the lowest possible cost to customers.
Senator Peterson: I am interested in the structure of Emera. It is a publicly traded company, and by capitalization Nova Scotia Power is two thirds of that. Was Nova Scotia Power ever a Crown corporation?
Mr. Bennett: Yes, it was.
Senator Peterson: It rolled into there. Did the Government of Nova Scotia take shares? Do they hold shares?
Mr. Bennett: No. I do not specifically know of all the shareholders of Emera. The Nova Scotia government could well be a shareholder. I am not sure. In 1992, the Government of Nova Scotia privatized Nova Scotia Power, which was a Crown corporation at the time. It was the largest initial public offering on the Toronto Stock Exchange in the history of the country. The company was privatized and sold off to shareholders, many of whom were Nova Scotians at the time, and over the years that evolved into the relationship we have today with Emera. Emera actually grew out of Nova Scotia Power to become a holding company for Nova Scotia Power and to provide a mechanism for expansion and growth in the energy markets.
Senator Peterson: The Government of Nova Scotia would not have any seats on Emera then?
Mr. Bennett: No, it is a completely private shareholder-owned company.
Senator Peterson: Emera then has to pay GST and provincial taxes?
Mr. Bennett: Yes.
Senator Peterson: On any of the projects?
Mr. Bennett: Yes.
Senator Peterson: Then the loan guarantee now is really a bit of a stretch. It would be a loan guarantee for a private company and would put a contingent liability on the federal government where they have quite a few now. I just do not understand that. It would be wonderful if you could do it, but everyone else would want to do it, too.
Mr. Bennett: Remember that the guarantees of the nature we are talking about are not to the benefit of our private company. In the regulatory structure, they translate into a benefit and lower rates for customers. In a regulated utility environment, costs for debt interest and those types of expenses flow through and are paid for in customer rates. I know it is a difficult structure to get your head around, but the idea here is not to try to provide any type of undue support to the corporate entity Emera; it is to provide support to an energy opportunity in Atlantic Canada, to make it a reality and to make it as cost-effective as possible for customers in Atlantic Canada.
Senator Peterson: I appreciate all that, but good luck.
The Chair: Would you like to have a go with this limited time, Senator McCoy?
Senator McCoy: My colleagues have discussed loan guarantees, and there has been mention of Bombardier and Ford. I have so little time and so many questions. I will squeeze in two short questions. I cannot remember the technical term for it, but there is currently an override on electric utility fees, I think, to support Efficiency Nova Scotia. How much is that?
Mr. Bennett: It is about 4 per cent of customer rates today.
Senator McCoy: What does that mean in cents per kilowatt hour? Can you recall? No? Anyway, we are talking about 4 per cent. That is twice as much then as renewables.
Mr. Bennett: It is 4 per cent on an annual basis. Renewables add an additional amount of about 2 per cent per year for renewables development. That money occurs as a line item on customers' bills in Nova Scotia. It flows through Nova Scotia Power and then is transferred to Efficiency Nova Scotia to support about $40 million a year of customer renewable investment programs.
Senator McCoy: That is another innovation I wanted to make sure we got on the record. Let me label it as an innovation, but we will pursue it later.
My second question is on smart grids. Much of what is being done to achieve negawatts — the premier called it negajoules, but it is the same concept — is achieved through central control of electricity applications. For example, California controls all of the air conditioners remotely. They are no longer yours to run at home. However, it requires a smart grid to do that. We have not delved into that aspect of your operations, and we have not given you time to talk about it, but perhaps you could just quickly give us a thumbnail on that.
Mr. Bennett: The concept of load shifting or demand side management through control and smart grid applications is certainly very much on our mind. At Bangor Hydro, we deployed smart grid technology almost seven years ago, when it was new. We put it out to all 115,000 customers in that company, and we have realized great success. We have learned a lot, and those learnings are now being transferred to Nova Scotia Power as we consider smart grid applications here in this market. We will be preparing an application in our capital plan, and we forecast that it is a developing technology that has not yet hit the point for effective use in Nova Scotia but is on its way.
We are also working in partnership with New Brunswick and Prince Edward Island on a joint study with the federal government financial support to study load control applications in this market. That just began last year, so we are early in the work, but we are looking at what we could do to optimize wind generation and load control. We are also very far, and have been for quite some time, down the road of load control applications in partnership with our largest customers. We have time-of-use rate structures that motivate our customers to shift their workloads or their electrical consumption around in the day, mostly onto the back shift, to level out electricity generation and therefore lower costs for all customers across the board. That happens on a daily basis, including contracts in place with many customers that allow us to interrupt them in the case of a short in the energy supply in the market. We can call on them to reduce their load and therefore bring a benefit to all of our other customers. The work is under way.
The Chair: Sir, all good things must come to an end. We were delighted to receive your testimony, and I gather we can keep in touch with you as matters evolve in this exciting project and in the integration initiative.
Mr. Bennett: Thank you very much for your consideration.
The Chair: Colleagues, we will now receive witnesses from Offshore/Onshore Technologies Association of Nova Scotia, OTANS: Ms. Barbara Pike, Executive Director, and Mr. Joe Fitzharris, Chair of the Board of Directors. We also have with us Mr. Peter Lane, CEO of Sprague Lake Enterprises Ltd.
There are many fascinating things going on in Atlantic Canada, and we are anxious to hear as much as we can.
Barbara Pike, Executive Director, Offshore/Onshore Technologies Associations of NS (OTANS): Good morning. I am joined this morning by the chair of our board of directors, Joe Fitzharris, who is the general manager of Marener Industries Ltd. Marener is a locally owned company with dockside facilities at Pier 9 in the Port of Halifax. It provides fabrication, mechanical, hydraulic repair, maintenance, project management services to the oil, gas, marine and industrial sectors. That is an example of one of our members.
Thank you for the invitation to appear before your committee. These are exciting and interesting times in the energy sector in Eastern Canada, and we welcome the opportunity to provide our view on those opportunities.
Briefly, OTANS is a not-for-profit industry association that is almost 30 years old. It was formed in 1982 as the Offshore Trades Association of Nova Scotia. There were about 170 members who were working to tap into the new promises and the opportunities from the offshore petroleum industry.
As the industry has evolved, so too has OTANS, changing from trades to technologies, then adding onshore interests to its mandate and name. However, the mandate has always been the support and maximization of Atlantic Canadian participation in the supply of both goods and services to meet the needs of the energy industry. Its purpose is to identify, promote and support the development of opportunities originally in hydrocarbon, but now in the complete energy sector and associated industries.
We continue to evolve and are expanding our mandate to embrace both the non-renewable and renewable energy industries, as well as moving beyond Nova Scotia to support members in other provinces. In a few weeks we will be unveiling our new brand, new bylaws and new mandate, but the bottom line remains the same: the support, encouragement and growth of the energy industry in this region.
We applaud your effort to move forward on a national discussion on energy and your identification of the need for a comprehensive Canadian sustainable energy strategy. You are so correct when you say that Canada cannot afford to watch from the sidelines.
We live in a country rich in energy assets, whether that is the natural resources of the non-renewable sector or the natural resources of the renewable sector. Wind is a promising source of clean energy, not only for provinces like Prince Edward Island but for dozens of remote Canadian communities now dependant on diesel-powered generators. The Bay of Fundy has the highest tides in the world; you have heard it here many times today. If our technology works there, tidal power can work anywhere. Apart from the continued growth and boom of Newfoundland's offshore oil industry, the most exciting energy project in the region is the proposed development of Muskrat Falls on Lower Churchill.
Yes, the Nalcor-Emera deal would benefit Newfoundland and Labrador and Nova Scotia, but it also has the potential to benefit New Brunswick and Prince Edward Island. This is a win-win scenario. Yes, there is work that needs to be done, but the most heartening thing on this file is the level of regional cooperation — seeking a win for everyone in the region. Our provincial governments are speaking with a united voice. Finally and thankfully we are talking and acting as one region. What is good for one is good for all.
As you know, the deal is between Emera, which is a publically traded company, and Nalcor, which is a Newfoundland and Labrador Crown corporation. The Newfoundland and Labrador government obviously has a hand in the deal, but the support and participation of the Nova Scotia government is essential.
More to the point, the provinces have made it clear that while Ottawa's participation is welcome, it is not a pre-condition. Premier Dexter has been particularly blunt — as he was here this morning: The deal will move ahead with or without a contribution from Ottawa.
The Chair: Do you think it is possible?
Ms. Pike: To move ahead without Ottawa?
The Chair: Yes.
Ms. Pike: Yes. That is what energy security and energy sustainability sounds like in Atlantic Canada, and it sounds good.
I am not sure there is a more secure or green energy source for Atlantic Canada. In fact, Canada has a hole in hydro-generated electricity. Freeing the flow, opening the transmission corridors, enabling provinces to transmit across interprovincial borders, could mean that rather than two nuclear plants in Ontario supplying future energy needs, electricity generated at Gull Island in Labrador could be powering homes in Toronto rather than in New York. Transmission is what enables this.
For the current deal, the fact that transmission exists in New England and that Emera is a player there helps. It is not just this project on the Lower Churchill that benefits, or the possibility of the second Lower Churchill project at Gull Island that benefits; it is also the independent producers of renewables in Atlantic Canada who benefit. That includes wind power and the wind technology being developed and researched on Prince Edward Island. That includes the tidal and wave power that is being developed and researched in Nova Scotia. However, as I have said, transmission is the key.
Last April, Nova Scotia Power, NB Power, and the governments of Nova Scotia and New Brunswick struck a deal to expand the transmission between the two provinces. It too is an essential piece to the whole free-flow discussion and indeed the question of viable energy security and sustainability on a national scale.
Transmission capacity as nation building is the principal foundation for the requested investment of a loan guarantee for the project. This means no dollars, but it is a guarantee that makes this project more affordable and an even better deal.
On the other hand, Prince Edward Island has made a proposal under the Green Infrastructure Fund for the Confederation Bridge power cable. The cost of that project is $90 million; the requested funds, a mere $45 million. Yet there is no word from Ottawa on either of these projects.
The new energy source and the associated transmission infrastructure are huge booms for Atlantic Canada and, therefore, for Atlantic Canadian businesses. If Nova Scotia is to be weaned off fossil fuel-generated electricity, it needs hydroelectricity and wave and tidal and wind and biomass. Apart from one generating station at Tufts Cove, the existing plants in Nova Scotia are too far from the existing gas pipeline for natural gas to be a viable option. On top of that, Nova Scotia Power is a cost-of-service utility, so if oil is cheaper, Nova Scotia Power is required to burn oil instead of natural gas. I must say, though, that in today's market, and likely for the foreseeable future, that scenario is unlikely.
On tidal energy, we have talked about it for generations, and in spite of decades of work by Acadia University, this is still in its infancy, but not for long, and the potential is huge. Work is progressing in the Bay of Fundy; the environment is harsh and the technology is progressing. If it can work in the Bay of Fundy, it can work anywhere, and that means being world leaders in tidal generation — an industry and a technology that can be exported around the globe. Without the free flow of electricity in this region, such development stalls.
On the Island of Newfoundland, the Holyrood plant continues to generate electricity for much of the capital city from fossil fuels. This is in a province that sits on the last mega hydro project in North America.
New Brunswick's reliance on fossil fuel-generated power, with Point Lepreau down and its refurbishing bill mounting, raises serious questions about the security of its electrical supply, as well as the cost to the taxpayers of that province.
On Prince Edward Island, research and development of wind power continues to be a key initiative of the government, but unless wind-generated power can be added to the grid and supplemented by other sources when the wind does not blow, it too will have trouble being weaned from fossil fuel-generated electricity.
The Muskrat Falls hydro project, with its 875 megawatts of power, makes economic sense for this region, and it fits in with your call for a Canadian sustainable energy strategy. The project has the support of all four Atlantic provinces and should have the support of the federal government.
Before leaving the renewables file, one has to take a look at biofuels. You will be hearing more about that shortly, but let me say that the research being conducted in this region on biofuels, particularly from algae, is exciting and innovative. The industry needs the support of the federal government and industry to help move this technology from research to development to production.
We would be remiss if we did not add something about the non-renewable sector. Oil from offshore Newfoundland and Labrador is a huge economic boom driver for this region. Gas production at Sable offshore Nova Scotia is in its final years, but Deep Panuke is scheduled to come on stream later this year. The plan by the Nova Scotia government to promote exploration through its play fairway analysis is promising, more so if the federal and provincial governments agree to some tweaking of the existing rights issuance regime.
Onshore is a completely different game. The potential for shale gas development in Nova Scotia, and more so in New Brunswick, is exciting. We just ask that you not get caught up in the hysteria and misinformation generated by such mockumentaries as Gasland. We ask that you support exploration and development with the knowledge that the technologies available today and the regulatory and environmental regimes in place in our provinces today make for a safe and responsible industry.
In closing, let me go back 30 years to the beginning of our organization when companies established to support and supply the fishing industry turned their attention to the emerging offshore oil and gas sector. They were our founding members. Many succeeded not only in our own backyards but also beyond, to compete successfully around the globe. The same expertise they developed for the oil and gas sector can be applied to support and supply the renewables sector, particularly tidal, wave and wind. We have the natural assets and the technological expertise to be world leaders in this emerging and competitive sector, but let me stress that transmission is key; capacity on the grid is essential; the free flow of electricity is a necessity. The longer we dally, the longer we delay, the longer we put politics ahead of common good, the more we fall behind.
To return to your statement that Canada cannot afford to watch from the sidelines, may I suggest that the past and much of the existing energy policy in this country have forced Atlantic Canadians to watch from the sidelines. We have the opportunity and the potential now, and our members are poised and ready for the challenge. We need Ottawa to step up and help move that opportunity and potential and make it a reality. Thank you.
The Chair: Thank you very much for an excellent presentation.
Peter Lane, Chief Executive Officer, Sprague Lake Enterprises Ltd.: Good morning. This morning I would like to talk briefly about torrefaction and its place in Canada's future in the energy industry.
I am speaking here this morning not only on my own behalf but also as a representative of a small group of companies that intend to start a torrefaction bio-coal industry here in Nova Scotia and across Canada. I will include there also that we are looking at the United States as well.
Currently our group is involved in several projects in Canada, either individually or as a group. These projects include responding to a request for expressions of interest to build a torrefaction research unit for Ontario Power Generation. We are also looking at building a 200,000-tonne bio-coal plant here in Nova Scotia, and 24 torrefaction process plants have already been sold in British Columbia.
Companies in this group are considered experts in their fields, which include torrefaction, science technology, growth and agricultural bio-crops and biofuel logistics. They include Sea 2 Sky Energy UK Ltd., New Energy Farms from Ontario, CCI Group here in Nova Scotia, and EverGreen Energy Corporation from Ontario.
My personal role in this group is that I am responsible for setting up the manufacturing units, the site construction, the commission, and the operation of the plants. I have over 30 years of experience in plant construction and commission worldwide, including time here as a project manager for Nova Scotia Power; I chaired the capital projects coordination meeting for the construction.
What is torrefaction bio-coal? Simply put, torrefaction is a low-temperature heat treatment suitable for woody biomass that produces what is considered to be a carbon-neutral, eco-friendly product, which is a direct replacement for fossil coal. This means that coal-powered generating stations do not need to be shut down. Quite the opposite, as people are finding out in Europe.
Bio-coal can be made from any woody biomass, from forest residue to agri-crops grown specifically for the purpose, such as poplar, willow or miscanthus.
The advantages of bio-coal over fossil coal are many. First of all, it is considered to be carbon-neutral. For every tonne of bio-coal that is used to replace fossil coal, CO2 emissions are reduced by 2.8 tonnes. As an example, Nova Scotia Power uses approximately 3 million tonnes of fossil coal a year. If we replaced all their fossil coal with bio-coal, Nova Scotia's CO2 emissions would be reduced by 8.6 million tonnes. Canada, as a country, uses approximately 70 million tonnes of fossil coal. If all the fossil coal were replaced with bio-coal, CO2 emissions would be reduced by over 200 million tonnes a year.
There are no mercury emissions with bio-coal. Just mixing one third bio-coal with fossil coal will reduce mercury emissions by a third. Sulphur emissions are near zero. Co-firing with fossil coal improves flammability and efficiency of burners, reducing the formation of ash, slag and NOx. Reduced NOx production decreases the need for additional air injection, thus saving power and therefore fuel. Moisture and ash content of bio-coal is less than 1 per cent. Bio-coal is less acidic, thereby reducing corrosion in boilers.
When compared to raw biomass and wood pellets, there is no competition. Bio-coal has the same energy density as fossil coal, so it substantially reduces the cost per unit of energy and logistics.
Bio-coal can be treated exactly the same as fossil coal. There is no need to modify the existing plant, storage or handling facilities. This is exceedingly important; it means that existing coal plants can be utilized.
Unlike wood pellets, bio-coal is hydrophobic, which means it does not require that you store it in dry conditions. Bio-coal is durable and has a long shelf life, unlike wood pellets. Raw bio-mass produces tars that clog up the burners and gives an uneven burn. Bio-coal is not biologically active, like wood pellets, so there is no fermentation, degradation or risk of spontaneous combustion. Bio-coal also has reduced ash compared to wood pellets and raw biomass.
Bio-coal and the economy: Every plant, every tonne of feedstock grown or harvested, every tonne of bio-coal produced provides jobs for Canadians and puts money back into the local economies, especially the rural economies so badly hit with high unemployment and lack of prospects; they are the economies suffering the most.
There are jobs not just for plant operators but also for forestry workers, farmers, truck drivers, welders, fitters, electricians, and all those service industries that would be needed to support the bio-coal industry. A standard bio-coal production facility will be operating 24-7, 365 days of the year, and will employ up to 32 people directly just to operate the plant. Indirectly, many times that number will be employed.
Currently five sites have been considered for use in Nova Scotia. These operations would provide long-term, secure jobs for 160 people just to operate the plants alone. These jobs created are long-term, full-time positions in areas badly hit by the economy and are spread over the rural areas of the province where job creation is the hardest. This applies across Canada as well.
In addition, these jobs are not subject to the influence of the boom and bust that plagues the construction industry on which forestry-related workers rely. At current prices, revenue for each plant is worth over $47 million to the local economy.
Availability of feedstock: Feedstock to produce bio-coal can come from two main sources, the forest and the farm. From the forest, for every six tonnes of timber harvested, it is considered 1.2 tonnes of waste residue are produced. Nova Scotia has 10.6 million acres of forest, which can produce 63.6 million tonnes of timber and 12.72 million tonnes of forest residue annually.
British Columbia has 40 million acres of forest decimated by beetle damage, forest that needs to be harvested quickly to stop further damage being done to what is left. That is over 210 million tonnes of dead and dying pine and enough feedstock to produce well in excess of 100 million tonnes of bio-coal.
From the farm, once a bio-coal market is created, it also creates a market for farmers and landowners to grow fast growing bio-crops such as miscanthus, poplar and willow.
Ontario Power Generation is currently looking for a supply of two million to three million tonnes of bio-coal a year as from 2014. Our group is actively looking at making this happen by liaising with the local cooperatives that will grow the crops and helping them purchase and operate the plants. Much of this bio-coal will be produced from local miscanthus grown by local cooperatives, with the remaining bio-coal made from forest residues.
In Nova Scotia approximately 100,000 acres of marginal land is not being utilized. That is sufficient to grow enough feedstock to produce over half a million tonnes of bio-coal a year. This is land that is marginal and unsuitable for growing food crops, so there is no conflict between food and fuel crops, which has brought the bio-coal fuel industry into disrepute in other regions of the world.
Torrefaction technology can also be used to produce bio-char, which is used for carbon sequestration in the soil to improve soil quality and plant yield. It can also be used in the restoration of contaminated soil.
The technology: Torrefaction has been around for a long time, but as long as fossil coal was cheap and plentiful, and before the time of worries about global warming and CO2 emissions, torrefaction was not economically viable.
However, times have changed, and for the last few years a great race has been on to develop commercially viable industrial-scale torrefaction plants. There are now more than 50 companies developing torrefaction worldwide, and some already have commercial-scale plants in operation in Canada.
The Chair: Where in Canada, sir?
Mr. Lane: B.C., predominantly.
The Chair: We have Mr. Torrefaction here.
Mr. Lane: He will know exactly what I am talking about then.
With respect to processing plants, the companies I represent today, and specifically Sea 2 Sky Energy under Richard Walton, who is acknowledged to be among the top five torrefaction experts in the world, have developed such a large commercial-scale plant.
Manufacturing companies have been identified in Nova Scotia that can produce at least three complete modules per month, and hopefully using modern techniques and good planning coordination, this target could be raised quite quickly. This means that within one year it is possible to have 36 plants up and running, producing nearly one and a half million tonnes a year of bio-coal. Extending that principle to other provinces, you can quickly see how rapidly the industry can expand to meet the demand for plants in bio-coal.
The individual plants are all identical, stand-alone, self-contained, skid-mounted units. This means they could be mass-produced in the factory, pre-wired and pre-tested and delivered to site in the back of three large trucks and take less than a week to be set up onsite and working. This is far more efficient and time-saving, rather than being manufactured onsite.
Manufacturing units in the factory also means weather is not an issue. As you all know in Canada, the Canadian winter is a serious issue in construction. By intelligent design, the plants are a true 24-7, 365-days-a-year operation, regardless of weather. Again, this is an important consideration due to the Canadian winters. Being modular, if any one unit is down for some reason, the other units can still be run with minimal disruption to production.
In conclusion, does torrefaction have a role to play in the future? I think it does. When you look at the problems in Europe, and if you learn from their mistakes, you will see that they are now building new coal and gas-powered plants, and importantly, power generation plants capable of using biomass fuel. Europeans now recognize that new coal and gas-powered generation stations are needed urgently if there are not to be serious power shortfalls in the near future. These shortfalls are, in part, due to decommissioning of coal-powered generation stations, and also due to the over reliance on wind energy, which has proven time and time again to fail to live up to their expectancies, especially in winter.
Using bio-coal means that existing coal-burning assets do not need to be shut down and can be utilized without modification, saving many hundreds of millions of dollars in cost disruption and uncertainty.
Bio-coal is a true 24-7 baseload fuel supply not affected by wind or weather. Bio-coal creates jobs for Canadians, especially in those areas hit the hardest. Bio-coal is eco-friendly, CO2-neutral, and the most efficient use of bio-mass for power production.
Torrefaction is a politically acceptable method for using biomass for power generation, and I have that on the authority of the Ecology Action group.
Bio-coal is a homegrown product. It reduces the cost of and the reliance on imports of coal, rerouting vast amounts of money back into the local economy. For example, in Atlantic Canada there is enough feedstock to produce four million to five million tonnes of bio-coal a year, putting over $1 billion into the local economy. The bio-coal industry can be rapidly expanded throughout Canada in time to meet future emission targets.
With regards to fuel security and stable pricing with the current problems in the Middle East and uncertainty of what happens next, the cost of oil-based fuels has increased dramatically, leaving the Canadian and world economies, once again, at serious risk.
Floods in Australia and relentless hunger for coal by nations such as China and India have forced up the cost of coal considerably. Locally produced bio-coal takes out the risk with regards to security of supply. It also means our prices are relatively stable, allowing for long-term planning and costing.
Bio-coal is exportable as a product and as a technology. Massive markets already exist for East Coast Canada and the U.K. and Europe; West Coast Canada's unlimited markets are in China, Korea and Japan; and in the central belt there are local markets with people such as Ontario Power.
A natural progression of a bio-coal industry is that dedicated bio-coal power generation station facilities can be built and sited at feedstock areas, reducing the downstream carbon footprint and greenhouse gas emissions. Basically, if you are harvesting the wood in the forest, you do not need to move the bio-coal; you burn it onsite; you connect it up to the grid, and you transmit your electricity.
The Chair: Those were very interesting presentations.
How about the chairman? Mr. Fitzharris, are you saying a word or two?
Joe Fitzharris, Chair of the Board of Directors, Offshore/Onshore Technologies Associations of NS (OTANS): No, I will just answer questions.
The Chair: I want to thank you, Ms. Pike, for your very bullish remarks and the nice things you said about our committee.
I have two little questions, the chairman's prerogative. First, you did not really get into nuclear, other than just referring to Point Lepreau's being down.
The second part of my question is that you said you would be remiss if you did not talk about the offshore. We heard about Mobile pulling out and not going on to the next phase in its gas project, and the Bass Brothers' announcement just recently must have been discouraging to you all. What does that mean, the sort of pulling away? Is that really related to the Deepwater Horizon incident, or is it something more sinister?
Mr. Fitzharris: I do not think it is directly related to the Deepwater Horizon. I think it is just an indication of the industry itself. Over the last while there have not been a whole lot of new discoveries, and there has not been a whole lot of new exploration, so I think that is the direction the industry is going in right now. It is also an economic thing with the low price of natural gas right now.
There are discoveries out there that are not being tapped into; as the price comes back up, there is an opportunity there. The offshore oil and gas industry in Nova Scotia has been cyclic since its start, and this is just a low point in the cycle, I think.
The Chair: The nuclear?
Ms. Pike: I did not mention nuclear because at this point in time our membership — and remember we are an industrial association or an association of industries that support the energy sector — has, for the most part, been for the oil and gas sector, onshore and offshore, as well as for the renewables, so that is why I did not mention nuclear. There is so much hydro capability in our region, so that is where you would like to see the power coming from.
Senator Dickson: Ms. Pike, I want to come back to the issue of transmission. I agree wholeheartedly with you that transmission interlinkage in Atlantic Canada is very important. Just to get a better understanding of the level of the request that has been made to the federal government, I notice in your presentation on page 3 that there is an application to Public-Private Partnerships Canada for $375 million for a transmission line to bring Muskrat Falls to the Maritimes. Is that the subsea line?
Ms. Pike: That was supposed to be part of the subsea line; however, as I understand, and from the presentations this morning, they basically have been told this does not really fit in with the P3, and that is why the government and the operators have gone for a loan guarantee.
The original plan, when it was originally announced, was that there was $375 million, and they thought that it should be able to qualify under P3.
Senator Dickson: Coming back to the loan guarantee, is that just for the subsea line, being $2 billion or whatever, or is it for the whole project, which is over $6 billion?
Ms. Pike: It is my understanding that is for whatever they are going to have to borrow to do this project.
Senator Dickson: The total, being the $6 billion?
Ms. Pike: Yes, not the $375 million.
Senator Dickson: Just to follow up and put it on the record, I was curious when Mr. Bennett was giving the presentation that the benefits of the federal government's giving the loan guarantee — assuming it would — were going to flow back to the ratepayers in Nova Scotia, yet a large percentage of the project — over $5 billion or somewhere in that vicinity — will be on the Island of Newfoundland and owned by Emera, not Nova Scotia Power. I assume that there will be some type of an agreement that all those benefits — assuming that guarantee comes through — will flow back through, somehow or another, to Nova Scotia Power and to the ratepayers of Nova Scotia. I sure hope so.
Anyway, moving on, I agree wholeheartedly on the issue of transmission. I would like to get your opinions on Maritime cooperation. I notice that P.E.I. had a request in under the Green Infrastructure Fund. I realize that it is important to P.E.I. to have that extra transmission and, as well, to Nova Scotia and New Brunswick to have that new 500 kV line going between New Brunswick and Nova Scotia. I am curious about whether any consideration has been made about lumping these transmission projects — in other words, the subsea, the 500 kV line, and the line to Prince Edward Island — into one package to the federal government in an effort to demonstrate cooperation among the Atlantic provinces?
Ms. Pike: I have not heard of that from the energy ministers. Have you?
Mr. Fitzharris: No.
Ms. Pike: However, when the energy ministers met here last week they were talking about an Atlantic Canadian system operator, which is interesting and would fall in line with what you are talking about, Senator Dickson.
Senator Mitchell: The chair said you were very bullish. It is a statement we have been hearing all morning, and what is sifting through for me is that here in Nova Scotia people are not stuck on this idea that all of this evolution is a need for change and will somehow hurt the economy. You see it as a huge opportunity for the future here, to stimulate this economy, which is music at least to my ears, and I expect many other members of the community as well. There is great leadership, great vision and great inspiration for what we need to do in this country.
You mentioned east-west transmission. Transmission is part of the core of what you are talking about. Have you looked at the price of that? We go more south so frequently, and there is less east-west; there is Alberta and B.C. — I am from Alberta — and that is great, but how much work has been done on that east-west transmission where you were talking about selling to Quebec or maybe even Ontario and New Brunswick?
Ms. Pike: Currently we could get electricity through New York to sell into Toronto, but we cannot go a Canadian route.
With respect to our association, we are not energy producers like Nova Scotia Power or Emera or Nalcor. We are here to represent those companies that supply and support the energy sector, whether that is oil and gas, onshore, offshore, or whether that is the renewables, wind turbines or tidal turbines, and the technology that is being advanced for wave.
Mr. Fitzharris: Yes, as far as where the grids run that is more provincial, more the government's objective. Ours is that once the routes are planned our companies will work to support that from a supply sector.
Senator Mitchell: Mr. Bennett made the point that the difference in cost of capital borrowing would be roughly 1 per cent, maybe 2 per cent even, and borrowing would be about 60 per cent of the project. If that is $3.6 billion, 1 per cent of that is $36 million and 2 per cent is $72 million. That is significant in terms of reduced carrying costs. That is not insignificant, it would seem to me.
Further to Senator Dickson's point, do you have any idea what that reduction would be per kilowatt hour?
Ms. Pike: I do not know. When I asked outside, I was told that without the loan guarantee, the rates would be this much, and with it they would be this much, so whatever that is.
Senator Mitchell: Significantly less.
Ms. Pike: Yes, right, it is significantly less, and that is good for business because the lower our energy cost, the better it is for business.
Senator Mitchell: Speaking across to Mr. Lane, thank you; this is a very interesting presentation that we have not heard of very much before. If coal costs $120 a tonne, how much does this bio-coal cost to produce the same amount of energy?
Mr. Lane: Based on Mr. Bennett's figures this morning, it would work out to around about $80 a megawatt hour, which is significantly cheaper than wind and future wind and this new hydro as well.
Senator Mitchell: But somewhat more than coal with today's prices.
Mr. Lane: At today's market price, coal is $118, but I do not know whether $118 was delivered or at FOB prices. I suspect that those were FOB prices and not set prices, because obviously there is significant cost in transporting coal, especially when it is coming up from South America.
Senator Lang: I would like to pursue a little further the question of the loan guarantee from the federal government, just to get it clear in my mind. First of all, if I understand this correctly, the P3 for the $375 million is not included in the loan guarantee. That would separate and apart?
Ms. Pike: It is off the table.
Senator Lang: That is off the table?
Ms. Pike: As I understand it from this morning's presentation, yes. That was part of the original thing, so that is off the table now. They are not looking for $375 million. They were told basically that it does not fit within the P3 structure.
Senator Lang: Sorry, I misunderstood that.
Is the Green Infrastructure Fund for the Confederation Bridge off the table as well, or is that still there?
Ms. Pike: I was speaking with the minister in P.E.I. yesterday, and she still has not heard anything back. That project is $90 million, and $45 million is what they applied for.
Senator Lang: Would that be over and above the loan guarantee?
Ms. Pike: That has nothing to do with this. It is a completely separate project.
Senator Lang: It is a separate project?
Ms. Pike: Yes.
Senator Lang: In your presentation, you said industry needs the support of the federal government and industry to move this technology and research to development and to production. You did not mention the province. Is there a reason why you did not mention the province there, or is that just understood?
Ms. Pike: Did it just say government, or did it say federal government?
Senator Lang: It said federal government.
Ms. Pike: When I wrote it I was thinking in terms of speaking to a Senate committee, but I meant government in general.
Senator Lang: I would like to go to natural gas. I gather you have one field that is declining, but you have another field that is coming in, the Panuke.
Mr. Fitzharris: Yes.
Senator Lang: Will that replace the existing amount that is coming from the declining reservoir, or will this be a substantially bigger gas field?
Mr. Fitzharris: No, it is not a large field. It will offset some of the declines. Its life expectancy is probably about 10 to 12 years, so it will help to sustain that level of gas for that period.
Senator Lang: We do not have a long window here at this point then?
Mr. Fitzharris: No.
Senator Lang: You mentioned shale gas earlier, and that certainly has been coming across on our committee across the country. It is turning into a game changer in all of North America, and you mentioned the potential for Nova Scotia. Can you perhaps elaborate on where we are with that potential and what time frame we are looking at from the point of view of trying to see whether or not there is an energy source there for you for the long term? Are we talking about a two-year or three-year period of time as you explore that particularly option? Do you know?
Mr. Fitzharris: Several developments are ongoing right now in the early stages, and the viability of those and the size of the fields are still being looked at. I do not think any of the companies have made any commitments yet about what they can actually produce. It is still very much in its infancy in Nova Scotia.
Senator Lang: Yes, I understand it is in its infancy. Do you have any idea of the time frame here? Are we talking about two years to delineate what is there, or any indications from those companies that are exploring?
Mr. Fitzharris: Probably a little longer than that. As I said, it is still fairly new, and by the time they get enough wells drilled and get a good indication of what the fields are, I think it will be a little longer than that.
Ms. Pike: New Brunswick is much further advanced. It has a number of fields and some very active companies looking at some interesting geology throughout the Sussex-Saint John area.
Senator Neufeld: I want to make an observation. That Newfoundland and Labrador, Nova Scotia, New Brunswick and Prince Edward Island got together and said, "Look, for the better of all of our people we need to work on how we are going to get this electricity delivered in these provinces from the Muskrat Falls project in a reasonable way," I think is great. In fact, I think that is probably — and I should be careful here — but probably long overdue, when you think about all the stuff that has gone on about some of the electricity generation in Eastern Canada. That is a real positive.
You also state that the federal government should get involved to enable provinces to transmit across interprovincial borders, which is an interesting comment to make.
I want to say that where I come from in British Columbia our transmission lines are open. Alberta can sell across our transmission lines. B.C. Transmission Corporation would still be the operator, but they can buy that space for X amount and transmit that — which they do, by the way, into the U.S. market.
Give me a snapshot of how the federal government should come in and tell, I guess, Quebec, because I do not think there has been a lot of that sit down agreement between Ontario and Quebec about actually buying some of that hydroelectricity; rather Quebec sent it to the U.S. Tell me how you think that process should take place in a simplified form, understanding a little bit of the history of it.
Ms. Pike: The National Energy Board actually has control of the pipelines, as well as the transmission of electricity. The difference is that for the transmission of electricity, the province that you want to transmit through has to provide permission, and if that is not given then the National Energy Board cannot step in. Why are we treating one source of energy differently than we are treating another source of energy?
Senator Neufeld: You know that that is not quite the answer I was looking for. I mean, the pipeline process is completely different. Private companies actually built those pipelines across those provinces because they had an agreement with the provinces to do it. We are talking about — and we will use Hydro-Québec, for instance — having all that electricity in Quebec and having a market in the United States, and you are saying — I guess you are saying; I am surmising — that the federal government should come in and say, "You know what, Quebec, you will build a line into Ontario and you will build a line into Eastern Canada." Is that what you are saying?
Ms. Pike: No, I am saying that if we have cheap electricity —
Senator Neufeld: But somebody has to build it.
Ms. Pike: Yes, and that is the responsibility of whoever happens to be the producer, whoever happens to be selling the power.
Senator Neufeld: If Newfoundland wanted to transmit it across Quebec, you are saying that Newfoundland should pay for that transmission across Quebec to get it to Ontario, and the federal government should say, "You will do this." Is that correct?
Ms. Pike: Yes.
Senator Neufeld: That is an interesting process. I do not know whether I would want to be part of that.
Second, I am surprised that Nova Scotia Power still has cost-of-service or price being the main driver in this world. B.C. used to have that. We changed that quite a number of years ago to where it is not just cost, it is something else. Do you know whether the provincial government here is going to change its legislation to actually deal with other renewables, or is it still stuck on cost?
Ms. Pike: I really do not know.
Senator Neufeld: You do not know that?
Ms. Pike: No, sorry.
Senator Neufeld: I have another question in regards to shale gas, and I am quite familiar with shale gas where I come from. What recommendation would you have for us as the proper way for the industry to come to Nova Scotia and start talking to the people about shale gas and how to do it? People are actually saying things that are not true about shale gas — I understand that; I have fought that for years; I have been in that industry for a long time. What process can you recommend that should be on the table for companies to actually take and do before they come and start drilling?
Ms. Pike: I think that it is up to all of us to continue the education and to continue to spread the word and talk to our neighbours and friends and people in our communities. For instance, about a month or a month and a half ago, there was an open house in Sussex, New Brunswick, organized by the provincial government. The government had a couple of ministers there as well as officials from environment and people from the energy and natural resources departments and the operators. They brought in drill managers and the various companies to sit down and talk. Hundreds of people went through during the day. Yes, some people went to that open house who, no matter what they were told, will not listen, but many people went through and listened, and hopefully they will go out and talk to people in their communities and their family, and people will actually take a look at all the information that is there and not just the misinformation that has been spread.
Mr. Fitzharris: One of the big things is for the companies to show the local benefits. For example, when Triangle Petroleum was drilling in the Windsor block, they were using as much local content as they could, and they were also giving back to the community. It is my understanding that they were very well received in the community there.
Senator Neufeld: I think you are saying that what they are doing now is actually working and that they should just continue that process to continue to talk to people to get the information out there. Would that be something I could take back to the companies that I know?
Ms. Pike: I think so. I think that they have to listen to the community, too. You cannot go in and just sort of say, "I know it all." It does not work.
Senator Neufeld: Thank you for that.
My last question is to Mr. Lane. I have some knowledge, but very little, of torrefaction and bio-coal, but I have some.
You have listed here the sale of 24 torrefaction process plants in British Columbia. Could you tell us where those 24 plants are located? You do not have to give that to us now.
Mr. Lane: Purchase orders have been made for 24 plants; they are not built yet, but they are in the pipeline. That was done directly through Sea 2 Sky Energy UK Ltd. I have a rough idea where they are, but I could get the information for you.
Senator Neufeld: That would be great. If you could send that to the committee clerk, then we would all have that information. I appreciate that.
Mr. Lane: I will be involved in setting up the plants, but I do not know exactly where they are at the moment.
Senator Lang: Just to clarify for the record, these plants are going ahead? They are purchased; they will be built and will actually go into operation?
Mr. Lane: Purchase orders have been raised, and as far as I am aware, yes, they will be built, because obviously there is a huge demand there because of the issues. There is a huge demand for torrefaction worldwide. It is considered to be one of the holy grails of renewable energy.
Senator Brown: Mr. Lane, I was very interested in the torrefaction and bio-coal. I think you said $80 per kilowatt hour is the cost.
Mr. Lane: Per megawatt hour.
Senator Brown: Megawatt hour. I assume that comes from cutting down trees, and trees that are dying or whatever, and transporting them to a plant to make the energy from that. Is that correct?
Mr. Lane: Yes. Obviously you have to pay for your feedstock. The feedstock will be tree residues, thinnings from the forest, or dead trees in B.C., or it will be agri-crops grown by local farmers. The feedstock is a multi-source.
Senator Brown: Are you planning on the cost of reforestation when you do that?
Mr. Lane: Definitely, yes. It is so important because this has to be a sustainable industry. There is no point getting through all your feedstock and then in five years' time not having feedstock. As the industry kicks off, what we use initially will be 90-odd per cent based on woody feedstock, giving time for the agri-crops to grow, because it takes about three years before you can start getting miscanthus. Then you have a mixture of feedstock from both supplies, so it is sustainable.
Senator Brown: Yes, I am wondering a little bit about that. I see forests all over that are growing naturally; they are overgrown with the trees being too close together. The trees fall and die, but it takes generations or more for that process to happen. If you clear off that much of a hill or a slope or a mountainside, your reforestation takes a long time to replace what you have taken off. I know that in farming, because I was there for a long time, if you start taking too much of the biomass off of farmland without replacing it, you lose the fibre, and the soil starts to become very fine. I was not around when it happened, but back in the 1930s there were great dust bowls all over North America that were caused from not putting enough fibre back into the soil and it ended blowing into the dust bowls.
Is the industry planning on using a percentage of that biomass and letting the rest of it go back into the soil? Otherwise, I think it will end up with the same kind of problems.
Mr. Lane: Certainly on the agri-crops supply side, one of the sister products of bio-coal is called bio-char, which is used for the sequestration of CO2 and improving crop yields, and it holds bacteria in the ground and everything else, and that would be used to return back to the ground.
From the forestry residue, obviously there will be replanting, and it will be sustainable sources, so there would have to be replanting. Some of the biomass would still have to stay on the ground. There are already regulations in place for that; you are allowed to take only certain parts of the residue away.
Senator Brown: You are talking about percentages, are you?
Mr. Lane: It varies. The tree tops, the stumps and everything else have to remain, but many of the forests, certainly in Nova Scotia, are not big, tall, strapping trees. Much of it is rubbish wood that needs to be cleared so that new good-quality trees can be planted. Unless someone pays people and finds a use for these poor-quality trees, new trees cannot be planted. It has to be sustainable, and obviously there is crop rotation based on a 10-year period or whatever, depending on the type of trees.
Senator Brown: I was more worried about clear-cutting than anything else.
Mr. Lane: Clear-cutting is not in the interest of the industry or for anyone. It is not on.
Senator Brown: Thank you.
Senator McCoy: I want to thank you all for your presentations. I am curious to know what your new brand name will be, but you are not releasing that today. Will you let us know as soon as that is made public?
Ms. Pike: Yes, we will.
Senator McCoy: I am also intrigued because we rarely get to speak to the service industry, so to speak, and yet this is where, in my view anyway, so much of the expertise, the knowledge jobs, the opportunities for staying on top of worldwide events occurs. In Alberta, we pride ourselves on our technological expertise. It is not so much what we have in the ground — it is what we know, and that is what you represent.
Mr. Fitzharris: Yes.
Senator McCoy: What I have not heard and am thirsty for is how many people you have engaged in that area, how much expertise you have, and what kinds of expertise there are? You also pull in your remarkable university network here in the Maritimes. I think we need to know that because that makes part of the understanding of the system.
I am afraid we do not have time to pursue that at length, but let me invite you to say whatever off the cuff you would like to for the moment, and I would encourage you to ply us with more detailed numbers at your leisure through the clerk.
Mr. Fitzharris: Our industry association covers all aspects of the development of the oil and gas industry. We have engineering firms, construction companies, universities, legal firms — every aspect you could think of. We are now moving more to an all energy focus, and we are very active in pursuing the tidal, because the tidal fits in very well with the current expertise that we have.
We can give you more information on our membership and some of the expertise in the local area. I know a lot of work is being done now on ocean renewable energy — agra, wave, wind and in stream. As well, the universities, especially in Nova Scotia, are joining together with some government agencies to set up a centre of excellence here in that respect.
Senator McCoy: I was surprised to hear that Nova Scotia is not ready for a smart grid quite yet, so that is another question we can pursue at another time. There is a huge component of information technology; that is another piece, I am sure, of the puzzle that you must have as well.
Mr. Fitzharris: Yes, although not so much with our organization. We are more the hard and fast, build something people — design it, engineer it, procure it, build it — and the research that goes into that, more so than probably on the IT side.
Senator McCoy: What about new materials? Your members would be involved in that to some extent?
Mr. Fitzharris: Yes.
Senator McCoy: By all means, fill us in in more detail when you can.
Mr. Fitzharris: Okay.
The Chair: Thank you very much. I am sorry you had to rush, witnesses. You did a wonderful job, though, a great exercise in speed reading and communicating.
We are going to move right on to our next witnesses, colleagues. We have with us Ann Janega, Vice President of the Canadian Manufacturers and Exporters, Nova Scotia Division. Before lunch, we will also be hearing from Efficiency Nova Scotia Corporation.
Colleagues, we have a fancy handout here from the Canadian Manufacturers and Exporters, CME LEAF, Lean and Energy Efficient. Welcome to our committee, Ms. Janega. We are most interested to hear what you have to say. I gather you have been in the room most of the morning as well.
Ann Janega, Vice President, Canadian Manufacturers and Exporters, Nova Scotia Division: Only for the second half. I have enjoyed the discussion.
Thank you very much, Mr. Chair, and thank you, senators, for the opportunity to be here.
The information that has been provided is pretty much background. I do not have a formal presentation to submit this morning but perhaps some background. What I hope to do this morning is take the discussion related to energy, environment and natural resources to the local level, to the level of jobs, which is something perhaps most of us can identify with.
I did provide you with a blue card with some statistics about manufacturing in Nova Scotia. I will say a few words about CME, the Canadian Manufacturers and Exporters. You are probably familiar with it. It is a national industry organization that obviously promotes manufacturing and exporting, which is always a challenge, I guess, in Canada. The organization has been around for about 140 years. Here in Nova Scotia we are focused on a vibrant manufacturing sector. I would like to point out that it is primarily rural-based. Unlike in other jurisdictions, many of our manufacturers are the anchor in small communities from one end of the province to the other. Although the term does not always resonate as being modern, in fact, manufacturing and advanced manufacturing is a key part of our economy.
I understand that the new gross domestic product numbers are coming out today, so perhaps we will have to update this situation. They are out. Okay. You can correct me later. The last numbers we looked at showed that manufacturing has held its position for more than 20 years in this province, delivering more than 10 per cent of the GDP here, which is an important anchor for our economy. Interestingly, again the last time we looked at it, our numbers compared with those of Alberta, for example, where manufacturing is also worth about 10 per cent of the GDP. It is an important sector obviously for all these jobs, about a quarter of which in Nova Scotia are related directly or indirectly to the sector.
That is a primary focus for us. I guess in the context of the discussion today it is worthwhile noting that energy typically is one of the top three costs recorded by manufacturing. With your resources, human resources and products used to produce, you are looking at one of the top three costs. Energy is a very big deal here. Particularly from the discussion today you have heard that we are inordinately reliant on fossil fuel. That is costly in terms of greenhouse gasses. It is costly in terms of the price that we pay, and that is a general price and also a levy. You heard about the more than $40 million that is tacked on to electricity bills. Industrial users pay the dominant share of that. It gets our attention.
Today I thought I would share with you our experience at CME of how we have approached this challenge of tracking the issues, some of which are, as we have heard today, very complicated. Many terms are being tossed around. In Nova Scotia we hear about the fuel adjustment mechanism, demand-side management, and a shift from the utility to the new agency, which we welcome. Also, it is very much a regulated field. To the average employer — manufacturer, in this case — all of this is confusing and costly and a little bit scary, too, in terms of the impact looking down the line.
How do we approach this in Nova Scotia? We have a group of very engaged employers. We have some very large firms, primarily locally based firms. There are many internationals and multinationals, but we find that our local, often family originating firms are leaders in this regard. In our organization, we have an active energy committee and an active environment committee. We try to track the issues and also come up with solutions, and to some extent we have been successful in that regard.
I will draw your attention to a study that we commissioned here a few years ago: Technical and Energy Management: Potential Analysis in the Nova Scotia Industrial and Manufacturing Sector. This study required us to look at who is using a lot of energy, what kind of energy in the industrial sense, and how to predict, for example, what the usage will be in the future so that maybe we could reduce the amount of transmission required in the future. Although it was done a few years ago, the study still has legs. It was picked up elsewhere in Canada — in Alberta, Ontario and British Columbia. The result of this study in all these areas has been to identify technical and management best practices. How can these firms get more from their energy dollars, and how can they make improvements either on the technical side or on the management practice side to achieve that?
I would like to mention that this started in New Brunswick, and it still lives on and is still giving us some results. For example, with the work done in that study, we were able to liaise with Nova Scotia Power in making suggestions on how their programming could work better with industry. We also worked with Natural Resources Canada, NRCan, which is an important partner of ours, to produce the LEAF program that is described in your kit.
You might be interested to know that NRCan as well as the Atlantic Canada Opportunities Agency and the other partners asked us to deliver this audit program. It is an assessment program for industry. In the case of NRCan, there is no staff on the ground, or at least there was not in Atlantic Canada at that time. I would like to highlight that the Office of Energy Efficiency is pretty well our only point of contact for programs like this to help industry do more and do better with energy management. That program is under way and doing quite well.
Also, I would like to bring to your attention a tool that was produced by Natural Resources Canada. It is called the Energy Management Information System. This is a handbook on how companies, including manufacturers, can achieve improved energy efficiency. It is extensive. It is complicated, and not many firms can pick this up, plug it in or hire a person and say, "Okay, we are there." That is where groups like ours try to step in and make a difference.
In the case of CME Nova Scotia, we will be announcing within not too many weeks, we hope, a new program that will be designed especially for industrial applications to help them operationalize, if I can coin a word there, energy management and to develop a culture of energy management where one does not exist. Also, that will allow them to actually demonstrate real energy savings.
The big thing, though, that we will be looking at from our new program is to help companies to reach the new ISO 50001 standard. This has not even been announced yet but is in the works. I understand the Government of Canada has the lead role in helping to design this new international standard. Certainly CME at my national level is involved with that, and unlike many other standards, which may be perceived as scary or onerous or superfluous, this is one that we welcome. Firms here, very large employers in Nova Scotia, have told us that they want to reach this new standard and that they are looking for tools to reach it. Again, through CME, we will try to address that need. We do work very closely with the technical and management representatives of these firms, and that is our goal.
Another piece of information I included in your background package relates to an energy conference. I would like to distinguish the various uses of energy that we have heard about here today — not for energy manufacturers and not for the future frontier of energy, but for the very practical, down to earth, let us get help in even reading our energy bill and in reducing it and in incorporating continuous improvement in operations. For example, at our event next week, which will be supported by the way by groups such as NRCan and perhaps groups such as Efficiency Nova Scotia, Helmi Ansari will be the speaker. His firm is Frito-Lay, which is a PepsiCo affiliate, and that company was the first manufacturer worldwide, as I understand it, to introduce an all-electric fleet of vehicles. They have also introduced the first compostable potato chip bag, and they have had a lot of fun with that. I do not know whether you have heard or seen some of the video clips about it. It is apparently very noisy but compostable.
Through programs like that that appeal to plant operators and to those firms that are providing key employment throughout the province, Canadian Manufacturers and Exporters is trying to do our part to develop a culture of energy efficiency and environmental management. I will close there, sir.
The Chair: Thank you very much.
Senator Dickson: Thank you very much for an excellent presentation.
Of your membership, how many companies would be involved in the clean technology sector, looking at the clean technology sector as comprising waste and water, power generation, recycling, energy efficiency, and process resource companies?
Ms. Janega: I cannot give you a specific number at the moment, but I can tell you that Scotia Investments, for example, which is one of the Jodrey family of companies — Jodrey is an original Nova Scotia family of companies — is involved in almost all those areas and is very active in our group. You will be hearing later today, I think, from Chuck Cartmill, with LED Roadway Lighting. That firm is a leader in our organization and one of the founding members of a group called the CME Continuous Improvement Consortium, and they get together on a monthly basis, roll up their sleeves, and try to figure out how they can address all of those challenges that you mentioned.
Senator Dickson: I notice from a recent article that small and medium-sized businesses in Canada, insofar as export is concerned, that are involved in clean technology and the clean technology sector have exponential export growth. Has your association considered conducting a study on what companies may be involved in that sector in Nova Scotia and the extent to which they may be helped by changes in government policy, either existing or new government policy?
Ms. Janega: We have not done a study on that lately, sir, but it is a great idea. Thank you. I did not bring our most recent study, which is referenced on the bottom of the blue card. You should be able to access it. It gives a breakdown of the firms, the type of firms that are active in our group. This is a national magazine from CME. The particular issue is Greening our environmental footprint, and I think it might address to some extent what you mentioned.
I would like to take this opportunity to make a plug. I came here from the round table on red tape reduction that coincidentally is meeting at exactly the same time as this group, and one of the points raised there is relevant. The Canada Revenue Agency's tax incentive program SR&ED, Scientific Research and Experimental Development, is the best program to promote innovation. However, that program is bogged down in serious administrative issues to the point that some of our leading firms have decided to just walk away from it. They are waiting four to six years for the credit to which they are entitled and for which they have hired very costly professional help, and still in Atlantic Canada the turnaround wait can be between four and six years to be refunded. That does not help innovation.
Senator Dickson: I would appreciate your comments, pro and con, for there being a continental U.S.-Mexico-Canada energy strategy. Would you be in favour of a continental strategy?
Ms. Janega: I think we would be in favour of a strategy to begin with. The CME certainly has been a proponent for this between the province and the federal government. When you throw in environmental regulations, it just becomes very onerous even to plan your local course of business. Any consolidation there would certainly be welcome.
As an aside, we find that groups such as the Canadian Council of Ministers of the Environment, even though it is not a government department per se, with the type of programming they can produce and then have picked up at the municipal level, then there is another entire level of obstacle perhaps in terms of addressing this national strategy even. So the answer is "yes" to your question. We are in. We will work on it for sure.
Senator Mitchell: Ms. Janega, I think you are the first presenter today who has talked about the fear of cost increases. The competitive edge is so tight. Are you less enthusiastic about doing away with coal-fired and electrical plants than previous witnesses? You were not here to hear them, so perhaps you can take my word for it.
Ms. Janega: We certainly recognize the demerits of the coal-fired system. As the world heads away from that kind of energy, we are hoping for a little bit of order in how it is done. Some of our members, for example pulp and paper mills that are active in our membership, have raised with me the concern that different types of paper mills are treated differently by federal programming based on their processes but not based on the type of energy they use. Our paper mills here feel that in provinces where there is cheap hydroelectricity, for example, their competitors get a break that is not available here because the type of source energy is not considered. I do not have much information on that, but they have convinced me that it is true.
Senator Mitchell: You said your membership is embracing the new ISO standard, and you said, "We just need tools to reach it." Could you give us an idea what tools you are talking about? Is it levels of government that you see providing some of those tools?
Ms. Janega: I do not think so. When we brought together our leading manufacturers, the ones we perceived as being leaders in energy management — for example, Maritime Paper Products Limited here in Dartmouth is very active — they introduced some of the recommendations that were in that first study I told you about. I even I asked them, "What do you think about what we are proposing? You must already be doing this, right?" This seems so basic. Their response was, "We are nowhere near that." Many companies, hopefully not our members, but many companies, just like consumers, even have trouble reading their energy bills. Interpreting an electricity bill can be daunting, and I guess small businesses in particular feel that, too.
Our program when we announce it will incorporate metering tools. Those are not readily available, so an organizing group such as CME can help with that. It will require training; it will require coaching; and most important, it will require a culture of change. We will be applying our approach to lean management and continuous improvement, for example, so that there is not in a particular firm just one energy manager but an overall culture of analyzing the whole system.
Senator Neufeld: I want to go a little further with the costs of electricity. Where I come from, manufacturers are always talking about the cost of their electricity, and you talked about it here. Can you tell me what the industrial rate is here for operators and also the commercial rate?
Ms. Janega: There are several different rates, and I am sorry I do not have those in front of me. I am a little bit outside of my area of expertise here, so I would rather not jump into that one.
Senator Neufeld: Are your members telling you that their electricity bills are too high or that they are afraid of what will come in the future? Let us understand that south of the border in New York electricity rates are probably three times as high as they are here, and those manufacturers are also operating, too, and they are looking at the same things, the costs of new electricity, renewable electricity. Any new electricity will cost us more. We have all been thriving on a lot of electricity that was built a long time ago.
Ms. Janega: There is certainly a lot of discussion here about electricity because it is the primary source of our overall energy, and again it is tied into the coal-fired issue. My perspective on this is issue is that, vis-à-vis industry and the electric utility, of which we have just one here, things have dramatically improved in recent years primarily because we have organized the systems and CME has been at the table and has, through probably many acrimonious meetings over the years, hammered out better information, better scenarios where costs are identified up front. I guess nobody can predict where energy costs are going, but to the extent possible they have identified the discernible costs and set up a framework for a more orderly publication of expected changes. This has come about through the overall demand-side management and industry's participation at the table with the utility and with the utility review board. We are stakeholders at these energy hearings. It has been a tough process over the years, but I think looking at it honestly from the industry's side, I think industry has been educated as well about what the realities are here, what we can control and what we cannot control.
Senator Neufeld: I know the large energy consumers in British Columbia would not always agree with me, but many people that say that all electricity in British Columbia is too cheap. In fact we have heard that at the committee here in recent times. The large consumers say not.
I instituted a program of stepped rates in British Columbia for large industrial consumers, which is now in place also for residential consumers. We looked back at their historical usage and gave them a block of power at the low rate that is there, and for anything over that they had to pay almost the full amount of what it would cost to bill new electricity. The world was going to come to an end, the manufacturers said, but interestingly enough not very many of them went into that second step because they all of a sudden realized that conservation is the cheapest form of electricity we can get. They started to modernize some of their plants with newer electric motors and newer systems. It cost some capital, but at the end of the day they consumed no more electricity and actually their production went up, and not all of them got into the second rate.
Would you say that would be kind of the same in this province? I am not familiar with this province, but is there room for the industry to do a lot of work to actually save electricity instead of just consuming more and wanting it at a cheap rate?
Ms. Janega: I think there is room for that for sure. We had an example offered recently with a brand-new firm, state of the art, very smug about everything they were doing positively. They challenged one of our consultants, saying, "We defy you to find a way for us to improve our energy consumption." The consultant went in and looked. A steel component is included in the manufacture of whatever this firm delivered, and it turned out that they were using a much higher grade of steel than they required for the purpose, and that required them to use more energy for one thing. It also increased their costs because they were paying for a higher grade of steel. Identifying that particular inefficiency led to a substantial saving, and that is the level we are trying to get to with our new program.
I think there is a lot of interest. We are very encouraged by Efficiency Nova Scotia. I think the fact that they have an industry mandate as well is useful for us, and we are looking forward to working with them.
Senator Neufeld: Thank you. I commend you for the work that you are doing.
Senator Peterson: I have a couple of questions on the issue of usage billing that some jurisdictions are trying to bring in. They are already getting push-back from people complaining about privacy, worrying that people will be able to tell when you are away from home and tell somebody else. Unless you are running a grow op, I do not know why you would be concerned about this. Do you think that this should trump moving forward with these initiatives to try to conserve power and try to get people aware of any off-peak times?
Ms. Janega: Those discussions are under way with our membership. I know that many now pay reduced rates to have an interruptible feature; in other words they can lose their power supply for periods of time with a certain amount of notice. It can work. It also can have devastating effects when the notice is inadequate. My understanding from our members is that they would be open to any of these, and protection of privacy has not come up.
Senator Peterson: Is there any cross-subsidization here between commercial and residential?
Ms. Janega: I do not think I can comment on that, sorry.
Senator Peterson: Okay.
The Chair: I think that covers our presentation from the CME. Thank you very much. We appreciate your coming this morning.
Ms. Janega: Thank you very much.
The Chair: We are down to the final pre-lunch witness, Mr. Allan Crandlemire, Chief Executive Officer of Efficiency Nova Scotia.
Welcome, sir. Thank you very much for your patience in waiting past the appointed hour of 12 o'clock. The premier and others made reference to you this morning, and we look forward to hearing what you have to say.
Allan Crandlemire, Interim Chief Executive Officer, Efficiency Nova Scotia Corporation: Thank you and good morning. I will just pick up on a comment a few moments ago from Senator Neufeld, who identified that conservation was the cheapest form of energy. I am glad to be able to follow with a comment like that.
On behalf of the staff and the board of directors of Efficiency Nova Scotia Corporation, thank you for the opportunity to speak with you today. Our board chairman, Bill Lahey, was hoping to join me here, but he has a previous commitment he cannot break and sends his regrets.
As interim CEO of Efficiency Nova Scotia, I will tell you about what Nova Scotians are doing when it comes to energy efficiency and conservation. The headline is that Nova Scotia is a small province doing big things, and the story is all about energy efficiency, the cheapest, greenest form of energy out there. After all, the cheapest kilowatt hour of electricity is the one you do not use, the one you never have to pay for. Before I take you any further in that story, though, here is a bit of context about Efficiency Nova Scotia.
We have been around for just over a year now, created through provincial legislation, but a truly independent corporation. That independence is at the very foundation of Efficiency Nova Scotia. Efficiency Nova Scotia really began at full speed in mid-December last year, only three months ago. We now have a staff of about 40 going flat out to deliver energy savings programs for all Nova Scotians — programs for businesses large and small, homeowners and renters, non-profit organizations, and people on low income.
It is worth noting that our staff, with a few notable exceptions, is very youthful. In fact, the average age is under 30. I can tell you that having all of those young, committed, bright people really fuels our corporation with another kind of renewable energy.
Efficiency Nova Scotia is governed by an independent board of directors and regulated by the Nova Scotia Utility and Review Board. Our vision sees a vibrant economy and a healthy environment and climate for generations to come. Our mission is to provide sustainable energy efficiency, conservation and energy solutions to those we serve.
We have good relations with the provincial government and Nova Scotia Power, the province's electrical utility, and we are independent of both of them. We get our funding from electricity customers through an energy efficiency fee on their power bills. For most Nova Scotia households that is a few dollars a month. For 2011, that translates into about $42 million funding for programs that will help Nova Scotians make their homes and businesses and institutions more efficient while saving them money, reducing the strain on the province's power grid, and helping Nova Scotia reach its aggressive goals of reducing emissions.
At this point we are concentrating on electricity because that is what we are mandated to do. Our funding comes from electricity customers, after all. However, we will become the one-stop shop for energy efficiency for Nova Scotians regardless of energy source. We have had positive discussions with the provincial government and are confident that in short order we will reach a funding agreement that will allow us to handle program offerings for Nova Scotians who heat with oil, natural gas and other fuels. We want people to know we are the people to ask, the place to go, no matter what sort of fuel they might use. That is a brief, efficient overview of who we are.
The Chair: You are a commercial enterprise.
Mr. Crandlemire: Yes, we are.
The Chair: You are for profit.
Mr. Crandlemire: Non-profit.
The Chair: Oh, it is non-profit.
Mr. Crandlemire: It is a non-profit.
The Chair: We have a thing in Quebec where you get your bill for your hydro and there is a little form there saying if you want to find out how to use less power in your house, you phone this number. Is this the same idea?
Mr. Crandlemire: Same idea, same role.
The Chair: There are incentives I gather for doing this.
Mr. Crandlemire: That is right.
The Chair: Thank you.
Mr. Crandlemire: Since 2008 when Nova Scotians began a concerted effort on electricity efficiency and conservation, they have saved enough electricity to power about 19,000 homes in the province. This year, 2011, we hope to add more savings to that, another 16,000 homes' worth of electricity. It is important to remember these are not one-off savings. Once you invest in efficiency, make those changes, the savings continue year after year after year.
Just take a compact fluorescent light bulb for instance. A traditional incandescent bulb for your home lasts about a thousand hours. A typical CFL lasts about eight to ten thousand hours, eight to ten times longer. At the same time, traditional bulbs consume about four times the electricity of the equivalent CFL. Think of it this way: For the $2 or $3 cost of a CFL, you are saving $50 over the life of the bulb in energy costs. I am not a financial advisor, but that sounds like a pretty good return on investment. Changing your bulbs at home may be small-scale savings, but they are significant nonetheless. Small steps by many people can make a big difference. More and more Nova Scotians understand that, and they are doing the right things, big and small.
Energy is a global issue today more than ever. Whether it is energy costs or the search for offshore and onshore oil and gas, renewable forms of energy, or energy security, we all have to start to understand that energy efficiency is not about sacrificing something or making do with less. To borrow a famous political quote, and to make it a bit more suitable for a family audience, we are not suggesting we freeze in the dark here in the east. This is about being smart, being innovative, reducing waste, saving money and helping the environment, using energy wisely.
It is worth thinking about what would happen if Nova Scotians decided to do nothing about energy efficiency, if we just let our consumption continue to grow. Within a decade, Nova Scotia Power would be forced to build a new power plant, a billion-dollar power plant, and all that cost would have to be paid by Nova Scotians. Happily enough, Nova Scotians are doing great things when it comes to energy efficiency and conservation. In 2013, if Nova Scotians continue their energy-efficiency drive, they will be actually bending the bar of electricity consumption down for the first time in 80 years. Think about that, bending the bar downward for the first time since the 1930s. In a time of growing energy consumption around the world, that will be a significant accomplishment for Nova Scotians to celebrate.
The Chair: May I interrupt you on that because it is a really interesting point? If you are bending the bar downward, and you anticipate that is possible, would that be without — I was being brainwashed, and I use the term loosely, last night by someone from Nova Scotia saying that of course there may be some major energy-consuming industrial facilities that would be closing down. Is that the thing that would make it possible, or is this more real conservation-type stuff?
Mr. Crandlemire: Believe you me, senator, we are not looking for those kinds of energy savings. We are anticipating that energy savings just through efficiency and conservation, not plant shut downs, will bend that curve downwards to where we are actually using less electricity in 2013 than we did in 2012, less in 2014 than we did in 2013.
The Chair: Without having a greater GDP or whatever, bigger output.
Mr. Crandlemire: Exactly. For Efficiency Nova Scotia, the timing of this meeting with you is ideal. Today, only minutes ago in fact, Efficiency Nova Scotia filed its first electricity efficiency and conservation plan with the Nova Scotia Utility and Review Board. The plan outlines electricity program savings of 234 million kilowatt hours for 2012, up almost 50 per cent from this year's target of a 158 million kilowatt hours, saving enough electricity to power about 26,000 homes in the province. To put that in context, we have about 400,000 homes. While those savings are up 50 per cent, the budget is almost the same, from $42 million up to $43.7 million. No one wants to pay more on their power bill, but for that annual investment, less than a dollar a week for most households, Nova Scotians are supporting programs that save them money on their power bill year after year. At the same time, they are reducing the impact on Nova Scotia's environment.
Our mandate is to deliver the best efficiency and conservation programs we can for Nova Scotians. We think our programs this year and the plan for 2012 will help Nova Scotians do an even better job of what they are doing now, saving money, reducing the demand on the power grid, and helping the environment. If Nova Scotians achieve the savings targets, they will be making significant contributions to the goals of the province's Environmental Goals and Sustainable Prosperity Act. It is an act that commits Nova Scotia to fully integrating environmental sustainability and economic prosperity. Nova Scotians are pulling together, working together to become more energy efficient. That is a tribute to the fact that Nova Scotians of all kinds, from individual homeowners to small business people to larger companies, all recognize how energy efficiency benefits them now and for generations to come.
On behalf of Efficiency Nova Scotia, thank you for your time today. I would be happy to answer any questions.
The Chair: Thank you very much, Mr. Crandlemire. You indicated that this is a very new organization that really got up and running only in December and that you are independent of Nova Scotia Power and independent of the Nova Scotia government, and yet you are regulated. Is this a non-profit organization that the citizens put together spontaneously, or was it mandated? You talked about your mandate. I think it is a very laudable thing, clearly a very important part of the mix. Where did the driving force come from to start it? Was it a government initiative?
Mr. Crandlemire: No. Back in 2006-07, players in Nova Scotia wanted to get into energy efficiency in a big way within the electricity sector, and right away there was a concern. The electric company, Nova Scotia Power, is in the business of selling electricity — that is how they make their money; that is their revenue stream — and there were concerns pretty much across the board amongst stakeholders about this question: How can your heart be in energy efficiency and conservation if your revenue is with energy sales? The perspective was, then, that we want energy efficiency in the electricity sector, but we are not comfortable with the monopoly utility managing those programs dealing with it from an administrative perspective. The upstart of that was that the government appointed a professor from Dalhousie University's Faculty of Management to lead a stakeholder session.
The Chair: Who appointed? The government?
Mr. Crandlemire: The government appointed a professor from Dalhousie University, Dr. David Wheeler. He held a broad consultation, and we looked at a number of different scenarios, from a utility managing programs to a regulator managing programs to government managing programs to models like Efficiency Vermont or the Oregon Trust. At the end of the day the recommendation that came back was to create a new, independent, not-for-profit administrator in Nova Scotia, and that is Efficiency Nova Scotia. It was created by legislation in the fall of 2009. That legislation was proclaimed in January of last year. The first board members were appointed, and we have grown from there.
The Chair: It was created by government, and there is enabling legislation that gives it, obviously in the context of the legislation, its independence.
Mr. Crandlemire: Yes.
The Chair: You have a free hand to do what you guys think is right. Thank you very much.
Senator McCoy: To take you back a little on your questions, chair, I presume that in the legislation, then, is a direction to the Public Utilities Board to allow Nova Scotia Power to charge two cents a kilowatt hour to every electricity customer to pass through to you. Is that how it works? Is that the mechanism?
Mr. Crandlemire: Yes, that is essentially correct. Before Efficiency Nova Scotia was created, Nova Scotia Power was managing the electricity efficiency programs as the interim administrator, and so the process was already in place at that time. There was a rate rider on customers' bills, every customer in the province, and that revenue would go towards energy efficiency programs. Since Efficiency Nova Scotia was created, Nova Scotia Power continues to collect that rate rider revenue on our behalf, but they turn it over to us month by month.
Senator McCoy: I have heard the barrier from some regulators saying, well how do we prove that that is in the public good or the public interest, which is one of their main lodestones. But in this case the legislation more or less said to them that it is in the public interest and therefore you may do it, or thou shalt do it. That got over that hurdle.
Mr. Crandlemire: We have a process in Nova Scotia called integrated resource planning that the utility has gone through twice now in recent times. One process was completed in the 2006-07 time frame, and then there was an update in 2008-09. In both cases, the most economic option under consideration was efficiency and conservation, and basically that process is looking for the most cost-effective way of balancing long-term supply and demand while meeting environmental requirements. As I said, energy efficiency was at the top of the list; renewable was second on the list; and other options like new fossil-fired plants, what have you, were further down.
Senator McCoy: Those would be publicly filed documents then?
Mr. Crandlemire: Yes.
Senator McCoy: With the board?
Mr. Crandlemire: Yes, they are on the Utility and Review Board's website. They are also on Nova Scotia Power's website.
Senator McCoy: Great. We will follow up on that.
That leads me to my second piece here. I want to try to quantify it. We are told that the current cost of electricity, at least on the energy side, is $45 per megawatt hour. You have given us the number of 234 million kilowatt hours of savings, and I am starting to get lost in the zeros. Do a million kilowatt hours add up to a megawatt hour?
Mr. Crandlemire: That 234 million would be 234 megawatt hours.
Senator McCoy: This is 2,340 megawatt hours?
Mr. Crandlemire: No, it would be 234,000 megawatt hours.
Senator McCoy: If you multiply 234,000 megawatt hours by $45, that is how much you have saved?
Mr. Crandlemire: Yes.
Senator McCoy: What does that work out to? Anybody with a quick calculator? Come on guys, who is the mathematical genius? I will sit and do that arithmetic in a minute because it is hugely more than the $42 million that is invested, and that is your point I suppose, is it not?
Mr. Crandlemire: Those savings that you just mentioned, the 234,000 megawatt hours, those are first-year savings. Keep in mind that those savings occur next year, the year after, the year after that; there are multiple-year savings. We are buying kilowatt hours at roughly four cents, $40 per megawatt hour.
Senator McCoy: I have not got half my arithmetic here. Let me go on to my next question and come back to this.
I do not know how to phrase it exactly, but I am curious to know how your citizens, the Nova Scotians, responded to this initiative. Their electricity rates went up, and that was a question Senator Dickson wanted to know. What will this do to my bill? Their bills did go up. How did you manage from an industrial, residential, and commercial institutional customer mix? How did you manage that whole acceptance?
Mr. Crandlemire: It is a work in progress, I would say. I think we still have much more work to do around public information, public education, about future energy costs, number one, and the cost of alternatives, number two, whether that is fossil-fuel generation, new power plants, renewables, or saving kilowatt hours through efficiency and conservation. The cost has been very small to households to this point in time, as I mentioned. It is only a few dollars a year. However, I recognize that no one is putting up a hand to volunteer to pay more. No one wants to pay more for electricity, but the reality is that we have to invest now in efficiency and conservation for longer-term savings. Certainly the arithmetic bears out that it is a good investment, that there are long-term savings from that investment up front.
Senator McCoy: That is the message you have been putting out, and people have been accepting it more and more, I presume. I am assuming that.
I have just finished the arithmetic, and if I can, though I have trouble with decimal points and zeros and so forth, I am thinking that just for the energy costs at least, I am into $103 million. Does that make sense? You are saving $103 million a year for an investment of 42 million?
Mr. Crandlemire: It is $10 million in year one for an investment of $43 million, but over the life of those savings, as I said, there is a return of roughly four times.
Senator McCoy: It just carries on forever?
Mr. Crandlemire: Yes; not necessarily forever, but certainly for many years, and depending on the measures, some of them would carry on for several decades, such as insulating an attic or insulating a basement, for example. Obviously, lighting or something like that would have a shorter lifetime.
Senator McCoy: Perhaps I need to let other people ask questions because I think that is the next exploration. There is more than just changing out to these mercury-laden CFLs.
Senator Neufeld: I have always believed the cheapest form of electricity is one kilowatt saved, and we need to do that. I commend you for that.
Was nothing in place for energy efficiency in Nova Scotia prior to the creation of your organization? That surprises me. I know Quebec and British Columbia have had programs for 30 or probably 40 years. It is Power Smart in B.C., and there is one in Quebec. They have been around for a long time.
Mr. Crandlemire: I would not want to imply for a moment that nothing was in place previously. We had a strong effort on energy efficiency back in the very late 1970s or early 1980s when energy prices skyrocketed the first time around, and like lots of others, we somewhat lost interest after that price peak moved through the system. Likewise, we were back at it again in the late 1980s and early 1990s, but when oil got back to $10 or $11 a barrel in the late 1990s, early 2000s, we lost interest again, and I do not think we are alone in that regard. However, we have been back in the energy efficiency game with vigour in Nova Scotia since 2005. That effort on other fuels was led by Conserve Nova Scotia, a government organization. It was led on the electricity side by Nova Scotia Power, as I indicated earlier, as an interim administrator just filling a gap until Efficiency Nova Scotia was created.
Senator Neufeld: That is great.
The second question I have is that you said the story is all about energy efficiency — the cheapest, greenest form of energy out there. I heard earlier that the public utility actually first considers cost, then considers green energy. How does that square with what you say here? We all know the cheapest cost is not always green energy. In fact, it is not. It is generated by fossil fuel or something like that. How do you square that with what you are saying here? Do you promote the greenest energy? Is that what you are saying? How do you do that?
Mr. Crandlemire: Here is the reality the utility is living with. The province has hard caps for greenhouse gas emissions in 2015 and an even tighter cap for 2020, and so the utility does not have the luxury of just looking at lowest cost. Yes, it looks for lowest-cost options while meeting those environmental requirements that have been put in place, and in that world where they have to meet CO2 reductions at home, here in Nova Scotia in 2015 and then even more significantly in 2020, we are at the top of the pecking order when it comes to offering those greenhouse gas reductions cost-effectively.
Senator Neufeld: That is a different explanation than I got just two presenters ago. I will let that one go.
The other thing is the amount of electricity you are saving, and you talked about that earlier. You talked about bending it backwards and actually not needing as much energy development as you have today. How is that squared with actually building the Lower Churchill, the Muskrat Falls? When I asked Mr. Bennett about how long the coal plants were going to stay in place, he had an estimate only but was thinking maybe 2035 or maybe longer into the future. Can you help me here a little bit? I like what you are doing. Do not get me wrong, I think it is great. However, when you say you are going to save that much electricity, and you know the province will grow, you have factored all those kinds of things into your numbers, and what you are saying is that you will consume less electricity; yet we have someone saying we will still keep the coal plants, but we need another 900 megawatts from Muskrat Falls. Can you help me there a bit?
Mr. Crandlemire: Here is the picture I would paint. We will have energy efficiency savings similar to what I have suggested to you today. I certainly plan on meeting the targets we have set for ourselves. We have a regulator and customers in Nova Scotia to answer to if we do not meet those targets. I am sitting here absolutely confident that we will do our utmost to meet those kinds of savings and bend that bar. I am not questioning for a minute that at the same time the utility and the province as a whole are moving on a direction where there will be more generation from renewables, some more generation from wind already in place to some significant degree and more being added over the next few years. There will be generation from biomass. There will hopefully be generation from Lower Churchill and have some of that electricity moved to Nova Scotia. I do not question for a moment that those coal-fired plants will be in place for many years to come, but their load factor will be much, much smaller than it has been in the past, and it has to be that way or we cannot meet the CO2 reductions that we have set in place for 2015 and 2020.
Senator Neufeld: The numbers you have given us here today about actually starting to consume less took into account the generation only that is presently in place in Nova Scotia. Would I be correct in assuming that?
Mr. Crandlemire: The numbers that I have talked about take into account the renewable generation that is planned to come on stream over the next few years as well as the existing generation that is in place. The integrated resource plan I spoke of earlier deals with existing generation. It deals with planned generation, whether in the form of biomass or wind or hydro from Lower Churchill. It deals with energy savings as well on the efficiency side. It deals with the entire picture.
Senator Neufeld: I will read a paragraph from your presentation back to you:
It is worth thinking about what would happen if Nova Scotians decided to do nothing about energy efficiency, if we just let our consumption continue to grow. Within a decade, Nova Scotia Power would be forced to build a new power plant, a billion-dollar power plant, and all that cost would have to be paid by Nova Scotians.
You took into account, though, building new plants. I understand that is correct. I am trying to get to a number, not an exact number but a plane where you worked from. Did you work from the generation that is in place now, or did you work including Muskrat Falls, the Lower Churchill, and all the wind power generation that will be built?
Mr. Crandlemire: We were working with a picture that had lots of renewables in the mix but did not have certainty around generation from biomass or Muskrat Falls. Obviously wind generation can back out coal, but you still need the megawatts of capacity there because there will be times when the wind does not blow. You do have the advantage with hydro from Muskrat Falls or anywhere else for that matter or with biomass generation where it is dispatchable, where you will have that when you need it. Obviously if we have those kinds of generation additions in the mix in years to come, we will not have the same need for a fossil plant, but absent energy efficiency and conservation, low growth tends to do this at about, in a decade past in the high 1 per cent range, in recent years in the low 1 per cent range, so 1.2 per cent or 1.3 per cent. Our challenge is to take that to zero or to bend that slightly negative, and we are on track to do that.
Senator Mitchell: Could you be specific? You go to a hotel in Europe and you put your card in the slot when you walk in and all the lights come on, and then you take it out when you walk out and they all go off, including the air conditioning. Why is it that this does not happen in North American hotels? It is free money; surely it is not no cost when I leave my room and happen to leave the lights on.
Mr. Crandlemire: I think the answer is quite simple, senator. Energy has been cheap in North America, and we have used it because it was cheap. Why worry about a card slot by the hotel door when kilowatt hours cost less than 10 cents? Certainly in Europe where they are used to paying two or three times as much, they have a lot more respect for that kilowatt hour. The sad part is I do not have any concern about people using the energy they need, but I think we all should be concerned about wasting energy that does not provide any value to anyone. Certainly if you walk out of that hotel room and leave the lights or the TV or the air conditioning on, that is not benefiting anyone, so that is a dead loss for us all.
Senator Mitchell: It is interesting that one major chain of hotels no longer automatically gives clients a newspaper, and their chain saves 50,000 newspapers a day. You would think that this kind of an electrical outlet thing would be very, very powerful, and they would actually save money even at 10 cents a kilowatt.
My next question may be mixing apples and oranges. It seems to me that carbon markets, even a voluntary carbon market, could encourage people to find the lowest-hanging fruit. I remember the One Tonne Challenge, which was a great idea, but when you actually got down to it I could spend $2,000 or $3,000 maybe on a new furnace to save a tone, or I could go to the European carbon market, a real one, a hundred billion a year, and pay $20 to save a tonne. Have you considered the implications of even a voluntary carbon market? B.C., for example, probably under Senator Neufeld's watch as energy minister, implemented a zero-carbon footprint policy for its government. The Pacific Carbon Trust is looking for people, businesses and farms, for example, who can reduce carbon, reduce energy use at the same time. Have you thought about that?
Mr. Crandlemire: Absolutely, to this extent. For every project that we incent, and it does not matter whether it is for a residential project or for the largest industry in the province, we own the carbon credits that come from that energy reduction at the end of the day. We do not know what value they will have or when they will have value, but we just want to make sure that we have that base coverage so that ultimately there can be a second revenue stream for us and we can reduce the cost on that line item of customers' bills by achieving that second revenue stream for carbon credits.
Senator Mitchell: That is fantastic. The other feature of it is that it might harness individuals to say, "My family and I want to have a zero carbon footprint." That is 30 tonnes a year on an average five-member Canadian family. We have nowhere really to invest in a carbon market where we could do that.
Mr. Crandlemire: It is doubly relevant in a province like Nova Scotia that in today's world, or in very recent times, had an electricity system that would be basically based on 80 per cent fossil fuels. It is getting better as time goes on. I am sure you heard this morning about electricity coming from wind or biomass or hydro from Muskrat Falls, but our base today is 80 per cent fossil, so every kilowatt hour has got a big carbon footprint associated with it.
The Chair: You may be interested to know that the federal minister, Mr. Paradis, made a big announcement yesterday about clean energy projects that the federal government apparently is funding. Over the next 10 years, $9.2 million will go to the ecoENERGY program for renewable power for the Digby Neck wind farm in Nova Scotia, a project that consists of installing 20 windmills capable of producing up to 30 megawatts of electricity. The wind farm will produce about 99 gigawatt hours of electricity per year, enough to supply 10,000 homes, the government, and so on. I do not know whether that is the type of thing that you are advocating.
Mr. Crandlemire: That was a federal incentive. It was available to wind projects across the country that were in place before the end of 2010.
Senator Brown: I will ask you a question if you are willing to tackle anything that goes beyond motion sensors. Our cities are lit up all night long everywhere we go. I came into Halifax the other night and could see it from miles and miles away. The excuse the building owners have is that they have cleaning crews going through the different floors. The question is why can they not have them shut off lights when they are not in that level, and why can we not just put some strobe lights on top of the big towers and keep the airplanes from trying to land on them if their lights are out? We just need some warnings of how high they are. We could stop unbelievable amounts of electricity from being used. Are you willing to go down that road and tackle that and see which city would go for it first? All you have to do it put motion sensors on every floor.
Mr. Crandlemire: I do not think there is any question but that 10 years from now you will see very different practices in place in Canada, I hope, and absolutely in Nova Scotia around lights being on through the middle of the night in buildings where no one is there and that sort of thing. It is a habit we have cultivated over decades in North America, where, as I said earlier, we do not respect energy. That is a perfect example of where no one is getting use out of that energy, and society is paying the costs in the emissions that go with it, but it would not inconvenience anyone if those buildings were dark in the middle of the night.
Senator Brown: No, it would not, and we would also stop killing thousands of migratory birds every year.
The Chair: Our local native son, Senator Dickson, has the last word.
Senator Dickson: Thanks very much, Mr. Chair.
Mr. Crandlemire, you have been doing a tremendous job. Keep up the good work.
I want to come back to the funding of the corporation, the semi-Crown or whatever it is that you are the interim CEO of. Recently there was a letter to the editor in The Chronicle Herald that referred to the few dollars a month as being another tax.
Mr. Crandlemire: Yes.
Senator Dickson: My question relates to whether other considerations were given for funding the organization other than having a separate line on the power bill, what the writer of the letter said was another tax. Why should I be taxed to pay for Senator McCoy's refurbishing of her basement?
Mr. Crandlemire: There are many reasons why you should be paying for Senator McCoy to save energy in Nova Scotia or for anyone else to save energy. The reality is that with a regulated electric utility situation, everyone pays for new generation. Everyone pays for meeting emissions reductions. That is a collective cost, and it is carved out in terms of so much for this rate class, so much for another rate class. The reality is that if Nova Scotians do not save energy, we all pay at the end of the day. That is why Senator Dickson should be paying as well as every other Nova Scotian, including the writer of the letter to the newspaper.
In terms of options for paying for this, there were some. I mentioned the stakeholder process earlier on that concluded that setting up an independent organization was the best way to go.
By the way, we are not a Crown corporation. We have no links to government other than that legislation established us, but the independent board of directors is responsible for appointing additional board members, so government has no involvement at this stage of the game.
The Chair: Not funding?
Mr. Crandlemire: Not even funding, although I will come back and touch on that briefly, Mr. Chair.
Here were the two options that were considered. On the electricity demand-side management side of things, just fancy words for efficiency and conservation, electricity rate payers will pay one way or the other; that decision was made. Government will not step in and do this all for the citizens of Nova Scotia. It does not have the resources and certainly does not have the resources to do it at the pace that the Utility and Review Board wanted it to happen because it recognized that efficiency is the best value for customers ultimately. Therefore, customers are going to pay. Now we have two options. You can either bury it in the cost so that no one knows how much they are paying and no one gets to complain because it is just there, or you can make it very visible to people, make them aware that they are paying for energy efficiency, saying here is the budget for 2012, and we need to get value for every dollar that is spent. The choice was made. We want accountability. We want performance-based. We want to have to deliver kilowatt hours for the dollars that are spent. Let us make it totally transparent, visible, in peoples' faces, so to speak.
This is not Efficiency Nova Scotia driving those savings at the end of the day; it is Nova Scotians. It is your participation in programs, small businesses' participation in programs, the largest pulp and paper company in the province delivering savings. That is how this happens. Efficiency Nova Scotia does not drive those saved kilowatt hours all by itself, by any stretch. It is house by house, small business by small business, low-income family, et cetera.
Regarding how government contributes, I spoke mostly about electricity efficiency and conservation. Government has run programs over the last few years through Conserve Nova Scotia. It was a small department, almost like a department of government, and once electricity demand-side management ramped up, government got out of the electricity part of the business and basically just focused on other fuels. It is important here in Nova Scotia because two thirds of homes would be heated with fuel oil as opposed to electricity. Historically we have had relatively expensive electricity, so that has discouraged electric heat until just the last couple of decades or so.
Government has had a history of funding programs for those other fuels. We are negotiating with government now. I would expect that we will be managing those programs for other fuels for government within the next month or two, probably starting with the new fiscal year, and we will be truly at that stage of one-stop shop for energy efficiency. It does not matter whether you are coming to me for electricity efficiency or efficiency around your space heating or water heat or what have you. We will be covering all the bases, but we will have a separate revenue stream for efficiency related to those other fuels, and that will be a government contract.
Senator Dickson: Does the transportation sector come within your mandate, or is it just electricity?
Mr. Crandlemire: Certainly we have a mandate for electricity first and foremost. By the way, legislation says we must do that. We may do energy efficiency for other fuels, so that is a "may" rather than a "must," but it will be happening with our contract with government. We could do efficiency programs around transportation. We are not that far down the road yet with government in terms of whether our contract will include those, but if there are incentive programs or things of that sort, I expect it is likely that we would manage those. If it is more on the policy side, I expect that will stay within government.
The Chair: That terminates our morning hearings.
Mr. Crandlemire, you have been focused and interesting. Thank you for your appearance and for your patience earlier.
(The committee adjourned.)