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Home > Speeches and Presentations > Speeches and Presentations 2010 > Views on the Current State and Future of Canada's Energy Sector

Views on the Current State and Future of Canada's Energy Sector

Presented by
Gaétan Caron
Chair and Chief Executive Officer
National Energy Board

Standing Senate Committee on Energy,
the Environment and Natural Resources
Ottawa, Ontario

27 April 2010

Views on the Current State and Future of Canada's Energy Sector

Outline

Today's comments will address where we are now and how that might evolve going forward.
I'll highlight the key objective of working to be sustainable in our energy systems.
I'll use electricity markets as an example to describe major trends, challenges, and the role of energy trade and the consumer.
I'll finish with some thoughts on initiatives to move us toward a sustainable energy future.

Role of the NEB

The NEB is an independent federal agency established in 1959 by the Parliament of Canada.
Two broad responsibilities that derive from the National Energy Board Act.
- Regulatory role includes: oversight of the construction and operation of international and interprovincial pipelines, international power lines and designated interprovincial power lines; authorization of pipeline tolls & tariffs; and authorization of energy exports (oil, natural gas, natural gas liquids and electricity) and imports (of natural gas).
- Advisory role includes: informing the government, industry and public about developments in energy supply and markets through reports like Canada's Energy Future, other Energy Market Assessments and making energy information available at our website.
We work with people inside and outside government as all of the NEB's work is fundamentally based on consulting with stakeholders.

Note: The NEB regulates approximately 71 000 kilometres (44 120 miles) of pipeline across Canada and approximately 1 400 kilometres (870 miles) of international power lines.

The World's Hydrocarbon Reality

With economic recovery, the world's overall energy demand will again be on the rise.
The International Energy Agency's (IEA) 450 Scenario shown here assumes strong action to cut CO₂ emissions and gains in energy efficiency.
Even under this "green" scenario, primary energy demand grows by 20 per cent from 2007 to 2030.
Fossil fuels will still dominate, accounting for two-thirds of the world's primary sources of energy demand in 2030.
A key question is: what strategies and policies can mitigate the impact of consuming hydrocarbons?
The challenge is how best to manage and reduce the effects of our inevitable hydrocarbon consumption.

Note: The International Energy Agency's (IEA) 450 Scenario refers to the Scenario where governments are assumed to take strong action to cut CO₂ emissions. These changes in policy would result in limiting the concentration of GHGs in the atmosphere to 450 parts/million of CO₂ equivalent and global temperature increases to 2^oC. Demand for fossil fuels peaks by 2020, and zero-carbon fuels make up one-third of the world's primary sources of energy demand by 2030. Actions, however, are required to be in place by 2020.

Canada's Hydrocarbon Reality

The NEB's environmental scenario, produced in 2007, also shows fossil fuels in Canada would remain dominant although zero-emission fuels could rise to meet almost a third of our requirements.
Canada is in a unique position in the global economy as a major energy consumer, producer and exporter. We have a large, cold country with a resource based economy. This results in Canada being one of the highest energy users in the world.
In addition, significant amounts of electricity, coal, crude oil, and natural gas are produced and exported every year and contribute to Canada's economy.

Sustainability

Sustainability is a key aspect of managing hydrocarbon consumption.
Picture a 3-legged stool, with the environment, economy and society representing the 3-legs. The objective is to integrate environmental, economic and social goals.
The public interest is inclusive of all Canadians, having regard to economic, environmental and social interests that change as society's values and preferences evolve over time.
The Board considers all of the relevant impacts on these interests when making its decisions. This is a key aspect of pursuing a sustainable energy future.
Canada is looking for a diversified supply mix that will be sustainable over time including hydrocarbons and a growing supply of hydro, wind, solar, tidal, and biomass. This is supported by technological advances in supply and demand combined with constant efforts to conserve.

Energy Trends: Electricity Generation

Using electricity markets as an example of future energy developments.
Conventional generation will provide the majority of energy through 2020.
Natural gas-fired generation rises from 8 to 11 per cent of the total.
Nuclear generation output is projected to gain slightly through additions in New Brunswick (680 MW in 2017) and Alberta (1 000 MW in 2020).
Generation from coal drops by almost half.
Alternative and emerging technologies begin to gain share in the Canadian generation mix, especially from wind.

Challenges

Integrating environmental, economic and social goals will be challenging and take time.
Like Rubik's Cube, the outcomes may be seemingly clear but achieving transformation is complex.
Renewables need infrastructure and their integration requires maximizing the flexibility within all resources.
Developments are underway in Canadian jurisdictions to manage the intermittent nature of wind; synergies are being explored in provinces with large hydro and wind resources to allow for energy banking and enabling the opportunity to integrate more wind energy into the system.
Public engagement and support will be essential for new infrastructure to be assessed in a fair and timely way. (Key development in support of this was the Major Projects Management Office (MPMO), established in 2007).
Many existing Canadian systems need to be replaced and supported with new efficient technology to accommodate a differently configured supply system.
According to the IEA's 2008 World Energy Outlook, investment of $13.6 trillion is needed for the global power sector by 2030 with $221 billion occurring in Canada.
Market forces, policy direction and decisions by regulators will enable sustainable transformation of the grid.

Energy Trade

Canada is well positioned for a lower carbon electricity future.
Interprovincial and international transmission capacity allows for synergies in the generation mix.
Emerging technologies could potentially provide significant benefits to Canadians by:
- helping ensure adequate and reliable supply by developing additional and more diversified supply sources;
- improving air quality; and
- reducing CO₂ emissions.
Key sectors likely to experience growth in energy demand are the production of oil sands in Western Canada and Canada's manufacturing sector.
A stronger push for energy efficiency may be the outcome of the combined impact of the desire to reduce emissions and the response to price volatility.

Complementary Technologies

Hydro and natural gas-fired power generation have the right operating characteristics to provide back up to the intermittent nature of wind as both can ramp up almost instantly.
In this way, our hydro capacity works like a battery to accommodate intermittent wind energy.
Due to their smaller scale and lower emissions, natural gas units also have greater siting flexibility that allows better coordination with electricity grids.
Canada is well supplied with both hydro and natural gas resources.

Role of the Consumer

One of the 2010 Olympic logos was an Inuit Inukshuk, which has a traditional meaning of "You are on the right path."
Staying on the "right path" to a sustainable energy future, involves a central role for the consumer in shaping the energy markets of today and tomorrow. Ultimately it is the consumer who pays for most investments, and it is the consumer who sets the level of demand.
Demand transformation depends on how strong a behavioural change the consumer is committed to make and the incentives and technological solutions that can best manage and sustain this change.
It will be important for regulators to continue encouraging market forces and be goal oriented rather than using a prescriptive approach.

Transformation and Growth: Demand

Advancements in "smart grid" technologies enable the consumer to make market decisions. Smart meters increase awareness of energy consumption and create an opportunity for consumers to respond to high, peak-time prices.
The installation of smart meters in Ontario, British Columbia and Alberta is an example of the consumer's increased participation. By 2011, Ontario will be combining smart meters with "time of use rates" for residential and small business customers.
Advanced automation and communication technologies to integrate intermittent and distributed generation efficiently is another element of the smart grid.
Distributed generation is often rooftop solar panels on homes and businesses or small cogeneration facilities at urban complexes.
Other initiatives to lower energy demand are stricter building code requirements, new minimum energy efficiency standards for equipment, new standby limits on common household items and the planned phase-out of inefficient lighting by 2012 through the Regulations under Canada's Energy Efficiency Act.

Note: The Energy Efficiency Regulations establish energy efficiency standards for a wide range of energy-using products, with the objective of eliminating the least energy-efficient products from the Canadian market.

Carbon Capture and Storage

Carbon capture and storage (CCS) is likely to be a key component of Canada's effort to reduce the emission of greenhouse gases.
In Alberta, four commercial scale projects have signed Letters Of Intent for funding from a $2B CCS Fund.
These projects are expected to achieve annual CO₂ reductions by 2015 equivalent to taking approximately one-million vehicles, off of the road.
The projects include:
- Swan Hills Synfuels Project that accesses coal seams 1,400 metres below surface, traditionally considered too deep to mine, and convert the coal underground using in-situ coal gasification into a clean synthetic gas. The syngas will be used to fuel new high-efficiency power generation and the CO₂ created during this process will be captured and used for enhanced oil recovery (EOR).
- Alberta Carbon Trunk Line, a 240 kilometre pipeline that will transport CO₂ from a fertilizer producer and oil sands upgrader for use in EOR.
- Quest Project will capture and store 1.2 million tonnes of CO₂ annually beginning in 2015 from Shell's Scotford upgrader, near Fort Saskatchewan
- Project Pioneer that will capture one million tonnes of CO₂ annually by 2015 from TransAlta's Keephills 3 coal-fired power plant west of Edmonton for use in EOR.

Regulatory Initiatives

The NEB has a number of tools in its tool kit to promote a sustainable energy future, such as:
- Land Matters Consultation Initiative (LMCI)
- Engagement of Environmental Non-governmental Organizations (ENGOs)
- Substitution and participant funding as outlined in the Budget Speech
- Active participation in the work of the Major Projects Management Office.

Toward a Successful Energy Future

We need to continue the public debate on what success in Canada's energy future would look like.
Last month, the NEB contributed to the public debate by holding a successful Energy Futures Conference in Ottawa that focused on building a sustainable energy future through:
- efficient energy infrastructure,
- innovation in electricity markets,
- investment in renewable energy projects,
- adapting to a new natural gas supply and demand reality,
- defining Canada's role in sustaining world oil supply, and
- meeting global demand.
Success in these endeavors would help to satisfy the environmental, social and economic goals of sustainability.
There are many actions needed for this success including regulatory, financial, and technological.
Outcomes will be maximized when effort is focused on finding solutions rather than on finding fault with energy choices.