Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 9 - Evidence - May 17, 2016
OTTAWA, Tuesday, May 17, 2016
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 5:03 p.m. 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 am chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room and viewers all across the country who are watching on television.
As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the 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. I'll begin by introducing the deputy chair, Senator Paul Massicotte, from Quebec.
Senator Ringuette: Pierrette Ringette, New Brunswick
Senator Mockler: Percy Mockler, New Brunswick.
Senator Seidman: Judith Seidman from Montreal, Quebec.
Senator Johnson: Janis Johnson, Manitoba.
The Chair: I'd also like to introduce our staff, beginning with the clerk, Marcy Zlotnick, and our two Library of Parliament analysts, Sam Banks and Marc LeBlanc.
Today marks our tenth meeting for our study of 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.
Today we have two witnesses: SaskPower and BC Hydro. Appearing before us via video conference, representing SaskPower, we welcome Mike Marsh, President and Chief Executive Officer; and Guy Bruce, Vice President, Planning, Environment and Sustainable Development. Representing BC Hydro, we'll hear from Chris Sandve, Director of Policy and Reporting.
Thank you for joining us tonight, gentlemen. You have some opening statements to make, and then we'll go to questions and answers. We will start with SaskPower. The floor is yours, sir.
Mike Marsh, President and Chief Executive Officer, SaskPower: Good afternoon, Mr. Chair and committee members. We're pleased to share SaskPower's plans for a sustainable electricity future in Saskatchewan. We've prepared a brief presentation, which will take about 10 minutes, and then we'll be happy to answer your questions.
Turning to slide 2, first let me tell you a bit about our company. SaskPower is the province's largest Crown corporation and the primary supplier of electricity in Saskatchewan. We are a fully integrated power utility. Our 3,200 employees manage more than $10 billion in generation, transmission and distribution assets and 156,000 kilometres of power lines in the province. We operate nine natural gas-fired facilities, eight hydro facilities, three coal-fired stations and five wind power facilities.
We also purchase electricity from independent power producers, as well as Manitoba Hydro, to bring our total generating capacity to about 4,400 megawatts. We serve about 520,000 customers in the province. Last year, we added over 8,000 new customers to our system. This January we set a new record for the most power used at one time: 3,640 megawatts.
Moving to slide 3, today about 40 per cent of our electricity comes from natural gas; 32 per cent comes from conventional coal; we get 20 per cent from hydro and 5 per cent from wind; and about 3 per cent comes from other sources such as heat recovery projects, as well as coal, with carbon capture and storage.
Slide 4. Let me tell you about our key challenges. I mentioned earlier we set a new record for peak load this year. We have seen 20 per cent growth in demand over the past five years, and we expect that to grow by an additional 10 per cent over the next five. As a result, we have increased our capacity by about 780 megawatts since 2007, and we plan to add about 1,700 megawatts by the year 2024.
We also have an aging system. Most of it was built between 1960 and 1985, like other utilities, and it is reaching the end of its useful life. As a result, we need to make historic levels of investment to renew and modernize the system and find cleaner sources of baseload power generation. Over the next 10 years, we will spend about $3.4 billion on capital sustainment, investing in what we already have. We'll spend $6 billion on projects related to growth, including new connections and new generation needed to meet increasing demand. An additional $573 million will be spent on other strategic investments to run the business, such as information technology and security.
We know these challenges are being faced by many utilities across North America. The Conference Board of Canada estimated that from to 2010 to 2030, Canada's electricity system will need an investment of about $350 billion to meet the needs of a growing population in Canada. SaskPower is investing today to help us meet these challenges as we work to comply with new and emerging emissions regulations.
Slide 5. In fact, our goal is to reduce emissions by about 40 per cent from 2005 levels by the year 2030. This exceeds the current federal Government of Canada target. Let me tell you about some of the things we are going to do to get us there.
Slide 6. Our carbon capture and storage project at Boundary Dam Unit #3 demonstrates technology that could allow the continued use of Saskatchewan's coal reserves and our coal-fired assets. Since it became operational in October 2014, the process has captured 839,000 tonnes of carbon dioxide. We are now operating a process at a level that meets emission regulations and our commitment to our CO2 buyer. In April 2016, the process captured more than 82,000 tonnes of carbon dioxide, which has us well on our way to meet our target for 2016 of 800,000 tonnes.
The carbon capture and storage retrofit has prolonged the life of BD Unit 3 to the year 2044. The unit is now the cleanest fossil fuel plant in all of Canada and is an essential part of our plan to reduce emissions going forward.
Slide 7. Another key part of our plan is setting a target to double our percentage of renewables in our generation mix from 25 per cent today to as much as 50 per cent by 2030. We'll meet this target by adding more wind power — our long-term goal is 30 per cent capacity by the year 2030 — and installing about 60 megawatts of utility-scale solar by 2021 and up to 300 megawatts by the year 2030. We're also looking at the potential for more hydro projects in Saskatchewan, as well as importing hydro from other provinces. We are evaluating the potential for biomass and geothermal.
We are working in Saskatchewan with the First Nations Power Authority and individual First Nations on a number of renewable power generation projects, including the proposed Tazi Twé Hydroelectric Project, which is a 50- megawatt hydro development in northern Saskatchewan.
Slide 8. This image illustrates what our system could look like by the year 2030. Of course, as we add renewables, we also need the back-up generation available to provide power when the wind isn't blowing or the sun isn't shining. In Saskatchewan, that back-up is usually natural gas, which is why we're adding up to 350 megawatts of natural gas at a new plant in southwestern Saskatchewan by the year 2019.
Going forward, we'll continue to evaluate all options as we replace our conventional coal units with an eye on cost, environmental performance and reliability.
Slide 9. We're often asked how these plans will impact customer rates. We know and our customers know that adding more renewable electricity options will come at a cost. To ease the impact to our customers, the total cost will be spread out over a period of 15 years as the new renewable generation facilities are constructed and put into service. After 15 years, the difference in customer bills will be approximately 5 per cent more than it would have otherwise been. Overall costs will depend on many factors, including generation technologies, emission regulations, future natural gas prices and the cost to integrate new generation facilities into our current electrical grid.
Slide 10. Energy efficiency, conservation and customer self-generation are also part of our plans. SaskPower has exceeded our 10-year goal of 100 megawatts of heat demand savings by the end of 2017 through our power saving programs. Our net metering and Small Power Producers Program offer customers the opportunity to generate their own grid-connected power using clean technologies such as wind and solar. Since methane emissions from oil production in the province have been identified as a major source of greenhouse gas emissions in North America, SaskPower is also partnering with private companies to help them capture methane to generate electricity.
Slide 11. To sum up, we know we're facing significant challenges at SaskPower. We're investing in our system to ensure our customers have the power they need today and into the future. We're evaluating all available options to supply that power while meeting our emissions reduction target. All of this will help us reach our goal of supplying the people of Saskatchewan with reliable, sustainable and cost-effective power.
That concludes our presentation. Mr. Chair, we're happy to take your questions now.
The Chair: Thank you. We'll go through the BC Hydro presentation, and then we'll do questions after that. Mr. Sandve, the floor is yours.
Chris Sandve, Director of Policy and Reporting, BC Hydro: Thank you, Mr. Chair, and thank you senators from the committee for your time today. It's really a privilege to have the opportunity to contribute to this committee and the discussion.
Like the gentleman from SaskPower did, if you turn to slide 2, I want to spend a little bit of time orienting you to who we are at BC Hydro and the structure.
Across the country, there are different market structures when it comes to electricity. In the case of BC Hydro in British Columbia, BC Hydro is a provincial crown corporation owned by the provincial government. We serve most of the population of B.C., approximately 95 per cent.
As you can see from the graphic, there is a fairly extensive network of generation transmission and distribution assets, and we're probably best known for our hydroelectric assets. Like some other provinces in Canada, we are very fortunate to have a large system of hydroelectric dams, particularly dams on the Peace and Columbia rivers that provide reliable, firm clean power for the system.
We also have a partnership with independent power producers. Independent power producers and customer-based generation accounts for about 25 per cent of our energy supply today.
If you turn to slide 3, it's a detailed overview of how that supply breaks down. Again, because of the fortunate position we're in in British Columbia, having that system of large hydroelectric dams, our electricity supply is quite clean and renewable. Last year, 98 per cent of our electricity supply was from clean or renewable resources, and you can see a breakdown there.
If you're good at math, you may see that the numbers there don't quite add to 98 per cent. The gas-fired thermal would be a bit more than 2 per cent. Our gas-fired thermal is dispatchable, so we have discretion with those resources and how much we run them. In the case of last year, we were able to not run some of that gas-fired thermal generation and get to 98 per cent.
From a planning perspective, with the Clean Energy Act the provincial government has put in place, we are required to plan to be at least 93 per cent clean or renewable, but in fact, like I say last year, we were 98 per cent.
If you turn to slide 4, this summarizes our mission as a company. The reason I put it here is it summarizes the challenges that we face as a utility. As the gentlemen from SaskPower mentioned and as I think has been mentioned in presentations from the Canadian Electricity Association and others, the challenges that I'll go through here are not unique to British Columbia. Certainly, there are challenges being faced by utilities across Canada and North America.
Challenge number one is to keep the system reliable. That involves in our case investing over $2 billion per year for at least the next 10 years in aging infrastructure and keeping that infrastructure reliable and also in growing the system to meet growing demand. That includes adding more generation resources as well as building out our transmission and distribution network to support new neighbourhoods and new economic development.
The second key part of our mission is clean. I mentioned we have a Clean Energy Act that the provincial government put in place in 2010. That at requires, among other things, for BC Hydro to be self-sufficient. That means that within our own borders, we must have enough generation resources to meet the needs of the customers that we serve, although we still are able to trade advantageously with other jurisdictions in order to maximize the benefit to ratepayers.
That act also requires that at least 66 per cent of the new demand that we forecast from 2008 to 2020 must be met through what we call demand-side measures. That breaks down into three things: rates, codes and standards and conservation programs.
That's a key part of our plan to meet growing demand. If you actually meet growing demand through conservation, you avoid the need to build that generation in the first place. That benefits the utility, and it benefits customers by helping them decrease their consumption and therefore decrease their electricity bills.
We do this in three ways. One is that rates are really more rate structures. We have, for example, a Residential Inclining Block Rate which has a higher tier if you consume over a certain amount as a residential customer, sending a signal that is intended to influence a residential customer's behaviour and cause them to consume less if they can.
There are codes and standards where, as technology develops and appliances and so forth become more advanced, we can, working with government, put more advanced codes and standards in place to ensure that people are purchasing more efficient technologies.
In conservation programs, we invest well over $100 million a year right now in programs to help our customers reduce their consumption, which also helps us as a utility by limiting the amount of new generation we have to build.
As I mentioned a moment ago, another key part of the Clean Energy Act is that requirement for 93 per cent to be cleaner renewable in terms of generation.
The third pillar is affordable. The government in British Columbia has recently put in place what they call a 10-year rate plan. That 10-year rate plan basically set up a rate framework, starting in 2015, in terms of how much the rates will increase while all this investment to meet growing demand and invest in aging infrastructure was going on. That puts a framework around all these investments, and it constantly requires us to recalibrate as we face pressures and decisions to ensure that we are staying within that rate framework.
Let's go to slide five, which is some key questions and challenges that we are facing and I think that are common to a lot of utilities as we look at how we move to a low-carbon economy and make these investments in our system. Chief among them is that balance between reliable, affordable and clean. How do we balance those three different objectives?
Some of the things we have done in British Columbia to help with that challenge: One, and this is an opportunity available in jurisdictions where you actually have a provincial or a crown corporation that provides electricity, is that government takes a dividend and net income from BC Hydro. They made a decision in 2013 to take less net income and dividend going forward as a way to leave more cash with the corporation to make those capital investments. As I mentioned, they have the 10-year rates plan. They kind of put a framework around the costs.
In terms of this challenge, I wanted to touch a little bit just on the current challenge we are facing with low commodity prices, particularly with regard to our industrial customers. I think last week you would have had a presentation from the Association of Major Power Consumers, and certainly there are a lot of customers in British Columbia that are facing challenges right now because of where commodity prices are in terms of copper and pulp and paper and coal and so forth. That's something we're certainly very conscious of as we look at making investments and what rate increases have to be. There are certain major industrial customers already under a significant amount of pressure because of where commodity prices are, and we want to make sure we don't layer onto that.
I think you learned about this a bit already, but to that end, for example, we implemented a $100 million conservation program with the thermo-mechanical pulp and paper industry in British Columbia where we helped them invest in more efficient equipment to help make their operations more competitive.
Another key challenge is the integration and back up of intermittent renewables. Again, we are privileged in British Columbia to have a large hydroelectric system, and so we have that backup power that is firm and flexible, that is able to integrate wind and solar, and so forth, and is still clean.
But the challenge that we have longer term, and this is where the second bullet comes in, clean capacity resources, is that within probably 10 years after we built the Site C Clean Energy Project and built out some of our existing hydroelectric assets, our key question is where does the next tranche of firm reliable clean power come from. It's unlikely that we'll be building anymore large dams in British Columbia after Site C, so that requires looking at other sources, such as pumped storage or geothermal or, in cases where it's required for regional reliability and so forth, probably having to look at natural gas.
Another creative solution we have looked at is what we call the Freshet Rate. One of the challenges we have in British Columbia with our renewable generation is that a lot of it tends to come in what's called the spring freshet where ice is melting and the water is running and we get a whole bunch of energy at once. That supply is not coincidental with our peak, which tends to be in the winter months when temperatures are colder. One of the solutions that we have recently looked at to help address that challenge is what we call a Freshet Rate where we are actually giving industrial customers a discount on the electricity rate they pay if they are able to shift some of their load into the spring time and use some of that available energy. For example, if they were taking maintenance outages in the spring and they can shift those maintenance outages to the winter, then they can take advantage of that.
Another challenge is the high cost of replacing diesel generation in remote communities. This is something we have done a lot of in British Columbia, but these are not cheap projects. The flip side of that, of course, is diesel is not cheap either. We actually pay up to about $350 a megawatt hour in some cases for our diesel generation. We are able to, in some cases, identify renewable generation that is $350 a megawatt hour or less and make those conversions, but in some cases it's considerably more than that and it's tough.
One of the things we have been looking at to help offset the diesel emissions in remote communities is looking at conservation opportunities again. If we can provide better insulation, for example, for houses in remote communities, then that can lessen the amount of diesel they have to burn to heat their homes.
Another key challenge that we're thinking about these days is the cost of natural gas verses electricity. A few years ago, the cost of natural gas was higher and we actually had a lot of upstream oil and gas producers that made the choice to connect to the grid and electrify their production because that was cheaper for them to do than self-supply with natural gas. Now, as the cost of natural gas has come down, the economics of that are a little bit more challenging for them. There certainly are producers that continue to want to electrify their production for social licence reasons, and perhaps as a hedge against where the price on carbon may go longer term in the future, but the economics are not so clear cut as they perhaps were a few years ago.
Turning to slide 6, from a utility perspective, when I think about transitioning to a low-carbon economy, the job of the utility in that is to first of all make sure that they have a renewable and clean electricity supply. BC Hydro has taken some steps to do that. First and foremost, our conservation and our Power Smart programs are something we are proud of. Since 2008, we have saved enough energy through those programs to power over 400,000 homes. Like I say, we're investing well over $100 million a year in those programs.
Secondly, we are building out the hydroelectric system. You are probably all familiar with the Site C Clean Energy Project. Where we can, we are also adding additional units to our existing hydroelectric generating stations, such as Mica and Revelstoke. We are building out our transmission infrastructure, for example, the interior lower mainland transmission line, and the reason I mention that line in particular is it was actually that line in combination with building out our generating units at Mica that actually enabled the phase out of Burrard Thermal, which was a natural gas generating station in the Lower Mainland, kind of the population hub of British Columbia or the most densely populated area of British Columbia. That was able to be phased out because we now had a more reliable transmission infrastructure able to take some of the clean energy from our Peace and Columbia systems and get it to the Lower Mainland where most of the load is.
Lastly, as I mentioned, we have a partnership with the independent power sector, and they are developing a range of renewable and clean generation products from biomass to run of river to wind.
Turning to slide 7, step two, as I look at it, is if you have a clean electricity supply, you want to look at how we can use that clean electricity supply instead of perhaps some more carbon-intensive supply. A really key opportunity for us, as I mentioned, is the electrification of upstream oil and gas production. If we can get that production connecting to the grid and powering their operations that way, rather than self-supply, that reduces emissions substantially.
We recently completed the Dawson Creek Chetwynd area transmission project, which actually increases the transmission capacity in a region that has a lot of oil and gas production going on right now and allows those producers to connect to the grid and electrify their supply.
We are also involved in electric vehicles. B.C. has about 3,000 electric vehicles right now, and BC Hydro owns and operates 30 fast charging stations across the province for electric vehicles.
I also wanted to highlight something that we have in B.C., which is low carbon fuel credits. These are credits that BC Hydro accumulates as a result of a regulation in place in British Columbia called the Greenhouse Gas Reduction Targets Act. Because electricity fuels things like our SkyTrains and electric buses where otherwise you assume people would be driving cars, BC Hydro actually accumulates credits because of that. We can sell those credits back to fuel producers and use that revenue to keep electricity rates lower than they otherwise would have been.
Another innovation is our Shore Power Rate. That allows cruise ships, when they are docked in port, to connect to the grid instead of idling in port and running their engines.
I also talked about displacing diesel generation in remote communities, and we had a recent success with that in January of this year with a biomass project with Kwadacha First Nation.
Moving to the last slide, slide 8, and looking ahead longer term, liquefied natural gas is a significant opportunity for British Columbia, and so we are working as BC Hydro with LNG proponents that want to connect to the grid to electrify some of their production. Particularly we have the LNG Canada project, the Woodfibre project and the Fortis Tilbury facility, which is in Delta, that are looking to take electricity for both their ancillary and compression needs in the case of Fortis and Woodfibre and their ancillary needs in the case of LNG Canada.
The Peace Region Electricity Supply project would add additional transmission capacity over and above what the Dawson Creek area transmission line provides. We're seeing very rapid growth in that region right now as a result of oil and gas producers connecting to the grid. They are very large loads, and so our need to add additional capacity will be met with the Peace Region Electricity Supply project and will make sure we have additional capacity ready and available to those producers that want to continue to connect to the grid.
Another opportunity may be with Alberta. Obviously they have an ambitious climate plan and are looking to develop out renewables. A significant portion of those renewables will likely be wind, and there may be opportunity, either by restoring some of the capacity on the existing transmission intertie between the two provinces or by building a second intertie for Alberta to lean on British Columbia for some capacity. Essentially, when the wind is not blowing in Alberta, we could send energy from B.C. to Alberta. When the wind is blowing in Alberta, they could send some of that energy back and essentially utilize British Columbia's dams as a bit of a battery and lean on us for that capacity. That's a conversation the two governments are beginning to talk about there.
We are also looking to expand our network of electric vehicle charging stations, and the last thing I'll mention is expanding the mandate of demand-side management. As I mentioned, for a long time BC Hydro invested in conservation programs and will continue to do that. Another thing we're looking at is whether there is an opportunity for BC Hydro to invest in projects that reduce greenhouse gas emissions where it makes sense for our customers. Is there an alignment there where, for example, if we have an industrial customer that could realize cost savings by converting their forklifts to electric, maybe we can help them make that investment, reduce their costs and also reduce greenhouse gas emissions.
I'll leave it there. Thank you for your time.
The Chair: Thank you very much, gentlemen. Those were good presentations.
Senator Massicotte: Thank you, all three of you, for being with us. It is much appreciated. I have a couple of questions for Saskatchewan and then B.C.
Your presentation talked about a 5 per cent cost increase over 15 years. Am I reading that right? In other words, is it only 5 per cent for the whole 15 years, or is it 5 per cent per year for 15 years?
Mr. Marsh: No, it's a total of 5 per cent over that 15 years. That's the incremental difference between building out. If we were to build out traditional gas generation, that's what we would have to do in order to meet the load anyway. By moving to a renewable strategy, we're looking at the difference between gas and wind, so that difference is the incremental add that we'd be passing on through rate increases to our customer. It works out to certainly less than 1 per cent a year. Over the 15 years, we've calculated at around 5 per cent.
Senator Massicotte: As you mentioned earlier, when you do wind or you do solar, it doesn't always work. Does that include the redundancy costs of having effectively two facilities to satisfy that power need in case the wind dies?
Mr. Marsh: Yes, it does. One of the fortunate positions that Saskatchewan has found itself in is we've had a very robust economy for the past few years. We've had to add gas generation into our fleet already, just to serve base load generation requirements as the load continues to grow. We have a lot of gas in our fleet today. We will be able to use that gas and hydro that we have on our existing facilities to backstop the wind in an appropriate way.
Remember, we're moving from 5 per cent wind today to about 30 per cent wind on a capacity basis by 2030.
Senator Massicotte: Directing this question to B.C., you're one of the provinces that has experimented with carbon pricing. I think you're up to $30 per tonne. There's a lot of debate about that. Most economists highly recommend pricing carbon, influencing the behaviour and so on.
Give us your experience. Have you seen much effect? Is that very important to your plan on renewables? Give us lessons learned from your own experience.
Mr. Sandve: I think in terms of the direct impact on BC Hydro, the carbon tax hasn't had a huge effect in the sense that when we're looking at the cost of generation, whether it's a clean supply or natural gas, we have to factor that carbon tax into the cost of the natural gas supply, but we're also then trying to meet that 93 per cent clean or renewable standard. There's a whole suite of things that go into energy planning decisions, and we have to work on a resource plan approved by the government.
The carbon tax is certainly one of the considerations in terms of how we build out that portfolio, but there is a number of other factors. I would say that some of the other factors, such as the 93 per cent standard and the government approval of a resource plan, are probably more influential in terms of the supply decisions we make.
The second piece is what the carbon tax is causing our customers to do in terms of deciding whether to use natural gas or connect to grid and use electricity instead. To use the example of upstream oil and gas, they have to factor the price of that carbon tax into their cost calculation, so the carbon tax obviously has the effect of self-supplying with gas looking less attractive and more costly and electricity perhaps looking better by comparison by having that cost. I think there has been some shift to electricity as a fuel source as a result of that tax.
Senator Massicotte: Just a final question again to B.C.: Last week, we had people from the mining industry talk to us about their concerns about the Green Plan. They were quite concerned that the increases in B.C. are threatening your competitiveness, and they said some major customers are moving further south along the shore. From what I see, you're currently 50 to 20 per cent cheaper than say Seattle or further south, but you're projecting a 9 per cent increase in costs, 6 per cent increase in costs and an average of 3 to 5 for the succeeding years. Will you be ruining your competitive situation and maybe permanently affecting your industrial base?
Mr. Sandve: That issue is certainly something that we're very conscious of, and we work closely with our industrial customers.
For the increase, as you mentioned, the government has put in place what they called their 10-year rate plan, which started in fiscal 2015, which is more like calendar 2014. The 9 per cent increase came into effect about two years ago. That was followed by a 6 per cent increase last year and then a 4 per cent increase just this past April. That is intended to be followed by a 3.5 increase next year and a 3 per cent increase the year after that. We think that once those increases have worked their way through, rate increases going forward will tend to be more in the range of the rate of economic growth or inflation, certainly below 3 per cent.
With regard to what that has done to competitiveness, one of the main studies we look at is the one put out by Hydro-Québec. The most recent study was put out this past April, I believe, so it into account the 9 per cent increase and the 6 per cent increase. With those increases, B.C. is the third lowest out of, I think, 23 North American jurisdictions surveyed when it comes to residential rates, fourth lowest for commercial and fifth lowest for industrial.
In fairness to the industrial piece, I think some of our industrial customers will argue that perhaps in other jurisdictions they have a bit more flexibility in terms of when they can consume, so maybe that fifth lowest doesn't completely take that into account.
Generally speaking, we continue to be, with those 9 and 6 per cent increases, within the first quartile when it comes to the lowest rates in North America, but it's certainly an issue we're very conscious of going forward in terms of striking that right balance between investing in the system that puts pressure on those rates but keeping the rates low enough so we remain competitive.
Senator MacDonald: I have so many questions. I'll start with Saskatchewan first.
Saskatchewan is a big producer of export uranium around the world. I'm a person who still believes in nuclear power. It seems it has fallen off the table here in Canada, although we're trying to export the technology. Saskatchewan has a stable geology out there. Is Saskatchewan looking at nuclear power at all? If not, why not? Why would Saskatchewan, which is a participant in the nuclear industry, not be participating in nuclear power generation?
Guy Bruce, Vice President, Planning, Environment and Sustainable Development, SaskPower: That's a great question. I'll answer that one. Actually, Saskatchewan has been looking at the nuclear option for several decades, and it keeps coming back for another review. The last time we looked at it, in 2009, the options looked like the large reactors in the 700 to 1000 megawatt range. Our system is only 4000 to 4,400 megawatts, so the large reactors are too big for our system.
We are monitoring the development of what's called Small Modular Reactors. They come in the 50 to 300 megawatt range. This is a technology we're continuing to monitor and to see how it progresses. It's an option we're looking at for the long term.
Senator MacDonald: Another question for Saskatchewan: I'm looking at your coal-fired facilities. Nova Scotia produces a lot of its power from coal-fired facilities. We know that the pressure is on to phase coal out, and I understand why in terms of its footprint.
I'm curious, of the units you've added, what sort of technological advancement is in those units with regard to scrubbing and reducing the emissions? What's the quality of the coal generation in Saskatchewan? What's the quality of the emissions control in these facilities?
The reason I ask that is there seems to be such a rush to get rid of coal. I'm not saying we shouldn't get rid of coal, although I'm one of those people that prefers replacement by natural gas because of cost. I'm just curious what the experience has been in Saskatchewan.
Mr. Marsh: The experience with our Boundary Dam 3 carbon capture project has been very positive. We're now approximately 18 months into full operation of that facility. As I said earlier, we're on target to capture 800,000 tonnes from that unit in 2016.
It's a nominal 150 megawatt plant when it's running on carbon capture. It's delivering about 115 to 120 megawatts to the grid. It's capturing approximately 90 per cent of the CO2 that goes up the stack when it's operating at maximum capacity.
We can operate that unit at any point in its range in order to meet our delivery requirements to Cenovus. Cenovus uses that CO2 for an ancillary recovery. We also deliver a portion of that CO2 to the Aquistore facility, and that goes into a deep saline aquifer about 10,000 feet underground.
That technology is working and working well. It provides an option for coal generating utilities not only in Saskatchewan and in other parts of Canada but around the world to reduce emissions far beyond the federal regulation today. It will allow us to clean up emissions from coal generating stations quite substantially and allow utilities around the world to continue to use coal, which is very stable, low-cost and in long-term supply, especially here in Saskatchewan and in other parts of North America.
It's a real technological option that we have decided to invest in with Boundary Dam 3. We continue to operate that facility and will continue to build the economic case for the next decision, which we expect to make sometime later in 2017 or into 2018.
Senator MacDonald: Do you believe the concerns being expressed about you falling short of your emission targets or a problem with the core technology are exaggerated, from your experience?
Mr. Marsh: I think they're exaggerated, absolutely. We're demonstrating today that we're on target to capture 90 per cent of the emissions, which is about three times better than any natural gas plant could deliver today. We are reducing emissions of our overall fleet by 800,000 tonnes this year. If you apply that to other coal generating stations not only in Saskatchewan but in other parts of Canada or North America, there would be substantial emissions reductions.
I think agencies like the International Energy Agency and others around the world have already indicated that, given the amount of coal generation in the world today, carbon capture technology is absolutely crucial to making sure the world can deliver on its low-carbon footprint in the future.
Senator MacDonald: I have a question for our representative from British Columbia. It gives me an opportunity to praise someone who is a great hero of mine. God bless W.A.C. Bennett. What a great premier and leader, and what a legacy he left with you when it came to great hydro power. You have great hydro power in British Columbia.
I've always been baffled that we do so little in terms of hydro exporting around the country, trans-provincial hydro export. I'm curious what the experience has been in British Columbia, why there seems to be so little of it and what you see in the future. They've been discussing it lately, but what do you see in the future with regard to the export of hydro power?
Mr. Sandve: I agree with your comments about W.A.C. Bennett. We're very fortunate.
One of the things that will become more and more important as jurisdictions across the country build out renewable generation — as has been talked about at this committee quite a few times, a lot of that renewable generation tends to be from intermittent resources like wind and solar — is what is the firm, flexible supply backing all that up? What's the capacity backing all that up? I think the large hydro resources have a real potential, as that trend continues, to be that large backup supply.
By integrating our transmission networks across the country more, looking at where we can effectively balance each other's systems and get some reliabilities and efficiencies from that, I think that will be a big challenge. Building that kind of infrastructure is not cheap and not quick, but certainly in terms of some of the more recent discussions that are very preliminary but have started between the governments in B.C. and Alberta, that would be part of the idea. B.C. has this clean, flexible capacity that can be sent to Alberta when the wind isn't blowing and can take it back when the wind is blowing. The two systems can balance each other that way.
Can that be taken further across the country? As that capacity becomes more and more important, those discussions may start to happen.
Senator MacDonald: What are the limitations on the transmission of that power?
Mr. Sandve: There's an existing intertie right now between B.C. and Alberta. That intertie is right now constrained in some cases because of a lack of redundancy or contingency plans on the Alberta side. The Alberta Electric System Operator has been working to address those. As they do, that will expand the capacity on the intertie. Essentially, it's capacity. You could maximize the capacity of that existing intertie or build a second intertie, and that would increase the amount of power that can be sent at any given time.
What we see with Alberta currently is that the price for power tends to be fairly volatile, so you can have hours where it's quite low and then you can have peak demand hours where it spikes up quite high. Typically in those peak demand hours when that intertie is full, we are sending as much as we can to take advantage of that high price. In the lower demand hours, the intertie is not full because it's not to B.C.'s or Alberta's benefit to necessarily utilize the full capacity at those times.
Senator Seidman: Thank you all very much. I'd like to pursue this question in a more general way with both of you gentlemen, Mr. Marsh and Mr. Sandve.
The committee heard from several witnesses endorsing an increase in interprovincial trade of electricity in order to leverage substantial baseload hydroelectricity resources in certain regions to displace fossil fuel generation in adjacent provinces. This type of trade is also promoted as a way to balance intermittent sources of renewable energy, wind and solar specifically.
Do you agree that increasing interprovincial electricity trade should be pursued to help meet emission reduction goals? What would be the obstacles to this? How can the federal government encourage interprovincial trade of electricity if you think that's something that should be pursued?
Perhaps we can start with Mr. Marsh.
Mr. Marsh: Thank you. I'll have Guy Bruce answer that question.
Mr. Bruce: I think we would support the notion that increased east-west transfer of power is a good thing. British Columbia and Alberta complement each other. One is well endowed with hydro resources, and Alberta is mainly fossil fuel.
Similarly, Manitoba and Saskatchewan are next door to each other. We actually do have purchase contracts in place right now from Manitoba Hydro. We've started dialogues with Manitoba, so natural opportunities exist there.
The traditional markets have always been north-south, so the commercial opportunities have always generated transmission expansion to the south. There has to be more of a regional approach to planning, I would say.
There are opportunities. The obstacles are, generally speaking, in terms of the cost of the infrastructure. Transmission lines to carry large amounts of power for long distances are very expensive. As well as cost hurdles to overcome, there are going to be public acceptance issues, landowner concerns and a variety of technical issues. But there are definitely opportunities there.
Senator Seidman: The last part of that question was how you see the federal government could encourage this kind of interprovincial trade What's the role for the federal government here?
Mr. Bruce: There are a variety of ways. I know there are certainly opportunities for funding of infrastructure that would help defray some of the costs. There are probably ways to streamline permitting for infrastructure projects. Those are a couple of things that come to mind off the top of my head. I am sure there are others.
The challenges with respect to infrastructure are common all across the country. We heard earlier in the opening remarks that all the utilities are facing infrastructure challenges, and they're very expensive.
Senator Seidman: Exactly. That was probably going to be my next question. Let's finish this one with Mr. Sandve perhaps, and then I might go on to the question of infrastructure, if I may. Mr. Sandve?
Mr. Sandve: First, I certainly agree with what was already said and I won't repeat those. I agree with the premise of your question as well. I think there's an opportunity for the system to become more reliable and, in particular, more efficient if it is interconnected. If you can utilize trade as opposed to having to build, for example, a natural gas plant to provide that backup redundant power, there are potentially efficiencies there, and those should be explored.
On the obstacles, the one additional obstacle I would mention in addition to cost would be how to recognize the value of capacity. What I mean by that is typically energy trading markets tend to be based on what's the cost of a megawatt hour of electricity. You send it over and you pay for that.
What is less developed is the compensation, if any, for capacity. What I mean by that is that if a jurisdiction like B.C. or BC Hydro is standing by and available to send power, and may or may not send that power depending on whether the wind ends up blowing or not, what is the compensation? How do you value that service in particular? Our electricity markets haven't necessarily gotten to a stage where that's part of the transaction and part of the value proposition.
As far as where the federal government can help, infrastructure dollars and money is an obvious part. It always comes down to money, it seems, in one way or another.
The other piece would be just by sending a signal. Policy-makers and certainly yourselves, as members of the Senate, are considerably influential in terms of how these conversations go, and providing that encouragement and sending that signal could be very impactful.
Senator Seidman: Thank you. I might pursue one point you made. En passant, you said that the on-standby position should be part of the value proposition. In other words, the province is on standby; the energy isn't necessary, but it has been on standby and hasn't been part of the value proposition. How do you see that becoming part of the value proposition?
Mr. Sandve: I think it just becomes part of the conversation. As provinces have these discussions about whether there's going to be more trade, it really boils down to what is the product you want and what are you willing to pay for it? If one of the products that jurisdictions are seeking more and more is that reliable backup supply that is there when you need it but not necessarily always called upon, then it's incumbent upon the people sitting around those tables to think about how we appropriately value and compensate for that.
The point I was making is that, to date, perhaps that product has not been as central to the conversation and, therefore, the value around it has not been identified. I think it's as simple as it's just part of the negotiation and part of the conversations that jurisdictions will have as this is built out.
Senator Patterson: Thanks to the witnesses. I'd like to further explore the commercial carbon capture and storage facility, which you've described as successful for SaskPower. I wonder if you could tell us how much federal and provincial money was invested in this project and whether you would know the cost per tonne of carbon abated.
Mr. Marsh: The project went online in the fall of 2014. At that time, the construction cost was just under $1.5 billion. Of that, $240 million was received from the federal government to assist in the construction of that facility.
Senator Patterson: If you could give us a cost per tonne of carbon abated, now or later, that would be appreciated.
I'd like to ask further: You've described this as a success. Would you then be planning on expanding the use of carbon capture technology to other facilities? I know you have a new facility in Shand Power. Or would you need government participation to make this viable or to expand the technology elsewhere?
Mr. Marsh: At the present time, we're looking at options to invest in as we look forward to the next decision. The next units for retirement in our fleet are what we call Boundary Dam Units 4 and 5, and we've been targeting any retrofit on those particular units.
Our engineering teams have already assessed and we've already stated publicly that we believe we can probably reduce the cost of capital construction in the range of 20 to 30 per cent from what the first one was, just based on our learnings and the fact that we're already into the next generation of carbon capture technology.
We're also looking at options whereby we might be able to use it on a larger unit, a 300-megawatt unit, which would help reduce the cost because you get a better economy of scale and you can probably get more CO2 capture.
There are a number of options we're looking at as we go forward. As I said in my presentation, we are currently targeting 2017, possibly into 2018, before we make that next decision on whether we use carbon capture technology on the next unit.
Senator Patterson: Thank you.
To BC Hydro, I'd like to thank you for your fulsome presentation. I'm from a region that has remote diesel. In fact, in Nunavut, that's 100 per cent of our source of electricity. I'm really interested in what you said about displacing diesel generation in remote communities.
I wonder if you could give us a bit more information about the biomass project with Kwadacha First Nation, how many people were involved and what the biomass source was. Also, now or later, could you tell us what success you've had in reducing power costs by investing in better insulation, I think as you've described it, in other communities?
Mr. Sandve: Sure. I think it might be best, if it's all right with you and with the rest of the committee members, that might be something I look into a bit more and get information back to you. I'm only familiar with both of those initiatives at a high level and would want to check with some of my colleagues and provide you a more fulsome answer, if that's all right.
Senator Patterson: It would be appreciated if you could provide that through our clerk. Thank you.
Senator Johnson: Thank you very much. It's always nice to come after the questions have been asked, and they have been very good questions.
I'm from Manitoba, so I'm obviously going to ask you something about Manitoba. As you know, we have a brand new board of hydro. I grew up on Lake Winnipeg, so I am familiar with what is going on at the generating stations up there.
When I looked at your deck, I notice that SaskPower's energy mix from 2016 to 2030 has a reduction in the use of hydropower from 20 per cent to 15 per cent. As your neighbour to the east in Manitoba, which has abundant hydropower ready for export, as we do to the United States as well, why would you not just import more hydropower from Manitoba? And do you believe Saskatchewan has sufficient electricity transmission energy capacity between its neighbouring jurisdictions?
Mr. Bruce: First of all, the reduction in 2030 is in percentage terms, so we're at about 20 per cent today, and we're 15 per cent. The reason the percentage is lower is because the total has gotten so much bigger, so we are actually projecting an increase in hydro capacity.
On the question about why we don't just import from Manitoba Hydro, as I mentioned earlier, we do have a 20-year contract now for 100 megawatts. That is in place. That is being facilitated through the construction of the Keeyask project. For longer-term opportunities, the potential is there, but they are contingent on other major hydro projects going forward.
We're in conversation with Manitoba Hydro about opportunities. There are opportunities for shorter-term transactions, but the longer term, firm capacity purchases do require additional infrastructure to be built. It's something that we're always looking at.
Senator Johnson: Can you talk about the projects going forward that you just referred to or not?
Mr. Bruce: I think it is public information that there were two major hydro projects that Manitoba Hydro was considering. The first one is Keeyask, and it's under construction; the second major project is Conawapa. That one is currently not moving forward at this time. Those are just a couple of examples.
Senator Johnson: Do you know when that might happen? We have a lot of hydropower that is sitting there.
Mr. Bruce: I couldn't speak to the current plans for development in Manitoba.
Senator Johnson: Well, we'll find that out. Thank you.
To Chris Sandve from BC Hydro, BC Hydro spent $445 million in conservation and efficiency measures during the 2014-16 period. Can you give us examples of some of these measures and how they conserve energy and at what cost? I'm sure the jurisdictions have been looking at this as well.
Mr. Sandve: We think of our customers as residential, commercial and industrial and so on.
The residential side can be things like retail rebates. We will partner with retailers such as Home Depot, Canadian Tire, Best Buy, et cetera, and give a discount off certain energy efficient products, whether they be light bulbs or efficient fridges, to encourage customers to buy those more efficient products.
On the commercial side, it can be if a customer is building a new commercial building, we can provide an incentive to make the cost of a particular type of equipment or building envelope improvement more attractive to them such that the building is built with that kind of energy efficient infrastructure already in place.
On the industrial side, it tends to be investments in more efficient equipment. For example, we have quite a few large pulp and paper customers. If they are looking at their production equipment and if they can make that production equipment more energy efficient, we provide an incentive there.
Perhaps the other one I will mention is on the residential side. We have what we call a Power Smart Residential Behaviourial Program where we give a challenge to residential customers to try to reduce their energy consumption by 10 per cent or more over the year. If they do, they get a $50 rebate. We have seen a lot of success in that program.
Senator Johnson: Can you also talk about the electrification of transportation and the shift to electric vehicles where B.C. has been a leader? What do you feel about drivers moving to EVs? If B.C. reaches the point of 25 to 30 per cent EVs in the next 10 years, will you have enough hydro capacity to power it all? Does all this depend on market factors and planners meeting to make preparations? What instruments do you use to measure electricity demand for EVs?
Mr. Sandve: On the electric vehicle growth specifically, as I mentioned, there are 3,000 vehicles on the road today. Our load forecast estimates that by about 2025 that will be about 66,000 electric vehicles. We are seeing some growth there.
I think that the major barrier will be customer awareness and comfort with electric vehicles. That's a shift that will continue to take some time. It's certainly starting to happen but will take some time.
As far as what we can do at BC Hydro to help with that, the more that we can build out charging infrastructure and make sure that that network is in place so that people have the confidence that they will be able to get where they need to be in an electric vehicle, that will help.
Actually, most of the charging of electric vehicles actually takes place at home or at work. If you think of your typical trip in a vehicle, you're not going 200 to 300 kilometres at once; you're going from home to work and back. By and large, most drivers in electric vehicles can get by just by charging when they get home, but I think there is a lot of anxiety around those longer trips. To the extent that we can build out that network of charging infrastructure, that will help allay some of those fears.
One of the reasons B.C. has had success with adoption of electric vehicles is the point of sale incentives that the government has provided. The B.C. government provides up to $5,000 for an electric vehicle, up to $6,000 for a hydrogen vehicle, to help with the purchase price.
You had another question around can we meet the demand. The interesting thing is electric vehicles are actually quite efficient. You would think that growing from 3,000 to 66,000 vehicles would have significant demand. It's not insignificant, but perhaps it's not as significant as some people might think. With 3,000 vehicles, we only have about 10 gigawatt hours of demand, which is statistically almost insignificant from a demand perspective. At 66,000, it's probably somewhere in the 250 gigawatt hour range. To put that in perspective, a large pulp mill, for example, probably consumes about two to three times that amount. Even 60,000 electric vehicles would only be about a third of what some of our major industrial customers consume in a given year.
Senator Johnson: We are so used to plugging in in Manitoba that we shouldn't have any problem. We plug in half the year, so it's a good thing we have all that power.
Are you familiar with the Singularity University symposium that was just held in Germany that talked about electric cars and that we won't even be driving cars, that cars will drive us? Have you heard of all that stuff in the future with regard to electricity and cars?
Mr. Sandve: I'm not familiar with the symposium you mentioned. Certainly, in some of the work that I deal with in electric vehicles, I have certainly read some of the literature around what the future may hold and whether we'll even be driving vehicles in the future, but I'm not familiar with that specific symposium you referenced.
Senator McCoy: First to BC Hydro, you mentioned reliability. What is your target for percentage of reliability?
Mr. Sandve: Percentage of reliability. I'm not sure I understand the question. Maybe I'll try it this way. We measure reliability based on a number of different metrics, things like number of outages per customer in a given year, number of sustained outages, number of total outage hours in a given year. We benchmark those metrics against other utilities across Canada and set targets for those on an annual basis. I don't have those targets committed to memory, so I can't specifically say what those particular targets would be. But in terms of percentage reliability, that's typically how we measure and benchmark our reliability, based on some of those metrics. I can certainly get those specific targets for you, if you would like.
Senator McCoy: Yes, if you would. TransAlta was a witness here not long ago, and they mentioned that their benchmark is 99.997 per cent, I think it was, deliverability. I thought that was a pretty common rule of thumb.
The other piece of information I would like to know from you is how much it costs you for an electric charging station.
Mr. Sandve: Certainly I will get the information on reliability, and thanks for the additional information there. I understand what you're looking for, and I'm sure we can provide that for you.
The typical fast charging station for electric vehicles — what I mean by fast charging is it's a station that allows you to go from empty to a full charge in typically less than half an hour — has a cost of $100,000 per station.
Senator McCoy: Is that in the rate base?
Mr. Sandve: Yes.
Senator McCoy: So the customers are paying for that in their fees or charges, then?
Mr. Sandve: That is correct. At least for the current 30 that we have in place. As far as whether BC Hydro continues to be the one making — sorry. I apologize. It's not in the rate base. BC Hydro owns the stations, but the capital funding for those stations is actually provided by the provincial and federal government. I apologize. It wouldn't be a capital investment on behalf of the rate payers.
Senator McCoy: You said both the federal and provincial government. What cost sharing arrangement do they have?
Mr. Sandve: I would have to go back and check. It was about three years ago, I believe, that those first 30 stations were deployed. I can check on the particular cost sharing arrangement and provide that information back to you as well, if that works.
Senator McCoy: Very good, thank you.
To SaskPower, I will ask the same question around reliability. What is your benchmark?
Mr. Marsh: Again, we benchmark against other Canadian utilities, as BC Hydro has suggested. We try to maintain above median for both our transmission and distribution reliability. I don't have the figures in the percentage terms that you're talking about. I would be happy to get those for you and get that information in the next while.
Senator McCoy: Super. That's excellent, thank you.
I'm sorry I was late. I was unavoidably delayed. You may already have spoken to this in your presentation. Certainly I've been listening carefully to your conversation with other senators around carbon capture and storage. I did want to congratulate you on your project. I very much admire your courage, I think I'll say, in taking it forward against fairly broad skepticism. We had the beginning of a project, a pilot project, in Alberta, and two of our utilities backed off at the last moment, so we don't have a similar example to boast about.
I'm very interested in this topic because I think this is an opportunity for Canada to invest in some innovative technology that I think would probably fall into the description of green technology, if I can say it that way. There is quite a bit of resistance from the NGOs, as I understand it. As I understand it, both the Alberta government and the federal government at the moment, at the elected level and therefore in the senior civil service, are leaning more toward the NGO view of this than the engineering view of this, if I may put it that way.
I have two questions, one general and one specific. First, I understand BHP from Australia recently made a major investment in the University of Regina to support ongoing research and development of the technology, so I would like more detail on that. Second, what can we do, perhaps in this committee even, but certainly as senators, to support you and others in promoting this technology?
Mr. Marsh: Thank you. I'll start with an answer, and perhaps Guy may jump in with additional information.
On the issue with BHP Billiton, the largest mining company in the world, they have made an investment. We are partnering with BHP Billiton on what's called a knowledge centre here in Regina. It will be located at the University of Regina, and the intention is to be a knowledge centre that works with organizations, not only in Canada but around the world, to promote the technology around carbon capture, the understanding of where it can be utilized, how it can be implemented and how it can be implemented more economically with every generation of the technology.
I think there is a tremendous opportunity here for information sharing amongst utilities, amongst governments and amongst educational institutions and universities that can advance the arts and science of carbon capture technology to everybody's benefit at the end of the day. That is why we partnered with BHP, and we're very happy to have them as a partner, and they are very happy to be here looking at carbon capture, and opportunities obviously around the rest of the world.
In terms of what the Senate can do to help promote this, I can tell you that we have had discussions with other utilities across Canada, other utilities that burn fossil fuels. The technology certainly continues to be of interest to those utilities, whether they are in Alberta or whether they are in Eastern Canada. I think it would be helpful if the senators would choose to provide federal infrastructure funding to promote carbon capture technology, understanding where the opportunities can be, especially in Western Canada, for things like enhanced oil recovery, which helps make the transition from highly carbon-dependent fuels today to a lower carbon footprint in the future a more orderly, less economically oppressive one. We all have to balance the cost of this to our customers and the impact to the economy overall.
I have characterized Alberta, Saskatchewan and perhaps New Brunswick and Nova Scotia as having to do the heavy lifting. As my colleague in BC Hydro has indicated, they were blessed with hydro. For years, we were blessed with fossil fuels, oil and gas, and coal. Moving over to a lower carbon footprint at some point in the future will take a lot of lifting and a lot of resources on the part of many. I think carbon capture is one tool in the toolbox that can allow utilities and governments around the world to help move in an orderly way to a lower carbon future.
Senator Massicotte: What is the cost of transporting hydroelectricity over a thousand kilometres or whatever? How significant is that compared to the raw cost of producing it? Can somebody help me there?
Mr. Marsh: I'm sorry; we could not hear the question here.
Senator Massicotte: What is the cost of transporting hydroelectricity over a long distance, say a thousand kilometres or whatever?
Mr. Bruce: I'll take a stab at that. I was just going to say that the big cost is the construction cost, the capital cost of high voltage transmission lines. You need very large towers. I think the ballpark numbers are in the order of $1 million plus per kilometre to build these lines. It depends on the terrain. It depends on the size. B.C.'s situation is a little different than Saskatchewan. I expect costs would be higher.
Senator Massicotte: If you take that cost and divide it by the power you can transport over that distance, what is the cost per kilowatt per hour given the transmission costs?
Mr. Bruce: I don't have a number off the top of my head. It depends on a lot of factors and the utilization of the line.
Senator Massicotte: Could somebody get back to us with a little more information on that, if you don't mind?
Mr. Marsh: I believe we could, yes.
Senator Massicotte: Thank you. Let me go back to the Boundary Dam. Senator McCoy talked about it. I'm just amazed that when you look at the world, a lot of companies — big companies — planned to do this kind of project in the last five to ten years, and nearly everybody backed off. Now, I read about somebody yesterday recommitting to it, one of the major petroleum companies.
Why does yours work so successfully? There must be something peculiar to it. If you could tell me, converting your production costs versus what you're storing, what is the cost per tonne equivalent of that construction cost? Why is it that you're so successful when everybody else seems to have failed?
Mr. Marsh: Well, I think we have to look at this in the context of the evolution of the technology in North America and around the world. Carbon capture technology applied to coal generating stations is still in its infancy. We are still in the very early days. Today, it's my understanding that there are 15 operating carbon capture facilities around the world. Some of them are on coal facilities; some are on gas facilities. But every year, there's more and more facilities being announced that will be implemented at some location in the world.
The technology that we have chosen is standard amine technology that is used in the oil and gas sector and has been for decades. It's a modification of that amine technology that allows the carbon dioxide atoms to attach to the amine, and then we separate that out through the process. It really is a chemical plant that you attach to a co-generating facility.
On the issue of cost, I will tell you that with a $1.5 billion investment and ongoing maintenance costs, the costs are certainly in the range of largescale hydro facilities.
When you compare them to other base load generating stations, it is certainly more expensive than gas today. The cost of natural gas, as you're well aware is very, very low, and the ability to put up a natural gas generating station is relatively easy, I would suggest, compared to building a carbon capture facility.
So today, the cost is high. I think the economics of the next carbon capture facility will be determined at some point in the near future, and we'll be able to look at a reduced dollar per megawatt hour coming out of carbon capture facilities with every new generation. That's the importance of continuing the work into the technology, to continue to drive down that cost for that next generation to the point where it is a very economic venture for many different utilities.
The other point to remember is people are now starting to talk about using carbon capture technology on natural gas facilities and other industries that produce carbon dioxide and release it to the atmosphere. It has application in a number of different areas.
Senator Massicotte: Just to make sure I understood correctly, what is the corresponding price per tonne of the CO2 you're saving because of this process when you amortize your cost of construction and so on? What does it work out to?
Mr. Marsh: Well, right now, I can't give you a precise number. We could probably calculate a range, but again, until we are operating in a stable operating range at the upper performance of this facility and we can extract the actual cost data from that, we can only really kind of ballpark a range right now.
Senator Massicotte: What is the range?
Mr. Marsh: I can tell you the numbers are significantly higher than the carbon taxes that are being looked at for British Columbia or other parts of Canada, but it's a direct investment in a technology that results in a direct reduction in CO2. I think that's the point that you have to look at. How a carbon pricing mechanism would affect a significant direct reduction in CO2 emissions is yet to be understood, I think. But that's the position that we have taken in the province and that is certainly why we made that decision to invest what we did. Drive those carbon dioxide emissions down and allow us to proceed with the next generation of coal.
Senator Seidman: Mr. Marsh, you made mention of the infrastructure challenges, and I wouldn't mind going back to that. On your website, you do speak to this. You say that SaskPower is facing challenges of infrastructure, and the lines and the plants installed during rural electrification are aging. We all know demands are growing, and expansion is necessary, so how does your company plan to adapt, while keeping power affordable for your residents?
Mr. Marsh: Just to put it in context, Saskatchewan has the second largest distribution territory of all utilities in the country. We are a big geography; the province is almost the size of Texas. If you look on the map, we have 156,000 kilometres of transmission and distribution lines that were put in a long time ago, just like every other utility.
We made significant improvements in our sustainment capital program over the last few years. We are now investing approximately $400 to $500 million a year in existing infrastructure, so that's existing generation, transmission and distribution facilities to make sure that we can continue to achieve the reliability that they were designed for.
At the same time, we have had growth in the province. You have the combined effect of having a growing economy. We have people coming to the province. We have had several years of approximately 10,000 new connects a year. Load growth just a matter of three or four years ago was in excess of 6 per cent. It's now dropped down to 3 per cent or 1 per cent. We continue to project 2 per cent going forward. That's why we're looking at a 10 per cent increase over the next five years.
With this new investment in infrastructure, of course, it's going to require sustainment for the long haul to make sure that it continues to deliver the energy that it needs to our customers.
The other important point about Saskatchewan is that two-thirds of the energy we produce serves industrial customers, similar to what BC Hydro was saying, so we need large baseload generation here in the province to make sure that we serve those customers. Potash mines, uranium mines and oil and gas sectors are quite large. The economy is very dependent, as a resource-based economy is, on getting electricity to those facilities.
We are going to continue with our sustainment capital programs well into the future. We are trying to manage this in a staged, controlled way, again, to minimize rate impacts to our customers and to make sure that we can manage this in larger programs and do it in a planned way.
As we build out the system, for example, if we have to add new transmission facilities, we are going to be salvaging out or upgrading existing transmission and putting in new transmission, which will allow the ability to transport energy predominantly east-west across the province. It will allow us, as we look to the future, the opportunity to move cleaner energy from our borders if that opportunity is available to us.
Senator Seidman: Mr. Sandve, did you have a comment about the challenges that you're clearly going to have in B.C. when it comes to infrastructure because of growing demand?
Mr. Sandve: Yes. Similar to SaskPower, as I think has been mentioned, three main factors are driving the need to invest. Number one is the fact that the infrastructure is aging and needs to be replaced and upgraded, and number two is the fact that demand is growing, the network needs to be expanded and new generation assets need to be put in place.
Number three is the need to modernize the grid. As you get things like electric vehicles, heat pumps, distributed generation with solar panels on roofs and everything else, that does a lot to the grid. The power that flows on grids today because of all those things is a lot different than back when grids were first built decades ago. That modernization of the grid is a significant cost. It's certainly a challenge.
At BC Hydro, we're investing well over $2 billion a year on that capital. As with SaskPower, we're very conscious of striking the right balance between making those investments to keep the system reliable, but also doing it at a pace that is going to ensure that we can keep rates affordable for customers.
As I say, one of the key things that we've done as a corporation owned by the provincial government, as part of this challenge and to help address it, is the government has actually decided to delink the return on equity that it takes from BC Hydro as a corporation that it owns from our asset base.
It used to be that as we invested more and more in the system, the required return on equity that we would send to the government, that the government would then use to fund schools and hospitals and everything else, that required return on equity would increase as our investment in the system increased. Obviously, as we're making more and more investments, that would require the return on equity to go up at quite a big clip. Starting next year, the B.C. government is actually going decouple those two things, and the return on equity will be linked to inflation and increase at a much more modest pace compared to what it would have if it continued to be tied to investments and assets.
Senator Seidman: So neither of your companies anticipate the kind of experience that Germany has chosen, which is to keep industrial electricity rates low while residential rates have increased in quite a rapid way to help pay for the countries' transition to cleaner generation?
Mr. Sandve: No. That hasn't been something we've considered in British Columbia. Certainly what we have looked at is the fact that we do have some industrial customers that consume a large amount of electricity and therefore are more sensitive to rate increases than perhaps residential customers would be. The approach we've taken there, rather than doing anything special with regard to rates, is to target specific large conservation investments of those customers to try to make them more energy efficient and competitive while keeping rates the same.
Senator Seidman: Mr. Marsh?
Mr. Marsh: In Saskatchewan, I would agree. We work closely with our key industrial customers on energy efficiency programs and modernization of their facilities. We look at rates through a cost-to-service lens that we believe is probably one of the best in Canada, which allows the rates to move up. Of course, key account customers or industrial customers are served at a wholesale rate because they're consuming energy typically at very high voltages. The cost of distribution infrastructure usually doesn't play into their rates.
We've attempted to make sure that we've minimized any subsidization in the rates, and we are trying to move all of our customers into a very narrow band where their revenue-to-revenue requirement is very close to one. I think that's an important consideration as we go forward.
Senator McCoy: Just to go back to BHP, did I miss you saying how much they invested in your knowledge centre?
Mr. Marsh: No. They have invested $20 million over the next four to five years as we develop the knowledge centre and begin work through the knowledge centre with organizations around the world.
Senator McCoy: One of the first pilot projects on CCS on a coal-fired electricity generator was in China. I understood that Australia was the lead on that project. Was BHP involved in that as well?
Mr. Marsh: I'm sorry, I wouldn't have the answer to that. I can certainly find out. I'm not aware of that one specifically.
Senator McCoy: Can I ask the question in another way? You may not be able to answer. Maybe we should be inviting BHP to share. I'm curious to know why a sophisticated company like BHP Billiton would be so interested in investing in this technology project, or at least in promoting this technology.
Mr. Marsh: I believe BHP has the same interest in the long term. They've built their company to focus on the assets that will generate long-term growth. I believe they understand the move towards a low-carbon future very clearly, and they're looking at how this technology may be applicable to industries that perhaps they might be able to support at some point down the road.
Senator McCoy: Thank you.
Mr. Sandve, I'm not particularly familiar with Site C, but it did generate a fair amount of controversy on the environmental effects that its development caused. How many acres are going to be flooded as a result of developing Site C?
Mr. Sandve: I don't have the precise acre number handy, but I'll get that for you. Perhaps in the meantime I can speak to impacts in a couple of different ways.
I can start by saying that all new generation projects have impacts, and that's not to minimize the impacts that Site C will have, but I think that was certainly part of the conversation within BC Hydro and broadly that government had with the public when they made the final investment decision on Site C. We have a growing demand for power. We're going to need to meet it somehow, and no matter how we decide to meet it, there are going to be impacts associated with that decision.
One of the attractive elements of Site C is that because it is the third dam on the Peace River and downstream from the W.A.C. Bennett Dam and the Peace Canyon Dam and the existing reservoirs associated with those dams, it's actually able to generate about 35 per cent of the power that the W.A.C. Bennett Dam generates with a reservoir area only 5 per cent of the size associated with the W.A.C. Bennett Dam, the Williston Reservoir. In that sense, comparatively speaking, it's a much smaller environmental impact than a hydroelectric dam that didn't have that built- in advantage already would have.
To take your point, all generation projects have environmental impacts, and Site C is no different. It went through an extensive federal-provincial review process to look at how to eliminate those impacts first and mitigate them second and try to be as conscious of those as possible.
Senator McCoy: Thank you for forwarding the information. I'm also curious to know how many birds and animal species have been displaced and whether any human settlements have been displaced. I'll be curious to compare the statistics with the James Bay project, which I think might have been bigger than Site C. Both may in fact occupy territory or have a footprint that is bigger than all the oil sands developments put together.
Mr. Sandve: Certainly I can get you the specific numbers with regards to birds and animals. With regard to landowners affected, I know that information. I can provide that now, if you like.
The number of landowners affected by the Site C project we estimate will be about 30. Of that 30, we expect 10 will have to move permanently as a result of the reservoir development. Ten may or may not have to move depending on the results of some geotechnical studies and so forth and how things pan out. Another 10 residents will likely have to move to a different portion of their property. They will likely be able to stay on that property but some of the other property they own may be affected. As I said, certainly those are impacts we don't take lightly, and we work closely with those landowners affected to ensure that they're properly compensated and consulted.
Senator Mockler: I have a few questions. One would be to Mr. Marsh. You're quoted as saying that SaskPower is the first utility to attach carbon capture technology to a generating station, and that precise expertise needs to be marketed. To whom should we market that technology?
Mr. Marsh: We've certainly been in discussions with utilities from China, Indonesia and the United States, where there is opportunity to integrate a carbon capture facility with a coal-fired generating station. In many of those locations, there are opportunities for enhanced well recovery, so for the use of CO2 into an enhanced well recovery field that is relatively adjacent.
As the technology becomes more widespread and there are opportunities in other jurisdictions, whether it's through regulations or carbon pricing mechanisms in other jurisdictions that drive the need to clean up emissions, there will be a need to do something with the coal fleet in those areas. Throughout the United States, the eastern side of the Rockies all the way to Texas is a good example of where there's a large coal supply and lots of coal generation — obviously an opportunity.
Senator Mockler: Congratulations. I think it's a step in the right direction when you're looking at the U.S., Indonesia and China.
We all know — and this goes for both utilities — about wood fibre projects and the importance of innovation and using new technology. We know how important your land base is when you look at it from the Canadian perspective. How would it enable you to reduce and/or control and introduce better technology in that particular field for your grids?
Mr. Bruce: I think you're referring to biomass technology, using wood waste to produce electricity. We do have two sites in Saskatchewan where that potential exists. The potential is relatively small in Saskatchewan. It's in the order of 100 to 110 megawatts. The economics are dependent on there being something like a sawmill or a pulp mill in operation, where the waste from that operation can be used and burned in a facility that produces electricity. That's where you get the economics. There are two projects that are currently being looked at right now.
Senator Mockler: Thank you. What about B.C.?
Mr. Sandve: With regard to B.C., we have 17 biomass facilities in B.C. right now, all of them run by the private sector. Typically, that is a customer as well. As my colleagues from SaskPower mentioned, typically you will have a pulp producer or a sawmill of some sort that is producing the wood waste. If they can have that generation onsite, then they can use the waste. That's certainly the case in B.C. with our 17 sites.
Those 17 sites produce about 3,000 gigawatt hours of electricity each year, which is about 5 per cent, I believe, of our overall supply. One of the attractive portions of it is that biomass generation tends to be very reliable and firm. It's not intermittent. It doesn't depend on whether wind blows or sun shines. Certainly it's a key part of our system in terms of we know it's there, we know we can rely on it, and it helps to balance the fibre supply.
The Chair: Thank you. I just have a couple of questions, if I could.
B.C. brought in the Clean Energy Act in 2010 and increased your demand side to 66 per cent management. What success have you had? Have you reached 66 per cent? That's a high number; in fact, it's a very high number. I'd be interested to know whether you met that or not.
Mr. Sandve: The target is for 2008 to 2020, and right now we're forecasting that we'll be over 70 per cent in terms of the amount met by 2020.
The Chair: So you'll beat the 66 per cent target?
Mr. Sandve: That's correct.
The Chair: Okay. Thank you.
The federal government's target that we're looking at is 30 per cent below 2005 levels, or somewhere around 300 megatonnes of greenhouse gases that are to be reduced by 2030. The hard numbers we have for 2013 are that oil and gas produces 179 and electricity 85, which is just over — well, it's 264 megatonnes, so it's a pretty high target, I think.
Do you think the public is aware of the cost and the changes that will have to take place to actually meet those targets? I know it's not within your mandate, but you must have discussions with your governments. Are you comfortable that we could actually meet those targets, knowing those numbers? If you took out all the oil and gas and all the fossil fuel generation, you're still not going to meet the 300-megatonne target. How do you folks feel about that? Do you think the public is aware? Do you think the public knows what the cost is going to be and that they're comfortable with it and the lifestyle changes they'll have to make? That is to either one of you, or both.
Mr. Sandve: I can start. I think you raise a good point, Mr. Chair. As far as some of the shifts that need to take place, the one I think about often is the transportation sector with regard to electric vehicles. Electric vehicles are efficient. You can fuel your car if it's electric for much less than the cost of gas. Certainly I think on that the awareness and the eagerness amongst the public to make the kind of transition that would be required to meet those kinds of targets, there is a ways to go there. That's something that we always have to be conscious of when we're working to meet targets, to make sure the shifts you're advancing are ones that customers can afford and that customers are practically able to adopt. You can't force people to make changes they don't want to make.
The second thing I would highlight is with regard to oil and gas production. To me, I see that as a big challenge because, as you mentioned, it is a significant source of emissions, but also because I think it will really depend on the economics. As I said, a few years ago, the economics were quite compelling to electrify natural gas facilities. Today, a number of our customers continue to want to electrify and find it compelling, for social licence reasons or whatnot, but it is also a fact that as the cost of gas has gone down, those economics have changed, and that's a considerable challenge.
Mr. Marsh: Mr. Chair, that's a very good question and a fundamental point. We're all aware that, on a per capita basis, Canada is a large consumer of energy, being a resource-based economy — certainly a big impact in terms of energy consumption.
In the electricity sector, utilities deal with the aging infrastructure issue and the investment required just to maintain a given level of reliability that we've come to expect. As utilities across the country, we look at grid modernization and upgrading devices on the grid to make it more intelligent and to be able to respond to outages faster, reduce the overall generation output and line losses and make the grid more efficient.
Then, you add in a move to go a lower carbon footprint, especially for provinces like Saskatchewan, Alberta and other fossil provinces. There's generally an understanding there's going to be an increased cost, but I think the magnitude and the quanta has yet to be determined.
Organizations that we belong to, such as the Canadian Electricity Association and others, have really tried to do a good job in educating people about the change that is happening in the industry, but there's a lot more work to be done. We continue to work on that here in our province, as a utility company trying to help our customers understand what these impacts mean and how we're trying to balance this as we go forward in terms of rate impacts on our customers. They will be significant over a period of time, but that understanding has to grow, for sure.
The Chair: Thank you very much, gentlemen. That was very interesting. You both gave great presentations and good answers. We appreciate your time on this important issue.
(The committee adjourned.)