Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 14 - Evidence - June 12, 2014
OTTAWA, Thursday, June 12, 2014
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day, at 9:02 a.m., to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
Senator Richard Neufeld (Chair) in the chair.
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The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia in the Senate and I am Chair of this committee. I welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television.
As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the www.sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website under "Senate Committees."
I would now ask senators around the table to introduce themselves, and I will begin with the Deputy Chair from Alberta, Senator Grant Mitchell.
Senator Mitchell: Hello.
Senator Massicotte: Paul Massicotte from Quebec.
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Senator Ringuette: Good morning, my name is Pierrette Ringuette, from the province of New Brunswick.
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Senator Wallace: John Wallace from New Brunswick. Good morning.
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Senator Boisvenu: Good morning, my name is Pierre-Hugues Boisvenu, from the province of Quebec.
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Senator Patterson: Dennis Patterson from Nunavut.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: I would also like to introduce our staff, beginning with the clerk on my left, Lynn Gordon; and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
On March 4, 2014, the Senate authorized our committee to undertake a study on non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories.
The committee has, to date, held five meetings with witnesses on this subject in Ottawa and, in May, travelled to all three of Canada's northern territories, as well as Atlin, B.C., holding private meetings and visiting sites.
Today marks our sixth meeting on this study and I am pleased to welcome, from Sustainable Development Technology Canada, Rick Whittaker, Vice President, Investments and Chief Technology Officer.
Thank you very much for being with us today. We look forward to your presentation, and I'm sure senators will have some questions. The floor is yours, sir.
Rick Whittaker, Vice President, Investments and Chief Technology Officer, Sustainable Development Technology Canada: Thank you very much for inviting us here today.
Obviously we think this is a very important study that you're undertaking, so I'm very pleased to see that that's happening and I'm honoured to be here.
As many of you will probably know who SDTC is, I won't spend a lot of time talking about who we are: obviously a policy instrument of government to commercialize new technologies.
What I will focus on today is the technologies in the North that we think can address some of the challenges there, so we'll talk about those, rounding out some of the discussions you've heard from some great witnesses thus far and give a perspective on the Canadian technology scene and what can be done and what might be practical to consider in this committee.
The rest of the reference material up to slide 7 is there for your reference on SDTC and some of the results we have achieved to date. If we skip ahead to slide 7, what we're talking about is an emphasis on the North in our organization that has been ongoing since around 2009. We have started focusing on the North, as the North has a number of what I call colliding priorities and interests that are happening right now.
Obviously climate change is a big one so we can touch on that a bit. Resource development, as we've heard from previous witnesses, is a big opportunity for Canada and one that must be done responsibly. That is a consideration.
Transportation in the North, as we've heard, from fuel to food to just basic logistics, is an issue. Transportation relates to energy, so that's a key priority. Exercising Arctic sovereignty, these are key years for us to be demonstrating that in the North as well. Of course, for Inuit and Aboriginal people and the people living and working in the North, their quality of life is central to this. I'll be focusing on that last point in particular as we go forward.
We've been active in the North. SDTC has a Northern initiative as a focus for technologies. Because technologies are developed in the South and for the South, they don't necessarily work in the North. It's a different approach that is needed, and I'll talk to you about that today.
In particular, we have invested $13 million since around 2009 in a number of key technologies for the North, leveraged by another $21 million in private-sector funding to realize some of these technologies specifically to address energy in the North as well as some of the other issues.
We've been hosting various virtual incubators and workshops — Yukon College hosted one with us last September — to engage people of the North in developing solutions to the problems that they face as well.
We've been working with other departments — and I'm pleased to see they were witnesses before this committee because they're important players — Aboriginal Affairs and Northern Development Canada, CanNOR, Natural Resources Canada, Environment Canada, all very important departments in this regard, as well as the Department of National Defence. They are important players in the federal system to be weighing in on this conversation.
If we go to slide 8, I'll just touch on the point of how sensitive the Arctic is. I don't need to tell this committee the responsibility we have in terms of the most sensitive ecological spot on earth — more sensitive, in fact, than the rainforest. The biodiversity in the Arctic is very thin, so any impacts that are done, climate change or otherwise, have a profound effect and, with sea ice melting, with resource exploration and more people in the North, these effects will be pronounced even further.
Being responsible has even more weight to it than the general, "Let's be responsible for our plan." The Arctic is very sensitive and must be developed and managed responsibly. That is at the core of how we look at the problem and the approach that we take to going into development and new technologies in the North.
On slide 9 we talk about development. You have heard other witnesses so I won't quote numbers, figures and facts on this, but I am happy to provide those if this committee wishes. In terms of development, we have an immense oil and gas reserve in the North, an immense mineral reserve in the North and immense energy opportunities in the North. Canada is poised for unprecedented development in the North, and it needs to be done in the way that I've been describing here.
Extraction and the use of energy can't be done in the same way that we're doing it in other places because the impacts are much more profound. If you spill diesel, the impacts in the North are much more difficult, much more problematic to deal with than if you do it in the South. It is not good in either environment, but the impacts and the sensitivity is even greater.
However, there are resources there, and in order to drive the economy forward and in order to feed the planet, these things need to be developed. It is a balance. That is really what it is about in the development.
On slide 9, there is shipping; we talk about transportation. Our interests in the North could very well mean more efficient shipping globally. The prize is very large. The cost estimates on the savings is about $120 billion a year versus going through the Panama Canal or Suez Canal. Shipping across the North in Canada could see a lot more traffic. Again, this intensifies the activity in that area. It could mean a net benefit globally in terms of the economic and environmental impact, but the means by which that happens need to be considered carefully.
You will notice in the theme of all of this, when I talk about climate change, resource development, shipping, at the core of all this you will see a theme emerge, which is, at the core of it, energy; right? How we deal with energy.
I have talked about industry and development, but underpinning all of this is people. This is really what I want to focus on in this particular talk this morning.
The pre-existing communities in the North face real challenges. I am pleased to see this committee is addressing these issues and examining this problem. There are about 80 communities in the North, as you have heard, in the very High North. There are many rogue communities throughout the North in general, but in the High North across the territories there are about 80 communities. I want to focus on Nunavut a little bit. There are about 25 communities all powered 100 per cent by diesel generators. Roughly 46 million litres of diesel running 85 diesel generating sets, producing 176,000 megawatt hours of electricity every year for around 33,000 people.
These people will tell you, and I am sure this committee, as you have done your tours, know that diesel is expensive, noisy and it pollutes their air, land and water. They don't like it, but it is a necessary element. When you ask why they choose diesel, they will tell you that it can run 24 hours a day, every day, and when it doesn't there is someone nearby that can fix it. That is very important.
If something goes down in the South, well, okay, there is somebody nearby; you can usually pull an expert in. If the power goes out, there is a little economic loss; there is something else to fill its place. In the North, you don't have that luxury. If you are without power, you are without heat; and if you don't have heat, you don't last very long. You are into an evacuation scenario.
Being reliable and running 24 hours a day is a must, not an option. Having someone who can fix it is a must. This tempers the way we look at alternatives in the North.
The story gets more interesting as you look at how energy is used. To bring one litre of fresh water into the community, treat it, distribute it, costs about four litres in fuel. Water, the basic element of life, requires a lot of fuel. Fuel is expensive in the North, so water is expensive in the North. The basic needs are expensive in the North.
Disturbingly, about 22 out of the 25 communities are out of environmental compliance. They do not have a consistent source of drinking water. This is a challenge.
When I talk about energy, you will hear a theme emerging here, which is about the integrated approach to energy, how energy is used, and how we can solve a couple of problems at the same time.
If we go to slide 12, we will see that some of the common elements that have an energy theme in it — and I will start with these ones — include waste management, clean water and reliable energy.
If you look at the waste management issue, you will notice that in many of these communities — and we only need to look to Iqaluit to see what is happening there — but every one of these communities, when your fuel cost is expensive, you don't ship your garbage far out of town, you ship it close, and you pile it. It doesn't decompose in the North like it decomposes in the South; so you end up with a growing mound of garbage right next to where people live. It gets cold and it stays cold. In the summer months, where there are a couple of months it warms up and leaches down into, guess what, your drinking water or into your community. This is a problem.
Waste management in the North is a particularly profound issue because the energy costs of shipping it far away are too great. Interestingly enough, we throw out, on average, in our garbage every day about 25 per cent of our daily energy needs. What goes into that pile just outside of town could actually be serving 25 per cent of the energy needs of these communities, if we could somehow process that into heat and electricity. I will talk a bit about that.
Similarly, clean water, if there is a way that you can avoid the water getting dirty and reduce the amount of energy required to clean it, you are saving energy in the North.
The key piece is reliable energy. We have heard renewable and non-renewable resources. Ultimately a key criterion in the North is something that is reliable, something you can count on.
We will go to slide 13. I mentioned before that reliable power is not an option; it is a must. The problem is that diesel is expensive and unsustainable, but it provides base load power all day and all night. It is ubiquitous. The same skills needed to fix a diesel Genset would be needed to fix a snowmobile. The skill sets are there.
It makes it hard for any renewable technology to compete, even if there's an economic business case, and I think this committee has talked about that in previous testimony in hearing from witnesses about the business case. Why not just get on with it? Well, the business case is definitely one important element.
The metric used in that business case is the levellized cost of energy. This includes the capital costs, the operating cost, and other costs related to the operation, such as fuel.
The reliability metric is what usually creates the challenge. Most common renewables are intermittent. They help the situation. You can reduce the amount of diesel used in the North, but that is not sufficient by itself. What ends up happening is you end up doubling your capital costs. You spend your money on the diesel Gensets and the fuel associated with that, and then you spend your money on the renewable technologies to help the situation, which can save fuel over the long run, but in the short run makes it very difficult to justify a business case. That is why we have not seen greater penetration of these renewables into the North.
We look at things like run-of-river technologies, hydro and hydro-related technologies where there are sufficient resources nearby a community, but unless the turbines are really deep, you have the Aboriginal folks who use these waterways as their navigation, for their fishing and their livelihoods. You can't put run-of-river up where people are fishing and working. It needs to be in rivers very low.
That technology, which we have heard promise of, has lots of promise in areas where you can deal with those types of issues; it is not purely the business case, is my point, that weighs in. It is a matter of these other factors coming into play.
We have heard about biomass, and we have talked about some early successes in biomass. As we know, there is a lot of biomass in the South but not a lot in the Northern Territories, so like diesel it must be shipped in. There have been very promising developments, and I am pleased to report to this committee that in the last several years that the energy density of biomass has gotten to a point where it is practical to be put into the North. You can ship it at the same or even less cost than diesel because you can make it high density, waterproof, and you can make it so that you can store it without hazardous handling. It doesn't contain mercury or sulphur; it doesn't auto-thermal combust. All these issues that you have with conventional fuels go away when you can start achieving some of these metrics.
We have got three Canadian companies that are now producing it; so it is a Canadian opportunity as well. As we all know, the forestry industry, whenever there are hard times, they are the first to get hit in economic downturns, and the last to come out. This is a way of bringing the forestry industry up as well. So there are some very promising developments on that front.
If we go to slide 14, this slide and the next slide I have left here for the committee's reference. It really looks at a compendium of sources to produce these two charts. I am happy to share with you the source data on all of this. But looking at the figure of levellized cost of energy, whenever you look at business cases, in addition to all those other factors that I am talking about, the business case is predicated on levellized cost of energy. Capital cost, fuel cost, operating cost over the long run. As you see, diesel generators and diesel in general is pretty high. There are very promising renewables throughout.
I have divided them into two categories: Those which solve 100 per cent of your problem and those which solve part of your problem; so intermittent base load is a very interesting distinguishing factor. You can see what the costs are generally there for those technologies.
On slide 15, I eliminated some of the options based on their applicability to the North with some of these other factors. When we start looking at infrastructure, proximity, operational maintenance and repair and those types of things, some of these options start falling out, as I have described before. We are left with a lower set of options in each of those cases, but worthy of consideration in how to move this forward.
There are some promising things that can be done, some things in the interim that actually cut through a number of the issues — social, economic and environmental.
As I mentioned earlier, on slide 16 we talk about the other issues that can be resolved at the same time. Suppose, for an instance, we take the biomass case, and we use biomass and start looking at biomass as not just wood but as the locally supplied garbage. If you can produce 25 per cent of your energy needs from the garbage and it's the same process that you would use then to use the biomass, that gives you one technology with a 100 per cent solution to the problem.
If you can take the heat and energy out of that process and use it for heating and electricity, then you start really making a difference in the North. Interestingly enough, we are discovering technologies that go one step further that take the garbage and the water and now start cleaning those up, so you end up with clean, useable water. Seventy-five per cent of the daily water is not drinking water. Seventy-five per cent of the daily water use is what they call technical water or water that can be used for washing and other types of things, flushing toilets and what have you. Rather than cleaning up 100 per cent of our water, let's clean up the 25 per cent that we drink and bring the rest of it to a reasonable quality. Then we can reduce that four litres per litre of water energy consumption that we use.
Looking at the system and looking at the problem in that way starts presenting some new solutions that we can start looking at and working on.
This committee also has storage in its mandate. Not all storage systems are equal. We have done a lot of examination and funding of technologies, everything from batteries to hydrogen fuel cells to compressed air storage and almost anything in between to look at what might work in the North. If it is subject to extreme temperatures and won't work, that rules it out. Batteries need to be kept warm, so that is a concern there. If you are looking at the application of integrating renewables, you have to look at it on a very narrow perspective. If the renewables are being intermittent on the seconds in and seconds out basis, some of these technologies fall down. Not all technologies are created equal.
One of the technologies that we're working on for the North actually is using compressed air. Compressed air may seem strange, but it can achieve a 78 per cent round trip efficiency. You can't get that out of other types of technologies as easily, certainly not for the same costs.
These are the types of things where, if you look at the problems of the North in an integrated fashion, non-obvious conclusions start coming out of the discovery.
Grid firming, making the power reliable and providing temporary storage are all important factors when we look at energy systems in the North.
I will pause there. I am certainly happy to take questions from this committee.
The Chair: Thank you very much for that presentation.
Senator Mitchell: That was very interesting. One of the challenges that came up in our visit across the North repeatedly, if not frequently, was the question of capital to develop. Of course, you are in that business.
Are you aware of the Yukon Research Centre and Cold Climate Innovation project in its general work but specifically P&M Recycling, which is the technology that takes oil out of plastic? Are those the kind of technologies that you would invest in? What would be the nature of your investment? Would it be research investment? Would it be development? Would it be commercialization?
Mr. Whittaker: Yes, I am aware of that technology and that work that is going on there. For the committee's reference, it really is creating a fuel out of plastics. There is not good recycling in the North. Recycling infrastructure, garbage treatment infrastructure in general does not exist, so anything you can do is a good thing to do.
If you can take your garbage and turn it into a fuel, that has to be a good thing. Fuel and energy are what's needed; energy is expensive and you are throwing it out in the garbage. It's better to use it as a fuel. We definitely support the concept of taking garbage and turning it into fuel. There are a couple of different approaches and all need to be explored. The one that you are referring to, taking plastics and extracting the oils out of them that can then be used as fuel, is a very good approach.
Plastic has great energy value in it. If you take the plastic and process it in your regular garbage, your energy content goes up. You can turn that into heat. You can turn that heat then into electricity. Those are things to be contemplated.
In terms of SDTC's role, we are development and demonstration. Our funding slice in life is around development and demonstration. After an idea has left the research lab and hasn't yet reached a commercial state of adoption is where we would come in, in partnership with the private sector, so $1 of government money for $2 or more of private sector money coming into project to de-risk them to make them commercial. Once they're moving along we stay with them, though. Part of our activity is to say, if we have one of these solutions, by itself it's usually insufficient. You usually need to start packaging together with other things, if they are from a small- or medium-sized company especially. Part of our work is to actually create packages of Canadian capability that can address 100 per cent of the problem.
I am very much looking forward to the development of that technology and others that can treat the garbage and start offsetting some of the energy concerns.
Senator Mitchell: Could you give us an example of an energy-related project in the North that addresses the mandate or that would fall under the mandate that we are addressing?
Mr. Whittaker: The one in particular that we are launching this year we have been working on for several years now is under the banner "autonomous community solutions." This is about creating modules, containerized solutions with companies such as Terragon from Montreal, which takes waste and gasifies it into heat; and other companies such as Shipstone, which uses an energy storage technology; other companies such as EnerMotion as a package. It's not a single company but it's now a package of solutions coming together to solve some of these issues. We will try that up in Cambridge Bay this year.
Senator Massicotte: Thank you for being with us this morning; very useful.
To go back a bit, you explained how you work. You say you do funding capital and you look to combine other technologies. You put up the initial capital 100 per cent or you always do a joint venture with another player to start off with? I want to see where you are.
Mr. Whittaker: It's always in conjunction with others. That is a good test to see whether there is a business case and a private sector kind of market opportunity to realize this after the government is done. It's always in conjunction with that.
Senator Massicotte: Are you both straight up pro rata share, any loss, any gain?
Mr. Whittaker: We do not take equity, so it's a grant, a contribution. Ours is granting contribution. The private sector money is a variety of formats. We see everything from equity to convertible notes to every kind of instrument imaginable, but the federal money that goes into these projects is done as a contribution.
Senator Massicotte: Is it a grant that they have to repay or is it a loan?
Mr. Whittaker: No, it's a non-repayable grant. It's a contribution because it does have milestones attached to it. We use similar due diligence to what is being done in the venture capital world, for example, where we require the technologies to perform and to meet milestones. Our contributions are phased and tranched over time and it is done the same.
Senator Massicotte: If I see the history, from what I understand, approximately to date you funded nearly 50 per cent or 40 per cent of the investments you have been involved in. Industry has funded around 60 per cent; is that right?
Mr. Whittaker: On average, we have been below 30 per cent. Our mandate calls for an average of 33 per cent. Any one project can go up to 50 per cent, but on average our portfolio has to be managed at around 33 per cent. We have found that when you take that little bit of risk out, the private sector says, "Okay, I can get involved in this."
Senator Massicotte: But at 33 per cent, the Canadian taxpayers absorb 100 per cent of the first loss; am I correct in saying that?
Mr. Whittaker: No. Your other observation is that we are going in on a milestone basis together with the private sector. There will be failures as we're not pushing the envelope on technology. If something fails, that "financial loss" is absorbed by everyone. The idea is that with the portfolio approach, your gains that you make —
Senator Massicotte: Let's say I take an investment of $100 and you fund it 33 per cent on the generic model. The joint venture loses 20 per cent. It gets liquidated and the loss is 20 per cent of the initial $100. I understand you lose 100 per cent of that loss; is that accurate?
Mr. Whittaker: Put the example this way: If $100 goes in, $33 from the government, and there is a loss of that, whatever is liquidated is done at that time. We can make a claim just like everyone else and get our 33 per cent back. But because we don't hold equity, it's a different story.
Senator Massicotte: Exactly. To be frank, I'm pleased to hear what you said earlier because you seem to be very knowledgeable as technology is your background. You summarized in your presentation different choices; and energy and water are big issues. Of the money you've invested, how much has been invested up North?
Mr. Whittaker: Of the money that we put forward and the numbers I quoted earlier, in northern projects we have $12.9 million of SDTC funding leveraged by $21 million of private sector funding.
Senator Massicotte: What is it predominantly up North?
Mr. Whittaker: The five companies include Terragon Environmental Technologies, Shipstone, EnerMotion —
Senator Massicotte: Generically, what is that?
Mr. Whittaker: It's energy, waste and water. Energy is energy generation and energy storage.
Senator Massicotte: Looking at page 15, obviously the choices are clear. When you look at this, it seems like a certainty. What's OPA?
Mr. Whittaker: OPA is the Ontario Power Authority who also did a study of remote communities including southern ones.
Senator Massicotte: I was looking at the costs per kilowatt hour. Clearly in the North, with the exception of some hydro, they're doing the most expensive. The solution is obvious. I should go biomass or geothermal. This makes it sound so simple. Why aren't we doing it if it's so simple?
Mr. Whittaker: You can't look at the energy by itself. It's an integrated problem. You have to deal with waste, water, energy and reliability.
Senator Massicotte: What's the relevance of page 15? Page 14 is a pure academic calculation. I understand page 15 considers all those other constraints. You're saying that page 15 is not relevant after all because you have all the other considerations, which make these things not applicable.
Mr. Whittaker: Page 15 starts to factor some of these in. We are focusing on biomass, which can include garbage, wood waste and other sustainable wood resources.
Senator Massicotte: You would save 70 per cent of the costs. Why don't we do it? Are these numbers hard and real?
Mr. Whittaker: They are now. This is just happening. This wasn't the situation 10 to 15 years ago. The technologies did not exist. I'm here to report to the committee that we now have enough diversity of supply in technologies and in biomass sources to give us confidence that we can start with this now.
Senator Massicotte: It's not dependent upon the size of community or distance from a river or from a hydro line.
Mr. Whittaker: In these cases, no. The idea is to drop it into a community like it is.
Senator Massicotte: In Nunavut, they didn't know what the answer is. In the Northwest Territories, most of them said that wood pellets are the way to go. In Yukon, it was predominantly natural gas.
How do you explain that? Why not one of those?
Mr. Whittaker: Here is the point: If you had natural gas or something nearby, that would be great. If you have to create infrastructure, it adds cost so it's not ubiquitous. Remember: Our challenge is to make something ubiquitous. Considering all of the factors, how can we find a solution that is more or less ubiquitous? Diesel gem sets have their success because they're applicable anywhere globally. Rogue communities don't always have natural gas. If they have it and it's convenient and nearby, it's great. As part of the biomass solution, the gasification process produces a natural-gas-like synthetic gas; so if you had natural gas, you could plug it in.
Senator Seidman: On your website, you talk about bridging the financing gap for emerging technologies. You develop the NextGen biofuel's fund to help bridge that gap. In your 2013 annual report, you say that the development of biofuel technology has been slower than originally expected. Could you give us more explication about that?
Mr. Whittaker: We have two funds. The SD Tech Fund is primarily what we're talking about today. In terms of the reference to the NextGen Biofuels Fund, let me start by saying that the policy intent behind that fund was focused on transportation fuels — primarily ethanol and biodiesel. Those were the two focuses. That's the reference online. The global ethanol markets have taken off the same way around next generation ethanol. It's a different situation for power fuels for the North; and that's what that's about. Most of the work we're doing on biomass and the biofuels I'm talking about today is happening in the SD Tech Fund.
Senator Seidman: Help me to understand the point of the second fund.
Mr. Whittaker: The second fund is to scale up large first-of-a-kind commercial scale biofuel plants that focus on either next generation ethanol or next generation biodiesel.
Senator Seidman: How does Canada compare to other northern countries in terms of energy research and development, specifically for northern energy supply and use?
Mr. Whittaker: In terms of research and development, we are on a par or even slightly ahead. We obviously have countries like Finland with a very strong forestry industry, which probably has a few steps on us on that front. Simply with its presence of 700,000 people in the North, Russia has been dealing with this issue on a larger scale than we have, so we're not way out in front of anyone there.
I think the race is on now and with the increased interest in the North, all of these countries realize that there is a very large economic prize. We're going to see a race there. We're on par so it's ours to lose. If we get on with it, we might just show some leadership and examples that we could be proud of.
Senator Patterson: For the benefit of committee members, the fire at the dump in Iqaluit wasn't burning when the committee visited, but it is burning in full force now — closing schools and causing people with respiratory illness to go to hospital. Four stories of garbage are burning.
The community produces 50 tonnes of garbage a day. I know Mr. Whittaker has been involved in a project with Terragon to begin to tackle that problem. Could you talk more about gasification and incineration because it seems we're throwing away some energy? Could you talk a bit more about that in its applicability to the North?
Mr. Whittaker: The technologies that you hear referenced around treating garbage usually fall into two categories. The first one is incineration, which has been used successfully overseas. Sweden is a very large incinerator user. It works very well on large scales. If you have a large scale problem, large scale power production and a large number of skilled workers in trades to repair it and keep it running, it works extremely well.
The challenge with incineration is you need highly skilled workers and sophisticated emissions control equipment, because when you put oxygen into garbage and burn it you produce poisonous gases, dioxins and furans. The emissions system has to be maintained and that requires skills.
We have generally found that incineration is not an ideal solution for the North because those necessary ingredients aren't as readily available.
The second technology is gasification. It's a thermal process that does not use oxygen. It takes the oxygen out of the system and thereby avoids the dioxins and furans. It produces a natural gas-like gas that comes out of it. If you have a natural gas system or equipment that uses natural gas, you can use that to generate power.
So our leaning has been towards technology, such as Terragon, that uses the gasification approach because it does not require the large scales, the skilled operators and the risk that these toxic gases are produced.
Senator Patterson: I'm very interested in the levelized cost of energy calculation, and I just want to say briefly in background, our committee was quite amazed when we were in Nunavut that there seemed to be a lack of concern about conservation. Income support clients pay a fraction of real energy costs, public housing tenants, their subsidized energy costs, and even private homeowners get a subsidy after so many kilowatt hours.
When we look at the levelized cost of energy, you talk about capital and operating costs. If we look at that formula in the North, should we not also build in the significant subsidies? I have just mentioned a few. Could you tell us how that formula should work?
Mr. Whittaker: Very good point. When we talk about who the players are to make this happen, why is it not happening, you have a complicated business case because the federal government actually subsidizes the fuel that goes up there. When that happens, your business case changes on the private sector side, and makes it much more difficult. In our case, what we're looking at here with some of these technologies is who would benefit from this. You can see the local users. They aren't motivated so much by cost, although each dollar they have in their pocket means that their quality of life can go up. They can buy more nutritious food and so forth, but the other stakeholder to gain is the federal government.
The federal government can save money by deploying some of these things. Why should the federal government stay involved in this? They have a vested interest in reducing cost. They're a stakeholder in this equation.
Senator Wallace: Mr. Whittaker, you indicated that this year you're going to work on key demonstration projects in the North with some of your partners. In response to Senator Mitchell, you gave an example of the autonomous solutions project in Cambridge Bay. What other key demonstration projects do you see being undertaken this year?
Mr. Whittaker: The one Senator Patterson mentioned was the work we're doing in Iqaluit. It was focused mainly on the waste management issue and taking a different approach. The mindset change is to treat your waste locally; produce your energy locally. The whole philosophy has become more distributive and resilient by dealing with your issues on a localized basis, as opposed to large centralized treatment facilities and generating facilities that we see in the south. The economies of scale don't work on communities that have 150 to 2,000 to 8,000 people, so the distributive approach on a smaller scale and more locally based is what we're doing.
Senator Wallace: Are there any other demonstration projects?
Mr. Whittaker: We have our hands full with those two. We are going to do those this year and see where we go from there.
Senator Wallace: You also referred to the potential for increased shipping through the North, and there are risks involved with that. Are you involved in any projects that would be considering spill response capabilities and technologies that would be applicable to the North, which I think would have different requirements than southern climates?
Mr. Whittaker: Absolutely. When the whole issue of the tailings ponds came up that's when we started looking at the broader picture, in terms of where you would have bitumen and oil challenges globally, including in our Arctic. There are technologies in our portfolio — and I'm happy to follow up with a list of those — that are spill response in their nature.
Obviously, that's not the approach you want to take as your primary course. Spill response should be the absolute last thing that we have, but it needs to be there. We're looking at front-end solutions that avoid the spill in the first place, that make it safer to transport, monitoring along the way. Some of those avoidance technologies are in that discussion, but there are technologies that work in cold climates, oil, for example, that adhere using surface tension to clean up those types of spills.
New materials are emerging, such as graphene. It's a new material that has many applications, including cleaning up oil spills, so we are working on a number of those. Some are ready for prime time now, other ones over the next several years.
Senator Wallace: In preparing for increased shipping in the North over the years ahead, do you have a plan you're working on and a number of key items? If so, what would they be and what period of time are you looking at to develop this? Within the next 10 years there will be far more oil moving through those Northern waters; the risk will be then. We have to be ready for it.
Mr. Whittaker: We're starting on it now. We have been working on it for probably four years now, so there is a plan. The other element is specifically related to ships. As we all know, Canada is embarking on an unprecedented defence procurement. We are procuring $25 billion or $35 billion worth of ships. We're working closely with the Department of National Defence to say, "How do you design a ship that considers some of these things?" It's not an oil tanker but it's still a ship that is subject to this. There is an opportunity for us to get more leverage out of that procurement by fostering Canadian small- and medium-sized businesses, while solving some of these other types of problems related to spills and responsible shipping transportation in the North.
Senator Wallace: You also referred to drinking water and the challenges that presents in the North. You said 22 out of 25 communities are without clean drinking water. Are you working on projects to develop new technologies to clean water rather than having to bring in potable water to certain areas where groundwater is contaminated? I know there are a number of technologies out there, but is your department working on particular projects that would focus on clean drinking water in the North?
Mr. Whittaker: Correct. In fact, in the autonomous community solutions, there are two types of water we're looking to produce in those technologies. One is what we call "technical water," the 75 per cent of the water you use on a daily basis, which makes it easier for the remaining 25 per cent if you just used your existing systems. Your economics work, however, using different types of membrane technologies, can take that remaining 25 per cent and bring it up to drinking water quality.
We've got a portfolio nearing, I would estimate, well over $50 million of technologies in water and at least half of those are applicable to the North.
Senator Ringuette: Thank you for all this information. I'm looking at page 15, which seems to have caught our attention. In regard to geothermal, the current technology that we have, and wind energy, are there any impediments for those two energy generating types not to be dependable in the North? Are there issues?
We can see that they are the lowest costing modes. They don't require any kind of transportation. There is 24-7 reliability, so what are the impediments with regard to the northern communities for those two systems?
Mr. Whittaker: We'll start with geothermal, and then we'll move to wind and solar. Geothermal, where it's available — and there is a good section that is available — the technologies exist. They are commercial. They are viable. It's a matter of finding a private sector investor that's willing to get on with things where the resource exists.
Drilling through the barrier, through permafrost, is the issue. Is that really an acceptable kind of approach? That would be kind of the primary filter.
Senator Ringuette: With regard to drilling through the permafrost, has there been any attempt? Is there any experiment being done?
Mr. Whittaker: There are, and, again, I can follow up because I don't have the specific references here. Nor is SDTC very heavily involved in geothermal, and the reason we're not involved is that is commercial technology, by and large. The technology already exists. Once it exists, it is out of our purview of investment. So I've put it on the list here simply because it is a technology that is viable. People are using it. If you can address the acceptability — it's an acceptability issue, not a difficulty issue — of drilling through the permafrost, then you can apply it.
Senator Ringuette: We're not talking about drilling a hole every 10 feet. Why isn't there a "business plan" to the federal government to look at geothermal investment in comparison to the current subsidy for energy in the North?
Mr. Whittaker: Money makes the world go round, and most of the private sector investors have been enamoured with the size of the wind and the solar markets. If you look at the magnitude of energy required, it is not a global business case. That's the issue.
Senator Ringuette: You're very involved in this. I understand that your main focus is towards new technology, but, that being said, if geothermal and wind are the least costly and the most dependable and the technology and requirements in the North can be met, who would be in charge of providing the federal government with a business case to move forward with regard to geothermal and wind in those Northern communities in comparison to subsidizing, year after year after year, the energy costs?
Mr. Whittaker: There are two reframing questions on that one. Geothermal is a base-load energy option primarily for heat. So it doesn't solve 100 per cent of those problems, but it is a base load for a good portion of it. What we're doing in the biomass one includes that business case. What we're doing on the autonomous community solutions includes that as a business case, and that's being developed now. In terms of wind, solar and pieces on the right hand side, I have classified those as intermittent. They sit in a different category. The cost is low when the actual resource is available. The wind doesn't blow all the time, and the sun doesn't shine all the time. In the North, we know that in particular.
In the wind case, there are different challenges to overcome. You may have heard some of these things. It works very well when you can maintain the systems and erect fairly large wind turbines to get your economies of scale. Mining operations are ideal for those types of things. Small communities not so much if you have blade icing and those things. Getting a crane up into Cambridge Bay and some of these other places is not an option, so it limits what you can actually do on the intermittent renewables side. We've almost put those as add-on technologies to a base load.
[Translation]
Senator Boisvenu: Your testimony was very enlightening, as my colleagues said.
I would like to talk about recycling in particular. I was a senior official in the Quebec department of the environment for 15 years. Over the past 10 to 15 years, tremendous progress has been made in reusing biomass and waste to develop new energy. You are saying that, in that region, there is a waste management issue because of the climate. Biogas cannot be produced in the long term, the way it is in the southern part, especially in Sherbrooke, where it is produced in large quantities in old landfills to make generators work.
You are saying that 25 per cent of energy could come from biomass or waste recovery, and probably from sewage treatment plants and solid sludge. Are there co-generation projects or plants like in Lévis, where they burn garbage to generate energy?
Are there projects in place right now that could be alternatives to diesel production?
[English]
Mr. Whittaker: The main question around co-generation is a very good one, and, in fact, what we're proposing as an integrated solution is co-generation — electricity and heat. Sixty per cent of your energy need is heat. The remaining 40 per cent is electricity, when you look at energy use in the North on an average basis, and you also need clean water. So co-generation has three elements in our contemplation. The first element is heat. The second element is electricity. And the third element is actually clean water from the process because the water that comes out of the garbage can then be purified to a level where you can use it.
So what I call "co-generation" is something that we absolutely are considering, and we'll be showing elements of that this year in Cambridge Bay.
[Translation]
Senator Boisvenu: In terms of waste management in communities, meaning the management of household waste as well as of sludge and sewage, is there a method in place to store those products in order to eventually use them as biomass in recycling projects?
[English]
Mr. Whittaker: Very good question, and I think the issue of "dumpcano," as Senator Patterson talked about, is a classic example of stockpiling garbage that has gotten away from us. We're not advocating the stockpiling of garbage. We're advocating the local treatment of it, so you can treat it just like you'd operate your dishwasher. At the end of the day, you put your dishes in the dishwasher. You hit a button. You provide some energy out of it, and you have taken care of your waste. That is a much more sustainable approach than trying to ship garbage as a fuel source. There are more energy efficient, energy dense ways to get energy up into the North via shipping versus sending the garbage in that direction. While it's a possibility, I think it comes with some very negative components to it.
The Chair: Thank you, senator. We're nearing the end of our time. There is another committee coming in. I have a few quick questions.
On slide 5, you say your current investment in 246 projects is $598 million. That's cumulative since 2002?
Mr. Whittaker: That's correct.
The Chair: Out of that $598 million, you've invested $13 million in the North; is that correct in what we're talking about here today?
Mr. Whittaker: That's correct.
The Chair: That clarifies that for me. I want to ask you a few questions about the comparison of northern energy options, slides 14 and 15.
How were those rates calculated? Let's use Nunavut for example and the cost of biomass or coal or geothermal or all of those you listed along with diesel. That is the cost. I use Iqaluit as an example. That is the cost in that area?
Mr. Whittaker: The methodology for calculating those numbers is to take the average for remote communities in the North, looking at the capital cost, looking to see if there is a transmission cost, looking at the operating cost, the maintenance cost, looking at the capacity factor — how reliable it is or how often it is available — and the fuel costs together.
It was drawn from a variety of sources, including our own portfolio. We've got actual data on Canadian companies that are demonstrating these types of numbers. That is taken together with international sources and some utility sources that have also done the calculation and analysis from there. We have taken all of that together and come up with a baseline set of numbers, which you see here.
The Chair: Okay. So it would be easy to do the diesel, simply because diesel already operates there. I am surprised that coal would only be about $100 when you have to move the coal there.
Mr. Whittaker: You have to move it, yes.
The Chair: The same as you have to move the diesel fuel.
I am wondering about some of the numbers. I will go back to a question earlier about geothermal or wind. I agree with your explanation, but with geothermal, if you are to generate electricity with hot water, you have to hit a sweet spot that has the hot water.
Mr. Whittaker: You got it. It's for heat.
The Chair: As far as drilling through the permafrost, we went into a mine that was 350 feet down through the permafrost. So I don't really think that is the issue. The issue is that there is nothing warm in the permafrost that will keep that water warm to recirculate through your home.
Mr. Whittaker: My point was not a technical issue; anyone can do that and drill far down. It's an acceptability issue. If you're in a community, do they want you drilling through the permafrost? That was the question. Technically, you can do it.
Where does the resource exist? That is the biggest one. If the resource exists everywhere, great. If you are going down and haven't found heat, that is a different issue.
The Chair: Okay. Wind is another one, at $100. My experience is that it is more than $100 where I live in southern British Columbia. I don't know how you can get wind for $100 a megawatt hour in Iqaluit when it costs about $110 in southern Alberta, as we speak today.
Second, the nuclear option says $100. I think everyone would wish you could put in nuclear for $100. If you go to the C.D. Howe Institute, they will tell you quickly that new nuclear is $120 to $140 a megawatt hour in southern Ontario. Unless I don't understand your graph, how can you do it for $100 in Iqaluit? Numbers are numbers.
Mr. Whittaker: The graph doesn't give you the details behind that. I am happy to share those.
The question on wind and the comment I was making with the graph was that wind is not applicable because it's got all these other issues associated with it. When it blows and when it is not icing up, you can get those kinds of rates.
The Chair: I understand that.
Mr. Whittaker: That's the issue.
There are developments with nuclear. There are emerging technologies that look at small nuclear. I have eliminated it on slide 15 as an option, simply because when you start adding in some of these other factors, you don't get these costs. The labour costs up there are far too great.
The Chair: Exactly. So, those numbers?
Mr. Whittaker: Those numbers don't apply, then.
The Chair: That answers that question.
When we talk about new technology — Europe has been using it, and you mentioned that they have been using it for quite a while — burning garbage. We have technology today that will burn garbage very cleanly. You said that garbage is piling up and it doesn't react the same way as it does in the southern part of Canada; I appreciate that, because it stays frozen.
Why wouldn't it be of benefit to burn that garbage to generate electricity? First, if it is polluting the drinking water, you get rid of that problem; and, second, you can get rid of the garbage that will continue to pile up for the next 100 years, and then someone will have to come in and clean it up.
You said that idea is something that would not be looked at. I want to explore that a bit further — unless I misunderstood you.
Mr. Whittaker: Let me be very clear. I think that processing the garbage up North is very important. It is a very important part of the energy problem as well as the clean land and water problem people face up there. Processing waste is an absolute must. There is no option in that one.
The comment I was making is that you have to be careful about the types of technologies. These are my comments to this committee: When you go with incineration, as much as we have the graph on here that says, "These are great costs, if you can actually make it practical in the North." The difference between slides 14 and 15 is that when you put practical considerations on them, things come off the table. Nuclear comes off the table.
The Chair: Pretty near all of them do, except these.
Mr. Whittaker: Right. A lot of them nearly do.
When you are looking at new solutions, biomass holds promise because, yes you've got to ship it, but you can ship it at a high density comparable to what you are doing with diesel, without the hazardous handling and storage. So your business case gets better justified.
With garbage, in particular, if you have to put in very skilled operators and sophisticated emissions control equipment, that ruins your business case in the North. It works in Sweden; it doesn't work in Canada's North.
Gasification avoids those things, so our leaning is toward the gasification route over incineration.
The Chair: We are past our time. We have another committee coming in, but the gentlemen will be available, I am sure, to ask some questions.
Thank you very much for being here. I appreciate your information. It was interesting and we learned quite a bit from your presentation.
Mr. Whittaker: Thank you for having me.
(The committee adjourned.)