2015 Canadian Energy Summit: Telling the Energy Story

ENERGY IN CANADA’S ECONOMY Nancy Olewiler SCHOOL OF PUBLIC POLICY, SIMON FRASER UNIVERSITY

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Three Key Words that Reflect Major Shifts in Global Energy Economics Efficiency Environment Competitiveness

shape energy in Canada’s economy

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Energy Council of Canada

Energy in Canada’s Economy up to 2013

Canada ranks 6th in renewables investment

Natural Resources Canada, Energy Markets Fact Book, 2014-2015

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Energy Council of Canada

GDP, Employment, Wages

Natural Resources Canada, Energy Markets Fact Book, 2014-2015

Average annual wage in oil & gas sector in 2013 = $130,000

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Energy Council of Canada

Energy, Clean Tech & Benchmark Share Price Indices, 2010-2014

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Energy Council of Canada

Energy Trade in 2013

Natural Resources Canada, Energy Markets Fact Book, 2014-2015

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Energy Council of Canada

Tax & Royalty Revenue, 2003 to 2012

Natural Resources Canada, Energy Markets Fact Book, 2014-2015

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Energy Council of Canada

Today’s Energy Economics: Oil & Gas • Peak Oil: an historical footnote? • Shale Oil & Gas: game changers • Geo-economics: US will be world’s largest oil producer? • Its output has ↑ 85% since 2008, tech change • Has capacity that is profitable @ current prices with DUCs in the wings (huge efficiency gains) • US (& other producers’) LNG developing faster than ours • LNG capital costs ↑ while market prices ↓ (Japan weighted •

average price forecast for 2015 = US $10MMBtu, down from $16 in 2014) Greenfield LNG project needs FOB price of US$10-12MMBtu

Markets at work: prices reflect ↓ scarcity & culling the high cost producers, investment $ on standby 8

Energy Council of Canada

Renewables: Solar’s Global Growth Globally • ½ total renewable investment • Total capacity 2004 to 2014: ↑ 3 to 165 GW • New investment 2014 = $100b • Economics: 10X efficiency ↑ • Utility scale not just distributed gen: e.g., 600MW plant in CA being built Canada

IHS Energy Week, Klein, WSJ 21 April 2014

Renewables added more global electricity capacity in 2014 than fossil fuels

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Energy Council of Canada

Coal: Yesterday’s Fuel? • Coal’s environmental impacts contribute to its phase out as a generator of electricity • Closure of Ontario’s coal-fired generation • Federal performance regs take effect July 2015 • Ageing assets • A significant carbon price greatly ↓ competitiveness • China: substituting to renewables & gas, piloting carbon markets & instituting carbon taxes • US: increasing regulatory stringency • Japan/Germany: temporary (?) resurgence • Improvements in CCS efficiency/costs ↓ ?

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Energy Council of Canada

What this means for Energy in Canada’s Economy • For energy producers – markets dictate focus on competitiveness through: • Efficiency improvements, cost cutting • Need environmental policies to sustain access to markets & address local/global environmental impacts • For energy consumers: • Boon to manufacturing (along with depreciation of Canadian dollar) • Energy efficiency gains mean lower price elasticity & less response by households to low prices

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Energy Council of Canada

Are We Doing Enough; the Right Stuff?

Natural Resources Canada, Energy Markets Fact Book, 2014-2015

Federal energy R&D = 8% of total Fed R&D Prov/Territorial R&D = 64% of total P/T R&D

Over to our panel

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2015 Canadian Energy Summit:

Telling the Energy Story

Energy in Canada’s Economy: Alberta Jennifer Winter

SCHOOL OF PUBLIC POLICY, UNIVERSITY OF CALGARY

Energy Council of Canada

Alberta’s Fiscal Situation

Million dollars

Natural Resource Revenue

Other Revenue

NRR share of total revenue

40,000

45%

35,000

40%

30,000

35%

25,000 20,000 15,000 10,000 5,000 -

30% 25% 20% 15% 10% 5% 0%

Energy Council of Canada

Energy Export Shares

Share of Canadian Energy Exports

Crude Oil 70 60 50 40 30 20 10 0

Refined Products

Petroleum Gases

Other

Energy Council of Canada

Energy Exports by Region (2012)

Prairies 0% Crude Oils Refined Products Petroleum Gases Coal Electricity Coke Other

10%

Central 20%

30%

Atlantic 40%

50%

BC and Territories 60%

70%

80%

90%

100%

Energy Council of Canada

Energy Imports by Region (2012)

Prairies 0% Crude Oils Refined Products Petroleum Gases Coal Electricity Coke Other

10%

Central 20%

30%

Atlantic 40%

50%

BC and Territories 60%

70%

80%

90%

100%

Energy Council of Canada

Shares of Emissions, GDP, and Population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% GHGs BC

GDP AB

SK

ON

Population QC

Others

Energy Council of Canada

Emissions Sources (2013) Alberta INDUSTRIAL PROCESSES 6%

AGRICULTURE 7%

FUGITIVE EMISSIONS 14%

TRANSPORTATION 16%

Canada

WASTE 1% STATIONARY COMBUSTION 56%

AGRICULTURE 8% INDUSTRIAL PROCESSES 7%

FUGITIVE EMISSIONS 8%

TRANSPORTATION 28%

WASTE 4%

STATIONARY COMBUSTION 45%

Energy Council of Canada

Electricity Generation (2013) Alberta Other fuels

Hydro

Canada Natural Gas

Wind

Oil

Coal Natural Gas Nuclear Coal Wind

Hydro

Energy Council of Canada

Policy: Specified Gas Emitters Regulation Alberta's Emissions by Facility Size 300

Million Tonnes

250 200 150 100 50 0

2005

2006

Emissions, Facilities < 50K

2007

2008

2009

Emissions, 50K = 100K

Energy Council of Canada

Policy: Specified Gas Emitters Regulation Coverage: Percent of Emissions by Sector (Facilities with Emissions > 100K tonnes) 2007

2008

2009

2010

2011 2012

Mining & Oil and Gas Extraction

70%

71%

81%

85%

85%

86%

Fossil Fuel Production and Refining

17%

18%

18%

20%

21%

18%

Electricity and Heat Generation

96%

93%

99%

99%

95%

98%

Manufacturing

49%

51%

39%

40%

40%

41%

Construction

0%

0%

0%

0%

0%

0%

Commercial & Institutional

0%

0%

3%

3%

4%

4%

Residential

0%

0%

0%

0%

0%

0%

Agriculture & Forestry

0%

0%

0%

0%

0%

0%

Transportation

10%

8%

8%

7%

7%

8%

Waste

0%

0%

0%

0%

0%

0%

Energy Council of Canada

Main Take-Away Points

• Emissions are not just from oil and gas • Lots of variation across Canada in terms of sources • Current policies are ineffective and inefficient • Carbon pricing?

2015 Canadian Energy Summit:

Telling the Energy Story

Energy in Canada’s Economy: Ontario Donald N. Dewees

UNIVERSITY OF TORONTO, DEPARTMENT OF ECONOMICS

Energy Council of Canada

Short Ontario Energy History • Small oil and gas production Southern Ont. • Cheap hydro electricity 1898 - 1960s. • Welland, Niagara, other large rivers near consumers. • 1963 water generated 70% Ontario electricity • Prices < Great Lakes neighbours.

• Added coal, nuclear, gas 1970-1995.

• 1973 water generated 50%. • Nuclear high costs, problems; shutdowns 1997. • Prices increased faster than neighbours.

• Post 2000 restructuring, environmental, gas plant cancellation, bungling raised prices more.

Average Residential Bill 1966-2006: Low Cost to High Cost in 4 Decades

14 12

cents/kWh

10 8 6 Nominal Cost

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Cost in 2010 dollars

2 0

1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 Year

Dewees U of Toronto

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Energy Council of Canada

Nukes, Environmental Policy, Bungling Raised prices 2000-14 • 2000+ restructuring blown up Nov. 2002, probably increased costs. • Promised coal phase-out early, often. •

Finally ended low-cost coal gen 2014.

• Procured wind & solar slowly to 2009. • Green Energy & Economy Act 2009 • •

FIT paid high prices for wind, solar. Implied value of CO2 as high as $500/tonne.

• Cancelled 2 gas plants, ~$1bn ransom.

Energy Council of Canada

Current Issues • Cap and Trade for GHG announced 2015. • Talked about since 2008 Discussion Paper. • 2009 bill 185/2009 required monitoring. • No details yet but WCI is based on C&T, auctioned allowances.

• Nuclear Refurbishment

• Darlington (4), Bruce (7) refurbishment to be serial, cautious, exit if going badly. • Many think Quebec power cheaper.

• Partial Sale of Hydro One

• Brampton distribution OK. • Share of transmission – cash grab or efficiency?

Energy Council of Canada

Main Take-Away Points

• Growth may whittle away your natural advantages. • Using the electricity sector for industrial policy & job creation can be costly. • Ministerial micro-management may not be more efficient than expert management. • Unwise environmental policy may be costly. • What benefits of government ownership?

Primary Electricity Production 45%

2013, % of Canadian total (482 TWh)

40% 35% 30% 25% 20% 15%

10% 5% 0% Atlantic provinces Statistics Canada (2015)

Quebec

Ontario

Manitoba

Saskatchewan

Alberta

British Columbia

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Electricity Consumption per Capita by Average Industrial Price (2012)

2012 per capita consumption (kWh)

25,000

QC

20,000

NL

SK MB

NB AB

15,000

BC

NS

10,000

ON

PEI 5,000

0 4 Statistics Canada (2014)

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6 7 8 9 Cents per kilowatt-hour (average price)

10

11 3

0.16 Residential Price Ontario & Québec 0.14

Debt Retirement Charge

1.27¢/kWh

0.12

0.04

Connection Service

0.02

Network Service

6¢

0.06

Rural Rate Protection Charge Wholesale Market Service Charge Energy (weighted average) Distribution Rate

$ per kWh

0.1 0.08

0 ON

14.9¢/kWh

QC (real)

8.9¢/kWh

QC (paid)

7.2¢/kWh

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Energy Council of Canada

Oil & Gas Exploration Permits

MERN (2015)

North American LNG Export Terminals (Potential)

Saguenay QC: 1.6 Bcfd

13. Goldboro, NS: 1.4 Bcfd 15. Melford, NS: 1.8 Bcfd 26. Port Hawkesbury, NS: 0.5 Bcfd 28. Saint John, NB: 0.67 Bcfd

FERC (2015)

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Regional Cap and Trade Programs

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Electrification of transportation

393 charging stations May 19, 2015 – 4.55 pm 8

Energy Council of Canada

Main Take-Away Points Quebec’s energy story: • Significant economic gains to be realized in the electricity sector • Oil & Gas production development could happen – but many uncertainties: price & social license

• LNG developments in transportation and export • Hard carbon constraint: Quebec leads (in partial improvisation) • Electrification of transportation is taken too seriously by many