Natural Resources Committee on June 13th, 2024

[The Chair, Liberal, George Chahal]

Thank you.

That is a reminder for everyone. We still have a number of folks to go through in the rounds, but if anything is missed or asked for, you can provide a brief after the meeting to the clerk.

We'll now proceed to Mr. Angus for two and a half minutes.

[Charlie Angus, NDP, Timmins—James Bay, ON]

Thank you.

Ms. Hickson, I would like to speak with you about the potential you were talking about of 16,000 megawatts internationally. Canada doesn't seem to be really on the map in terms of geothermal, and yet what I find surprising is that I would think we'd have enormous resources. I see that the old Springhill mine, which caused such a human disaster, is being refitted for geothermal.

In my little town of Cobalt, I have at least six abandoned shafts on the hill behind my house. We have at least a hundred in the surrounding bush. In Timmins we have shafts that go down 5,000, 6,000 or 8,000 feet into very, very hot water, because the shafts have filled up.

Is that a potential for using geothermal, from the infrastructure from closed mining operations?

[Catherine Hickson]

Yes, absolutely. Another one is in Yellowknife, where there are two deep mine shafts. These are geothermal projects that are ripe for the picking. They're not being picked because you cannot make the finances work.

Why can't you make the finances work? A lot of it has to do with that upfront high CapEx that I was speaking about. For investors, essentially what geothermal is up against is providing that thermal energy through natural gas. When I answered the question about the carbon credit, it really was about that. Geothermal cannot compete against natural gas without that added bonus of essentially a carbon credit. That's what a geothermal project—

[Charlie Angus, NDP, Timmins—James Bay, ON]

I'm sorry. I have a very short amount of time here.

You're saying that, for example, for the old McIntyre number 11 shaft that my grandfather worked on, which is 6,000 feet deep and full of hot water, we can't just stick a pipe down and be doing heat transfer. That's the technology they tell me they can use at my house if I get a heat pump.

Why are the upfront costs so high to make something like that doable?

[Catherine Hickson]

It's because we're competing with natural gas. My guess—I do not know the specifics of it—is that your community probably already has natural gas pipelines in place. What we have to do is build a district heating system as well as recovering that heat. That's where the cost comes in.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Mr. Dreeshen for five minutes.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

Thanks to all of the witnesses. It's a very interesting discussion we're having this afternoon.

First of all, I'll go to Ms. Wong and Capital Power.

You spoke about the holistic cost of delivery and energy. Of course, in Alberta, most of the natural gas goes out to all the farms and all the communities. That network is already there. I think it's critical to talk about projects that are already in the ground. We have the same scenario in other provinces. They've developed their systems, and we're happy for them. We seem to have a bit of a concern, though, as we continue on our natural gas journey.

One of the other things—Mr. Simard mentioned this—is cost breakdown. That's something I would like all of the energy producers we're talking to today to give some thought to. Maybe you can give us this information.

There is a cost to all aspects of a project. I've always said it's important to measure the commitment—the greenhouse gas emissions and whatever it is you have to use from the first shovel that digs something up to the last shovel that covers it up. Yes, we have the use of it, and the length of time you're going to run a project. All of those things are important, but it's also important to make sure you analyze all the environmental aspects, because it's the environment we're dealing with. The greenhouse gas aspect is a thing that everybody wants to focus on, it seems, but it's the environment we're concerned about. I'm curious about whether we could look at that.

First of all, Ms. Wong, do you have those types of numbers available for, as I said, the full life cycle of projects you're engaged in?

[May Wong]

For some of the projects, we have some of the costs for the entire ecosystem.

One of the challenges in being able to quantify the holistic cost is information not always being available, and also not consistently being able to holistically look at the life cycle on an end-to-end basis. Many pieces of the value chain, and consideration of risk and opportunity, are part of the assessment, in terms of an investment process we look at.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much.

Mr. Balaban, I'll go to you as well, because you're primarily speaking on the renewables we already have in Alberta.

Do you have those metrics available for the different types of projects you work with?

[Dan Balaban]

I don't, unfortunately, have them available at my fingertips.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thanks.

Let me go to Ms. Hickson, then.

I think you've been talking about actual costs when we're dealing with geothermal. That's the part you've been dealing with. It's distribution, and transmission after that.

Do you have any figures you could share?

[Catherine Hickson]

In what aspect? Is it in terms of the total project investment?

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Basically. It's not just the investment, but also the actual types of work required to drill the shafts and do all of those other things.

What energy sources are you using to make sure this works? If a project has to be decommissioned, what are the costs associated with that?

[Catherine Hickson]

Geothermal has a very low decommissioning cost because it's not a pollutant in the same way hydrocarbons are. We don't have the orphaned well issue that you do with oil and gas—suspended wells and abandoned wells.

Maybe the best thing is the Alberta No. 1 project. We started that project in 2017. We are not able to move it forward because we have not been able to get the capital investment we need. Our target, in terms of the cost of power, is that we would like a power purchase agreement at $75 per megawatt-hour. Currently on the Alberta grid, the price of power is significantly lower than that, so the project is not yet economically viable.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

I'll go back to Mr. Balaban.

You spoke about the moratorium that took place in Alberta. Of course, it was there to establish a consistent legislative and regulatory environment. You said this caused grief because you had projects that were under way.

Were you part of the discussion? It says they had interested stakeholders meeting with the government. Is that part of it? Certainly, in connection with that reclamation security requirement, these were the things we were hearing on the ground that farmers wanted to know about. They wanted that sort of assurance.

Did you meet with the provincial government?

[Dan Balaban]

Yes. I've discussed some of my concerns, but just to be clear, I had no concerns with any of the specific things that were being evaluated. I think that in the context of a fast-growing industry, that makes sense, but the moratorium was unnecessary.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

[The Chair, Liberal, George Chahal]

Thank you.

We'll now go to Mr. Jowhari for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Mr. Chair.

Welcome to all of our witnesses.

Madam Hickson, I'm going to come back to you.

I was looking at the submission that was made to the committee from Geothermal Canada, which is entitled “Deep Geothermal Energy in Canada”. Paragraph number 2 says, “Deployment of the various types of geothermal systems in the spectrum is dependent on [the] local geological conditions, population/industrial requirements, decarbonization targets and other factors.”

Can you explain something to us? You've talked about the spectrum, and I think you've talked about three different technologies and you've talked about some of the recent ones, but can you expand on that one?

It's very interesting. The way I read it is that we could implement geothermal depending on where it would be in the jurisdiction. Province by province, we can go and do the analysis and recommend the type of geothermal. You also highlighted here the “population/industrial requirements” and “decarbonization targets”. Can you expand on those? Why are these required?

[Catherine Hickson]

They're required because of that high CapEx. Geothermal projects, unlike wind and solar, have a high CapEx and the return on your investment is.... Our financial modelling for Alberta No. 1 puts our return on investment at about 10% to 15% in that eight- to 10-year time frame. The problem with this is that we are competing directly with investors who are putting their money into hydrocarbons. Those hydrocarbon investments will pay significantly better ROIs than a geothermal project.

There needs to be a population that needs the power or needs the thermal energy. I already mentioned, in answering the other gentleman, that it's not just putting a heat exchanger down into a well; particularly in the case of thermal energy, we have to build a district energy system. Those district energy systems, because we're talking about digging up the ground, are expensive.

Again, we are competing in many localities across Canada with already built infrastructure that is based on natural gas. The best place to put in geothermal is in new development, where we can build that thermal energy requirement or extraction into a new facility.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay. That's great.

Can you give us a sense—

[Catherine Hickson]

Does that answer—

[Majid Jowhari, Liberal, Richmond Hill, ON]

Yes. That was great.

Can you give us a sense of the size of the CapEx that's needed?

Also, in your 10 points that you highlighted, in number 7, you're saying that “Although [they] have a high Capex...[it's] a very low OPEX”. Can you also give us a sense of the size of the CapEx and the size of the OpEx as compared to the others?

[Catherine Hickson]

I can't give you exact figures, but what I can say is that I was involved in the project with the City of Regina. They have put forward a geothermal project to heat with thermal energy only—no power—a very large aquatic centre. It probably doesn't mean much to you, but the geothermal system was to provide 22.7 million BTUs per hour for that aquatic centre. The capital cost of that was $25 million.

On the flip side, with our Alberta No. 1 project, we are looking at an investment of $100 million, but that is to provide over 83,000 megawatt-hours per year of energy. That 83,000 megawatt-hours per year is equivalent to basically 70 megawatts of solar or about 30 megawatts of wind to produce that same amount of megawatt hours, and that's not without....

The other piece in terms of the financials is that for the geothermal project, we don't need battery backup or the natural gas peakers. We are firm and can feed directly to the grid.

[Majid Jowhari, Liberal, Richmond Hill, ON]

I have only about 10 seconds. Can you tell me about the OpEx? You're saying the OpEx is very low. Do you have any numbers around the OpEx?