Notes for a Keynote Speech by. Denis Tanguay. Executive Director Canadian GeoExchange TM Coalition. Future of Renewable Energy in Canada

Transcription

1 Notes for a Keynote Speech by Denis Tanguay Executive Director Canadian GeoExchange TM Coalition Future of Renewable Energy in Canada Renewable Energy North of the Boarder Conference organized by: Initiative for Renewable Energy and the Environment (University of Minnesota) And Consulate General of Canada (Minneapolis) Minneapolis, Minnesota May 11, 2006 Check against delivery

2 2 (Greetings) It is a real pleasure for me to be here today and share some thoughts on the state of the renewable energy industry in Canada. I have been known over the years as someone who usually makes provocative speeches and comments. Essentially, since I like being challenged when I listen to a speaker, I promise I will do my best to do the same today. Speaking last implies two very important things: first, to attempt to say intelligent things; second, to be brief and concise. I promise I will do my best to respect the second point but I will let you make your own judgment on the first. There is also one thing I now like to do when I attend a conference. It is to walk out of the room with at least one idea for a project to pursue. Renewable energy offers a very fertile ground for debates so I am sure finding potential projects will not be a problem. I was asked by the conference organizers to talk about the future of renewable energy in Canada. But before I give you my opinion on this question, there are a number of issues I would like to address first. This discussion will help set the ground for my answer. Although I could spend a lot of time talking about specific renewable technologies, my remarks will focus on renewable energy from two angles. The first is grid oriented and looks at ways to increase overall electricity supply. Wind, small hydro, biomass, landfill gas, tidal energy, geothermal are all seen as alternative electricity production technologies. Concerns about these technologies are essentially twofold: 1) how to bring the per-unit costs of production down to be competitive with traditional electricity supply; and second, 2) how to access the electricity grid. Very little attention is given to the consumer and how this renewable energy will be consumed. The grid oriented view is a pure supply approach. The second approach is more oriented at consumers as it focuses more on the services provided by the energy supply. Geoexchange, ground source heat pumps, passive solar and small scale solar PV are examples of such technologies. The energy services from these technologies are, for example, mainly heating, cooling and hot water production in buildings and to a lesser extent electricity production. Also, these distributed energy systems are not well developed although in many cases, the technology is mature and its efficiency well proven.

3 3 The future of many renewable energy technologies depends largely on the ability to integrate them into the national energy system, regardless to whether they use or not the traditional transportation and distribution infrastructures, but also how they are successfully integrated with energy efficiency. Producing renewable energy with new or emerging technologies, regardless of how the energy is going to be used, is an economic and environmental nonsense. It does absolutely nothing to develop an energy conservation culture. Providing heating and cooling for a building that looks like a colander is not, in my view, the most appropriate way to manage energy. Better and more energy efficient buildings will obviously influence the design and sizing of alternative energy systems. Similarly, energy efficiency measures will have an overall impact on consumption levels. By producing energy where it is needed, renewable technologies essentially bypass the energy transportation and distribution systems, making them more cost competitive and efficient. In addition, increased reliance on distributed renewable energy systems provides some relief on tightly utilized delivery infrastructures, while contributing in a potentially significant manner to the security of supply and diversification. The challenge for Canada and for the United States is not necessarily to put more renewable energy on the grid, but to optimize the integration of this energy into an efficient supply and demand environment. The full potential of most alternative forms of energy will come from such an approach. This is true in buildings for both heating and cooling. This is also true for mobile applications. For fleet managers, the increased use of biodiesel, ethanol or hydrogen makes little sense if not coupled with an internal energy management program aimed at improving the overall consumption level of the fleet. For example, using a hybrid car s gasoline only cycle to drive at 140 km/h on the highway is certainly not a sound energy management practice. It defeats the purpose for which the car was bought in the first place. *** A major challenge ahead for the emerging renewable technologies is to achieve mainstream recognition. In this regard, I believe one of the best model to follow is the wind industry, which successfully has became in a short period of time an important source of electricity supply. Wind energy is no longer considered as a marginal non-competitive alternative promoted solely by green activists. For example, in Canada, in the province of Québec, 90 % of the electricity is generated by hydro. The provincial government announced last week in its new energy policy that it will further develop its wind generating capacity to reach 4000 MW by In an already renewable energy dominated supply environment, wind is making a major breakthrough. This means that from a 100 MW of installed capacity in 2003, wind power supply will be multiply by 40 over the next 9 years, representing the equivalent of 10 % of Québec s peak demand. Wind power success was achieved for two reasons. First, the industry responded to energy demand with a professional and business like attitude and second, it was done at a scale manageable by electric utilities. Very often, renewable energy is not considered mainstream because it is site specific on a small

4 4 scale such as in the home or a small building. This is also generally true for most geoexchange systems, small PV, or solar thermal systems. Where it is economically feasible, wind has become an integral part of every conceivable energy policy or strategy developed by utilities and governments. Few policy makers will be insensitive to this technology. Wind power is at first glance more attractive because it provides electricity on a larger scale. So far, most utilities are only paying attention to this form of supply but it may well change in the future. Why then has the wind power scenario not been replicated for other renewable technologies? There are other proven technologies in the renewable energy industry. Further, there are many technologies that are also cost competitive. We have plenty of success stories to report. So, what is missing to make renewable energy more palatable to the consumers, the utilities and regulators? *** I would argue that the biggest threat to the renewable energy industry is the industry itself. Wind technology became a mainstream alternative when the industry got organized, became inclusive of all interested stakeholders, and implemented a professional market and government relations approach. As sad as it may sound, there are many market ready technologies that fail to emerge because of the industry s incapacity to carry its messages to decision makers and to the financial community. Despite the very positive environmental message they carry, many technologies also fail to make major breakthroughs because their spokespersons prefer to fight governments and policy makers, complaining they are not doing enough faster. Under these conditions, many technologies are doomed and will remain forever in the innovation valley of death. Unfortunately, and for some mysterious reasons, the renewable energy sector is plagued by individuals I refer to as "greenstremists" Not only do these people harm the development of the technology they claim to promote, but they also overshadow serious environmental organizations that are otherwise making an extremely valuable contribution to the energy debate. Another major impediment to mainstream recognition, and I mentioned it earlier, is the fact that many renewable technologies are essentially and often small scale and site specific. Many people involved in installing small renewable systems do not see the value of cooperation at a higher level because their main and often only concern is to see how best they can control the market within a radius of 10 miles around their shop. On the other hand, more important players are often only interested in maintaining their market share or preserving their market dominance rather than working at growing the market. These people should be reminded that a growing share of a declining market will not help them survive through time. Furthermore, emerging renewable technologies will only successfully penetrate a market if they do so on their own merits. This requires a lot of patience but also effort and imagination. Promoting renewable energy through energy substitution is usually not the right approach. This only serves the purpose of raising more barriers. The promotion of any renewable form of energy as a viable option, or even better, as a complement to the better use of a traditional form of energy, will certainly be a winning combination. Geoexchange

5 5 technology, for example, rather than being promoted as a displacement technology for electricity or fossil fuels, can be seen as a way to help electric utilities to manage their daily or seasonal peaks or for gas distributors to keep their customers and explore new business opportunities. There are so many ways to market a technology we should not be afraid to use our imagination. However, there is an obligation for all of us to better understand the market constraints that are impeding the emergence of renewable technologies in the market. There is also an obligation to understand the regulatory environment constraining a wider penetration rate for these technologies. Finally, there is an obligation to understand why energy consumers may or may not choose a specific renewable energy technology for their energy needs. In a recent book, for which he recently received the Donner Prize, a national award honouring the best book on Canadian public policy, Professor Mark Jaccard from Simon Fraser Unviersity, provided some interesting comments about the future of renewable energy: A continued role for fossil fuels does not preclude the development of energy efficiency, nuclear power and renewable energy, and can be complementary allowing these to develop at a pace consistent with R&D, technological change, capital stock turnover, wealth creation, improved security measures and relative cost evolution. This being said, if there are millions being spent on tax credits or tax breaks for fossil fuel exploration, similar treatment should be given to the renewable technologies. Per unit of energy on the market, fair treatment for all is what we need, nothing more, nothing less. But renewable energy industries should not wait nor rely on governments or public utility boards for their development. We are not in the corporate welfare business. Overall, we also need to refine our business approach and provide more solid economic arguments and understanding or renewable energy technologies. Finally, none of these technologies should be seen as a one size fits all solution to the world s energy problems. When I see unrealistic numbers on energy potential for renewable energies, I feel annoyed because I know I will have to spend hours and hours explaining the unexplainable. When promoting renewable energy, we should pride ourselves on being realistic rather than idealistic or political. A few years ago, when I was the CEO of the Québec Energy Efficiency Association, a journalist asked me what the energy efficiency potential was for electricity in the province. I responded in less than 2 seconds: Anywhere between 0 and 165 TWh. At the time, the total electricity consumption within the province was 165 TWh. Essentially, I meant that the potential depended on so many variables that he could pick any number and it would do the job. And these variables are so volatile that the potential is already outdated before you even think about publishing it. Asking about the future of the renewable energy industry is more or less the same. What matters is not the number or the potential or a target. What really matters is for every stakeholder within the industry to set an objective and to work towards its achievement. If we all do that on our own, and work with others who do the same, the outcome might be quite surprising. So, what about the future of renewable energy in Canada?

6 6 The intelligent response to such a question is that the future looks brighter than ever. Rising fossil fuel prices, tight energy supply, growing needs worldwide, increasing price volatility are all necessary and sufficient ingredients for the successful emergence of many new and alternative renewable sources of energy. Increased developmental activities in many provinces will obviously have an important impact on neighboring jurisdictions and we will likely observe a strong multiplier effect. Canada s two largest provinces recently announced policies or measures that will strongly contribute to the development of renewable technologies. On March 21 st, 2006, the Ontario government announced a standing offer for renewable energy, purchasing electricity produced from wind, biomass and small hydro at 11 cents per kwh. The most important point of the announcement was the purchase of solar energy at 42 cents per kwh. Last week, on May 4 th, the Government of Québec published a new energy strategy that also contained many positive measures for the development of renewable energy. As mentioned earlier, 4000 ME of additional wind power will be required and 4500 MW of new hydroelectric power plants are expected to be commissioned over the coming years. They also asked the Québec Energy Efficiency Agency to design and implement an incentive program for the expansion of the geoexchange technology in residential, commercial and institutional buildings. Finally, the construction of a cellulosic ethanol plant (using wood and agricultural biomass) is expected to be operational by 2008 with the objective of having an average 5% ethanol content in all gasoline in the province by Sustained demand for more electricity will also obviously set the pace for the growth in the renewable energy business. In addition, the North American power plant fleet is also aging and so are the transmission, transportation and distribution infrastructures. According to the International Energy Agency, the capital requirements for the North American energy industry over the next 30 years are estimated at more than US$ 3.2 trillion. I would guess there is plenty of room here to foster the development of renewable energy sources. I have always thought that the biggest challenge into making a speech or a presentation is to get the audience to leave the room with more questions in their mind than answers. Hopefully, I did not give you the answers you were looking for. I do hope however that over the next weeks and months, and using some of the things I have discussed today, that you will promote the renewable energy industry in a different way. That policy makers will take a new and fresher look at renewable energies and their role in the overall energy supply and demand equation. That regulators will force themselves to better understand the market dynamics of renewable energy technologies. That researchers will explore business opportunities and partnerships to commercialize their technologies more efficiently. The future of the renewable energy industry in Canada, in the United States and elsewhere in the world, lies in people s imagination. What is needed is for some individuals to be the catalysts of this imagination. In this regard, leadership is not something that is owed to you or something you beg for, but something you earn through action. Thank you very much for the invitation to speak to you today. It was a pleasure to be amongst you.