Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 18 - Evidence - March 29, 2012
OTTAWA, Thursday, March 29, 2012
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8:05 a.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator Grant Mitchell (Deputy Chair) in the chair.
[Translation]
The Deputy Chair: Good afternoon everyone. I am calling to order this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
[English]
I am Grant Mitchell, the deputy chair of this committee. I am from the province of Alberta, and I am filling in for Senator Angus, the chair, who is unfortunately unable to be with us today.
Today, we are continuing to examine the potential, the possibilities, and the need for a Canadian energy strategy. This is the continuation of a study that has spanned about two years and nine months. We have heard from upwards of 250 witnesses from all sectors, all provinces, and all territories. It has been a very in-depth study, which we have found has had a great deal of resonance with people in this country who are demanding and desiring insight into the energy situation and who want to progress with a full debate about these important issues.
I would like to welcome, in particular, the people who are watching on television and all across Canada to this hearing this morning. I would like to remind everyone watching and everyone in the room that our energy study website, which is very informative and gives people updates on what we are doing and some history of what we have done, can be found at www.canadianenergyfuture.ca./www.avenirenergiecanadienne.ca
This morning, it is my pleasure to introduce the senators and staff at the table today: Senator Paul Massicotte from Montreal, Quebec; Senator Bob Peterson from Saskatchewan; Lynn Gordon, our very able clerk, who manages all of us and this process; and Marc LeBlanc, the Library of Parliament analyst who is, in fact, writing the report and has begun writing the report as we sit here. That is a daunting task, which he is confronting with great competence. Marc would not be able to write the report without the help of Sam Banks, who is from the Library of Parliament as well. We also have with us Senator Richard Neufeld from British Columbia, and Senator Dan Lang from the Yukon.
We have the privilege and pleasure this morning to have with us two senior officials from the Government of Ontario. David Lindsay is the Deputy Minister of Energy of Ontario. He has previously served as the Deputy Minister of Northern Development, Mines and Forestry, the Deputy Minister of Natural Resources, and the Deputy Minister of Tourism in that government. He was, prior to that, the CEO and President of the Association of Colleges of Applied Arts and Technology. He has had a long and distinguished career in the public sector and is, among other things, a fellow of the School of Policy Studies at Queen's University, which resonates with me because I did a masters at Queen's University. We welcome you, Mr. Lindsay.
With him today is Jon Norman, Director, Transmission and Distribution Policy, Ministry of Energy. He is a professional engineer, with over 12 years of experience in consulting and government. He has had career experience in both the energy and environmental sectors, as well as in management consulting. As I said, he is currently the Director of Transmission and Distribution Policy with the Ontario Ministry of Energy, where he is responsible for some areas that we have been particularly focused on — the development related to electricity grid expansion, smart networks, and Ontario's feed-in tariff program. He has worked on negotiations on hydroelectric power purchases and climate change cap-and-trade. We welcome you as well, Mr. Norman.
Mr. Norman and Mr. Lindsay, the way we work is that you have some time to present, and then we have some time to ask questions and hopefully get into a discussion with you. Thank you very much.
David Lindsay, Deputy Minister, Ministry of Energy, Government of Ontario: I am pleased to be here on behalf of my minister, Chris Bentley, the Minister of Energy of Ontario, and to be supported by my colleague Jon Norman. We also have Petra Fisher, from our office, here to help us today. We have a bit of an overview presentation to hopefully help kick off the discussions of Ontario's perspective on energy issues for Canada. We have brought some backup materials, so, Mr. LeBlanc and Ms. Banks, there is lots of background information we are glad to share. Any follow-up questions are welcome; we want to be helpful to you in your work and your deliberations today.
The emphasis of most of my remarks today will be on the recent changes we have undertaken in Ontario with respect to the electricity sector, most specifically, and the opportunities we see for economic development, not just for Ontario but for all of Canada, coming out of some of the things we have been doing on the electricity side of the larger energy agenda.
While other provinces in Canada are significant energy exporters, in Ontario, because of our industrial base, we are a much larger consumer of energy than we are a producer of electricity. Across Canada, the term "energy" has different connotations and different meanings. Alberta and the resource-producing provinces would maybe think of energy when they think of oil and gas. In Ontario, when we talk about energy in the legislature and in the ministry I am working in, we are mainly focusing on the electricity agenda. That will be the main focus of my remarks today.
Having said that, the first oil wells in North America actually were in the province of Ontario, and we had a significant extraction of oil in the 1800s. That is long ago, so we have lots of abandoned oil wells in southwestern Ontario. By virtue of our geography, we do not have any fracking. There are no shale gas deposits that we are currently aware of in Ontario. Likewise, the provinces on either side of us, Manitoba and Quebec, and also Newfoundland, are significant producers of hydro electricity and there is much potential for export there as well. In Ontario, we were one of the first jurisdictions in North America to harness hydro electricity and create the first public utility coming out of Niagara Falls. We have a history of oil and gas. We have a history of hydro electricity, and the electrification of our province started with Sir Adam Beck's efforts in harnessing the energy coming out of Niagara Falls.
Over the years, as Ontario increased its industrialization and expanded its economy, the resource coming out of Niagara was not sufficient, so we started moving into coal and then nuclear energy, as part of the mix of supply we use for our electricity portfolio in the province. For the first part of my presentation, what I would like to do is to talk about the supply mix that makes up our electricity portfolio in the province of Ontario and some of the significant investments we have been making, over the last eight years or so, to modernize our system and replace coal — a significant commitment to carbon reductions in Ontario — with other renewable sources. I will make some observations about the economic opportunities, as we see them, for the electricity sector, and then I will conclude by suggesting that the green energy activities in Ontario should be considered as a significant part of a national opportunity as part of our energy agenda.
Turning to slide 3 of the presentation, when we talk about energy, as I said in the introduction, we think more specifically about electricity, but, in the 19th century, the first oil wells in North America were in Oil Springs and, appropriately named, Petrolia, Ontario. The management of abandoned oil wells is probably a larger responsibility of provincial officials today than the managing of oil and gas extraction. That foray into the oil industry, however, spawned a very large business we have now in Ontario, and it is called Petrochemical Valley, in Sarnia, Ontario. The Sarnia-Lambton area has one of the largest clusters of petrochemical refineries in our country. It accounts for about $6 billion in traditional chemical shipments and petrochemical activity and employs some 5,700 people in Ontario, so we do have some downstream activity in the oil and gas sector. In addition to Petrochemical Valley in the Sarnia-Lambton area, we have a fairly mature distribution system of natural gas. We have storage capabilities, under the old salt mines of southwestern Ontario, of approximately 270 billion cubic feet, so that is an important pivot point for distribution of natural gas and storage of natural gas for Eastern Canada.
I bring up these stories of our past and the foundation of the petrochemical industry in Ontario for two reasons: First, I want to note that, while we do not have a significant extraction of oil and gas right now, we are a major consumer. Our industrial base requires that, and our population requires that. However, we do have considerable downstream business activity, so there are opportunities for oil and gas business in Ontario.
Second, and maybe more important, I want to emphasize that Ontario has been a pioneer in the succeeding waves of energy evolution in our country, whether it is the petrochemical sector, the hydroelectric sector, or moving into the green energy sector. That is where I would like to focus the balance of my comments.
The electricity sector in Ontario has undergone some significant change, and some of those points are highlighted on slide 4 for those of you who are following along. The investment in electricity, every year, is a market of about $16 billion, so it is a significant part of our economy. As a result of recent investments we have been making in the smart metre technology and in developing time-of-use pricing, we are a real test bed and significant leading edge for smart metre innovation and smart grid innovation in Ontario. We probably have the largest test bed in North America for that new activity that we are looking forward to taking economic advantage of.
Slide five talks about some of the transformational changes we have made and undergone over the last few years. We have renewed our infrastructure, reduced our reliance on coal, and increased our use of renewable energy sources. We have built a clean, reliable, and modern system and laid the foundation for that emerging clean energy economy for the province of Ontario.
The pie chart, on slide 6, demonstrates the changing supply mix that we are moving towards. We have taken a long- term approach to our electricity planning, first with the introduction of the Green Energy and Green Economy Act in 2009, and then, more recently, with our long-term energy plan that we published in 2010. We have copies of that in the materials we have distributed for you today, so you can see for yourselves some of the work we have done and the trajectory we see for electricity and the supply mix in Ontario's system.
Slide 7 tries to give you a bit more information. We have been involved in lots of activities over the last number of years. It would take a long time to go through all of them, but let me delve into a few.
Over the last eight years, more than $13 billion has been invested in our power system to tackle the shortfall we were experiencing with electricity at the beginning of the decade, 2002, 2003. Since 2003, we have added some 9,000 megawatts of new power. Just to put that in context, that addition of 9,000 megawatts of new power, about 25 per cent of our system's capability, is equivalent to the entire electricity of the province of Alberta, the province of British Columbia, or the provinces of Manitoba and Saskatchewan, or of Newfoundland, Nova Scotia and Prince Edward Island combined, and it is equivalent to about a quarter of the production of electricity megawatts for the province of Quebec. Nine thousand new megawatts being brought onstream in eight years is a significant investment and revitalization of our electricity system.
In addition to that, you on this committee know the challenges of transportation and moving our natural resources across the country. The same challenge also applies to electricity. We have invested $9 billion in our transmission system, which is creating power lines from Toronto to the senator's territory up in the Yukon. That is a lot of transmission lines.
The province is also making a significant shift to renewable power. We have seen evidence of economic activity associated with that shift. There has been a deliberate effort on the part of the premier and our government to create a green economy. We are now the leader in wind and solar power generation and home to the largest operating wind and solar farms in the country. Last year, more than 80 per cent of the power generated in Ontario came from various emissions-free sources: hydroelectric, nuclear, wind, solar and biomass. We have also introduced some of the most aggressive conservation efforts in North America, encouraging energy efficiency through innovative programs, technology, and education aimed at residences, small businesses and industry.
Finally, we are well on our way to meeting the premier's goal of eliminating the use of coal in electricity generation in the province of Ontario by 2014, and that will be the single largest contribution to carbon reductions — I stand to be corrected — but I believe in all of North America.
The transformation of our energy sector is bringing about significant and meaningful change. It is reducing pollution, obviously, reducing emissions, increasing the reliability of our system, and affording an economic opportunity. That is where I would like to focus some of my efforts for the next few minutes, to talk to you about the economic and green energy opportunities.
Slide 8 talks about the Green Energy and Green Economy Act. It was enacted to expand renewable energy and energy generation in the province, encourage energy conservation, and promote jobs and economic growth. At the heart of the Green Energy and Green Economy Act, we established the most comprehensive feed-in tariff program in North America, a large undertaking for our ministry and the Ontario Power Authority, which is implementing this program on our behalf. It has sparked a significant development in the renewable energy sector.
Since 2009, the feed-in tariff program has generated clean and green energy programs of unmatched scope. If you go to any conference on electricity and energy across North America, indeed around the world, the Green Energy and Green Economy Act in Ontario has generated a lot of attention and a lot of interest in inbound investment. To date, we have identified about 20,000 jobs that have been created as a result of some $27 billion in private sector investment. We are on track for the government's commitment of 50,000 jobs being created as a result of this new investment in green energy. We have tracked so far 30 companies that have come to Ontario or established renewable energy activity on the manufacturing side in the province of Ontario.
As a result of the feed-in tariff program launch, we have now had two years of experience under our belt, and the government committed that after two years we would review the program to look for improvements. On March 22, my minister, Minister Bentley, made that report available and now we are starting to implement the recommendations from that report. It has recommended some price adjustments. I think there is a copy of that report in your package. I would be glad to talk about that in more detail. We have committed to implementing those recommendations, and it will continue to drive our green agenda on the generating side.
Let me turn to slide 9, if I could. Slides 9, 10, 11 and 12 focus on where the opportunities are for us in Ontario in the electricity sector and, I would argue, for the rest of Canada.
The work we did on slide 9 I will have to explain a little bit. The printing did not come out exactly the way we had hoped. Those should all be circles. There should not be any squares on that chart.
To help to identify where we might capitalize on the investments being made in the sector, the government commissioned a study. It is not yet published, but this is a one-page summary of a very thick report we have been working on, something we call an asset map. It is quite intriguing to see where the opportunities might be. Let me take a minute to explain how to dissect what that bubble chart in front of you is trying to tell you.
The vertical axis signifies the rate of growth of these subsectors that we have identified, and then the horizontal axis is intended to demonstrate the size of market opportunity around the world for these particular subsectors. Each bubble of the chart — some of them are squares — is intended to reflect the size of that business in the province of Ontario, so the larger ones are the large clusters of businesses and the smaller ones are the nascent or growing ones. As you can see, we have a smattering of businesses across the broad electricity industry, and we have a balanced portfolio of strengths in various sectors.
The bottom right of the chart is meant to represent the steady state, maybe not a lot of growth, but a big market around the world; and the top left is not yet a large market, but they are fast growing. In business, when you are trying to build a healthy portfolio, you want to make sure you have some steady, stable, solid opportunities and that you have some growing new opportunities. We are trying to make sure we are reflecting not just one but that we have policies to help advance and deepen the economic opportunities in all portfolios. We can delve into that in more detail if you would like, but in the interests of time I will continue on.
Slide 10 talks about the smart grid. We believe that is a huge opportunity for Ontario and for Canada. Think of the smart grid as the Internet comes to the electricity sector. How do you go from just the transmission going down the line into people's homes to being a two-way, multi-dimensional communication?
That is high tech, going from the old rotary-dial phones that some of us would remember, to those smartphones. That is the evolution that is about to take place in the electricity sector, and we in Ontario are on the leading edge of that. Four and a half million smart metres in operation and time-of-use pricing working in homes and small businesses across Ontario, live and real today, is the largest concentration of smart metres and interconnectivity in North America. We are on the leading edge and we should be finding a way to take full advantage of that for the Province of Ontario.
Since we are an early adopter, we are attracting investment and attention from multinational companies, our universities and our colleges, and we are working with small entrepreneurs to create new businesses, new products and new opportunities. The next step for us would be to help find new markets for them to go international.
Slide 11 gives you a little bit of a graphic of what the smart grid is supposed to look like. The province now has many innovative companies trying to find their opportunities in this new business.
We have something called the Ontario Smart Grid Forum, a utility- and industry-led initiative focused on creating a road map for where we are going with the smart grid and its implementation. It estimates that Ontario electric utilities will invest approximately $2 billion in smart grid technology over the next five years. That is a huge investment. How do we find the best way to leverage that investment for both inbound investment into the country but, more importantly, export and international opportunities?
Hydro One, the province's largest electricity distributor, has launched called something called Smart Zone. It is an initiative in the Owen Sound area of our province that is focused on integrating various solutions in the areas of distributive generation, distribution automation, and the planning tools that need to go in behind that. The project has attracted private sector expertise and investment, including system integration and project management services from IBM, for example.
In April 2011, we in the province launched something we refer to as the Smart Grid Fund. Jon Norman and his team have been working on this initiative. Our minister will want to make some announcements shortly, supporting Ontario- based initiatives and projects to advance the smart grid. Investing in and encouraging innovation and, more importantly, bringing that innovation to market is part of our agenda.
Mr. Chair, I am not sure how much time we have.
The Deputy Chair: You have enough time to finish.
Mr. Lindsay: We believe this is a global opportunity for Ontario, and our minister has taken a leadership position in trying to advance this opportunity. We want to be that test bed for new products and new innovations for all of North America, and provide that manufacturing base for those innovations.
There are other jurisdictions that are just on the starting blocks going around this track, and we think we are already around the first lap, so we are a little bit ahead. However, we must continue to be aggressive if we are to take full advantage of this opportunity. We are alert to the challenge. Ontario is moving aggressively to ensure we keep that leading advantage.
As a country, we are clearly seen as a leader in our commodities and our energy brand. Slide 14 speaks to this. You, as the committee studying this, know the numbers far better than I do, but we are in the leading edge of significant resource production. We see the transportation of electrons, the smart grid and smart use of electricity as another opportunity to be on the leading edge and take economic advantage as a province and as a country.
In 2011, the global clean energy market of wind, solar and biofuels topped $250 billion, surpassing investment in traditional fossil fuels for the first time. Global investment in renewable projects is expected to mobilize nearly $7 trillion of new capital within the next 20 years. Therefore, in addition to the traditional resources, we should be figuring out how we take advantage of that as a country, as well.
We have a great opportunity, a great history and a great record of energy and resource management, and we should be leveraging that into the smart grid sector, and the electricity sector, as well.
I am glad to go into further details. We have tried to share a number of our materials with you. With that, Mr. Chair, I will conclude our remarks and allow you to open it up to questions.
The Deputy Chair: Thank you very much. It was very enlightening and interesting. Does Mr. Norman have anything to add?
Mr. Lindsay: He will answer all the questions.
The Deputy Chair: It was very interesting. At one point you said you may be a little ahead, and I am sure you are, except for the Yukon. I know Senator Lang from the Yukon will want to dispute the fact that Ontario will be ahead of that.
Senator Lang: Thank you for coming this morning. We certainly appreciate it.
I would like to go into costs, because you never really outlined exactly what the financial obligations will be to the consumer at the end of the day. We have read about the green energy initiatives that Ontario has taken. At the same time, there has been public debate about what the actual cost of these types of programs will be as far as the consumer is concerned.
I would like you to outline for us a few things. First, will all the costs going into these initiatives be paid by the consumer, or are you subsidizing them through other government programs? Second, at the end of the day, will you be able to compete in the marketplace with other close economies where your energy costs will be comparable, so you can be competitive, especially in your case, in the manufacturing field?
Mr. Lindsay: That is an excellent question. It has been the subject of some debate and discussion in the province of Ontario. As part of our long-term energy plan, we go into detail on the cost and pricing of electricity, beginning on page 57 of chapter 7. Let me quickly say a couple of things.
The system in Ontario had been underinvested in for some considerable period of time, so the transmission lines from Toronto to the Yukon, for example, had to be invested in. Also, we have invested in 9,000 megawatts of electricity generation, a new tunnel for hydroelectricity transmission in Niagara Falls that we call the Beck Tunnel, and the Lower Mattagami River and other natural gas plants.
Out of the 46 per cent increase in electricity prices we have estimated over the next five years, about half of it is actually investing in the upgrading and improving of the existing system. The other half, roughly, is attributable to the new green energy initiatives — wind and solar, in particular — through our feed-in tariff program. In our published estimates, our prices will go up by about 46 per cent over the next five years. Less half of that is renewal of the existing and half of it is investing in the new green.
The government's strategy of getting out of coal is a significant societal and health commitment. It will reduce asthma, deal with particulate matters in the atmosphere, and contribute to the production of carbon. There are externalities to the production and use of coal that are now being borne by getting out of coal and the costs to moving to greener renewable sources.
We are constantly looking for efficiencies, savings and better ways to do it. With the use of the smart grid, we will be able to find leakage in the transmission system, we will be able to do repairs — self-healing grid. Using it more efficiently and effectively is something we want to do. However, the government has not shied away from the fact that prices will go up, and they have published where those price increases are coming from.
To help the retail customer get through this five-year reinvestment phase, they have brought in something called the Clean Energy Benefit in last year's provincial budget. Homeowners and small businesses will get a 10 per cent rebate off their monthly electricity bill to help reduce those costs for the next couple of years as all those new investments come online.
Senator Lang: I want to pursue this, but I do not want to spend the whole meeting on it. I am looking at cost again.
Mr. Lindsay: We have spent whole elections on it.
Senator Lang: Then you have all the answers. To make it clear, I want to get a yes or a no here. With all your initiatives, will they be paid directly by the electrical consumer, or will there be subsidies over and above what the electrical consumer will pay?
Mr. Lindsay: All of those investments are applied to the rate base, so they will be paid through the electricity system. The 10 per cent rebate to customers comes through the tax base.
Senator Lang: That is a subsidy.
Mr. Lindsay: The modest investment in the smart grid that Jon Norman's team has been working on is $50 million to help innovation and get new economic development opportunity that comes out of the tax base. However, $16 billion a year of expenditures is through the rate base.
Senator Lang: You never mentioned nuclear energy. What is the future of nuclear energy for the province of Ontario?
Mr. Lindsay: Again, we have all those details in our published report, the Long-Term Energy Plan, and it is the government's commitment to continue to have nuclear as what we refer to as the "base load," an important part of our energy mix. It has been on or about 50 per cent of our electricity supply, and it will continue to remain so.
Over the next 10 years, we have ten reactors that will require significant refurbishment. Each of them is several billions of dollars. We have 10 reactors that need to be refurbished, and some of the units at Pickering will be coming offline, so we will replace those as new units at Darlington, which is outlined in this published report. Our commitment to nuclear continues at about 50 per cent of our overall mix, and we refer to that as our "base load."
Senator Lang: Recognizing that the constitutional and practical responsibilities of the province for energy and the responsibility of the federal government, what role do you see as the federal government's responsibility as far as energy is concerned? When we talk about a strategy for the country, where do you see the federal government being a part of it, and how will they play a part in it from Ontario's point of view?
Mr. Lindsay: That is a very good question, senator. I and all the deputy colleagues across the country have been working with our teams on a national energy framework. I know you have talked about that at this committee before, and the ministers of energy gathered at Kananaskis last fall to release that report. It provides a good foundation for some of the directions we all need to cooperate on.
I think the opportunities for a federal role are, in part, coordination, certainly, in the international profile, investing in research and innovation and the marketing and international promotion of our strength as a country.
With respect to some of the supports that the federal government has announced in Newfoundland, for example, my premier has said he would be most welcoming of those kinds of supports for infrastructure in the province of Ontario as we make our investments in grid upgrading.
Coordinating east to west helps us all use our electricity, natural gas and oil more efficiently, so we can have those resources for export opportunities. The more efficient we are internally and the more we lighten our environmental footprint and have a good brand that we can sell internationally, the better it is for our economy as well as our environment.
Senator Neufeld: I want to start with oil and gas and ask you how much of your CO2 emissions are encompassed in oil and gas. You stated that you have the largest petrochemical industry in Canada, and I agree with you. You would consume an awful lot of natural gas and oil. You have a refining capability in Ontario that is huge, obviously, because your population is huge. That only makes sense.
What part of your CO2 emissions comes from that? Would you agree with me that Ontario is pretty dependent on the Western provinces for oil and gas, unless you import from someplace else, and you may import some from someplace else? Do you import all of your natural gas and oil from Western Canada? What are those amounts?
Mr. Lindsay: I do not have those numbers at my fingertips. We can get those for you.
The first question is what our use of oil and gas is, and we can get you those numbers. The second question is what our carbon emissions are. The charts I have in my mind are not based on how much comes from oil and gas but what comes from different sectors of our economy and the transportation sector. Our electricity sector was one of the largest emitters, so getting out of coal is a significant reduction there.
The next largest, if I remember the pie chart, is transportation, so automobiles and trucking are the second largest contributor. The Government of Ontario has been moving aggressively to encourage replacement fuels, ethanol fuels and moving toward supporting electric vehicles and the electrification of our Go Transit system. Those are all policy directions that the Province of Ontario is moving towards to reduce carbon in the transportation sector. As to the details of how much comes from each sector, we can get that for you. I have not got it off the top of my head.
Senator Neufeld: That would be appreciated because it is a big part of Ontario's economy, and I would like to know what the GDP is for the oil and gas services that you people have, as the petrochemical industry and the refining industry are huge, and what the dependence is on Western Canada for those supplies of that raw resource. Would you also give me the natural gas prices?
What portion of your greenhouse gases are due to transportation in the pie chart? Do you know that? Would it be about 30 or 35 per cent?
Mr. Lindsay: I would have guessed in the 20s, but that is a guess. I will have to get the chart for you.
Senator Neufeld: Could you get that for me, and could tell me what Ontario has done? Have you mandated other than what the government has mandated for ethanol and biodiesel in those fuels, or do you have low carbon standards that you are looking at in Ontario for transportation fuels and so forth?
Mr. Lindsay: We have a suite of those kinds of policy tools that we are moving forward on. Also, you may be familiar with Ontario, Quebec and other provinces that are in the Western Climate Initiative, partnering with California and others. We are looking at all kinds of creative options to find out how we can make our contribution to the reduction of carbon emissions, not just in the transportation sector, but in all aspects of our economy.
Senator Neufeld: I appreciate the ones you are going out to think about, but I am interested in where the rubber hits the road. What have you done in those avenues to reduce the carbon footprint?
With respect to electricity, because most of your presentation was on electricity, what are your residential, commercial and industrial rates as of today?
Mr. Lindsay: Each of our distributors has slightly different prices.
Senator Neufeld: Can you give me an average?
Mr. Lindsay: I want to say roughly eight cents a kilowatt hour.
Jon Norman, Director, Transmission and Distribution Policy, Ministry of Energy, Government of Ontario: It is roughly 10 cents. There is a regulated price plan available for residential customers, so those prices are determined every six months by our energy regulator, which looks back over what the projected costs will be over the next year and determines the rates on that basis so that it is recovering the actual costs. It varies on the basis of the price of natural gas and the price of other sources of fuel in the electricity system.
Senator Neufeld: I understand you do not have a postage stamp rate, then; you have a different rate, in different areas of the province, depending, I guess, on how far it is from generation or those kinds of things.
Mr. Norman: No, we have a postage stamp rate.
Senator Neufeld: You have a postage stamp rate? You do not know what the postage stamp rate is for every one of those?
Mr. Lindsay: If you look on page 59 and 60 of the long-term energy plan, we have projected our estimated prices for the next 20 years. Right now, we are at about 9.2 cents industrial, projecting out over the next 20 years, in nominal dollars, to 14.9 by 2030. As for residential prices, we are currently at about 11 or 11.4, projecting out, in real dollars, to 15.4. That chart is on page 59 and 60 of that book.
Senator Neufeld: Okay. Thank you very much.
Mr. Norman: We also have a time-of-use pricing structure, and that is for all residential and small commercial customers. That has a different price on peak, which is around 11 cents. Mid-peak period, during the shoulder periods of the day, is around 9 cents, and off-peak periods are around 5 cents.
Mr. Lindsay: That is why I hesitated to answer your question because it depends, literally, on the time of day and the time of year.
Senator Neufeld: I understand time-of-use pricing. You do not have time-of-use pricing for industrial? You have a flat rate for industrial?
Mr. Lindsay: Boy, this is going to get complicated. The way the prices are set, the global adjustment is a charge that comes on for all users. If the large users are able to shift their load, they can reduce the impact of the global adjustment charge. Through encouraging them to load shift, it benefits the system, and they benefit from price reductions.
Senator Neufeld: What would the global price be then? When you talk about the global price, what did you just call it?
Mr. Lindsay: We refer to it as the global adjustment.
Senator Neufeld: What is that?
Mr. Lindsay: You have large energy producers who have large capital costs. There is a market price, and, if they have a contract to supply electricity to us, the differential between the market price and their return on the fixed capital is added into the global adjustment. For our renewable programs and our conservation programs to benefit the overall system, those costs go into what is referred to as the global adjustment, and then that is redistributed across all consumers.
Senator Neufeld: How many customers does Ontario Hydro have? You say you have 4.7 million smart meters in place. What percentage of your customers is that? Obviously, you have a heck of a lot more than 4.7 million customers.
Mr. Lindsay: No, that is pretty well 90 per cent of them.
Senator Neufeld: Is that 90 per cent of your customers?
Mr. Norman: That is 99 per cent of residential and commercial customers. There are also mid-sized industrials that are on the spot market and very large industrials directly connected to the transmission system. There are basically about 250 of those.
Senator Neufeld: As for the feed-in tariff rate, I understand a bit about this stuff as a previous Minister of Energy in British Columbia for eight years. We have a feed-in tariff also. Can you explain a little more to me what your feed-in tariff is? Does it vary for different forms of energy or for on peak or off peak periods, and how is that rate set?
Mr. Lindsay: Great question. In the report that we just published on March 22, the complete list of the new feed-in tariff prices is on page 27. I can just read down the list — rooftop solar is at a certain price.
Senator Neufeld: What is it?
Mr. Lindsay: For less than 10 kilowatts, the new FIT price will be 54.9 cents. For projects of greater than 500 kilowatts, it will be 48.7 cents. For wind, it will be 11 .5 cents. For biomass, it will be 13.8 to 13, and on down the list.
Senator Neufeld: Solar is at 48.7. That is $480 per megawatt, right? How much solar do you have going into the system?
Mr. Lindsay: Right now, it is growing quite significantly, and we have projected that the numbers will be in the 3,000 to 4,000 megawatts by the time it is all built out. Then we have wind, run of the river and hydro, and biomass, for a total target rate we have set of about 10,700 megawatts.
Senator Neufeld: When you have that feed-in tariff, if someone builds something, who pays for the transmission to hook that to the main transmission grid?
Mr. Lindsay: They do.
Senator Neufeld: That cost is all incorporated by whoever wants to put in whatever, wherever they want to put it in.
One other thing is electric vehicles. Ontario is huge in vehicle manufacturing, and you did have a program. However, as I understand it, in this last budget, that program to encourage electric vehicles to a degree has been dropped. I know how budgets say it, but what it really tells you is in the fine print. Would you help me a little bit there? Do you still have programs to support electric vehicles, and the budget is just talking about something a lot smaller?
Mr. Lindsay: I am not familiar with what you are referring to. Unless you are, we can get you more on that. The target that the government has set is one in 20 by 2020, so 5 per cent of our —
Senator Neufeld: That is still there?
Mr. Lindsay: Yes.
Senator Peterson: About the smart meters and the time-of-use measurement, have you had opportunity yet to measure the impact with consumers? Are they becoming conscious of energy conservation in dropping their usage in prime time?
Mr. Norman: The studies are actually underway right now because most of those customers have been put on time- of-use pricing in the past year. You need a full year's data to be able to analyze the load-shifting effect, the benefit from a conservation perspective.
When we entered into the program, there were several pilot studies done, which typically showed a between 3 to 5 per cent shift in usage from the peak periods of the day to the off-peak periods of the day. There was an effect. That same effect is noted in other jurisdictions that have moved on to smart metering and time-of-use pricing. We are also finding, from customer surveys, that a substantial majority of them are aware of their time-of-use rates and are responding to them.
Senator Peterson: I get a bill from Hydro Ottawa, and it jumps out at you when you go down the line. Hopefully that will work on the conservation side.
As for your feed-in tariff program, is that optional, or is it built into the overall price structure? In Saskatchewan, it is an optional thing. If you want to pay more, you can have green power and say that you are helping out. What is it here?
Mr. Lindsay: The way the system works is that the Ontario Power Authority enters into contracts with these suppliers, and it is a 20-year contract. To get the payback of their capital costs, it is a price set for 20 years. Then those prices are allocated to the global adjustment that we were referring to earlier, so it is blended into the overall rate. You do not just buy green power separately; it is procured by the system, and then it is paid for through the blended rate.
Senator Peterson: When you see an invoice with just electrical charges, you are paying for part of this as well, right?
Mr. Lindsay: Yes. Again, the pie chart that shows our mix includes nuclear, hydro, gas, and other renewables.
Senator Peterson: Bruce Power is a private operator. Can they sell to the market directly with an industrial user? Can they negotiate directly?
Mr. Lindsay: I believe they can. I do not know how much of that they have done. I do not know their commercial operations, but I think they can do that. The facility is owned by Ontario Power Generation, OPG, the province's facility, and then it is leased to Bruce Power to run as a business.
Senator Massicotte: Thank you for being with us. You are very informative. You are obviously a very important producer and consumer of energy in Canada. It is nice for us to better understand what Ontario is doing. I compliment you and fully support your efforts on green energy. It is a major challenge for the world, and it is nice to see our most important province rising up to the challenge.
Further to the comments of Senators Neufeld and Lang, let me tell you the impression one could have from quickly reading the materials and obviously reading a lot of articles. I really like what you are doing. One can get the impression that you are subsidizing, compared to market rates, real energy. Look at the rates you are paying. There have been a lot of articles on this stuff. You have decided to subsidize green energy significantly, and I would have to say a lot more than Hydro-Québec is paying when they make bids for some of that energy. Your argument will be that this is for green energy and also for us to get a competitive advantage and create these industries and companies in our province and we will be a world leader in creation of employment and also offering those services in the future. I see that angle from reading the material.
I have two comments. If I look at your energy use in 2003 compared to 2010, you have reduced your coal by 15 per cent, but that 15 per cent is actually equal to your increase of oil and gas by the same percentage. You can make the argument that your green energy also replaces water, but it is actually 15 per cent, 15 per cent, so your reduction of coal is equal to the increase of oil and gas.
The other comment I would be concerned with, if you look at Spain and other countries in the world, many countries did take the same strategy from a business sense to subsidize these businesses so they can have a competitive advantage that will last forever, but it does not work. Spain is having immense difficulties. They are world class solar. China has now taken over. Businesses will go where the greatest opportunities are. Could you comment on whether that strategy is sustainable or just wishful thinking?
Mr. Lindsay: I would like to make a couple of comments. You are correct. The government made a conscious decision to support green energy for economic opportunity, but also very importantly for health care reasons. We had some studies on the costs of treating children with asthma and lost workdays. The particulate matter coming out of our coal and carbon is an economic cost and a health care cost. They also factor into their thinking when they are thinking about replacing coal with other renewables.
You are right that we have increased the amount of natural gas, and that is not a one-to-one replacement with coal. As we bring on renewables, wind and solar, as you would know, are variable, so if we need to quickly ramp up or down, the gas provides that flexibility. Gas has not replaced one-to-one coal. It is a complement to the renewables portfolio.
As part of the feed-in tariff program for our economic agenda, we stipulated that there must be a certain percentage of domestic content in the production of the facilities, so we stimulated a business that three years ago was not there. It will be a competitive world, and everyone else is moving there, so we will try to be supportive to our manufacturers, but we are also moving into the integrating of renewables into the system, which is also an exportable skill, hence the smart grid focus in my remarks today.
Green energy is not just wind and solar. It is the whole portfolio. Our evolution into this has opened up new opportunities on the economic side while reducing environmental and health impacts.
Senator Massicotte: Is there a lesson for us to learn in the rest of Canada? I get the impression, like a drunken sailor, when you got scared eight or nine years ago when you reorganized, you were concerned about a shortage of supply. That is a significant issue for anyone. Maybe your generosity relates to that fact. We are all very sensitive to pricing versus the alternative of not having energy. It is a major issue. Maybe all of us would become a lot more flexible and oriented to green energy if we were also threatened with lack of supply. Maybe we as a country should focus on supply. Things are not certain all the time. Would you respond to that?
Mr. Lindsay: The challenges of supply in 2003-04 were significant. The minister of the day, who is now our Minister of Finance, Dwight Duncan, tells me stories about how he would wake up in the morning and the first thing he would do is check the weather to see how it would impact on the needs for electricity, and then he would check the supply of electrons on the system. It was an impetus to reinvest in the system with the list of investments that I talked about, both the transmission and generating 9,000 new megawatts. Yes, that was an impetus, but the Green Energy Act came on a little bit after that, so that is the next generation of their thinking in the electricity portfolio. I do not think they went to green energy because of the shortage of supply.
Senator Massicotte: Senator Lang talked about the national role. You made comments about marketing, selling of goods and getting organized. You also mentioned east-west. Having said that, are you suggesting that maybe the federal government should take a more significant role in encouraging east-west transmission lines and different connections? Should there be an east-west encouragement re pipelines, oil and gas?
Irrespective of your policy and your concerns from 2003 on, you have not significantly increased the amount of hydro coming in from Manitoba. Manitoba told us they are open and looking to actually sell more of the hydro to your province, but your province does not seem to want to agree to pay for the transmission costs. You have not imported significantly much more in the last five years, yet Quebec says they are selling a lot to the United States. Why is east-west not more significant when you see that neighbouring provinces are individually selling more to the United States then they are to you? Why is that the case? Should the federal government do more there, or should economics dictate?
Mr. Lindsay: My colleague is more expert to transmission than I am, so I will turn it over to him in a minute.
First, with respect to the relationship between Quebec and Ontario, there has been a significant investment in intertie upgrades over the last eight or ten years. I do not have the numbers off the top of my head, but we would be willing to enter into additional discussions for more. I do not think there is a conscious impediment there. There have been a number of conversations, and there have been some significant investments to upgrade the intertie between Quebec and Ontario.
There have been numbers of discussions with our colleagues in Manitoba, but herein lies the classic Canadian dilemma. Our geography is sometimes our friend, and our geography is sometimes our enemy. An intertie between Manitoba and Ontario is just a very thin line on a map, but the distance between the Ontario-Manitoba border and our baseload is like going from Toronto to Sarasota, Florida. That is a long way. Ontario is a big province. In our long- term energy plan, we will be investing in something we refer to as an east-west intertie that will allow that flow to take place, fully on the ratepayers of Ontario's dime to build the intertie. Once we have that connection, it will allow more east-west connection. But just remember, it is the equivalent of Toronto to Sarasota, Florida, to go from the Manitoba border to Toronto. The Quebec opportunity and the Newfoundland opportunity and the Manitoba opportunity are all wonderful, except that it is a big country. That is where the federal government could be helpful.
Senator Massicotte: This is a 20-year plan, and you are obviously going green, but you are also obviously going natural gas. All environmental experts say natural gas is less polluting, if you wish, a little bit less, 20 per cent less than oil, around half of coal, so that is very good, but it is still highly polluting. They say that is very good as a transition in the next 20 or 30 years, but if we want to get to where we have to get with CO2, we have to be even more energy efficient than natural gas provides for.
A lot of experts will say we should go nuclear. Nuclear has had hiccups recently in terms of Japan. It has had security issues and also pricing issues. You are maintaining your nuclear percentage. You are putting more emphasis on natural gas. I also see some green, but it remains relatively insignificant. How do you get to the real long-term plan of very low CO2?
Mr. Lindsay: There is a whole chapter in our long-term energy plan — chapter 3, beginning on page 37 — devoted to conservation. We have some of the most aggressive conservation programs being implemented in the Province of Ontario. By 2030, in our supply mix, we are counting 28 terawatt-hours of conservation. That is a contributor to the reduction of CO2 emissions.
With respect to nuclear, it is a large part of the cost of maintaining an electricity system, as is investing in both the refurbishment of our existing capacity as well as the development of new nuclear capacity, as I mentioned earlier.
I would note that Ontario, and Canada by extension, still has a very good international reputation in the nuclear field. The World Association of Nuclear Operators did a significant report coming out of Fukushima on how to take the lessons to be learned from that tragic incident. The Chair of the World Association of Nuclear Operators Post- Fukushima Commission is the head of Ontario Power Generation. His name is Tom Mitchell. His immediate predecessor, Duncan Hawthorne, has presented to this committee, and also runs Bruce Nuclear Generating Station.
Therefore the current and former chairs of the World Association of Nuclear Operators are both nuclear operators here in Ontario. That is a doffing of the hat to them and their teams. We have depth and capacity in the nuclear field that the rest of the world still works toward.
Senator Massicotte: You are proposing two new nuclear generators in Darlington over the next 20 to 30 years. Why not more? It is less expensive than much of the green stuff, so why not build significantly more?
Mr. Lindsay: It was a conscious decision on the part of the government to have a mix of supply and not have too much of one and not enough of the other. They believed that the base load of nuclear is sufficient. In the early spring when people are not using their heating as much and have not started their air conditioning — on an Easter weekend — we could drop down to as low as 12,000 or 14,000 megawatts. Turning on and turning off nuclear power stations is something you do not want to do a lot.
About 14,000 megawatts of capacity is what we would refer to as base load, so that is how you get to that number.
The Deputy Chair: Senator Lang has to leave to go to another committee, which is urgent, so I have asked if I could bump him up on the second round.
Senator Lang: I will bring up an issue that is important to the country, to Ontario and all provinces and territories, and to the planet, for that matter. That is the question of the oil sands. We talk about a national framework for energy between the provinces and the territories. We obviously have a mix, discussing nuclear here; we are discussing wind and solar, and hydro with Ontario. However, you go across to the West and you get to Saskatchewan and Alberta and we are talking oil and gas and the oil sands. There is a lot of controversy about the oil sands from an environmental point of view.
I do not know how we got so high up on the environmental agenda in the world, when you take a look at the fact that the greenhouse gas emissions from the oil sands are significantly less than the coal mines in North America or Venezuela or any other energy-driven country across the world.
What concerns me is what might be a misunderstanding on Canadians' part, but there seems to be in Canada a discussion of whether the oil sands should be going together in view of some of the statements that have come out of Ontario, primarily. Does the Province of Ontario have the position that the oil sands should proceed and be developed for Canada? Is that a clear policy on behalf of the Province of Ontario?
Mr. Lindsay: As a public servant, I would prefer not to step into the political realm. I know the Ministry of Economic Development and Trade in the Province of Ontario has annual missions to Alberta with our economic development teams to build that business-to-business relationship. The Premier of Ontario and his government have, as you can see from the policies I have presented today, moved aggressively to reduce the carbon and health impacts of Ontario's energy portfolio, more particularly our electricity portfolio.
I think there is a need for a delicate balance between how to take advantage of economic opportunity and how to ensure we have the lightest footprint on the environment that we possibly can.
Senator Lang: I do not think anyone argues that, but Canada has to be unified in respect to talking about all our energy resources, whether they be in Ontario, Alberta, British Columbia or the Yukon. I find it difficult as a Canadian to see how some parts of the country want it both ways.
I will be very frank here. The fact is that without the oil sands, a lot of the revenue that Ontario or the Yukon gets to spend will not be there, if they are not developed. A compromise has to be reached. The Province of Alberta, and I think I am speaking for my good friend Senator Mitchell here from Alberta, is doing everything they can to meet their environmental responsibilities.
I have to go, but I would like to leave the message here that I think it is important that the provinces and territories get together and come up with a common position and support Canada. If we do not go internationally as a unify body that you talked about earlier, there is no point in going.
Mr. Lindsay: I do not think there is any disagreement that we should be unified and working together. That was the effort of both officials and ministers in writing the national energy framework in working with our colleagues in Alberta and across the country. If my minister were here, he might want to talk about the opportunities to support all provinces and ensure we are all successful.
If you look at the hundreds of millions of dollars that have gone into research into, let us take for example, carbon capture and storage, we would hope that similar or comparable investments would go into renewables in the Province of Ontario.
Senator Lang: I take it the Province of Ontario would support Alberta and vice versa; is that what you have just said? Thank you.
Mr. Lindsay: As always.
The Deputy Chair: We are very happy that we have a unified committee.
Senator Seidman: Canada is indeed an energy leader, as you have put on the head of your slide 14, and has the potential to be a powerhouse.
I would like to ask you about your smart grid leadership. We have heard a lot about the importance of smart grid over all these months, or maybe years, of these hearings. I would like to ask you about your experiences and challenges to date. You specifically mentioned very briefly Hydro One's Smart Zone initiative in Owen Sound. I am asking you for more details about your experiences there, including the challenges you may have had so far.
Also, it is clear that there is a need for important cooperation between public and private sectors, and the demands for an emphasis on encouraging innovation are pretty spectacular. I would like you to elaborate on that and how have you managed that.
Mr. Lindsay: Those are two excellent questions; thank you, senator. Again, my colleague Jon Norman has been very much in the lead on this agenda, so I will invite him to comment and give you more details than I can.
Suffice it to say, the smart grid is still relatively new. As I have mentioned in my remarks, we estimate there will be about $2 billion worth of investment in improving and upgrading our smart grid in Ontario over the next four or five years. That is all through our public utilities; Hydro One and all the local distribution companies are the customers of this new equipment they are investing in. Therefore, public-private partnerships are an interesting choice of words.
The private sector suppliers, whether it is the big companies like IBM, Siemens and General Electric or the small entrepreneurial creative companies, are all bidding for work with our public utilities to create this smart grid. Where the province wants to be helpful is how to marshal all of that business activity, brand it and make it an export opportunity for Ontario and create Ontario as a hub for smart grid knowledge and the exporting of this smart grid technology.
The customer right now for smart grid is public utilities. That has its challenges because they are regulated, and if the regulator does not approve certain expenditures, they have difficulty making those investments.
How do you spur or prompt innovation in a regulated environment? If it has not been previously tested, sometimes regulators are reluctant to approve the expenditures. That is a business model challenge we face, and, wanting to export it internationally, some of our utilities have done amazing work on a humanitarian, international charity support basis. They let their staff go to support Haiti in rebuilding and other things like that, which is all wonderful stuff. However, there is also a business opportunity that we should be promoting as well. As a regulated utility, they are not normally encouraged to get into those businesses. That is a business model challenge we are grappling with.
That is a business challenge I refer to. I am not an engineer; I will let Mr. Norman speak to the engineering side. We are trying to provide some funding and some support to encourage businesses to spend research and innovation money to create new products and new opportunities. Minister Bentley wants to pursue aggressively, with his colleagues in the ministry of economic development trade missions and support, going international: build it, invest in it, innovate, and then market it internationally.
Senator Seidman: If I could pursue that particular part of the question for a moment, how much luck are you having in getting the cooperation and innovation that you are looking for in the private sector, including the universities, for example?
Mr. Lindsay: As the engineer, Mr. Norman is best equipped to quantify luck.
Mr. Norman: In fact, over the past several years, we have been working quite a bit with academia, industry and utilities directly in the leadership in those sectors, to try to define what smart grid needs to be for Ontario and what it means to have a system that is evolving.
I think the question was asked earlier about what the change has really been in carbon emissions. We are looking at a plan here where we are going from 40 megatons per year of carbon dioxide emissions in 2000 to less than 10 by the time we are hitting 2015. We are on that trajectory right now, even as we go forward. That is a very substantial shift, not only in the benefits to human health and the environment, but also to the way the electricity system operates.
Modernizing the grid, which, in part, is many of the expenditures the deputy has referred to, as part of the long-term energy plan, is a key component of moving towards that future. It involves automatic switches, intelligence on the system, being able to see at the distribution level what is actually happening so that grid operators can manage their system more efficiently, and can enable this renewable generation to be connected.
We have put in place, by working with industry and academia, a whole policy framework that many leaders from around the world come to talk to us about, and say, "How can we move on the smart grid?" They look at our framework and say, "These objectives make sense. I think we will try to do the same thing in our jurisdiction." We have tried to lay a framework for those utilities to be able to say, "We are regulated, but we know what we are trying to achieve, and we will do it in the most cost-effective manner possible, and, in fact, trying to make sure there are long- term savings to the electricity system."
It is a plan that is based on benefits over the long run.
The other benefit that comes from this is the economic development benefit. As we have been working on this problem for several years now, we do have companies in Ontario that are quite advanced in their development of technologies for the smart grid. Some of them are small and work on in-home devices or other types of home energy management systems. Some of them are large, like IBM and GE, which are based in Ontario and have global centres of competence for smart grid in the Greater Toronto Area.
There is a tremendous opportunity to continue working with these companies and to, in fact, set that pipeline internationally. As the deputy has pointed out, our minister is quite committed to establishing things like institutes or commercialization centres that can help with actually bringing that innovation forward.
It is a continual learning path, but the advantage is that we are one step ahead on that track compared to the rest of the world, so it is an interesting place for Ontario to be.
Senator Neufeld: Thanks, gentlemen, for all your information. I did want to ask about conservation. We did talk a little bit about it. You sent me to page 37 in your book, so I read a little bit of it. You state that with respect to accomplishments from 1995 to 2003, there were no provincial conservation programs.
Is that telling me that in Ontario, until 2003, there were no conservation programs of any kind?
Mr. Lindsay: We had some in the early 1980s, and then as the economy ebbs and flows, conservation seems to come into vogue and out of vogue, so there was a period of time when we did not have any conservation programs.
Senator Neufeld: That is interesting because BC Hydro has had one since the early 1980s. It started out with something small, namely, smart meters, but it has grown into something larger.
Mr. Lindsay: We have had a cyclical relationship with conservation programs.
Senator Neufeld: There is the statement that the goal to reduce peak demand by 6,300 megawatts by 2025 was included in the 2007 plan.
I am familiar with British Columbia and what I put in as a conservation target, which actually has been increased, and it is that 50 per cent of new incremental supply would be met by conservation. Using those terms, your system is way bigger, so you play with numbers a bit. What percentage of your incremental supply would that 6,300-megawatts be to get them on the same level?
Mr. Norman: If I understand your question correctly, the answer might be 100 per cent, so that all the projected load growth over the 20-year planning period of the plan will be met largely through conservation. In fact, all the supply resources we are talking about developing are in large part replacement resources.
Senator Neufeld: Are you telling me that 100 per cent of the new incremental supply in Ontario will be met totally by conservation? That is a pretty big bite to me.
Mr. Norman: That is of load growth.
Senator Neufeld: I mean incremental supply — not load growth — incremental supply.
Mr. Norman: I am referring to load growth.
Senator Neufeld: Am I to understand it is one hundred per cent of Ontario's incremental supply?
Mr. Norman: I believe that is the case.
Senator Neufeld: I would like you to check that and get back to me.
Senator Massicotte: It shows it is met largely by conservation, but there is an increase in what you call "demand net of existing compensation."
Mr. Lindsay: We can refine the percentage numbers for you, but the order of magnitude is 17, 18 and 19, if you look at the pie charts and the mix.
Senator Neufeld: I will review those more closely.
Senator Massicotte: With respect to your feed-in rates, Annex 4, the FIT two-year plan, there are obviously different rates depending on your source of fuel. Why would that be the case? Obviously, it is philosophical question.
On a pure market basis, you should say, "I will pay this amount. I do not care if it is solar roundup or wind; let the producer decide and let the capital flow to those who are smarter and more efficient." Why is it that you want to subsidize for a rooftop more than for water or wind, for instance?
Mr. Lindsay: The way the Ontario Power Authority has developed the model with a number of outside consultants and presented it for the minister's consideration was they did a costing analysis, what it costs to produce these and what a reasonable rate of return would be in today's economy. They set a rate of return and set what they determined on a quartile basis, the top quartile through to the bottom, a reasonable cost would be for producing these, and the government picked a middle range.
We pay different prices for natural gas, hydro and nuclear coming onto the system. It follows that paying different prices for different types of renewables is based on their capital cost and cost of production. It is a derived number from cost plus reasonable rate of return.
Senator Massicotte: You are trying to drive supply. You are interfering in the marketplace, thinking that is what you have to do to get your supply, but many times that does not work.
Mr. Lindsay: It sounds so negative when you say it that way.
Senator Massicotte: Look at what happened in Russia and many countries that tried to manipulate the market; it usually does not work.
Let me talk about something really technical on nuclear. Your province has been debating what to do with the plants, and I think you have had many discussions with the federal government. We actually went on site to a couple of your nuclear plants, and debate was related to the use of CANDU. The sense I had is if you had a pure choice, you would not stay with CANDU; you would go with new technology, such as Westinghouse or GE. You can make the argument that CANDU is not the product of the future, but you have a significant amount of employment related to the CANDU reactors and the renewal of those plants. Where are those discussions at?
AECL has been sold, now SNC-Lavalin is in control of it. Where are you at with that? Are you still committed to CANDU? I know your projections show nuclear, but where are you at with your energy sources? Is it at CANDU or something else?
Mr. Lindsay: Again, there is reference to the nuclear procurement discussions we have been having in the long-term energy plan. I will not try and find it now, but let me make a couple of points. Out of the fleet of CANDU reactors around the world, the majority of them are in Ontario.
Senator Massicotte: Because we have not sold any for the last decade.
Mr. Lindsay: Whether there is a decision at some point in the future about procuring the new reactors and what technology we will use, we still have 20 CANDU reactors in Ontario, and given the nature of CANDU technology, they require refurbishment. There is a significant body of business, employment and economic activity in the refurbishment of the existing reactors. There is a large employment and economic impact in the CANDU technology we have right now.
Once the federal government concluded their transaction with SNC-Lavalin, the province reengaged in discussions with SNC-Lavalin. Infrastructure Ontario, which is one of our capital procurement agencies of the government, and Ontario Power Generation have reignited those discussions with SNC-Lavalin. It will be a market-driven competitive conversation to get a good price.
To talk about abandoning CANDU, that is rather dramatic language because with 20 CANDU reactors —
Senator Massicotte: You are stuck with them, yes.
Mr. Lindsay: — we will have to continue to maintain that knowledge and technology in refurbishment and the going-forward of those existing reactors, regardless of what other mix of fuel supply or other nuclear technologies we may or may not want to explore.
Senator Massicotte: You are saying it will be a market-based transaction. Previously you were worried, and rightly so, with cost overruns and who bears the cost of surprises in your refurbishment. Are you still looking for a federal government guarantee or some kind of upside as to what that cost could be?
Mr. Lindsay: The interesting conversation we had a couple minutes ago about Ontario supporting Alberta and Alberta supporting Ontario, if Alberta were to suggest that the federal government should not abandon one of our largest technologies in the country, we would welcome that support.
Senator Massicotte: So the answer is yes, you would like to see some roll-out. Thank you.
Senator Johnson: In your recent news release, you talked about encouraging greater community and Aboriginal participation through a new priority system, which would also prioritize projects with municipal support. Do you want to comment on that, please, and also how the negotiations go with the Aboriginal communities in Ontario?
Mr. Lindsay: An interesting subset of the work we do in the Ministry of Energy is finding ways of being supportive of our Aboriginal communities and getting them on an economic footing. We are trying to stimulate green energy projects, which would be another doorway for economic opportunity for First Nations communities.
With respect to the system we had with the feed-in tariffs in the first two years, what you are reading from is the press release that announced the launch of our two-year review. In the first two years, we encouraged Aboriginal communities to find business partners and bring forward renewable projects. The way the procurement system worked — this may be rather vernacular or crude language — was that it was date-stamped. In other words, those that came in first were processed first.
We have decided that a way to ensure the first in is not always the primary benefit, if Aboriginal communities are taking some time to find partners, why do we not add a bonus point system to the ranking so that when these feed-in tariff submissions come in, if we give an Aboriginal partnership some bonus points, it moves up on the rankings list. It is to give them a bit of an opportunity; rather than being three hundred fiftieth on the list, they can move up a little higher.
The other policies we have brought forward to try to help Aboriginal communities, if they are going to take an equity position in a business opportunity, the Province of Ontario will make some loan guarantee provisions to help them find financial support and pay that back through the money they make from their partnership and their equity position. If they buy into a renewable project, we will help with loan guarantees so they can borrow money and they pay it back with the profits they make from being a partner in these projects. We are trying to help them financially and in the procurement rankings process.
Not all communities will be interested or able to participate, so it is up to the chiefs and councils and their leadership to decide. We will be receiving their submissions as opposed to proactively going out and seeking their submissions.
Senator Johnson: Thank you for that. I was going to ask a question about how the process would work with them and for them. It is more complicated, but they sure need it.
Mr. Lindsay: Another piece that we will be working on — and I think it is alluded to in this report — like the Yukon, the Northwest Territories and other parts of our country, we have a lot of First Nations communities totally off the grid, such as remote northern communities. There are about 24 or 27 of those First Nations.
Senator Johnson: There are some in Manitoba.
Mr. Lindsay: Yes. We are looking to see if we can do some off-grid work with them with respect to renewable projects, and hopefully that will be another business.
Senator Johnson: That is creative.
Mr. Lindsay: Rural and remote electricity generation happens around the world, whether it is in the middle of Australia or the middle of Africa, so we should be able to find that opportunity in Canada as well.
Senator Johnson: Good. Thank you so much.
The Deputy Chair: I have a couple of quick questions, some technical and one or two more policy.
With respect to your last point, I should mention, and I am sure you are aware, that former Prime Minister Paul Martin is doing a great deal of work with entrepreneurship on Aboriginal lands, reserves and with communities, particularly with youth, so it might be that there are some synergies there, if you are not already actually exploiting them — the synergies, that is.
I am quite interested in the feed-in tariff, but I would like you to help me and maybe some of our viewers understand. On page 27 of our feed-in tariff book, when you say that the new feed-in tariff price is 54.9 cents, does that mean that the government is subsidizing the 54.9 cents or that the feed-in tariff has brought the price down to 54.9 cents, and the consumer is now paying 54.9 cents, in the full pool, for that type of electricity?
Mr. Lindsay: There is no government subsidy here. This will go onto the rate base. For each kilowatt that the proponent sells into the grid, they will get paid 54.9 cents, and that cost will go onto the global adjustment. That gets blended into your overall price that you see on your Ottawa hydro bill.
The Deputy Chair: Depending on the level of usage at which you buy your power, the price was something like 5 cents to 11 or 13 cents. That would include the 54.9 cents for that? If solar replaced everything, the price to the consumer would be 54.9 cents? I am exaggerating for emphasis here, but, averaged in now, it is still very competitive. I think those rates are actually below Alberta's. I think Alberta has jumped to 13 or 15 cents as a result of deregulation.
Mr. Norman, you mentioned that you are pushing to get the emissions from 40 megatonnes to 10 megatonnes in quite short order — by 2015. Is 40 megatonnes the amount of emissions not for your whole economy but strictly for electrical generation?
Mr. Norman: Yes, it is for electricity.
The Deputy Chair: That is excellent.
Your total electricity production, just to confirm, is 35,000 megawatts?
Mr. Norman: Yes.
The Deputy Chair: What is your total usage?
Mr. Norman: I think it has peaked around 27,000 megawatts.
The Deputy Chair: You are not importing then — or you are importing at certain times — if you are producing 35 and using 27.
Mr. Norman: It depends on the time of day and time of year, but on average there are imports and exports, and they sort of even out.
The Deputy Chair: Right.
Mr. Lindsay, you were talking about Sarasota and Manitoba, but you did not seem to absolutely rule out the possibility of east-west grids that would link up to Manitoba. That is interesting to me and, I think, to us because we have heard that the Rocky Mountains of east-west grids is Manitoba, but you are suggesting that there is some potential to go beyond that.
Mr. Lindsay: I believe there is. I am not sure when I stop having a professional bureaucrat's public opinion and drift into a personal opinion, but I think an east-west grid is good for —
The Deputy Chair: You are safe here.
Mr. Lindsay: Except for everybody on TV.
An east-west grid is a good thing for the economy and for Canada, but I do recognize that some of our sister provinces will want to get the market price that they can get for their commodity stateside. Building a transmission line from Manitoba to Ontario — equivalent to Toronto to Sarasota, Florida — is a big capital cost. If you can just scoot across the border and sell it into Dakota, how do we help the economics of that? There needs to be a role for the federal government to help. No one will say, "We do not want to work with our sister provinces and our colleagues east-west." However, the geography of the country is the geography of the country. If you can sell it straight into New York, without building a grid east-west, that is economics.
Senator Massicotte: The way I read the answer you gave is that, unless the federal government subsidizes the cost of doing so, it is not economical to do so today. Am I correct? That is what I heard.
Mr. Lindsay: It is a good, tight, crisp summation of a very long answer.
Senator Massicotte: Thank you.
Senator Neufeld: But it is the right answer.
Senator Peterson: Have the Americans improved the control of their grid system? A number of years back, it collapsed and had that domino effect that came right into southern Ontario. Has that problem been rectified or does it still exist?
Mr. Norman: Ontario is part of the North American Electric Reliability Council, which is a collection of all the grid operators in North America. Since that blackout in 2003, they have established all kinds of working committees so that this type of situation and the events that sort of snowballed to lead to it, cascading across all of these different control centres, would not happen. The chances of it are substantially mitigated. Ontario's system operator has been a big part of that exercise.
The Deputy Chair: One of the issues that we are confronting in the whole question of Canadian energy strategy is the roles of the provinces, which, of course, are predominant, versus the role of the federal government. It is a sensitive issue. I am from Alberta, so the question of federal leadership in this sticks in our craw. At the same time, there are some areas — and you have alluded to them — for a continuum of federal coordination, federal moral suasion, and even, perhaps, federal leadership in some specific areas.
You mentioned the potential role of the federal government in assisting in this east-west grid, at least from Quebec and Newfoundland. What would that be? Is that subsidies that Senator Massicotte and Senator Neufeld are referring to, or are you seeing something else there?
Mr. Lindsay: I think the challenge is driven by the economics. I would be reluctant to formally use the word subsidy because that means many things to different people, but I think help with the economics is clearly what is —
The Deputy Chair: Okay, so it could be a loan guarantee that does not necessarily cost anything but reduces interest costs for a major project.
Mr. Lindsay: That is the model they used in Newfoundland. In the last federal election, the Prime Minister's announcement was of a loan guarantee model. For different parts of the country and different funding initiatives, there may be different financing tools, but it does come down to the economics and financing of it. Whether it is a subsidy, a loan guarantee, or some other creative tool, like public-private partnerships, the economics are very challenging because of the geography.
The Deputy Chair: Often, in this debate, we see that anything other than conventional oil and gas or oil sands oil and gas are costs. Ontario, from what you have been saying, emphasizes that there really are economic opportunities, from feed-in tariffs to development of technologies to new research and company initiatives to manufacturing to international marketing. Is international marketing an area where there could be leadership, coordination, and initiative at the federal level? I know that in the past there were the trade missions — with great success — but is that something that would be useful in marketing new energy technologies, for example?
Mr. Lindsay: I personally believe so, and I know Minister Bentley has been working with his colleague in the Ministry of Economic Development in Ontario to figure out how we can establish trade missions and promote our companies in the international market. A lot of the grid development that needs to take place is in developing countries, so loan guarantee support and financial support from Export Development Canada, trade missions, country to country, and support in getting the Ontario and Canadian profile into these jurisdictions — the marketing, financing, and branding of Canada — would be a part of it. I jokingly say around the office that when you think about making a watch, people still think Switzerland. If you want a smart grid, think Canada. If we can brand it that way, I think we have got a success.
The Deputy Chair: With respect to the smart meters, I think, in the condominium that my wife and I have when we are in Ottawa, we do not have a meter in our unit, but the condominium has it. It is all pooled; we all pay, so there is not a lot of pressure on any individual to use less. Would that be just management policy on the part of a condominium association to get everybody thinking about this, or is there a way to get to each unit?
Mr. Norman: There is a way to get there, but it might be slow. It is true that not all multi-residential apartment complexes have their own meters. That has been a separate challenge as to how you get sub-metering into those buildings.
In Ontario, what we have done over the past couple of years is enable a regime that allows companies to go out and sub-meter buildings to try and encourage that level of conservation to be taken up. When they do that, they have to install, by law, smart meters. It is moving in that direction, but it is a transition, and there are obviously landlord- tenant issues to think about, and equity issues.
Senator Massicotte: He resides in a new condo. I am supremely surprised that they have not separately metered. I thought new condos, or 90 percent of them, would have separate meters.
The Deputy Chair: It is seven years old.
Mr. Norman: That is true. It is very unusual for a new condo.
The Deputy Chair: Maybe the meters there are fine. I am cognizant of it. I am always turning things off, but with my one unit in 100 units —
Mr. Norman: That is unusual.
The Deputy Chair: I will check it. It is probably my oversight.
Senator Seidman: There has been very recently reference to studies done on smart meters indicating that they have some kind of negative health impact. Are you aware of that, and do you have any comments on that?
Senator Johnson: What can they do? Grab you?
Senator Seidman: No, but they give off some kind of —
Mr. Norman: Electromagnetic field. There are concerns, and many of those concerns have been raised in different jurisdiction as well. In Ontario, our meters meet all the Health Canada requirements. In fact, Health Canada has been looking at this issue in great detail and puts out standards for those meters.
By way of context, the emissions from a smart meter are actually orders of magnitude less than a cell phone. It is a question of magnitude as well.
The Deputy Chair: Thank you very much. You have addressed a broad range of issues that we have had addressed from many different individuals and witnesses in a way that demonstrates that you have really pushed the frontiers of some of the issues we have been considering, and it has been very informative. We appreciate it greatly.
Mr. Lindsay: We are glad to share any additional information and follow up, if you would like.
The Deputy Chair: I will suspend for a minute, and then we have things to discuss.
(The committee continued in camera.)