Natural Resources Committee on June 10th, 2024

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

How much per kilowatt hour would it cost to do that? Would there be increases?

[Alex Simakov]

I think we want to be clear as well that when we talk about new capacity right now, storage is the cheapest, at $682 a megawatt business day, but that's not cheaper than an existing asset that's already built and paid for. Certainly, we're not going to get the economies of an asset that's been fully capitalized. That's just realistically not how any market or any energy resource would work.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Okay. There will be some stand up costs still to come.

Mr. Bennett, your organization put out a paper saying the following:

While Canada has the potential to have a clean, modern net-zero economy, it is incumbent on the Government of Canada to communicate the trade-offs to be made to achieve our net-zero aspirations. Achievement of this goal will come at a cost—in terms of energy rates, equipment investment, and energy development.

Tell us more about the “in terms of energy rates”, please. What would that look like?

[Gilbert Bennett]

The impact on energy rates from a substantial investment in new equipment and new technology in our view is going to have an impact that needs to be looked at very carefully. You're looking at assets that today have been amortized over decades. As I said in my remarks, we're talking about replacing that entire infrastructure over again in the next 25 years.

We have not done rates analysis, but it's reasonable to conclude that there will be upward pressure on rates when you spend $1.5 trillion to $2 trillion on new electricity infrastructure for our country.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

Thank you.

[The Chair, Liberal, George Chahal]

Thank you.

We will now go to Mr. Majid Jowhari from the Liberal Party of Canada.

You have five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Welcome to all of our witnesses. Thank you for your testimony.

I'm going to start with Mr. Simakov from Energy Storage Canada.

You rhymed off three numbers very quickly. I did try my best to write them down. You talked about 24%, 40% and 90%. Can you quickly highlight what those numbers are again? My apologies that I wasn't fast enough. I would like to get a reminder on what those numbers are.

[Alex Simakov]

Sure. No problem.

The first number is 24%. The cost per megawatt business day from last year's procurements to this year's decreased by 24%. They're 24% cheaper.

The second figure is 40%. The 1,782 megawatts of clean energy storage procured came in at $672 per megawatt business day. That is 40% of the cost of the gas assets that came on. Those gas assets were 411 megawatts of natural gas and biogas generation. That averaged $1,681 per megawatt business day.

The last figure is 90%. Of the 10 clean energy storage projects, nine of them featured first nations equity of at least 50%. Many had more than that.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you for that.

As a result of that, you said, energy storage will be the cheapest method for electricity. You then talked about Ontario being the third-largest jurisdiction in North America in terms of leading the storage. Is that true?

[Alex Simakov]

There are two points here. We are the cheapest new capacity. I would stress that we are not cheaper than existing capacity assets, but yes, we are the new cheapest, if you'd like to build any new additional capacity.

As far as other jurisdictions are concerned, Texas is the leading one and California is second. Ontario will be third once this procurement is built.

[Majid Jowhari, Liberal, Richmond Hill, ON]

You said that some enablers would be sufficient transmission capacity, tax incentives, interprovincial interties and balancing the phase-out of the gas plant. I'd like to get your input around the regulations of energy storage.

This is according to the Canadian Renewable Energy Association:

Most jurisdictions in Canada lack a clearly defined legislative and regulatory context to guide the participation of energy storage in the electricity system. This barrier can prevent these jurisdictions from taking full advantage of energy-storage solutions in a timely manner to advance the energy transition.

What are your thoughts on that?

[Alex Simakov]

That's accurate.

I would like to point out two things. Historically, we've had either generation assets or loads for consumers. Energy storage as a bidirectional resource can do both and needs regulatory reforms.

I'd like to recognize Ontario and most recently the Province of Alberta, which, under Minister Neudorf, recognized energy storage resources as a distinct resource class. That's been a major improvement and will be an essential ingredient for the restructured electricity market consultations currently under way for Alberta. Those two provinces are at the forefront. Other provinces do need to effect some regulatory reforms to fully recognize the capacity of bidirectional energy resources.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I have about a minute to go.

You talked about jurisdiction and that they're leading on that. Can you share one or two your recommendations around regulation that would complement the tax incentives and interprovincial interties to be able to expedite the storage?

[Alex Simakov]

From the federal government?

[Majid Jowhari, Liberal, Richmond Hill, ON]

Yes.

[Alex Simakov]

From the federal government, I would suggest that for large infrastructure projects—for example, the long-duration energy storage—one way to maximize bids and competitive pressures would be to allow a stipend for qualified bidders who put forward a viable project but aren't successful.

For example, Ontario will be leading a long-duration energy storage procurement next year. It's only the third in the world. It's very expensive to put together a bid and to compete. Not everyone is going to win, but if they know that there will at least be coverage of their costs put forward, Ontario will see a lot more competition come forward and ultimately see lower rates for ratepayers.

At the moment, there isn't a provincial mechanism to finance this. If the federal government were to step in and cover a portion of those costs—we're talking in the tens of thousands of dollars—we could see savings in the many millions through increased competition and global pressures.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Liberal, George Chahal]

Thank you, Mr. Jowhari.

We'll now go to Monsieur Simard for five minutes.

[Mario Simard, Bloc, Jonquière, QC]

Thank you, Mr. Chair.

Mr. Bennett, since we don't have a lot of time, we may send you questions in writing if we need more information.

I must confess my ignorance. I'm not very familiar with hydroelectricity producers outside Quebec.

Can you provide the committee with the number of existing hydroelectric facilities and the number of projects in development?

[Gilbert Bennett]

Yes, absolutely, we can provide that.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

The last recommendation you mentioned in your presentation was about working to address barriers to electrification.

Can you give us some examples of those barriers?

[Gilbert Bennett]

Some examples that come to mind are local building codes and standards for electric equipment. For example, in Ontario, most recently there's been a debate about whether the electricity service for new residential construction should be able to accommodate an electric house instead of a natural gas heated house. We would say it's cost effective to make sure that new building stock is built to be electrified, providing a service to the garage for an electric vehicle down the road. It's much easier to do that with a new house than it is to call an electrician to come back and do it later.

We think there are cost-effective approaches that could be used, and those happen at the provincial level in building codes and the municipal level in terms of by-laws. Municipalities that have made decisions to limit the growth of natural gas for new residential construction are helping to facilitate an electric future, so we would support that.

Anytime there's an opportunity to use more electricity, we think that's a good thing.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

If you have other examples of things that could be done to better support electrification, you can send them to us in writing.

Mr. Bennett, Hydro-Québec recently announced that it planned to invest $100 billion in its system by 2035, if I'm not mistaken. That means the clean electricity investment tax credit the government announced in the last budget is quite timely. However, I see many of the requirements as problematic, especially the rules around labour and the obligation to return savings to customers, which is almost impossible for Hydro-Québec to do because it can't pinpoint the specific basin the electricity came from. Considering all of Hydro-Quebec's facilities, I don't see how it would be able to do that. What's more, in Quebec, the rates are set by a board.

Does your association think the requirements for the tax credit are flexible enough?

[Gilbert Bennett]

No, we don't. We think they're overly restrictive. We believe the rules and limitations on what should be an incentive are unnecessary. If our federal policy is to promote investment in electrical infrastructure, whether it's generation, transmission or smart distribution systems, then those should be structured as an incentive. We find there is an addition of unnecessary conditions that ultimately slow investment down, slow projects down. We think that is not helpful if we're to achieve this goal rapidly.

[Mario Simard, Bloc, Jonquière, QC]

Thank you.

Now I have a very short question for all the witnesses. A simple yes or no will do.

If we want to move towards electrification and develop a clean electricity sector, do you think carbon pricing is necessary?

Let's start with you, Mr. Bennett.