Good afternoon, Mr. Chairman, and honourable committee members. Thank you for the opportunity to talk to you today.
In addition to speaking on behalf of TransAlta Corporation, I'd also like to speak in a second role that I hold, which is the chair of the Canadian Clean Power Coalition in Canada, an industry-government group focused on developing new technologies for clean use of fossil fuels in the generation of electricity.
TransAlta is Canada's largest investor-owned electricity company, with a broad portfolio of fuels, both renewable and non-renewable. We do business in five provinces in Canada as well as the U.S. and Australia.
I'd like to focus my remarks today on the innovation in the generation of electricity as a key part of our business. Let me begin with the observation that the electricity sector has historically been slow to innovate. Historically, we construct large, purpose-built capital stock, largely determined by the region in which we're operating, and often driven by regulation which requires us to ensure the lowest cost power to consumers.
However, this paradigm is changing for several reasons.
First, the cost and performance of various generation technologies are converging. This is a function of newer technologies providing better performance and, in some cases, lower capital costs per megawatt installed. Generation companies like ours now have tougher decisions to make in selecting a technology and a fuel type that we will live with for the next 30 to 50 years.
Second, externalities introduced by governments in response to public demands have become much more important in the selection of generation technologies. I'm thinking specifically about environmental requirements and objectives to build more renewable energy.
These are admirable goals, but they do change the historic practice of utility companies, which has historically been focused on selecting the lowest cost near-term technology for consumers.
Finally, a factor of change is the introduction of new innovative generation technologies, which is accelerating in pace and complexity. Examples are long, but include things like high-pressure combustion, oxy firing, biomass torrefaction, gasification, underground production of syngases for power production, hydrogen-fired turbines, high-performance wind turbines, new run-of-river turbines, and tidal power, not to mention emerging thermal and PV solar technologies.
Let me note at this point that most companies in the electricity sector in Canada are not in the business of developing new generation technologies. In fact, the companies that do so are large international companies often much bigger in scale than utility companies here in Canada or for that matter in the United States.
What our companies do is focus on the adoption and cost-effective employment of these technologies. Let me give you some examples from TransAlta's perspective of how this might work to give you a sense of context.
We don't develop mercury capture technology, but through intensive experimentation, we have learned how to optimize its performance in terms of the use of catalysts and additives that result in lower costs and better performance.
We don't develop monitoring equipment for wind machines, but over the past two years, we developed, installed, and operationalized smart wind monitoring systems that have allowed predictive analysis on maintenance requirements, meaning less downtime, fewer major equipment issues, and a great ability to be able to predict problems before they occur.
We don't develop carbon capture technology, but we did lead extensive design work to explore and aggregate components, carbon capture, and pipeline sequestration; and enhanced oil recovery in order to understand the technical and financial aspects of carbon capture and storage.
We don't build coal-fired boilers, but we did develop a new device using digital radiography technology that dramatically changes our ability to check for boiler leaks during shutdowns, resulting in our ability to view not 100 pictures from radiology today but somewhere in the order of 17,000 pictures per day, and allowing us to again avoid potential future leakages and downtime.
That perhaps gives an idea of how many utility companies in Canada actually look at innovation and technology more as deployment as opposed to development.
Let me also talk about some of the work we are doing through the Canadian Clean Power Coalition. This coalition involves joint RD and D work, which also, by the way, has a partner, through the Natural Resources Canada CANMET laboratories. That is becoming a great partnership.
This organization, which I chair, is looking at things like biomass coal-firing, being able to reduce emissions associated with power generation in conjunction with other fossil fuels; and coal beneficiation, in order to improve coal, for example, before it's combusted, such that impurities are removed, emissions are reduced, and that sort of thing. Underground coal gasification is another area of study with this industry-government group, which has proven, remarkably, to be of interest to many of the members, in terms of being able to produce synthetic gas underground prior to production and use that synthetic gas as fuel for power generation. I believe that's a model for us to continue to look at new developments, in a joint and leveraged fashion, in the electricity sector.
Let me make a couple of points about things that drive innovation in our sector, or perhaps that sometimes don't drive them. The first is to know that, almost without exception, new generation costs more than existing generation on a megawatt-hour basis. This is important because utilities' traditional responsibility to keep electricity prices low creates an interesting dynamic as to whether to maintain and extend the lives of existing generation units and technologies as opposed to investing in new generation technologies that would perform better but at a higher cost.
This is not an issue to be taken lightly. In many jurisdictions in Canada, our sector is regulated by governments that are also the owners of the utility. Whether utility companies in these regions can adopt new, more expensive, generation is largely a factor of whether their governments will allow these costs to be added to the rate base. In more competitive markets, such as Alberta, and to some extent Ontario, this issue is slightly different. There, the markets determine the price and therefore the economics of alternative forms of generation of power based on supply and demand. Choice of generation fuels and technologies is made on forecasts of future power prices; the costs of fuel; and trade-offs between low-capital, high-operating technologies like natural gas, or high-capital, low-operating technologies like hydro.
Let me close by talking briefly about what we see as the role of government in supporting innovation in the electricity generation sector. I think there are some very clear areas where the government is already performing, and perhaps continued emphasis in these areas would be beneficial.
First of all, I would ask that the government continue to support participation in international trade and technology dialogues with other countries that develop generation technologies. I'm thinking particularly of the U.S., Japan, Korea, and Germany. Those have proven extremely useful to industry, in terms of maintaining an active dialogue about new generation technology; to us, as users and deployers in a cost-efficient way; and to those countries as developers of these technologies.
Second, I would encourage the government to continue support for the leading work being done by the CANMET laboratory of Natural Resources Canada. They are truly a world-class organization and are doing some brilliant work in terms of developing and exploring and researching new generations. I believe that work needs to continue.
Finally, I would ask that the government continue to support joint industry-government collaboration in specific areas of development, such as carbon capture and storage, wind technology, and through associations like the one I chair, the Canadian Clean Power Coalition.
I think there's also a role to ensure that our energy policy and strategy for the nation is consistent with and cognizant of environmental policies that we wish to install within the country.
We believe it's extremely important to make sure those things are done hand in hand as opposed to separate streams.
With that I'd like to close and I look forward to your questions.
Thank you very much.