Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue No. 19 - Evidence - December 15, 2016
OTTAWA, Thursday, December 15, 2016
The Standing Senate Committee on Energy, the Environment and Natural
Resources met this day at 9:03 a.m. to continue its study on the effects of
transitioning to a low carbon economy.
Senator Paul J. Massicotte (Deputy Chair) in the chair.
The Deputy Chair: Welcome to this meeting of the Standing Senate
Committee on Energy, the Environment and Natural Resources. My name is Paul
Massicotte from the province of Quebec, and I am deputy chair of this committee.
I would like to welcome the members of the public here in the room as well as
those watching on television. As a reminder, these committee hearings are open
to the public and are also available via webcast on the sen.parl.gc.ca website.
You may find more information on the meeting schedule on our website under
I would now ask senators around the table to introduce themselves, beginning
with my colleague on my right, Senator MacDonald.
Senator MacDonald: Michael MacDonald, Nova Scotia.
Senator Enverga: Tobias Enverga, Ontario.
Senator Fraser: Joan Fraser, Quebec.
Senator Seidman: Judith Seidman, Montreal, Quebec.
Senator Lang: Dan Lang, Yukon.
The Deputy Chair: I would also like to introduce our staff, beginning
with our clerk, Maxime Fortin, and our two Library of Parliament analysts, who
are to my right, Sam Banks and Marc LeBlanc.
Before introducing our witness, I would like to mention that Senator
Carignan's motion, which was adopted by the Senate last week, will bring a few
changes to our committee. First of all, new members will be joining us. The
committee will soon have 15 members. Another change will affect the make-up of
the Subcommittee on Agenda and Procedure, which will have an additional member,
chosen from the senators who are not members of a recognized party. The
committee's adopting a motion to this effect is good practice.
If you agree, I would need a motion stipulating that, pursuant to the order
adopted by the Senate on December 7, 2016, the membership of the Subcommittee on
Agenda and Procedure be increased by one non-voting member chosen from the
senators who are not members of a recognized party, to be designated after the
Is the motion moved?
Senator Lang: So moved.
The Deputy Chair: Thank you. Is it your pleasure, honourable senators,
to adopt the motion?
Some Hon. Senators: Yes.
The Deputy Chair: The motion is adopted.
Today marks our twenty-ninth meeting in our study on the effects of
transitioning to a low carbon economy, as required to meet the Government of
Canada's announced targets for greenhouse gas emission reductions. I am pleased
to welcome today's witness, by videoconference, from the Canadian Energy
Research Institute, Allan Fogwill, president and chief executive officer. Thank
you for agreeing to testify before us today. I invite you to make an opening
statement, after which we will go to a question and answer session.
Thank you for joining us this morning, Mr. Fogwill. We appreciate your input.
One of our witnesses made reference to your institute earlier this week, and we
look forward to hearing from you.
Allan Fogwill, President and Chief Executive Officer, Canadian Energy
Research Institute: Thank you to the committee for the invitation. What I'd
like to do is give you a few points about our electrification study, and then we
can discuss it generally.
The Canadian Energy Research Institute is a 40-year-old organization that
provides objective research dealing with the economic and environmental impacts
of energy issues. Due to our neutral status, we do not make recommendations or
suggest policy options. We do our best to give government and industry factual
evidence from which to make their decisions.
There is a lot of debate in Canada right now about the transition to a lower
carbon economy. One solution is to use electricity for all end uses in the
residential, commercial, industrial and transportation sectors. CERI undertook
an analysis to determine the impacts of electrifying the residential, commercial
and passenger transportation sectors. Industry and freight transportation are
more complicated to assess, so those were left out of our analysis for now.
We wanted to know how effective these sectors could be in helping Canada meet
its 2030 and 2050 carbon dioxide reduction targets. Our research sought the
answer to three questions: One, what major transitions in energy systems are
required to electrify the end use energy services of residential, commercial and
passenger transportation services? Two, what level of emissions reductions can
be achieved through electrification? And three, what would it cost?
We compared our electrification scenario to business as usual. Under this
scenario, electric equipment replaces natural gas equipment in the residential
and commercial sectors through the normal retirement and replacement cycle. The
one exception is that the predominant fuel being replaced in Atlantic Canada is
heating oil, not natural gas.
We also replaced gasoline and diesel passenger vehicles with electric cars.
The timeline for this replacement started farther out in our review period due
to the still developing nature of electric car technologies.
At the same time, the increased electricity demand, which was provided by the
grid, evolves into one with a high level of renewable and other non-emitting
generation options, averaging over 60 per cent in each province or region. The
remainder of the electricity was produced with natural gas or with natural gas
combined with carbon capture and storage.
Our first observation from the analysis is that a significant move of energy
services away from natural gas, gasoline, diesel and heating oil would suggest a
significant drop in emissions. There was, only not enough.
If we consider our 2030 target, which is 30 per cent below 2005 levels, we
see that Atlantic Canada is 7 per cent below; Quebec, 9 per cent; Ontario, 14
per cent; Manitoba, 11 per cent; Saskatchewan, 8 per cent; Alberta, 6 per cent;
and B.C., 9 per cent. In 2050, the results are similar, namely, additional
reductions in emissions but only a fraction of what is needed to achieve the 80
per cent reduction target.
So this first observation is that electrification of these three sectors is
not enough. The industrial and freight transportation sectors are significant in
terms of greenhouse gas emissions and would be need to be included to achieve
Canada's emission reduction goals.
The second observation in our analysis is that the average retail electricity
price in 2050 would be about 16 per cent to 77 per cent higher than the
business-as-usual case. That roughly means that in addition to the usual annual
increases we see in electricity rates of 1 to 2 per cent across the country, we
would see an additional 2 to 3 per cent each year for 30 years — not large in
and of themselves annually, but many electricity customers across the country
are already concerned about affordability.
The third observation is that the increase in electricity demand is about two
to three times what we use now. That would mean an expansion of the grid in each
province of two to three times. Given that renewable technologies represent
lower energy density options, that land-use footprint would likely be larger.
We know from simply reading the news that citizens are concerned about energy
infrastructure being built anywhere near their communities. This build-out of
the electricity system would be cause for concern. One solution to this,
however, is the extensive use of distributed and self-generation. While this
option can help reduce the overall footprint of the expanded electricity grid,
siting issues will remain a challenge.
One other thing to keep in mind is that there are taxes on fuels. Total taxes
collected federally and provincially on gasoline amounts to $11 billion
annually. This tax revenue would disappear if we moved to our electrification
scenario, with follow-on consequences to government budgets.
In summary, a move to electrification of the residential, commercial and
passenger transportation sectors is only part of the solution if the federal and
provincial governments want to achieve their emissions reduction goals.
The Deputy Chair: Thank you, Mr. Fogwill.
Senator Lang: Thank you very much for being here this morning. The
first question I have is to do with the assumptions that you accepted for the
purposes of your long-term study to determine the energy required in the years
out that you spoke of. I ask this because Canada presently welcomes
approximately close to 500,000 new applications in one manner or another for
Canadian citizenship or to work here or to go to university. The numbers are
significant. In one year, you've got the size of a big city; in 10 years you
would have 5 million people if you used those figures.
In order to determine the requirements that individual Canadians would use
individually and collectively, what assumptions did you make in respect to the
population that Canada would be at when you came to the end of your study?
Mr. Fogwill: Senator, I don't have the exact number in my head at this
point, but we did include the general growth in population and economic activity
that has been demonstrated in the last 10 years, and we've projected that out to
the end of our study cycle.
Senator Lang: Do you think you could provide us with that information?
Mr. Fogwill: Absolutely.
Senator Lang: I want to go into another area, and you touched on it in
your presentation. That's the question of the difficulty in proceeding with any
project of any kind in view of what some term as the "not in my backyard''
syndrome in respect to actual development, whether it be electricity, hydro or
anything else of that nature.
My question goes to the fact that there has been a significant change in the
political milieu of Canada. At one time, those that would make presentations to
the regulatory process were individuals who brought generally their own
individual perspectives and were not paid to do it. It gave the opportunity to
voice their opinion. Today, we have organizations that are being funded from
outside this country with significant millions of dollars to go on a daily basis
to protest any development here in Canada.
Has your organization ever thought of doing an in-depth study of where this
money is coming from and who is actually providing this money so that Canadians
can be made aware of exactly who and why people are giving millions of dollars
to provide for these political organizations?
Mr. Fogwill: Senator, we've never had that discussion within the
institute. The short answer to that is no, we haven't had any thoughts about
doing that sort of work.
Senator Lang: Does what is occurring concern you?
Mr. Fogwill: As a citizen, I am in favour of people respecting our
democratic institutions. In terms of how prepared people are to engage with
those democratic institutions, I view that as secondary to the credibility of
the institutions themselves. My hope is that we're all able to respect the
process and the decisions that come out of the process.
Senator Lang: I'd like to follow up. I'd like to hear your
observations in respect to the fact that millions of dollars are being made
available from outside this country to finance a good portion of these
protestations. Was that of concern to you or your organization in respect of how
you view the regulatory process and how we appear not to be able to proceed with
any of these decisions?
Mr. Fogwill: Senator, I don't know enough about the ins and outs of
the various organizations that may or may not be funding different stakeholders,
so I don't feel in a position to speculate on what's happening. I can't really
form a valid opinion about that.
Senator Fraser: Good morning, Mr. Fogwill. Thank you very much for
I have two questions. The first just arises out of my ignorance. In your
presentation, you talk about one solution to the social problems possibly
created by building out the electricity system, and you say one solution is the
extensive use of distributed and self-generation. I suppose self-generation is
having your own solar cells or windmills or whatever.
Mr. Fogwill: Yes.
Senator Fraser: What is distributed generation?
Mr. Fogwill: It's similar, but it would be a larger scale. If you
think of an electricity grid, normally you have generators out at the end,
transmission that brings it into the cities, and the distribution system that
distributes the electricity. You could build small generators in the city so
that it's more connected to the local system. They aren't necessarily for one
individual but, rather, for the system as a whole.
Senator Fraser: Driving around the countryside, we increasingly see
quite large farms of solar panels, but what I don't have is a fix on how large
one of those collections of solar panels would have to be to supply a village.
Do you have any sense on that? I'm thinking about your acute comment about
social resistance to too much land use.
Mr. Fogwill: Going back to my point about low energy density for wind
and solar, I wouldn't be able to give you an exact number right now. I could in
terms of a follow-up. It would be extensive, and it would be several acres for a
small village, and even larger than that as the community became larger.
Senator Fraser: Thank you. If you do have any data, it would be good
Mr. Fogwill: Okay.
Senator Fraser: As we go forward, what did you assume about the
increased energy efficiency of equipment that uses electricity, be it cars or
Mr. Fogwill: Well, there's inherent efficiency improvement when you
move away from a fossil fuel-based piece of equipment to an electric one. In
residential space heating, you can have 90 to 95 per cent efficient natural gas
furnaces, but your electric baseboard heater is 99 per cent efficient; so there
is an automatic improvement there.
The real improvement happens in passenger transportation, where you're
getting about a 300 per cent improvement in energy use in an electric vehicle
compared to an internal combustion engine.
Senator Fraser: But that's with today's technology. What I'm wondering
is whether you were assuming even more efficient technology. For example, if I
go out now to buy a dishwasher, I can see how much energy it's likely to use,
and it is going to be significantly less energy than the dishwasher I bought a
few years ago.
Mr. Fogwill: With the still-emerging passenger vehicles, we've made an
assumption about their improvement over time, so there is something built into
that, but the real big change in efficiency for passenger transportation is just
that one switch between an internal combustion engine and an electric car.
Senator Seidman: I appreciate the economic analysis and the set-up of
the use of electricity. Coming from Quebec, of course, I understand the
efficiency of electricity and the value of access to low-cost electricity.
We have discussed in this committee the grid-sharing across provinces, and
the impact of that, besides it being fairly complicated, was very costly
alternatives. What we heard from other witnesses was that this would be
extremely costly and involve huge infrastructure and expansions. Have you looked
at the feasibility of build-up in the North, across provinces, so that
electricity could become more viable for provinces that don't have immediate
access or aren't rich in electricity generation?
Mr. Fogwill: Senator, we produced another study a few months ago that
I can provide to the committee, and it looked at several hydroelectricity
generation options to bring hydroelectricity to the province of Alberta. The
options range from the Site C project in British Columbia to a potential project
being built on the Slave River, all the way over to a project being built on the
Nelson River in Manitoba. We have the costs associated with those.
If you look at it from a tonnes-of-CO2 perspective, the cost
ranged into the $200 per tonne range. They're not cheap, but it's definitely
possible with today's technology.
Senator Seidman: Have you costed other options, a mixed use, building
in other sustainable energy options? We've mentioned wind and solar. Have you
looked at a mixed grid?
Mr. Fogwill: In this study we're about to release, we do have a high
percentage of wind and solar and large-scale hydro and nuclear as non-emitting
sources in each of the provinces, so there is a mix of those technologies for
the generation of electricity.
Senator Seidman: And that study is coming out soon?
Mr. Fogwill: It's on my desk right now. It will be out within a week.
Senator Seidman: I look forward to seeing that.
The Deputy Chair: Before we continue, if you don't mind, colleagues,
I'd like to introduce Senator Galvez, who joined us in the Senate yesterday.
Welcome here. You have a lot of expertise in our committee's subject. Thank you
for joining us.
Senator Galvez: Thank you.
Senator Enverga: Thank you for your presentation, Mr. Fogwill. On your
status about reducing the gas emissions, have you ever compared Canada to other
countries? Are we better or do we still have a long way to go?
Mr. Fogwill: Well, we haven't done a formal comparison, but Canada is
very much in the forefront of having a low-carbon electricity system, primarily
because we've been blessed with large-scale hydroelectric resources across the
country. That has really put us very much at the top overall internationally in
terms of how much of our systems actually start off with low emitting attributes
compared to other jurisdictions.
Senator Enverga: The federal government announced a benchmark for
carbon pricing in Canada. The benchmark is set at $10 per tonne in 2018 and
increases by $10 a year to reach $50 per tonne in 2022. My question is this: Do
you support carbon pricing as a means to reducing gas emissions? Do you believe
carbon pricing in Canada will have negative consequences on Canadian companies,
particularly in light of pro-business policies being proposed by President-elect
Mr. Fogwill: Senator, I'll go back to a statement I made at the
beginning of our discussion: We're a neutral organization that doesn't make
recommendations or suggest policy options.
What I can say in terms of carbon-management tools is that there are examples
around the world where carbon taxes or carbon levies have worked. There are also
examples around the world where cap and trade systems have worked. There are
examples around the world where regulations have worked. My reading of those
suggests that some combination of all of those elements would probably be very
successful, but in terms of whether I agree that we should go with a carbon tax
versus a cap and trade system, that's not my place to say.
Senator Griffin: Thank you for your presentation. It was very
In September, your institute released a 20-year forecast for Canadian crude
oil and natural gas industries. Will the recent pipeline approval for Kinder
Morgan's Trans Mountain Expansion and the Enbridge Line 3 projects significantly
change the outlook of Canada's oil and gas forecast that you made?
Mr. Fogwill: Our initial discussions — we will update that in a few
months — suggest that there may be some slight change, but there are other
aspects associated with oil-production increases aside from market access. The
other thing to keep in mind is that at certain prices, there is already market
access through the rail network that companies have been investing in. In the
short term, it's not clear whether or not those decisions will have an immediate
effect on production.
Senator Griffin: My second question is: Other than electrification,
what are the next two or three best technologies that will lead to a lower
Mr. Fogwill: Senator, I've been thinking about this a lot, and I've
been thinking about climate change and carbon management almost my entire
career. There is no silver bullet; there is no one answer.
Speaking as an individual now and not as the head of the institute, I believe
we have to look at everything. We have to consider carbon capture and storage.
We have to consider nuclear. We have to consider changes in the structure and
design of our cities. Everything should be on the table, and nothing should be
set aside because it seems like a simple answer. It's not. It's very
complicated. It's going to require everything from everybody to bring us to that
point. I do believe that in the end, we'll have a mix of renewables,
non-emitting sources and fossil fuels with carbon capture and storage. I think
that's the only way we're going to be able to make it.
Senator MacDonald: Actually, there is a way to do it, and you touched
upon it. To produce this type of power, to provide this type of electrical grid
that would electrify everything, isn't the only way to do it and have no carbon
footprint to go nuclear? Nuclear power would provide all this and would be able
to meet demand. Solar and wind don't meet demand. Isn't nuclear the way to go if
we want to produce power at this level and provide the type of electrical grid
where you can electrify everything?
Mr. Fogwill: You're saying a fully nuclear system?
Senator MacDonald: In terms of producing that kind of power across the
country where you would electrify everything and be able to meet the demand, how
could anything be better than nuclear?
Mr. Fogwill: It's definitely something that needs to be considered, of
course. When any technology is dismissed from consideration because of
uncertainty or lack of facts, that's an improper way of looking at it. I do
think nuclear needs to have a stronger consideration going forward. We still
have issues and concerns related to long-term storage of nuclear waste. Those
need to be addressed and would want to be addressed before we take a long step
towards more nuclear.
The Deputy Chair: If I could, Mr. Fogwill, I will just ask you a
couple of questions.
I'm trying to make sure I understand the starting point of your presentation.
You've electrified everything you thought you could, with the exception of
industrial and freight transportation. When you say "industrial,'' you're not
talking about industrial transportation. It is industrial firms, industrial
companies and freight transportation. Is that accurate?
Mr. Fogwill: That's correct, the industrial sector.
The Deputy Chair: You electrify everything: 60 per cent by green
energy, 40 per cent by natural gas and some combination of natural gas and CCS.
Even at that, you basically get a reduction of maybe 10 to 11 per cent on
average across Canada. The conclusion you're making is that we're a long way off
the 30 per cent that we define as our goal across the country even if we did all
Mr. Fogwill: Yes.
The Deputy Chair: What's the solution? You're saying, verbally, we're
not getting there. We have to look at everything else and so on. If you look at
the price per tonne of CO2, what is the next best step? Is this the
cheapest way to get there, electrification? You probably have an average cost of
$75 to $100 a tonne. Ontario is at $114. From a pure economical point of view,
if the population bought into it, what are the next two or three things we have
to do, at the cheapest cost for the economy, to get there?
Mr. Fogwill: Several areas come to mind, and they're really about
technology development so that we have the tools available.
One of the drawbacks associated with wind and solar is their intermittent
nature. As a result, they are held back by the lack of firm power, which they
can get from storage. There is a lot of research being done on storage, and that
needs to continue in order for the wind and solar to really take a much larger
role in our electricity grids.
The other aspect that I think we should be considering is carbon capture and
storage in a much bigger way in order to be able to use our fossil fuels but
reduce or eliminate their impact on the environment. We don't have an energy
shortage, but we do have an emissions problem. If there's a way that the fuels
can be still used and emissions can be eliminated, then that benefits both the
environment and our economy.
The Deputy Chair: Having said that, what is your assumed cost per
tonne for CCS?
Mr. Fogwill: Carbon capture and storage was expensive. I don't have
the numbers here, but it is in the report. It's quite expensive.
The Deputy Chair: We had a witness with us recently, Dr. Jaccard, who
was saying basically $176 a tonne. He was asked, if you want to go simply
pricing carbon, how do you get there, and he replied that $176 is the most
economical way, but the population would probably not buy into it, so therefore
you have to combine it with regulation and so on.
You're saying if you electrify the adjacent provinces, it is $200 a tonne.
That's pretty high. CCS is probably close to that, from our understanding, at
least over $100 a tonne. What would nuclear be, in your mind? Do you know that
Mr. Fogwill: Nuclear in terms of dollars per tonne related to carbon
The Deputy Chair: Exactly.
Mr. Fogwill: No, I don't have that number.
The Deputy Chair: Would one of the solutions be to increasingly remove
natural gas from the production of electricity? You've still got 40 per cent use
of natural gas to get there.
Mr. Fogwill: If you're looking at trying to decarbonize the
electricity supply, yes, you want to do your best in terms of minimizing natural
gas use, but the concern there is that the alternatives, which are the
renewables, can't provide the same type of service to the grid as the natural
gas units can. That's where you would need to be able to have much better
storage options for the electricity than the renewables would produce. It's a
little bit complicated.
The Deputy Chair: How about conservation? With this imputed price of
carbon, did you project maybe just consuming it less? Is that in your model
Mr. Fogwill: No, we didn't include that because we were trying to keep
the scenarios and the parameters within the scenarios tight. We just wanted to
show the difference of electrification. There's definitely a role for
conservation and energy efficiency in other areas. We didn't include that.
There are other studies that show that there are significant improvements.
Some of those studies, however, really focus on improving the same fuel. For
example, you'll see studies from natural gas companies that say, "We can save
this amount of natural gas by going from 70 per cent efficient equipment to 90
per cent efficient equipment.''
What we see with the electrification study is that for most of the end use
equipment, it's at its maximum limitation in terms of efficiency. At that point,
you're limited in your conservation efforts to looking at the envelope with a
house or the building and the size of the house or the building.
The Deputy Chair: Senator Galvez, would you have a question for our
Senator Galvez: It's very interesting, and I will have many questions,
but maybe what I can do is complement the answer that Mr. Fogwill gave to the
nuclear question by Senator MacDonald. There is the experience in Europe of
European countries, such as France, which is facing the end of the life of their
nuclear facilities, and they are facing the problem of what to do with all the
radioactive waste that has been accumulated and was not factored in any economic
I really appreciate and have learned a lot from your answers, Mr. Fogwill.
The Deputy Chair: Mr. Fogwill, I think you've answered all our
questions. Again, thank you for being with us this morning. We appreciate it.
Keep up the good work, because I think it's very important information for the
decision makers in effecting all these alternatives available to us. Again,
thank you for being with us this morning.
(The committee adjourned.)