Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 42 - Evidence - April 17, 2018
OTTAWA, Tuesday, April 17, 2018
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 4:51 p.m. to study on the effects of transitioning to a low carbon economy.
Senator Rosa Galvez (Chair) in the chair.
[English]
The Chair: Good evening and welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Rosa Galvez. I’m a senator from Quebec and the chair of this committee. I apologize to our guests for this late meeting. Unfortunately, we don’t have permission to sit before the Senate adjourns.
I will now ask senators around the table to introduce themselves.
Senator Cordy: Hi, I’m Jane Cordy. I’m a senator for Nova Scotia.
Senator Massicotte: Paul Massicotte, senator for Quebec.
Senator Neufeld: Richard Neufeld, senator for British Columbia.
Senator Seidman: Judith Seidman, Montreal, Quebec.
The Chair: I would also like to introduce our clerk, Maxime Fortin, and our Library of Parliament analysts, Sam Banks and Jesse Good.
In March 2016, the committee began its study on the transition to a low-carbon economy. The committee is studying five sectors responsible for 80 per cent of Canada’s greenhouse gas emissions. These are electricity, transportation, emission-intensive and trade-exposed industries, oil and gas, and buildings.
Today we welcome by video conference from Calgary, Alberta, Kenneth P. Green, Senior Director of Natural Resource Studies, Fraser Institute; and from British Columbia, representing Clean Energy Canada, Dan Woynillowicz, Policy Director at the Morris J. Wosk Centre for Dialogue, Simon Fraser University.
Thank you very much for joining us. I invite you to proceed with your opening statements, after which we will go to questions and answers.
I think Mr. Green will be first.
Kenneth P. Green, Senior Director, Natural Resource Studies, Fraser Institute: Very good. I want to thank you for inviting me to testify to the Standing Senate Committee on Energy, the Environment and Natural Resources.
I’ve studied energy and environmental policy for over 25 years now at think tanks across Canada and the U.S. My testimony here today represents my personal opinion, and it should not be assumed to represent the views of anyone associated with the Fraser Institute other than myself.
The subject is transitioning to a low-carbon economy. Fortunately for us today, we have a good example of what such a transition looks like in terms of the costs and benefits involved. Unfortunately for those in Ontario, they are having to live with some serious economic pain as a result of Ontario’s green energy transition.
The Fraser Institute just published an essay collection on this topic entitled Understanding the Changes in Ontario’s Electricity Markets and Their Effects. The essays summarize the institute’s findings and research conducted over the last 10 years, starting from even before Ontario started on the path of the Green Energy Act.
Ontario’s power problems began after the government in 2005 decided to phase out coal power. That started prices rising immediately, as coal was a lower-cost electricity production option at the time. But when the government imposed the Green Energy Act in 2009, that was when prices really started to take off. The centrepiece of the Green Energy Act was a program to provide long-term guaranteed contracts to generators with renewable sources — wind and solar power — at a fixed, above-market price. Paying for those commitments, as well as the cost of new natural gas power and to cover the costs of conservation programs in the act, Ontario levied a new surcharge on electricity called the global adjustment.
I want to take this aside for a moment, because when you talk about a transition to a low-carbon economy, we have to realize that in energy transitions of this sort where we are moving from a reliable kind of power generation to an intermittent one, it’s not a matter of replacing a megawatt of natural gas power with a megawatt of wind. It is about having the megawatt of gas power available when the wind is not blowing and, on top of that, building another megawatt of wind. It is about having a highly redundant system that will inevitably be more expensive. We could talk about batteries and storage later, but this is a serious consideration that has to be made.
Let me go back to the global adjustment. Between 2008 and 2016, the global adjustment, the part of the power bill in Ontario that includes the things I mentioned, grew more than 70 per cent, causing a drastic increase in electricity prices. That high cost associated with aggressively promoting renewables is particularly troubling when you consider how little is generated by these sources. In 2016, non-hydro renewable sources generated less than 7 per cent of electricity in Ontario while accounting for almost 30 per cent of the global adjustment.
Ontario’s decision to phase out coal power generation was justified at the time with claims it would provide large health and environmental benefits. At the time, we pointed out that the Government of Ontario had contradicted that claim and that Ontario’s coal plants were a minimal contributor to Ontario’s air quality problems, which were mostly due to pollutants coming up from the United States. Subsequent research we conducted bears that out. The actual environmental benefits received from phasing out the coal plants could have been achieved with retrofits that were under way, at one tenth the cost.
As a result of the structural shifts in Ontario moving to green energy, they wound up having to build gas plants as backup and the wind they contracted. That means they often have surplus electricity in Ontario that is generated by sources out of phase with the use of Ontarians. Because it can’t be stored in any bulk, they have to sell that electricity to other jurisdictions, including those in the United States, at a loss and subsidize the Americans to buy Canadian energy for either cheap or free. That is a result of the trends of poorly planned transition to intermittent sources.
Because of all of this, electricity costs have risen substantially in Ontario, which now has the fastest-growing electricity costs in the country and among the highest in North America. Between 2008 and 2016, Ontarians’ residential electricity costs — imagine this — over only eight years, went up by 71 per cent, far outpacing the 34 per cent average growth in electricity prices across Canada. In 2016, Toronto residents paid $60 more per month than the average Canadian for electricity.
Between 2010 and 2016, large industrial users in Toronto also experienced large cost increases. They experienced spikes of 53 per cent and 46 per cent in Toronto and Ottawa, respectively, while the average increase in electricity costs in the rest of Canada was only 14 per cent. In 2016, the large industrial users paid almost three times more than consumers in Montreal and Calgary, and almost twice the price paid by large consumers in Vancouver.
Soaring prices in Ontario are a significant financial burden on the manufacturing sector and hamper its competitiveness. In one recent study of ours, we estimated that 75,000 jobs were lost due to the lack of competitiveness in the manufacturing sector and the loss of manufacturing in Ontario from 2008 to 2015.
As an aside again, Ontario is not unique in this. You can look at the experience in the U.K., Germany and Spain. Every place where rapid transitions to green technology have been tried, they caused more jobs to be lost than created, and they invariably drive power prices up exorbitantly.
There are serious obstacles in the way of making any rapid energy transitions, and making a transition from power sources that are abundant, affordable, reliable and domestic to those that are more expensive, intermittent, require redundancy and are sourced abroad will be particularly difficult and costly to electricity consumers, and eventually to people who use motorized transportation.
I’m not saying this transition will not or should not happen. I’m only observing that trying to hasten energy transitions is risky and, in most cases, quite costly, according to all the information we have to date on forced energy transitions.
Thank you and I would be happy to take your questions.
The Chair: Please go ahead, Mr. Woynillowicz.
Dan Woynillowicz, Policy Director, Morris J. Wosk Centre for Dialogue, Simon Fraser University, Clean Energy Canada: Thank you, and thank you for the opportunity to speak with you tonight. I know it has been a long day for you, so I will try to keep my remarks brief.
I would like to preface them by making an overarching recommendation both to the committee and to the federal government, and that’s to ensure that as we evaluate and embark on actions to reduce greenhouse gas emissions, we don’t focus solely on what needs to be cut and the associated costs, but we also consider what we need to build and the associated opportunities for Canada’s economy.
Underpinning any serious effort to address climate change does require that we transition how we both produce and consume energy. Driven by a confluence of technology, economics and policy, not all of which are directly related to climate change, the global energy system is now undergoing a period of relatively rapid transition, and I would like to share some of the key trends we recently documented in a report entitled Energy Disrupted, which I believe you all have copies of.
The first trend to point out is the role being played by China, which has emerged as a major market leader and disruptor in both renewable energy and electric vehicles. Chinese renewable energy investment set a new record of $132 billion last year, representing 40 per cent of global clean energy investment. This push to clean up China’s grid is not just clearing their air, it’s also underpinning entire industries. China now dominates the global supply chain for solar and produces over 70 per cent of solar panel modules in the world.
It’s a similar story with electric vehicles or EVs. Roughly half of all plug-of cars personal cars sold globally last year were in China, which saw a 73 per cent increase in EV sales over 2016. The country is also the world’s biggest manufacturer of EVs, as domestic cars accounted for 90 per cent of China’s sales last year. Its battery business is booming, too, and on track to be three times as large as the rest of world’s combined.
Amy Myers Jaffe of the Council on Foreign Relations summed up China’s strategic objective quite nicely. She said, “China is banking on clean energy technologies as major industrial exports that will compete with U.S. and Russian oil and gas and make China the renewable energy and electric vehicle superpower of the future energy world.”
The second trend is the shift toward electric and fuel-cell vehicles. Last year we saw countries, including Norway, the Netherlands, Scotland, France and Britain, all announce dates beyond which they will prohibit the sale of internal combustion engine vehicles, both because of concerns with climate change but even more so because of concerns with urban air quality. Those announcements have sent a serious signal to both the global auto sector and the oil sector. Automakers are beginning to respond. By the end of 2017, there were 156 EV models to choose from, up from just 97 at the start of 2016, and by 2020, the number of available models will grow to 217.
To put this into context, it took 20 years for the first million electric vehicles to be sold the second million took 18 months, the third million took about 10 months, and it’s anticipated that this year will see over 1.6 million electric vehicles sold. So the market is evolving very quickly.
Now, while there are only 3 million EVs on the road today, in BP’s most recent energy outlook they forecast that there will be 300 million by 2040. And while there will be 2 billion vehicles on the road by then, twice as many as today, because of a combination of more fuel-efficient vehicles, use of biofuels and the use of electric vehicles, they anticipate that oil demand over the period between now and 2040 will remain relatively flat for transportation.
This leads me to the third trend, which is the evolution of the world’s largest publicly traded oil and gas companies. As the CEO of Shell has said, “Societal acceptance of the energy system as we have it is just disappearing.” The world’s second-biggest publicly traded oil company, Shell, announced last year that it will be investing up to $2 billion annually in clean energy by 2020, and they have also chosen to divest of their Canadian oil sands assets and focus on gas.
Statoil has similarly made big investments, particularly in offshore wind power, drawing on its experience and expertise in offshore oil drilling. They plan to invest roughly $16 billion in renewables by 2030. Total has become a top employer in solar and battery power and has similar ambitions. They aim for their low-carbon business to account for 20 per cent of their portfolio by 2035. And BP, British Petroleum, is once again investing heavily in solar, wind and biofuels.
Now, none of this is surprising. According to a recent report from Wood Mackenzie, oil and gas companies that adopt renewables early will be at a competitive advantage, whereas slow adopters could find themselves at a structural disadvantage. The report estimates that these companies would need to spend $350 billion on wind and solar power by 2035 if they wanted to have the same market share of renewables that they currently have in oil and gas.
I would like to draw two conclusions regarding these trends. The first is that the transition to clean energy is irreversible, and it is gaining momentum. The second is that while the transition will create challenges for some companies and countries, including Canada, it also presents significant opportunities.
Policies designed to help reduce emissions here in Canada are driving innovation and the development of many new technologies and services by Canadian firms. But it is not just the Canadian market that will offer them opportunity. They are going to have opportunity in markets around the world, including the world’s fastest-growing economies. Just as one example, Vancouver-based Ballard and Toronto-based Hydrogenics both produce fuel cells that convert hydrogen into clean electricity. They are both finding significant market opportunity in Europe and China.
In closing, while it’s an imperative of good governance to ensure we understand the cost associated with policies to reduce greenhouse gas emissions, it would be short-sighted to not also understand and consider the other side of the ledger and the economic opportunities and benefits that can accrue from being amongst the leaders in providing low-carbon technologies and services, not just for use here at home but for use in countries around the world.
Thank you.
The Chair: Thank you very much.
Senator Massicotte: Thank you both of you for being with us this late; your patience in waiting for our availability is much appreciated. I will start with a question to Mr. Green.
You chose an easy subject, the high energy costs of Ontario electricity. We have heard that story many times, and I think we would agree with your thoughts in that respect. But when you look at that lesson, if you extract from there, I think what you’re trying to tell us is that when you change technology or change the process, there are always surprises, and it may be costly. Agreed, any change is obviously full of perils and risks. But what do you recommend we do when the fact is, as you know, any delay in getting to our climate change objectives will cost immensely? It is a multiple of the savings we think we are making by delaying.
What do you recommend we do when you consider the indirect costs of not doing anything with climate change or not doing as much as we need to with climate change?
Mr. Green: I would argue, and I have already argued, that — I will put in a disclaimer here. My training is in environmental science and engineering, and I believe in climate change. I was an expert reviewer for the IPCC’s world report on the science of climate change, their third assessment report. And my belief in climate change is within the envelope of the IPCC’s estimates for the doubling of CO2, between 1.5 degrees and 4.5 degrees Centigrade.
I’m an empiricist by nature; I tend to give more weight to studies that actually measure temperature changes and correlate them with emission changes, and those tend to cluster toward the lower end of that range.
Now, there are still considerable risks. But what I would argue is that we do not at present have the technology to rapidly decarbonize society affordably. We do have the technology right now to make society more resilient to change and better prepared to handle what climate science tells us is already baked in the cake. There is already more warming coming.
I have always focused on how to make our infrastructure resilient, how to localize where the actual damages will be done in terms of hydrological changes and meteorological changes and find ways to mitigate that damage. Meanwhile, I support a robust R&D investment to find those breakthrough technologies that are necessary, such as large-battery technology and carbon dioxide capture technology that can be applied to the problem as we move down the road and develop those technologies.
I think the history of trying it now with the current blend of technologies we have leads to unsustainable situations and leads to unsustainable programs, such as in Europe, where they’re clawing back renewable substances, and in Australia, where they cancelled the carbon tax. If you embark on an unsustainable effort, it will be unsustainable. I believe that attempting to get straight from where we are now with a fossil fuel sector that generates the overwhelming majority of the energy people use to an exactly reversed situation in the course of 40 years is highly improbable.
I would point to the work of Václav Smil from the University of Ottawa, I believe. He has written a pretty exhaustive history of energy transitions, and they never occur in much less than 40 to 60 years, and that’s after they’ve reached 10 per cent adoption in their target markets. The change from oil to coal to natural gas — each of these transitions took about 40 years after they got 10 per cent into the market, and renewables are nowhere near that.
Senator Massicotte: In your mind, technology today is not adequate to get us there. However, you must acknowledge that you’ve heard experts that say the technology is there. The challenge is more the process and how we get there.
You’re saying no, it’s not there. So we should focus on R&D and on mitigation. All of us agree with that. But many would say: Why not also make a contribution immediately to ration CO2? You’re saying it’s probably wasted money; R&D should be more efficient before you get there. Is that what you are saying?
Mr. Green: That’s correct. I will give an example. We’ve heard these arguments before. My very first editorial, written for the Los Angeles Times, was on the California Electric Vehicle Mandate in 1995. Exactly the same arguments were made about the EV1, GM’s electric vehicle, that it was real, it was ready for the market, it had the range people needed, and it was affordable and irreversible. The trend was set and we were off and running.
A few years later, GM had to recall all of the EV1s and retired them because they were not maintaining their ability to actually function in the ways consumers needed.
So we’ve heard these arguments for not just decades but an entire century with regard to electric cars. There has been an announcement that electric cars are ready for the market roughly every 10 years since 1900; yet, they fail to outcompete internal combustion engines and the money spent on them is wasted.
There’s a good reason why they call the place where investments go to die the valley of death. It’s because that’s where they need to die. Trying to bypass that, goodwill or not, I think runs the risk of not just racking up large costs, wastes, but also perhaps undermining the stability of the electrical systems we need as we focus only on the electrical systems we want. We easily wind up with a situation where we’ve got an imbalance in our power sources, as Ontario does, and a hole so deep we can’t afford to fill it.
Senator Massicotte: I’d like to get Mr. Woynillowicz to respond to that. Your approach is totally different. You’re basically saying the company that has a fast start will be ahead of the track, ahead of the pattern, ahead of the group and is going to be a big winner. Therefore, you’re doing the opposite. Your blind faith into the system says, “Let’s subsidize and push these people to be ahead of the curve and have multiple benefits.”
I kind of share the concerns of Mr. Green: If you look at the history, often the front runner doesn’t finish second or third or doesn’t finish at all. We’ve seen many instances of that. Even with the solar panels, we’ve had immense changes in the world in who are the best suppliers, and now it’s the Chinese. How do you respond specifically to Mr. Green in light of that?
Mr. Woynillowicz: I think I would say two things. One is that the horse is out of the barn insofar as Canada is not going to be the leader in any of the clean energy technologies that are currently gaining traction in the marketplace. I would say numerous other countries have the pole position on that.
I would say that Canada still does have the opportunity to be amongst those leaders and to carve out a niche where we find we can have some comparative advantage. We’re not going to be able to compete with China when it comes to, for example, manufacturing photovoltaic panels at scale to meet mass demand, but some aspects of related solar technology, for example, solar trackers. We have a company out of Toronto, Morgan Solar, which is amongst the leaders in innovating that technology that can then be deployed. Further upstream in technology and innovation, in sciences, certainly when it comes to the digital component of the transition to energy, all of the software, there are niches where Canada is strategically situated and can compete.
I would also say that I don’t take as cynical a view towards the need to sometimes take some risk associated with embarking upon ventures to develop and deploy these new technologies. I would argue that had that same outlook been applied 30 or 40 years ago to the oil sands, the amount of government support and business risk that went into exploring different technologies — there are many technologies that were being developed to try to extract bitumen from the oil sands that did in fact fail. They had the safety net of support from the government. If we applied that same kind of cynical view in terms of needing to have perfect foresight on the ability to compete and produce that resource at low cost, we would never have made it to the place where we have, where we see such significant oil sands production and are benefiting from that.
So I think we need to take a balanced view towards how we approach this, and we don’t need to have all of the answers. We need to have some of the answers. First and foremost, though, we need to have good policy design when it comes to everything from providing support through research and development through to commercialization or some of the other climate change policies that are going to begin to shift the marketplace and shift behaviour towards the adoption of these new technologies.
Senator Massicotte: Obviously, every company wants to be the winner. That’s how the market system works. But I think you’re proposing much more than that. You’re proposing not only policy changes or incentives, but I presume you’re proposing putting up government money to try to find a winner and obviously avoid the loser. Am I correct in saying that? Are you proposing the market systems take place with maybe one exception of carbon taxes? What do you specifically suggest the government should do?
Mr. Woynillowicz: I do believe that it is a matter of sending the right market signals in terms of what we need. For example, when it comes to electricity, we need reliability, we need stability, we need it to be as low cost as possible, and we also need it to be clean. I’m confident that if you send the marketplace those signals and you’re not overly prescriptive in terms of selecting which technologies will bear fruit, then you can actually have very successful outcomes.
If we take the example of Ontario, which I realize you’ve heard a lot about, their approach was having government select what they thought the price should be and bake that into the contracts. Compare that to the approach that was taken in Alberta last year, which saw the lowest prices we’ve seen for wind power in Canada; they used an auction-based approach where they asked companies to give them the best price for the project, and they would award contracts to the lowest-cost bidders. Part of it is a function of how you design the policy to try to procure the outcome that you want.
Senator Massicotte: Thank you.
Senator Cordy: Thank you both very much. As Senator Massicotte said, you’ve been very patient in waiting for us to finish up in the Senate Chamber. We truly appreciate it.
Mr. Woynillowicz, you spoke about what China is doing. They are making 70 per cent of the solar modules, half of all the plug-in cars are built in China, and China has 90,000 electric buses on the roads. I’m new to the committee and had not heard that before. When I think of China, I certainly don’t think of them being environmentally friendly because that’s sort of the opinion in anything I had been reading.
What brought about this change? Is it just that they know the rest of the world wants these things and they’re building them, so it was strictly economical? Or had they actually bought into the need for making changes?
Mr. Woynillowicz: Based on the research that we’ve done, I would conclude that the primary driver for the investments that China is making is actually domestic political stability associated with urban air quality. You had a population that was increasingly choking to death and actually beginning to experience economic issues associated with the extent of urban air pollution. They had airports that had to shut down because there wasn’t enough visibility for planes to land. The threats to the government in terms of a population that was no longer going to accept such poor air quality, I think, has been the primary driver for the Chinese government to prioritize shifting to cleaner forms of energy production and consumption, which are symbolized by renewable energy and electric vehicles, the examples that I gave. But that has now been fully baked into their industrial strategy and their economic and export strategy as well.
They are saying, “We have a domestic imperative to do this but we also recognize that beyond our own domestic market, there is a global marketplace for these technologies and we’re well positioned to compete in that global marketplace.” So they really have blended together both an environmental imperative and an economic opportunity into a strategy to be dominant in this sector.
Senator Cordy: You spoke earlier about the investment that was made early on in the oil sands to extract the bitumen from the ground. I come from Nova Scotia, so the oil sands have been looked on favourably as employment for many of the young people in Atlantic Canada.
But I’ve also heard from people that the newer forms of energy, like wind and solar energy, are not getting that funding from governments that the oil industry got early on. Senator Massicotte spoke about governments and whether they should be picking winners and losers; I’m not suggesting that so much. Does the government start making major investments in alternate forms of energy? And if so, how do they prioritize them? How do they select them? Or do you just know that some things, as it was in the oil fields in Alberta, some were not winners; some didn’t produce.
What does the government do to make it a win-win for everybody?
Mr. Woynillowicz: I would say that when it comes to clean energy technologies, whether we’re talking about energy supply, everything from various renewable forms of electricity, solar, wind, biomass, tidal, et cetera, and when looking on the demand side of how we consume energy, everything from furnaces to heat pumps and the types of vehicles we drive, there is a diversity of choices in the marketplace which will achieve the objective of reducing greenhouse gas emissions.
I don’t think the government needs to select a single technology and say this is the one that we’re going to back, nor do they need to prescribe anything beyond the outcomes that they want to have and then to play the role of enabling the competition amongst those different technologies. At the end of the day, we’ll see which ones will succeed.
In the case of electricity, I think one role the government can play in terms of enabling more renewable electricity across the country, as the federal government has identified, is through interprovincial transmission lines. As Ken pointed out, one of the challenges with wind and solar is they’re both variable in nature. The wind doesn’t always blow, the sun doesn’t always shine. It’s very unpredictable. We know that. We need to figure out how to fill those gaps.
In Canada, we are blessed with an abundance of hydro power. We have a significant number of hydro assets in a number of provinces. If we more strategically connected those provinces to some of their neighbours who don’t have those hydro assets, we could optimize the electricity grid so that we can integrate the newer technologies, like wind and solar, while also having the stability we need using those large hydro reservoirs as batteries. I know that’s something the Senate has looked at, as has the federal government. There’s a lot of opportunity there. That’s a way in which the federal government can help enable renewable electricity and more decarbonization of the grid, by working with the provinces and making a financial contribution towards getting those new regional interties between provinces.
The Chair: Before I give the floor to Senator Neufeld, I wanted to ask you something, Mr. Green. Your point is that it costs Ontario to do the transition, it’s very expensive, and that Ontario should invest more in adaptation.
Are you suggesting that Ontario shouldn’t move or transition to renewables? And if you’re not saying that, what is the renewable energy that Ontario should be looking at? Coal has a lifetime in producing electricity, and electricity plants have a lifetime. If I remember well, the lifetime is at the end point because these plants are for 40 or 50 years, and I think we are already there. What is your recommendation?
Mr. Green: My recommendation would be to look for the least expensive, least polluting ways of replacing coal as power plants phase out and become economically non-competitive simply because they’re more expensive than natural gas.
I would argue that the logical transition for our society is to gain an immediate greenhouse gas benefit of one third or one half reduction by moving to natural gas from coal, and looking at expanding renewable assets that are reliable, where it’s affordable or where it’s just viable, new hydro capacity or even tidal energy or run-of-river hydro. But the overriding concern needs to be not a search for perfection in our life as we know it. We’re not going to move to a world of 80 per cent decarbonization in four years. Instead, we need to take the next baby step that gets us there while preserving Ontarians’ quality of life and the ability to do business, manufacture and produce in Ontario. It’s not going to do a lot of good to capture the renewable market if you haven’t got a manufacturing base left because your power prices are so high.
So that would be my suggestion. I’m not for picking winners and losers in technology. I will point out that the previous senator asked why not just put a price on this and not pick winners and losers. I did a study on this at the Fraser Institute. Everywhere in Canada that has instituted carbon pricing has turned it into a revenue-raising device and specifically picked a percentage of wind and solar power and particular levels of transit build out and a number of bicycle lanes. They have picked and chosen winners and losers that are not in any way creating a market signal that manifests people’s values from the bottom up. They’re imposing those values from the top down.
Senator Neufeld: Thank you, gentlemen, for being here and for waiting for us. I appreciate that very much.
Some of my questions have been asked, but we tend to hear mostly about electricity. We’re already 85 per cent clean, one of the cleanest in the world of electricity. There are a couple of provinces that have some real problems because they don’t have good access to hydro and all of those kinds of things.
I’ll stay with electricity and get both of you to answer this. When we talk about changing over to electric cars, would you agree with me that it’s a little easier to do that in Britain, Sweden and Norway, to put in all the facilities to plug all these cars in, not just at home but all over so that people can drive all over, as compared to changing that whole system in the second-largest country in the world, Canada? To put in all the charging stations, looking at the service stations that it takes to actually fuel the automobiles and trucks now, they’re prolific; they’re all over the place. So I assume you’re almost going to need the same thing for electricity outlets for people to charge up.
What I understand — and maybe you can help me here a bit — is that even the fast-charging stations can take 10 to 15 minutes. I don’t know how many people want to sit in line for 15 minutes behind 10 cars to get their battery charged so that they can continue going down the road. Help me a little bit with this and with the clean energy that we already have. And I’ll just ask one other with that.
You mentioned China. I think China had to clean up. It’s good that they are leading and doing all the things that they are doing. When I look around my home, when I look around stores, almost everything is made in China. For us to assume that we can take over that solar industry and compete with China in building solar panels here, I could be wrong, but I don’t think we can. So there are a number of questions there, and I’ll ask both of you to comment on them, please.
Mr. Green: As I’ve mentioned, I’ve written about electric cars since 1995. There are very large challenges with widespread electrification of the vehicle fleet that most people don’t discuss or understand. As you pointed out, Canada is very big country with vast transportation distances that are not well suited to electric vehicles with limited range. That’s true particularly for trucking or long-haul transit but is also true for normal consumer movement. Yes, the fast truck stations do still take a considerable amount of time to only get you a partial charge compared to filling up your tank with gasoline in a four- or five-minute visit.
The other problems not addressed here in Canada are that you will have to generate a lot more power, because it takes a lot more electricity to charge these cars as you get more of them in the population.
Another issue that hasn’t been discussed is that Canada is a cold-weather country. Batteries and electric cars tend to lose about half their charge in cold winters.
Finally, most housing developments are not designed to be able to accommodate electric car charging. The residential housing development assumes only a certain number of houses per block, but when you plug in your electric car to recharge it, it draws the same current as a house. If you had a street with six houses, and they each have two electric cars, you go from having six houses to the equivalent of 18 houses. You can’t support that on most municipal grids, which means those grids will have to be upgraded, and in many parts of Canada, they are underground.
The challenge to electrification is very large. The subsidization we are seeing — and there is a report out just today on who is buying electric cars. They are mostly households with incomes over $100,000 that are buying electric cars and getting $10,000 or $12,000 subsidies to buy a car that a normal taxpayer couldn’t afford to buy. Then they get further subsidies with discounts at charging stations and discounted electricity. They often get other special favours like access to carpooling lanes even if they wouldn’t meet normal carpooling standards.
I think the subsidization is somewhat dubious on ethical merits, let’s say. The car companies would be the first to say, “If you lose that subsidy, we don’t make sales.” Nobody is buying a vehicle for an extra $12,000 compared to a comparable internal combustion engine.
I will address China. I tend to be cautious about ascribing motivations to China. They are not exactly an open and transparent society. Dan might say I’m cynical, but I think China recognized early on the opportunity to make a great deal of money in foreign currency by buying into the idea of greenhouse gas emission reductions. Their offsets have been shown to be not just dubious but fraudulent. Their solar panels are gathering in piles of millions for disposal. The waste will be a nightmare. Then, as you said, they probably had to do this because of the fact that people were dropping dead.
But the question remains: Could they have done that with natural gas, as California did, and bring the air qualities down from the air quality levels I experienced in Los Angeles in the 1970s to what it is today? They didn’t do that with wind and solar power; they did that with natural gas. China could probably have done the same thing for less, but that would not have gotten them external currency like offsets in solar panels and windmill turbines will.
Mr. Woynillowicz: Thank you. Obviously, it’s easier in countries that are smaller when it comes to travel between cities and travelling shorter distances, the important thing to acknowledge in Canada is that for the vast majority of the population, their driving habits are often within a city and for relatively short distances. Statistics Canada has found that 85 per cent of Canadians’ daily driving needs could be met with the first generation of electric vehicles, such as the first Nissan Leaf. For the vast majority of urban transportation right now and people’s driving habits, an electric vehicle is suitable. Building out additional charging capacity between urban centres would help for family vacations.
When we are talking about a transition to more electric vehicles, the reality is that it will be relatively gradual. In Canada, the federal government has committed to an aspirational target of 30 per cent of new vehicle sales by 2030. Only one in three vehicles sold would be electric. It would still be a relatively small proportion of the overall fleet of vehicles on Canadian roads.
In terms of some of the concerns raised about access to charging and what it means for electricity demand, even at 30 per cent over the next dozen years, we are talking about a very slow penetration rate — one that could make a significant contribution in terms of emission reductions. But we are not talking about taking all gasoline cars off the road overnight and forcing everybody to drive an electric car. We need to put that in perspective.
When it comes to charging the vehicles, the vast majority of charging happens at home, overnight. To the point that Ken raised about Ontario currently having to export surplus power overnight at a loss, if you had more electric vehicles in Ontario, Ontarians would be soaking that up. They’d also benefit from the lower rates overnight as well.
We have to think about this from a systems perspective in terms of how the pieces fit together. We need to be thoughtful from a policy perspective, and then we need to be innovative in developing some of the technologies we might need to fill the gaps.
A key thing is to recognize that this will not happen overnight, and that is not what most people are recommending. There may be a few outliers who suggest we should get off fossil fuels tomorrow, but that is not the perspective I bring to the committee.
In terms of the role China is playing, we have to acknowledge that whatever the decisions taken in Canada, China has a lot more influence in shaping global markets around the world. The fact that they have taken this lead and are moving in this direction, like it or not, is something Canada will have to adapt to, just as economies around the world are.
Senator Neufeld: I agree with those responses. It’s not as easily done as said.
The other thing is that the use of fossil fuels will increase dramatically until 2040. Those are the estimates from BP and the IEA. But if I remember correctly, about half of the fossil fuels consumed in the world is for gasoline for powering transportation. The rest is for thousands and thousands of products. Wherever I go, people tend to talk about electricity — all we have to do is build more wind and solar panels, and Bob’s your uncle, and everyone’s happy.
But nobody seems to want to dig into it. I have been across the country and gone to four different universities. I asked them all about what they are doing to invent technology to replace all those things that natural gas and oil provide us with now that aren’t gasoline and diesel. Those are all the products we get off the shelf. You want to build electric cars? You need a tonne of plastic. I only saw one tiny thing where a company is starting to use sugar cane to make plastic, but none of the universities are doing any work on this.
What do you think of that? To me, we have a problem here. It’s easy to say windmills and solar panels — I get it, along with the intermittent power thing — but what about all the rest of the products? I use plastic as just one example. If you go to a car, most of it is not the powering of it but the building of it.
What do we do there? How do we get innovative in that world?
Mr. Green: You make a very valid point, senator, that virtually everything — you focus on plastics, but I speak to our students at student seminars and I think of all the things in their houses, clothing, backpacks, transportation and schools. Even the air we’re breathing that is pushed through and filtered is brought to us by energy. Shampoo is a great example. A shampoo bottle is made out of reformulated oil, is filled with reformulated oil and labelled with reformulated oil. So when you shampoo your head, you are basically anointing yourself with oil.
But it goes beyond all of the petrochemical industry that we rely upon for our things. It also makes fertilizer. Natural gas is the feedstock for chemical production in North America, and it is also the feedstock for making fertilizer, which we consume in rather prodigious quantities. As you said, there is no reason to believe the expectation that just because you decarbonize your electricity sector or your transportation sector, the oil will not be used. As you said, the EIA, BP, ExxonMobil, all projections out to 2040 and beyond show a maintenance of the market share for fossil fuels moving forward. The relative share of renewables is lower.
One last point on that, which is the subsidies for renewables. Studies have been done that point out that because renewables are such a tiny part of the actual production, per megawatt hour of production, renewables are subsidized an order of magnitude more than oil and gas are in either the United States or Canada.
Mr. Woynillowicz: I think it’s worth bearing in mind that the concern that exists with fossil fuels from a climate change perspective is less so their production; it is their end use, if that end use is for the purpose of combustion. If we look at a barrel of oil that comes out of the oil sands, 80 per cent of the life-cycle emissions come from the end-use combustion. Twenty per cent come from the emissions associated with burning natural gas to use as heat, to extract the bitumen, to upgrade it, et cetera. Obviously, the oil sands industry is working diligently on reducing that 20 per cent that comes from upstream production.
But to your point, in terms of the large number of other products that come from fossil fuels, using that fossil fuel feedstock to produce those materials is not the issue from a climate change perspective. It is their end-use combustion as fuels, whether for mobility or heat or to generate power. So to the extent that we can be addressing successfully the emissions associated with the upstream production, and we’re shifting away from end-use consumption, there will still be a significant market opportunity for fossil fuels meeting all of those other market demands for which there are not readily available substitutes and for which there hasn’t been the same level of attention paid in terms of research and development as trying to find substitutes for that end use combustion, which is the bigger problem when it comes to climate change.
The other point I would like to make is that an area where Canada has an advantage is that we already have, as you noted, a power grid that is remarkably clean compared to many of our peers. Secondly, we have an abundance of renewable energy resources from hydro to wind, solar, geothermal, tidal, biomass. We have a competitive advantage compared to other developed countries in being able to move towards electrifying more of our economy. Substituting the use of fossil fuels with clean electricity for heat, power, mobility and industrial use is an opportunity to leverage a strength we have and reduce emissions associated with the consumption of fossil fuels. And then to the extent that we are also successful in addressing the upstream emissions associated with fossil fuel production, we can continue to be a fossil fuel producer, to the extent that there is still demand for producing plastics, as a source of carbon. In the United States there is a research group looking at how they can use coal as a source of carbon fibre, and they’re 3-D printing submarines from it.
This is not to suggest that the value of hydrocarbons will go to zero. It is that where we find value may change, and, from a climate change perspective, it needs to shift away from finding that value in burning them.
Senator Seidman: Thank you for your presentations. I would like to echo my colleagues and say thank you to you for your patience and waiting until we were able to get here rather later than we had expected.
Mr. Woynillowicz, I would like to ask about your clean energy review in March, called Energy Disrupted. Most of the ideas you presented to us in your presentation. The cover says “Five trends driving the global energy transition,” and the second one is “Big Oil is shifting to renewables.” What you presented to us this evening were four big players — Shell, Statoil, Total and BP — who are all playing very large roles in converting and looking at renewable energy.
What I didn’t hear from you is what the Canadian companies are doing in this area. Would you be able to give us some idea of what we’re seeing on the part of our own companies in Canada?
Mr. Woynillowicz: Thank you for the question.
We have seen a shift but to a much lesser degree, and there are only a handful of players in the Canadian oil and gas sector that have begun to diversify into renewables. The most notable is Suncor Energy, which has developed on the biofuel side and has also diversified into electricity, both wind and solar. Pipeline companies like Enbridge and TransCanada have also been significant investors in renewable energy development, both in Canada and also in markets elsewhere in the United States, Europe and further abroad.
We are seeing somewhat of a transition. In recent years, the Canadian oil patch has been much more focused, and rightly so, on reducing the costs and trying to reduce the environmental footprint of their oil and gas production. Of course, that is what they know. It’s a core competency, and the reality is we are now operating in an era where the world is awash in oil and relatively cheap oil, and consequently there has needed to be a focus on reducing the costs of Canadian oil because Canadian oil, particularly oil sands, is a higher-cost source.
I’m sympathetic to the need on their part to really focus on their core business.
That said, I certainly admire Suncor’s early foresight because they have been investing in renewables for two decades now, and it is imperative that more oil and gas companies, particularly as we come back to a period of profitability, also take a longer view and look at how they might be able to evolve their business over time so that they can capitalize on some of the new opportunities that are emerging and not find themselves in a situation where as demand for fossil fuels does begin to decline or other competitive factors make it challenging for them, they are not left with only the ability to do one thing that is no longer needed to the same degree that it is today.
Senator Seidman: You mentioned that it costs money to make these investments, and, given the constraints the Canadian companies have had, they have not gone that route. Is that the only reason?
Mr. Woynillowicz: I think there has just been a focus on doing what they know how to do, and that has been to explore for and produce oil and gas.
I would also say that much of the shift that we’ve seen has really only happened over the past five or six years, driven largely by falling technology costs for both wind and solar, as two examples. The oil majors, Shell, BP and Total, have the ability, I think, to respond much faster to that. They have much larger balance sheets they can draw from to diversify and invest in a variety of things, including in some higher-risk ventures.
But again, I think it behooves Canadian companies and the Canadian government to be thinking and to be thoughtful about how we are going to evolve so that we continue to have successful Canadian energy companies in the future.
Senator Neufeld: Should we look further afield than all of those big multinationals? I can tell you that Encana, a large Canadian company, is extensively switching over to electricity in all their new production facilities, and plants are being electrified in northeastern British Columbia, where I come from. And so are some of the smaller companies, as is CNRL, another great Canadian company. I will admit that it hasn’t been so for decades, but the electricity has become much better available to them, and they want to reduce their greenhouse gas emissions so that they can continue to produce the natural gas because that’s mostly what we produce.
We should perhaps check some of those out and give them kudos for what we are doing for electrifying with clean electricity generated in British Columbia. That is a general point; that’s not known.
Mr. Woynillowicz: I agree, absolutely. The comment I was making was specifically with regard to investing in electricity generation, in renewable energy generation. But when it comes to electrification, I would say the oil and gas sector is looking seriously at that, particularly in northeastern B.C. where they can benefit from the low industrial rate for electricity. And with the fact that it is clean, it is a wise strategy to look at electrifying their operations. And it is a critical element as to how British Columbia will be able to achieve its reduction targets.
Senator Neufeld: I have seen solar panels in northeastern B.C. at gas and oil sites for over a decade. They have been utilizing it for a long time.
The Chair: Thank you both for your testimony. And thank you, colleagues, for your questions. It is very much appreciated.
(The committee adjourned.)