“This is what Canadians expect us to do” – the Trudeau Liberals’ confusion on Energy Policy

Pickering-Nuclear-Wind-Turbine

During his national town hall tour in January 2017, Prime Minister Justin Trudeau made a stop in Peterborough, Ontario where a distraught woman tearfully recounted that her electricity bills were greater than her mortgage payments. Despite working more than 75 hours a week, the woman, Kathy Katula, said she feared losing her home and that, despite earning $50,000 a year, she was now, “living in energy poverty.” Katula asked Trudeau how he could justify imposing a carbon tax on people like her who are struggling to keep their heads above water.

In response, the Prime Minister rightly pointed out that electricity generation is under provincial jurisdiction but also suggested the world is moving off fossil fuels, linking that to, “the extreme weather events that are coming.” Trudeau then suggested that because of the anticipated harms and costs these coming events imply, “we are facing a challenge where we have to change behaviours.” In closing out his response to Katula, he said that carbon taxes would have to be imposed by the provinces in such a way that they do not unduly burden the most vulnerable in society but that, “we need to get off fossil fuels, we need to make this transition, we need to start protecting our lakes, waters, rivers, streams, our lands, our children’s future and that means we are going to have to go through a shift period.”

Fast forward eight months to October 2017 and the Generation Energy Forum hosted in Winnipeg by Natural Resources Minister, Jim Carr. On taking office in 2015, Carr’s mandate letter from Trudeau outlined a number of responsibilities, foremost among them a directive to work closely with the provinces and territories to, “develop a Canadian Energy Strategy to protect Canada’s energy security; encourage energy conservation; and bring cleaner, renewable energy onto a smarter electricity grid.”

Two years into his mandate, Carr was promoting Generation Energy as an important means for gathering input to support the formation of an energy strategy. According to a media advisory, the forum would bring together, “more than 600 people – from youth to industry, academic, Indigenous and community leaders,” to, “explore Canada’s path to affordable energy, the next generation in technology and innovation, energy governance and Canada’s role in the global energy transition.”

The forum’s keynote speakers included “international energy experts”:

  • Fatih Birol – Executive Director, International Energy Agency;
  • Eldar Saetre – Chief Executive Officer, Statoil Global;
  • Annette Verschuren – Founder and Chief Executive Officer, NRStor; and
  • Elyse Allen – President and Chief Executive Officer, GE Canada;
  • Jeremy Rifkin – President, Foundation on Economic Trends and Advisor to the European Union.

An interesting cross-section of speakers representing: an intergovernmental agency focused on measuring and analyzing global energy supply, demand and emerging trends; a Norway-based global energy company, principally an oil and gas producer with interests in carbon capture and storage and wind projects; a start-up Canadian clean-tech company focused on the development and operation of energy storage solutions; the Canadian arm of a global industrial powerhouse engaged in everything from commercial finance to, jet engines, locomotives, healthcare and digital energy management technology; and, finally, a small consultancy offering pathways to the future to government clients around the globe.

Curiously, but not surprisingly, there was no keynote speaker listed representing any major Canadian fossil fuel producer. Curious, because fossil fuels have been largely responsible for delivering our current prosperity and will be essential to its continuance well into the future. Unsurprising, though, given that the current government is possessed of a singular will to “decarbonize” the national economy by mid-century and for any national energy strategy to be adopted it must serve that objective. In a press release to launch the forum, Minister Carr stated, “…it is this generation’s responsibility to act now to develop an affordable and reliable path to the low-carbon economy of the future.”

Post-forum, Natural Resources Canada posted at least two of the keynotes, one from Eldar Saetre of Norwegian energy giant, Statoil, and another from Jeremy Rifkin who is, for all intents and purposes the Foundation on Economic Trends. Saetre’s remarks, as might be expected from the leader of a modern energy company, were founded in today’s realities; fossil fuels provide more than 80% of the world’s energy while wind and solar, despite their rapid growth, still only provide about 1%.

Saetre, who established at the outset his belief in climate science and the need to address the problem of climate change, suggested that we need to concentrate on the 80% if we are to make any progress. A key point he made is that the content of the 80% is important, and that replacing coal with gas in power generation is critical as is focusing on how oil and gas are produced. Reducing emissions of greenhouse gases associated with gas and oil production is a key ambition of Statoil and Saetre stated that the company has succeeded in reducing its level of emissions by 50% compared with its competitors. Statoil has invested heavily in carbon capture and storage technology and has a small, but growing, portfolio of renewable energy projects. All of which speaks to a measured, pragmatic approach to an enormous economic and technical challenge.

By contrast, Jeremy Rifkin’s address was apparently founded in some alternate reality of his own imagining. This, it seems, is not unusual for Rifkin who has forged a career and become an advisor to heads of government around the world without possessing the sorts of credentials you might expect someone in his position to have. He is a prolific author with a gift for threading together seemingly disparate pieces of information into policy narratives.

Rifkin wastes no opportunity to advertise his relationships with his government clients. Early in his Generation Energy keynote he described the beginnings of his role as advisor to German Chancellor, Angela Merkel, and mentioned that he now has a similar relationship with China. Just as quickly, he jumped the rails with his own interpretations of both climate science and economics by first suggesting recent weather events provide evidence that we are experienceing “real-time climate change” and then saying that the Great Recession of 2008 was triggered when the price of oil peaked in July 2008 at $147 a barrel and that the financial system collapse that followed was just the “aftershock.” Both of these assertions are well outside the consensus views of climate scientists and economists respectively.

You will likely trip over Mr. Rifkin’s thesis on how to solve the climate/energy problem by spending only a very small amount of time searching for it online. He has been peddling his “third industrial revolution” argument for a few years now. It boils down to his view that we have been through two industrial revolutions and are now entering a third. Each comes about through the convergence of breakthroughs in communications, energy and transportation technology. The first was built on mass print media, coal, and rail transport. The second arose from the advent of telephony, radio and television, oil, and mass-produced autos. According to Rifkin, the third industrial revolution will revolve around an “emerging convergence of the communication, renewable energy, and automated mobility internet,” all of which will rest on the Internet of Things.

Rifkin says he told Merkel that growing the German economy would not be possible using 2nd industrial revolution infrastructure and that the key is to embark on the building of infrastructure for the current, 3rd industrial revolution. Doing so will solve the climate problem while also providing jobs and economic growth for decades. According to Rifkin, Germany has made tremendous progress and now gets around 33% of its electricity from wind and solar. He also maintains that the capital cost of wind and solar have been dropping exponentially and that the marginal cost of operating these assets is near-zero as the wind and sunshine are free.

Off the rails again, it seems. The myth of Germany’s Energiewende (transition to low-carbon energy) has been starting to unravel for some time. A McKinsey study of the program’s most recent results revealed that it is foundering on multiple fronts. Far from being economically viable, the push to renewables is still only achievable through subsidies. The study found that CO2 emissions are far above targets, actually increased in 2016, and that jobs in wind and solar declined substantially for the fourth year in a row. Further economic damage is being wrought through reductions in employment in energy-intensive industry where energy costs are limiting growth, and by increasing energy poverty among ordinary citizens who now pay CAD $0.45 per kilowatt hour which is 47.3% above the European average. Overall, program costs continue to rise and are forecast to hit CAD $115 billion by 2025.

Holding Germany up as an example for Canada ignores the basic reality that, at least in terms of electric power production, Canada is the leader and Germany is the laggard. In 2016, public power production in Germany came from hydro 3.8%, biomass 9.0%, wind 14.2%, solar 6.9%, nuclear 14.6%, brown coal (lignite) 24.5%, hard coal 18.2%, and gas 8.3%. The largest source, lignite, produces nearly twice the CO2 emissions as gas. German CO2 emissions have, more or less, flatlined in recent years. The largest reductions were a consequence of German reunification when outmoded vehicles, industrial equipment and other infrastructure in the former East Germany were replaced with more current technologies. The cost of introducing renewables into the power mix for a negligible reduction in greenhouse gas emissions has been staggering.

By contrast, 59.3% of Canada’s electricity is generated using hydro power, around 16% comes from zero-emission nuclear plants, 9.5% from coal, 8.5% from gas and 1.3% from oil. Non-hydro renewables, wind, biomass, and solar, provide the remaining 5+%. In total, 51% of German electricity is produced using fossil fuels while in Canada only 20% is. Germany is decommissioning its nuclear fleet and as a consequence is relying more heavily on dirty lignite coal which it has in abundance. According to Jeremy Rifkin, it’s over for both coal and nuclear, and oil will soon join them as “stranded assets.” There is no evident support for his view based on global efforts to date.

We have our own Energiewende disaster in the making in the form of Ontario’s Green Energy Plan. Ontario decided in 2009 to transition to renewables (primarily wind and solar) despite already generating more than 80% of its electricity virtually emissions-free with hydro and nuclear. Today, after billions paid in subsidies and billions more to be paid in the future, Ontario has succeeded in making its power more expensive than almost any other jurisdiction in North America, imposing energy poverty on citizens like the unfortunate Kathy Katula, and destroying the competitive advantage its manufacturing sector once enjoyed when Ontario’s electricity was competitively priced. On a given day, these new renewable energy “assets” produce power that is surplus to requirements and which is then spilled over the border to jurisdictions with which Ontario competes for commercial and industrial investments.

The lie of this transition can be viewed in near real-time on Ontario’s Independent Electricity System Operator’s (IESO) website. As this is being written, 86.7% of power in Ontario is being produced by the nuclear fleet (57.4%) and by hydro (29.3%). The wind turbines in the province are operating at less than 50% of their capacity, contributing about 5%, while the solar installations are operating at less than 5%  of capacity and so delivering almost nothing (it’s an overcast day in November, so unsurprising). The forest of wind turbines and prairies of solar panels that would be needed to take on the full job defies imagination and if it were a windless night, then what?

About 89% of the amount of power generated by wind is being exported. That power is more costly to produce than power generated by gas, hydro or nuclear and is sold at a loss. The system operator is forced to accept the renewable power so it must scale back less costly production from, principally, gas, but also hydro to accommodate the “green” contribution. It’s also worth noting that with more renewable power on the grid more “dispatchable” power, typically provided by gas plants, is required. This enables the system operator to ramp up or reduce power as demand requires. The alternative would be to add massive storage systems to hold any surplus generated when demand is low for release when demand rises. In either case, the cost of adding renewables to the mix is not limited to erecting a wind turbine or building a solar array.

Other jurisdictions, notably South Australia, have gone down the renewables path too, with similarly unimpressive results. Two major, state-wide blackouts have occurred to date in South Australia. Because of the distortions imposed by subsidies for renewables, coal-fired generators have been shut down and no new capital is being invested in gas plants because it is uneconomic to operate these plants on an intermittent basis. South Australia relies on power generated conventionally and imported from neighbouring states and when the interconnect failed the lights went out. Meanwhile, Australia remains a major coal supplier to India and China both of which, under the Paris accord, continue to build new coal-fired generating capacity. It is difficult to see how this mess can be seen as progress.

There are countervailing views to Rifkin’s but they seem to get less attention, perhaps because they offer up hard realities instead of a fanciful, imagined future. Cambridge University Department of Engineering Professor, M.J. Kelly, recently wrote that, “…what is done in the name of decarbonization should leave the world in a better place. I am sure that what has been done so far in the name of decarbonization is set to fail comprehensively in meeting its avowed target, and that a new debate is needed.” Kelly points out that the growth of mega-cities makes the use of renewables less viable. Both wind and solar require large areas of land for deployment and densely populated urban areas do not afford this. Only nuclear and fossil fuels can provide the energy needed under such constraints.

Professor Kelly suggests that the greatest potential impact lies in behavioural change. If the world’s population could be convinced that it is in their best interests to reduce consumption of any, and all resources, particularly fuels and electricity, then energy consumption and related emissions could be halved. There is no appetite for such a change in the developed economies and it would be grossly unfair to suggest limiting consumption in the developing world. The latter want the advantage enjoyed by the former; cheap and reliable sources of energy, mainly fossil fuels, to transform their lives and narrow the living standards gap between each.

The harsh reality, according to Professor Kelly, is that, “…the ratio of fossil fuel energy used to total energy used has remained unchanged since 1990 at 85%. The call to decarbonize the global economy by 80% by 2050 can now only be described as glib. “(I)t is only possible if we wish to see large parts of the population die from starvation, destitution or violence in the absence of enough low-carbon energy to sustain society.”

Following the Generation Energy Forum Minister Carr stated that the energy strategy called for by his mandate letter would be an “ongoing dialogue” rather than a single document. According to Carr, the forum, “…was a very important milestone along a path that has no stop signs.” This opaque message is a pretty unsatisfactory outcome two years into his tenure. It’s not as if energy and the environment haven’t been the focus of considerable public, media and government attention at all levels. It must also be true that Carr has access to a wealth of data, both public and private. Hosting a forum to gather ideas should have been the least consequential activity undertaken in the service of formulating a strategy. That Carr seems to think more dialogue is the right approach to determining a way forward is beyond disappointing; it is an abdication of the responsibility to meaningfully manage a key portfolio that profoundly impacts the lives of all Canadians.

The federal Liberals like to boast about their commitment to evidence-based policy making. On this file, they appear to have abandoned that and instead allowed themselves to be romanced by the likes of Jeremy Rifkin. To be fair, in Gerald Butts, Rifkin has at least one fellow traveller who is very close to the seat of power. Butts, Principal Secretary to Prime Minister Trudeau, is on record while president of the Canadian arm of the World Wildlife Federation (WWF) saying, “…we don’t think there ought to be a carbon-based energy industry by the middle of this century.” Before heading up the WWF, Butts was Principal Secretary to Dalton McGuinty under whose watch the Green Energy Act in Ontario was introduced, to disastrous effect.

Rifkin and Butts might charitably be described as sophists. Aristotle observed that, “the art of the sophist is the semblance of wisdom without the reality, and the sophist is one who makes money from apparent but unreal wisdom.” The evidence clearly shows that promotion of renewable wind and solar power as the way forward ignores reality. The unrelenting focus on electricity power generation while largely ignoring all the other uses for fossil fuels minimizes the scope of the challenge. It is reasonable to take the position that Canada needs more fossil fuels in its energy mix than other countries simply because of its cold climate, vast geography, limited and narrowly dispersed population, and its prodigious resource wealth, the exploitation of which is essential to sustaining the quality of life enjoyed by Canadians.

It is physically impossible to reliably provide space heating, enable cross-country transport of people and goods, link remote communities or economically transform resources with only wind and solar power. The ice storm that struck Ontario in 2013 provides a perfect illustration of the challenge that weather alone poses. A couple of days after the storm struck, wind generation was zero because the turbines would have been at risk of severe damage if operated while coated in ice. Solar too, was effectively inoperative for 24 hours per day, not just the usual 15 hours or so at that time of year. Meanwhile, the nuclear plant was humming along providing the bulk of the base load power needed, as were gas-fired and hydro generators. Damage to the distribution system was the major problem at the time, but renewable generators are demonstrably more vulnerable to the vagaries of the weather than conventional power sources. Moving goods across this country or operating any heavy industry would be staggeringly difficult without fossil fuels, particularly during the dark and cold of a Canadian winter.

The Prime Minister and other members of his cabinet and caucus are fond of explaining or justifying their policy positions with trite comments along the lines of, “this is what Canadians expect us to do.” There is clearly widespread support for some sort of action on climate change but it is hard to believe that Canadians expect the Trudeau Liberals to decarbonize the country at any cost and all for the sake of reducing Canada’s share of global emissions to something like 1% instead of 2%. The collective and individual sacrifice required will be enormous. Considering the absence of any true successes on this front anywhere to date, there is little reason to believe the transition, as promised, will create new wealth and countless clean-tech jobs, or have any measurable impact on global temperature.

The present government has an obvious distaste for conventional energy projects to the point that it throws up roadblocks like posting arbitrary bans on tanker traffic or declaring, without consultation, certain wild areas as off limits to pipelines, just because. They also show a marked lack of enthusiasm for those projects that have already been approved or are nearing approval.  They simultaneously talk up Canadians’ expectations regarding process reform, broader dialogue (at least among the like-minded) and the need for social license. It would be encouraging if, instead of hosting public fora with keynote speeches delivered by fabulists, the government spent more time actually examining the evidence available and the Canadian reality of a difficult climate, vast geography and resource potential.

If the government wants a starting point for an energy strategy that can be articulated in a document it might consider:

  • That natural gas is a welcome substitute for coal in the near- to mid-term. Canada could make a meaningful contribution to achieving global, rather than just domestic, emissions targets by prioritizing the construction of pipelines and LNG terminals on its west coast to service rapidly growing Asian markets;
  • That our northern latitude and the relative low levels of insolation the country receives dictate limited or no investment of public money in solar technology. Let markets decide if solar can compete rather than backing an also-ran with taxpayer dollars;
  • That battery back-ups, pumped storage, or other power storage technologies will only partially mitigate the problems posed by intermittency and will also add significantly to the cost of building and operating wind and solar generators. Just as for solar, let markets decide if wind can compete rather than forcing taxpayers to subsidize high cost, unreliable power options;
  • That it will be impossible to decarbonize without using nuclear power generation. Canada’s CANDU technology has safely and reliably provided carbon-free power for decades. It is time to invest in the next generation of nuclear reactors. Canada has been sitting idle while other nations are researching thorium molten salt technology which, it should be noted, does not produce weaponizable plutonium as a by-product. China is moving aggressively to add more nuclear power. If Canadian taxpayers are to be asked to subsidize anything in the decarbonization effort, it should be nuclear power. The fundamental difference between nuclear and renewables is that nuclear works while wind and solar are technological blind alleys;
  • That the oil and gas industry in Canada has made, and continues to make, huge strides toward cleaner, lower emission, and more efficient production. Oil sands producers have a strong history of research and development and have steadily reduced the environmental impacts of bitumen mining. The industry has been responsive to public concerns and deserves the support of the national government both domestically and abroad;
  • That security of supply, competitive pricing, and fitness for purpose as objectives for an energy strategy are no less important than the need to decarbonize;
  • That Canada’s regulatory processes are robust and have served the country well. Technical expertise, i.e, being able to evaluate the safety, quality of engineering and the alignment of a project’s benefits with the national interest, are within the purview of regulators. Issues of gender diversity, incorporating non-technical, “traditional knowledge” and considering the impacts of end-user consumption are not. The outstanding safety record of regulated transportation networks in Canada provide ample evidence of the quality and integrity of the regulatory process. The government should, in plain language, identify what specifically is meant to be wrong and what exactly it is they are trying to fix. It looks suspiciously like their wish is to “fix” the outcomes of these processes so that they more closely align with their ideologically-driven, activist agenda;
  • That carbon taxes are just taxes by any other name. British Columbia’s much touted tax has done very little to change behaviour in the province, which is the primary reason for having such a tax. Over the past few years, British Columbians, like other Canadians, have been buying thirsty full-size pick-ups and other light trucks in record numbers. If the province’s carbon tax had been effective, surely sales of light trucks would have declined. Introducing a carbon tax and then using the revenue to support arbitrary choices made by the government, which is what Ontario is planning with its planned cap-and-trade scheme, is terrible public policy. A properly applied carbon tax should supplant all the other de-carbonization regulations and subsidy schemes. Either regulate to achieve a desired outcome or de-regulate and replace all the other schemes with a tax and let the market work its magic. Otherwise, this is just another tax standing in the way of the middle class and all those who are trying to join it.

Canadians deserve sound policy and honesty from their government. On the energy file it appears they will continue to receive muddled, ideologically skewed policy and endless obfuscation. Is that what Canadians want, or is it simply the best that they can expect from the high-minded Trudeau Liberals?

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