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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

North American Electric Reliability Corporation
Board of Trustees Meeting

5 August 2010

Thank you for the opportunity to speak to you today about the energy sector in Canada. Our organization has been participating in NERC for a number of years and we are strong supporters of the work you do in promoting the reliability of bulk power systems in North America.

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 describe major trends, challenges, and the role of energy trade and the consumer
• I'll finish with some thoughts on initiatives to move forward.

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; authorization of energy exports (oil, natural gas, natural gas liquids and electricity) and imports (of natural gas); and to administer the Canada Oil and Gas Operations Act (COGOA) on non-Accord frontier lands and offshore territories for any oil and gas activities that occur.
  • 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, approximately 1 400 kilometres (870 miles) of international power lines, and over 1600 wells in frontier lands and offshore territories (only 1 offshore well drilled since the NEB attained COGOA responsibilities in 1991).

The Hydrocarbon Reality

Globally, it will be increasingly important to assess energy matters sensibly. North America's overall energy demand is on the rise. Everything we do in our day to day lives use energy. Our businesses, cars, homes, all manufactured goods, the food we eat, attending this conference…, and the list goes on. As the world continues to grow and develop, we will use more of these things and the associated energy.   The International Energy Agency's (IEA) 450 ppm Scenario shown here assumes strong action to cut CO₂ emissions and gains in energy efficiency. Under that "green" growth scenario, primary energy demand is expected to grow by 20 per cent from 2007 to 2030. Hydrocarbons will be with us for some time. In 2030, fossil fuels will still dominate, accounting for two-thirds of the world's primary sources of energy demand. Going forward, it's a matter of how strategies and policies can mitigate the impact of consuming hydrocarbons. How to best manage and reduce the effects of our inevitable hydrocarbon consumption is challenging.

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 does similar energy modeling work from a Canadian perspective. 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's Energy Resources

Significant amounts of electricity, coal, crude oil, and natural gas are produced, exported and consumed every year and contribute to Canada's economy. It is vital that these resources be managed responsibly and safely

Including the oil sands, Canada's oil reserves are second only to Saudi Arabia. Canadian oil production is projected to grow from about 2.7 million barrels per day in 2009 to 3.8 million barrels per day in 2020. Most of this production, over two thirds, goes to meet the needs of US markets. Canada is the number one supplier of crude to the US and this will likely remain the case for years to come.

Net natural gas exports for 2009 were about 7 Bcf/d, or about 45 per cent of Canadian production. From a US standpoint, Canadian natural gas represents 11% of American natural gas requirements. Canada's largest natural gas export markets are the U.S. Central/Midwest and Northeast regions. And like the United States, Canada has vast reserves of conventional and shale gas.

• In 2009, Canada generated 575 teraWatt hours of electricity with almost 80 per cent coming from non-GHG emitting technologies including large hydro, other renewables and nuclear
• Natural gas-fired and nuclear generation are expected to increase, while generation from coal is expected to drop almost in half by 2020
• Alternative and emerging technologies are expected to begin to gain share in the Canadian generation mix, especially from wind

In 2009, the energy industry accounted for seven per cent of Canada’s gross domestic product and $81 billion of our total exports. In real terms, energy accounts for about 23 per cent of the total value of Canadian exports. The upstream oil and gas industry in Canada spent $33 billion in 2009.

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

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 often need infrastructure and back-up supply for integration. 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
• Meaningful public engagement 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 will need to support an expanded range of applications (e.g. changing consumer uses with new TVs, etc., and evolving smart grid instrumentation)
• 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 all contribute to the pursuit of a sustainable grid

Role of the Consumer

• The Inuit Inukshuk 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.
• 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.
• Initiatives to lower energy demand include 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.

Regulatory Initiatives

• The NEB has a number of tools in its tool kit to promote a sustainable energy future
• We have a robust regulatory model that has evolved over time (51 years). This allows a transparent and complete assessment of major energy projects and follow-through on decisions to ensure safety, environmental and social commitments are kept throughout the lifecycle of the project. The NEB's model is not perfect and we are continually improving it through such vehicles 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 in streamlining the entire regulatory process working with our federal partners
  • Our energy information program. Canadians need a neutral source of information and analysis in order to take better decisions. The NEB as an independent regulator, with a mandate to keep under review energy developments is well positioned to provide that
• Strategic priorities for the NEB are:
  • Reviewing Arctic offshore drilling requirements
  • Greater clarity in application filing requirements
  • Improving public engagement to be better attuned to society's evolving values and preferences
  • Being expert and independent in the regulation of safety and the environment
  • Ensuring Canadians are well informed and equipped to make energy choices in pursuit of sustainability

Toward a Successful Energy Future

• We need to continue the public debate on what success in Canada's energy future would look like
• Earlier this year, 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
  • Changes to consumer behaviour as well as the development of technologies and processes to delink the relationship between improved quality of life and increased energy use
• 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.

 

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Date Modified:

2011-10-28