THE STANDING SENATE COMMITTEE ON ENERGY, THE ENVIRONMENT AND NATURAL RESOURCES
EVIDENCE
OTTAWA, Thursday, November 3, 2022
The Standing Senate Committee on Energy, the Environment and Natural Resources met with videoconference this day at 9:02 a.m. [ET], to study emerging issues related to the committee’s mandate.
Senator Paul J. Massicotte (Chair) in the chair.
[Translation]
The Chair: Good morning, everyone. My name is Paul Massicotte, I am a senator from Quebec, and I am the chair of the committee.
Today, we are conducting a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources.
I would like to begin with a reminder. Before asking and answering questions, I would like to ask members and witnesses in the room to please refrain from leaning in too close to the microphone or remove your earpiece when doing so. This will avoid any sound feedback that could negatively impact the committee staff in the room.
Now, I would like to introduce the members of the committee who are participating in this meeting: Margaret Dawn Anderson, Northwest Territories; David Arnot, Saskatchewan; Michèle Audette, Quebec; Pierre-Hugues Boisvenu, Quebec; Mary Jane McCallum, Manitoba; Julie Miville-Dechêne, Quebec; Karen Sorensen, Alberta; Josée Verner, P.C., Quebec.
I wish to welcome all of you, and the viewers across the country who may be watching.
Today, we are meeting to continue our study on hydrogen energy.
This morning, for our first panel, we welcome by video conference: Jeff Griffin, Vice-President, Science and Technology at Canadian Nuclear Laboratories.
Also, from Renewable Industries Canada, we have Andrea Kent, Board Member, Vice President Industry and Government Affairs at Greenfield Global, and Douglas Dias, Board Member, Vice President Sales and Market Development at Greenfield Global.
Welcome and thank you for being with us. You each have five minutes to deliver your opening remarks. We will begin with Mr. Griffin.
Mr. Griffin, you have five minutes.
[English]
Jeff Griffin, Vice-President, Science and Technology, Canadian Nuclear Laboratories: Thank you very much, and good morning. I appreciate the opportunity to be here.
I’d like to start by acknowledging that the Canadian Nuclear Laboratories, or CNL, operations across Canada occur on the unceded, traditional territories of Indigenous peoples. We recognize the unique history, spiritual beliefs, cultural practices and languages of Indigenous peoples and are firmly committed to being an active participant on Canada’s journey toward healing and reconciliation.
Canadian Nuclear Laboratories is a world leader in nuclear science and technology, offering unique capabilities and solutions across a wide range of industries. Actively involved with industry-driven research and development in nuclear, transportation, clean technology, energy, defence, security and life sciences, we provide solutions to support government and industry in keeping these sectors competitive nationally and internationally.
A key part of CNL’s science and technology mission includes our work with hydrogen, much of it performed in a modern, state-of-the-art hydrogen facility at our Chalk River campus. CNL’s hydrogen capabilities were born out of the critical importance of producing, managing and purifying heavy water, which requires separation of deuterium, an isotope of hydrogen that enables the safe operation of CANDU reactors and is chemically identical to hydrogen. Our capabilities were further improved by a need to understand hydrogen behaviour in order to ensure the safe operation of nuclear reactors.
More recently and looking to the future, CNL and others have invested in the role that hydrogen can play as part of the efforts in Canada and globally to develop and use clean or low-carbon intensity fuels to help achieve Canada’s 2050 net-zero goals. The role for hydrogen is well outlined in the Hydrogen Strategy for Canada that was released by Natural Resources Canada, NRCan, almost two years ago. While much of the hydrogen produced today is not what we would call clean hydrogen, Canada is well positioned to transition to such production from non-greenhouse gas emitting sources such as renewable energy sources and nuclear energy.
Nuclear energy is recognized as a competitive energy source to produce low-carbon hydrogen at a large scale given its industry-leading baseload reliability and high-capacity factors. The connection between existing and new nuclear installations and production pathways for hydrogen and other low carbon-intensity fuels such as synthetic fuel, green ammonia and methanol is a key research area for CNL. As a result, CNL formed a Hydrogen and Tritium Technology directorate to bring focus to the opportunities expected to support the decarbonization of industrial, transportation and power sectors and support Canada’s international commitments for carbon reduction. CNL’s hydrogen work also encompasses storage, transportation and utilization, all areas where CNL has expertise.
Specifically, CNL is actively doing work in the following areas: We are working to support Canada’s transportation sector in understanding how hydrogen and other clean fuels could support their fleets. We have undertaken feasibility studies in the rail and marine sectors, which will help inform the important decisions they must consider as they transition their fleets to meet carbon-reduction goals. We have worked with industry to assess opportunities for clean synthetic fuel production and use, combining green hydrogen with carbon captured from air. Potential uses include heavy industry and transportation segments.
There is much talk of small modular reactors, or SMRs, and CNL, as a nuclear laboratory, is heavily involved in supporting these new and emerging technologies. While SMRs are still in the early stages, CNL is looking at how these technologies, once in operation, could be leveraged to use their clean electricity and industrial heat to generate green hydrogen.
As the world looks for reliable, deployable and cost-effective approaches to meet net-zero emission targets, offering solutions to decarbonize the economy has become a national strategic priority. To truly advance this agenda given the magnitude of the challenge requires a multi-disciplinary, collaborative approach that brings together national laboratories, commercial industry and academia. CNL is well positioned to play a variety of roles by providing technical support to both federal and provincial governments in establishing strategic direction, developing technical solutions to key challenges and creating and operating demonstration platforms to support growth of new and clean industry by narrowing the gap between research and technology commercialization.
At the highest level and following its broad national and international mandate, CNL seeks to enable industry testing, evaluation and demonstration as well as support, as possible, the formation of commercial hubs where the market, energy supplier, technology developer and owner-operator intersect, creating favourable partnerships that can help advance technologies to deployment. An example that is already underway is CNL’s Clean Energy Development, Innovation, and Research Initiative, CEDIR. CEDIR is focused on advancing the science of hybrid energy systems allowing CNL and technology developers to demonstrate how clean technologies, including hydrogen technologies, can work together alongside other renewable energy sources. Right now, CNL is working with industry and government on projects to examine energy mixes for communities, geographical areas or industry in a technology-neutral way by minimizing system costs while also achieving performance requirements and greenhouse gas emissions reduction targets.
As I close, I would like to briefly address some of the questions posed by the committee that they hoped this study would help address. My responses come from a CNL perspective, that is, as a research institution and not a policy advocacy group.
First, with respect to the hydrogen energy opportunity for Canada, in the near term, Canada already has the ability to produce large amounts of hydrogen at competitive prices due in part to our access to inexpensive natural gas, but as we transition, in many jurisdictions, green hydrogen is another option for taking full advantage of Canada’s electricity grid with its strong renewable and nuclear components. For Canada’s diversity of energy assets and needs, hydrogen offers a powerful decarbonizing potential, most notably in the heavy industry sector.
Second, CNL believes hydrogen can help Canada achieve net zero greenhouse gas emissions by 2050, and we believe Canada’s hydrogen strategy from NRCan provides a solid framework toward that realization.
Third, the short-term challenge in establishing the hydrogen industry in Canada is the lack of a defined and growing market. A lot of industries are not willing to make investments or the transition due to lack of demand, which keeps supply low. In the medium term, if we switch to hydrogen fuels, it will be challenging to maintain a reliable and affordable supply chain that can scale up to the amounts that will truly help decarbonization.
You also asked what policy instruments would help industry grow. We believe a clear carbon policy with long enough timelines to support private sector investment, decision making, technology development and adoption will support industry growth.
Finally, in order for the hydrogen industry to develop sustainably in Canada, we believe it’s important to build, leverage and adapt infrastructure. It is likely that the government can help drive this in order to provide the confidence that is needed to attract the necessary private investments. To enable this, ongoing research and study are necessary to support adequate codes and standards to spur the technology adoption. This will be of great importance.
With this, I conclude and thank the committee for their time.
[Translation]
The Chair: Thank you very much. Ms. Kent, you have the floor.
[English]
Andrea Kent, Board Member, Vice President Industry and Government Affairs at Greenfield Global, Renewable Industries Canada: Thank you to the chair, deputy chair and committee members for having us here today to speak on behalf of Renewable Industries Canada.
[Translation]
Thanks again, Senator Massicotte, for the nice introduction.
[English]
Both my colleague Douglas Dias and I have been heavily involved in the development of federal and provincial policies and programs for renewable fuels over the last decade, and perhaps a little bit more. In the interests of time, we will include in our written comments a more thorough brief on the breadth of our association and the commercial bench strength that the members of RICanada encompass, but suffice to say we represent a business coalition of Canada’s foremost pioneers in low-carbon fuels and the low-carbon biofuels and clean technologies that are already widely used throughout Canada for liquid transportation decarbonization.
We currently produce low-carbon ethanol, biodiesel, renewable diesel, renewable natural gas and sustainable aviation fuel, and our businesses are all ready or are well positioned to become producers of biofuels that operate truly on a circular economy and that will truly be net zero on a life-cycle basis. Policy path for hydrogen and the scope and scale of the investments that are critical to Canada’s success and competitiveness is something that we have been working with government and partners at all levels for some time.
The committee’s study is especially well timed, in our view. I will offer a brief overview of a project that illustrates this and hits on the salient points both in the policy landscape and in the commercial energy market space. Douglas will answer questions on this project in more detail as well.
For the past three years, Greenfield has been developing a major hydrogen project to be located adjacent to our ethanol biorefinery in Varennes, Quebec. We have been working closely with partners on project design, technology selection and routing for the high-voltage power lines to the site, which will incorporate a 60-megawatt electrolyzer using PEM, or protein exchange membrane technology. Many hydrogen projects are challenged by the absence of a constant, rateable demand. We have overcome this problem by designing this project primarily as an e-methanol project, with methanol output targeted for marine fuelling through a hub strategy at the Port of Montreal. For our project, the carbon dioxide comes from ethanol fermentation. This is biogenic carbon dioxide, so the resultant methanol fuel is near net-zero carbon. Again, I am happy to answer any questions on this in more detail.
I’ll summarize some recommendations that we’ve brought to the committee in order to help inform this important study. First, climate policies are increasingly becoming investment policies and vice versa. This is especially true in the low-carbon fuel and energy market, including hydrogen. Today, Canada has a price on carbon and announced grants. However, the U.S. Inflation Reduction Act provides up to a $3 U.S. subsidy per kilogram low-carbon hydrogen produced and a 50% investment tax credit that can be used for investments in storage infrastructure. So far, Canada has no such incentive or credit of this nature. There’s also a clean technology investment tax credit that was announced in the last federal budget at 30%, but we’re waiting for more details on that. I think it’s important for the committee and the Government of Canada to consider how to better assess, adapt and compete, given these new and increasingly technology-competitive investment conditions. I’m sure the committee has heard that feedback already.
Second, programs that have been announced must be deployed, such as the Clean Fuels Fund. Speed is very important to the clean energy transition as early adopters gain an advantage in critical mass of investments that further attract capital, and these funds should also be recapitalized, given the rapid changes in the global energy market and the emphasis on energy security.
Last, while there is no one perfect solution to climate change, this does not mean we cannot effectively weigh our options. Life-cycle assessment of carbon emissions tells us we need more low-carbon hydrogen to meet our climate objectives and more renewable fuels in general, including ethanol, biomass-based diesel and sustainable aviation fuel. Canada should match hydrogen and other clean fuel investments offered in the U.S., IRA and leverage life-cycle assessments so we can make smart investments today and ensure we transition to ultra-low carbon in an economically viable way.
[Translation]
Thanks again for the invitation. We are now available to answer your questions.
The Chair: Thank you. We will begin the round of questions with Senator Miville-Dechêne.
Senator Miville-Dechêne: Thank you to our witnesses. My question is for Mr. Dias.
The Varennes project is of interest to me as a Quebec senator. However, I must admit that, in the rather short description, I didn’t see the connection with this project, which involves hydrogen and ethanol. Is it a hydrogen-related project? If so, how does it relate to hydrogen? If I understand correctly, there isn’t enough demand for you to sell all the hydrogen you produce. Could you explain how that works? What kind of potential does it have? Is it economically viable?
[English]
Douglas Dias, Board Member, Vice President Sales and Market Development at Greenfield Global, Renewable Industries Canada: Thanks for the question.
The project is a green hydrogen project, taking the power under tariff from Hydro-Québec, which is clean and renewable power, and using a well-known commercial electrolyzer technology to produce green hydrogen. Green hydrogen, therefore, is the main product of that process. If there were sufficient demand for green hydrogen in the early days, the project would end there. However, what we’ve discovered is that there is insufficient demand for this volume of green hydrogen in the early days while the energy transition is nascent, what we call the chicken and egg phenomenon, so the number of engines and pipelines that can take hydrogen, directly require further investment on the demand side.
What we’ve done with our project is to introduce a second unit operation to make a derivative of hydrogen, which is synthetic fuel. It’s e-methanol. It is, in fact, a way of delivering hydrogen using existing supply chains. The main issue with stopping at the first step in the early days of the energy transition is that the supply chain is immature. The method for transporting hydrogen to the consumption points is very challenging. By doing a second-unit operation converting gaseous hydrogen to liquid e-methanol, we can use existing supply chains like tanker trucks, ships and existing engines to consume the hydrogen in methanol form.
Senator Miville-Dechêne: That’s very clear, but isn’t it also because green hydrogen is too expensive? Is that one of the reasons why you don’t have enough demand, or not? And are you subsidized, or is it completely private?
Mr. Dias: Our company is a private company. There are a number of grant programs that we have applied for. As Andrea said, the timeline for hearing back on those requests is ongoing.
Senator Miville-Dechêne: No subsidies.
Mr. Dias: None have been announced yet. We certainly hope for it.
As for the question of whether the projects are economically self-sustaining, there is certainly a gap between the conventional hydrogen and conventional methanol pricing and the green hydrogen and green methanol pricing. We’re still in a discovery process with potential customers in the Port of Montreal and in other industries, heavy industry, transport and so on, to see what price they would be willing to pay, which will be motivated by the carbon price in Canada and other reasons that they have to pursue the transition.
Senator Miville-Dechêne: Considering all of this, how optimistic are you, in the actual context of Canada, that hydrogen will become a possible alternative?
Mr. Dias: Our view is that it takes all of these pathways to achieve net zero, and it seems like society and policy-makers are highly motivated. What we’re seeing commercially is that there is still a gap between the available technologies and what we can deliver to customers, and that’s the challenge we’re working actively to solve. Our hope is that some policy instruments will help. The reduction in the cost of producing green hydrogen should also improve over the course of time. The price on carbon in Quebec will also be further motivation for some of those industries that are hard to decarbonize to improve their willingness to make these projects sustainable.
The Chair: I want to congratulate you. Not only is your answer good, but the speed of your speech is very good.
Senator Sorensen: I have a quick question, which I think you just answered, but then I have a longer question.
This is directed to Renewable Industries Canada. When the government’s draft Clean Fuel Regulations were released in 2020, your organization praised the draft for recognizing the full value of clean fuels like ethanol, biomass-based diesel, renewable natural gas and green hydrogen in the fight against climate change. I want to ask about green hydrogen only being identified. I think I heard you say we need to use all the tools, but was that suggesting that only green hydrogen is an answer?
Ms. Kent: No, it’s not exclusionary, but it is where our ambitions are taking us, and that would be on that life-cycle carbon assessment. We believe in life-cycle carbon. We’re striving to be biogenic as part of our business plans and within reach of our technologies. I think my fellow witness mentioned leveraging expertise and capability, and we would be very much acting in that spirit. That certainly isn’t to exclude other options, but it’s where our play and our expertise specifically lies. It’s also technology agnostic. We think it’s a fair, equitable and bankable way of getting there.
Senator Sorensen: My apologies for being late. I didn’t hear a majority of Mr. Griffin’s comments.
I’m going to take us a bit off hydrogen. I had the most fascinating conversation on my flight here about fusion energy. I knew nothing about it. I know we have very limited time, and I don’t expect anybody to be able to elaborate on it, but for Mr. Griffin and one of the Renewable Industries Canada people, is fusion a potential major solution, as this person on my flight suggested to me?
Mr. Griffin: Thank you. I take note of the speed at which I need to speak now. I will endeavour to do better. Thank you for that.
Fusion is a very interesting area right now. I’ll try to keep this short, but over the last few years, we’ve seen a huge uptick in interest and, actually, some technical progress. For a long time, it always seemed to be 30 years off, and now it looks like it’s maybe a decade or less off, but there is still a significant physics challenge in fusion. We have seen considerable investment across the fusion industry and private investment over the last few years, and I believe now that many of these companies are starting to turn to taking on the engineering challenges, not just the physics challenges. It does seem to be moving closer.
I will point out, though, that fusion probably will have no effect directly on the hydrogen industry because fusion will be providing — let’s assume that it operates and there will be power plants that will operate at fixed locations. One of the very good things about hydrogen, as we’ve just heard from Greenfield Global, is that it provides the possibility of transportation of energy. It can replace battery and electrics because you can put it into either liquid hydrogen, high-pressure gas or in a chemical form and transport it, put it in large vehicles or marine vessels and things of that sort.
I think fusion is very important to keep in mind for the overall challenge of energy and clean energy by 2050, but it’s not in and of itself a solution to all the issues.
Senator Sorensen: Thank you. Great answer.
Mr. Dias: I’d be pleased to offer a comment. When we think about the energy transition and the goals through 2050, we endorse the approach of pursuing all avenues. The things we have today I perceive as having very low risk because they’re here now and they’re scalable. There will be other alternatives available in 5, 10 and 20 years, and our view as an association and as a company is that we desire to pursue those, but to truly attain net-zero ambitions, we need an early start. Time is of the essence. For things like fusion — and by no means am I an expert — I foresee further out in the time horizon.
The focus that we have and that we’re advocating for is to take the here-and-now solutions, scale them up as quickly as possible, take things that are ready to be commercialized out of the laboratory and into the commercial space and motivate parties to pursue that. Of course, the ingenuity and innovation of scientists and researchers is amazing. They will no doubt come up with marvellous solutions. But the whole energy transition, in our view, cannot be hinged on things that have yet to be demonstrated.
Senator Sorensen: Excellent. Thank you, both, for the great answers.
Senator Arnot: I’m directing this question to all the witnesses here this morning. I want to get a better understanding of a couple of things.
What do we need to do immediately to keep Canada competitive? What kinds of subsidies are required? Do we need to mirror the U.S. subsidies or do we need to do better than the U.S. subsidies to enhance investment in hydrogen technology and its development and transportation and all of these issues? Are there policies that need to be explored that would enhance a competitive advantage to Canada notwithstanding the monetary subsidies that you’re saying? What do you really need there?
When we talk about short term and medium term, it seems to me that early adopters and their capital move to the United States. Our exploration of hydrogen energy will see an evaporation of investment dollars.
Ms. Kent: I will take a stab at addressing it with some quick points, and then if you want to fill in, Douglas, please do. Do we need to mirror the U.S.? I think that was kind of the headline question there, senator.
It is pretty obvious that what the U.S. has put forward as its Inflation Reduction Act, or IRA, is an oddly marketed, very ambitious climate program. It really, truly is a bonanza. It’s generational. It is very economically driven. It is offering incentives and tax credits at a rate and mass that we really have not witnessed before. This is in a country with neither a national price on carbon nor a carbon pricing regime. I think you are always going to experience differences across borders and jurisdictions in the approach of what’s in column A and what’s in column B.
I also think we would be remiss if we didn’t fully appreciate the fact that the mechanisms and approaches that the U.S. has set forward really are at a level of ambition and generosity that has not been our approach up until now in Canada. We have set out very detailed plans. We have developed very comprehensive performance-based regulations like the Clean Fuel Regulations. To the policies-to-enhance aspect of your question, that absolutely does that from a liquid transportation fuel perspective. It does not address hydrogen directly, however.
When we look at what we need to seize this moment — my colleague touched on it — there are here-and-now solutions. If we are going to reach our climate goals, the most important greenhouse gas reductions in front of us are the ones we can make right now. Those should be accelerated. We need better, faster mechanisms to accelerate those, whether it’s match-in or policy parity — something that will cause a company or a business to say that they can do this in Ontario, Quebec or British Columbia or in a given place and that the economics will sort out.
Do you want to wrap up with some specific examples of what that might look like?
Mr. Dias: Yes, but first I would like to add that there is also ambitious policy on the other side of the Atlantic. Europe is currently living in its Renewable Energy Directive II regime with a third iteration being negotiated this winter which has policy for low-carbon fuels more broadly.
As Andrea said, the clean fuel standard really relates to on-road transportation fuels. It does not relate to other modes of energy or other modes of transport. It was narrowly scoped. In contrast, the Renewable Energy Directive III in Europe and the IRA in America are very broad in scope, so that’s a key difference.
The other thing we have been discovering is commercial. In our federal system, we have power that is regulated by the provinces with provincially focused regulators. Therefore, the tariffs and availability of clean and green power is addressed by those regulators. We have a federal hydrogen policy and federal hydrogen ambitions, so we need alignment, somehow, between the provincial and federal policies to have something commercially operational.
Mr. Griffin: My comments will be very brief on this. As I said at the outset, most of my perspective is going to come from CNL as a research institution and not as a policy advocacy group, but I will say that in our discussions at CNL and our discussions with industry, we hear much of what we’ve just heard from the other witnesses, which is the importance of policy alignment or consistency, an understanding of where the regulatory frameworks are going to go and what financial incentives will come into play. All that makes sense to me when I stand back and look at this because, if you want private investment, any major change like this as we move toward 2050 does require some stability and understanding of where markets might go, so I agree with much of what was said. It’s very consistent with the discussions that have occurred between CNL and the industry that we have worked with.
The Chair: We have some time, so I will permit myself to ask some questions. I have a lot of questions in my head.
Let me start with Mr. Griffin. You said that the plan that’s already been established is right on. It’s going in the right direction. But meanwhile, I must admit I’m a little cynical because my limited experience in life tells me that it’s always good enough at first, but 10 years later, it fails or disappears and for some reason it wasn’t the best we could do. How do you respond to that? Why should we feel confident this time that the money being spent is in the right place at the right time and there are no more “ifs” about whether we are going to succeed? How can we get there?
Mr. Griffin: That’s a very good question. It’s a very fair question. Are you talking about the Hydrogen Strategy for Canada from NRCan?
The Chair: Yes.
Mr. Griffin: I see that as a framework rather than a detailed plan. I certainly can’t speak for NRCan and don’t try to, but in my reading of it, I see it as a framework. In that sense, I think it’s laying out the challenges and where we are right now. Like any plan — or in this case a framework — it’s most important and most valuable at the beginning, and it’s always subject to change as things emerge. Over the next 10 years, things will change. There will be new discoveries and new improvements in fuel cells or some other processes, and I think we’ll see advances in many areas. Something like this, I think, will just continue to be revised. From my perspective, there’s no concern that it can fail because I don’t think it can really fail as a framework. It’s meant to start us on a path and outline that path and the challenges we’re facing. The kinds of meetings like the committee is holding here are really important to help understand the perspectives of all the different stakeholders in this. I think that helps define how this might change over time. I hope that answers your question.
The Chair: I’m not sure it does, but I think it’s probably the best we can expect.
Let’s talk about the modular nuclear approach. We talked quite a bit about nuclear, especially for Canada with our CANDU. As you all know, our CANDU has not been as successful as we thought it should be. There is limited demand for it. We are talking a lot about modular. It’s smaller, and it’s manageable. What is the future there? Many of you are talking about it, but other experts talk about how nuclear is 10 to 15 years away, and it’s very delayed and expensive, and by the time we get there, there will be better energy and better storage plans and maybe it’s a waste of money because it takes too long to get all the approvals and so on. Do you want to make a comment about that?
Mr. Griffin: I’ll be happy to start.
From my perspective, small modular reactors are really the future or a strong part of the future. I’ll go back to the comment that was made earlier that there is no one single solution to all of this, but I think SMRs, or small modular reactors, have a real role to play. The idea there, of course, is that since they are modular, it’s more of a manufacturing-type thing. It’s not that they get tremendously expensive, one-of-a-kind or very-few-of-a-kind-type plants like we have seen up to this point. This offers an opportunity to go into locations to support industry and small communities. I think we’re looking at this in the nearer term rather than the much longer term. We are working with Global First Power, which is part OPG and part Ultra Safe Nuclear Corporation, to have a demonstration SMR at our Chalk River site in the next few years — not a decade, but in the next few years. I think that’s an important step. You alluded to the regulatory approvals and all that, and those discussions are going on with the Canadian Nuclear Safety Commission. I believe it is an important step, and I think that hydrogen can couple to it, because SMRs can provide electricity and heat that would allow clean hydrogen production.
The Chair: When do you think the SMRs can be in place and productive? What is the timing like? And any idea on price?
Mr. Griffin: I don’t have the background to speak to the price. From everything I’m hearing, we should see demonstrations within the next four to five years, whether in Canada or elsewhere. The U.S. is also pursuing it, and China and others.
The Chair: How about the fuel per se? Can we access it locally, or are we dependent on Russia in any respect?
Mr. Griffin: We are not going to be able to be dependent on Russia, of course — the high-assay low-enriched uranium, or HALEU. I’m not in the middle of these, but efforts are being made right now to look for alternative supplies for that high-assay low-enriched uranium or to be able to operate with an enhanced low-enriched uranium. Different companies are pursuing different pathways for that.
The Chair: Ms. Kent, you mentioned earlier that you have a real project that is producing green energy. There’s a lack of demand, but it may be coming. Then you talk about the electrolyzer that is available.
When you look at the American plan, when all the crumbs fall, we will have to choose, because you can’t be competitive in everything. The United States is basically a broad brush, large population with immense creativity. You have to pick and choose. What would we choose? Could it be something important that we produce as a country? Is that the right approach? Because you are not going to compete and succeed with every idea. Any comments there?
Mr. Dias: If I could begin, we love the idea of sustainability hubs. This is the concept where the supply and demand are neighbours and benefit from that symbiosis. This is the heart of our concept in Varennes, Quebec, where we already have an existing hub that involves bioethanol, renewable natural gas, industrial demand and demand in Montreal East with the oil terminals and oil refineries. It’s a hub concept. It’s very symbiotic. It ensures that a given project will have durability and will make sense in the present and for years to come because the partners in the project become interdependent and are growing together. It’s not one person’s vision or ambition that the whole structure is built upon, but it’s partnerships of supply sources and demand sources. In my view, that’s where we have seen the best economics, and therefore it’s where we believe we can compete most favourably.
I agree that we can’t be all things to all people, but there are places where we have the ingredients for success — which are low-cost, clean, electric power, heavy industry and population centres for drivers and consumers. When we bring all of these partners together, that’s what we believe is a recipe for success in building projects that will stand the test of time.
Ms. Kent: Going back to your first question of where does this confidence come from now when other attempts maybe have been laggard or haven’t reached full potential, I think the confidence comes from the fact that, at least from our perspective, we no longer consider ourselves a seller, producer or maker of a specific fuel type necessarily. It really is a product that is a carbon reduction. We are selling compliance options for some of the policy regimes and requirements that are in place as part of Canada’s climate plan. That is where the value creation comes from. That’s kind of the North Star of what guides business decisions.
I think the acceleration will come in through partnerships. If there are clear policy signals, there should be a reasonable, scaled-to-Canada’s-size and -ambition grant program and assistance to de-risk those investments. It should be determined by the needs of the customer in terms of what their decarbonization ambition looks like as well. It can come from a variety of places. It might be leaders, it might be ESG, environmental, social and governance, or it might be the ability to attract smart venture capital. That is what is giving a lot of people in the marketplace optimism and confidence. This time around it’s a bit different.
The Chair: You mentioned one of the advantages we have in Quebec. We are pricing carbon, which means there is a form of taxation. Basically, it’s net zero from the government’s view. You say that’s quite important. But in Quebec, as you know, we don’t price carbon. It’s not a taxation scheme; it’s a cap. All the economists say that the best we can do is put a price on carbon. We have done that. Does the fact that Quebec is cap and trade that affect the net result to your benefit or dis-benefit?
Mr. Dias: It has certainly brought parties to the table for discussions, because every large emitter, which is the target of the cap and trade policy, realizes they have obligations. Due to declining caps over time, they have growing obligations, so they have a growing compliance burden. That’s why we have seen a great deal of motivation for parties to come and find solutions. Some industries are easier to decarbonize, like transport. Some industries — like mining, metals, cement — have different challenges to decarbonize and need bigger solutions.
The Chair: Are we applying that taxation or form of pricing consistently, or do we have so many exceptions or grants that most of the economy is not being affected by carbon? Is that a possibility?
Ms. Kent: There certainly are exemptions, but I think you could say that about almost any regulation or government policy. Looking at things that work, the signal that is sent by a stick is important; however, the seeds planted by carrots also work really well. One of the things we have done in expertise, going back to low-carbon fuel standards in provinces and federally, is looking at complements to a price on carbon and making sure that mechanisms are there that function in a complementary way. Not only is the price signal set, but also investment can be attracted, and those magnets get coupled with any price on carbon.
[Translation]
Senator Audette: First, thanks very much to those who came here to testify virtually or in person.
Thank you very much, Mr. Griffin, for having pointed out in your opening remarks how important Indigenous peoples are. On the one hand, as an Innu, and on the other as a senator from Quebec — a vast territory where many projects are being discussed — I will take a holistic approach with you.
Yesterday at the Standing Senate Committee on Aboriginal Peoples meeting, the First Nations national chief talked about establishing a national economic growth and prosperity table to discuss issues related to the economy. I believe that Indigenous people should be part of that initiative. I know that your mandate covers all the Indigenous territories, Inuit, Métis and First Nations.
You’re talking about aligning policies between the federal government and the provinces, or a hub in Varennes. First Nations people live in all those places. To what extent are they being involved, or informed of the process? Yesterday, First Nations talked about the Canadian Nuclear Safety Commission and that’s good, but I think it’s important for Canada to see your efforts or hear about what you’re doing with First Nations, Métis and Inuit people across Canada.
[English]
Ms. Kent: Absolutely, and thank you for those comments.
Maybe I can just speak from our observations in one of the processes that a lot of our members were involved in, which is the applications for Clean Fuels Fund and the Net Zero Accelerator fund. We were very supportive of the inclusion of specific and strong criteria to prove exactly what you’re saying to make sure that not only were they identified but also accelerated, whether it’s through co-signing on these projects and making sure that there is significant effort being put into the collaboration and ensuring the equity and diversity is there. Certainly, that’s something that should continue and needs to be front and centre of all of these discussions. Just as ESG has tried to put a spotlight on certain areas of what it truly means for holistic sustainability, that certainly is part of it from a project basis and a national basis. We spoke about making sure we continue to advance the inclusion of it not only as part of the conversation but also in the evaluation of how projects are measured and that it truly is part of everything across the board. I know that is a specific example, but it’s something that we have already looked at and are supportive of ensuring it continues to go forward.
Mr. Griffin: If I may respond as well for CNL, I want to emphasize what I said at the beginning. CNL and AECL, Atomic Energy Canada Limited, who manages our contract here, are firmly committed to being active participants in these discussions, and we have many activities all across Canada. We have begun engaging with the Indigenous communities across all these areas on many different levels. We are finding this to be a very important part of our planning and our discussions as we go forward.
The Chair: Ms. Kent, regarding your private enterprise, you have invested in the technology. Frankly, that’s comforting to me. When you see people spend their own money, it gives you a sense of confidence. It’s easier to spend government money. Having said that, who would be the type of investor who invests in your company that obviously has confidence you will achieve success? What kinds of organizations or people are investing in your company?
Ms. Kent: There is no one type; that’s certain. What is interesting about some of the companies that you see in the fuel space, and certainly I think is proven when you look at Greenfield, is that they truly started — in Greenfield’s case, it was over 30 years ago — looking at an opportunity where the environmental aspect of it was very clear and definite, but there was a strong economic basis as well.
When you look at a renewable fuel like ethanol, there was a huge smog problem with air pollution at the time, but there were also issues around sustainable farm gate income and looking at opportunities for rural economic development. That business built out, continued to improve and became more and more valuable to fuel producers with the layering on of policies for decarbonization. The environmental benefits started to grow and became more of a beacon for investment and interest. That’s continuing to play out now.
I think we touched on why sometimes people may be attracted to partnerships around renewable fuels, whether it’s existing biofuels or something that is in development like hydrogen. Some of it may be because they think it’s a smart business decision. They read the tea leaves and see increasingly smart capital being drawn toward net zero. You may have strong government programs, whether it is a requirement to fall within a cap or an opportunity to capitalize on a new grant program. Some of it may just be good business perspective. The number is growing larger every day of people who just believe that now is the time to lead. Now is the time to be active participants and take strong climate action with reliable solutions. That’s the spectrum. I think you will find everything from good business to good citizens.
The Chair: Thank you to all three of you, Mr. Griffin, Ms. Kent and Mr. Dias. These were very interesting discussions, and we are trying to get a grasp as to how important this is. We want everybody to succeed, and we hope that will be the case. Thank you very much for your time and your expertise.
(The committee adjourned.)