Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 20 - Evidence - March 2, 2011 (afternoon meeting)
CHARLOTTETOWN, Wednesday, March 2, 2011
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 1:11 p.m. to study the current state and future of Canada's energy sector (including alternative energy).
Senator W. David Angus (Chair) in the chair.
[English]
The Chair: Good afternoon. We continue the public hearings of the Standing Senate Committee on Energy, the Environment and Natural Resources. We are on a fact-finding series of hearings as a part of our ongoing comprehensive energy study where we seek to establish a strategic way forward for Canada in this complex world that is changing so much with an exploding population and increased industrialization in countries like China, India and Brazil, and the demands for energy are increasing literally second by second. Clearly we have to re-engineer our system.
We are pleased to have with us this afternoon Mr. Andrew Noseworthy, who is the senior advisor on energy for the Atlantic Canada Opportunities Agency, known to us as ACOA.
Andrew F. Noseworthy, Senior Advisor to the President on Energy, Policy and Programs, Atlantic Canada Opportunities Agency (OCOA): I have prepared remarks which I believe have been circulated to you. I propose to run through them, and certainly would welcome any questions or comments that you might have along the way.
I appreciate the opportunity to appear before you today and speak specifically about the role that ACOA plays in the energy sector. I am hoping through my comments I will be able to provide you with a better understanding of the opportunities this important sector presents in this region. I also want to take some time to provide you with an overview of ACOA's activities in the sector.
I know you have already heard testimony from a variety of federal departments, which we consider to be sister departments and with which we have a deep relationship, and I mean departments like Natural Resources Canada. I think it is quite important to have those communications and have an appreciation of what those departments do because, quite frankly, it is also by definition, an indication of what we do not do with ACOA. While the energy sector is important to us as a catalyst for economic growth, the reality is that we have neither a direct regulatory responsibility in this sector, nor are we the principal federal policy lead on energy matters, even within the region.
There are a variety of federal departments and agencies which do play a pretty active role in this region in the energy sector: NRCan, of course, which is a federal department that has the lead for both policy and regulatory matters; on the economic development side, along with us, Industry Canada, which plays an important role in shaping national industrial policy as well as International Trade, which oversees trade and commerce pertaining to this sector; Environment Canada, which focuses on the environmental aspects of energy development and production and also has policy and regulatory roles. Beyond all of them, there are a variety of others that also play a role, including departments like Indian and Northern Affairs, Fisheries and Oceans, Transport Canada and Canadian Environmental Assessment Agency, CEAA, just to name a few.
Unlike them, ACOA does not have a statutory or regulatory responsibility in this field. Our legislative mandate is to support regional economic development in the region and, more particularly, to enhance the growth of earned incomes and employment opportunities in the region.
You may ask, given our limited direct responsibility in this sector, why do we care about energy at all? I believe the answer actually can be —-
The Chair: Mr. Noseworthy, that is a good beginning in telling us about these organizations. Could you tell us a bit about yourself first, maybe your background?
Mr. Noseworthy: I am happy to do so.
As you have indicated, I am Senior Advisor to the President of ACOA on Energy. I have been with the Government of Canada for approximately seven years. I spent approximately 18 years as a public servant in the Government of Newfoundland and a period of time there as Associate Secretary to Cabinet and also as a Deputy Minister of Intergovernmental Affairs. In the intervening period, I also played the role of executive director to the Romanow Commission on Health Care.
This is perhaps an appropriate time to also indicate that I really am not an expert in the energy field. I will seek to answer your questions to the best of my ability, but I am not an expert in this area.
The Chair: That is helpful. You originally hail from Newfoundland, do you?
Mr. Noseworthy: I do indeed. I have staff and responsibility, of course, across the region. I will get into this in a moment, but ACOA actually has an energy team and a very close association with the Department of Natural Resources Canada. We have created the Atlantic Canada Energy Office, which might be of interest to the committee and is, I think, a bit innovative.
To come back to why we care about energy, I would direct the committee back to the testimony given to you last year by Elizabeth Beale from the Atlantic Provinces Economic Council, or APEC. When she appeared before you, Ms. Beale noted the critical role that energy plays in Canada's economic growth. One of the more striking points in her testimony was the fact that, for the past 10 years, annual energy sector investment in this region has been somewhere between 55 and 65 per cent of total investment in the region. Her perspective and her comments to you reinforced some of the publications that APEC has released of late, including its Atlantic Report, released last year. The report stated that the energy sector has grown to become the most important group of industries in Atlantic Canada.
Today, the sector is about 12 per cent of Atlantic Canadian GDP. I am not sure that tells the whole story because, in fact, there are areas across this region with a much more dominant impact, such as Newfoundland and Labrador, where this sector constitutes about a third of provincial GDP. Regionally, the sector is responsible for about 18,000 jobs. Energy products represent almost two-thirds of the region's merchandise exports and energy products produced here in Atlantic Canada represent about 58 per cent of regional exports at a value of about $16.7 billion.
Petroleum sector has the potential to grow and become an even more dominant force in our economic future, and, indeed, that is true beyond the petroleum sector and into the renewable sector as well.
The numbers that I have given you — and I must attribute most of them to Elizabeth — show that Atlantic Canada has already built a significant strength in the energy sector, and we have a solid foundation that is based on four major considerations. The first is our resource base. With respect to petroleum resources, Atlantic Canada's offshore sector is strong and growing. This is evidenced by the fact that today, Newfoundland and Labrador is the largest producer of conventional light crude in Canada and the offshore resources of that province show significant promise for even further development. Beyond that, the region boasts considerable potential in natural gas and oil production, both in the conventional areas of the offshore around Newfoundland and Nova Scotia, and in new frontiers like Labrador and the Maritimes Basin. Indeed, with respect to the Maritime Basin, which encompasses the waters around P.E.I., the Geological Survey of Canada has suggested its potential could rival that of the Beaufort-Mackenzie Delta and produce 39 TCF, or trillion cubic feet, of natural gas. In addition to that, as I believe the committee has already heard, there is shale gas potential across the region. That is just oil and gas.
This region is also a literal powerhouse of clean and renewable energy, as is demonstrated in the potential of the Lower Churchill River — a project that I know you have already heard some things about and I know you will hear more about tomorrow in Newfoundland. In fact, some people see that area as having some of the last undeveloped hydroelectric potential in all of North America.
Beyond this, the region also has one of the best wind energy profiles in North America, as you have heard from a number of speakers today, and that is especially true here in P.E.I.
Beyond wind and hydroelectricity, the Bay of Fundy is considered to be one of the best sites for tidal power generation in North America and world-class companies are now deploying commercial-scale turbines on its sea floor. Indeed, a report prepared for NRCan last year indicated that the generating potential of the Bay of Fundy alone could be 3,000 megawatts in tidal energy. That is just in that bay. There is, in fact, vast potential for other forms of ocean and wave energy throughout this region and there is potential in other areas as well; for example, wood waste, biofuel production from sources such as algae as well developments in the fields of hydrogen and solar energy. The first base or foundation for economic activity here in the energy sector, as I have said, is our resource base.
The second is our existing capacity in terms of major international assets in this field. Major projects like Sable, Hibernia, Terra Nova, Whiterose and Deep Panuke are world-scale projects and active demonstrations of our capacity to engage in really large-scale stuff in the offshore. Beyond the offshore, the region is home to Canada's largest oil refinery and the country's first LNG terminal in Saint John, New Brunswick, where you were yesterday. Of course, that is not to mention the mammoth hydroelectric project at the Upper Churchill.
The presence of all these massive projects brings me to a third foundation for growth in Atlantic energy industries and that is our basic industrial capacity and the expertise that exists here as a result of these projects and our skilled labour force.
Of course, the fourth and final foundation I would mention is the growth in our potential for research expertise.
As the committee might know, a few years ago, Angus Bruneau, who actually hails from Newfoundland, chaired a national advisory panel on energy, science and technology. When it produced its report, it said, "Without a stronger emphasis on energy innovation, we will increasingly rely on technologies developed by others to access our own resources.'' He made that statement nationally, but I believe nowhere is it perhaps more true than here in Atlantic Canada, where unlocking the potential of our resources has often required new and innovative solutions; for example, to deal with oil and gas exploration in harsh environments, or where technological advancement has been critical to maximizing the potential of renewable energy resources, like tidal.
As a result of the challenges presented by these resources and exploiting them appropriately in a sustainable way, companies and academic institutions in this region already have pioneering experience in areas such as ice management and wind energy. The capacity we have built to overcome the challenges we face here are not only important to maximizing the potential for sustainable and responsible development here, but they provide our companies with the opportunity to apply their innovative ideas and expertise elsewhere around the globe; for example, in Greenland and the Arctic.
With abundant energy resources, world-class researchers and facilities, excellent business and transportation infrastructure, low business costs and well-educated workers, Atlantic Canada is a world leader in energy production, export and research, and this capability has made Atlantic Canada a major player in the North American energy industry as a secure and reliable supplier of petroleum, natural gas and electricity. We have the potential to play an even greater role in the future. All this is why ACOA cares about energy.
Let me turn to us as an agency and give you a brief overview of what we do and specifically what we do in this sector.
Created in 1987, ACOA is a federal agency that works with Atlantic Canadians to build a more innovative, productive and competitive economy. We are mandated to lead and coordinate federal economic development activities in all four Atlantic provinces, and fundamental to our role is the responsibility to work with regional partners and stakeholders to encourage economic growth and opportunity, and to seek to ameliorate the economic challenges that face this part of the nation. Our programs are focused on supporting the private sector in creating and strengthening the economic opportunities and encouraging innovation.
Fundamentally, our activities are focused in three core areas: enterprise development, community development and policy advocacy and coordination. Through programs such as our Business Development Program, or BDP, we assist with new business start-ups and we help existing businesses expand and become more competitive through innovation, the development of trade opportunities and with productivity and skills improvements.
ACOA has been engaged in the energy sector since the agency's inception. Our traditional focus was, in fact, on supporting small and medium-sized businesses, especially in Newfoundland and Nova Scotia, to take advantage of the growing offshore sector at the time of the commencement of the Hibernia and Sable projects. Through programs like BDP over the years, we have provided assistance to companies to support the development of business plans, marketing and modest aid for expansions.
This work continues, as does our work with the offshore boards and the provincial governments in securing benefits for our companies from major projects, and we also work closely with the industry associations to strengthen capability and investment and marketing opportunities.
Beyond this traditional core of activity, over the past decade, our efforts in this sector have been supplemented by others, most notably by the establishment of the Atlantic Innovation Fund, or AIF, which provides support for innovation and commercialization of R&D in a variety of sectors, including energy. Indeed, the energy sector has been one of the most active under our AIF program and to date, we have invested over $90 million, or about a sixth of the funds distributed to date, on energy-related R&D projects in this region.
In addition to our direct support for energy projects through our BDP and AIF programs, ACOA has been an active partner with industry and provincial governments in promoting new investment in the region's energy sector. We have also placed significant emphasis on building a robust international supply capability in this region to satisfy the demands of major energy projects, not only here, but around the globe. By way of example, we have been working with provincial governments and industry associations to further develop markets and opportunities for local supply companies in countries like Brazil, Greenland and the U.K. through activities like business missions that are designed to showcase the capabilities of our companies and link them with potential buyers and distributors abroad.
Beyond all of this activity, ACOA plays a somewhat unique advocacy role on behalf of the region and its industries within the federal system and in the development of federal policy. This advocacy role is embedded in our legislation and in our legislative mandate and is critically important in a sector as geographically dispersed and technically complex as energy.
In this context, we are an advocate for the responsible development of the region's energy sector and we work closely, as I have said, with other federal departments, but not only them, but with the provinces and with industry, to address challenges and build opportunities in the region.
In that context, I would like to spend a few minutes talking about two specific issues that I know are of interest to the committee. I have already briefly mentioned the Atlantic Canada Energy Office. I will speak about that first and then perhaps the Atlantic Energy Gateway, which I know you are keen to hear about.
The Atlantic Canada Energy Office, or ACE, was announced by the former Minister of Natural Resources, Gary Lunn, in St. John's in June 2008 as a mechanism for the Government of Canada to coordinate and manage its energy- related activities in the Atlantic Region. In announcing the office, Mr. Lunn noted that ACE was to be a partnership between ACOA and NRCan that would integrate NRCan's mandate for energy resources and policy with ACOA's mandate for economic development. Further to the announcement, ACOA and NRCan staff held extensive consultations with industry and provincial governments regarding the potential structure and role of ACE, and the conclusion of these consultations was a general consensus that ACE should focus on strategic industry development issues.
With a small staff across the region and a main office in St. John's, Newfoundland, ACE's mandate covers both the traditional petroleum sector and the clean and renewable energy sector. We have sought to ensure that the establishment of this office does not muddle or confuse formal responsibilities of either ACOA or NRCan or simply add another level of bureaucracy to the management of energy issues in the region.
In this context, ACE actually co-locates staff from two federal departments, creating new synergies between the two, and creating an opportunity for joint work plans, while at the same time allowing both departments to exercise their full legislative and statutory mandates in the region.
ACE, as I have said, does not have a direct role in the regulation of the sector. We see our role as assisting clients in connecting them with federal programs and services, and we do not play a direct role in program management. ACE does play a role, however, in areas like investment attraction, and it seeks to coordinate the activities of ACOA and NRCan in areas like trade development, R&D support and policy analysis.
First, we see the role of ACE as fostering collaboration and dialogue on key issues related to industry development, whether that is within the federal family, with the provinces or with industry and academia; second, improving communications and awareness and information flow in Atlantic energy issues inside the federal system; and, third, supporting and facilitating efforts to address impediments to industry development, in particular, by undertaking, encouraging or fostering new policy analysis and policy development on industry development issues.
The office has been in place for about a year now and I am pleased to say it is functioning quite effectively. I believe it has created a starting point for industry in accessing the federal system and it has improved our capacity as a government to provide on-the-ground coordination of work in this area, in particular, between ACOA and NRCan.
With respect to the Atlantic Energy Gateway, you are probably aware that it was announced in March 2009 with an investment by the Government of Canada of up to $4 million. In announcing the AEG, or Atlantic Energy Gateway, federal ministers noted its objective was to facilitate development of the Atlantic renewable energy sector by fostering collaboration, common understanding and communication between governments and between governments and the private sector to maximize and expedite the development of renewable energy resources in the region.
In this context, the AEG is seeking to focus on, first, sharing information pertaining to the development of Atlantic Canada's clean energy resources and, second, where necessary, undertaking new analysis to increase understanding of these resources and the challenges and opportunities facing new development. This is truly a collaborative exercise co- managed on the federal side by ACOA and NRCan, and it involves building partnerships and consensus amongst stakeholders, including the four provinces and regional utilities, to foster a common understanding and approach for the development and distribution of the region's clean and renewable energy supplies. The focus of the AEG is on detailed policy work in areas such as the merits of the integration of regional electrical systems, the examination of best practices in financing renewable energy projects, best practices in supporting R&D, and in developing supply chain opportunities for renewable energy projects. The AEG work is being undertaken under the supervision of a management committee of federal and provincial deputy ministers and with the active engagement of both other people in provincial governments and in the private sector. It is our hope that the specific studies and analysis under way as part of this project will be completed later this year.
In conclusion, it is my hope that I have shown you that there is a bright future ahead for Atlantic Canada's energy sector, that the region's energy potential is vast, and that developing these resources would help build Atlantic Canada's economic strength. For its part, ACOA will continue to support the further development of this sector through its continued application of our programs as appropriate through our efforts to advocate and support this sector in areas like investment attraction, trade and supplier development, R&D support and policy analysis and advocacy. We will also continue to work closely with other federal, provincial and industry partners through initiatives like ACE and the AEG toward the common goal of further developing and capitalizing on our region's energy potential.
I apologize for being wordy, senators, but I thought I would read that into the record.
The Chair: Thank you. I would like to ask you a few preliminary questions, if I may. First, ACOA is an entirely federal agency?
Mr. Noseworthy: That is correct.
The Chair: It reports to Minister Ashfield, I believe.
Mr. Noseworthy: That is correct.
The Chair: Are you based here in Charlottetown?
Mr. Noseworthy: I am actually based in St. John's, Newfoundland.
The Chair: Is that the head office of ACOA?
Mr. Noseworthy: No, ACOA's head office is in Moncton. We have approximately 30 offices across the region, including regional offices that are staffed at the vice president level in each of the four provinces, as well as a satellite agency known as Enterprise Cape Breton that operates in that area.
The Chair: Both ACE and AEG are also federal programs?
Mr. Noseworthy: That is correct.
The Chair: Let us start with Gateway, AEG. Does it have an office anywhere?
Mr. Noseworthy: No, it is a project. It is not something that we would see as an initiative that would have a long life, although it is quite possible that the work that we will undertake will result in more durable relationships between governments and utilities that will have a life beyond the work that we are undertaking. The objective and focus of the AEG is on a specific package of policy work over the course of the next year or so.
The Chair: You say it is jointly managed by NRCan and ACOA, so that means it reports up through both of those agencies.
Mr. Noseworthy: That is correct.
The Chair: To both Minister Ashfield and Minister Paradis at this point?
Mr. Noseworthy: That is correct.
The Chair: What has it actually done so far with the $4 million, if anything?
Mr. Noseworthy: Actually, we have not spent a great deal of money at this stage, but I think we are ramping up to do so. The money will be spent largely in two fundamental areas. The first is a collection of work around core industrial development issues related to the renewable energy sector. For example, we are planning a piece of work that would look at best international practices in financing small-scale renewable energy projects. We are shaping that right now and would hope to have a response to the RFP and a consultant in place in the next while. The results will be shared publicly, and it will help inform policy making not only by ACOA and NRCan, but other federal agencies and the provinces as we look toward further development of the sector. We are doing other work around supplier development, best practices in facilitating R&D support by governments in the renewable energy sector.
That is the first package of things. It is a collection of studies that specifically look at economic development issues and what would constitute best practices that we might be able to apply in this region.
The piece is more technical and reflects on the fact that Atlantic Canada is not a big market and that there is a potential for efficiency and economy of scale by encouraging greater cooperation between the region's utilities and an integration of activity, both in terms of the management of the system and also perhaps in future development opportunities.
That piece of work is looking at what the models for cooperation in this area might be and in other places, for example, the ISO model that you would see in the Unites States, and also a piece on macroeconomic modelling that will seek to try and provide the utilities with some direction on where there are opportunities for collaboration and what the potential benefits might be.
There is a large number of players involved in this process — all of the utilities, all of the provincial governments — and we have spent most of our time to date trying to frame those studies in the most appropriate way. The work on regional planning is under intense development as we speak, and our hope is that that work will start in an effective way in the course of the next couple of months. The specific studies on economic development are about to start. I believe the first one may come out in the course of the next week or so as an RFP for bid.
The Chair: We are not the federal government, as you know. We are a part of the constitutional structure of the federal government in terms of being the independent upper house of Parliament, and we do such things as study public policy, like the one we are doing on energy. We have been hearing suggestions of how some of these basic energy issues have national import in terms of a distribution system or an east-west grid or a cable under the Northumberland Strait.
We have had it suggested the federal government has to get involved — this is not regional, this is part of nation building. All kinds of suggestions have been made about loan guarantees and underwriting the costs of cables. We have heard a lot of things. Whether or not those things ever happen, I guess, would be a matter of policy, an energy policy. The mandate you have just described seems to be within that area.
It is confusing. You have ACOA, ACE and AEG and not a lot of money and no office, and I am Premier Ghiz. I want to get some money to do something that I think is of interest and importance to not just P.E.I., but P.E.I. as part of the greater nation. Are you the right guy to come to? I mean, who are the people to go to?
Mr. Noseworthy: We are not funding specific energy projects.
The Chair: Would you develop the policy and recommend it to the Cabinet? This is really what I am trying to find out.
Mr. Noseworthy: Clearly, the Department of Natural Resources is the federal lead for energy policy. Depending on the nature of the program, there could be any number of federal departments and agencies that potentially put funds into future projects.
The Atlantic Energy Gateway process is not about funding a specific project. It is not about looking at a specific piece of infrastructure. It is really motivated by the notion that if we can facilitate getting the provinces and the utilities together to talk and communicate about where there are strategic economic advantages to collaboration, something good could come out of it; and to try in that context to provide them with a common base of information to inform future policy making.
ACOA has no direct involvement in the energy sector, as I have said. I am certainly not an energy expert, as I have already indicated to the committee. We see our role as a facilitator in bringing together the others that do have that capacity, so that they have the right information in front of them and can have an informed communication between them. Perhaps a way to look at this is, in some way, people are aware of the viral nature of messages on the Internet. This is in some way viral policy making in that our objective at the end of the day is not necessarily to use this work to frame our own projects and programs, but, in fact, to inform the broader community with the hope that good will come from it.
The Chair: Right. Well, I have to tell you I am a little bit confused.
Senator McCoy: On page 6, you talk about the report of the National Advisory Panel on the Sustainable Energy Science and Technology Strategy. What was the name of the lead on the panel?
Mr. Noseworthy: The chair of that panel was Dr. Angus Bruneau.
Senator McCoy: That should be in the Library of Parliament?
Mr. Noseworthy: It should be available. It was released in 2006.
Senator McCoy: It is something we should add to our reference documents. It seems to me there is a great deal of potential in the work that you are doing at the gateway and, you are quite right, developing a sort of common understanding is extremely important and I can understand the exploratory nature. It is very exciting. When you say that you hope that some of these studies will be completed later this year, you have whetted my appetite.
Is this committee on your mailing list? You must be pumping out some very interesting pieces of opinion or fact- based reporting that we should be accessing on a regular basis.
Mr. Noseworthy: I certainly hope we will be. I do not think we really have at this point. Certainly, any of the materials that we produce will be publicly available. Our time to date on this work has been spent getting all the players around the table to agree on what the right pieces of work should be and what should be contained in those studies. We figured it was better to do that work up front and provide that common foundation.
The first piece of work, which I indicated will be a piece that looks at financing of small-scale projects, we hope to have out as a call for proposals in the near term. I suspect we will see that later this spring or summer. I would think all of the pieces will start to come out over the course of the next couple of months.
Senator McCoy: Could I encourage you to put this committee on your mailing list and I will give you my card, too. I would like to be directly on your mailing list — or your e-mail list, I should say.
Mr. Noseworthy: Certainly.
Senator McCoy: It is an electronic list. I commend you on your efforts.
Senator Mitchell: Mr. Noseworthy, I have a note here that as recently as November 30, 2010, the terms of reference of the Atlantic Energy Gateway initiative had not been finalized, but I take it now that they have been?
Mr. Noteworthy: Yes.
Senator Mitchell: Could we get a copy of those?
Mr. Noseworthy: I will endeavour to bring that to the committee.
Senator Mitchell: Just to follow up on the point about the loan guarantee issue, it has been very prominent in the thinking of Nova Scotia on this project. I do not know that it is actually a deal breaker, but you can see it as a deal breaker from where they are on that issue. Do you have a position? Is ACOA pushing for that loan guarantee?
Mr. Noseworthy: I am afraid that is a question that is best directed to the Federal Department of Finance or federal ministers. The Atlantic Energy Gateway project was announced well before the announcement of the Lower Churchill or Muskrat Falls project, and it is generally designed to encourage and foster collaboration across the region. It is not designed to provide any specific insight or analyses on any specific project. We are not looking at Muskrat Falls specifically as ACOA in that context.
Senator Mitchell: The Atlantic Innovation Fund does specific distribution of money to projects, I think. You say that it has to date invested over $90 million on energy-related R&D projects in this region. Close to one-sixth of those funds has been distributed.
Mr. Noseworthy: AIF is an interesting program. It is designed to encourage the commercialization of research in the region, specifically to promote innovation. We have done some very interesting projects in the area of energy. An interesting one, for example, would be with a company by the name of Atlantic Hydrogen in Fredericton, which has a close association with the University of New Brunswick. They have actually developed a technology that can scrub carbon from natural gas and reduce the emissions from natural gas while improving its efficiency as a combustible fuel by roughly 30 per cent. We have provided monies to them through our AIF program to assist in its ultimate development. Another interesting project in the same vein would be Ocean Nutrition in Halifax, which has the potential to develop a biofuel out of an algae-based source, and we have provided support for them.
ACOA does provide funding support for the commercialization of research projects. We do provide support for small to medium-sized businesses in the sector to support their growth and expansion. Looking back at our 20-odd- year history and specifically at the supply sector, for example, in Newfoundland and Nova Scotia, we provided a lot of direct support for companies back then in assisting them in starting up and positioning themselves to maximize from the development of the offshore. We see much less activity with them now. We do not see those companies coming to us looking specifically for funding, for example, from our BDP program, but we still have a very deep relationship with them. They come looking for us for advice on what is happening in the sector to assist them in making relationships with some of the oil companies, and the nature of our business has changed from simply providing funding support for specific projects to assisting them in understanding what is going on in the broader energy community.
Senator Mitchell: Could we get a list of the projects that AIF has funded?
Mr. Noseworthy: Yes, I will endeavour to do that for you.
Senator Mitchell: Are you aware of Seaforth Energy?
The Chair: You must be investing in that.
Senator Mitchell: No, I am just interested in it.
The Chair: You bring that up a lot.
Senator Mitchell: Here is a company that is in Nova Scotia. It is local. It is in the heart of one of the developing wind enterprise areas of the world. It was interesting in that yesterday one of our expert witnesses in this area from New Brunswick did not recognize it under the name Seaforth Energy. I noted today that P.E.I.'s development is older than Seaforth Energy, so they are not using the technology and yet here is an economic opportunity waiting to be exploited in a good way, and it seems not to have come up on the radar in its neighbouring provinces. Are you aware of it?
Mr. Noseworthy: I am generally familiar with the company. I am not sure it is appropriate for me to specifically talk about our arrangements with any specific commercial entity.
Senator Mitchell: I take it, then, you have an arrangement. The examination of best practices in financing renewable energy projects is very interesting. That is AEG's focus. Have you got anything yet written or reported in that regard?
Mr. Noseworthy: We see that as a consultant's study. We have a group comprising the provinces and ACOA, and we have finalized the terms of reference. We intend to put out an RFP in the next week or so for that piece of work. As I have indicated, we should have results back in a few months.
The Chair: I want to come back to where I was trying to go earlier. If you put yourself in the position of your political masters, the prime minister and his ministers are up there and they are getting heat from places in these provinces about where the "feds'' could help in a big way in a major project of national consequence. The logical thing, it seems to me, would be to look to folks like you down here who are on the ground and say, "What is the score? Brief us on this. What is your recommendation? What do we do?'' There seems to be a hodgepodge of so much stuff. I am not being critical. I am just trying to understand how it works because the public does get the impression the big behemoth of the federal government is up there and here we have something really important and we do not know how to get through the maze. They have a policy making group on the ground, but they are not even dealing with the issue, if you follow what I am saying.
Can you comment on that or maybe just tell me I am barking up the wrong tree?
Mr. Noseworthy: Our specific focus, as I have said, with the Atlantic Energy Gateway is to, first, encourage communication and, second, to encourage collaboration between the provinces and utilities and ourselves.
The Chair: ACOA generally though is here for economic development.
Mr. Noseworthy: Clearly, we provide advice to the government on a range of economic policy issues and when called upon, we provide advice on specific projects.
Senator Brown: Do you have a specific budget for R&D or are you just passing it up the chain to those that come up with the R&D, the actual funds, I mean.
Mr. Noseworthy: Inside ACOA, AIF is an established program, which has ongoing funding, and it is a program of general application. We do not have any programs specifically targeted at funding and supporting R&D in the energy sector per se. Energy projects coming into our AIF program compete against other sectors for funding. It is perhaps a statement on the significance of the capacity of this region that the energy sector has been such a dominant piece of that program. The Atlantic Innovation Fund is an established program designed for funding research, commercialization in this region.
Senator Brown: I do not quite understand. Are you the decision maker or do you make suggestions that it is a good project and then push it up the line or are you making out the cheque?
Mr. Noseworthy: The agency indeed makes out the cheque. In that particular case, with respect to AIF, we actually have an independent advisory board that reviews all projects and provides specific advice to the minister, and, in fact, we go through a rather intensive peer review process of analyzing projects to determine their integrity and their business potential.
Senator Brown: That is good. I am pleased with that approach because it does have to go far to move it up, all the way to, say, the prime minister or someone close to him. You are able to do it all in the region. Projects are brought to you, you give suggestions, information and then you can actually make a decision if you come to an agreement with the players.
Mr. Noseworthy: The way it works with our AIF program is we provide funding for projects in a succession of rounds. We are presently in our eighth round of funding under that program. We will announce our intent for a funding round. We will invite letters of expression of interest. Then there is a second phase of a more detailed application, which goes through a detailed review process involving this independent advisory committee I mentioned, which ultimately provides advice to our minister.
Senator Brown: Can you give us an idea of how long it takes for a decision from your level? Are we talking months, years or what?
Mr. Noseworthy: I believe we started the work on the eighth round last spring and our hope is to have announcements in the relatively near term. Typically, each one of the rounds we have held to date has generally taken nine months to a year from the announcement of the round to the announcement of projects.
The Chair: Does NRCan have an office or a representative in any of the Atlantic capitals?
Mr. Noseworthy: Through the Atlantic Canada Energy Office, what we have done is co-locate staff. NRCan has three staff in the region. They all work out of St. John's in the energy sector. There is a representative of the Geological Survey of Canada, one from their Frontier Lands branch and one from the policy branch. ACOA and NRCan actually work through a process of developing a joint work plan for what the office does that involves both those staff and my office.
The Chair: Is there not someone here in Charlottetown or in Halifax or Saint John? The NRCan office is joined with others in St. John's?
Mr. Noseworthy: That is correct.
The Chair: For the record, we were scheduled to go to that new LNG terminal at Canaport, but unfortunately an incident of climate change diverted our aircraft and we did not get to it. We hope to go and visit it on another occasion.
Mr. Noseworthy: I encourage you to do so. It is a fascinating facility to see. There is quite a fascinating collection of major projects in the greater Saint John area with the refinery, of course, and the LNG facility.
The Chair:, I suppose it is a significant element in the overall energy mix right now.
Thank you, sir. We really appreciate the time you have taken to be with us.
Our next witness is Leslie Malone, Policy Associate for Environment Northeast. I take it you are more involved on the environment side of things; is that correct?
Leslie Malone, Policy Associate, Environment Northeast (ENE): Environment and energy policy, yes.
The Chair: You have the floor.
Ms. Malone: Good afternoon, everyone. As mentioned, I represent Environment Northeast. Thank you for undertaking this study and for the opportunity to speak with you this afternoon. I am looking forward to using my time today to talk about the importance of prioritizing energy efficiency in Canada's energy system of the future and also the benefits, the potential economic and environmental benefits of increasing our investment in this very important energy resource. My presentation, which I will aim to keep relatively short so that there is sufficient time for questions, is going to track the slide deck that hopefully has been circulated. I do apologize that it has not been translated into French. That is my delinquency.
By way of background, ENE, or Environment Northeast, is a not-for-profit organization. We engage in energy policy, research and advocacy in the U.S. and Canada. We have offices in Maine, Massachusetts, Connecticut, Rhode Island and Ottawa, Ontario, although until fairly recently, our Canadian office was located here in Charlottetown, but as of January, I am based out of the capital. We are currently entirely funded by foundations. ENE staff is composed of attorneys, economists and environmental scientists.
The Chair: We have an interest in these foundations. Could you give us a sense of who funds you?
Ms. Malone: They are primarily based in the U.S. Actually, I do not think we have any Canadian foundation support at this point. The Energy Foundation is a key contributor. The Oak Foundation also funds aspects of our work, especially around energy efficiency policy. I would have to go into our annual report to pull out some more.
The Chair: That is fine. Are you an American?
Ms. Malone: I am from Charlottetown, P.E.I. I am Canadian.
The Chair: Do you work in all of these offices?
Ms. Malone: No, I work out of the Canadian office. I am the Canadian office.
The Chair: In Ottawa.
Ms. Malone: The rest of our staff is located in New England.
Our staff focuses on energy policy, climate policy, forestry and land use and transportation. Ultimately, the crux of my presentation is that we are radically under-investing in low-cost efficiency resource. We need to rebalance our investment choices in order to save Canadian households and businesses billions of dollars to create jobs, increase our energy independence and reduce greenhouse gas emissions. To do this, ultimately, we need a cultural shift in Canada at the federal, provincial and territorial levels toward viewing energy efficiency as a bona fide energy resource that is assessed and procured alongside traditional supply options.
Because of the benefits of investing in energy efficiency, it has assumed a leading role in energy policy in a number of jurisdictions. It is a low-cost resource. For example, in the electricity sector, the cost of efficiency is approximately $0.03 a kilowatt hour for the lifetime of the measure, whereas in a number of jurisdictions in Canada, you are spending three, four times that amount, or more, on the cost of electricity. The cost effective efficiency resource is abundant and procured locally, which means that the economic benefits are impressive. Finally, energy efficiency is a commonly recognized policy tool for addressing climate change. It leads to significant reduction and avoidance of emissions.
The figure on slide four compares spending on electric supply versus efficiency programs in 2008 in Canada. As you can see, there is a fairly significant discrepancy in terms of where the money is flowing. Even in regions of this country where there are relatively good efficiency programs, because of the way utilities have been regulated and the market barriers that exist, we are spending at least 26 times more on high-cost supply than on efficiency, which, as you can see, is a much cheaper resource. It does depend on the energy supply mix, but in some cases, can be down to a third as much per unit of energy. Ultimately, these investment choices need to be rebalanced.
P.E.I. actually offers a relatively good and fairly timely illustration of the abundance of the efficiency resource. In 2007, the provincial government undertook an energy efficiency potential study to assess what the extent of the resource was and how much of the resource could be procured cost effectively. The results of this potential study showed that all of the projected energy growth forecast out to 2017 in the residential, commercial, institutional and transportation sectors on the Island could be offset by investing in cost effective efficiency initiatives. The net benefits, as demonstrated by the study, were that over the ten-year period, savings to consumers or rate payers would be around $150 million, emission reduction would be in the order of 150,000 tonnes, and for every $1.00 put into these efficiency programs, $2.50 would be returned to the local economy in direct benefits.
To address this discrepancy in spending and to also try to access this huge capacity, the provinces need support from the federal government. They also need to put in place energy efficiency procurement mandates that will direct utilities to invest in efficiency that is cost effective and less expensive than new supply. In addition to funding electric and natural gas programs, we need to focus on heating oil programs, and this is especially important in this part of the country where we rely fairly heavily on heating fuel. This is called the "all fuels'' approach that jurisdictions in the U.S. are now moving toward.
Ultimately, to be able to do this and to access this huge potential, we will need new funding sources. In many parts of the U.S. and in Canada as well, system benefit charges are used to fund electric efficiency programs. Federal funding also comes into the mix and is a very important piece of the puzzle. The revenue from cap and trade programs is also a potential funding source. In the U.S. Northeast, where the Regional Greenhouse Gas Initiative program is currently operating and has been since September 2009, the states are committed to direct almost 70 per cent of auction revenues towards efficiency programs. The program has not been operating for long, but this is translating into hundreds of millions of dollars for new funding for state programs. This is definitely turning into an important funding stream for efficiency. Then for heating oil, what is being explored and discussed for implementation is a floating surcharge on heating bills.
I am on slide 7 now and I just wanted to illustrate that in all of the New England states, they have electric efficiency procurement mandates and some have the same for natural gas. That is resulting in aggressive annual energy savings targets that are being brought forward by the utilities. They are mandated to do so, but they are nonetheless impressive. This is translating into significant funding, generally speaking, which is demonstrated on a per capita basis in slide 8. In fact, the funding that is going toward efficiency programs in New England is making these states leaders in the country in terms of spending, and this is shown in slide 9, on a per capita basis as well.
On the provincial side, some provinces could be seen as being among the leaders in the U.S. and Canada. Others would require significant investment to catch up to industry leaders and then all will require ramping up to approach the cost effective levels that exist in the province. You will note that New Brunswick is missing from the figure on slide 10 and that is only because they were not included in the 2010 Consortium of Energy Efficiency or CEE report. They would be among one of the leading provinces. They have good funding, impressive programs, award-winning programs, in fact.
The conversation usually turns to the question, "If efficiency is so cheap and so abundant, why do we need these programs and attention via funding? The fact is that there still are significant market failures that need to be addressed. Those include liquidity constraints, the split incentive where the person investing in energy efficiency might not be the beneficiary, there are information problems or access to information, and then some of these investment decisions are fairly complex. What efficiency programs do in the U.S. and Canada is provide technical assistance, consumer outreach and education, and they also offer the financial incentive needed to invest in, for example, the appliances, high-efficiency lighting, insulation, efficient motors and so on.
For the remainder of my presentation, I want to focus on a study that we did in 2009. It was called, Energy Efficiency: Engine of Economic Growth. We were interested in looking at the design and implementation of most efficiency programs in New England. This was a New England-based study, but I should note that we are talking with the provincial governments in Eastern Canada to do a similar exercise here. In New England, it is very much a public process and there is a significant amount of state oversight, so the direct economic benefits on consumer energy bills have been well studied, but understanding the non-direct impacts of the efficiency programs is equally important, both the impacts from investing in the energy efficiency measure and the savings that result.
We modeled the expanded investment to approximately capture all cost effective efficiency for three fuel types in the six New England states. That report was released in October 2009. It is available on our website and it goes through in great deal the methodology that we used, so I will not take up your time with that right now. However, I did want to note that the model we used, the REMI, is commonly used by states and has been used by some provinces to assess their policy proposals. It is a well-regarded, well-tested tool and it has been quite helpful in being able to present the results with confidence and then being accepted with confidence, too.
What we modelled were efficiency investment levels that were based on state plans and potential studies that looked at the cost effective potential, similar to what P.E.I. had done in 2007. The target savings for electric efficiency programs were modelled at a conservative level that achieves two per cent reduction in energy consumption per year, and for natural gas and heating oil, we looked at 1.25 per cent of annual consumption. We took those levels of savings that we wanted to achieve and figured out what that translated into in terms of investment. The figure on slide 14 is the actual investment levels, which are fairly significant, that we ended up putting into the report. The investment levels needed to capture these savings were ramped up from current budgets by 50 per cent per year for electric and natural gas and 100 per cent per year for heating oil because there is not as much experience in funding in heating oil programs.
We looked at these investments over a 15-year period and we modelled the energy impact over an additional 20 years so that you were able to capture the full extent of the benefits. What you will see on slide 15 are the direct results in terms of energy cost savings. The energy cost decreases ended up yielding savings of $29 billion for electricity, $6 billion for natural gas, $15 billion for unregulated fuels for a total of $50 billion. That is over the course of 35 years. They were very impressive savings.
The next slide shows the emission reductions that we saw. Total lifetime emission benefits from expanded efficiency programs for the three fuels were 536 tonnes. It is interesting to note that the lower emissions not only provide environmental benefit, but also provide economic benefits in terms of a decreased amount for electricity, which translates into a reduction of emissions associated with energy production.
I should back up and point out that these figures and graphs refer to the states where the cap and trade program is functioning. This is an important component, if we ever have a carbon price in Canada.
The reduced emissions lead to a lower demand for emission allowances, which reduces the price for allowances and reduces the overall cost of a cap and trade program.
On slide 17, we turn from the direct benefits to some of the larger macroeconomic benefits in terms of total impacts. The individual column represents a cumulative of all the states operating individually, whereas the last scenario that we ran looked at what would happen if all six New England states implemented these programs together. In fact, they return even greater benefits. As you can see, the output in terms of gross state product, income and employment is quite impressive.
Slides 18 and 19 reflect total economic impact in terms of the investment required to create the programs. Here, you have dollars of gross state product, increase per program dollars spent, and on the following slide, you have job years created or the job creation potential per $1 million invested. I now wish that I had included a comparison slide on renewables or fossil-based technologies, for the orders of magnitude can be, in certain cases, quite a bit higher.
One of the reasons is seen on the next slide, which shows the components of the economic impact. When you invest in energy efficiency, you receive benefits from the initial investment in the mechanism, the person that is installing or operating it. You also receive benefit from the savings that are delivered. Finally, there is an economic impact on the rate payer from the surcharge used to fund the program. There are three components.
We found that in all the cases, the savings delivered by efficiency investments were substantial, whereas the actual initial investment was not as significant. This is important because when you are comparing efficiency investments with other resource options, typically, you look at the initial investment and the economic results flowing from it. Efficiency fares well, but it really is the savings that bump it up and demonstrate that it really should be a first resource.
The following slide is our new go-to slide because it reflects the overall economic benefits for New England. It is the scenario in which all states act together. While the total initial investment in efficiency programs for electric, natural gas and unregulated fuels would be significant, it is absolutely eclipsed by the resulting economic output, direct and non-direct, in terms of gross state product or GSP and employment.
I have included slides in the appendix, but I do not want to go on too long. I am happy to address any questions based on the first part of the presentation and the appendix.
Senator Mitchell: Are you aware of the Efficiency New Brunswick and Efficiency Nova Scotia programs, and is the counterpart program here the Evergreen Program?
Ms. Malone: No, it would be the P.E.I. Office of Energy Efficiency.
Senator Mitchell: What is your assessment of those programs? Are there numbers that would correspond to the kinds of figures you have here?
Ms. Malone: I am not in the program development area, so I cannot really speak to the specifics of the programs, but my understanding is they are functioning quite well. They are not necessarily funded to the level that would start to even approach their cost effective potential. However, they are relatively new, save for New Brunswick, which has been operating for longer. It is a process that ramps up over time. They are starting at a good spot, but will need additional funding as they expand existing programs and target other sectors.
Senator Mitchell: If you were the premier of one of these provinces right now, what would be your five priority efficiency programs?
Ms. Malone: It would be situation/jurisdiction specific, but you would want to focus on weatherization. Within the weatherization envelope are some leading edge programs.
Senator McCoy: You mean insulation?
Senator Mitchell: Windows.
Ms. Malone: Absolutely, the building envelope, and also advanced lighting, which is important for residential, but especially commercial and industrial sectors. Those are the two big program areas.
Senator Mitchell: Do you have a more detailed analysis? Have you a list of programs?
Ms. Malone: We have focused mostly on the policies to get funding to these programs. We do have someone on staff who has the technical knowledge of the actual programs, and I would be happy to pass on the information.
Senator Mitchell: It would be very nice to see that. I would like to see specifics. I mean, it is very compelling —
Ms. Malone: But what does that mean?
Senator Mitchell: Yes, what does it actually mean?
I refer you to the chart on slide 21. If you did these total efficiency programs, the cost for electric $16.8 billion?
Ms. Malone: Yes.
Senator Mitchell: That is actually what they have spent on efficiency programs for electric in those states?
Ms. Malone: No, that is if they were to ramp up to capture all cost effective energy efficiency over a 15-year period. They would ramp up for three to five years and then maintain those program levels for the remainder, which would result in that level of spending.
Senator Mitchell: You get $99 billion in extra gross state product.
Ms. Malone: Yes.
Senator Mitchell: Efficiency spending would account for about 12 per cent of that?
Ms. Malone: Yes.
Senator Mitchell: There is great leverage here.
Ms. Malone: Yes.
Senator Mitchell: It creates jobs?
Ms. Malone: It creates a significant number of jobs and, relatively speaking, it should be where we are putting our money first.
Senator Mitchell: Improves health?
Ms. Malone: Improves health, yes.
Senator McCoy: My first question relates to slide 4. You refer to a CEE Industry report.
Ms. Malone: The Consortium of Energy Efficiency. It is an industry group that does a significant amount of analysis of state and provincial energy programs and each year releases an industry report that looks at provincial and state budget levels for electric and natural gas.
Senator McCoy: They have a website, CEE?
Ms. Malone: They do.
Senator McCoy: That report will be available there?
Ms. Malone: There is a link to it on the home page.
Senator McCoy: It is hard to ask intelligent questions because I have not had a chance to absorb all of this. I obviously need to read your report as well. It seems to me to be a positive story, but some analysis or understanding, at least, has to be grasped here because there is a time delay. You are accumulating, you say, over 15 years, et cetera, et cetera.
Ms. Malone: We are presenting is the cumulative result, but these programs start to deliver economic output and benefits immediately. They are extremely cost effective. We do have results broken down on an annual basis, which I can provide.
Senator McCoy: To some extent you are saying you are backing off on investment in additional energy projects, new generation projects in electricity, or a new oil refinery or pipeline or gas pipeline, which would presumably mean a lowering of economic activity, right?.
Ms. Malone: That is accounted for in our study.
Senator McCoy: It is factored in?
Ms. Malone: Yes, it is.
Senator McCoy: So over 15 years it is a net increase?
Ms. Malone: Yes, the economic output is net. It is a 15-year period of investment, and the benefits shown are for a 35-year period. Because of the lifetime of efficiency measures, you continue to see benefits for at least 20 years.
Senator McCoy: You have done the calculation on the direct and indirect benefits. I presume you would apply the same methodology in a socioeconomic benefit analysis when we are applying for the next big refinery or whatever. It is an input/output model, I presume?
Ms. Malone: Actually, it is not an input/output model. It is a general equilibrium model. It returns some of the same results as an input/output model, but it has the ability to go further in the economic analysis for the region in terms of regional feedback and so on.
Senator McCoy: I will leave my questioning there because I think I need to study. I am glad to know you are in Ottawa. We can always tap into your wonderful resource again.
Ms. Malone: Absolutely.
Senator Mitchell: It would be really interesting to have information on the direct cost saving, given your claim, and it is a powerful claim. Is there a way to calculate, say, the average cost of saving one kilowatt hour over a certain specified period? You would have to specify a period of time.
Ms. Malone: Yes. On average it costs $0.03 to save a kilowatt hour.
Senator Mitchell: Which costs $0.09 or $0.10 or $0.12?
Ms. Malone: Or much more.
Senator Mitchell: Yes, but on average.
Ms. Malone: On average.
Senator Mitchell: Wind is even $0.07.8.
Ms. Malone: Yes. In residential programs, it ranges from a low of $0.01 a kilowatt hour to $0.04 a kilowatt hour, and typically for commercial and industrial programs, the range is $0.01 to $0.02 a kilowatt hour saved. The difference in cost is significant.
Senator Peterson: Who is spending all this money to make this happen?
Ms. Malone: In the states that we looked at, they are utility-run programs. The electric utilities or the natural gas utilities administer the programs. They are funded through rate payers and then that funding goes into the utility programs. In some cases, they are supplemented by state-funded programs. Generally, those are the low-income programs.
Senator Peterson: Is it the homeowner who ultimately pays?
Ms. Malone: The rate payer, yes.
Senator Peterson: You collect the tax and then the utility encourages me to do this by giving me incentives and so on?
Ms. Malone: Yes.
Senator Lang: I am kind of amazed that your organization is funded by the Americans just from the perspective of Canada. Nobody can argue about the need for efficiency. Obviously, costs are going up, so we are all moving in that direction. I am surprised. Is there any other department in the federal or provincial governments doing this type of work that you are doing here?
Ms. Malone: In terms of analysis?
Senator Lang: Yes.
Ms. Malone: They are definitely engaging in energy efficiency potential studies. They are monitoring the programs that they would have in place. This type of analysis is reasonably unique in the U.S. and we have not seen anything similar in Canada that looks at not only the direct but also the indirect benefits. As I mentioned, fingers crossed, we will be doing a similar study for at least the Eastern Canadian provinces in the near term.
Senator Lang: In the conclusion and recommendations, you say that the federal and provincial governments must support advance building and appliance/equipment standards, energy policy reforms and new funding mechanisms. Are you aware that at least in some of the jurisdictions, building codes have changed over the last number of years substantially to meet the principle of energy efficiency and, obviously, saving of energy. Also, the federal government passed regulations not too long ago on the standards of appliances and equipment coming into the country?
Ms. Malone: Yes.
Senator Lang: I think we have obviously met those responsibilities, then, from across the country.
Ms. Malone: For the most part, currently, those regulations would be quite helpful, but it involves ongoing adjustment based on best practices. It requires a continuing focus with new recommendations.
Senator Lang: I want to follow up on your premise about efficiency and government. At the same time, we need more money to study ourselves to see if we can become more efficient, which involves more money from the taxpayer in one manner or another. Have you done a study on how we could accomplish some of these objectives without asking for more money, on utilizing existing resources and redirecting those resources to the objectives you talk about?
Ms. Malone: We have not looked into that, but, presumably, there are pots of money that could be better used to benefit the environment.
Senator McCoy: Alberta is beginning to conduct some of these sorts of studies. When I did a literature review of this area, I found it very difficult to lay hands on hard data. It is an emerging area. We have not really learned how to think in a 21st century way about energy. This is one of those leading-edge turnarounds to look at things a little bit differently from the traditional methods. However, as we saw yesterday, even the major corporations like a little help on the efficiency side when it is in their own interests,.
Senator Lang: When it is driven by costs that you cannot afford to pay, you try to find another option to deliver the same program or deal with your situation. I think that is happening across the country.
Senator Mitchell: The average cost per kilowatt hour is $0.03, and I know this varies with the source of the energy, but pick one or an average. What does that cost per tonne of reduced carbon emissions, GHG?
Ms. Malone: I do not have that number off the top of my head, but we have definitely compiled it somewhere.
Senator Mitchell: Could you get that to me, because here is where my thinking is going. You are talking about pools of money that could be used differently. I am not entirely opposed to carbon capture and storage. Some companies actually want to do it, and some governments are doing some things. The problem with greenhouse gas is that there is always a reason not to do anything that fixes it. Even wind apparently makes people sick or ethanol is burning food or nuclear is dangerous. They all have a problem. It would be interesting to analyze the use of that pool of money, for example, in carbon capture and storage, although the results there would be a moving target in that we do not quite know. What would it look like if you took that money and put it into a productive conservation program such as you are talking about? It is a lot of money, and it might capture or forgo the emission of tonnes and tonnes of carbon.
Ms. Malone: One of the reasons it is so easy to sit up here and advocate for efficiency is that it is one of these options where there is no fail. We should be investing in it, the economic benefits.
Senator Mitchell: Yes.
Ms. Malone: I take your point, and I am reminded of the McKinsey cost curve, the emission reduction cost curve or mitigation cost curve. If you look at the cheap options, they are all efficiency and it is when you move towards the right that you bump up against carbon capture and storage and that type of thing.
Senator Mitchell: It is much more expensive, yes.
Ms. Malone: I will look into that number.
Senator Mitchell: The ultimate limiting factor with efficiency is that even if we increased our efficiency by twofold and we emit 50 per cent less than what we are emitting, once we double the population or double development in China and India, all of a sudden, we are back to square one. This is an interim step in some sense to finding ways not to emit.
Ms. Malone: Absolutely.
Senator Mitchell: Or maybe it is a step that drives us to that. I do not know.
Ms. Malone: That could be complemented with a cap.
Senator Mitchell: A cap, yes. Would you price carbon, and how?
Ms. Malone: That would be one of the first things that I would do, and then I would also make sure that the revenue was being used towards programs that reduced emissions further, and efficiency would be number one on that agenda.
Senator Mitchell: Which jurisdictions in RGGI are auctioning credits?
Ms. Malone: Every single state is auctioning credits. Some are auctioning up to 100 per cent of the credits and in total, approximately 70 per cent of the allowance value is explicitly going towards efficiency programs, hundreds of millions of dollars within the first year of the program.
Senator Mitchell: What prices are they going at, the carbon credits?
Ms. Malone: Carbon credits start at around $3 a tonne, a short tonne. They did fall, I think to the floor price, which is $1.86 a tonne, but that is because the cap is over-allocated. It was set too high. RGGI is going into its second phase in 2012 and, hopefully, there will be some adjustments before then.
Senator Brown: Have any American cities of any size ever tried turning the lights out? I do not mean the streetlights. I mean turning off the tower buildings, the huge business areas that shut down from certain hours of the night. The reason I ask is that I have an experience in my own family. My wife was on the board of Federated Cooperatives, which has offices in four provinces, and they started out with motion sensor lights just to try them and then they went to a policy of just telling everybody, "Shut the lights off when you leave.'' They saved $1million a year for the nine years she was on the board. I do not know whether they are still doing it, but if they are, it has gone up considerably from $1 million a year because that was over a decade ago.
When the space shuttle was travelling across Australia, which takes all of about 30 minutes to go across the entire continent, they asked the people of Australia to shut their lights off so they could see the effect of seeing the continent with no lights on at night. It was a significant change in the electricity generation just in 30 minutes.
Ms. Malone: I can imagine. That is impressive. I do not have a good example to point to, but I am sure that Earth Hour data are available, which is an initiative that the WWF and a number of other organizations are involved in. I think the date is March 28. I should know that. They ask cities, individuals to turn off lights. I am sure you get some impressive data from that, over the years.
Senator Neufeld: I am a firm believer in the concept that the cheapest form of energy is what we save. In British Columbia, the Peace Canyon dam puts out about 650 megawatts, and through Christmas it takes everything that dam can produce to keep the extra Christmas lights on just in the province. It is interesting that when we put it in that context — and we all like those little lights flashing from our houses — how much energy it does take.
On slides 9 and 10, do the efficiency budgets for states and provinces refer to electricity, natural gas and oil or is this just electricity?
Ms. Malone: I believe, just looking at the numbers, it should be just electricity. The CEE does present data on electricity and natural gas. I apologize. We should have distinguished what the figure is looking at. Looking at the numbers, it is per capita spending on electric efficiency.
Senator Neufeld: Is there some place you can get the efficiency, the same kind of graph or numbers, for natural gas and oil for home heating, all those kind of things?
Ms. Malone: The CEE website would have program spending on natural gas. It is not nearly as significant because the programs are not as mature. I am not aware of any one place where you could find the data for oil programs, but at the same time, oil programs are very limited across the country and involve minimal spending at this point.
Senator Neufeld: It is interesting to me that California, which is viewed as the leader in almost everything that happens with efficiency and regulations around cars and greenhouse gas emissions, does only half of what Vermont does.
The second slide is really interesting to me because it talks about Canada. The interesting part for me is that Quebec, Manitoba and British Columbia — British Columbia being the highest, by the way, folks — which have some of the lowest electricity rates across Canada because they have just about all the hydroelectricity that is available across Canada, actually have the best programs for efficiency. That is quite surprising when you look further down the list at the source of electricity generation for the other provinces. Some of them are not there. I am amazed because I have heard people in Atlantic Canada say how the oil and natural gas cost so much and that they have to generate with it, yet their utilities and governments are not looking toward how to save electricity. That graph says a lot to me, if it is just about electricity. There has to be some real looking inward for some of these provinces, with their utilities, to actually conserve electricity, instead of thinking about how they can generate more. Would you agree with me? I mean, it really hit me. It is great that those three provinces have the lowest rates, but I have always thought that it was the cost of the product that drove people to get efficient. This slide shows that I was totally incorrect.
Ms. Malone: A number of factors weigh in on the investment levels of the province. One is potential export opportunities, but also, it is very much the culture in the provinces and within the utilities. It is the decision makers that are required to show leadership to mandate that utilities invest in the lowest-cost resource. That is what is happening in New England and that is why we are seeing such high investment levels.
Senator Neufeld: Are you saying that because Quebec or Manitoba can export, they can afford to have more efficiency measures? Is that what you are saying?
Ms. Malone: Not necessarily. They could, but, potentially, they could look to it as an economic opportunity. If they are conserving at a cheaper cost internally, then they have more supply that has mobility.
Senator Neufeld: British Columbia is a net importer, so that does not jibe with what you just said, right?
Ms. Malone: Not necessarily, sure.
The Chair: Ms. Malone, you have undertaken to give us some calculations, a few figures.
Ms. Malone: Yes.
The Chair: If you could send them to our clerk, that would be super.
Our next witness is David Taylor from the University of Prince Edward Island.
David Taylor, Manager, Sustainability and Energy Efficiency, University of Prince Edward Island: Chair, deputy chair and members of the committee, I am the Manager of Sustainability and Energy Management at the University of Prince Edward Island here in Charlottetown.
The University of Prince Edward Island offers a dynamic learning environment and promotes teaching excellence and student access in arts, science, education, veterinary medicine, business and nursing.
UPEI has extended its impact well beyond its shores through unique partnerships that contribute to a vibrant research agenda with exciting opportunities for undergraduate and graduate studies.
Commitment to renewal has equipped the historic campus with excellent new teaching and research facilities, student residences, a student centre and a sports complex.
More than 4,600 students from 59 countries attend UPEI. They get to know their professors personally and quickly become a part of a tightly-knit community that takes pride in supporting their success.
As an education institution UPEI strives to be a model to our students and community. A commitment to sustainability and energy management goes back more than two decades when bio-mass heating was used on campus. This commitment is continued in the establishment of my current position at UPEI and the inclusion of sustainability and energy management in our strategic planning. The institution also has a multi-disciplinary sustainability advisory committee that reviews and suggests initiatives on campus in improving sustainability.
Our sustainability program here on campus includes a multi-stream waste collection system, energy monitoring systems to identify energy issues early and address them quickly, efficient lighting and control systems to create smarter buildings to reduce consumption, energy efficient building design practices, water conservation, resource reductions, including paper and other consumables.
The university is connected to the district heating system and is one of the largest cumulative users. The heating produced at the plant provides all the space heating and most of the domestic hot water usage on campus. In addition, it provides cooling to a large percentage of campus through the use of campus absorption chilling. The district heating system in Charlottetown is a successful model of a shared energy system and an example to other regions for energy efficiency. The economies is of scale derived from the larger system could not have been achieved by a single customer of the system but are from the collective nature of the service.
The centralization of the heating plant removes the individual boilers that would have been used in individual buildings primarily heating with oil and have resulted in a net reduction in overall emissions. Emission control systems at the centralized plant, which would be uneconomical to single users, reduce the level of pollutants released into the atmosphere. The system utilizes solid waste and renewable wood bio-mass to significantly reduce the usage of fossil fuels in space heating, a significant contributor to greenhouse gas emissions.
Government investment was critical in the development of the system which now operates as a stand-alone operation. Strategic investments on the part of government in district energy can provide for long-term emissions and cost reductions. Utilization of the district energy system provides hundreds of thousands of dollars in savings to the university each year.
UPEI is a leader in energy efficiency. The campus is currently embarking on its third energy retrofit since 2004. A comprehensive energy audit was completed last year, the first of the campus since 2001, and will provide over a $100,000 in annual savings once implemented. This retrofit will include lighting, mechanical systems and automation controls to help reduce overall energy usage on campus.
In the past, the university has taken advantage of federal and provincial funding programs to reduce our energy usage. These programs have helped the university to reduce its energy footprint and implement projects that would otherwise be uneconomical when evaluated on their own merits.
While committed to energy efficiency, the university must be fiscally responsible in its implementation. In energy efficiency terms, the low-hanging fruit or greatest opportunities for savings have been almost depleted across campus. However, these opportunities are relative and projects that are uneconomical can be accelerated with strategic investments by government and government agencies and energy retrofits.
Our experience on campus has been that energy efficiency retrofits occur in a three- to five-year cycle. Key influences on this cycle have been changing economics, rising energy prices that made more feasible projects that were uneconomical a few years ago, changing technologies, advancements in technology that have reduced the cost of some retrofits or new technologies that have provided for new retrofit opportunities. LED lighting is a recent example.
Economies of scale have come into play as the campus has grown and we have looked to partner with other institutions and stakeholders. As governments invest in energy efficiency through audit and retrofit programs this provides opportunities for end users, including the university.
The campus is continually looking to foster innovation and job creation through the use of new technologies and practices in sustainability and energy management. Only through their implementation on a larger scale will suppliers have the opportunity to improve their products and reduce cost to end users. The university can use its size to help influence these changes. Programs of government that invest in energy efficiency help the institution to make these investments and further that innovation and job creation.
The university looks on favourably and supports the continued development of Charlottetown's public transport system. The system has reduced overall pollution emissions with the reduction of vehicles on local roads. It has also begun to influence city demographics, and students, who are provided a discounted bus pass, no longer feel the need to live close to the university. As well, the system provides affordable transportation for those who cannot afford their own vehicles. Government investment in public transportation is critical in ensuring its long-term success.
Though we have made great strides and improvements on campus it is not without challenges. There is no standardized system of tracking and benchmarking performance of buildings, whether that be carbon emissions or energy. What we cannot consistently measure, we cannot improve. There is a need for a standardized open source reporting mechanism that provides for key indicators for comparison. This should be provided by a trusted federal agency to provide national consistency.
We need to strive to ensure that energy management and sustainability are horizontal over the entire enterprise and not done in isolation. It is up to government to provide leadership and resources to allow us to change the culture and practices of current and future generations.
I would entertain any of your questions.
The Chair: This morning we had the pleasure and the privilege of meeting over breakfast with the premier, and he mentioned the initiative by, not just the university, but also other educational institutions, to give more critical mass to the project. Congratulations to you. It is an excellent thing.
Senator Mitchell: Do you have any figures on how much usage or efficiency in conservation you have been able to achieve in your program? Are you able to measure that?
Mr. Taylor: We are measuring through the current retrofit that we are doing now. With the previous retrofits we did not have good measuring tools in place.
In 2007 we embarked on putting those measuring tools in place. We have installed electrical metres and heat metres that are much more accurate than what we had. Before we had monthly data to compare, which was pretty good, but now we actually have 15-minute data on every building on campus for comparisons. As we go forward with these retrofits, we are able to quantify more closely. We know there has been savings, but we cannot quite nail down the number in terms of what we have been able to save.
Senator Mitchell: I think it is UBC that is proposing to build the perfect state-of-the-art energy efficient building. Are you proposing or planning anything of that kind with future construction?
Mr. Taylor: We have incorporated a lot of those ideals in the construction we have had currently on campus. I am a firm believer that the greenest building you can build is one you do not have to build. That has kind of been our mantra on campus as much as possible, to maximize utilization of the space we already have, but when it necessitates a new building, we have incorporated the latest technologies and newest technologies.
We have incorporated geothermal energy on campus. We use the district heating system. If you compare the district heating system against electricity, which is a bit unfair because that would not be the likely fuel of source — you would probably use heavy fuel oil for an institution of our size — the spread is about $0.09 per kilowatt hour. It would cost us $0.09 more a kilowatt hour to heat the campus with electricity than with the district heating system, so it is not insignificant. With oil, well at the current price, it might be close to that, as well. It would probably be in the $0.06 or $0.07 per kilowatt hour range. From that perspective, we have utilized and maximized that technology.
We have also looked at our buildings. We do not have any LEED-rated buildings on campus. In our experience, at least on the East Coast, when we have gone to build these buildings, we found that the investment it takes to get LEED certification in buildings often does not match the performance boost of the building. In some cases, the investment you would make into that LEED certification would be better put to use in the building itself. We have made those kinds of strategic decisions on campus. For instance, a recent example, a building on campus was going to cost about $200,000 to certify it with LEED. We decided to put that $200,000 into the building with a more efficient ventilation system.
Making those types of strategic decisions to further conservation on campus are the types of things we are trying to do. We are trying to change the overall culture. We have a building currently under construction on campus, it is the new school of nursing, and that is incorporating or utilizing the district energy system.
We are minimizing the amount of cooling in the building based on the orientation of the building. We are using low VOC components in the building so that the building does not need quite as much ventilation. We are trying to use demand ventilation in the building so that you can control the time of day when the building is actually in operation.
We do that across campus now. Two years ago we questioned why we were leaving 14 or 15 of our 22 buildings open at night when we were only offering 10 or 12 classes. We put them all in two or three buildings and closed the other buildings down.
It is making those kinds of simple changes, much like the co-op example earlier, that have led to significant savings for us. They are small operational changes that are simple, typically, to implement.
In the latest audit I mentioned, our primary focus will be on those types of end-user technologies. We are looking at things like new lighting technologies. We have adopted a new lighting standard on campus to reduce the amount of lighting output that is required in particular areas. For instance, in some areas we have been lighting as high as 75 or a 100 lumens, and we are dropping that back to about 30 lumens. That does not provide any less lighting for tasks that people can do but it reduces our lighting load by about 50 per cent. We are actually using 50 per cent less light to provide typically the same amount of task lighting for individuals to do their daily operations.
In that case, we are actually removing things and lowering things rather than making significant investments. I guess you would put those under the category of "low-hanging fruit.''
At the same time, occupancy sensors are a big part of this latest retrofit. They have been utilized pretty significantly in our newer buildings on campus. We have a pretty diversified campus, everything from buildings over 100 years old to one under construction. Over the years, we have been trying to rationalize that range of building ages and technologies on campus, and this is one measure that we have looked toward.
Senator Mitchell: You can imagine how much we could reduce the government's deficit if we did that in the federal buildings in this country.
Mr. Taylor: You have a perfect example here in Charlottetown with the Jean Canfield Building, which we look to actually as a beacon, I guess, when designing buildings for the campus. I mean, the Jean Canfield Building incorporates some of the latest technologies in sustainability. For instance, it utilizes natural ventilation rather than mechanical ventilation as much as possible. There is mechanical ventilation installed but the building is designed with a central shaft through it that acts like a natural chimney, so air naturally wants to rise. It creates a current within the building, so you do not need as many fans and mechanical systems to operate it, and that is a federal building.
It also has, I think, 240 kilowatts of solar panels on the roof. It has a cistern in the basement that utilizes the grey water. All of the toilets in the building are fed through grey water, which is water that has already been used or captured through a rain gutter system on the roof of the building.
All existing technologies combined in a new way in a single building leads to a significantly efficient building.
At U.B.C. they are looking at and have done a lot of the same things. I have been in a few of the buildings, the advance buildings that they have built on their campus, and they look towards the same types of technologies.
The Chair: Do you have any buildings with grass on the roof?
Mr. Taylor: We have one. The Atlantic Veterinary College has a green roof. It was built probably before green roofs were en vogue. That would have been constructed in 1985. That is still in place. On any summer day or early fall day, people take their lunch out on the roof of the building. They have easy access to the roof of the structure.
Senator Peterson: Does the university have an engineering and science department where the graduate students can assist in developing strategies for energy management?
Mr. Taylor: We have an engineering program. Prince Edward Island offers the first three years of an engineering degree and then students leave and go either to UNB or Dalhousie University to complete their degree. The reasoning behind that is a full four- or five-year engineering degree is quite expensive to operate and accredit and with the number of students we would have on Prince Edward Island, it just did not seem to be warranted because we would have to run multiple streams of engineering. We have a large environmental studies department and biology department that works closely with the environmental studies department. We are always working with both the engineering department and environmental studies to try and further these types of things, whether they be technology- based or end-user based.
Senator Peterson: You said you have bus passes for the students. Do you have a dedicated bus service to the university, as well?
Mr. Taylor: The bus service is operated by a private operator. Trius Transit is the operator bus service in Charlottetown. It is operated as a city system. The students pay for that bus pass at a discounted rate — I think it is $25 per semester — and that provides them with unlimited ridership throughout the semester.
Holland College, which is just down the road here, is looking at doing a similar thing.
That pricing structure gives a bit more long-term stability to the transit system. It gives them a revenue stream for which they can plan. When those buses arrive on our campus in the morning they are standing room only. When you consider that there was no busing system in Charlottetown five years ago, it is pretty impressive that they have been able to reach that level.
Senator McCoy: You call for standardized open source reporting mechanism that provides the key indicators for comparison. What does that mean?
Mr. Taylor: We can measure against ourselves but we do not know if that is a fair measurement when we are looking at making investments in future energy efficiency.
We have done comparisons against some other institutions across Canada, those that have made that information available to us. We have no kind of third-party, audited, standard system that we can look to to say this is where this building should be. This is where it is. This is where it should be. Are we better? Are we not? It would help us in making strategic investment decisions in terms of where we should be putting our money in energy efficiency. Should we be investing in building A or building B? Where could we maximize our dollar invested in terms of reducing consumption.
Senator McCoy: You described the value of such a model. What would it look like exactly?
Mr. Taylor: The ones we have seen are usually measured either in terms of energy per area, so you could have gigajoules versus —
Senator McCoy: Do you have precedents that you would follow?
Mr. Taylor: We have some. Within the LEED standard, for instance, they do follow energy standards that dictate certain energy level consumption and certain targets you have to meet or match. We can often look to those. In the institutional sector, it is difficult because we are like mini municipalities, with many different types of buildings on our campus. For instance, it is very difficult for us to compare our veterinary hospital to the residences on campus, to an academic building or a sports complex.
It is a little different if you were, say, a real estate operator and you had 15 malls. You could take those 15 malls and directly compare them and make allowances for variations in location and those types of things. However, it is much more difficult for us if we have, say, one veterinary teaching hospital. How do we compare where that should be? We would have to compare it against others. There are only four others in the country.
We try and match it against other hospitals and other medical institutions that we think would be comparable in an effort to get an idea of whether this is reasonable. Is this where it should be? We are always looking to make those investments to reduce its consumption regardless, but a targeted system like that would help us to strategically make better long-term decisions in terms of where we want to invest.
Senator McCoy: Let us take the example of the veterinary hospital. You say you compare yourself with a hospital. Where do you get the data for the hospital?
Mr. Taylor: It would depend on the hospital and which jurisdictions allow the information to be made publically available. In some cases, it might be somebody you bump into literally at a trade show who happens to have their data with them and is looking for somebody else to compare to. Quebec has a requirement that universities publish their energy efficiency values on an annual basis. We use that as a good benchmark from time to time.
We visited Concordia University in Montreal, and they shared their energy statistics with us in terms of energy usage per given areas or gigajoules per square metre. They are measured on that in the province, and they are required to publish that information. In discussions with some of the institutions there, we found that it creates public pressure on those institutions to ensure that they are doing everything they can to drive down their consumption levels.
A system like that could go a long way. If people had to report on where their consumption levels were, then people would have to answer questions as to why consumption levels are high. What is driving consumption to that level? There is incentive to drive those levels down to avoid those types of questions.
Senator McCoy: The Office of Energy Efficiency, federally or CSA, for example, would that be the sort of place?
Mr. Taylor: Some standards body, yes.
Senator Lang: How much money was put in for the purpose of your energy system, the solid waste and renewable wood bio-mass system? How long will it take to pay it back in real terms? I would like you to describe you system, as well. Are we talking about replacing the landfill when you talk about a solid waste system?
Mr. Taylor: Yes, the system was actually developed by the provincial government back in the mid-90s. At the time, there were three separate centralized systems. There was one at the university, which fed the university. There was one at Holland College here in downtown Charlottetown. There was a third but I am not sure on the location.
It was decided at that time that the provincial government would rationalize those into one centralized plant. That is the plant that now exists just down the road here on Riverside Drive. That plant has four solid waste incinerators so it does use municipal waste primarily provided from across the Island.
It works in tandem with the Island waste watch system so diverted from that would be any compostable waste, paper waste any of the recyclables. Those are removed from the waste stream first and then what is left goes into those four main incinerators. That provides about 40 per cent of the energy that the plant utilizes in solid waste.
The next largest contributor would be wood mass, typically through either woodchips or sawdust. At one point, it was provided locally through a couple of saw mills here on Prince Edward Island. Unfortunately, those sawmills have shutdown over the last few years so they have had to source that particular product off Island. That provides about another 40 per cent of the total usage of the plant.
The remainder is made up, primarily this time of year, by fuel oil, both through a boiler at the Riverside plant and back-up boilers on campus at UPEI. The provincial government made the initial investment to develop that system, and then it was turned over to a private operator, I believe in 1997. It has changed hands two or three times since then, but it has been operated as a private enterprise since that time.
In that time frame, the private entity has actually made investments in the plant to expand it and provide more value for end-users. I do not have the numbers in terms of paybacks or what the arrangement was when they took it over. I am not sure if they purchased it from the provincial government or how that was undertaken. It was through significant government investment that that came about.
We spend about $5 million a year on utilities at UPEI, which is about 5 per cent of our overall operating budget. If you compare that to other institutions, especially in Quebec, Ontario and further West, the average is closer to 2 to 2 1/ 2 per cent. We are significantly higher. You have heard that, I am sure, in the last few days, that pricing in Atlantic Canada is significantly higher. Our average cost of electricity on campus for last year ran in the order of $0.15 a kilowatt hour. We are a pretty electrical intensive institution. We have a lot of research. We have a veterinarian teaching hospital. You may not see a lot of things that we are doing at other institutions because the economics for us actually do make sense. When you get to that price point it makes sense to do some of the things we are doing, whereas for others it may not if you are at $0.05, $0.06, $0.07 a kilowatt hour.
The Chair: Mr. Taylor, thank you for coming.
We have two witnesses left. Mr. Matthew McCarville is appearing as an individual. We also have with us Mr. Tony Reddin, Project Coordinator, Energy, Environmental Coalition of Prince Edward Island.
Tony Reddin, Product Coordinator, Energy, Environmental Coalition of Prince Edward Island (ECO-PEI): I am joined by another member of our committee, Dr. Kirk Brown.
My background is 30 years of involvement with energy and environmental issues, both locally and regionally, and also education work in the schools and such.
ECOPEI, or the Environmental Coalition of P.E.I., is a community-based action group formed in 1988, and our goal is to work in partnerships to understand and improve the Island environment.
Our energy project, which makes us a member of the Atlantic Canada Sustainable Energy Coalition, has produced several documents including in 2007 one called Pathways to Sustainable Energy Prosperity on Prince Edward Island which had extensive recommendations for provincial energy policy, and many of those were followed in the provincial energy strategies.
First, I thank your standing committee for promoting this important discussion of a sustainable energy strategy for Canada. Your discussion paper, which I did not have a lot of time to study, is a valuable document, and we appreciate the effort you are making to get Canadians involved in these issues. I noticed in particular that one of the goals was how to engage Canadians, and that is critical.
I will not repeat the evidence that you, I am sure, have heard many times, that our irresponsible overuse of fossil fuels is causing widespread human suffering, climate crises and gross destruction of our planet's natural beauty and resources.
Earlier it was mentioned that you have not heard much about storage of electricity, in particular, energy from wind turbines and what solutions there are for that. One is storage without using batteries, for example, using surplus electricity to heat water, ceramic bricks or some type of mass which then stores that heat and releases it when there is less wind and more demand on the electricity. Another example is using the surplus of electricity to cool freezers extra cold, and then when less electricity is available, the freezer still has extra cold in it and does not need to run at the time of greater demand. There are other examples like pressurizing air or other fluids to take that energy back when needed. Another method for maximizing wind is shifting the peak. Mr. Younker could tell you more about that, and he would have if you had asked him.
These are simply programs to encourage and reward those who use the electricity at the times when there is less demand and lots of supply. That would typically mean a lower price for perhaps overnight hours or other times, for example when there is surplus from available wind capacity. I just wanted to add those to your proceeds.
I do want to raise some other issues that I did not see in the discussion paper, and forgive me if there were things I missed. Most of those involve an examination of our values as Canadians. I think the Canadian Sustainable Energy Strategy must include and actually be based on a consideration of our values first.
Number one is the choice of using less energy from all sources. This is almost an attitude thing, a choice of how do we actually use less, not how do we use what we are using more efficiently, but where are there places where we just do not need to use as much? This is critical if we want to lower our fossil fuel use, lower our greenhouse gas emissions, and avoid more economic and climate catastrophes. Your question in the discussion paper was: What does Canada need energy for, and how much do we need? I would answer we need a lot less energy than we are using, and especially a lot less than what we waste.
In another sense, I would like to paraphrase Gandhi to say solar energy is enough to satisfy everyone's needs, but not enough to satisfy anyone's greed. There are limits to the earth's resources, as we know, and that applies to the construction of all energy projects, whether or not they are renewable energy projects.
Until every political decision in Canada at least begins with the question how can we do this using less fossil fuels or using no fossil fuels at all then we are doomed to continue destroying the planet. Is that the choice we want to make? Of course not. Our present economy runs on fossil fuels, an over-consumption of resources and on unending growth to raise the GDP. Our economy will have to be drastically changed from being so dependent on fossil fuels. The sooner we make that change to a sustainable economy, the less painful and expensive it is likely to be.
This will require courageous leadership on every level of government showing and inspiring Canadians by example and by cooperation. Practical programs to reduce fossil fuel emissions and increase energy efficiencies are only the first steps of turning away from those destructive habits of the growth economy.
We must also reject fossil fuel projects that endanger our seas and shores such as drilling in the Gulf of St. Lawrence. I would refer you back to the excellent presentation given in Halifax by Gretchen Fitzgerald of the Sierra Club which included 10 well stated reasons to protect the gulf.
Of course this is all not to say that we stop using fossil fuels today, but our unending focus has to be how to use less, and how to use our creativity to be fossil fuel-free as soon as possible. This requires that we be mindful of the choices that we make all the time in our actions, both in the long-term, far-reaching decisions of those with political power, and in the everyday choices of everyone of us. For example, I think a meeting like this could have been held at least partly by videoconferencing, and bringing people together by efficient use of existing technology and using a relatively small amount of electricity and other energy fuels. I realize that is a challenge, but I hope it will happen.
Also, this room and this building, as nice as it is, and all our workplaces and homes for that matter, could be cooler and still be comfortable, and probably healthier.
The second issue I want to raise is that young people who are the future, of course, must be included in these strategic planning discussions and decisions. That raises the question: How do we do that? We do that by asking them how to include them and then listening to them, and challenging ourselves to set an example for them that will give them hope instead of cynicism. An important part of engaging young people in society's decision making is to provide proper funding for schools and programs such as Katimavik, that give young people a place to explore and discuss issues and to be involved in community work.
I might mention that the sustainability program at UPEI, and actually at many other universities, that David Taylor just described is as a result of initiatives of the Sierra Youth Coalition, which is a national youth-run organization.
Young people do not even wait to be asked to be included. They have plenty of initiative, but the potential for their contribution could be so much greater if we give them that chance.
The third issue relates to agriculture and how can we produce good food without fossil fuels? Food, of course, is a basic need, but Canadian farming methods are very fuel intensive and show little signs of changing. Another aspect of this issue is the shortage of farmers — the average age of farmers in P.E.I. is almost 60 — and the difficulties the young people face to start farming. Yet at the same time farms and soil could provide an extremely valuable role to store the excess carbon that we have put in the air. That is through increasing the organic matter content of those soils, which have generally lost tremendous amounts of carbon over the years of intensive farming, but that could be reversed and those soils could hold and sequester even greater amounts of carbon than they had in the first place. We must find ways to reward farmers for providing this service to society. We must find ways to preserve farmland from development and being paved over. Again, I suppose pavement is sort of a sequestration of carbon, but it does not work nearly as well as organic matter in the soil.
Agricultural land trusts may be a useful tool to use for all those problems. That is another possible solution for land preservation, for rewarding organic farming methods, and for giving young farmers affordable options to start farming. Those are all, of course, tied into energy questions.
Issue number four is that Canadian trade and energy agreements must be negotiated to serve Canadians instead of corporations. Corporations, as we know by definition have a mandate to maximize their profits and that is usually taken to mean short-term profits, and will usually mean pushing for free unregulated trade regardless of the expense to people and the environment. It is just the facts of life. The principle of fair trade must replace that of free trade.
Our economy cannot get off fossil fuels while we depend on exporting so much of them to the U.S.A. The NAFTA agreement must be changed to encourage conservation on both sides of the border.
Oil developments in the tar sands must at least be limited from expanding until it is determined if there are better ways to supply our energy needs.
Atlantic Canada has already begun to cooperate with the New England states to set goals for reducing fossil fuel emissions. New renewable energy sources must be used in creative strategies to get us all off those fossil fuels. For example, hydroelectric power, and in particular the Muskrat Falls project in Labrador, must be used to balance and optimize wind power in a regional grid.
The fifth and final point is that of nuclear power, which is mentioned in the discussion paper, but we disagree with the conclusions that are reached there. Nuclear plants, in our opinion, are unnecessary, unsafe and uneconomical. The huge costs and risks involved are no solution and that takes resources away from safer solar solutions. Those solar solutions are advancing every day all over the world. Canadians can gain and build on an amazing variety of new solar energy projects that are happening all the time.
To repeat the issues I raised: First, using less energy from all sources is a critical part of avoiding more economical and climate catastrophes; second, young people must be included in these strategy planning discussions and decisions; three, farming without fossil fuels is a challenge that must be faced; fourth, Canadian trade and energy agreements must be negotiated to serve Canadians instead of corporations, and, fifth, nuclear power is unnecessary, unsafe and uneconomical.
With all those issues in mind I ask you to take the leadership on a Canadian sustainable energy strategy to a new level. Set an outstanding example for all Canadians of dedication to the this cause — and it is a cause, it is really a shift of values that we are talking about — by shifting the financial resources that you control to finding solutions for our energy climate crisis.
To conclude, I hope that our children will remember us for the beauty that we preserved, not for the money that we made.
I will now take questions.
Senator Mitchell: Mr. Reddin, you have described sort of the other side things, and there is a really very powerful message in what you are saying.
On your point number four about farming techniques, in fact, in Alberta, we have a cap and sort of trade program, somewhere between trading and offsets, which is the first such effort in North America. It is not good enough. It is intensity based. Nevertheless, it was implemented by Premier Stelmach's government, and it is a step. Farmers there are actually producing sanctioned credits and selling them to TransAlta in order for TransAlta to make its caps. I believe there are 21 different methods by which farmers can capture carbon in a sanctioned way.
Mr. Reddin: Including organic matter in the soil?
Senator Mitchell: All that kind of stuff, yes. There are 14 ways, I think, for dealing with raising livestock, and there are seven ways of growing grains, or vice versa.
That brings me to my question about carbon credits and markets. I believe that there is a place for them, that they assist us in finding the low hanging fruit. In fact, we could have made Kyoto, I use this just as an example, at $20 a tonne in the European markets for about $5 billion a year. That would not have bankrupted the Canadian economy despite what people say, the people who do not want to do this. All that money, if we did it here, could go to farmers and businesses. Anyway, I run on.
What do you think about carbon markets, carbon credits, that kind of thing?
Mr. Reddin: I agree with you. It is the sensible way to fund the energy efficiency and other programs to get us off fossil fuels. It is going to happen eventually because they will get more and more expensive. It is another way to do it much less painfully.
Senator Mitchell: You touched on an answer to this question, but I would like you to elaborate a bit more. I have often said this before, and I know my colleagues will be tired of it, but I will say it again. It is not that we need more technology to reduce greenhouse gas emissions, what we need is a new technology to convince people that they have to do it. You were alluding to educating youth, Katimavik, for example. I think you mentioned funding for schools. That is really part of the difficulty here. It is a culture change and it also involves convincing the public that votes for governments that do not feel like they have enough leeway or political credit to do what they have to do. You see it at the most basic and simplest forms of environmental construction, a wind mill or a wind turbine. That people would resist that and make up, I would argue, health problems and so on is incomprehensible.
Mr. Reddin: To address that example, I think it is Denmark — and Mr. Brown may be able to add to this — where the wind development that they have done has been very community-based. Is it Germany or Denmark?
Kirk Brown, Member, of the ECOPEI Energy Project Advisory Committee, Environmental Coalition of Prince Edward Island (ECO-PEI): Denmark.
Mr. Reddin: There has been little public opposition because people were part of the decision making, and the setbacks were properly put in. I think an important part of it is to involve people in the decisions.
You are right, it is not easy. It is a challenge, but that is no reason not to do it.
Senator Mitchell: It is not just lobbying governments; it is lobbying people.
Senator McCoy: Earlier I was asked somebody to briefly address the environmental impacts of a large scale hydro development. It strikes me you would have some opinions that I think we should put on the record. If you would be able to, I would invite you to do so.
Mr. Reddin: It is not something on which I claim to have expertise or much involvement with studying. The main issue with hydroelectric dams is of course the large land mass that is taken and in effect destroyed, put under water. There is always a question of how long that dam will actually work. It will eventually fill with silt depending on the design and such. The other is, of course, the major financial investment and is that investment the best choice for that money or would energy efficiency solve the same issues and the same things that we are trying to deal with for less investment. In other words we could perhaps do more with energy efficiency and conservation programs than by putting it all in one big project.
Of course, there are other issues of just whose land is it that is being used, and are there better uses for that land than putting it under water, and other issues around transmission corridors and, again, the large land use for that. Even the total energy input to build a dam has to be looked at very closely, because it is such a big project that a tremendous amount of energy has to go into putting it in place.
Mr. Brown could probably add to that.
Mr. Brown: Another important aspect of it is the ability of dams and water behind the dam to act as a battery. It tends to compensate for wind energy. It comes when it is blowing, but it is not when you need it. It becomes a battery, in effect. I have been trying to get the province here to do something with dams in Nova Scotia and New Brunswick for quite a while, and talking about it anyway. You do have to take a good look at the situation. Sometimes it does work, sometimes it does not work.
Senator McCoy: One of the themes I hear you alluding to at least is a systemic approach to analyze how much we need, the best way to get it, and whether we are doing those comparisons across a number of platforms. I am hearing those sorts of considerations pushing your comments. Am I correct in detecting that?
Mr. Reddin: Yes. To me it is not just a matter of how are we going to supply ourselves with energy, it is how is our society going to run. We can see the crisis happening now. We are lucky in Canada to be protected from it, so far. I refer to not just the climate events, those are obvious, and we are suffering those, but also the consequences for people who do not have the resources to protect themselves. Obviously, overseas on other countries severe pain is being suffered. We have to decide how our society will be run. A big part of it is using resources that we should not really claim. They should be left there for future generations.
Senator Brown: I have listened with interest to your presentation, Mr. Reddin. You have outlined an awful lot of problems but not too many solutions. However, I want to talk about farming costs, because I know a little bit about them having been in the business for about 50 years.
Farming is non-unionized. The costs that go to farming can only be solved by larger farms. I will just give you one example using combines. When I was a teenager my father bought a couple of used combines. I think one cost $800 and the other one cost $500. He spent a lot of time fixing them. I spent a lot of time driving them and taking them back to get fixed. When I got out of college the first combine I bought was two years old and it cost me $38,000. A new one would have been $58,000. When I left farming 10 years ago I had bought a combine that was a little over $200,000, but only had one straight cut header. The other pick up header would have been another $50,000.
I am now on an advisory committee ultimately to the ministry and Mr. Harper on the current costs for farmers. I polled my neighbours just a couple of months before Christmas for their costs today. I was a little bit surprised. It is about $450,000 for a John Deere combine, and when you add a couple of pickups, one pickup header and one straight cut header, you are over half a million dollars. This is a consequence of having unionized labour that is able to raise their cost every time they deal with the factory. The same thing happened with cars. I am sure you are more aware of the price of cars over the years than you are with farm machinery. I will tell you right now that organic farming is far more expensive food when it is put on the shelf, and it comes from very small farms with intensive labour. If you can give me the answer to that problem of farming I would very much appreciate it.
Mr. Reddin: I wish I could. I can hear what you are saying, and it amazes me. Someone was telling me not too long ago about selling a tractor, a Cub International, I think it was, for $3,000 or $4,000. It was in Newfoundland, and I said, "You would not sell many tractors in Newfoundland.'' He said, "These little Cubs are 20 horsepower or whatever. We would sell 40 or 50 of them.'' There just are not that many farmers in Newfoundland, but there were not that long ago.
Certainly we have come to the point where it is really hard to have a farm that is not huge. Of course, the farms in P.E.I. are tiny compared to what you are talking about in the Prairies. However, it is the same situation in that potato farms here are tending toward really big farms to make a go of it.
Energy costs will make it even harder as fuel oil goes up, but that is another reason to tackle this problem of how to farm with a lot less fossil fuel. Right now it is hard to see doing that. How would you run those combines?
Senator Brown: We could do it with LNG, but even LNG when you start converting costs $100,000 for an engine.
Mr. Reddin: Generally, one would suppose an electric motor is a much better use of energy than fossil fuels. You do not waste nearly as much heat.
Senator Brown: Yes, that is right, but it is hard to get an extension cord that goes five or six miles
Mr. Reddin: What about a hybrid? I could see that happening. I am surprised it is not. You would know better than I about electric.
Senator McCoy: There is something about life cycle conversion rates in making electricity. If you do that entire analysis, electricity is not necessarily a good source for either space heating or mobility. It might be tidy, but there is more thinking to be done.
Mr. Reddin: For sure.
Senator McCoy: I am pretty sure it is not the panacea that is being touted.
Mr. Reddin: It is going to take a lot of creative thought, and that is why we have to start now and do more and more of it.
Mr. Brown: I started on a farm when I was 14. It was the best summer job I ever had. I enjoyed farming. Farmers on average are 60 years old in our province.
Senator Brown: Actually they are quite a bit older.
Mr. Brown: Are they older than that elsewhere?
Senator Brown: I think Senator Peterson will back me up when I say they are closer to 70 years old.
Mr. Brown: It is hard to say where the food is going to come from then unless we have commercial farming, and yet other sources say that it is most efficient to have smaller farms in some respects.
Senator Peterson: Mr. Reddin, you made a comment that nuclear plants are unsafe. I was just wondering if you had any examples of that, say over the past 40 years?
Mr. Reddin: The cycle for nuclear power, first of all, mining uranium and the tailings from that are a health hazard. The plant itself emits routinely large amounts of tritium, which is a health hazard. Assuming that you get a useful life out of it, you then have to deal with all of the radioactive material that is left. That is, again, another legacy for our great, great, great grandchildren.
Senator Peterson: You can state those things you do not like. Maybe that is how you should phrase it. To say it is not safe I do not think is really fair because nothing has happened. They have all set aside millions of dollars, hundreds of millions of dollars to decommission them. It is just a matter of getting it in the right context, rather than going around saying they are unsafe and it is dangerous. Driving a car is far more dangerous.
Mr. Reddin: As an accident, it is such an unthinkable catastrophe, either with radioactive tailings from mining or with the plant itself, that it is on a whole different scale. When you drive a car there is a certain element of choice, whereas you do not choose to live within the range of the damaging effects of a nuclear power plant failure. There are plenty of other elements. If you like I can provide more information about my arguments. I would be happy to pass that on.
The Chair: Thank you, Mr. Reddin and Mr. Brown.
Mr. McCarville, you are here in your own right as an individual, I understand. You have furnished us with a very thoughtful paper, which I have just read.
Matthew McCarville, as an individual: Mr. Chairman and members of the committee, I have a keen interest in understanding global warming issues and energy solutions.
My research background is in the ecological forestry, bioscience and energy sectors. From 2007 to 2010 I was coordinator for the ECO-PEI Energy Project. In 2008, I completed a training seminar led by former Vice President of the United States, Al Gore, for the Climate Project Canada, and since have delivered presentations to raise awareness about climate change and energy solutions. I have some consulting experience in the energy sector, and am currently beginning research for a marine renewable energy infrastructure assessment for the Nova Scotia Department of Energy.
The Chair: What is marine renewable energy?
Mr. McCarville: That includes tidal, offshore wind and wave. I expect we will be focusing on those methods in that order in terms of priority for this assessment.
Today I want to talk about a plan to convert Canada's energy system to 100 per cent wind, solar, geothermal, tidal, wave and hydroelectric power for all purposes. I will initiate this by asking the questions: What is the problem. Why do we even care. Why act quickly? Why can we not act in 100 years?
Aside from the 2.5 to 3 million air pollution deaths a year, the hidden medical and insurance costs, et cetera, temperatures are rising rapidly. In Atlantic Canada, from September to December in 2010, 89 new temperature records were set including three new lows and 86 new highs. In the 2000s we had nine of the 10 hottest years in recorded history. That is not to say that these are the hottest years ever during the evolution of the earth. There have been hotter years 100 million years ago, but nobody lived at that time so we did not really have to deal with it. Now we have huge populations to support infrastructure, and we want to be sustainable for a while.
Arctic sea ice is decreasing very rapidly, in the order of 15 per cent in the last decade alone. Because the Arctic sea ice is very thin, only a couple of metres, sometimes three to four metres, when it decreases you uncover the lower albedo ocean below on the order of 5 to 6 per cent albedo versus about 87 per cent for sea ice. There is a rapid positive feedback. As sea ice disappears it is much more difficult for it to recover. Once the sea ice is gone the climate can warm even more rapidly. This is really important when we are looking at the solutions because we need solutions that can be implemented quickly. Thus we cannot rely on solutions that might be available in 15 years, 20 years or 30 years, because even if you have a new technology, it will still take decades to implement that technology. We have to rely on the best technologies that exist today to solve the problem.
Next we will look at a "Review of solutions to global warming, air pollution, and energy security'' by Mark Z. Jacobson which was the top downloaded article in March 2009 in Energy and Environmental Science Journal. In sum, the paper reviews and ranks major proposed energy related solutions to global warming, air pollution mortality, and energy security while considering other impacts of the proposed solution such as on water supply, land use, wildlife, resource availability, thermal pollution, water chemical pollution, nuclear proliferation and under-nutrition. The use of wind, concentrated solar power, geothermal, tidal, solar PV, wave and hydro to provide electricity for battery electric vehicles and hydrogen fuel cell vehicles, and by extension, electricity for the residential, industrial and commercial sectors, will result in the most benefit among the options considered.
The combination of those technologies should be advanced as a solution to global warming, air pollution and energy security. Coal, using carbon capture and storage and nuclear offer less benefit thus represent an opportunity cost loss, and the biofuel options provide no certain benefit and the greatest negative impacts.
Next we will discuss "Providing all global energy with wind, water and solar power'' by Mark Z. Jacobson and Mark A. Delucchi, published in Energy Policy Journal in 2010.
In abstract, the paper analyses the feasibility of providing worldwide energy for all purposes including electric power, transportation, heating and cooling, et cetera from wind, water and sunlight, known as WWS, they call it. In Part I, authors discuss WWS energy system characteristics, current and future energy demand, availability of WWS resources, number of WWS devices, and area and material requirements. In Part II, they address variability, economics and policy of WWS energy. They estimate how many wind turbines, concentrated solar plants, solar PV power plants, rooftop PV systems, geothermal power plants, new hydroelectric power plants, wave devices, and tidal turbines can power a 2030 WWS world that uses electricity and electrolytic hydrogen for all purposes. This WWS infrastructure reduces world power demand by 30 per cent and requires only about 1 per cent more of the world's land for footprint and spacing. Authors suggest producing all new energy with WWS by 2030 and replacing the pre-existing energy by 2050. Barriers to the plan are primarily said to be social and political, not technological or economic. The energy cost in a WWS world should be similar to that today.
Next I assess converting Canada to WWS infrastructure for all purposes. Using Natural Resources Canada data on total energy use in Canada for 2008, I convert Canada's energy use from petajoules to terawatt hours. Total energy use in Canada converted to electricity is 2,424 terawatt hours per year. Reducing this figure by 30 per cent due to electricity and hydrogen conservation measures mainly from replacing inefficient combustion processes, such as described in the paper by Jacobson and Delucchi, results 1,700 terawatt hours per year.
To determine whether this amount of power can be generated using technologies recommended by Jacobson and Delucchi, I assess Canada's wind, solar, geothermal, tidal, wave and hydro energy resources using available data. A Statistics Canada map shows the country's population is mostly distributed in southern areas which I use as an overlay to roughly assess the transmission and interconnection requirements. For these recommended energy sources, I draw assumptions about capacity factors from data to calculate how much power can be generated from installations. Thus, I estimate 55,000 5-megawatt wind turbines, 500 300-megawatt concentrated solar plants, 500 300-megawatt solar PV power plants, about 3 million 3-kilowatt rooftop PV or wind power systems, 150 100-megawatt geothermal power plants, and 10 new 1,300-megawatt hydroelectric power plants, 5,000 .75-megawatt wave devices, and 5000 1-megawatt tidal turbines plus the existing 70,000 megawatts of hydro capacity can power Canada using electricity and electrolytic hydrogen for all purposes.
Vehicles, ships and trains would be powered by electricity and hydrogen fuel cells. Aircraft would be run on liquid hydrogen. Homes would be cooled and warmed with electric heaters, no more natural gas or coal or even nuclear, and water would be preheated by the sun.
If Canada converts all personal vehicles to battery electric vehicles powered by wind, the footprint would be 0.2 square kilometres, about twice the area of Parliament Hill. Land area for turbine spacing can still be used for agriculture.
Space heating is a key service representing 62.8 per cent of end-use energy in Canada's residential sector. Fortunately wind, the best resource option in general, tends to be almost doubly as powerful in the coldest month compared to the warmest. Electric thermal storage devices such as dense, ceramic bricks can thus be installed to supply Canadians with wind for space heating with reliability. For P.E.I. the average household using ETS for space heating and a 95 per cent wind and 5 per cent hydro supply mix results in life cycle CO2 equivalent emissions of 200 kilograms per year.
Aside from cryogenic hydrogen for aircraft, which you have to combust, along with some high temperature processes that would replace steel production, for instance, there would be no need for any combustion except in some very remote circumstances. In sum, this path to sustainable energy in Canada achieves more than a 90 per cent reduction in CO2 equivalent emissions from total energy use, down from 488 megatonnes of CO2 equivalent in the year 2008 to about 32 megatonnes per year.
I encourage people to review these energy solutions carefully using the sources and calculations in this testimony as a starting point. More detailed information and analysis can be supplied upon request.
Last, I have a page on "Moving Canada forward'' which talks about energy policy options, and maybe I can sort of talk off of that page as we get into questions.
The Chair: You have obviously done a lot of work on this. Does this material form part of your labour where you are working, or was this done on your own time?
Mr. McCarville: Over the three years that I was involved with the ECO-PEI Energy Project I was paid for 35 hours a week, and in addition I probably spent another 35 hours a week of my own time gathering information, understanding energy systems and atmospheric science. I am by no means an academic or an expert per se, but someone who has worked hard to try to understand these issues over the past few years. Since I have left that position, I have continued to spend a lot of spare time trying to continue to keep pace with understanding this kind of information.
Senator Brown: Have you cost out the changes that you talk about with the turbines, the wind generation and all the things that it would take to produce this amount of electricity?
Mr. McCarville: If you look at the cost of wind development in Eastern Canada, for instance, the University of Moncton's K.C. Irving chair of sustainable development, Yves Gagnon, and his team produced a paper that looked at the economic impact of a 100-megawatt wind farm and found that the cost is $2 million per megawatt, and that prices were $0.08 cents a kilowatt hour. For this path to sustainable energy in Canada, I used the methodology that Jacobson and Delucchi from Stanford University and UC Davis used, and I relied on their analysis and their findings which they summarize in the abstract of their report on providing all global energy, where they say that the cost should be similar to that today. Keep in mind that cost includes, for instance, the Black Lung Benefit Program in the U.S.. Since the 1970s, over a 30 year period, $35 billion was spent because of black lung disease from coal. Also, external costs include the premature deaths from air pollution and illnesses, and medical and insurance costs for dealing with those health effects. It is quite an order of magnitude when you try to internalize these external factors.
If you look at how quickly the world is dealing with responding to global warming with climate change mitigation, it has been estimated by John P. Wyatt from the Energy Modelling Forum at Stanford University, that we are on a track to 5 to 6 degrees Celsius of rapid warming while we notionally hope to stabilize temperature around 2 degrees Celsius. If you look at military scenario planning it is quite plain to see that there is a hockey stick curve to try to ramp up the military industrial capacity to deal with the fallout which may arise from 5 to 6 degrees warming relative to 2 degrees of warming. We can get into a very long discussion about why there is no business case. We are spending $44 billion to renew our military industrial capacity for the 21st century. This language was in the media when the Government of Canada said it would spend $35 billion on navy and $9 billion on aviation, while swelling our efforts to assert Arctic sovereignty and other things. If you capitalize $44 billion, $1 of equity and $4 of financing, at $2 million per megawatt of installed wind capacity — and you can do the math or I could give you a back-of-the-envelope calculation — and coordinate it with other countries, you can de-risk and actually solve this energy problem with really very little downside economically.
Senator Brown: I will accept your argument, except you have passenger ships, tractors, and aircraft listed as hydrogen powered. The total cost of going from fossil fuel to no fossil fuel has to be in the hundreds of trillions of dollars.
Mr. McCarville: I did hear one estimate, although I did not have a chance to really get into the nitty-gritty. The cost to this whole conversion world-wide would be in the order of a $100 trillion.
Senator Brown: That is what I thought.
Mr. McCarville: If you keep in mind what we are already investing in energy acquisition and look at the level of risk and exposure from military scenario planning alone, let alone the cost, current and future, for air pollution deaths and health problems, in other word look at the whole picture, I do not think it is that much of an issue to give it more consideration.
Senator Brown: I will grant you that it is not impossible to do. When we figure out the cost we will probably try to do some of what you have suggested. We are doing a lot of that now with wind energy and other alternatives.
Supposedly, in the next 50 years, we will add 2 billion people to the planet Earth, and we have to be able to feed them. The one thing that will happen with ice caps coming off of the North Pole is that geologists estimate that agriculture will move farther north in Canada, something in the order of 100 to 200 miles further north. We will at least have more room for increasing food production.
The last thing I would have to say on the conversion you talk about with no fossil fuels at all is that it would mean a dramatic change. If in your scenario I look around this room there would be no microphones, just copper wires hanging down. Most of the clothes we wear these days would be disappear. A lot of us would be sitting around here naked. There is an awful lot of stuff that comes from natural gas that goes into clothing, the shoes we wear, the tires on our cars. I cannot list the number of things that would be missing without fossil fuels. I leave you with that comment.
Mr. McCarville: I do not disagree that petroleum products are very integral today to the way that we live our daily lives. I think it will continue to play a role. Even if you convert the energy system there is still opportunity to refine petroleum products, but you would be putting it to other uses rather than combusting it into the atmosphere.
Senator Brown: We blame the warming on CO2, which everyone seems to agree on, but CO2 is not pollution. It is the sulphur dioxides and trace metals that come from car and truck exhaust. That is what causes the pollution we see. We do not see CO2.
Mr. McCarville: That is a really good point from the perspective that CO2 is naturally found in the atmosphere's composition. That could be argued perhaps to some extent, but for instance, for Canada to spend more money on coal plants using carbon capture and storage is totally irrational. We should be spending it on wind because there is no air pollution. Whereas if we switch to using coal with carbon capture and sequestration, the emissions are still in the order of 450 grams of CO2 per kilowatt hour, and not only that but you decrease the efficiency of the coal plant by 14 to 25 per cent. Also, this capturing of the carbon dioxide does not capture any of the other air pollutants such as the NOx and SOx and other air pollutants that come from coal plants. Your air pollution will actually go up if you use carbon capture and storage, those air pollutants that you were referring to. Using CCS to notionally justify oil sands expansion is totally irrational from an environmental sustainability point of view, in my opinion. I would just leave it there.
Senator Brown: I will leave you with your opinion.
Senator McCoy: Your presentation challenges a great many assumptions that all of us hold, and some of us may never be able let go of some of our assumptions. However, it encourages us to rethink and reexamine what we know or what we think we know. I appreciate that, and I will follow up and read these two articles that you have taken as inspiration.
You have done a good job in presenting the whole picture, but there are still some variables. However, as soon as you start looking at a system you can start saying things such as, "Well, what about indoor air quality? Incidents of asthma, and perhaps even autism, are pushed by making building envelopes airtight, et cetera, et cetera.'' There is more to be done here. With regard to ten new major hydroelectric plants, it is not empty land up north. We think of it as hinterland, but native peoples think of it as homeland, and they need that space because of the way of life and the low productivity of the natural ecosystems up there.
There are some considerations that I would raise, and you are nodding and agreeing with me. I will not ask questions, but I did want to thank you. It is a breath of fresh air, and it is going to push my imagination and inquiries further, and I appreciate that.
Mr. McCarville: There certainly are challenges. Somebody mentioned this morning rare earth elements, and that the permanent magnets in wind turbines use a small amount of neodymium. The global reserves of neodymium are such that if you convert the entire world to 50 per cent wind power for all purposes you are converting to electricity and electrolytic hydrogen to power the world. With 50 per cent wind using neodymium in the permanent magnets, you have exhausted a significant portion of the global reserve for that element.
As mentioned earlier, there are options to using turbines that do not rely on neodymium. It should also be noted that electric vehicles will also use neodymium because it slightly improves their efficiency. It should not be understated that it is incredibly challenging, and we should remain focused. If 40 per cent of the world's power is by solar PV, for instance, then you will run into some material challenges. Luckily as materials become short you can easily switch to other materials. With the current global reserves on land for lithium there is in the order of enough lithium for 1.1 billion electric cars, and there are other options as well for that material. In the end, however, you have to get to near 100 per cent recyclability of content. It is not a problem for the steel and the concrete and the turbines, but we do need to get to near 100 per cent recylability to be able to sustain any kind of systems of these orders of magnitude for global populations such as we have today. It should not be understated.
In terms of hydroelectric, you were wondering about the environmental impact, and I can tell you from a climate change perspective there is a range. One is the industry estimate and the other is the peer reviewed scientific estimate. If you look at the median point between those two you end up on the order of 65 grams of CO2 equivalent per kilowatt hour taking into account the construction of the dam and the flooding of the vegetated area, et cetera, and the fact that it is likely to operate for about 80 to 100 years.
Senator McCoy: That is grams of CO2 equivalent.
Mr. McCarville: Yes.
Senator McCoy: In many cases we are consumed by this climate change argument. There are ecosystem considerations. There are weasels that will not chase rabbits underwater.
Mr. McCarville: The reason ultimately for recommending hydro is that it is such an excellent load balancer it would allow us to maintain reliability at the most reasonable cost possible while reducing emissions in the order of magnitude that is necessary to keep ecosystem functions from collapsing, which they would at around 4 degrees or 5 degrees Celsius of warming.
Senator McCoy: You are saying it is the lesser of many evils?
Mr. McCarville: Yes. Right now, a lot of the literature suggests that we are risking function collapse of our marine and ocean ecosystems. Not only have we changed the composition of the atmosphere, but of the oceans as well, and that is felt by the marine ecosystems.
The Chair: I agree with Senator McCoy in terms of the questions you have raised and some of the old truths you are challenging. You have done this in a polite, logical, a well reasoned and an unobnoxious way, and we really appreciate it. Thank you for being attending.
Mr. McCarville: The reason I would not recommend nuclear and the authors of these papers I referred to do not recommend nuclear is that, from their analysis of the literature — and they look at industry estimates and scientific peer reviewed literature — it produces in the order of 9 to 17 times more carbon emitting than wind. It also carries with it the highest upper limit mortality risk. Right now we have just over 400 nuclear power plants in the world. If you look at a large scale expansion to power the world with nuclear, then you are looking at in the order of 15,000 850-megawatt nuclear power plant facilities. They would be dispersed across countries that are not necessarily as well governed or as stable as ours. Geopolitically it is difficult to make the case to Iran not to enrich uranium when facilities for enrichment of uranium exist in the United States, for instance, and they are the only country in the history of humanity that has actually used a nuclear weapon. It is estimated that as the U.S. gets more efficient internal combustion engines it will reduce associated air pollution deaths from 25,000 deaths per year to 15,000 deaths per year. If you had just one bomb go off in a major city and you average it out over 30 years then it is more than 25,000 deaths per year. We can pretend that that risk does not exist, but it is not zero. For that reason, we have to ask "Do we need this?'' If not, then we should avoid it.
The Chair: Thank you. It was very helpful.
(The committee adjourned.)