Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 7 - Evidence - May 5, 2016
OTTAWA, Thursday, May 5, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8 a.m. for the election of the deputy chair; and to study the effects of transitioning to a low carbon economy.
Senator Richard Neufeld (Chair) in the chair.
[English]
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'm chair of this committee.
Honourable senators are likely aware of Senator Mitchell's new responsibility as Government Liaison, Government Whip. Senator Mitchell has therefore resigned as deputy chair and as a member of this committee.
I would like to congratulate Senator Mitchell on his role and thank him for his work on the committee. I have worked with Senator Mitchell on this committee I think since I got here and so he's now gone but he said he might come back at some point in time.
As a result of this resignation, we must now elect a new deputy chair. I would like to receive a motion to that effect.
Senator Mockler: Mr. Chair, I would like to nominate another able senator.
[Translation]
I propose Senator Massicotte from Quebec as deputy chair of the committee.
[English]
The Chair: It is moved by the Honourable Senator Mockler that the Honourable Senator Massicotte be deputy chair of this committee.
Hon. Senators: Hear, hear.
The Chair: It is your pleasure, honourable senators, to adopt this motion?
Hon. Senators: Agreed.
Senator Massicotte: I will just reassure you I will keep my promise; you will have cookies in the morning from here on.
The Chair: Are there any other nominations? Thank you. Senator Massicotte, welcome back. You were here before so it's good to see you back and we'll carry on.
I would now like to welcome 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 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. There is no need for an introduction, but Senator Massicotte, the deputy chair.
Senator MacDonald: Michael MacDonald, Nova Scotia.
[Translation]
Senator Ringuette: Pierrette Ringuette, New Brunswick.
[English]
Senator Johnson: Senator Janis Johnson, Manitoba. Good morning.
Senator Seidman: Judith Seidman from Montreal, Quebec.
[Translation]
Senator Mockler: Percy Mockler, New Brunswick.
[English]
Senator Patterson: Dennis Patterson, Nunavut.
The Chair: I would like to also introduce our staff, beginning with the clerk, Lynn Gordon, and our two Library of Parliament analysts, Sam Banks and Mark LeBlanc.
Today marks our seventh meeting for our study on the effects of transitioning to a low-carbon economy, as required to meet the Government of Canada's announced targets for greenhouse gas emission reductions.
In the first segment of our meeting I am pleased to welcome the Canadian Electricity Association, Sergio Marchi, President and CEO; Devin McCarthy, Director, Generation and Environment; from Capital Power, Martin Kennedy, Vice President, External Affairs; and from Nova Scotia Power Inc., Terry Toner, Director, Environmental Services.
Welcome Mr. Marchi, and thank you for being with us today and assembling the group for us. We look forward hearing your opening statement and then there will be some questions and answers. The floor is yours, sir.
Sergio Marchi, President and CEO, Canadian Electricity Association: Thank you very much, Mr. Chairman. Good morning, senators, and thank you for the invitation to appear before you this morning.
For 125 years CEA has been the authoritative voice of electricity in Canada. I'm pleased this morning to be joined by Devin McCarthy, as well as two members, Martin Kennedy from Capital Power and Terry Toner from Nova Scotia Power. Together we will provide you as best we can with our sector's perspective relating to Canada's transition to a low-carbon economy.
CEA released the climate paper in February, which is in your folder that I think is being distributed.
Internationally, the Paris Agreement represents a potential watershed moment. I say potential because the proof will be in the doing.
Domestically, our governments must move from the poetry of the Paris Agreement to the prose of a viable Canadian policy and in doing so build a national consensus in partnership with industry, with other stakeholders and with the blessing of Canadians. This will not be an easy lift. However, Canada's electricity sector can help. With 82 per cent of our electricity already GHG-free, Canada is among the cleanest producers in the world. By comparison, the corresponding figure in the United States is only 31 per cent.
The Conference Board of Canada's recent climate report gave Canada an overall D grade. The bright spot was the A grade for Canada's electricity sector. I say this not to boast, but rather underline that electricity is a strategic asset for Canada and is central to our country's clean energy solution.
How can we best leverage this advantage? First, set an economy wide and North American wide carbon price. A continental price will deliver the greatest environmental return, while providing protection and competitive positioning for Canadian companies.
Second, focus on economic sectors that can offer the greatest emission reductions. Frankly, electricity is the only sector in Canada to have achieved significant emission reductions since 2005, some nearly 30 per cent, and we will likely achieve the same again by 2030.
The small amount of coal-fired generation that will remain after 2030, as well as Canada's modest natural gas generating fleet, are both relevant to constraining rate increases for consumers. As well, energy efficiency efforts will provide better results than adding further constraints to the generation mix.
Third, we require a national electrification strategy and starting with our transportation sector would be logical given that it represents nearly one quarter of Canada's and North America's carbon footprint. Electrification should also be applied to building efficiency and various industrial applications.
Fourth, enhance Canada-U.S. electricity collaboration to further squeeze GHGs continently. This is particularly relevant given current efforts to forge a North American agreement on energy and the environment.
In this regard, we just published a report which made 10 recommendations for policy makers in the three countries and, again, a copy of this paper is in your folder.
Canada runs a notable surplus in electricity trade with the United States, some $3 billion annually, and we believe we can significantly increase this given the opportunities created by President Obama's Clean Power Plan.
I was in Washington a few weeks ago with a delegation of CEOs and we encountered absolutely no push back, no opposition to selling them more clean power. In fact, they need it if they're to meet the new emission targets.
Fifth, urgently address climate adaptation. The impacts of climate change are clearly and already with us. Therefore, we urge Canadian policy makers to enact adaptation measures. Literally, the costs of inaction far outweigh the cost of being proactive. CEA has also produced a detailed report on this and, again, it's also in your folder.
Sixth, bring first-class power to our northern and indigenous communities. Reliance on polluting and expensive diesel must come to an end. Surely they have the same rights to the benefits of reliable low carbon electricity as the rest of Canada.
Here too electricity can play a transformational role. But I will not elaborate because I recognize that this committee has already produced a very good report on the energy challenges and opportunities for Canada's North.
Seventh, we need to heavily invest in renewing our electricity infrastructure. There is no getting around this critical reality if we are to have reliable and low carbon electricity. Many of our assets are at the end of their life cycle. Over the next 20 years, we'll need to invest some $350 billion in renewing that infrastructure and CEA was encouraged that Budget 2016 acknowledged this.
Finally, in the post-COP21 era, we need a true partnership between governments and industry more than ever. While governments rightly set the climate ambitions, it is industry that will achieve them.
Success therefore will only be built upon a strong partnership. We would recommend the establishment of a permanent national government and stakeholders' climate forum. This would bring together federal and provincial government officials, industry, NGOs and indigenous leaders.
Not an easy group to break bread with, but the mission must be to find that common ground and forge that national consensus, as elusive as it may be, otherwise governments will be placed in a position to impose and that brings with it its own unique challenges.
With this, I will turn it over to Martin Kennedy.
Martin Kennedy, Vice President, External Affairs, Capital Power: Senators, good morning. Thank you for the opportunity to be here today representing Capital Power. We're an independent power producer, publicly traded, and headquartered in Edmonton.
Our Canadian operations include wind farms in B.C. and Ontario, but the core of our operations are in Alberta and so I'll focus my remarks today on the opportunities created as Alberta implements its climate leadership plan.
Alberta's plan greens the grid in three ways: through the phase-out of all coal-fired power in 2030; an increased carbon price on emissions from electricity generation calculated based on a performance standard; and the development of roughly 4,200 megawatts of renewables through a competitive process.
These actions are projected to cut Alberta's emissions in the electricity sector from 45 million tonnes today to 15 million tonnes by 2031, a substantial contribution to achieving provincial, national and global climate targets. This is primarily due to the closure of 2,500 megawatts of coal-fired power that would otherwise have operated past 2030, and the development of renewables equal to two thirds of Alberta's current installed coal capacity.
Now the provincial government has also committed to implementing the climate leadership plan in a way that fits with Alberta's energy market, and this is critical to retaining investor confidence, maintaining grid reliability and achieving the lowest cost transition for consumers and business.
Alberta's power market is unique in Canada. It delivers low cost reliable power, but at no risk to taxpayers or ratepayers and that's because in Alberta generation is corporately owned and developed at investor risk. Generation is not conducted by Crown corporations or provided by regulated return utilities or delivered under contract to government, all models common in the rest of the country.
Instead, wholesale prices are set by supply and demand in an open, competitive market and based on price signals from the market generators invest. We invest to develop new sources of supply. Our only source of revenue is the future price of power that will be earned from those assets in the open market.
This model has been extraordinarily successful for Alberta customers and businesses. Supply has more than doubled since 1996 and delivered energy prices have averaged just six and a half cents a kilowatt hour on consumer bills. Current prices, today's prices, are less than half that amount.
Now, leveraging Alberta's competitive energy market is one of the ways we can dramatically reduce the cost of the renewable build-out in our province. While the market will evolve to include incentives for renewables, the incentives have been carefully designed to minimize market distortions and consumer cost.
Instead of government contracting to pay the full cost of new renewables, Alberta's climate advisory panel recommended instead that generators should only be able to compete for renewable energy credits known as RECs. These top up the market price for power. This cuts the cost to consumers in half. It also dramatically reduces the liability on government balance sheets for renewables contracts.
Meanwhile, the new gas-fired generation that will also be needed to support the transition away from coal will continue to be developed based on price signals in an open competitive market. Companies such as Capital Power have projects lined up and ready to support the transition. Our own initiatives include a major new natural gas fired facility west of Edmonton, and our second east-central Alberta wind farm.
Successfully implementing Alberta's climate plan requires the construction of more than 6,000 megawatts of new power generation between now and 2030 — an investment of $30 billion in a single province in a single sector. Our investment decisions depend on being able to forecast revenues and compliance costs over periods of 20 and 30 years and that requires reasonable certainty about whether future federal policy will disrupt electricity markets or distort the price signal. Even well-meaning actions can have unintended consequences.
For example, there is growing interest in the topic of new electricity inter-ties between Alberta and other markets. One preliminary study has estimated new hydro imports into Alberta could cost more than double the local price for electricity. So any study of inter-ties should include an assessment of the impact to Alberta consumers. For consumers, the development of renewables within Alberta may be a much better deal.
We should also study the impact to markets and to the cost of implementing Alberta's climate plan. The second and third order impacts from a new inter-tie could be substantial. Local renewable developers would likely require higher prices for their own top-up contracts, and provincial liabilities for those contracts would increase. The net effect would be to raise the cost of building renewables in Alberta.
It's therefore critical to broaden our analysis. By doing so, we can design and implement policies that deliver the lowest cost path to a lower carbon economy.
As new initiatives are taken to deliver on Canada's Paris commitments, I would propose that additional federal action in the electricity sector be designed and implemented in a way that respects different provincial market designs.
We encourage decision makers to consult widely with stakeholders so full impacts are understood, and this includes studying the net impact of policy on emissions, on consumer costs, on market functioning and on the ability of provinces and industry to effectively implement their climate plans. By working together, we can deliver a solution.
Terry Toner, Director, Environmental Services, Nova Scotia Power Inc.: Good morning, Mr. Chairman and senators. I'm pleased to have the opportunity to address your committee. The Honourable Sergio Marchi has done an excellent job outlining the views of our industry. Mr. Kennedy has been able to provide a Western context. I want to take just a few moments to bring a perspective from the East Coast of Canada from Nova Scotia Power.
I always start these discussions with the goal, which we think is ultimately to cost effectively reduce carbon emissions. There seems to be a general consensus that carbon pricing in some form makes sense, but carbon pricing can take many forms and not the least of which are three: carbon tax, cap and trade or strictly emissions hard cap.
Nova Scotia has chosen the hard caps route, with a regulation mandating specific hard cap emission reductions for the period 2010 through to 2030. This has been recognized in an equivalency agreement with the federal government and has begun to be implemented.
This initiative was carried out in a transparent manner before our provincial regulator, through processes that engaged stakeholders across the province. And progress to date has seen a reduction already of 37 per cent from our 2005 levels. This already exceeds the federal target of a 30 per cent reduction by 2030. This represents the equivalent of closing the production of three coal-firing units on our system. This has been a significant success already for our province, of which Nova Scotians and Canadians can be proud.
The certainty of the regulation that the province provided has allowed for the necessary lead time and the confidence to invest in new low and non-emitting forms of generation and the accompanying transmission. This includes a mix of alternatives such as wind, renewable imports, efficiency improvements and cleaner natural gas units.
But there has been a cost to bring this about and that has resulted in increases in electricity rates, our form of carbon pricing. It is our belief that the direct measures put in place in Nova Scotia have resulted in specific and real emission reductions at a cost that in our market is more competitive than a simple carbon tax would achieve.
In making this transition, there are other things to consider. First, electricity has become an essential service and delivering that in an effective way has become an increasingly complex and dynamic challenge.
Second, it's important to have sufficient capacity to support the load during peak demand periods. This is an important component of reliability of supply and customers demand this.
Third, to minimize costs for our customers it is important that utilities have flexibility to manage the retirement of the coal-generating units during this transition to a low-carbon environment.
Fourth, it will be important to allow for backup generation to support times when renewables are not available. As hard as it is to believe, there are times in Nova Scotia when the wind does not blow and the sun does not shine.
Lastly, in this vein, there is value in making investments in transmission and distribution assets to tie together this modern collection of generation alternatives and to offer the operators visibility and control of the assets.
We feel the plan in Nova Scotia has already delivered considerable emission reductions, and we will be delivering more by 2030, approaching a 60 per cent reduction from 2005 levels. But there remain other opportunities.
Moving forward, electrification of other sectors, transportation and home heating to name two, appear to be an excellent opportunity to reduce total carbon emissions, but this could require some cap flexibility to minimize upward pressure on electricity rates as we take on the burden of those emission reductions. This could indeed deliver net benefits across all sectors.
There may also be some opportunity in the Atlantic region to obtain additional emission reductions over the medium and longer term with a regional approach.
The Nova Scotia low carbon framework has delivered the necessary carbon emission reductions while enabling the achievement of stable, predictable rates. So we are well positioned to deliver further substantial reductions over the next decade.
Should a carbon tax be added on top of what has already been achieved in Nova Scotia with the hard cap approach, the additional environmental benefits would be small and may necessitate consideration of financial instruments or support to pay for the previous investments made.
Ideally, the carbon tax would only apply for electricity emissions above the provincial targets. For our national carbon policy to succeed, it will be important that jurisdictions that have taken early action on carbon not be penalized for having done so.
In conclusion, in Nova Scotia we have already made significant and important progress in reducing the carbon footprint for our generation, and we have begun to identify possible next steps that would be affordable and fair. The Nova Scotia low carbon framework is working and changes to carbon legislation and regulation need to recognize and build on this success.
Thank you.
The Chair: Thank you very much.
Devin McCarthy, Director, Generation and Environment, Canadian Electricity Association: They are giving the prepared remarks, and I am here to answer any questions you may have.
Senator Massicotte: Thank you to all four of you for your presentations and comments.
This week the Parliamentary Budget Officer prepared the first report or plan which maybe we can get. In one of his reports he says the three most important sources of greenhouse gas emissions are crystal generation, transportation and extraction.
He estimates that $50 million tonnes of greenhouse gas emissions could be eliminated in electricity production at a carbon cost of $12 to $57 a tonne through a shift to renewables, notably wind power and through carbon capture and storage.
He is saying you are one of the three sectors that needs to become even more productive than you currently are to achieve our goals; is that significant?
I know by 2030 a lot of existing coal-fired electricity plants should be shut down. Do we need to do more than that, or will the biggest burden be satisfied through the existing policy, say in Alberta?
Mr. Marchi: Thank you, senator. As I mentioned in my second recommendation, I think governments also need to go to the sectors where we're going to really find increased reductions.
We're not saying that people shouldn't or governments shouldn't look to the electricity sector. What we'd like to say is that we've already got a good story. Governments have mandated the elimination of coal and our sector has not fought that. Our sector has collaborated and worked on that.
We're sitting right now at 82 per cent GHG free. By 2030, that number could possibly, depending on circumstances, go up to 92. I would say that if I brought a report card home to my parents at 92, it would be not bad. However, I also think that renewables, which solar is at around 1.4 and wind is at 0.4, hold the key going forward, and obviously our utility is bringing those on line. We think, however, the electrification of transportation and industrial processes and building efficiencies is where we can also play and facilitate to really bring them those extra reductions.
After 2030, we are going to have between 5 to 7 per cent of coal production largely with carbon capture and storage. Saskatchewan, SaskPower, is the only company in the world to put in carbon capture storage at a coal facility in this process.
We are going to be able to eliminate coal production completely by 2040, and so I think we're bringing those reductions down progressively. I think our sector is a leader. I think other sectors should also be asked to pull their weight.
Senator Massicotte: You are saying the parliamentary officer is wrong?
Mr. Marchi: No, I think they are looking at a number of sectors, including ours.
I don't want to knock any other sector, but I challenge any other sector to come to the table with cleaner hands. I think we need to be even-handed about how we apply carbon reductions across our economy.
Senator Massicotte: If I look at your eight recommendations, and I appreciate that it is very clear where you are coming from, but things like focus on economic sectors that can offer the greatest emission reductions, establish a national electrification strategy, urgently address climate adaptation, support needed investment, and you also have the code name of partnership with the government.
When those words are used, I always say how much money do you need? How much do you want? How much subsidy are you looking for? What is the point?
Mr. Marchi: When you look at the $350 billion infrastructure price tag that we will have to invest over the course of the next 20 years, we're not looking for very much of that from governments. This will come from our utilities. But what keeps our CEOs up at night is the political risk associated with getting $350 billion of investment through the regulators. God bless all the regulators. We need regulators when there are monopolies. But what I would say is that protecting the consumer on cost is absolutely critical. But I believe that it should not be the only variable because if we are being asked to procure the cheapest possible system, we will undercut the reliability of our first-class electricity power in the next 20, 30, 40 years.
We are saying to protect the consumer you also want to have the best system, the strongest system, especially since Mother Nature is playing with us pretty aggressively. For that $350 billion rebuild, that's going to come mostly through utilities through the rate hearings.
Where we think we would need incentives from government is perhaps in the North. Why is that? Because when we go to the rate hearings, we are not allowed to light up the North because regulators will say there is not the critical mass of consumers to support it. When we go for innovation projects on greening technologies, the regulators shut us down.
So what is happening is there is a gap between our inability to get through the regulatory process some of the more aspirational ambitions of federal and provincial governments. So we are working with the federal government now to look at the gap and how we can put some projects that can speak to the aspirations of lighting the North without diesel and greening technologies and utilizing some of the infrastructure monies in the second phase, which is more long term and transformational. For example, hockey is religion, God bless hockey, but we cannot continue to build hockey arenas through infrastructure. What are the transformation nation building projects that we can underwrite through part of these monies, and there we would think there is a specific opportunity to address that, but by and large utilities are paying their way.
Senator Massicotte: Thank you.
The Chair: I want to ask a quick question here because you talked about the regulators in monopolies are holding you down to the cheapest possible price. That's not consistent across the whole country. Would you agree with me? Tell me which provinces are saying that you must first look at the cheapest possible cost. In my province I changed it from the cheapest possible cost as they had to take into account other things, like green energy. Tell me which other provinces or other regulators are holding you to that.
Mr. Marchi: I would say that you're right. There is not a one-size fits all. And I never said that because we have different systems across the country. The one in Alberta is unique. What we're seeing, to be brutally honest with you and your committee, is an incredible politicization around electricity rates in our country.
I lived and worked in Europe for some 10 years where they have the same rebuild demand that we have, that the Americans have, that the Japanese have. Guess what? Nothing lasts forever — post Second World War build. In Europe the politicization is nowhere what it is here. I'm not saying it's right or wrong; I'm just saying it's really politicized. In Ontario opposition parties use electricity rates as one of the top three tools during Question Period. The political masters are also kind of sending the signals to keep prices low and, of course, that's an important variable. We're simply saying, "Let's marry low costs. Let's prize frugality and marry that with the value that we hold for electricity. Electricity today — and maybe I'm biased — is indispensable to our quality of life and to our economy. If it's indispensable, then it's a national asset. If it's a national asset, what do you do with assets? You nurture them. I see a lot more pressure than needs to be on that issue called "cost'' and we run into it at the regulators.
Senator Seidman: Thank you very much for your presentation this morning. I would like to explore the relationship between infrastructure grid and interprovincial trade of electricity. We've heard a lot over the last week and a half or so about the infrastructure issues in this country. And you have a section on infrastructure renewal in the electricity sector in your most recent report, Adapting to Climate Change: State of Play and Recommendations for the Electricity Sector in Canada. We also heard from TransAlta Corporation about the regionality of transmission markets in this country. We also know that there is greater relationship north-south than there is east-west.
How do you see expanding interprovincial trade of electricity so that provinces with greater resources can somehow help other provinces? I'm thinking of Saskatchewan, Manitoba and Alberta, for example, or even about Quebec, the province I come from, which is very well-endowed with hydro generation.
Can you tell me what the obstacles are that you see and what the federal government can do to encourage that kind of interplay?
Mr. Marchi: Mr. Toner would like to respond. But to preface that, our Minister of Natural Resources has raised the question about east-west. And so he should. When you say "east-west,'' you conjure up a huge tract of land that would make an east-west grid financially unviable. How do you allow for transmission of electricity from one end to the other?
From my perspective, senator, when we talk about east-west I think we need to regionalize that east-west discourse, with Nova Scotia dealing with Ontario and Quebec, or as you said Alberta dealing with British Columbia and Manitoba. We need to regionalize the discourse because if we are to have a national east-west to complement the north-south, one reason it's north-south is the cost and distance, which obviously plays to advantages.
Mr. Toner: I will give three quick examples of things that are afoot or contemplated in our region. Nova Scotia Power, we have a tie directly to New Brunswick and have exchanged electricity back and forth to our mutual benefit over time. We contemplate an additional tie-line and we're also starting to cooperate in joint dispatch of some of our units and other ways to find savings.
The second example, which links to that and is widely known, is that we are in a partnership with Newfoundland and Labrador, where they're creating a hydro facility in Labrador. We're building a cable from Newfoundland to Nova Scotia as part of that. That's going to link the Atlantic Provinces and create the possibility of additional generation. Through that whole ring of interconnection, it will loop in the opportunity for Hydro Quebec to participate in that as well.
That's a very important step for us. One of the things the federal government did to assist or remove a barrier was to provide a loan guarantee. It didn't take actual federal money but it reduced the cost of the project and sent a signal that this is a good eastern product.
The third example comes as we look to the future. We're collaborating with utilities within that whole area, including New England, to identify the next regional approach. Could it be additional wind in the region and an additional hydro project that together would provide additional clean energy for the Atlantic Provinces? There may be some left over we can also sell to New England to help them and in so doing make the project more affordable.
In our eastern region, it's one small example. In terms of what the government can do, don't create additional burden or barrier above and beyond the measures we're already taking, which are reducing the emissions. This is important in Nova Scotia. We don't have huge hydro resources so that is an import part of our solution. We added 500-megawatts of wind to our system over the last decade, which is a lot. Our peak effort is in the 2200 range. In the middle of the night during summer, we might have only 700 or 900 megawatts. If it's all wind, that's quite an adjustment to our system. It's that collection of measures that allows us to move forward and the government has been helpful in the equivalency agreement and the loan guarantee.
Senator Seidman: You're integrating renewables into the grid. How reliable is that? We heard a bit about reliability yesterday from the Ecological Institute. How much down time would you imagine?
Mr. Toner: The wind doesn't blow all the time and it's not dispatchable and predictable in that sense. But that is one of the reasons in Nova Scotia that while we're reducing our coal fleet, we are not necessarily taking out all of our units. But the amount of time they run is much less. Eventually, they'll be taking those off. It provides a cost-effective backup to our system until battery and other technology comes along. There is development of other things that are strengthening the system. We're using the existing resources today to do that cost effectively.
Senator Ringuette: I believe that in order to meet an objective of low carbon economy we need to have a national energy strategy with all the energy sectors within this group.
Have you discussed with the federal government the possibility of a national energy strategy committee and your involvement in it?
Mr. Marchi: Senator, I agree with the concept. And kudos to our premiers for embracing the Canadian Energy Strategy document, which has come a long way. We have contributed to the process. We also welcome the federal government wishing to engage in bringing that Canadian energy strategy over the goal line. I think it's very important, because people have talked about Canada being a superpower when it comes to energy. We can quibble whether, technically, that's correct, but what those people are correct about is that energy is a big deal for our nation. If it's a big deal, then you also need to have a big policy and strategy about it.
I'm also a believer that most of the largest national undertakings have come when the federal and provincial governments have worked together. Clearly, this is one area where those two senior levels of government must work together to bring out a strategy, engage with industry and then implement that strategy as well and as intelligently as we possibly can.
We've raised that issue with Minister Carr. In fact, Minister Carr was the person who started the COF process on the Canadian Energy Strategy, so he's pretty well positioned to jump in there.
Senator Ringuette: I certainly agree with your recommendation in regard to upgrading the electrical grid to meet the flux of weather that we've experienced and that is ahead of us.
In the Constitution of Canada — and you say, "Where is she going?'' — there is an impediment in regard to hydroelectricity. And I'm sorry, I cannot state the actual section in the Constitution, but it does say that a province that produces hydroelectricity cannot require a higher price for electricity to another province than the price in its own province. Therein lies the issue of Hydro Québec — and then forwarding all their excess electricity south of the border, because there is this impediment in the Constitution with regard to the sharing and profitability of the system with other provinces. I wonder if you can comment on that.
Mr. Marchi: Regrettably, I'm not a constitutional scholar, and I don't want to jump in there in any speculative way.
Mr. McCarthy: The only thing I could offer there is that the markets into which Hydro Quebec is selling that power are some of the highest-cost, highest-price jurisdictions in North America, so Constitution or not, New England is —
Senator Ringuette: That's why they're not selling to other provinces, because of this impediment in the Constitution that requires them, if they sell to New Brunswick or Ontario, to sell at the same price as they sell to the customers in their own province.
Mr. McCarthy: Yes. Okay, but —
Mr. Marchi: I will look into that. It hasn't come onto my radar screen, but you noted it, so I will brush up on it.
Senator MacDonald: Thank you for your presentations today. My main questions will be to Mr. Toner from Nova Scotia Power Inc.
But I want to make a few points to Mr. Marchi. I looked at your recommendations and most make sense to me. They are fairly reasonable, but the first one — setting an economy-wide North American carbon price — is something that I think would be a huge mistake for the country. The approach of Nova Scotia Power Inc. over the last number of years, and like a lot of Nova Scotians, I'm not a big cheerleader for Nova Scotia Power Inc., but the way they managed their resources — not to abandon those things that are low-cost until the newer technologies are proven and the ability to shift back and forth — is a better way to manage our resources.
We had people in here from Europe in the past few days. The price of power in Europe has gone through the roof. You mentioned the politics around the cost of power. The Auditor General of Ontario said they overpaid by $37 billion because of changes the Ontario government made in the production of power. That's a huge amount of money. For our industries to remain competitive and to not put people into energy poverty, I think we have to be very careful at the pace in which we flip from carbon-based power to non-carbon-based power. We have to be very responsible when it comes to this stuff.
Nova Scotia is one of those provinces in which the increase of power is always passed on to the consumer. No matter what the cost, the consumers pay for it. We're very conscious of this.
I want to speak to you, Mr. Toner, about the Muskrat Falls project. The link comes in at Big Lorraine, which is a few miles east of my house in my hometown, so I've gone there to look at the project. It's a great idea to link this power through, but Muskrat Falls has some problems ahead of it. It has some safety issues when it comes to building a structure on clay, it has environmental issues when it comes to mercury, and it has some financial issues when it comes to cost overruns. I know that Nova Scotia Power Inc. is basing a lot of its future management of power on the ability to get this green power from Newfoundland. There may be some delay in getting that power and we don't know how much it will cost.
I'm a big believer in using natural gas in the transition from coal as opposed to rushing head-long into renewables. I would like your response to that as somebody who works for Nova Scotia Power Inc.
Atlantic Canada has 222 TCF of gas not being tapped into, both on land and coal-bed methane. Should we be looking at a strategy in Atlantic Canada to make ourselves attractive to industry and keep our power costs reasonable by opening up technology to extract this gas and put it into use?
Mr. Toner: I will try to answer those concisely.
I will start with the Muskrat Falls maritime link. The piece we're building is the piece that is the transmission line — the cable undersea — and that's on target and under budget. That will create a link to Newfoundland. They will continue to finish their transmission responsibilities. That will link the area of Muskrat Falls, which is not far from Upper Churchill, where there could be a linkage.
They have access, perhaps at some cost, to other means to meet their contractual responsibilities with us. But we have a solid agreement. We believe that once they are able to look at all of their issues there that they will eventually get that project moving.
Yes, we've built that in such a way that it's an important component for us, but there are other sources that we could temporarily obtain — low-carbon or no-carbon energy. We're going to be able to meet our responsibility to our consumers in Nova Scotia.
Gas has been important to us. We have built a gas-fired station in Tufts Cove at Dartmouth. We own the LNG terminal pipeline out of Saint John, and we have been a participant in that. We continue to look at opportunities in natural gas, coming from New England and Atlantic Canada sources.
Yes, that and other sources could be a part of it. Our solution has been to have a portfolio where we're not blessed with any one resource being huge; we have a lot of things. We're looking at tidal, wind, biomass, a little bit of oil but mostly gas, a little bit of coal and imports. That's the solution we have taken, and we've been successful for the 34 years I've been with the company to always meet our obligations in a cost-effective way.
I agree that there are other alternatives we could explore, but there are costs and political and social challenges to that. We are open to that.
Senator Patterson: First of all, I want to say how pleased I was about your recommendation about lighting up the North — bringing first-class power to our Northern and indigenous communities. Nunavut is an exception in the absence of ways to reduce gas emissions, totally dependent on diesel.
Then, you have this recommendation about setting an economy-wide North American carbon price. The premiers just met in Dawson City and reiterated their stance against a carbon tax, saying that it will disproportionately affect Northern residents. The premiers say: "We already pay a carbon tax because we buy most of our goods from Ontario and Quebec, and it's already embedded in what we do. In Vancouver, the premiers and the Prime Minister agreed we should transition to a broad suite of measures that will include pricing carbon, but they didn't say it had to be.
So I guess my first question is: Would you agree that setting a carbon price is not effective in any form, is not an effective tool in the North, where carbon pricing won't be an incentive to go into alternative energy because, right now, there aren't any alternative energy sources?
Mr. Marchi: First, we've been saying, in terms of lighting up the North, when people say, "Yes, but Mr. Marchi, that's hugely expensive,'' I say, "Yes, but, as Mr. Trudeau would say, it's 2016, and, the last time I checked, the North was still part of Canada. There are still obligations on the part of Canadian governments.'' Way back when, we lit up the cities and then we extended that to the rural area. We feel it's now time to complete that triangle and light up the North properly.
Second, on carbon price, we feel like many other sectors, a carbon price that governments fix, with broad-based applicability — that's why we say economy-wide — with looking to our friends to the South because we don't want our companies hurt on the altar of a carbon price, with the flexibility as well to accommodate regional sensitivities, as you speak of, to the North. We think a carbon price well done can be a good signal, senator, to innovation, to investment and to linking, hopefully, to aspirations that Canadians have of cleaner water and cleaner air in a cleaner environment. We think there is a way to do that, but we need to do it well because, if we do it badly, it's going to hurt us.
Martin wanted to jump in to answer part of your question.
Mr. Kennedy: I would just emphasize, senator, that we should never conflate North American carbon price with a federal carbon tax. I think there is a common thematic between the Nova Scotia presentation and my own in that we have, in some cases, very robust provincial carbon plans, some that include tax mechanisms and others that include other expenditures. We should be looking at their equivalency against some backstop or standard federally. If there is a role for the federal government to step in where plans are inadequate, that's all well and good. But where the provincial plans are sufficient and make an adequate contribution to achieving national goals, there isn't a need to pancake on top of that an additional tax. The idea that we should price carbon and should make a judgement about the equivalency between jurisdictions as to the investments and mechanisms they've made is a fair proposition. Layering a federal carbon tax on top of these provincial actions may not be necessary and may even be counterproductive.
Senator Patterson: Thank you very much for that.
I was also thrilled to hear your suggestion, Mr. Marchi, that infrastructure money should be used in transformational projects. What we have been hearing is: Use infrastructure to shorten commuter times and build transit in urban centres.
You mentioned our energy study. Thank you. We looked at connecting to the North American grid — there is a possibility in Manitoba and probably Saskatchewan — or taking advantage of our hydro resources. We have, as you said, a very small population base to pay for that infrastructure.
How do we figure out what these transformational projects are? Is this where the national strategy comes in? I think our committee kind of said, "Well, it looks like hydro might have potential. It looks like connecting to the grid might have potential, but they have to be viable.
What's the mechanism for Canada to determine how it invests effectively, as you have said, in the rural regions and my region, Northern Canada?
Mr. Marchi: Certainly, one place, as you said and as Senator Ringuette mentioned, is a Canadian Energy Strategy. Now that the federal-provincial relations button has been reset somewhat, that doesn't mean it's going to be a love in — never has been; never will be — but the collaboration and the cooperation on those big national endeavours are crucial. One of the outgrowths of having that collaboration and an energy strategy is to address the needs of our country and to define what the answers to those needs are, either through policies or transformational projects.
What I can tell you, senator, is what we're doing in that regard in addressing that gap that I talked about between regulators telling us no and governments saying, "Why aren't you doing it?'' We've identified a number of key departments. We're bringing a number of key members. With us, we're bringing a number of those transformational projects, and we're having a round table with those departments, with our members, with the projects, so that we can have that discourse and, hopefully, have a meeting of the minds and look to Budget 2017 and beyond to begin to fund those transformational projects. That's what we're doing.
Senator Patterson: Great stuff.
Senator Johnson: Thank you for your very good comments this morning.
I was reading your recommendations. Senator Patterson touched briefly on lighting up the North. I'm very interested in the trilateral issue — Canada, U.S. and Mexico. There are several comments in your booklets about it. Coming from Manitoba where we have a lot of Northern indigenous communities, I'm particularly interested in your recommendation about encouraging Canada, U.S. and Mexico to ensure that action on clean energy solutions to remote and indigenous communities features prominently in the next phase of trilateral cooperation. Could you tell us more about that? As chair of the Canada-US Inter-Parliamentary Group, I'm in Washington a lot, and this is always an issue that we address, particularly the Mexican piece now because they're meeting so much of everything. It's almost not Canada-U.S. anymore; it's Canada-U.S-Mexico in all the things we discuss.
Mr. Marchi: Thank you, senator. We were invited by the Government of Canada to address the trilateral meeting of energy ministers from the three countries in your hometown of Winnipeg in February, and the ministers said, "Look, Marchi, can you identify cross-border electricity opportunities that would provide some ideas for where we can work?'' We were gratified to have been invited, and we tried to identify some of those opportunities. Then we said, "Why don't we also try to build that into a report so that it can inform this discourse because there is momentum behind this agreement?'' The Prime Minister had it in his platform — one sentence — and, now, we think that one sentence could be pretty powerful. We think it's a smart way to proceed, particularly post-COP21, in looking to harmonize, with the United States and with Mexico, our clean energy and clean environment ideas. For example, we deal very much with the United States. We have a sister organization. But we don't have a sister organization in Mexico, and we should, from a North American perspective.
The recommendation you pointed to is to identify that our three countries all have remote areas and ask what we can do, collectively, to address that and maybe leverage the synergies that we each bring to the table.
So we are hopeful that, at the "three amigos'' summit on June 29, they can have it advanced enough to sign. I do not know where it's at in the internal policy discussions, but we are a big fan of a North American agreement. Recommendation No. 10 also speaks to consultation because we say, "Look, we really have to do this with industry. So don't just tell us about things that are getting done or that you want to get done. Let's engage together because it is really about a partnership. Governments set the ambitions, and industry has to meet them.
We're looking forward to that and we are happy to be at any table. We also sent you a copy of that report because I recognize your leadership on the Canada-U.S. front, and we think this is a very timely and topical discussion piece.
Senator Johnson: I've been interested with the way that Canada has brought so much to the table in terms of the ideas and recommendations vis-à-vis our trilateral. I know Mexico really appreciates it. They've been extremely interested in talking to us about many of these things. I'm sure, in terms of especially the northern piece, with the U.S. now chairing the Arctic Council and all the things that are happening, they have finally really kicked in there, too.
Mr. Marchi: I've met with both the U.S. ambassador and the Mexican ambassador. Speaking for Mexico, he is particularly energized, if I can use that word, on this agreement. He is a big booster.
Senator Johnson: Thank you very much.
Senator Mockler: A notable omission in your presentation — and I'd like to have your comment on it, Mr. Marchi — is nuclear production. Do you have any comments on that, especially coming from New Brunswick, where CANDU has been successful?
Mr. Marchi: Gaëtan Thomas, the CEO of NB Power, constantly reminds me of that. If I omitted it, it's not because I'm afraid of it. We believe in nuclear. We believe it should be a healthy part of the mix. We all know that nuclear is a very expensive proposition that needs critical mass in terms of size of town or community.
We also recognize that, in the political discourse, nuclear is one of those issues that sometimes makes people run for the exit. We saw what happened in Germany after the Japanese earthquake, where they went from one extreme to the other, and now they are burning more coal. And guess what? Kids are bringing puffers to school a little more than they used to.
We also believe that Canadians in that discourse should judge the Canadian nuclear activities from their record and not necessarily judge them based on what happens elsewhere. If you look at the nuclear record in Canada, it has been impeccable, and I think that they deserve some benefit of the doubt.
We support nuclear in the mix. We think it's a part of moving to a cleaner environment, for sure. Between that and hydro, I think we're blessed, as well as renewables.
Senator Mockler: My last question is for Mr. Toner. Would you support a second nuclear plant in Atlantic Canada?
Mr. Toner: In Nova Scotia we have laws that say we can't build it and operate it. As I mentioned earlier, with the ongoing and growing cooperation we have with NB Power, we're pleased that they run a very efficient unit there. If it appears that that's the next thing that should be built in the region, we would obviously be open to that.
Senator Mockler: You said, Mr. Toner, that we should not create additional burdens. Could you explain to us what burdens you don't want government to create?
Mr. Toner: Mr. Kennedy touched on it as well. We believe that we are already taking measures that cost us money and that have been passed on to our ratepayers and are achieving the actual goals that have been set out by both our provincial government and, through equivalency, by the federal government.
For example, if we were to have an additional carbon tax on top of what we're doing, we don't believe it will change the behaviour significantly unless the tax was enormous. We think we have been more efficient in having legislation in our province — a bit painful initially, but once we understood how to make that work successfully, we have certainty so we can invest. We have invested, not just in our own facilities but in IPPs and other means, imports. We are not trying to solve it all ourselves, and in fact we're trying to solve it together in our region.
We think we are already doing what is asked, so additional penalty would seem to be something we pass on to the consumers and would not add a lot of benefit.
The Chair: Thank you. I have one quick question, and if you don't have the answer you can actually provide it to the clerk, please.
You said that you would need $350 billion over the next 20 years, if I remember correctly.
Mr. Marchi: Yes, starting in 2010, actually.
The Chair: What would that do to rates, on average? I don't always like averages, but what would that do to rates, on average, across the country if you use that $350 billion? If you have an answer now, that would be great. If you don't, you can certainly get back to us with that.
Mr. Marchi: I think I will get back to you, but I also don't want to skirt perhaps part of the question that says: Will there be a higher cost passed on? The answer is yes. It speaks to the reliable electricity Canadians have come to rely on. Ultimately, the buck stops with the consumers. The question is cost married with value; is it a value proposition worth doing?
The other thing is: What are the costs of not investing the way The Conference Board of Canada — that's not our number, by the way. The Conference Board of Canada did a study and calculated the 350. The flip question is what happens if we don't invest? I can tell you what's going to happen in 20, 30 years. There will be more blackouts and more brownouts and less reliability. It is kind of a two-dimensional question, but I don't have the numbers about the predictability.
Devin, do you?
Mr. McCarthy: Yes, I believe so. The National Energy Board, in 2013, estimated that rates across Canada — so the average scope — would go up by 20 per cent, 2013 to 2035, so about a per cent per year over the span of this.
The Chair: I would like you to double-check that and make sure you're comfortable with it. I understand about not doing it. I'm not saying we don't do it. This committee is not here to say that at all. I think we understand the problem and the issues quite well. I would just like to know what those costs are, or what those costs would be to the end consumer. That happens to be Fred and Martha who actually pay the bill at the end of day.
Mr. Marchi: The bill today, on average — Statistics Canada — is $3.59. It's cheaper than the United States, cheaper than Europe. $3.59 for something indispensable, we think we have it pretty good.
The Chair: And we do. We heard from Germany. They're only at about 43 cents for the average household. Denmark, the other one that's held up all the time, is about the same rate. We understand that. They are not so great over there. We are great here, and we appreciate that. We know that. We just want to know what those costs would be.
Thank you very much for your presentations and answers. We appreciate that.
For the second part of our meeting, we are continuing our study on the effects of transitioning to a low-carbon economy. I am pleased to welcome, from the Canadian Biogas Association, Jennifer Green, Executive Director; Kevin Matthews, Director; and Donald Beverly, Director.
Please proceed with your opening remarks and then we'll go to questions.
Jennifer Green, Executive Director, Canadian Biogas Association: Thank you, Mr. Chairman, and thank you to the committee for the opportunity to speak to you today about biogas as part of the solution to Canada's transition to a low-carbon economy.
You have introduced my chair and vice-chair. I will be providing our remarks and then we will look for questions that can be directed to the team as you wish.
The Canadian Biogas Association is the collective voice of Canada's biogas sector, developing the biogas industry to its fullest potential through capturing and processing organic materials to maximize the utility and value inherent within that material.
Our members span the entire value chain of the sector and consist of farmers, municipalities and private sector owners and operators of biogas systems, technology suppliers and consultants, financial and learning institutions, utilities and waste industry and organic residual generators.
As part of our remarks, I aim to leave you with an understanding of three things: What biogas is and how it is used; how much biogas is currently being generated and what the potential is to address our need for low-carbon solutions; and lastly, how the biogas industry contributes to a low-carbon economy.
In the context of these discussions, Canada is tasked with reducing 300 million tonnes of CO2 equivalent by 2030. Biogas is a proven and adaptable technology installed across the country in a variety of settings and sizes that has the potential of reducing 37 and a half million tonnes of CO2 per year or capable of reaching over 10 per cent of Canada's GHG reduction target.
Biogas offers Canadians a multi-faceted solution to helping protect our environment by capturing methane, generating renewable energy sources and creating new and expanded economic opportunities. In order to get there, we need supportive policies and programs that enable carbon sources to be available and reused in a sustainable manner.
Biogas is a renewable source of methane gas, created when organic material breaks down in an oxygen-free environment. This biological process is referred to as anaerobic digestion. The main component of biogas is methane, also the key component of natural gas. Biogas can be upgraded to renewable natural gas, which is carbon-neutral and interchangeable with conventional natural gas.
The source material that forms biogas is carbon from organic materials. As shown on page 4 of your package, the Canadian Biogas Study summarizes these five sources of carbon from organic materials found in agriculture, such as livestock; manure and crop residues; residential or commercial source-separated organics, which is human food residuals either pre-consumer or post-consumer; landfills; and biosolids from waste water treatment.
Biogas offers the greatest opportunity to manage carbon sources, whether this is agricultural by-products, the processing of source-separated organic materials from residences or commercial businesses, or landfill gas recovery.
So how is biogas used? A biogas project can be highly specialized, utilizing one or more of these carbon sources, or designed as an integrated, multipurpose system, accepting and processing multiple materials for a range of energy applications. As illustrated on the graphic on page 5, biogas produces renewable heat, electricity and pipeline quality gas that can be stored in a pipeline and used for transportation, household heating or industrial, commercial and institutional purposes.
The key takeaway is that biogas provides a closed loop opportunity for multiple businesses, extracting energy while recycling valuable nutrients.
In the case of transportation fuel, biogas can be upgraded to renewable natural gas. In the example of return to base fleets on page 6 of your package, the chart shows that switching to compressed natural gas results in emissions reductions of about 25 per cent from diesel or gasoline, with over 30 per cent price savings expressed in diesel litre equivalents.
Fuelling with compressed renewable natural gas results in emissions reductions of about 90 per cent from diesel or gasoline at approximately the same price. A blend of CNG, compressed natural gas, with 10 per cent RNG, renewable natural gas, results in emissions reductions of about 31 per cent and provides added benefits including using local resources, job creation and nutrient recycling. When blended at 10 per cent, renewable natural gas only adds about 5 cents per litre, and most of this cost is in distribution. There is no requirement today to blend renewable natural gas, hence the recommendation for a renewable fuel standard.
Today in Canada, there are well over 100 operating biogas projects generating renewable electricity and heat and close to a dozen renewable natural gas facilities across Canada.
The map of Canadian projects on page 7 illustrates the cluster of biogas development, producing either electricity or renewable natural gas, which is predominantly located in British Columbia, Ontario and Quebec. The variety of projects is being developed by farmers, municipalities and commercial private sector entities.
Anaerobic digestion technologies are proven, can develop in small footprints and function compatibly with existing operations, for example, on farms or waste water treatment plants. Biogas delivers energy when Canadians need it. It is a 24/7 source. Biogas is flexible, renewable power that can interface uniquely with a diverse energy mix. Biogas generates energy independent of weather and can produce renewable electricity or be stored in the natural gas infrastructure for a generation of combined heat and power hosts.
Biogas in the form of renewable natural gas is an important addition to the portfolio of energy options available to biogas producers. RNG can be produced to meet all of the technical standards and requirements of conventional natural gas and therefore offers the same degree of versatility at the same time as using existing infrastructure.
On page 8, the Canadian Biogas Study found that all biogas derived from carbon sources together have the potential to meet about 3 per cent of Canada's natural gas demand, or 1.3 per cent of its electricity demand. This amount is estimated if all carbon sources are used.
Biogas reduces two critically important greenhouse gases — carbon dioxide and methane — as noted on page 9. Carbon dioxide emissions are reduced when biogas replaces fossil fuel use — for example, coal, diesel or natural gas — and methane is captured in the biogas process and is converted to energy.
The Canadian Biogas Study identified that all biogas sources have the potential to reduce Canada's GHG reductions emissions by 37.5 million tonnes per year, the equivalent of taking 7.5 million cars off the road. This offers Canadians a solution that gets them over 10 per cent of the way to reaching a reduction of 300 million tonnes of CO2 by 2030.
As was mentioned earlier, in transportation, RNG can reduce emissions by up to 90 per cent when compared to diesel or gasoline.
Looking at the potential for methane abatement in another way, page 10 illustrates conceptually all the areas where biogas can play a role in reducing carbon when compared to baseline conditions and practices in place today.
Under a framework of supportive policies and programs, in scenario one, biogas reduces the biogenic methane from fugitive landfill gas emissions. In scenario two, it reduces biogenic methane from the storage of livestock manure. In scenario three, it displaces the fossil-based CO2 from natural gas combustion for electricity production, with carbon- neutral biogenic CO2 from biogas-producing renewable electricity.
In scenario four, it displaces fossil-based CO2 from natural gas combustion for heat production, with carbon- neutral biogenic CO2 from biogas producing renewable heat. In the fifth scenario, it displaces the fossil-based CO2 from diesel combustion in transportation with carbon-neutral biogenic CO2 from renewable natural gas fuel.
The key takeaway message from this page is that there are multiple ways in which biogas can reduce methane emissions or displace other higher carbon-intensive fuels with lower carbon solutions. In some cases, biogas reduces GHG emissions by greater than 100 per cent from fossil fuel baseline.
So how does the biogas industry contribute to a low-carbon economy and provide value to Canadians? Biogas projects provide added value to Canadians as noted on page 11 in the package. In addition to methane abatement, renewable energy potential and waste management solutions, as previously referenced, biogas also offers economic and social stimulus to Canadians as shown on page 12.
Biogas plays many important roles in local economies, including investment in innovation, advancement in clean technologies, engagement of youth, and job creation. Realizing the full potential of biogas development can lead to 1,800 separate construction projects, with capital investments of $7 billion, and an economic spin-off of $21 billion to the Canadian economy; close to 17,000 construction jobs for a period of one year, and 2,650 ongoing long-term jobs; 100 new and expanded Canadian companies, including biogas system designers and developers, equipment suppliers and laboratories.
What can the biogas industry and government do together to help Canada achieve a low-carbon economy? We've already identified on the map the clusters of projects developed. Provinces with supportive policies and programs have demonstrated the uptake for biogas development. Page 13 identifies some key policies across Canada and the U.S. A range of approaches has helped to advance the growth of the biogas sector, including regulation, policy, taxation and incentives. Each province has implemented different mechanisms and tools which have been instrumental for the growth of the biogas sector.
Specific examples include: cap and trade regulation; offset protocol development; bans on organic material going to landfill; policies supporting climate change initiatives and complementary measures; feed and tariff rates in Nova Scotia and Ontario; capital grants in Quebec and Ontario; and innovation funding, such as in Alberta, which leveraged public contributions with private investments.
In addition to Canadian provinces, the U.S. has implemented programs, including renewable portfolio standards for electricity, and renewable fuel standards and low carbon fuel standards for renewable natural gas to transportation into California. The U.S. could benefit from Canadians projects, but at the expense of Canada's ability to meet its own carbon reduction goals cost effectively. Without supportive policies and programs, biogas projects will not be developed. More needs to be done to enable the sector to grow. The Canadian Biogas Association would like to work together with provincial and federal governments to develop conditions where carbon sources are available, valued, and optimized for energy and resource recovery.
As noted on page 14, we feel this can be done by introducing changes to Canada's renewable fuels regulations to include RNG as an allowable fuel, similar to the renewable fuel standard in the U.S. It makes sense for Canada to align with the U.S. EPA in their efforts. We already see a willingness by Canada's federal government ministries to do so, including: mandates to encourage optimized use of carbon sources and that encourage RNG production to green the natural gas supply, value and recognition for methane emission reductions from biogas via carbon pricing; offset protocols and targeted innovation investments; and biogas and RNG incorporated into Canada's energy strategy and climate strategy.
Biogas is a winning solution for Canadians to help achieve a low-carbon economy. Biogas development offers immediate steps to reach aggressive GHG targets with a 10 per cent contribution to Canada's 300 million tonne target. With a focus on carbon, Canada is well-positioned to create the right conditions for biogas producers and consumers to take advantage of this low carbon fuel.
Mr. Chair, thank you very much for this opportunity to present, and I'm happy to answer any questions.
Senator Massicotte: Thank you for your presentation. You stated 70 per cent of your sources come from agricultural sources. Is that the potential? Or is that the realistic proportion of your source as it exists today?
Ms. Green: That number from the study is the potential from all agricultural sources. The studies show the full value of livestock manure, plus other crop residuals which could be considered. It takes 50 per cent of that total number. It is a very conservative number, but it does not include purpose-grown crops. It has taken a very conservative number and it's the potential as projected.
Senator Massicotte: Is that number relevant? I'm having difficulty seeing the ease of capturing that biogas from the agricultural sources. Tell me how you capture it and how does it work out to be such a high percentage?
Ms. Green: In terms of the ease with which you can actually capture that material, it's looking at the total number and being able to put a conservative figure on it.
Kevin Matthews, Director, Canadian Biogas Association: The material is not too difficult to capture because it is available on all the farms today. They don't do anything with it. They are either turning it under or spreading it back on the fields. There is not enough incentive from the energy value that's associated with it to produce energy from it. We have it, we just don't utilize it.
Senator Massicotte: If you make the comparison to potential oil exploration, for instance up North, there is potentially a lot of oil in the ground, but when you do the calculation, it is based on the price today. Here is how much reserve we have. If you make that application to the sourcing, what does that number become? Is it 10 per cent? Is it still a significant source? For impractical sources, there is no incentive to change the method currently being used. What do you do with that?
Ms. Green: Your observation is true. There will not be an opportunity where all agricultural applications will be able to implement these types of technologies to be able to use their materials for anaerobic digestion. It is very much a conservative estimate that was looked at across the board in terms of what material is out there. The study looked at the base in terms of what material is out there and looked at what could be practical in terms of its application.
Senator Massicotte: Every province has different policies to basically incite or motivate people to be more green and efficient. With those existing regulations, is your process financially feasible? Are they profitable? Do you need more incentives for the governments to make progress with your ambitious objectives?
Ms. Green: Where there has been biogas development, it correlates well in the provinces where there are supportive policies and programs. We feel that in order for biogas to continue to grow, those programs, regulations and laws need to be put in there to create the conditions so that the investment, reliability and the forward path for growth is there. Those programs have helped to support the industry, without which we wouldn't see the development we have today.
Senator Seidman: Thank you very much for your presentation.
We probably know the least about this kind of renewable process for RNG, for example. It's pretty interesting. In Quebec there is an RNG in Terrebonne that is converting landfill gas to natural gas. There was a big announcement in Saint-Hyacinthe at the end of April. This plant was going to divert residential organic waste and waste from local food processing plants from the landfill because the province had put into effect that they will not allow organic waste to go into the landfill as of 2020. So this is a huge impetus for the province to figure out how to deal with this.
We don't do a lot of public education on these issues, but I know that other countries use this specific approach to transferring organic waste and using it to regenerate energy back into their communities.
This is very innovative here, but perhaps not so elsewhere. Are there other models that you have used internationally in devising your approach and your plans? You're saying that in order to reach full potential you need capital investments of $7 billion. What models are you using from an international perspective?
Donald Beverly, Director, Canadian Biogas Association: I will actually use the two examples that you gave. The Terrebonne plant is an international site. It is the largest landfill injection site in the world, it is using 100 per cent waste from the Montreal region, and all of it is being exported to the United States because there is no market in Quebec that will support the project.
There are viable markets in the States — California in particular — that make it interesting and those markets are there simply because there is a mandate to have renewable content in their fuel supply. It's a very attractive market for them.
The Saint-Hyacinthe project is also under a mandate, but because it's receiving a subsidy — two thirds of the capital to build the equipment — all the gas has to be consumed in Quebec. This is also an interesting project: It is the second largest source-separated organic digester injection project in the world. We've got two big winners here, but they have to sell the gas in Quebec and they can only sell it to Gaz Métro. Gaz Métro has its hands tied in terms of what it can pay for the gas, and it is just enough to cover the cost because there is no renewable value attributed to do this.
To go back to your question on international models, where a mandate exists, markets exist. Where no mandate exists, it's a tough go.
Senator Seidman: Of course, in Quebec there is the mandate to get it done because we can't put organic waste into landfills any more, but that has to then be consumed in Quebec.
Mr. Beverly: What ultimately happens is the taxpayers would have to cover whatever losses are incurred by that Saint-Hyacinthe facility, should there be some. Saint-Hyacinth, as I said, is the second-largest digester for injection applications in the world. There are a number of other projects in Quebec — Beauharnois and Montreal — and they are all smaller. They will all have challenges in terms of how they will cover their costs because they cannot export to viable markets.
If there were a viable market — if there was a renewable content rule for the gas grid or a renewable fuel standard for fuels, that would be a smaller market — that obligated the gas utilities to buy the gas at a fair price, then you would have something more interesting.
Senator Seidman: Would that be a role for the regulators?
Mr Beverly: The regulators can only respond to what the law says. If the law says you shall have 5 per cent renewable natural gas in your supply, then they are going to ask the utilities for their acquisition plans.
Senator Seidman: So that's a role for us as legislators?
Mr. Beverly: Absolutely.
Mr. Matthews: The crying shame behind a project like Terrebonne is that it's all Canadian waste going into the landfill, but the Americans get the full value of the associated environmental attributes, which everyone is going to add up as we try to meet our targets. It's our material, but it's on their side of the accounting ledger and that's not a good way.
We produce a lot of organics, the organics can be transformed and it's unfortunately the way the market exists today, in most places, that it is more economically beneficial to put waste in the landfill than it is to convert it into an energy source. That's what needs to change.
Senator Seidman: As citizens we have to demand that our government have legislation that requires a 5 per cent renewable in natural gas, for example. That would then put the onus where it should be and we wouldn't be sending it to the U.S.
Mr. Matthews: Right.
Senator Seidman: Thank you.
Senator Massicotte: Regarding that last point, isn't there a carbon tax, or some pricing of carbon in most of the provinces? You could argue that, really, the material goes into the landfill. They're paying for it, no?
Mr. Beverly: No. The carbon tax doesn't apply to the landfill gas. The larger landfills have to capture the gas and burn it. The smaller ones do not, so that methane goes to the atmosphere and contributes to the 20 per cent of methane emissions from landfills that we live with and nothing is being done about.
Senator Johnson: Biogas production in Canada has a wide range of potential applications, as we have been discussing, including the landfills, municipal wastewater treatment facilities, farm-based operations and the pulp and paper and food and beverage industries and, in my province, fish. What about those fish guts in Lake Winnipeg that I can't seem to get anybody to pay to have reprocessed for better organic uses?
I'm really interested to know how many biogas facilities are currently operating in Canada. What is the most common type of biogas facility? Which type holds the most promise for generating biogas and why? And what is percentage the potential of total landfills that produce biogas? I don't think people in Canada have a clue. I don't.
Ms. Green: I think you're right. The technology is here and it is being used. The way biogas has been integrated across Canada, again, is very dependent on what the programs are motivating each of the provinces.
For example, in British Columbia, we see that the FortisBC utility offers the opportunity for facilities to come on and provide RNG to the system and that's a voluntary opt-in program. So there are facilities there that are able to capture the carbon material and create renewable natural gas.
In Alberta, we see a lot of biogas go to electricity. We're seeing that used mostly on large, agricultural operations that are incorporating different types of food materials in combination with their agricultural source materials.
In Ontario, we're seeing a lot of applications both in the agricultural sector as well as one facility that collects all the source-separated organic materials in the Toronto region and that particular facility is also operating.
In Quebec, we see again a lot more RNG. There is not as much agricultural uptake there.
Across the board, there are about 100 operating facilities in Canada, and close to a dozen renewable natural gas facilities.
So they are here, they are now and they are producing energy but very much motivated provincially where the programs provide them avenues to develop.
Mr. Beverly: May I add to that?
Senator Johnson: Please do, in terms of the promise for generating biogas facilities.
Mr. Beverly: Landfills are producing biogas, all of them — even the closed ones — because even decades after they are closed they continue to produce and emit. The ones that are actually captured and doing something with it number in the range of 12, and we have hundreds in Canada.
Senator Johnson: Why is that?
Mr. Beverly: Because it's cheaper to let it go to the atmosphere.
Senator Johnson: But in my province of Manitoba, it's leaching into the lake. Whether it's manure or because of fishermen depositing entrails of fish on the land, it all goes into the water.
Mr. Beverly: There is no incentive to capture it.
Senator Johnson: I understand that, but I wonder how we can further try to capture it. It's a public relations campaign, too, of course. It would have to be.
Mr. Matthews: There are rule of thumb numbers, but our population produces about a tonne of garbage per person across the country and about 30 per cent of that is organic in nature. That's 10 million tonnes of organic waste. Different types of material produce different volumes of gas, but it's about 100 cubic metres per input tonne, 100 cubic metres per tonne of organics.
On a GHG basis it's pretty much the equivalent. For every tonne of material that is diverted for digestion and production into energy, it produces about a tonne of reduction of GHGs.
It's not the answer; it's an answer. It's part of the mix and an opportunity for every Canadian to participate, because we are the generators, individually, of the material, and we're just not finding a way to harness its opportunity. It tends to be a wasted opportunity. We each pay at the pump, we pay at the electrical bill and everything, and we feel captivated by that whole exercise. It gives people something to do, to participate in reaching our reductions.
Senator Mockler: In New Brunswick, we have Laforge biogas. Have you visited them?
Ms. Green: Yes.
Senator Mockler: How would you rate that across Canada, that particular facility?
Ms. Green: That facility on an agricultural operation is large. I think it has the opportunity of generating up to 1.2 megawatts of electricity. That would be a large-scale facility. What we have seen is the innovation by the agricultural community, by farmers, to diversify their operations, to recognize the contributions that agriculture provides to GHGs and to be able to integrate them. That facility would be representative of a small number of farms because of its size, more similar to many of those in Alberta.
Senator Mockler: I listened carefully to what you have presented. What is the most common type of biogas facility that we should encourage?
Ms. Green: I think it's a mix of all of them, because the organic sources that are available to us offer the opportunity of combining some of those sources. We've talked about the landfill. We've talked about the agricultural operations. You can look to being able to co-digest or mix some of these organic sources.
I think that as you're looking at solutions to reducing GHGs, biogas offers the diversity of its applications not particularly to one sector but to multiple areas in terms of being able to bring those carbon sources together and embracing that as a fuel.
Senator Mockler: In western New Brunswick where we have heavy production of dairy, hogs, potatoes, potato residues, poultry and hog manure, that was the solution. They have, in Atlantic Canada, Laforge as an icon moving forward. We should be a little bit more specific than just in general what to do with the biogas, to feed the electric grid.
Senator Patterson: I come from the largest jurisdiction in Canada with 20 per cent of the Canadian land mass but scattered in 25 rapidly growing communities amongst a total population of 37,000 people or so.
I know you're here to talk about the potential for large-scale applications of biogas. That's all very exciting, but I'm wondering, our small communities go to great expense to truck solid and liquid waste to and from homes and landfills or very primitive sewage lagoons. I am curious whether you can tell me if there are viable small-scale applications for converting biogas into alternate energy.
We see this being done in India or Africa, and I've often wondered if there is any potential for small-scale applications in cold, isolated rural communities like those I represent.
Mr. Matthews: The answer is yes; it's coming. Generally with technologies, as things get under way, there are usually large applications where they start, economies of scale and whatnot.
I've spent many years in the business and I get questions all the time such as, "Do you have something for me?'' These are the smaller communities. Generally, the answer is, "No, we don't.'' But as time has gone on and technology has developed around the world and is developing around the world, it brings these into smaller, more manageable and useable units like you're talking about.
There needs to be development and innovation in the industry. As money is brought out through the different programs, whether through renewable fuel standards, RFS- or RPS-type programs, these monies — and I think Ontario, for example, is one that is trying to amass a pool of dollars which they can channel into innovation — will make the technology available for smaller applications. It is coming, and support will drive it sooner rather than later.
Senator Patterson: I think there was talk at the Vancouver meeting of a low-carbon economy fund. Do you think there might be a role for the federal government in promoting biogas through initiatives like that and possibly including them on a smaller scale?
Ms. Green: Absolutely. I think that there is a role, and we've listed a couple of those recommendations. I think that others have alluded to the fact that the education and awareness pieces are also extremely important.
As we look to the energy and climate strategies that Canada is undertaking, it would be an absolute benefit to us all to be able to incorporate biogas and renewable natural gas into those strategies as options available to us. The recognition of this technology also comes with the investment support that, as Kevin alluded to, would be necessary to move us forward.
Senator MacDonald: Thank you for this presentation. I find this really interesting, I have to say. I am one of those people who, over the last number of years on this committee, has been watching the way politicians and governments have conducted themselves, when it comes to solar and wind power, by rushing to invest in these things without any real assessment of the long-term financial impact or the financial efficacy of it.
When you have waste that you can use and it is not going to any other use, it seems to me that this is a much more advantageous route to go. We know that if you look at the numbers in the country, the percentage of power that's produced by solar or wind is still relatively small for the amount of investment.
In any technology, the more you invest, the bigger the unit you produce and then usually the price comes down. How much money has been invested in this technology across the country compared to, let's say, solar or wind power? For every dollar you have invested, how much has been invested in wind power or solar?
Ms. Green: Again, the programs that have been put in place have not been amassed to a total number. It's something we can look at and get back to you on. You're definitely going to see that correlation. There hasn't been as much investment into biogas, so the programs that have been designed from all renewables have definitely shone the spotlight on others as opposed to biogas. I think a shift in that regard would definitely propel this industry forward and it would have greater receptivity to the Marthas and Freds of the world because they understand that they are also contributing to this. It has this definite benefit.
Senator MacDonald: Outside of landfills, is this primarily a rural technology? That is, is this something primarily based in rural areas and used to feed rural communities?
Ms. Green: In addition to the energy generated, anaerobic digestion also produces a by-product, namely, digestate. If you're putting a carbon source in, you will end up with another carbon source and that material is recycled and can be used as nutrients and soil amendments. In that regard, there is a close tie to the rural areas. That's why it dovetails nicely with the agricultural applications.
The City of Toronto has a facility in the city. These types of technologies have the adaptability of being integrated on a smaller footprint than some other technologies and can capture and control the odours with very sensitive degrees. There is an opportunity to be able to locate these facilities in proximity to what we call the "feed stock,'' or organic materials, so that the ability to integrate the systems to where the source of the materials is and to use them is there.
Senator MacDonald: What's the most common largest biomass or potential biomass product not being tapped into or utilized to its full extent?
Mr. Beverly: It's forest biomass. It doesn't produce biogas so it is a bit outside of our area. However, it produces the same type of product, namely, renewable natural gas, or it can be used to make electricity. That would be the single largest one. Going down the line, currently it's the landfills, though, that will diminish over the decades because we are reducing the amount of organics that are going there. What will grow will be the source separated organics run by municipalities such as those described by Jennifer that are located in Toronto. Then there will always be the agricultural, which is a more distributed system. It is always a smaller scale. The trouble is getting that to a centralized spot is difficult, so it is a smaller base. It's a larger one but more difficult to reach.
The Chair: Those are the end of the questions, but I have a couple, if I could.
There is an ongoing project now with the provinces that produce natural gas and the federal government to see how fugitive gas can be captured in the system. That's where it leaks out at valves and those kinds of things. We know that straight methane going to the atmosphere creates four times more greenhouse gas than if it was burnt. To try to capture that gas or stop those leaks, that fugitive gas makes sense. It is the same from landfills: straight methane.
Have you made any contact with the Minister of Environment, or the Ministry of the Environment and Climate Change or Department of the Environment to see if you could actually be part of that process in capturing landfill gas?
Mr. Beverly: Your reference to gas emissions is outside the scope. That's the responsibility of the oil and gas industry. I think it's 43 per cent of all methane emissions. Landfills represent 20 per cent of methane emissions and manure management another 8 per cent. About 28 per cent that could go to biogas currently has few effective mechanisms to try to capture it. There is one within the cap-and-trade system in Quebec that would allow that benefit of multiplying every tonne of methane captured by 21 to get your CO2 reductions as offset credits. That does exist on the books, but currently there are zero projects because it's too complicated.
The Chair: Let me get back to the question. There is a process ongoing now between the oil and gas industry and Environment Canada to see about actually reducing fugitive gas from the system because it's straight methane.
Is there some correlation here that you folks could do along those lines with the oil and gas industry or with the ministry or the department of environment, to look at landfill gas as being part of that because it's straight methane? Could you do that or have you thought of that?
Ms. Green: We have not been made aware of that. That's something we could definitely look into in terms of understanding what their scope of work is and how there could be a correlation for our technology to play into that.
The Chair: I would suggest you can do it through CAPP, the Canadian Association of Petroleum Producers, fairly easily.
You say that 37.5 million tonnes of greenhouse gases could be saved on a yearly basis. Further on you say that it would create 1,800 separate construction projects, $7 billion in capital investment and $21 billion in economic spinoff to the Canadian economy. Would I be correct in assuming that? If regulations were put place, however you came up with that $7.35 million figure, it would create that kind of economic activity; am I correct in assuming that?
Ms. Green: That's correct. That's how the information is meant to read.
The Chair: If you did that, what would that cost per tonne? Let's say all the regulations were put in place. You must have figured out some regulations, something to arrive at these numbers. If so, how much would that be a tonne? If you don't have that number —
Mr. Beverly: I can do it because I'm more familiar with the gas side of it. I'm sure we could transpose it over to the other side.
The additional cost to produce RNG over natural gas adds about $7 a gigajoule, which comes to about $140 a tonne of carbon dioxide.
The Chair: I'm fine with that. The last quick question is about Canada's landfill in Quebec. You referred to it earlier. It started selling renewable natural gas to California in 2015. How do you move it from Quebec to California?
Mr. Beverly: Commercially, with contracts. The gas is presently consumed in Quebec.
The Chair: You put it in the present pipelines.
Mr. Beverly: It's consumed in Quebec. A carbon tax is paid on that as if it was natural gas but the gas is sold commercially, because of the continental network, through contracts.
The Chair: California claims that but it's burnt in Quebec?
Mr. Beverly: Yes.
The Chair: Thank you very much for your presentation. I appreciate it.
(The committee adjourned.)