Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 11 - Evidence - June 9, 2016
OTTAWA, Thursday, June 9, 2016
The Standing Senate Committee on Energy, the Environment and Natural
Resources met this day at 8:07 a.m., in camera, for the consideration of a draft
agenda; and, in public, to study the effects of transitioning to a low carbon
economy; and for the consideration of a draft budget.
Senator Paul J. Massicotte (Deputy Chair) in the chair.
The Deputy Chair: Colleagues, we have before us a budget for our
proposed travel on our low-carbon economy study. The budget encompasses three
trips: one week-long trip to Saskatchewan, Alberta and B.C; and two shorter
trips, one to southern Ontario and the other to Montreal, Quebec.
If you are in agreement, I would need a motion to say that the special study
budget application of $154,983 for fact- finding in the West, Ontario and
Montreal as part of the committee's study on transition to a low-carbon economy
for the fiscal year ending March 31, 2017, be approved for submission to the
Standing Committee on Internal Economy, Budgets and Administration.
Is this motion moved? Is it your pleasure, honourable senators, to adopt the
Hon. Senators: Agreed.
The Deputy Chair: The motion carries.
Welcome, everyone, to this meeting of the Standing Senate Committee on
Energy, the Environment and Natural Resources. My name is Paul Massicotte, and I
represent Quebec on the Senate. I am the deputy chair of the committee.
Welcome to the members of the public who are in the room and those watching
on television. The committee hearings are open to the public and are available
via webcast on the sen.parl.gc.ca website. You can also find more information on
the schedule of witnesses under "Senate Committees.''
I will now ask the senators around the table to introduce themselves,
starting with my colleague to my right.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
Senator Patterson: Dennis Patterson, Nunavut.
Senator Mockler: Percy Mockler, New Brunswick.
The Deputy Chair: I would also like to introduce our staff, starting
with our clerk, Marcy Zlotnick, and our two analysts from the Library of
Parliament, Sam Banks and Marc LeBlanc.
This is our fourteenth meeting to study the effects of transitioning to a low
carbon economy. The transition is necessary to achieve the Government of
Canada's targets for reducing greenhouse gas emissions.
I am pleased to welcome our witnesses for today's meeting: Eric Denhoff,
President and Chief Executive Officer of the Canadian Hydrogen and Fuel Cell
Association; Andrea Kent, President of the Canadian Renewable Fuels Association;
and Barrie Kirk, Executive Director of the Canadian Automated Vehicles Centre of
Thank you all for agreeing to speak with us today. I would like to invite
each of you to make your opening statement, and then we'll move on to questions
and answers. The floor is yours.
Eric Denhoff, President and Chief Executive Officer, Canadian Hydrogen and
Fuel Cell Association: We have provided all the materials in advance. I
won't read every word as I think they're available to the senators.
The major thrust of our presentation is twofold. One is to make the point
that Canada is, unusually, a world leader in this technology in the same sense
as we are in some areas like aerospace and some other high-tech sectors. Canada
has about 2,000 people working in this small industry, and it produces about
$200 million a year of revenue, almost all of it export revenue.
We produce fuel cells for automotive applications, stationary power, buses,
backup power and for an intriguing new approach called power-to-gas where
surplus wind or solar energy is taken at virtually no cost. Hydrogen is produced
and then can be injected into the gas lines as storage and put back into the
power grid that way, or it can be injected into the electrical grid through fuel
cells. Canadian companies have sold this technology to Germany's largest
utility, E.ON, and it's been used with amazing success in the North in a mine in
the Arctic called the Raglan Mine, which has saved more than 2 million litres of
diesel fuel already this year using this kind of zero-emission technology.
Where we are struggling is to find increased domestic use of opportunities
for zero-emission fuel cell vehicles and other applications of fuel cells. They
reduce emissions effectively to near zero when using renewable hydrogen, and
renewable hydrogen is increasing in availability extensively through the use of
surplus solar and wind and through biomass.
While battery electric vehicles also reduce emissions — and we have no
contest or complaint about battery electric vehicles, we think they have
terrific applications as well — only fuel cell cars meet the extended range and
quick refueling demands — they can be refuelled in two or three minutes — that
consumers want at this time, and they have the efficiency of three times an
internal combustion engine.
For example, if we had 5,000 fuel cell vehicles on the road by 2020, yearly
greenhouse gas emissions would be reduced by 14,750 tonnes; 20,000 vehicles by
2025 and 100,000 by 2035 would reduce it, at the end, by 290,000 tonnes of GHGs.
Interestingly, in Canada, we make the fuel cells for everybody else in the
world, but we don't use them much ourselves. In Vancouver, Daimler/Mercedes has
invested more than $70 million to build the world's first automated fuel cell
plant. They have more than 50 employees working there to rapidly commercialize
large-scale, multi-thousand per year production of fuel cells that will be
shipped back to Germany and placed in Mercedes cars for sale there.
We have 225 employees in a joint venture between Daimler and Ford in
Vancouver who are doing research and development on commercialization of fuel
cells. Ballard has a five-year engineering services deal with Volkswagen for
about $100 million.
We are selling fuel cells like hot cakes suddenly this year all over the
world, except Canada.
Hydrogenics, a company in Toronto, has sold more than $100 million worth of
fuel cell orders for buses and trams to China. They've sold more than 100 fuel
cell sets for trains to France.
Ballard has sold 300 buses this year alone to China and has concluded their
bids on, I think, a 25-bus order to the United States, and they will be bidding
on a 142-bus order for zero emission fuel cell buses to Europe shortly. They
have, of course, 50 or 100 buses on the road already.
Hyundai is offering fuel cell vehicles for lease in Canada. Now you can lease
them in Vancouver. There are 15 or 20 of them driving around now, and they
leased the first one in Toronto a few weeks ago.
Companies like Greenlight Innovation have expanded into Europe, opening an
office in Germany, and they have been selling fuel cell testing equipment around
Only British Columbia has incentives of $6,000 per car if you buy a fuel
cell, as opposed to Ontario that has probably a combined subsidy of about
$14,000 for battery electric vehicles.
The difference with fuel cell vehicles is that virtually nothing of the
battery electric component of a battery electric vehicle is built in Canada.
Wind turbines aren't built in Canada, and solar generators generally aren't
built in Canada, but the fuel cells are all built in either Vancouver or Toronto
for these items I'm talking about.
A fuel cell bus is two or three times more efficient than a regular bus and
saves more than 1,100 pounds of CO2 a year. The efficiency is 200 per
cent that of a diesel bus. It's like running an electric trolley bus without the
wires. If we had a fleet of 5,000 fuel cell buses in Canada, we'd be saving
450,000 tonnes of GHGs a year.
There are a variety of Canadian firms that are building fuelling stations
which, of course, is the old chicken-and-egg scenario. You won't get a lot of
fuel cell cars until you have fuelling stations. We build great fuelling
stations. We build them all over the world — all over the world, except in
Canada. We are building some of the new fuelling stations in California for the
100 fuelling station rollout in California that is under way there now; they'll
have 50 stations done over the next year and 100 over the next two years. We're
building fuelling stations in Germany as well. We just build them for other
people, but we don't make many for Canada.
We have designed and constructed these stations for people like Shell, for
their hydrogen project in California, and we have been awarded stations for many
years around the world. Vancouver, at one point, did have, I think, up to five
fuelling stations, but we have one right now because of the lack of availability
The global projected hydrogen fuel cell market by the end of this year will
be $8.5 billion, so Canada really does have a chance to build on what we have
and establish a high-value, high-tech market that contributes to GDP, tax
revenues and national pride. We could be creating thousands of new jobs and we
could be finding new automotive industry supply chain opportunities for
companies in Ontario who want to build components for fuel cells to go into new
fuel cell cars and for integration.
I mentioned some of the international work we've done. What we don't have
that other people have is the equivalent government funding level. Canada
contributes probably, oh, I don't know, $10 or $20 million a year to fuel cell
research and development, the United States Department of Energy alone more than
$100 million, and then other departments, like defence and various other groups,
probably almost match that. Canada produces products for the Americans, for
example, in defence. We make fuel cells as personal power for a platoon-level
troop because they are so technology laden now that otherwise they have to carry
very heavy battery operations around.
Other places have incentives for vehicles that we don't have on a national
basis, and every country that's involved in this business except Canada has a
national strategy for fuel cells. Korea, Japan, U.S. and Europe all have
national strategies on how they intend to integrate hydrogen fuel cells into
their economy and what they intend to do about it.
Europe will spend $1 billion over the next few years on hydrogen fuel cell
deployment, and as I said, the United States is well over $120 million, while
Japan and Korea are well over $100 million a year.
As an association, we've begun lobbying the federal government for a national
strategy. I'll just be candid: The Tories hated fuel cells. They viewed it as
something the Liberals started, which wasn't actually true: Mulroney was the
first investor in fuel cell technology. It was actually initially a Tory thing,
but the federal bureaucracy viewed it as something funny going on over the
mountains there in British Columbia and couldn't quite understand it.
Even though we were the inventors and the people who commercialized fuel cell
technology and we created the passion for it around the world, our own national
government, after a while, decided that they were bored and they would move on
to other strategies.
This is a real tragedy for Canada, because we do have tremendous
opportunities here. We have a wonderful product. It works. It's commercialized
now, and it does need the incentives that are similar to those offered by other
governments, particularly around a national strategy.
I won't go through all of the presentation in detail; I think that's
sufficient. It's just to say as the national cradle for fuel cells and hydrogen
commercialization, Canada has an opportunity and really should pay more
attention to the technology and make modest investments.
We're very happy the new government has put out an RFP for new fuelling
stations for Canada where they are offering to pay 50-cent dollars and that they
are looking at additional opportunities on how the technology can be deployed.
We look forward to working with the new government in this positive fashion to
exploit our creativity and our industry in the future.
I really want to thank the Senate for this opportunity. It doesn't happen too
often that we have the opportunity to speak to senators directly on this topic,
and it's much appreciated. Being from British Columbia, we'd prefer afternoon
sittings, of course — it's about 4 in the morning when we get up to come here —
but I think the Senate has been a great friend of our industry over the last
decade or so. We've had a lot of interest from individual senators and have
appeared a few times before committees. I think it has really helped to keep the
public interest alive on a topic that otherwise might have faded from view, so
thank you very much.
Andrea Kent, President, Renewable Industries Canada: Good morning to
everyone, Mr. Chair, and, of course, members of the committee. I want to echo
Mr. Denhoff's comments in thanking you for this opportunity to appear here
before you today.
We have been long-standing supporters of any initiative by the government, in
either place, to look at how we can remove GHG levels from all sectors, really,
a sector-by-sector approach. Looking at the ambitious targets that have been set
by the new government, we certainly do have a very sizeable challenge and a lot
of work before us. We're very grateful for the opportunity to bring our
perspective and contribute to that conversation and that ongoing policy
I'm Andrea Kent. As mentioned, I'm the President of Renewable Industries
Canada. I suspect some of you may be much more familiar with our association
under its previous name, which was, of course, the Canadian Renewable Fuels
Association. Our association has been representing biofuels producers,
distributors and retailers in Canada for over 30 years. It's a pretty proud
history that we have. The rebrand happened actually two weeks ago today. It is
really intended to reflect the upward trajectory and the movement and evolution
of the renewable fuels industry in Canada and the diversity of the companies
that are now operating, not just in the biofuel space but truly in the bio-based
economy space where we can displace an ever-growing amount of petroleum and
fossil fuel products through bio- based materials, substitutes and, of course,
liquid transportation fuels.
Our members have been working really hard in this area to grow their
businesses and diversify their products beyond fuels for some time. I'd be happy
to come back and talk about that in more detail at a future sitting, but for
today, we think that we can share our expertise and make some contributions in
looking at the challenge before us, looking at how biofuels policy in Canada has
contributed to GHG emission reductions so far and looking for opportunities to
expand that potential and grow out those benefits, both from an environmental
and an economic standpoint.
As you know, 195 signatories to the Paris agreement have indicated that their
target is to ensure the increased global average temperature stays below 2
degrees Celsius above pre-industrial levels and also to meet COP21 commitments
to make meaningful reductions in greenhouse gas emissions. Looking at those
targets and contrasting them to the current state of play, the results can be
GHG emissions in Canada have never declined. In fact, they have been rising
exorbitantly for decades. That's the trend we are up against here. According to
Government of Canada data, total GHG emissions in 2014 were about 730 megatonnes
of carbon dioxide. If Canada were to hit our 2020 emissions targets of 622
megatonnes, we would need to find a way to reduce annual emissions by at least
110 megatonnes. That's about 15 per cent of 2014 emissions. I know that we've
provided some simple slides that visualize this stat in a pretty effective way.
There's a lot of room to make up for. We are here to take an honest and
pragmatic view of that challenge and say that it is possible, but, in order to
get there, we really need to leave no stone unturned when it comes to searching
for ways to reduce greenhouse gas emissions.
In 2014, Canada's transportation sector accounted for 171 megatonnes of total
GHG emissions. That's about 23 per cent of total emissions. It's second only to
the oil and gas sector. If we are going to win the fight against climate change,
we need to remove transportation sector GHG emissions — it's really that simple
— and biofuels can continue to play a vital role in achieving that objective.
The way we see it, producers of renewable fuels really are some of the first
low carbon pioneers. Biofuels have continued to be proven one of the lowest
cost, most effective pathways to taking GHGs out of the transportation sector.
Looking at ethanol, it can reduce emissions by as much as 62 per cent on a
life-cycle basis. That is from the very beginning of the process, so from well
to wheel, to where it's burned in the tailpipe. Looking at biodiesel, those GHG
emissions, on a life-cycle basis, it can be as high as 99 per cent compared to
Canada has regulations under the Environmental Protection Act that require a
blend of 5 per cent ethanol in gasoline and 2 per cent biodiesel. These
renewable strategies have proven to be very effective. The mandated requirements
have proven to remove 4.2 megatonnes a year of GHG carbon from the environment
every year. To put it another way, that is the equivalent environmental benefit
of removing 1 million cars from the road every single year.
What we're proposing is a simple regulatory change that would expand these
requirements in the federal renewable fuel standards so that it would be up to a
10 per cent blend of ethanol and gasoline and raise the biodiesel requirements
from 2 per cent to 5 per cent. Doing so on a staged-in, incremental basis would
allow obligated parties enough time to ensure that there are no technical
barriers to implementing the change.
It's worth noting that these are already established, integrated fuels that
are in the marketplace today. There really is no infrastructure cost associated
with increasing the mandates. There's no change in consumer behaviour that's
required. All you really are getting is an additional GHG benefit and reduction
out of the transportation sector. Expanding the mandates in the ways that I just
described would be the equivalent of an additional 1 million cars coming off the
road from a carbon intensity standpoint.
We have a lot more ideas. Obviously, this is a very complex issue. Like my
colleagues here, we have ideas for ways that infrastructure can be enhanced and
ways that government support can be broadened for innovation generally speaking,
but I think that the simplest, most immediate way to get some short-term and
achievable GHG reductions is the expanding of the known, reliable and existing
platform for biofuels. Doing so sooner rather than later means that we will be
ever closer to reaching those 2020 and 2030 targets as well.
Thanks for the opportunity, again, to appear before you today. I very much
look forward to our discussion and answering your questions.
Barrie Kirk, Executive Director, Canadian Automated Vehicles Centre of
Excellence: Good morning, senators. Again, my thanks for the invitation to
The Canadian Automated Vehicles Centre of Excellence — that's a mouthful, so
we say CAVCOE — was formed three years ago to help the public and private
sectors get ready for the arrival of self-driving cars. We are not working for
any of the companies actually making or developing self-driving cars; we're more
involved with the opportunities and challenges for the rest of the world.
My first message is that the first generation of self-driving cars is already
here. You can go into a showroom today and buy partially self-driving vehicles
that have intelligent cruise control, lane centering, pedestrian avoidance and
automatic braking, self-parking. Those are some of the features. Also, in
Europe, there are fully automated, self- driving shuttle buses.
In the oil sands, Suncor has ordered 175 self-driving heavy haulers, these
monster dump trucks. That's a great step forward. Suncor tested one of these for
about a year and found that computers really are better drivers than humans. No
surprise there. One of the downsides is that Suncor will be laying off about 800
people. Every technology advance has a downside, and, with self-driving cars,
one of those is job displacement.
Ford, Toyota and others predict that they will have commercially available,
self-driving cars by about 2020.
General Motors has already invested over $1 billion in self-driving cars, and
they're moving rapidly into the area of self-driving taxis. In fact, there's a
report in yesterday's Globe and Mail that, tomorrow, General Motors will
announce that it is hiring 1,000 engineers and other research and development
people in Oshawa and Markham to work on autonomous and connected vehicles. Even
though Prime Minister Trudeau and Premier Wynne will be at the announcement,
that hiring of a thousand people is being entirely funded by General Motors,
which shows the level of interest and the level of investment.
There are a bunch of different levels to this whole space. I prefer to talk
not just about autonomous vehicles; I talk about an ACE vehicle. An ACE vehicle
is autonomous, connected and electric. They have a huge range of benefits. The
biggest single benefit will be safety. Everybody involved in this realizes that
computers will be safer than silly, stupid human drivers. My hope and my prayer
is that we can save about 80 per cent of the collisions, fatalities and injuries
A second but equally important benefit will be the environment and energy,
because most of the driving we do is in urban areas. Electric vehicles are going
to be very green, help the environment and produce a lot of downstream benefits.
A lot of the early work with autonomous vehicles is being done with electric
vehicles. The Google car, for example, is electric. The shuttle buses I
mentioned, which are operational in Europe now, second-generation, fully
autonomous shuttle buses, are electric.
The trend towards shared use of autonomous vehicles means driverless taxis.
There will be a trend away from personal car ownership to shared electric,
autonomous taxis. This is going to permit cities to harness the power of this
technology to completely redefine how we plan cities.
The City of Toronto is one of our clients, and they understand that the
opportunities with autonomous vehicles give them a way downstream to completely
redesign Toronto. They don't have all the detailed answers, but they have a big
I like the vision that Helsinki has, which is to have an integrated mobility
system — cars, bikes, transit — that is so integrated, convenient and affordable
that nobody wants to own their vehicle. It's a wonderful vision.
We and the Government of Canada have two broad options: to take a step back
and let the technology and industry roll this out by themselves, or to actually
manage that. Our feeling and recommendation, and that of other people as well,
is that it's important to get behind the technology, to guide it forward and to
Of the G7 countries, Canada is not only dead last in its preparations for the
benefits of AVs, but way behind the other six countries. I'd like to see to us
not only catch up but move ahead. One of the ways we can do is to create what we
call a Canadian Automated Vehicle Initiative. The Netherlands has done this;
Australia has done this; Singapore has done this; and the U.K. has done this;
but we have not.
There's a real opportunity there to guide the technology, the deployment and
the policy work. Among other things, this will really help us to move forward,
reduce our carbon footprint and harness the power of electric vehicles,
especially for urban travel.
A U.K. parliamentary committee has recognized that this is not just a transit
or transportation issue; it's government wide. The U.K. parliamentary
transportation committee has recommended the establishment of a minister for
driverless vehicles to coordinate across all of government. If I had a lot more
time, I could explain a lot of other impacts.
We also need to become a lot more attractive to the industry. It's well known
that the Ontario government, since January 1, has permitted testing of AVs on
public roads in Ontario. They have a regulatory framework for that. The reality,
which is less well known, is that so far not one single company has applied for
that permit. We do not appear on the radar screens of the car manufacturers,
with the possible exception of GM. We need to improve on that. We need to be a
lot friendlier towards the AV ecosystem.
We need to work with other levels of government on transportation master
In the U.S. government, Anthony Foxx, Secretary of the U.S. Department of
Transportation, wrote a wonderful article last year in which he said that with
connected and autonomous vehicle technologies, we can increase the traffic-
carrying capacity of our roads by a factor of five. By having vehicles that can
safely travel closer together, you can get far more vehicles on each kilometre.
To be frank, senators, I don't believe that, but if we can use technology to
increase the capacity of roads by even a factor of two or three, it would be
wonderful. I wonder why we're thinking about spending tens of billions of
dollars on new infrastructure when we could spend much less on technology and
achieve the same result. I agree that we need to repair existing infrastructure,
but in terms of new infrastructure, I've been advocating that any request for
federal funding for new infrastructure, transit or transportation should include
an assessment of the impact of autonomous and connected vehicles.
One other thing: The Organisation for Economic Cooperation and Development in
Paris, OECD, has a report from last year. It's free and on their website. Their
amazing conclusion is that with driverless taxis, which they call taxibots, and
traditional transit in major cities, we can take 9 out of 10 privately owned
vehicles off the roads — 9 out of 10. Now, that's a lot more bullish. Compared
to the OECD, I'm a moderate. Even if we can take 4 or 5 out of 10 private
vehicles off the roads in our major cities, it would be a huge step forward.
I'm urging everybody who will listen to me that we need not only to invest in
infrastructure but to dedicate part of it to smart infrastructure and technology
to achieve the same overall goals.
The bottom line: I look back on the 20th century — well, maybe the last half
of the 20th century, but I read my history books. We know that cars had a huge
impact on our personal lives in the 20th century. They have a huge impact on
society, on our cities' urban planning and the world. I'm predicting that, in
the 21st century, the arrival of self-driving cars will have an impact of equal
magnitude. One of the beneficiaries of all of that will be energy and the
environment — our carbon footprint.
Thank you again for your attention. Like the other speakers, I look forward
to your questions.
The Deputy Chair: Thank you, Mr. Kirk. I must add that if anybody
doubts automated driving can be safer than personal driving, they have never
seen Senator Ringuette drive a car.
Senator MacDonald: I thank all of you for being here. There's so much
we can discuss here. There's so much on the table.
Mr. Kirk, you would be pleased to know that I'm the Deputy Chair of the
Senate Transportation Committee, and automated vehicles are in the queue. We're
going to be studying them next. We will be going to Edmonton soon. I won't be
asking you questions on that today. I'll wait until we get our committee up and
I'll start with Mr. Denhoff and hydrogen fuel cells: I've always been
interested in this technology and have followed the early years of Ballard. You
mentioned that we're building fuel cells around the world. Who is building them?
Is it Ballard or a subcontractor? Is it you association? Who is building them?
Mr. Denhoff: No, senator, they're built by Ballard in Vancouver, by
Hydrogenics, a firm in Mississauga, which is a competing publicly-traded
company, and they're built by Mercedes/Daimler in Vancouver, as well, for export
back to Germany. We have an industry cluster in Vancouver and a smaller one in
Toronto centred around either providing components or extensions of the
applications of fuel cells.
Senator MacDonald: Are we still considered to be the leader in
hydrogen technology in the world?
Mr. Denhoff: We are, although I think in some areas, depending on the
area, other people have either caught up or are moving ahead of us. Japan is
investing so much money, as are Europe and even Korea, that I think if we don't
make further significant investments in Canada in the next five years, we'll
start to fall behind.
If you have a submarine that you want fuel cells in, they're probably
Canadian fuel cells. If you have backup power for telecom in Indonesia, those
would be Canadian fuel cells. If you have buses in China, those would, in all
likelihood, be Canadian fuel cells.
Senator MacDonald: You bemoaned the lack of government investment in
this technology. I'm looking at some numbers. The lack of investment doesn't
seem to be attributed to any one government or any particular philosophy.
There's about 7 per cent invested, total, from Canadian governments. It's not a
lot of money.
Why is there so little growth and so little investment in this in Canada? One
of the problems we've noticed here is it's the same thing with nuclear
technology: We're exporting our nuclear technology everywhere but haven't built
a new reactor in 30 years. It seems to be the same problem.
Mr. Denhoff: I think it's a combination of factors. I think the
industry overpromised early on. When I joined the association four or five years
ago and looked back in the clippings, there had been a sense 10 years ago that
the industry would expand much more quickly than it could. The primary
challenges were reducing costs — the cost of platinum is one of the key
ingredients in a fuel cell — and increasing durability. Those took longer to
take place than people were patient for.
Of the funds invested in Canada — say, about a billion dollars over the last
30 years — most of that has come from the private sector, and they continue to
make investments now. In fact, there's been quite a resurgence in the last year
or 18 months; governments in the U.S. and overseas and the private sector are
ramping up their investment.
I think it's often difficult for the federal government because they're asked
to pick between battery electric, fuel cell electric or alternate fuel
technology and others. We don't ask them to pick us alone or make a particular
choice. We just ask for comparability. There's an accelerated capital cost
allowance for wind and solar, for example, but for whatever reason there is not
for hydrogen fuel cells. We think there are simple things like that.
I must say the Quebec government has done a marvelous job recently in
introducing California-like minimum regulatory requirements for zero emission
vehicles, much like my colleague was talking about for renewable fuels. Quebec
has said 15 per cent of vehicles in the future have to be zero emission if you
want to sell your regular cars here. Those kinds of things are in existence in
the other jurisdictions, and they drive the investment by OEMs or they drive
investment by other applications.
If Canada does a couple of very simple things, we'll maintain our leadership
and accelerate again. We're funny that way. From the Avro Arrow to all kinds of
other technologies, we like to invent them and then have somebody come in and
snatch them away from us. I've been in a meeting with the deputy minister in
Ottawa who said, "Yeah, it is a good technology and probably does require some
investment, but it will happen. The Americans or the Europeans will put the
money in, and we'll get the benefit of the vehicles eventually anyway, so why do
I want to risk my capital?''
I understand the reasoning. I'm a bit more nationalist than that, so I would
prefer to see us make some investments, or simply have a regulatory environment
equivalent to that we are seeing emerge in California and elsewhere where, if
you want to sell vehicles, which probably produce a quarter of the pollution in
the country, X per cent of those must be zero emission.
We have a very quirky problem: They're all commercially available now.
Hyundai, Honda and Toyota are all making and leasing or selling fuel cell
vehicles. But they're making them in quantities of 3,000 and 5,000 and 10,000.
When you want to compete to have those vehicles deployed to Canada, they say
"Well, in California, if we don't deliver vehicles there, it costs up $85,000 to
$100,000 per vehicle penalty.'' In Scandinavia they get free import duty, which
is 100 per cent on a vehicle going there, they get free ferry passage, free
HOV-lane access and free parking. We're competing to have those vehicles
deployed, and we don't have the competitive tools to do that. We don't have the
incentives that others have.
Senator MacDonald: You said we require modest investments. What does
"modest investment'' mean?
Mr. Denhoff: I think they're on this sort of plane: We spend some
money now in Canada on R&D in doing things like reducing the amount of platinum
needed in fuel cells and increasing the durability of fuel cells and that sort
of thing. We think there should be continuing modest increases in funding.
The federal government has increased the funding for the IRAP — Industrial
Research Assistance Program — significantly, and that helps our industry a lot.
That's the kind of thing that's important.
Second, we think this sort of regulatory change to enable accelerated CCAs —
that cost would literally be in the few millions to the treasury. I don't think
it would even be $10 million or $20 million a year. It would be very modest.
The third thing is investments in infrastructure. You need to build fueling
stations. In California, for example, to blanket the state with 100 stations,
which they feel is sufficient to handle the expected deployment of vehicles
there, the California government is spending, I think, about $100 million over
five or so years towards subsidies towards those stations in a competitive
environment. Industry is investing too. Toyota puts money in, and the government
puts money in.
To roll out initially in major markets like the Greater Toronto Area,
Montreal and Vancouver and places like that, you would probably need about a
similar hundred stations over the next five years, and that would provide
sufficient coverage. Then you'd be rolling out the connectors, just like you do
Superchargers for Teslas. The federal government has begun that by offering
50-cent dollars on the next few stations. The B.C. government offers some
funding for fueling stations. We need to accelerate that.
At the federal level, I think you're probably talking in the neighbourhood,
over five years, of a maximum of about $50 million in stations, and that would
produce 100 to 200 stations around the country and provide the initial network
you would need. It's real money, but it's not dramatic.
Senator MacDonald: When it comes to this technology, the
transportation that comes to my mind are buses and things of that nature. How
transferable is this technology to other means of transportation, whether it's,
let's say, trains, ferries or bigger, heavier vehicles? Is it practical for this
type of transportation?
Mr. Denhoff: It does seem to be for trains. Alstom, the big French
company, and Hydrogenics from Toronto are filling an order for 100 train set
units for France. China is buying train set units, and I think Bombardier, if I
remember correctly, actually tried a train unit some years ago, just for
experimental purposes. I don't think there's an issue there around commercial
application; I think there's just an issue around adoption. It's quite a
I've seen several examples in Scotland and Scandinavia where they're piloting
the use of fuel cells for ferries, sometimes as backup and sometimes as primary
power, and I don't think there's any particular commercial reason not to use
them. Again, this is just a conservative industry that is used to diesel and
It's used extensively for backup power for telecom companies. If you don't
have power and your cellphones aren't operating, there's no revenue. In the
Bahamas, during the last major hurricane, the fuel cell-backed stations all
operated seamlessly, while the battery backup ones went out after a few hours or
days, and the diesel ones, often, were damaged in the storm.
There's a lot of good use for stationary applications. In the United States,
high-temperature fuel cells are used by these really large data companies that
are driving huge amounts of data and therefore using a lot of power. They will
take natural gas and clean it up and take the GHGss out of it by running it
through fuel cells and power these huge data centres with them, and it has
The most commercial application of all, interestingly, is forklifts and
material handling. Coca-Cola, Whole Foods, Canadian Tire and Walmart are on
their fifth, sixth and seventh sets of orders because they're commercially
competitive, GHG-reducing and easy to deploy. There are a lot of different
applications we're seeing now that probably weren't envisaged five or ten years
Senator Ringuette: I'm a very strong believer, and, like my colleague,
I have been following the Ballard development for 20 years now.
We've talked about transportation applications and telecom and so forth. How
is the research going with regard to building energy requirements, whether
you're looking at homes or commercial complexes and so forth? Because,
ultimately, I believe you are looking at how your technology can substitute for
fossil fuel markets. Where are you in regard to that kind of building
Mr. Denhoff: Thank you, senator. That's a very interesting question.
Canadian companies like Ballard have built fuel cell powering applications for
Toyota's headquarters building in California. It was powered by Ballard fuel
cells, using biomass energy to power the fuel cell.
In Canada, generally, in places like Quebec and British Columbia,
hydroelectric power is so cheap that it really undercuts hydrogen. In Alberta,
natural gas is so cheap, and it's so oriented towards gas.
In the States, they use a lot more, as I said, in buildings where they reform
natural gas into hydrogen and run it through a fuel cell. They do it more as a
GHG reduction because it's not really any cheaper. You're adding a cost of
reforming the natural gas.
In Japan, it's terrifically popular. There are hundreds and hundreds of
thousands of homes powered by fuel cell applications, for several reasons. One,
it's not really more expensive than the incumbent power system there, but, two,
they want independence from the grid, because, after things like Fukushima and
other events, they really want individual home independence from the grid.
In Canada, it's a tough sell just on price. When you have very cheap
hydroelectric power and very cheap natural gas, it's tough for both homes and
institutions. It's more difficult for vehicles even.
Senator Ringuette: That brings me to my second question. With regard
to cost, how do you compare yourself to other energy sources?
Mr. Denhoff: We are competitive, depending on the source of the
hydrogen. Renewable hydrogen, particularly, is very competitive, and hydrogen
that comes from a by-product industrial process is usually quite competitive,
depending on the transport costs. On-site generated hydrogen, if you put a
little mini wind tower on the back of the building here and generated
electricity and then used some electrolyzer and made the hydrogen, would
probably be reasonably competitive because there's no transport cost.
One point, for example: They had to transport the hydrogen from Quebec all
the way to Calgary for the Walmart forklifts. Even after transporting it all
that way, the GHG profile was still lower than battery electric forklifts
operating in Calgary because it's coal-fired power that they were using from
electricity there. But the transport costs made the hydrogen more expensive than
if they'd used natural gas or electricity.
The price is coming down quite rapidly, and there are markets already in
North America where the hydrogen price is competitive with gasoline. The engines
are more efficient, so there's no reason to believe that it can't be competitive
when on a large scale.
Senator Ringuette: I have one more question, and this question is for
Ms. Kent. Ms. Kent, I was a Member of Parliament in the House of Commons in the
years when we approved the legislation for ethanol fuels. I must admit that, at
the time, I found that it was an interesting solution. However, since then, I
must say that different studies on the impact of using food content in either
gasoline or diesel and the impact around the world with regard to the food
supply and the cost of food supply is certainly a great concern.
You are asking the federal government to move from 5 per cent for gasoline to
double that, 10 per cent. Have you looked at the ramifications with regard to
the availability of food and the cost of food with regard to your
recommendation? With all of the different new alternatives, I don't think that I
would support the increase to 10 per cent. Have you done any study with regard
to what the effect would be in Canada of doubling the ethanol requirements?
Ms. Kent: Absolutely, senator, and I thank you for the question. This
is an issue that comes up a lot. It's a general issue of sustainability as well,
and making sure that our industry is accountable in this area is something that
continues to be very important to us.
When the initial mandates were built out in 2007, it was largely an
agricultural push, which is an interesting but very relevant part of
understanding the initial reasoning behind instituting the renewable fuel
standard. It wasn't just an environmental policy, of course, as you recall, but
it had a very strong agricultural driver to it and a rural economic component to
it as well. Farmers wanted to have more market opportunities for their crops in
Canada. They wanted to have a larger domestic market for them.
As to international food security and food scarcity issues and sustainability
issues, when you look at deforestation and other practices happening on a global
scale, when you look at the Canadian context — and I think that it's fair that
you view and analyze it in the context in which we are speaking, which is a
Canadian mandate for domestic biofuels production here.
We have, of course, continued to monitor this. At the time the policies were
brought in and even more so today, crop production in Canada continues to trend
in a direction that indicates we are producing more crops on less cropland. In
terms of the sustainability profile and the environmental responsibility profile
from a Canadian crop perspective, there is no concern in competing against food
crops to put in an increase in the ethanol gasoline market.
When you look at oil prices and food prices, going again to the food versus
fuel component that you asked about, there are links. Obviously, food prices and
oil prices tend to move and peak and valley in tandem. When you look, however,
at corn prices in the same way, the effect of corn prices is really quite muted.
For any demand for corn prices or any suspected increase in the cost of food as
a result of biofuels, we have proven, through publicly available data from the
world price indexing of this, that there is no threat there and that there is no
competition between the two commodities.
I think that what really is at the core of people's concerns about food
scarcity and food security has to do with issues that are larger than biofuels
now. I think it has to do with food waste. I think it has to do with very
unfortunate economic factors around the world that are causing these pressures.
I'd be really happy to share with you the latest findings. We presented a lot
of this dashboard information on biofuels market, outlook, commodity prices and
how they continue to work together in a broader market context in some open
panels. We invited officials from Environment Canada, Natural Resources Canada
and Agriculture Canada, the three core industries, to show them, and it's
available online. I'll definitely make sure that the latest data are there,
because the concerns are valid in that global context of food security.
It's important to keep a close eye on how the food and biofuels market
actually function and how they support each other in Canada, because that's the
Canadian context and reality to these policies. Looking at expanding out from 5
per cent to 10 per cent, if you get gas in Ontario and look at the label, it
already says it can contain up to 10 per cent ethanol. Because of the price
advantage of ethanol and its wholesale discount to gasoline, which continues to
be about 20 cents a litre, many obligated parties are already regularly blending
upwards of 7 per cent to 7.5 per cent.
The other issue is that we're not fundamentally changing behaviour. We're not
really fundamentally changing the market for food crops and biofuels production.
The increase in the mandate is simply adding in that policy certainty so that we
guarantee a minimum sustained level of additional GHG reduction benefits and the
economic benefits too of having that policy certainty to grow in a very
I appreciate your giving me the time to answer that.
Senator Ringuette: I look forward to the data. Still, I hope that your
data are very conclusive because as of yet, if I had the opportunity to review
my vote in support of ethanol, I would probably remove it.
Ms. Kent: That candour is fine. It's important to realize that it's
not our data. They're Environment Canada and Agriculture Canada data, world
price indexing information and Statistics Canada data. I'm more than happy to
In terms of energy literacy, understanding these issues is important. It
should apply to all sectors, and this rigour should apply to all policy options
as well. Electrification is a great example. In jurisdictions on coal, it's not
a low- carbon option at the end of the day, but looking at options that we're
talking about here, it can be a huge environmental benefit.
The Deputy Chair: Thank you. This is such an important issue, and
there may be a lot of misinformation out there. I know you answered, but for
most Canadians, including many senators and myself, I'm not too sure we
understand the response you gave. Am I correct in saying that in Canada we
import food source to create our biofuels? In other words, the demand exceeds
the local supply from a country sense?
Ms. Kent: I guess this is most specific to corn ethanol, as you're not
really talking about biodiesel as much, so I will answer in that context. Corn
is the ethanol that we're talking about here from the fuel perspective that goes
into gasoline. Biodiesel in distillate comes from different biomass, such as
rendered fats, crushed seed oils or used french fry grease. They are different.
Senator Ringuette's question was specific to the ethanol mandate and corn
The Deputy Chair: How about a little larger? I don't want to escape
the issue by talking about only one. Could you consider the whole food source? I
think canola is a big part of it, as is corn.
Ms. Kent: Sure, yes.
The Deputy Chair: Are we satisfying our demand locally? Are we
Ms. Kent: We do import, but gasoline imports as well. A lot of this is
determined by price. We are a liquid transportation fuel, which we're talking
about here. In many ways, we will behave in the market similar to other fuels.
There is an import-export component to it.
Looking at ethanol in Canada, we have 15 domestic producers. The total
capacity is 1.8 million litres a year. We operate all of those facilities close
to or at capacity regularly. Sixty per cent of ethanol is produced in Ontario.
The cycle begins in the farmer's field, is transported to the processing
facility and then ultimately is blended and put into the fuel market. Often this
is within a 100-kilometre radius that we're talking about. It is placed
strategically close to the agricultural biomass sources. It's produced
domestically. It employs people in rural areas, and then it gets blended into
the fuel pool. It applies across.
The Deputy Chair: Could you just deal with the short answer? From the
statistics I saw, we're importing. But to increase the percentage of biofuel in
our fuels, diesel and so on, it would only suggest that we'll either have to
increase production in our country or most probably in the short term import
The Conference Board of Canada made a study recently, and the World Bank
commented recently also, to the extent that we are going to import more and
cause more food source to be created. The counter-argument if that is the case
is that supply and demand will dictate. Like the World Bank noted, there's a
cost issue with the food source, obviously, and even a poverty issue in the
world sense because we're importing predominantly from the United States. Maybe
it is relevant somewhat to simply say we have no problem in Canada, but it seems
to be a real issue. There have been many studies showing from a total sourcing,
including water, that some of the stuff, including corn, given the total
ingredient and the total cost, may be not such a good idea.
Ms. Kent: If that were the way the market behaved, I would agree that
it would really not achieve the economic component of it.
GHG benefits will accrue where the fuel is used. Even in the instance where
we have some imports coming in right now, as long as those biofuels are being
used in Canada, the transition to a low-carbon economy is being achieved. It's
kind of a technical outlier here, but it's an important context to go back to
the core of the study that we're talking about. I suspect firmly that if you
look back at how the original mandate from 0 per cent to 5 per cent worked, it
created policy certainty in an area so that investment could take root and build
out a domestic industry.
We have imports right now, but the majority of those imports are going to
what we refer to as voluntary compliance — this over-blending that I mentioned.
Even though the mandate is for 5 per cent in gasoline, because of that price
advantage, most of the times when you're at the fuel pump you're putting in,
unknowingly, 7 per cent or 7.5 per cent, 8 or almost 10 per cent. That's why the
fuel label will say up to 10 per cent ethanol.
When you take the mandate from 5 per cent to 10 per cent, we already know
there's no technical barrier to it. We already know that the food and fuel
relationship in Canada is not one that would create any scarcity or
sustainability issues. What you do is send a market signal to the Canadian
marketplace. You give them that certainty. Look at Ontario's announcement to
increase their gasoline mandate that came out in their climate action plan. I
know that some biofuels producers are already calling the bank as they look at
expanding their domestic operations to fill that demand locally.
The issue we've had is that we're at capacity to meet the existing mandate.
We're filling the voluntary overage with imports because there hasn't been a
strong market signal to increase domestic capacity. In addition to the
additional 1 million cars' worth of GHGs that increasing from 5 per cent to 10
per cent would deliver, you would also get that economic kickback of domestic
Again, the cycle has to be that virtual cycle.
The Deputy Chair: The issue was not just the imports but whether it
would be good for the economy and society when you consider the whole source.
Obviously, the more demand you have for a certain food source, it will affect
price, production and deforestation if you have to import a lot. There's a
consequence of all that. I think that's the point we were trying to make.
Mr. Denhoff, obviously you're competing somewhat against electric cars. I
would make the observation that you seem to be losing that competition. In fact,
Musk from Tesla recently said "fool cell'' as opposed to "fuel cell.'' Why are
you losing that reputation for competition against electric cars if it's so
Mr. Denhoff: I'm not sure as yet that we are. They're both electric
vehicles. Fuel cells are in an electric vehicle the same as a battery electric
vehicle. Mr. Musk has a particular personality that lends itself to attracting a
lot of news coverage. He's sort of the Donald Trump of the transportation world.
His battery plants are going to be huge.
Look, it's a fabulous product if you want to spend $120,000. He hasn't built
the new, less-expensive one yet. If you want to spend $120,000 or $140,000, you
can participate in the supercharging system if you want to wait somewhere
between overnight and a half an hour to charge the battery. If you're driving
from Ottawa to Toronto and you don't mind stopping partway and sitting there for
an hour or so to charge your vehicle, then the application is fine. It's most
well-suited, obviously, for urban transport around town where you're going to
use the battery much less and you can charge overnight.
The Deputy Chair: Why did he choose that technology and not hydrogen?
Mr. Denhoff: His view is that he can reduce the size and weight of the
battery load in the vehicle and increase the distance available before charging
such that he'll have the competitive advantage.
When you have a hydrogen fuel cell vehicle and you roll into the Newport,
California shell station, it takes you 2 or 3 minutes to fill your car up,
exactly like a regular internal combustion car, and when you go driving, it goes
for 500 kilometres or so without refueling.
The problem with battery electric right now is that they cannot yet get the
battery small enough, the weight down enough and the power up enough. It doesn't
work well in large power applications. It works fine for smaller cars, but it
doesn't work as well for trucks, and it doesn't work as well in cold weather. He
and others haven't yet been able to demonstrate that they can get the battery
load down and their price down sufficiently.
So look at it this way: take a company like Toyota. The chairman and Chief
Executive Officer of Toyota, Takeshi Uchiyamada, was the chief designer of
Prius, probably the most successful car in Toyota's history and one of the
world's most successful cars. He personally decided that hydrogen fuel cell
vehicles were the vehicle of the future, not that there was no role for battery
electric. He clearly saw that as well. So they bet more than a billion dollars.
The chairman of Hyundai, a Korean manufacturer, bet more than a billion
dollars on fuel cell vehicles even though they're very cognizant of battery
electric. In the European joint fuel cell undertaking, companies like Daimler,
Volkswagen and others are spending billions more.
Somebody will win or both will win. It may well be, over time, that Elon Musk
cannot get costs down enough and cannot get battery duration long enough that he
can successfully sell vehicles for longer-range applications. They could be
niche vehicles for people who have a lot of money and who are willing to pay and
sit around waiting for superchargers. On the other hand, it could prove that,
over the long-term, his vehicles are super-successful and drive out other
technologies, like hydrogen fuel cells.
We're not asking government to make a bet one way or the other. We're saying
to the government that the urgent imperative for GHG reductions is so enormous
that you should be even-handed and just have a regulatory environment that says
we want zero emission vehicles, and then let the market decide. The market can
fill them up with hydrogen fuel cell vehicles or they can fill them up with
battery electric vehicles.
One of the tragedies for Canada is that Elon Musk very cleverly has taken
manufacturing of those vehicles out of the traditional Detroit-Windsor-Oshawa
triangle and has moved the battery plant and the car production plants out to
California and elsewhere. This presents a very profound risk to Ontario, in
fact, in that if the next generation of battery-electric vehicles don't have to
reside in Ontario and Michigan and places like that, then you can decentralize
automotive manufacturing, and all of that supply chain and all the rest of it
disappears from Ontario. So why Ontario and the federal government wouldn't want
to make a modest investment to make sure they're not picking the wrong
technology in fuel cells is sort of beyond me. It's not a major investment.
Most of it is simply regulatory. It's just like Quebec. Say you have to
provide 10 or 15 per cent or whatever modest number the government thinks is
appropriate, and then let the market decide.
We're not enemies of battery electric. They're electric vehicles like us.
The Deputy Chair: Mr. Kirk, you're an expert in this matter. You talk
a lot about your automated cars, and you've made it very clear the future is
electric cars. Is that battery-operated, or hydrogen-operated? What are you
espousing and why do you foresee that?
Mr. Kirk: My prediction is that the future for autonomous cars and
driverless vehicles and taxis will be electric. The companies who are actually
making vehicles like that today, the European companies, are making low-speed
shuttle buses. Tesla we've mentioned, and Google has their prototypes. New Flyer
in Winnipeg has battery-powered buses. They are all working on the
battery-powered electric model, and they feel that shows the most promise.
As I mentioned earlier, the reality is that most of our driving is urban. I
agree that, at the moment, battery-powered technology has some range issues, but
battery technology and drive train technology is improving at about 8 per cent
per year, which represents a lot of changes, and charging technology is
improving. As we move ahead to the 2020s, we will see a lot of battery-powered
electric vehicles in use.
I agree with my colleague that Tesla's vehicles at the moment are expensive,
but there are two things I do want to emphasize. One is that the price of
electric and autonomous vehicles is coming down. Ford has announced that its
autonomous vehicles will be "for the masses.'' As we move into shared driverless
taxis and car ownership goes down, the cost for transportation goes down.
Last year we published a report jointly with the Conference Board of Canada
that showed that with the use of self- driving taxis, the average Canadian
family would save $3,000 a year. Now that assumes, of course, that the use of
the vehicles is convenient, but I think it will be, the way the industry is
working. All the players are working towards that objective. We're not looking
at individual people buying a high-priced ca; we're looking at people buying a
The Deputy Chair: By why not hydrogen? The argument seems so simple
and so good. You don't have to wait 10 years to be able to drive from Florida to
Mr. Kirk: Maybe fuel cells will be useful for long distances, but for
urban use, certainly the industry trend is towards battery-powered electric.
The Deputy Chair: But why?
Mr. Kirk: To be honest, I'm not completely sure. I'm not an expert on
the battery side. I just know the industry is moving in that direction. They
have their own reasons, and it's a good question to ask some of the
manufacturers, but to be honest, Mr. Chair, I don't have a simple good answer
Mr. Denhoff: If I could interject, Mr. Chairman, I'm glad you raised
New Flyer Industries, because it's a great Canadian company in Winnipeg. They're
a wonderful bus manufacturer that makes buses in Canada and the U.S.
They were the original bus manufacturer of fuel cell buses for Vancouver,
where they manufactured 20-odd fuel cell buses. They make them now and are
exporting them into the United States, and I believe they've won — I think it's
been announced or will be announced — a major bus order in the United States for
fuel cell buses.
Van Hool, the major bus manufacturer in Europe, makes hundreds of fuel cell
buses. Aberdeen, Scotland has just launched Europe's largest fuel cell fleet,
and they have 10 or 20 going. Oakland has a big fleet of fuel cell buses in
California. They have the same availability rate as diesel buses, none of the
GHG emissions, work very well in urban environments and are a terrific
application because they have a single fueling station to service. They run all
day and don't have to be recharged partway through the day.
In some urban applications, fuel cells work extremely well already. The cost
profile is there and the fuel supply is there. In other applications, battery
electric vehicles work very well. In heavy duty trucks, battery electric is not
going to work. Heavy duty postal delivery vehicles and that sort of thing won't
work at this time, and fuel cell vehicles do work.
There are areas where battery electric is clearly superior and there are
areas we would argue where fuel cell vehicles are superior. Let the market
figure it out. That's why we have a market.
The Deputy Chair: In your case, I understand — I'm not an expert or
scientist — you're sourcing hydrogen on one hand from natural gas and on the
other from H2O, which is much more complicated. I gather most of your
sourcing must come from electricity or natural gas to create hydrogen. Is that
Mr. Denhoff: There's an intriguing array now. We have
The Deputy Chair: Give me a sense of the proportion.
Mr. Denhoff: It's different by jurisdiction, but in Canada I would
think the bulk would come from industrial by- product in Quebec and places like
that. We don't really reform natural gas much in Canada for it, but you would
get a little bit from that.
And then some comes from wind to electrolyzer. You take wind, you create the
electricity and using an electrolyzer you create hydrogen, and then you can
store it in tanks or put it directly into the natural gas grid.
It comes predominantly from industrial processes at this point, but rapidly
increasingly from renewables like off- peak wind, solar and biomass.
Senator MacDonald: I want to go back to your subject matter. When it
comes to this technology, are there any areas where it's not really applicable
or where it wouldn't be technologically feasible?
Mr. Denhoff: I think stationary power in Canada is a pretty tough
sell. There are a few applications. It's super in isolated communities, like the
Raglan Mine, where they've taken themselves pretty much off diesel, using wind
and hydrogen. For a big building in Ottawa, it's great for backup power, but if
you're going to have to take natural gas and reform it and run it through a fuel
cell, you are going to add a price to do that. I wouldn't think of it as a
sole-purpose power rather than a backup power. But, for most of the other
applications, yes, I think it works very well, even in Canada.
Senator MacDonald: If you were to advise the government and this
committee on a set of recommendations with regard to the growth of the use of
hydrogen fuel cells, what would your shortlist of recommendations be?
Mr. Denhoff: I think it would be very simple. One, just create a
national strategy that parallels those that other countries have done and,
within that, take a look at the policy, the regulatory and the taxation
framework that might encourage further investment in the sector by government or
the private sector or both. I think that short answer would resolve the bulk of
Government can make its own assessment of the efficacy of the technology, its
commercialization, viability, the benefits to Canada and that sort of thing.
They've done a number of studies over time, Industry Canada and others. It
wouldn't take them that long. Within six months, they could analyze and decide
what their view is of the benefits of hydrogen fuel cells to Canada and then
create a framework that enables further investment in that. It takes some work.
This is rocket science, but it doesn't take rocket science-like timelines to do
the work. That's why I took the job, so I could be able to say, "Yeah, this is
Senator MacDonald: Ms. Kent, we haven't forgotten about you. Biofuels.
I'm one of those people who has a radical view when it comes to growing food. I
think we should grow it to eat it. I've always had trouble with the concept of
growing food to turn it into fuel.
I know that there was quite an issue in the States a number of years ago with
the amount of money that was being spent by state governments in the biofuel
industry, particularly ethanol and corn, and, really, for the most part, they
had to cut out most of these programs because it was crippling them economically
to subsidize this industry.
I assume we're susceptible to the same pressures in Canada. How do you
address these concerns?
Ms. Kent: I'm enjoying my time here today, and, with all due respect
to the way the conversation is going, I have noticed a general trend of very
forward-looking questions for my colleagues on either side, which is great in a
transition-to-low-carbon-innovation discussion, but the biofuels questions seem
to be 15 years ago in a lot of ways.
The Deputy Chair: It's not rocket science.
Ms. Kent: I'm not a rocket scientist either.
We do not have here in Canada a lot of the subsidy programs that you
mentioned in the U.S., Senator MacDonald. We are not asking for that here in
Canada either. I think it's only fair to highlight that difference. As similar
as the two marketplaces are, how we have approached building out the industry
has been pretty different, and the size of our market is relatively so small
compared to the elephant in the room, which is theirs.
A lot of those studies and a lot of those subsidy programs have really
pivoted around the U.S. blend wall and market share for oil versus renewable
content. Here, I'm really proud that the Canadian approach has been a lot more
integrated and less polarized. When we look at what we're advocating for here,
it really is just increasing the mandated requirement along the lines of what
the marketplace is already doing.
I think that we would probably benefit from sharing some more of the current
information that we have regarding crop use, crop production and food prices.
That would really substantiate what I'm trying to explain here in that these
scarcity and food security issues are not part of the domestic value chain for
biofuels production as we are doing it now and as we intend to build it out in
The other thing we haven't touched on as well is that innovation is twofold.
Innovation is transformative. It is disruptive. But, at the same time, it also
enhances and improves existing technology, and it grows efficacy in existing
Next generation advanced or cellulosic ethanol is what is coming down the
line. We are ahead in the game, in some ways, of commercializing that in Canada.
One of our member companies, Enerkem, is in Edmonton. It is waste-to- biofuels
technology that is displacing solid municipal waste that otherwise is going to
go into a landfill and create literally tonnes of methane gas and turning it
into an advanced biofuel. This is a marriage between really advanced
first-of-kind technology, as well as being able to operate off of an
established, successful renewable fuels platform. We need to be able to work in
tandem, especially in the short to medium term. There is a valuable role here
I think what I've heard very loud and clear from the honesty and candour of
the senators around the table — and I thank you for that — is that we probably
need to do a little bit of a better job of getting you a current picture of how
it is that our industry has come along this path. No pun intended here.
Obviously, there are some food issues rooted in where we came from, but it isn't
really part of the current picture. It certainly should not be a concern going
forward, especially looking at the fundamental ask that we've asked for here.
Thanks for giving me that added chance to elaborate a little bit more on
The Chair: We are looking forward to getting the information.
Senator Patterson: I want to say this has been a most stimulating
panel. I think the three presenters have excited and enlightened me. I think
they've all been complementary.
Mr. Denhoff, you made a very compelling case for fuel cells in vehicles. I
wonder if you would address the question of cost. You talked about the Tesla and
its prohibitive cost. How do fuel cells in vehicles compare in cost?
Mr. Denhoff: A fuel cell vehicle, if you lease it in California, I
think it's 499, something like 499 a month, including the fuel. I think it's
similar in Canada. Because of the dollar depreciation, it might be slightly
higher, into the 500s. That's for an SUV, the Hyundai Tucson SUV. In the market,
you would see a relatively comparable price for a modestly premium vehicle.
You're not going to get a Honda Civic equivalent fuel cell vehicle yet, and it's
all just economies of scale. When you're making 3 or 4 or 5,000 of those
vehicles a year as a manufacturer, you're simply not getting the scale.
We see, for example, with buses, that the fuel cell buses originally were
almost 3 million. Then they were 2.5, then 2, then 1.8, 1.7, and, now, with the
European bus order for 142, I think it is, they anticipate the price of the fuel
cell buses to come in in the 7 to $900,000, which makes them competitive with a
Similarly with vehicles, to be fair to Mr. Musk, the reason those Teslas are
100,000 is the scale of production. He argues that, once he can get production
up, he will have a $35,000 or so U.S. mid-range vehicle. That won't have access
to the super stations. They'll have to pay.
For all of them, whether it's fuel cell or battery electric, it's getting the
scale of production up, and that produces cheaper cars. In the market, you can
lease them or buy them competitively now, but the manufacturers are
internalizing that subsidy, basically.
What's very interesting — and I'll provide some data later — is that, on
companies like Ballard, their original fuel cell buses, for example, were about
$3 million, and their durability was X hours, 3 or 4 or 5,000 hours. Now, their
fuel cell bus price would be down in the million something range, and they've
cut the cost of the fuel cell by half, but the durability is up into a range
that's comparable for when you would have to replace the engine in a regular
We were really pleased; there was a demonstration project of 20 buses in
Vancouver. At the end of the almost five years they ran, Ballard had expected,
if they were going to renew the project, that they would have to put in all new
fuel cell systems, but I think fewer than 20 per cent of those buses needed few
fuel cells, and now there's a new generation beyond that.
We're certainly getting there on cost and price. They're more expensive than
the incumbents. Trolley buses are $1 million compared to a diesel bus at
$600,000 or so. Why do we do it? For environmental benefit. Finding the sweet
spot where people are willing to pay for the environmental benefit but not
through the nose is the place where both battery electric and fuel cell electric
vehicles are headed.
Senator Patterson: Senator MacDonald asked Mr. Denhoff about
recommendations. I'd like to ask the other two presenters. I'm enthusiastic
about this. What should we recommend, Ms. Kent? You talked about the regulatory
changes in the ethanol maximum. Would there be anything else that Canada should
do and that we should recommend to the federal government.
Ms. Kent: I would say, as mentioned, the increases in the existing
mandate, so looking at moving ethanol from 5 per cent up to 10 per cent, and
biodiesel from 2 per cent up to 5 per cent. Incrementally, those would be our
short-term and most immediate asks for sure.
Another area of work that would be of interest to this group is to look at
other initiatives that the government has already announced. In Budget 2016, a
sizeable alternative fuels infrastructure component was given through Natural
Resources Canada. As best we know, biofuels is not being considered an
alternative fuel for the context of that infrastructure build-out. Mr. Denhoff
said it well when he said that we're not competing with any other renewable fuel
alternative. It's just making sure that there is that policy comparability
across the board so that market pathways are presented and consumers can decide
for themselves. Including some infrastructure for biofuels would be good in that
Looking at taxation and regulatory frameworks would promote innovation both
at the front end for new fledgling technologies and would recognize that some
solid work is already in the pipe that still needs commercialization help as
well, whether through tax exemptions or other policy. Natural gas and propane
are exempt from fuel excise taxes to increase their uptake. Something similar
could be done for cellulosic ethanol, which we talked about a while ago, to help
it take root in the marketplace as well.
Senator Patterson: Mr. Kirk, you talked about requiring transit
infrastructure proposals to have an autonomous vehicle strategy. We're about to
roll out billions for transit infrastructure projects. We may have missed the
boat there, I fear, in terms of implementing your recommendation. Would you add
Mr. Kirk: I don't think it's too late. It's a good question.
Obviously, here in Ottawa, they are rolling out Phase I of the Ottawa LRT
system. The Phase II project extension is still in the planning stage. I read
through the business plan for that, and I was disturbed to find that there was
zero mention of autonomous, automated or self-driving. There's an unstated
assumption that the future is an extension of the past. Everything I am saying
and other people who are experts in this area are saying is that autonomous
vehicles, ACE vehicles and driverless taxis will be here soon, and therefore the
past is not a guide for the future.
We expect later on this year the federal government to bring out both
announcements about additional infrastructure spending and innovation agenda. My
hope is, and I recommend, that the requirement for an AV impact analysis will be
included in that.
The concern I have is this: Take the Ottawa LRT as an example. I recognize up
front that when the plans were being developed 10 years ago, a light rail system
was certainly the right decision. But in the last five years, a huge amount of
progress has happened in the area of autonomous and driverless vehicles. The
developments have been very rapid.
Assume that driverless vehicles are the way of the future in the 2020s. I
mentioned earlier General Motors, which has spent $1 billion. They've bought
Lyft, a car sharing technology. They've invested in Cruise, which makes
autonomous vehicle technology; and they've done other things. The President of
General Motors in the U.S. said that their focus will be on driverless taxis and
that they are now very well-positioned to enter that market and that General
Motors believes that the driverless taxi market is the logical and best place to
start with autonomous vehicles, and that will compete with all sorts of transit
I was listening to the CBC earlier this week about the new Ottawa LRT system.
Suppose people live in Kanata, which is where I live. They are going to work.
They may walk to a bus stop, take a bus and then change to light rail, then get
off the light rail and go to the office — a multi-modal, complicated journey. If
the driverless taxi industry in the 2020s can offer an option for perhaps two or
three neighbours to share a self-driving taxi and come downtown in one step
without all the changes, there will be a market for that, even if they cost a
little more than regular transit. That is going to remove ridership from
traditional transit, reduce revenues and increase the taxpayer operating subsidy
for light rail for the rest of the century.
I'm recommending that the AVs and driverless taxis should be part of the
business plan and an explicit part of the financial model. To be blunt, to me
light rail is a 20th century solution with its fixed route and fixed schedule
point to point. The trend in the 21st century is towards on-demand, flexible
routing and point to point. A driverless taxi solution meets that test; light
rail does not. The mayor of Los Angeles has said twice, in public: Why are we
still building light rail? His point on light rail is that it's 20th century.
Instead of putting rails in those tunnels under Ottawa, if you had an asphalt
roadbed and buses that were electric or fuel celled or whatever, then the same
asphalt roadbed could be used for driverless taxis and relieve some of the
congestion on the streets at ground level.
There's no simple answer to the right transit solutions in any city, whether
Ottawa or anywhere else, but the worst possible scenario is to ignore this
elephant in the room, and the best thing is to address it and build it into the
business plan and financial models.
The Deputy Chair: Relative to the average person buying the average
car, tell me the price comparison between a hydrogen car, an electric vehicle
and maybe an existing gas vehicle. Give me a sense of quantum. Let's say a
person buys a car for $25,000. How much more for hydrogen?
Mr. Denhoff: There aren't entry-level hydrogen fuel cell cars on the
market. They are typically mid-range. They would compete with mid-range SUVs or
cars in the price range of the $499 lease per month.
The Deputy Chair: Make it simpler. What's the purchase price in
Mr. Denhoff: They're mostly leased, so I'd have to look. The lease
range is from $499 to $599 per month, putting them in the upper middle range.
The Deputy Chair: That's a big gap. That's 20 per cent. Let's say $525
Mr. Denhoff: I think so.
The Deputy Chair: Compare that to the existing.
Mr. Denhoff: In that range, I honestly can't answer for sure. There
would be a premium, but it's not dramatic. I'm sure you can lease a non-hydrogen
fuel cell Hyundai car or Toyota Mirai equivalent for less, but I don't have that
at my fingertips.
The Deputy Chair: More than 10 per cent or less than 10 per cent?
Mr. Denhoff: I think in the 10 to 20 per cent range.
Senator Mockler: We could be here for another two hours following up
on a few of the questions from Senator MacDonald.
Could you provide us with a grid of North America when it comes to the cities
that should have a business plan with the new types of vehicles? I appreciate
your saying that. Could you provide that to the committee?
Mr. Kirk: Fairly simply, the sad part of the story is that over 90 per
cent of the transportation master plans and transit strategies in all of North
America — Canada and the U.S. — do not refer to autonomous vehicles. That's the
exception. A few municipalities are starting to think about it. I've mentioned
Toronto. Calgary is starting to think about it, but no municipality that I know
of in Canada has built autonomous vehicles into their transportation or transit
master plans, so the grid becomes very simple.
The Deputy Chair: If Moncton does it first, it will be the first in
the world, then.
Mr. Kirk: Absolutely, yes.
Senator Mockler: Thank you, chair. I did have a drive in a Tesla in
Moncton, as a matter of fact, and I was impressed. The computerization of that
vehicle is unbelievable.
My question is: Where do lithium batteries fit into your concept?
Mr. Kirk: You're looking at me, senator, and I'm not an expert on
lithium batteries. I'm an engineer, and I know the limits of my knowledge. With
respect, sir, I'll take a pass on that one.
Mr. Denhoff: There is a variety of different battery technologies used
for a variety of different solutions in these situations. I just can't comment.
It's not an area I spend any time on.
Senator Mockler: Can I share a little information? Where Senator
Ringuette and I come from, we have a lot of woodcutters. I've been privy to
looking at chainsaws with lithium batteries that you can buy at Walmart,
Canadian Tire and elsewhere. We're very impressed in our neck of the woods, in
Atlantic Canada, when it comes to Oregon, which is a specialized chainsaw
company. We know they're credible. They have a lithium battery-powered chainsaw,
a branch cutter and trimmers. They last for anywhere between four and a half to
six hours. We were very impressed by that.
Mr. Denhoff: For small applications, they're terrific. They're really
hard to beat. It's where you need more power or you need it for a longer period
of time that you run into issues.
There are some intriguing things about fuel cells, as I mentioned earlier, in
defence applications. The Americans just placed a second follow-on $5 million
order from Ballard to use fuel cells for the platoon-size squad of power supply.
They all have navigation things, and they're carrying around hundreds of pounds
of electronics now, and the batteries you need to provide long-life support to
that are too heavy.
I'm careful to say some of these applications beat the pants off fuel cells,
like a chainsaw. We don't have one yet for that. There are fuel cell
applications for phones, but not competitively. Then when you get into larger
trucks or really cold weather and on and on, then we do better. Everybody has
The Deputy Chair: I made a comment earlier about Senator Ringuette
being dangerous in a car. Imagine if she had a chainsaw beside her.
Senator MacDonald: The one thing we haven't discussed is the
assumption we're all working from, which is that we're trying to reduce CO2
emissions and that CO2 emissions are fundamentally bad when it comes
to global warming and things of this nature. Of course, when it comes to things
like wind power, we think it is supposed to be so green, but there's a lot of
front-end CO2 emissions from wind power. You're producing towers and
turbines, and there's a cost to that in terms of carbon. You're cutting wood
roads to establish these things, and there's a cost to that. You're mining
copper to produce generators, and there's a cost to that as well. As with hydro,
there's a front-end cost. It's destructive to produce hydro, although it's very
green. What are your front-end costs? What are the CO costs when it comes to
producing biofuel or hydrogen cells?
Ms. Kent: When we say our profile is CO 60 to 99 per cent lower,
that's a life cycle analysis. That is everything from well to wheel. We'll look
at the biomass, where it's grown, how it's harvested, how it's transported to
the production facility, how it's processed, how that is transported to a
blender, how it's blended and then, ultimately, what comes out of the tailpipe
at the end. That takes into account that entire value chain. There is a cost,
but the net benefit is still there.
Mr. Denhoff: Ours is the same. Our numbers, when we put them in, show
the total. If you take hydrogen from wind, exactly as you say, you have all that
steel being used, the infrastructure and the fuel to set it up. If you have
battery electric, you have a huge absorption of hydroelectric power off the grid
for cars. In some jurisdictions, that will require you to build new power
plants, and then you will have NIMBY and transmission line issues to go with it.
None of the technologies are without an impact. All of them generate savings
of GHGs at the end of the day. I agree with you 100 per cent that there's no
magic fairy dust here that produces a completely zero emission source. Even if
it's from biomass, you still have to have big machines and that sort of thing.
Senator MacDonald: When it comes to wind power, when they're
abandoned, it's a bunch of junk on the landscape.
The Deputy Chair: What's the percentage reduction of life cycle cost?
Mr. Denhoff: I submitted that in writing. It depends on whether it's
buses or cars or whatever the application is. Fuel cell engines are two or three
times more efficient than diesel, just in terms of efficiency, and the GHG
reductions are in the presentation I gave you. It depends whether it's cars or
The Deputy Chair: That's the 30 per cent?
Mr. Denhoff: Something like that.
Senator Ringuette: With regard to tax incentives, which you all seem
to be looking for to go to the industry so that they can reduce their cost and
increase the scale, wouldn't it be more efficient for the federal government to
give a yearly tax credit to users for carbon-free car purchases? Then the tax
incentive towards no fuel or no GHG emission would be a permanent thing, and
that would increase the demand, the scale and so forth. Maybe we're looking at
it the wrong way. If we want to increase the presence in Canada, maybe the way
is to go through a user tax credit rather than an industry tax credit.
Mr. Denhoff: We do that a bit in B.C. There's a $6,000 credit there.
They do that in other jurisdictions, too. The cheapest solution of all is just
to regulate that OEMs must employ a percentage of vehicles that are zero
emission if they want to sell their regular vehicles in Canada, and that doesn't
cost the taxpayer anything. But either works.
Ms. Kent: I think you need both. If you really want to transition to a
low-carbon economy, you have to attack vehicle by vehicle in the fleet, and at
the same time you should be making the fuel cleaner across the entire fuel pool.
Why would you choose one or the other when you could do both?
Mr. Kirk: Most thought leaders, as I said earlier, feel that the era
of personal car ownership is going to slowly come to a close. There will be a
lot more driverless taxis. Morgan Stanley, in the U.S., has predicted that we
are now witnessing the start of the end of the auto industry as we now know it.
These are hugely disruptive changes, and any incentives need to be oriented
toward the driverless taxi market rather than personal car ownership.
The Deputy Chair: Thank you very much, all three of you. I think this
was a very interesting discussion, and we certainly learned a lot. Hopefully we
will make use of this information to contribute to a Canada that produces less
CO2. Thank you very much.