THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, November 20, 2014
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 8 a.m. to study non-renewable and renewable energy development including energy storage, distribution, transmission, consumption and other emerging technologies in Canada’s three northern territories.
Senator Richard Neufeld (Chair) in the chair.
[English]
The Chair: Welcome to this meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources. My name is Richard Neufeld. I represent the province of British Columbia and I'm chair of this committee.
I would like to welcome honourable senators, any members of the public with us in the room, and viewers all across the country who are watching on television. As a reminder to those watching, these committee hearings are open to the public and also available via webcast on the sen.parl.gc.ca website. You may also find more information on the schedule of witnesses on the website, under “Senate Committees.”
I will now ask senators around the table to introduce themselves, and I'll begin by introducing the deputy chair, Senator Paul Massicotte from Quebec.
Senator Patterson: Dennis Patterson from Nunavut.
Senator Ringuette: Pierrette Ringuette from New Brunswick.
Senator Sibbeston: Nick Sibbeston from the Northwest Territories.
Senator Wallace: John Wallace from New Brunswick.
Senator Black: Douglas Black from Alberta.
Senator Seidman: Judith Seidman from Montreal, Quebec.
The Chair: Our two Library of Parliament analysts are Sam Banks and Marc LeBlanc.
On March 4, 2014, the Senate authorized our committee to undertake a study on non-renewable and renewable energy development, including energy storage, distribution, transmission, consumption and other emerging technologies in Canada's three northern territories. The committee has held meetings with witnesses on this subject in Ottawa to date, and last May travelled to all three of Canada's northern territories, holding private meetings and visiting sites.
Today, I am pleased to welcome, for the first portion of our meeting, from the Qulliq Energy Corporation, Alain Barriault, President and Chief Executive Officer; and from the Government of Nunavut, William Mackay, Acting Assistant Deputy Minister, Intergovernmental Affairs. Gentlemen, the floor is yours.
Alain Barriault, President and Chief Executive Officer, Qulliq Energy Corporation: Good morning, Chairman Neufeld and committee members. Thank you for the invitation to discuss energy issues in Nunavut.
Qulliq Energy operates and maintains 100 per cent diesel generation, off grid, in 25 remote and isolated communities, spanning 20 per cent of Canada's land mass and three time zones.
Of Qulliq Energy's total fleet of 102 gensets, 40 date from 1974 to 2001. They account for 61 per cent of the installed capacity and are approaching the end of life. Seventeen of our 26 power plants are also near or at the end of their 40-year useful life.
Besides the PowerPoint presentation and notes I had provided to committee members, I had also provided a separate map of Nunavut power plants, by age, to give members an indication of the challenge we're facing.
Many of the plants that we have, which are over 40 years old are, of course, remnants from a Northern Canada Power Corporation, which was the federal Crown corporation of the day. We are facing environmental liability challenges, as well, as we decommission some of these older plants.
There are some obvious challenges in providing reliable energy in this context, but there are also numerous opportunities. Diesel purchases represent 45 per cent of the corporation's total expenses. This accounts for roughly 55 million litres of diesel, of which one third of the consumption is in Iqaluit alone.
I'm currently on page 4 of my presentation, if any of you are following.
Displacing this diesel consumption, of course, will give us a large potential to decrease our greenhouse gas emissions, as well as our environmental risk related to shipping and storage of diesel fuels.
Within Nunavut, even though we are rate based, the subsidies and the rate structures are such that the Government of Nunavut and its agencies are indirectly paying the bulk of Qulliq Energy's costs. Reducing power rates through investment in hydro and other large energy projects would decrease power rates, decrease the Government of Nunavut's rate burden, and free up much needed federal transfer funds for social housing, health and other priorities.
As well, as you all know, reduced power rates have the added benefit of being an economic driver and are often the deciding factor in the viability and longevity of major projects. Mining operations in Nunavut have cited that up to 20 per cent of their operating costs stem from on-site diesel generation.
Displacing diesel with cleaner alternative energy makes sense, in large part, because diesel is very costly. So the business case for displacement is better than with lower-cost fuels, and as well there are substantial greenhouse gas emission reductions.
On page 5 of my presentation — energy, security and isolated grids — each of our communities is an isolated grid on its own. If a prolonged winter outage would occur, then we would face extensive damages due to freezing. So from a risk management basis, any alternative energy source that we introduce into the mix still has to be backed up by our diesel infrastructure. Anyone following the northern news would have seen a power outage in Cambridge Bay last week. Our largest diesel generator went off-line, causing rotating blackouts until a crew could be flown in from another community. Of course, getting parts for this aging infrastructure is a constant challenge.
We're dealing with aging infrastructure, as I noted at the beginning of my presentation. Power plants with 40-year lives have a $15 million to $25 million replacement cost. Generator sets are more in the order of 10 years. If we can get them installed for $2 million, it's a good price these days. We're looking at roughly $1,000 per kilowatt to purchase a generator and another $1,000 per kilowatt for installation. As well, we're facing aging distribution lines, transformers and switchgear. Just to maintain our periodic replacement of this base equipment, Qulliq Energy needs in the order of $35 million per year for capital planning.
Of course, as with other utilities, our upgrades are financed through debt and debt financing is serviced through our customer power rate charges. Any debt that Qulliq Energy incurs is included within the Government of Nunavut's debt cap. Whether we have borrowing ability in terms of financial stability, we still have the restriction of the Government of Nunavut debt cap that we need to work on with our Department of Finance.
The debt challenges are exacerbated by having a very small customer base. With a population of 36,000, we have a customer base of 14,000 people. A $400 million hydro development project represents just over $11,000 per capita — every man, woman and child — or $28,000 per ratepayer. Passing this debt on to our ratepayers just increases the already highest rates in Canada. Of course moving to lower-cost generation is very attractive; however, it's capital-intensive and we need assistance in order to get there.
Current estimates for hydro in Iqaluit are that we can generate 18 to 25 megawatts, which will meet Iqaluit's needs for the next 40 years and displace 15 million litres of diesel. We also have promising hydro sites in the Kivalliq region to service all of the larger regional communities of Baker Lake and Rankin Inlet. Again, we're talking hundreds of millions in investment.
The federal government has provided energy development funding to other jurisdictions. Without similar funding assurances by the federal government to Nunavut, Qulliq Energy really has no option at this point but to use its limited resources and target it to maintain its current diesel-generating abilities.
Alternative forms of energy: Qulliq Energy continues to explore photovoltaic, wind and tidal. Of course, the largest challenges with intermittent sources of energy are control, storage and integration into small grids. Technicians are few to begin with in Canada and would be even harder to make available unless we trained them ourselves.
Despite the challenge of high capital costs and the small client base, federal investment in our projects represents tremendous opportunity for Canada to become a world leader in export-ready, cold climate alternative energy. If we can operate and maintain wind farms at minus 40, tidal power in frozen bays, photovoltaic storage during 24-hour sunlight for use in 24-hour darkness, then these technological operations will work anywhere on the planet. On top of that, we will have developed not only the technology but also a skilled and valuable workforce.
In Qulliq Energy's context, peak demand is our driving force for determining our fixed generation capacity. Every generator at some point has to have an oil change or some other maintenance outage, which means that taking out our biggest generator from our lineup, the remaining generators have to be able to meet the demand. For us, reducing and levelling demand is paramount to allow us to avoid the costly upgrade of generators, displace diesel consumption and provide more reliable service to meet a growing capacity.
To this end, Qulliq Energy's board of directors has identified conservation as one of its strategic priorities to help abate demand. We are undertaking a number of projects, including supervisory control and data acquisition systems on our generator sets and automatic metering infrastructure. Smart metres are being implemented in Iqaluit over the next few months. As well, we're looking at LED lighting opportunities and photovoltaics, and we're working with the Canadian High Arctic Research Station on their energy agenda.
We've also been involved with the Hudson Bay Regional Roundtable Energy Options Working Group, which has been tasked with trying to prove the viability of extending the transmission grid from Manitoba into Nunavut. Again, this project is in the order of hundreds of millions of dollars. At this time we have municipal, territorial and provincial governments involved as well as industry, as Agnico-Eagle and Areva also at the table.
Investment and partnership are key. We're currently in discussions with Inuit development corporations who have expressed interest in partnering with Qulliq Energy for the provision of energy infrastructure. The biggest opportunities are hydro development and connecting to the Manitoba grid. These projects are on a nation-building scale that would enable Nunavut to be a net contributor of wealth to Canada. Nunavut has an enormous mining potential; however, it is clear that mine life and viability are linked to production costs, of which power represents a significant portion. Without more affordable power options in Nunavut, developers will pursue opportunities in other jurisdictions where their business is more profitable. With strategic federal investment in Nunavut energy, power rates can be better controlled and serve as an economic development enabler.
Mr. Chair, I would like to thank you and the committee members for this opportunity to appear before you and to address your questions.
William Mackay, Acting Deputy Minister, Intergovernmental Affairs, Government of Nunavut: Mr. Chair, I don't have any prepared remarks, but I'd like to say a few things off Mr. Barriault's last slide.
I'm with the Department of Intergovernmental Affairs. Intergovernmental relationships are a key part of our energy strategy. The Government of Nunavut welcomes this report. I've looked through the transcripts of the hearings that have been held by the committee, and I know that the committee recognizes that Nunavut is unique in respect of the three territories because all 26 communities are on diesel, so it's imperative that we find an alternative source of energy. As Mr. Barriault noted, hydro presents a great opportunity for the Government of Nunavut to get off diesel as it's the best source of renewable, reliable and clean energy for Nunavut.
Also as Mr. Barriault noted, the projects are expensive, but we feel they will pay for themselves over time. In that respect, I'd like to reiterate from our department’s point of view that a partnership with the federal government is imperative to the development of clean, reliable energy in Nunavut. I don't think we can make that point strongly enough.
We also have partnerships, as Mr. Barriault noted, with the Government of Manitoba and we're cooperating with Yukon and the Northwest Territories. As I mentioned at the opening of my remarks, Nunavut is unique in its situation and I think the committee, based on the transcripts I've read, recognizes that.
I don't have much more to add. Mr. Barriault is, of course, the expert on this, but I'd be happy to take any questions as well from the committee.
The Chair: Thank you very much. We'll go to questions now.
Senator Massicotte: Thank you, Mr. Barriault and Mr. Mackay, for being with us.
As you know, we've had quite a few presentations over the last months. What is the best opportunity to reduce the energy costs up North? Mr. Barriault, your responsibility is large. You predominantly deal with diesel, but you've been exposed to hydro, wind and solar. Everybody talks about what could occur, but is there any proven data or experience where people have invested in one of those? What is the solution? What is the most promising solution? Mr. Mackay just mentioned hydro. Is that the opportunity, at the least cost, or is it wind? Is it solar? Is it wood pellets? Is it ground heat?
Mr. Barriault: The biggest opportunity at this point is really that of hydro. Any of the other alternative energy sources would displace part of our diesel but would never replace it. Within the existing technology, we're not seeing anything that can immediately fully replace diesel. Hydro is very reliable. The challenges, of course, as we've seen in other jurisdictions, are low water levels at times. I believe in Northwest Territories this past week there were ice jams at one of the dams. However, it still provides the most reliable energy source as an alternative to diesel.
Senator Massicotte: Is it also the least expensive of all the four or five I named? With hydro, you have a distribution issue. You have a distribution challenge, and it will be quite costly, I presume, to carry that energy.
Mr. Barriault: At this point, definitely transmission is a large cost. If we look at Iqaluit as an example, we're talking a number of miles of transmission lines just from the dam site to the city itself. It's only going to serve the city of Iqaluit and no other part of Nunavut.
On the Kivalliq side, meanwhile, several rivers could potentially serve up to three communities, maybe more. Again, every time you add a community, you have quite a length of transmission line that you need to install, service and maintain.
It is a large upfront cost. As Mr. Mackay has noted, it will pay for itself over time. It is really a long-term investment that we're looking at, and it is capital-intensive, but it is still the most promising.
Senator Massicotte: It will pay for itself. In other words, if somebody said to you, “I'm going to give you a loan and you pay it back in the next 30 years,” you would take that money and you would build hydro?
Mr. Barriault: I haven't seen the calculations. We know the generation costs are much less than what we're currently paying. Again, we'd have to look at interest rates and costs of money. It will pay for itself over time because these projects usually have a 100-plus life, but how long will it take to pay it back? What kind of cost can we look at in terms of building these hydro dams? We've seen some costing coming from Canadian companies, but we've also seen much better costing numbers coming from Iceland and Denmark, for example. We need to explore a bit more what the opportunities are to build hydro on a more cost-effective basis as well, and that will bring the payback period much lower.
Senator Black: Thank you both for being here. This is obviously very interesting but complicated.
I want to focus on hydro. We are where we are now. We can accept that it's not ideal. I want to try to come to an understanding whether or not there's any realistic possibility for hydro. I have a couple of specific questions.
We're going to forget money for the purposes of this discussion. Is there any realistic possibility of a tie-in for hydroelectricity from northern Quebec or Labrador or Iceland? Rather than generating your own, can you buy it from somebody else?
Mr. Barriault: That's a question I've asked myself. I've been President/ CEO now of Qulliq Energy since October 14. It is a question that is being explored. I'm aware that there were links quite a number of decades ago that were tried by the military. With undersea links, of course, ice scouring is always a challenge. We're seeing now proposals being put on the table, and likely advancing, to put down undersea cables for the provision of Internet services, so why not run an extension cord, effectively, from Muskrat Falls?
Senator Black: If we can land on a comet, we can somehow figure out undersea cables; do you agree?
Mr. Barriault: I agree.
Senator Black: Let's get a little more specific. If this were an option, what is closer to you? Is the best source Labrador, is it northern Quebec, or is it Iceland or Greenland? What's best?
Mr. Barriault: Again, it depends which communities you're trying to service.
Senator Black: I want to service Nunavut.
Mr. Barriault: All of Nunavut?
Senator Black: Yes.
Mr. Barriault: We're still talking very long transmission lines from community to community, with large orders of magnitude in terms of those costs and the maintenance.
Senator Black: We just want to service the capital. Let's forget about the outlying regions for now. Where would you bring it from?
Mr. Barriault: Where would I bring it from? One possibility at this point with the Chidliak mine making progress with Peregrine Diamonds is to go across the peninsula from Iqaluit towards Northumberland Sound and then go across to Greenland. That could be one option. Other than that, you're going down Frobisher Bay through the Hudson Strait into Ungava Bay to get to Kuujjuaq. We'd have to look at some of the various challenges.
Senator Black: I would agree that's the shortest flight. This is something we should look at, then. Is this something you would encourage us to look at, or is this just a dream?
Mr. Barriault: No, I think it's something worth looking at. There are large amounts of low-cost hydro available through Hydro Quebec and now through Nalcor. These are options that are on the table.
Senator Black: Insofar as you can disclose, you're not in any form of discussions at this moment in time? This is just a thought?
Mr. Barriault: It's only a thought at this point, but I have mentioned it to some of my counterparts in other energy areas.
Senator Black: As my last question, I want to pick up on something that my friend and colleague Senator Massicotte raised. Let's presume that this is possible. Obviously, there's a big financial ticket associated with it. Let's pretend that the Government of Canada elects to support that initiative. Do you believe that, in a period of time, that loan from the Government of Canada could be repaid, or at least the interest on it repaid? Is there any economic possibility that the Government of Canada could see some repayment?
Mr. Barriault: That's a discussion I would have to have with my GN finance colleagues before I could answer that question properly. I know for Nunavut that servicing is a challenge, as members are aware. Nunavut's debt ceiling was raised from $200 million to $400 million just a few years ago. Any large project, such as an airport development, cuts into that quite substantially and leaves very little room to entertain other projects. Discussions around debt cap and limitations would need to take place with Treasury Board.
Senator Black: That's helpful. Thank you.
Senator Seidman: I'd like to pursue this discussion that you're having with Senator Black. You did mention Iceland and Denmark in your presentation, and I can think of Finland and Greenland and other Arctic countries. It seems to me, as Senator Black said, that if we can land on a comet in this day and age, we should be able to somehow figure out a way to have reliable, sustainable energy in the North. Are there international models? Are these other countries managing to deal with these issues? There may be differences in population spread and population density. Overall, do these other Arctic countries have models that work for sustainable energy in their countries, and are we engaging with those countries through the Arctic Council? I see here that we're in discussion with CHARS and with the various government levels and things within Nunavut, but surely we need to go beyond that. Is everybody in their silos and no one is talking to each other?
Mr. Barriault: I am aware that in the past, Qulliq Energy officials have met and visited other Nordic countries to look at their energy systems. I apologize, but I'm not fully up to speed on everything Qulliq Energy has done in the past, but I am aware that we do have contacts and at least, at this point, informal partnerships with other countries. We will be pursuing those discussions. We do want to learn from other people's experience, and if others have found means of resolving the problems that we're facing, then it's in our best interest, of course, to inform ourselves of that.
Senator Seidman: I wouldn't mind hearing from Mr. Mackay on that.
Mr. Mackay: To add to what Mr. Barriault said, Canada is a member of the Arctic Council, and Nunavut participates as part of that Canadian delegation quite closely. The Arctic Council — one the priorities for this chairmanship and hopefully continuing in U.S. chairmanship is the black carbon task force. It is aimed at reducing methane black carbon within the Arctic. This is a problem. Dirty energy, so to speak, is a problem across the Arctic. There are isolated communities in the circumpolar world, not just in Nunavut or in Canada. There is a lot of cooperation in terms of information sharing and best practices. So that is a good forum for Nunavut to learn about ways that we can reduce our reliance on diesel and we've been taking advantage of that. I just thought I'd add that point because you did mention the Arctic Council.
Senator Seidman: Thank you for adding that.
I would like to pursue QEC-installed wind monitoring equipment. Hydro, of course, is the most reliable, and being a Quebecer myself, I understand that only too well. Quebec made a lot of very smart decisions some years ago, and we're now fortunate to be reaping the rewards of those decisions. But, those decisions were not easy decisions. It took enormous courage to make these decisions and invest the kind of monies that needed to be invested in that kind of futuristic thinking.
One shouldn't imagine that now that we reap those rewards, it was easy back then. It wasn't. I'm saying that inspiration and courage to carry through in being creative, inventive and futuristic doesn't come easy. It's really important, and in the future we do all share the rewards.
I'd like to go to wind as a sustainable energy source, and surely not one that you can count on, in the same way that you can with hydro. But, I know QEC installed wind monitoring equipment in Cape Dorset, and I want to know if you have any preliminary results as to the feasibility of a wind-hydrogen-diesel generation plant.
Mr. Barriault: Data has been harvested in Cape Dorset, and there have been several other wind projects over the years that the Government of Nunavut and Qulliq Energy have been involved in.
We're very much aware that there's a lot of potential within wind, but the biggest challenge, as you've noted, is storage. So if we look at hydrogen storage, we haven't, to my knowledge, performed any feasibility studies at this point. The data that has been collected hasn't been analyzed to that level of detail yet.
Qulliq Energy has been a member in the past and still remain part of the North Atlantic Hydrogen Association, NAHA. That's principally what they look at — generation — whether it's through PV or through wind, and then from there the conversion to hydrogen for storage of energy.
Again, we'd have to look at all the steps involved in generating the hydrogen and the storage of the hydrogen, but also then generating energy from hydrogen and what the infrastructure requirements are on that. So there's still some work to be done on that end of it.
The only thing we are fully aware of is that we have all the wind we need.
Senator Seidman: So that has some promise, if you can try to figure out the storage issues. Are there financing issues and challenges? Are you looking at financing alternatives to help with up-front capital costs?
Mr. Barriault: Well, many of the larger scale alternative energy schemes do involve a sizable up-front capital investment. I know Diavik mines did install their generators. They're saying they were looking somewhere in the area of eight years, I believe, as a pay-back period.
How much of their diesel are they displacing? I don't have the full numbers on that. Again, if we're looking at displacement rather than replacement, then they're getting power when the wind is blowing and maybe they're not getting power when it's not. Those are all part of the challenges we need to look at. If we need a sizable up-front capital investment to pursue or investigate these energy sources, that takes away from our limited resources that we need for end-of-life equipment that we're now facing.
Senator Ringuette: This is very interesting. Did I understand correctly that in regard to all the northern territories, there is not one specific working group looking at the energy requirement and that it's different groups working a little bit in isolation?
Mr. Barriault: Well, the territories, I believe, all have representation through the Arctic Council, which is more circumpolar in nature. I have made contact with my counterparts at Yukon Energy and Northwest Territories Power Corporation. We are looking at meeting in the new year and to discuss some of these issues and common challenges. We also recognize that we have very different circumstances, but we do have some similar challenges as well.
Mr. Mackay: To add to that, as Mr. Barriault noted, the Arctic Council is an important forum, but we also are participants in the Council of Federation, which has an energy strategy that it's developing and Nunavut is closely involved in that. One of the issues that that energy strategy is attempting to deal with is off-grid communities that rely on diesel. That is not just a challenge for Nunavut, but for Manitoba and the other two territories. So it's a common problem, although probably most acute in Nunavut, but we do work with other provinces and territories to try to address that.
More recently, the three premiers met and issued a release saying they were committed to working together to try and address their common energy problems.
I just wanted to add to that in terms of intergovernmental forums that we work in. Energy is always a key issue in those intergovernmental talks.
Mr. Barriault might even be ready to say this, but we do have a formal MOU with Manitoba. There is a steering committee that meets twice a year, and one of their main topics of discussion is energy. So there is quite a bit of cooperation.
Senator Ringuette: Mr. Barriault, you have something to add?
Mr. Barriault: Further to this Nunavut-Manitoba MOU, which is part of what is driving the Hudson Bay Roundtable discussions as well, Qulliq Energy is also a member of the Canadian Off Grid Utilities Association. Besides northern challenges for off-grid utilities, we work with all other Canadian jurisdictions that have similar isolated grids. We share best practices.
Senator Ringuette: Building a hydro power plant when there is an issue of uncertain water levels is kind of iffy, in my perspective. We have a federal program for public-private partnership that could be useful. Would you say that in order to increase the data and analyses for all northern territories it would be useful or maybe even required to have a consulting firm to analyze all the options to be able to determine the optimal combination for the region? It could be a combination of geothermal for heating residential and commercial buildings, in recognition of the challenge you face in respect of the life of your current system.
From my perspective, this is becoming a time constraint situation where analyses and options need to be put on the table to make a decision. After a decision is made, the construction will have to be done, so you're looking at maybe five years.
I understand the steps being taken, but maybe a more global giant step needs to be taken to meet a certain timeline required by the system you have in place.
Mr. Barriault: We have quite a bit of data already. We have been stream gauging in some of the potential sites around Iqaluit for the last five to eight years. We have a fair confidence in terms of some of the flows available for hydro developments.
When you look out of a plane sometimes, you see a relatively small-looking lake that is feeding a river system. It can be a bit deceiving because a very vast land feeds into that flow. We get our share of snow every year and our spring run-off, so we have a fairly reliable source from the data we've been able to put together.
In terms of analyzing some of the various options, there is always more to come to the table. We've had proposals through Manitoba, for example, to bring LNG by rail to the Port of Churchill and ship it to various Kivalliq communities. Of course, we need the infrastructure and the storage capacity to deal with it.
Senator Ringuette: We're looking at the entire northern region. Definitely there is a need for analyses of all options with the data that you have. There's no doubt about that. However, there seems to be a time constraint. In order to meet that time constraint in respect of your current and future demands for energy, there needs to be a bigger picture. Perhaps a consultant could be hired by the federal government to analyze all the demands and look at all the options to determine the possibilities and the costs for the whole region to make a decision to move forward.
With regard to available financing, the new project in Labrador has a federal government loan guarantee. They're not providing the loan but they're guaranteeing the loan, so that carries a lower interest rate. There are many options, but because of the time constraint on your current system, there's an urgent need for an overarching body to say, “Take all of this and move forward.” That's my opinion.
Mr. Barriault: It would be helpful to have a broad-scoping project to look at these various alternatives such as, as we've heard today, providing power from Greenland and from Ungava Bay. There are various options that we have not fully analyzed or costed out. If this could be led through a broader nationwide or northern energy strategy approach, it would be of great interest and assistance to Nunavut's needs.
Senator Patterson: I thank the witnesses and am grateful that our committee is studying these problems, which are very sharp in Nunavut — energy challenges. I'd like to talk about hydro. I'm going to describe the issue as I see it and you can correct me.
Iqaluit has been identified as a hydro priority. It uses one third of the diesel burned in Nunavut and has one quarter of the population. You've talked about this potential and the need for federal help. However, in the last two years, significant money has been invested in two new gensets and a building to house them. I would like to know what was put in, what was budgeted and what it ended up costing. I know this was done before your time, Mr. Barriault, but it would be useful to the committee to understand how much some costs have gone into continuing the diesel project in Iqaluit.
Mr. Barriault: The situation Iqaluit faced with its diesel generation was the aging infrastructure. From the time that Iqaluit was chosen as the capital of the new territory, the population has grown in leaps and bounds and so has the demand for energy. Demand and the pattern of growth within the city itself created large challenges in terms of maintaining capacity and the distribution network. Trying to maintain steady voltage levels required Qulliq Energy to do a full replacement of its distribution system within the city, and there were large costs associated with that. With old and failing Caterpillar engines, the decision was made years back to put in two new Wärtsilä 5-megawatt gensets. The total cost of the project, off the top of my head, was in the order of $25 million, but I would have to verify that number.
Senator Patterson: Please do.
Mr. Barriault: I can provide that information to the committee. There definitely were challenges in the procurement methods.
Also, as you're doing upgrades to an old plant, it's like renovating a house: When you open up a wall, you find surprises sometimes — something you might not have anticipated. Some things probably should have been anticipated but other things are hard to anticipate. As you're installing new engines and trying to connect them to old switching gear and transformers, you have to modify and make changes as you go along.
How much of that added to the cost, I can't really tell you at this point, but these are typical challenges you would have with any kind of an upgrade. Whenever we do a genset replacement in any community, we have to look at all of the other plant equipment to make sure that everything will be compatible. It has been a driving cost, and it has been extensive. Whether we proceeded with hydro or not, it was an upgrade to the infrastructure that just couldn't wait.
Senator Patterson: The corporation has worked on a hydro option for Iqaluit and identified a site. A preliminary environmental review was begun, and there was significant public concern expressed about the proximity of the chosen site to a territorial park, to the transportation corridor, to Kimmirut and to a fishery. As I understand it, the feasibility studies that were begun have stopped. There's been no further money spent on completing those studies, as you note in your presentation. I'm not aware of any formal approaches to the federal government with respect to completing the feasibility studies or to enlarging the debt cap for the financing of such a project.
I know you're dealing with crises. You mentioned the one in Cambridge Bay last week. Keeping the lights on is undoubtedly a big part of your job. Maybe it's hard to sleep some nights, I don't know, but I can imagine it is a challenge.
What is the priority being placed by the Government of Nunavut and the Qulliq Energy Corporation on hydro in light of these setbacks? The feasibility study stopped. There was a public outcry over the chosen site, and there were no formal approaches to the federal government to make further progress. Where is it at?
Mr. Barriault: At this stage, it is a matter that we are aware that we will need hundreds of millions to proceed. We could spend more money to determine exactly how many hundreds of millions, but at some point we need to identify a source for those hundreds of millions.
Our next step in advancing hydro in Iqaluit is roughly a $6 million endeavour to continue with the studies and moving to a feasibility stage. Our current minister, in his discussions with this committee as part of the tour, spoke quite clearly, I believe, to focusing limited resources at this stage to keeping the lights on and maintaining our current generation capacity rather than investing into hydro until some feasible manner of moving forward can be determined.
Moving to discussions on a debt cap has to be preceded by discussions within the Government in Nunavut in terms of how those debts can be serviced at that point. Whether we can access debt or not, we still have to service it as some point. Partnerships and investments are one possible route in doing that. As I noted earlier, we have been in discussions with some of the development corporations. We have a presentation coming to us from Qikiqtarjuaq Development Corporation in two weeks' time.
We are still exploring various avenues. It is a project that we would very much like to see brought forward. It has huge potential to reduce our power rates and provide us with a long-term, reliable means of generation.
Diesel infrastructure has to be replaced on a regular basis. As a corporation, we're very good at keeping the lights on and keeping these old engines running and replacing them, and we know how to do that, but we also recognize that it's money after money after money because these gensets wear out and the plants wear out. Longer term infrastructure, such as hydro, once it's built, the maintenance costs are much lower, of course, and then your generation costs make everything affordable.
The Chair: I'm going to have to move on. I still have three questioners, so I'm going to ask if we can tighten the questions and answers, because we are running short of time.
[Translation]
Senator Boisvenu: Mr. Barriault, Mr. Mackay, good morning. I would like to hear what you think about the option of developing many small nuclear power plants in the North. The documents suggest that this is a technology that is developing quickly. For example I could mention Toshiba and EDF in France. There is a lot of research being done, and they say that this technology could now be usable.
These types of infrastructures do not require much in the way of action guidelines, compared to a hydroelectric plant, both in terms of distribution costs and operating costs. Have you done any studies on this subject? Might this be a useful option for certain villages with higher populations? Energy development and energy availability go hand in hand with economic development. It is like the chicken and the egg. If you do not have energy available, development will not occur; if you have development without energy, it will not work. Could nuclear energy perhaps be a good source of quick revenue that could be developed?
Mr. Barriault: We are only just starting to look into the nuclear sector. From what I have been told, licences are more expensive in Canada than in other countries. The technology is evolving rapidly. Micronuclear technologies and other technologies are available on the market. Studies continue to be carried out on that subject. There is potential. The reactors are small, but they need to be placed deep underground.
Senator Boisvenu: They need to be put underground.
Mr. Barriault: They need to be placed 150 feet below ground, and because of permafrost, this presents a big challenge. According to our board of directors, we are going to continue studying all forms of energy, including nuclear energy.
Senator Boisvenu: You said that licences are expensive to obtain if you want to operate a nuclear facility?
Mr. Barriault: Yes. According to our information, it costs more than $20 million per year for each nuclear site. I can check and get the exact figure by the end of the meeting.
Senator Boisvenu: Are these licences granted by the federal government?
Mr. Barriault: Yes.
Senator Boisvenu: Could there not be a partnership between the federal government and communities so that they could agree on a particular fee policy?
Mr. Barriault: That would be possible. There are also technical requirements that we need to respect. For example, if development is being carried out on an isolated site, that could pose additional challenges.
[English]
Senator Wallace: Mr. Barriault, are the power costs paid by commercial, industrial and residential customers in Nunavut subsidized by the Nunavut government?
Mr. Barriault: Yes.
Senator Wallace: And how heavily would that be? What percentage of the total rate would be subsidized?
Mr. Barriault: The subsidies on residential, for example, are based around the Iqaluit rates. Effectively, Qulliq Energy will provide power at a lower rate than the actual production costs. The exact amount —
Senator Wallace: I don't need the exact amount. Just in terms of percentage, are the customer costs subsidized by 50 per cent of what they would otherwise be if they weren't subsidized? I would like a percentage just to get a sense of it.
Mr. Barriault: In some communities it is much higher than 50 per cent. Again, it’s based on a comparative from community to community in terms of generation costs. The intention is to try to level the playing field somewhat in terms of energy costs.
Senator Wallace: It would be fair to say that the degree of subsidization by the Nunavut government is considerable, and it's for the benefit, obviously, of the customers.
Mr. Barriault: That it is.
Senator Wallace: Has any type of financial model been developed by your corporation that would show that if there were a significant conversion to hydro power from diesel-generated power, that that would reduce the extent of subsidization required, or would it increase it because of the increased capital cost of hydro plants?
Mr. Barriault: Taking capital cost out of the equation, we're looking at generation costs in the order of 13 cents a kilowatt hour versus anywhere from 50 cents to over a dollar, so the savings are definitely there on the generation side. But if you have to carry the debt financing cost within the rate structure, it could well result in a power rate increase, depending what the equation is.
Senator Wallace: Right. So if all of the capital costs of converting to hydro could be eliminated and paid by someone else, then it makes sense.
Mr. Barriault: Definitely.
Senator Wallace: If the capital cost isn't covered by someone else, it may not; is that fair to say?
Mr. Barriault: There would be a break-even point, definitely.
Senator Sibbeston: You have limited Nunavut debt cap, and obviously you look to the federal government to provide the investment needed to do something substantial, apart from what exists at the moment. Do you see any event or reason that the federal government in the next few years would respond to you in a positive way and provide the funding? I know that increasingly the North gets the attention of the South. You have a Minister of the Environment at the moment in the federal government ideally situated to help you out. The Prime Minister goes north once a year, in the summer, and there are plans for armed forces bases and just generally the North warming up and the Northern Passage becoming more significant. What would prompt the federal government at this stage to respond and provide the funding?
Mr. Barriault: From an energy perspective, as I think several committee members have noted this morning, and myself as well in my presentation, affordable energy is an economic development enabler. There are many unrealized opportunities just waiting for their business cases to make sense.
Looking at Kivalliq as an example, whether we look at a transmission line or hydro development of some sort, making energy more affordable will likely open up many of the identified mineral deposits that exist. Agnico-Eagle has stated already their mine life projections for the Meliadine project could easily double if power rates were made more affordable. If they're looking at 20 per cent of their overall operating costs being on diesel generation, and if they could eliminate a large portion of that, then their viability and the life of their projects is that much longer, which means more dollars coming into the economy. Suddenly Nunavut becomes not just a receiver of transfer payments but at some point ideally we'd like to see Nunavut being a contributor of net wealth to Canada. That's really the driving force behind this.
Senator Patterson: I have one quick question on subsidies. Your annual report gives information about the Territorial Power Support Program and Public Housing Power Support Program. Are there subsidies also provided to commercial customers and, if so, could you provide that data to the committee, please?
Mr. Barriault: Yes, we can undertake to provide that information to the committee.
Senator Massicotte: Mr. Barriault, I'd just like to make a comment. I'm not the government and I can't speak on behalf of the government. One has to make the observation that for 20 or 30 years we have had high energy prices, yet no one knows for sure what to do. I highly recommend that if you want to be successful with the federal government, and I think that's what you're proposing, you have to put the research together. I think you have the raw data. You say, “Here's the plan, here's what's going to work and here's what we need.” Be very specific, with hard data. We're still speculating about this could work, this could not work, we could maybe repay it, and we could not repay. As you well know, it's hard to respond to that. I highly encourage you. You're new in the job, but if you have hard data with a good dossier and say, “Here's the best energy source, and here's what is in the best interests of my population,” I suspect you'd increase your chances of getting support from the federal government then.
Mr. Barriault: Thank you. I know proposals have been brought forward or approaches have been made to the federal government through the Government of Nunavut as part of the Government of Nunavut's overall priorities for funding of projects. These submissions without a doubt have to be comprehensive, and they have to prove the business case effectively, and we recognize that. As part of this discussion today, I know we're highlighting some of the various issues and challenges being met. Without a doubt, and as part of our normal business, anything we would bring forward would be meticulously researched and substantiated.
The Chair: I have a couple of quick questions following along from Senator Massicotte, and I appreciate your response in that you are new on the job.
When I look at a couple of things, with the Nunavut electricity plant life expectations that your company provided, Iqaluit has 40 years remaining on the life of its generation. I assume that's the two new plants that were just put in. There are 14 communities that are at zero. Do you find it to be a bit alarming that you have 14 in that category, or is there something I'm missing in this chart? If in fact you have 14 communities — I believe it's 14 — that are at zero life expectancy for their generation, have studies been done that show either what it costs to continue with diesel or maybe some other form, not just something that might work but something that would work? Do you have anything like that that's provided to the federal government so that there is some plan of how you're going to actually keep the lights on in those communities? Maybe zero life expectancy isn't a big deal. I'm not sure.
Mr. Barriault: Zero life expectancy is a big deal, but it also means that we are spending our capital dollars in replacing components and making upgrades and trying to extend that life by five-year and ten-year increments as much as possible. Some buildings are built on shifting permafrost and are causing structural issues. We continue to keep generators running and try to maintain the integrity of the plant as much as possible, but there are some definite challenges that can only be fixed by full plant replacement. At some point we have to replace them. We will continue our efforts to keep them running because we have to. It's as simple as that.
Because of the large distances between each community, for a solution to get off of diesel, we don't need one solution; we need 25 solutions, generally speaking. There's some opportunity for a few communities to be linked together, but all in all we're looking on a case-by-case, isolated basis. That's really the off-grid challenge that other jurisdictions face as well, but not with the vast geographic challenges that we have in there as well.
What is the solution for getting off diesel? In many cases there's no clear solution. In the case of Iqaluit, I believe there is, for Kivalliq, I believe there is; and we may have some others in the works. Hydro-Québec, as I read in a recent newspaper article, appears to have decided to keep supporting their diesel infrastructure in the Nunavik area for the next little while until they can find the cases and the ways to get off diesel.
Diesel can be reliable, but it has a limited lifespan, pollutes and has a high cost. If you have an isolated, off-grid location where you want to build a mine or otherwise, the quick and easy solution always is to put diesel generation on site. It is a reliable way to provide power, but it has imitations and challenges.
The Chair: I'm quite well aware of that. When people talk about tying all these communities in via transmission lines, I think about the permafrost, the shield and the weather to deal with, which other places don’t have. Then you have to be able to service those lines if something happens. I'm familiar enough with electricity to know that.
I'll go back to the question on the 14 communities: Has a plan been presented to the Government of Nunavut that they have applied to the federal government or other for money to replace those? Is that in the works, or can you provide any of that to us?
Mr. Barriault: We can undertake to provide to the committee what has been submitted in terms of energy plans. I'm not sure if my colleague can expand in terms of what he may be familiar with that has been submitted to the federal government in the past.
I am aware that through Finance Canada, typically on a yearly basis, the Government of Nunavut will make representations on its priorities for inclusion in the federal budget. Energy has been one of the top priorities of this government for quite a number of years, so presentations and undertakings have been made.
The Chair: I would think so. What I'm looking for, or would like to see, is the overall plan to provide electricity. I've said to my colleagues a number of times that diesel, at the end of the day, could be the only option for many of those places. Maybe there are other options, but what I've heard to date, it's a case of “If you just give me some more money, I'll try to see if it works.” Maybe that isn't the way to go.
I see you're putting in smart meters, you say, in Iqaluit. What did it cost you for smart meters in Iqaluit? What was the driving force?
Mr. Barriault: In part, putting smart meters in Iqaluit came with some financial assistance through the federal government. I believe the Canadian Northern Economic Development Agency, CanNor, provided some funding, if I'm not mistaken. It was also a matter of trying to better control our demand and our load monitoring. We have new engines in place in Iqaluit, and we've had a recent upgrade to our distribution lines. Of course, we have a cost of reading metres. Using smart meters and doing data acquisition using our distribution lines will give us real-time data in terms of outages, troubleshooting problems and better identifying our energy challenges. It makes sense in terms of monitoring and controlling our demand better and reducing our costs of generation. Business cases have been put forward to show where our savings are, and we have those available. As well, part of the viability of the project was getting outside funding for part of it.
The Chair: I'm quite familiar with the smart meter processes. I was wondering about the driving force because it's just a small distribution area of one community, Iqaluit. It's usually interconnected with transmission, how you deliver transmission, how you keep your transmission lines loaded, and all those kinds of things in huge systems across, for instance, a whole province. I was interested in why it would actually make sense. Maybe you could provide us with a little backup information on that, if you would, please.
Mr. Barriault: Yes.
The Chair: Thank you very much, gentlemen. I appreciate your coming. Thank you for staying a little bit later. It was interesting. I know you have some challenges, but I'm sure you're well aware of those challenges and you'll do a good job of figuring out how to deal with those issues across such a huge area.
Senators, during this second portion of our meeting today, it's my pleasure to welcome Denis Tanguay, President and Chief Executive Officer of the Canadian GeoExchange Coalition.
Mr. Tanguay, thank you for being with us today. I believe you have a presentation to make and then we'll go to questions and answers.
Denis Tanguay, President and Chief Executive Officer, Canadian GeoExchange Coalition: Thank you, Mr. Chair and senators, for the opportunity to once again address this committee to talk about ground-source heat pumps, heat pumps and related technologies.
I'm going to make my presentation in French, but I'll be more than happy to entertain the discussion in either French or English afterwards for your questions.
[Translation]
The Canadian GeoExchange Coalition was founded in 2002. It was an initiative of the federal government and electricity distributors, and the goal was to transform the geothermic market in Canada.
This process has been underway for 12 years now. There has been a lot of progress in the industry since 2002, since our organization was founded. Essentially, we work with industry to train and grant accreditation to professionals. That has been the main goal of the coalition for several years.
We also collaborate with research organizations to promote research and development and geothermic technology in Canada.
I may come back to this later, but we recently organized the 11th International Energy Agency Heat Pump Conference, in Montreal, in May. One thing we noticed at that conference is that Canada is a world leader in geothermic research and development, particularly as it is applied to cold climates.
On slide 3, briefly, you can see the growth of the low temperature geothermal industry in Canada, from 1990 to today. I will not spend a lot of time on this, I just want to point out that you can clearly see that at the beginning of the 1990s, Ontario’s program to promote geothermic heat pumps had a significant impact. There was certain amount of growth in these industries in terms of new facilities established every year, and afterwards, there is another significant period of growth starting in the mid-2000s. That was due in large part to the federal government’s EcoENERGY program, but also to various programs implemented in different Canadian provinces.
Obviously, geothermal energy, like any energy, is affected by the relative prices of different forms of energy. So currently, this may not be a golden age for technology in certain regions of Canada. Everything is dependent on the price of energy. So the situation is completely different in each Canadian province. Given the fee structures that exist in the territories, we think that this technology could be implemented in an economic and effective way there.
Slide 4 is essentially just a different way of presenting the same information, strictly in terms of the total number of facilities that currently exist in Canada. It went from several hundred in the earlier 1990s to more than 120,000 facilities today. So, this technology is working, it has been proven, and it is making good progress in terms of penetration.
You have already seen slide 5 in a previous presentation. I simply wanted to draw a distinction between high temperature geothermal energy, which involves electricity production and which could potentially be developed on the west coast, notably in B.C., the Yukon and possibly in the Northwest Territories, and low temperature geothermal energy which uses the ground as a source of energy. You extract energy or the equivalent of kilowatt-hours or joules or whatever measurement you want, from the ground. This is done through mechanical means powered by electricity.
Essentially, when you talk about the systems’ performance rating as being three or four, that means that you use one unit of electricity to extract three or four heat units from the ground.
This technology is flexible and it is part of a whole range of possible energy solutions. I know that this committee has already studied the subject. Since last spring, you have heard from many different associations presenting their technologies. Where we are different is that our technology supplies energy rather than just managing demand. In our opinion this is extremely important, because first of all, we think about how we can provide energy to the North, and later we think about how we can help communities reduce their energy consumption or adapt their energy consumption in order to better manage energy supply in their area.
So this involves moving from the macro level towards the community level and looking at each of these communities which have specific and very different energy supply needs, whether it be in the Yukon or in Nunavut.
Another important factor in terms of heat storage, is that a heat pump is actually part of the system that stores heat in the ground. Okotoks is one example. Solar energy is gathered in the summer, stored in the ground, and extracted in the winter using heat pumps. This technology can also be implemented in certain northern areas. Our technology is very flexible.
On slide 7, I did not want to get into too much detail, and I made sure not to put a dollar sign on anything, because I knew that Senator Massicotte would corner me. I did not want to go down a slippery slope. So, I simply gave an example of a technology that could be implemented in the North, and that is the thermosiphon.
You may have heard about this technology involving solar panels. It is essentially the same principle. You can see a circuit in the vertical portion of the illustration; this is a closed circuit in which there is a coolant at a given pressure, which varies depending on the design and the location. The liquid evaporates, rises up through the system, gives off heat that was stored in the soil, and comes down again as a liquid. So there is a perpetual motion inside a tube; and as long as gravity continues to exist, it will continue to work.
The principle of this geothermic sub-technology, if it were to be implemented in buildings, is that it would pre-heat the air in certain buildings from -40 to -14, as in this example, and it would save a huge amount of energy in pre-heating the air.
One of the advantages is that it would improve air quality in buildings. Of course, in the North, buildings are very heavily insulated. But the fact remains that buildings need to breathe and air quality inside the buildings can become an issue. This technology allows us to solve that problem. The other advantage is that we can change the design temperature of -40 — the temperature in the three capitals and in Fairbanks, Alaska. This technology allows us to change the design temperature for heating systems from -40 to -15 degrees. For example, we can use the same design conditions as in Ottawa, Montreal or Toronto, in other words around -15 degrees for heating equipment. So we can lower the design temperature.
This is simple to install and simple to use. There is no mechanical work. Once installed, it continues to work simply because of gravity. The heat pump does move mechanically inside. Eventually, technology may be used to regenerate the permafrost around the building where it may melt. So by extracting heat from the ground, we could return to more favourable conditions. Obviously, technology may lead to a change in demand for electricity, and this can be done according to seasonal or daily peak periods, depending on the design. It can also be coupled with different sub-technologies.
Very briefly, I mentioned earlier that Canada is a world leader in low temperature geothermal energy. This is something that people do not always know because of the size of the industry. However, the International Energy Agency Conference which we organized in May, in Montreal, was a real eye-opener; there were 33 countries present, and the research presented by Canadian researchers was greatly praised. This has already led to student exchanges and research between Canada and other countries.
In my opinion, this research and development capacity needs to be maintained and encouraged, particularly when it comes to the subject of cold climates. For example, there is a federal laboratory in Varennes and one in Ottawa, as well as at different universities. For reasons that escape us, in the Montreal area, there is intense research into geothermal energy being conducted; at L’École Polytechnique, at ETS, and at Laval University, they are all doing geology research, as are several other universities across Canada.
What is currently lacking in the industry is a catalyst that would allow all of these people to work together more closely and to discuss the work that is being done, following the model of the research network on solar energy. It would be possible to do something similar with geothermal energy.
We have three recommendations concerning how this technology should be rolled out. We believe that the Government of Canada needs to strengthen its leadership by guaranteeing stable long-term funding to support research and development. This would apply to demonstrating and rolling out heat pumps for cold climates, as well as other related technologies.
In our opinion, it is clear that cold climate solutions, especially in the North, will not come from abroad. They will need to be developed in Canada and adapted to the climate. Progress has already been made, and we need to continue our research.
Assistance programs and targeted initiatives are essential for our teaching institutions and our research centres, if we want to transfer innovative technologies and adapt them. In my opinion, manufacturing capabilities will follow once we have managed to demonstrate clearly that there is a demand for these technologies in northern regions.
Finally, territorial governments, communities and service suppliers serving the energy industry in the North need support in terms of technology options. But I think this subject was sufficiently discussed in the previous presentation.
Knowledge transfer goes hand in hand with project demonstrations. We have heard a lot about demonstration projects for several years, each time that we want to market a new technology. We should not forget that there is an advantage in presenting these technologies in places where there is a demand, and training the local labour force to use and maintain these technologies over time.
Those are our three recommendations. I would now be happy to answer your questions.
[English]
The Chair: Thank you very much for your presentation. We'll go directly to questions.
[Translation]
Senator Massicotte: Thank you for your presentation, Mr. Tanguay. It was very interesting, and we are making progress. You described your technology as being very simple, both theoretically and mechanically. This has been implemented in many other areas in Canada. But how far have we really come with this technology?
It makes sense: your fees are structured and the temperature can get as low as minus 30 degrees. If Mr. Wallace wants to see a return on investment of 10 per cent, are you certain that you can offer him that? Is your company sufficiently developed that you have clients and precise statistics, and that you can go into the field to have that 10 per cent return?
Mr. Tanguay: I was expecting that you would ask a question about funding. Indeed, the technology has been proven. You are right. The business models have also been approved. There are different formulas that can be developed or adapted for geothermal energy. I would like to give you two examples.
First of all, the Government of Nunavut issued a call for proposals on October 31 concerning the management of demand in its buildings. There were around 69 buildings in 39 communities on the west coast of Hudson Bay. Essentially, the call for proposals was issued to green energy service companies.
The company will finance all of the work and will be paid back in energy savings. Geothermal energy is often part of this type of call for tenders. It could certainly be part of the range of solutions, like building technology.
In the case of this call for tenders, the challenge is to convince the Nunavut government. We are a little late because the call has already been published. The idea is to add a technological specification to it, encouraging energy-efficient companies to submit their proposal, and they would then refinance such work and make back the money thanks to the savings to be had. That is one of the models. There are companies that offer energy-efficient services.
The other model is the creation of an energy-efficient services company. In short, this would be a private company financed by capital from slow-growth pension funds. The pension fund would set up the systems and take ownership of them, and make its money back over 10, 15, 20 or 30 years. The important thing is to get a decent rate of return.
Senator Massicotte: Given that energy prices are so high in Nunavut, even with all the subsidies, why not simply do all that yourselves? You could draw up your service plan and find investors. If it is profitable, you should go for it.
Mr. Tanguay: I agree with you about the technology. But I would like to add a clarification. The problem right now with conventional geothermal is that the equipment is mainly devised for climates that require cooling, not so much heating. In the North, you will need equipment that heats. We have to demonstrate the technologies I spoke of earlier, those devoid of complex equipment. We will get rid of all the air conditioning components and concentrate solely on the heating.
In theory, someone could go tomorrow to finance the projects in the North the way people finance things in British Columbia, Montreal or Toronto. That is possible from a financial standpoint. But from a technical standpoint, the technology or the product might not be up to snuff. That is why more should be done to support research that will help demonstrate these new technologies built in Canada rather than abroad.
Senator Boisvenu: Thank you, Mr. Tanguay, for your very interesting presentation. My question is along the same lines as that put by Senator Massicotte. Was what you presented earlier practical or theoretical, as it applies to the North?
Mr. Tanguay: I think it is practical. I will give you an example. In the 1950s, they tested heat pumps on a military base in the North using sea water. I cannot tell you where it was. But it was put into practice in the 1950s. It has clearly been applied, and the theoretical aspect has more to do with adapting low temperature geothermal technology to the conditions prevalent in the North. That has never been tested in situ. That is what we need to do.
We need to show that the technology works well in northern climates, and that it is practical. It is one option among others for the North. It is a matter of building design and technology. We need to proceed on a case-by-case basis. It is not a matter of installing geothermal everywhere across the territory, because we know it works.
Senator Boisvenu: Do you have a demonstration centre? Is this in fact technology you wish to sell?
Mr. Tanguay: Yes.
Senator Boisvenu: If you wish to sell it, you have to show that it is profitable. Do you have such a demonstration centre in the North, in order for people to see for themselves that it is more economical than diesel? Is your presentation this morning of a theoretical or practical nature?
Mr. Tanguay: The specific type of technology presented this morning is theoretical. In practice, we know geothermal in general works. The idea in this case is to show how this technology tested in southern climates would work in northern conditions.
Senator Boisvenu: Will your industry set up a demonstration centre?
Mr. Tanguay: We are not talking about a large building here. It would be a small building in the North where we will install this technology. This will not be a $2-million demonstration centre. And that is actually a problem: there are programs that allow for large-scale, energy tech demonstrations, whether it be wind turbines or solar farms that cost millions. In our case, our project would cost $100,000 in specific northern conditions. It could be started as early as next year.
Senator Boisvenu: Do you intend to start it?
Mr. Tanguay: We are the association that represents the industry. There is a shift of late in the labs and research centres towards finding a potential client. We can indeed facilitate that, and we would love to do it.
[English]
Senator Patterson: Thank you, Mr. Tanguay.
As you know, the three northern territories and much of Northern Canada, which could include 40 per cent of Canada's land mass if you add in Labrador and northern Quebec, have significant challenges in meeting their energy needs. I'm wondering if you could tell us whether there are any existing federal programs or measures that assist earth energy systems in Canada.
Mr. Tanguay: At the present time, I'm not aware if there are any for low temperature ground-source heat pumps. There may be something at high temperature, but I'm not 100 per cent sure. I think the technology can sneak into existing programs to some extent, but there is nothing specific for earth energy as far as I know.
Senator Patterson: So I take it that the rapid growth that you've described in ground-source heat pumps has been funded by the private sector.
Mr. Tanguay: Yes and no. The system, if it costs $30,000, then there were subsidies available for residential applications, in the second part of the year 2000. That was providing a 10, 15 per cent subsidy to the customer, but the balance was paid for by the customers themselves.
As I mentioned, conditions are quite different right now because of relative energy prices, but in the North it would be quite interesting to see how the system operates under the rate conditions that exist in different communities.
Senator Patterson: I'd like to ask about a project that got great attention in the Northwest Territories. There was a proposal in 2011, generated by the City of Yellowknife, to develop a big geothermal district heating project that was going to use warm water in the abandoned gold mine under the city. It was a $49 million proposal that would have leveraged $14 million from the federal Clean Energy Fund Program. I'm wondering if your association was aware of the debate that occurred in Yellowknife and the unfortunate result that the taxpayers in the city rejected borrowing the money for that system. Can you comment on that?
Mr. Tanguay: I was not aware of the debate. That's the short answer, but I can comment on the technology. It is currently being used in Springhill, Nova Scotia, among others — mine water, basically. It is an extremely good example to show how heat pumps can be used to extract energy from the ground. That would have been, probably, a perfect model for a private initiative. I don't know how it would have been financed or if it was a public endeavour, or if it was a private thing that a private investor would be interested in, in order to supply heat to the City of Yellowknife. That would be technically feasible. There is no question about that. It's a question of financing.
It's unfortunate that it didn't go forward, but technically, it works well in many places in the world.
Senator Seidman: Thank you, Mr. Tanguay. I would like to ask you specifically about some comments you made regarding transfer of these technologies to the field. You talk about the leading research institutions and the universities in this country, who are all very much involved in R&D.
You say the industry needs a catalyst to transfer the technologies from the labs into the fields. You say:
Flexible and targeted assistance programs and initiatives are key to leverage the knowledge of our educational institutions and research centres and to move adapted and innovative technologies in to the fields.
Could explain what you're getting at a little more? Specifically what comes to mind is the recent ramp up in this country of the innovation fund, by this government, and a huge amount of money that is now going into doing exactly this — the recognition that we are very weak in this county in transferring knowledge to practical application in the field and an increased emphasis on applied research to do this. So I'd like to know how you are taking advantage of this kind of program and how you see it fitting into the future of geothermal.
Mr. Tanguay: If I recall, and my apologies if I'm wrong, but my first reaction when I looked at this program — and maybe we were victim of the fact that heat pumps are not considered to be an innovation — was that we could not qualify under the recent programs.
What I'm talking about is basically, five or six years ago, there was the creation of the Solar Buildings Research Network. I think with the NSERC funding, it was the catalyst that let the solar industry Canada emerge, as it did in the past year.
Geo sort of snuck into the solar building network because we were part of a building technology that could use solar assistance; and with thermal storage, we were there and sometimes we were not there. What I'm talking about is an NSERC program that would allow ground-source heat pumps and heat pumps in general to be considered as a stand-alone technology that needs to be sustained to help create linkages between universities, research centres and the private sector.
What happened for the solar industry is that the private sector followed what happened in the universities and the research centres, and they basically partnered with them. So I would love to see the same thing happen for heat pumps and ground-source heat pumps, and I'm sure the industry would follow if this model would be developed for heat pumps.
Senator Seidman: So you're saying that you're not eligible for their technology transfer funding programs. It's interesting because you mention NSERC. I'm looking at the Idea to Innovation Grants on NSERC's website and you're saying you don't qualify to be part of these programs. Is that what you're suggesting?
Mr. Tanguay: Well, high-temperature geo might. Low-temperature heat pumps, I doubt it. Again, I'm not a hundred per cent sure, but it seems to me when I checked, we were not in there, or we were not considered innovative enough, which is a bit unfortunate. I think right now we could demonstrate that there are so many innovations that could emerge out of the technologies that we may fit in there.
It's a question of the chicken or the egg. Do we fit or are we considered to be innovative enough to be part of this program?
Senator Seidman: Perhaps it's a question of developing an innovative project, using geothermal, that might end up qualifying for this kind of program.
Mr. Tanguay: I think the problem with heat pumps and ground-source heat pumps is that the scale of the projects is so small, because we're talking about the building and that it's difficult to fit into this multi-million dollar demonstration projects and they don't cost that much money.
It's a matter of small-scale demonstration projects that could be replicated to basically every building in the North or in the South. It doesn't matter. That's what we're looking at.
Senator Seidman: When you say the industry needs a catalyst to transfer the technologies from the labs into the field, what do you mean? What kind of catalyst are you looking for?
Mr. Tanguay: The answer is the research network, like the Solar Buildings Research Network.
Senator Seidman: That's helpful. Thank you very much.
Senator Wallace: As you point out, Mr. Tanguay, ground-source heat pumps have become very popular with residential properties in the southern part of the country. When you think about its potential use in the North, are you thinking that practically speaking, considering cost and all the other factors, it would have application to an individual residential basis, or is it probably more ideally suited for larger scale commercial and industrial buildings in the North?
Mr. Tanguay: For a variety of reasons, I would see the technology penetrate the markets or the communities through public buildings first. We're not talking about huge buildings. I think it's easier to manage the technology for public buildings and use the opportunity to demonstrate and showcase the technology, and to train people locally to work on the systems, maintain them and install them, and then you can consider transferring them to residential applications. It can be done at the same time, but I think it would be easier in terms of technology promotion, training and education purposes. That would fit quite well with public buildings.
Senator Wallace: Anything can happen. It's just a question of money. The technology could be used, as we see here, in the South for residential properties, but I was wondering. Realistically, when we're looking at the recommendations we will make when we finalize our report, could this be a realistic solution in the North for individual residential properties? I'm getting a sense that anything is possible, but that's probably not the most realistic use of this technology in the North.
Mr. Tanguay: I wouldn't say that. I have in mind a study that was done in Alaska. There were 60 residential systems installed in Fairbanks. When you look at the weather conditions in Fairbanks, Yellowknife, Iqaluit and all other communities in the North, they are quite similar. So, yes, the technology would work anywhere in the North.
It would be interesting to test adapted technologies for cold climate, an Arctic climate, so they are more efficient and maybe less complicated in terms of operation and mechanical work within the machines themselves. It is an option.
My dream is that when your report comes out, ground-source heat pumps will not be a footnote at the end of page 75 or something like that. It is always the case that we have difficulties promoting the technology as a mainstream option. Because it's a building technology, we're often forgotten when we talk about energy supply. It is energy supply, but at the building scale.
Senator Wallace: Are there any examples where heat pump technology has been successful in northern climates in countries other than Canada?
Mr. Tanguay: Finland, Sweden, Norway — Scandinavia basically.
Senator Wallace: It has been successful?
Mr. Tanguay: Yes.
Senator Wallace: Why is there a need for you to do a demonstration project if it's been proven elsewhere? Why wouldn't you just piggyback on their success?
Mr. Tanguay: I think one of the biggest differences between Sweden and Canada is the geology and the ground conditions. It's in the North, but for the design conditions, the weather is not minus 40, as I was talking about. Again, in Alaska, they have been working quite well. It is not a big deployment, but they've been deployed and monitored, and they work.
The rest is a question of finances. You look at electricity rates and energy prices. In some municipalities they made economic sense and in others they didn't make economic sense. It's a case-by-case basis, but there is a business case that exists for the North for sure.
The Chair: I have a quick question. Is there any place that you can point to where this process has been used where there is permafrost? There is some permafrost where I live, but permafrost is pretty touchy when you get up into the North, or even into solid rock, which is prevalent in many parts of the North. Is there any place in the world where this has been tried and true with permafrost and it doesn't cause a resulting problem from putting it in? I'm familiar with it in the southern part of the country. Lots of people put it in. I'm not saying it's not viable. In the North, we have to look at that, depending on which part of the North you are in.
Mr. Tanguay: I think you have a good point. Depending on which part of the North you are in, the conditions will be different. I don't know about the geology of Alaska, but with Fairbanks, I think the geological conditions are fairly similar with permafrost there as well, and we would have to go back there to see what they did.
It would be an issue if you have a community with 10,000 buildings and the houses are so close to one another and the geofields have to be installed close to the building. Then it could be a problem, I think. Other than that, when you look at the way the communities are designed, you can install the boreholes far enough from the building that it doesn't create any problem in terms of changing the ground conditions.
It could be a benefit as well. If you have a condition where permafrost is defrosting, you can design ground-source heat pumps to maintain the permafrost in the ground. It could go both ways.
The Chair: That is theory, then.
Mr. Tanguay: I'm not aware of any place where it has been done.
The Chair: My knowledge is that Fairbanks doesn't sit on permafrost.
Mr. Tanguay: So we would need to demonstrate that.
The Chair: You commented that it would be difficult to decouple the air conditioning part of it, because that's what happens mostly where I come from in B.C. In the Okanagan, there is a lot of this type of heat, and they use it for air conditioning also. Why would that be so difficult? I mean, you have systems. Where I live, people don't have air conditioning with it, but you said it was a difficult process.
Mr. Tanguay: I don't recall saying it was difficult. The current heat pumps on the market are reversible, so you can either heat or cool. There are some mechanical parts you would not need in the North. If you manufacture heat pumps without reversible valves, for example, you could probably have a product that is cheaper. If you remove mechanical parts and keep only what you need, it is a lot easier to maintain and manage, and you can also reduce the price of manufacturing those heat pumps.
The Chair: So it's a rather simple thing.
You said there was a subsidy at one point. Where was this subsidy?
Mr. Tanguay: For residential application?
The Chair: Yes.
Mr. Tanguay: It was the ecoENERGY Retrofit program for homes, and it was from 2008 to 2012. A whole bunch of provincial programs were also present at the same time.
The Chair: Thank you very much. I appreciate it.
(The committee adjourned.)