RNNR Committee Report

Communities vary in size, structure, resources, laws, and opportunities across Canada, leading to a wide array of considerations and no standard approach to integrated energy planning. The following themes present the most prominent and recurrent issues brought forward by witnesses throughout the Committee’s study, with varying repercussions for different communities.

Technology

Integrated energy systems entail interconnected rather than individual technologies. The right mix of options and configurations could generate better results than the sum of otherwise individual yields, and go far in supporting more dependable and resilient systems.[22], [23] For example, energy from sources such as wind or solar energy could be used more effectively in conjunction with energy storage technologies to regulate fluctuations in energy supplies and demands.[24] In practice, multiple technologies—both conventional and alternative—are required to deliver the energy requirements of most Canadian communities. A brief selection of alternative technologies illustrates key challenges and opportunities associated with community integrated energy choices.

Small Wind Systems

Wind power in Canada mostly comprises large wind systems (i.e. 80-metre tall turbines for utility scale transmission), which provide about 1 percent of national electricity. For the purpose of integrated energy systems, small wind systems (under 300 kilowatts per turbine) present additional opportunities and different challenges:[25]

1. Small-sized residential systems (1-10 kW) cost about $6,000 and provide 10 to 20 percent of household electricity needs in a good wind region. As few as 300 to 400 systems are installed in Canada, mainly due to environmental rather than economic interest. Utilities and governments offer no incentives to recognize the benefits of these systems, and connection costs to the grid often exceed the initial cost of the technology.
2. Medium-sized commercial and farm systems (10-100 kW) cost between $180,000 and $200,000, and can provide over 50 percent of the electricity requirements of a medium-to-large dairy farm. There are about 70 to 100 of these systems in Canada, mainly due to the economic investment they represent to many farmers by gaining them independence from the grid. Out of the 10 global manufacturers of these systems, half are Canadian, selling mostly overseas. The benefits of small wind systems are likely to increase with the growing electrification of rural communities in Canada and around the world.
3. Large wind and wind-diesel systems for remote communities (50-300 kW). On the island of Ramea, Newfoundland, six 65 kW turbines provide about 80 percent of the population’s electricity requirements. In Canada, over 300 northern remote communities rely on diesel generation, which costs anywhere between 25¢ to $1.50 per kilowatt hour (15 times higher than rates in the south) and causes air pollution and diesel spills. Half of the global wind-diesel expertise is Canadian, again, applied mostly overseas. An investment of $51 million could provide about 10 percent of electricity in Canada’s north.

There are generally no incentives that recognize the benefits of small wind systems. Aside from their environmental benefits, small wind systems generate local employment opportunities and reduce energy transmission losses due to their proximity to energy demand. Wind is a human-resource intense industry. In Germany, it employs 64,000 people and represents the second largest consumer of steel after the automotive industry. In Canada, the wind industry (mostly large wind) employs about 4,000 people.[26]

Between now and 2020, about $1 trillion dollars will be invested in the wind industry globally, which could further distinguish competitive advantages between global market players.[27]

Heating with Biomass

According to the experience of the Quebec Federation of Forestry Cooperatives, heating institutional buildings directly with forest biomass could produce 15 units of thermal energy for one unit of oil (the ratio is 1 to 4.6 for ethanol and 1 to 6 for pellets), which represents “virtually all the energy available from the resource.” Leftover, locally available forest biomass could be exploited, providing an opportunity for communities to support their own needs. An investment of about $1 million per site could install the necessary furnaces and material storage facilities.[28]

Heating with biomass in place of oil has been an important factor behind Sweden’s 7 percent reduction in carbon dioxide emissions. Heat is produced at high enough temperatures such that “all gases are burned and steam emissions and dust levels are very low.” In Quebec, the industry achieved supply costs slightly lower that 3¢ per kilowatt (compared to 8¢ for electricity and over 11¢ for fuel oil) in short supply cycles. For every 500,000 metric tonnes of biomass, one job is created.[29]

“Biomass for [the] institutional heating sector virtually does not yet exist in Canada,” and the technical expertise required to support it is deficient.[30] Biomass can also be used as a renewable source in central district heating, as outlined by the Dockside Green project in Victoria, British Columbia. The project will connect each building to a greenhouse gas neutral biomass district heating system, which uses biomass gasification technology to gasify local waste wood in order to eliminate particulates during combustion.

Geothermal Technology

Thermal energy, which accounts for most energy consumption in Canadian communities, is lost in significant amounts in conventional energy systems. Using geothermal heat pumps, thermal storage and ground heat exchangers, geo-exchange[31] technology represents an opportunity to harness and redistribute a portion of heat losses, thereby raising the overall efficiency of energy systems.[32]

Canada’s GeoExchange industry underwent unprecedented growth as a result of the Canadian GeoExchange Coalition (CGC) Global Quality GeoExchange Program, which focused on training, accreditation and certification. About 3000 industry stakeholders were trained on Canadian standards and best practices in the past 2 years, and 1000 CGC professionals received accreditation.[33]

Sustained by strong financial incentives in the residential retrofit market, the geo-exchange industry reported at least 50 percent of solid annual growth in each of the past two years, generating a minimum of $250 million in direct economic activity in all of Canada’s regions, mostly in the residential sector. Large scale projects in the commercial sector are also increasing steadily reflecting stakeholder awareness to both the benefits of GeoExchange technology and of the CGC Quality Program.[34]

Despite the feasibility and growth of geo-exchange technology, the industry faces a number of market barriers. The standard for geo-exchange installation and design has not been revised since it was developed about 15 years ago, and does not reflect the current reality of geothermal markets. This lack of an up-to-date standard makes it easy for geo-exchange technology to get outlawed at the municipal level in favour of other options with higher standards. Other market barriers are caused by the general disinformation about geo-exchange technology and reluctance to divert from conventional practices; financial issues related to investment timing with capital stock turnover and the lack of adapted financing; supply issues for new technologies and equipment; and shortages in trained labour.[35]

Green Building

In Canada, the operation of buildings generates between 30 and 35 percent of greenhouse gas emissions (48 percent if building material is to be included). Two noteworthy building approaches apply an integrated design strategy, using various conservation and efficiency principles (e.g. climate-responsive design; heat and drain water recovery; and healthy building material):

• The Net-Zero Energy Home Approach targets designs that produce “at minimum, an annual output of renewable energy that is equal to the total amount of its annual consumed/purchased energy from energy utilities.” [36] Net-zero homes are “grid-tied,” establishing homeowners as both energy consumers and producers.[37]
• The Leadership in Energy and Environmental Design (LEED) Standards. Canada’s first platinum-certified building, at the Parks Canada Gulf Island Park Reserve, uses one-quarter the energy of a similar conventional building and saves 32 tonnes of greenhouse gas emissions annually. LEED certified projects cost between 3 to 4 percent more than conventional buildings, with a payback period averaging between 3 and 5 years, depending on the energy prices in a given year. LEED are unregulated, voluntary standards.[38]

The cost of energy efficient building will decline as the availability of technologies increases and builders become more familiar with efficiency and conservation principles.[39] Retrofitting represents greater opportunities than new-building since only about 3 percent of building stock changes in Canada annually.[40] It is however less expensive to build new than to retrofit existing buildings.[41]

Smart Grids

A smart grid is a series of initiatives brought about by various organizations to bring together elements of the electricity system (i.e. production, delivery, and consumption) closer in order to improve the overall system operation, and facilitate the integration of distributed generation, renewable energy sources, and energy storage technologies. For example, smart grids could offset variability in renewable energy production (e.g. periods of excess or low wind production relative to demand), activate demand responses when supply is insufficient, and reduce congestion on transmission and distribution lines. Smart grid technology has the capacity to anticipate and address problems before they lead to outages, and allow consumers to control their electricity use in response to price-changes and other parameters, thereby promoting energy efficiency and conservation. According to Gridwise, a U.S.-based alliance of electricity stakeholders, “a $16 billion investment over the next four years would trigger smart grid projects worth $64 billion [and create] 420,000 direct and indirect jobs.”[42]

Figure 2: Smart grid illustration

Source: Electric Power Research Institute.

Smart grids are still in their infancy, and their development requires a multiplicity of technologies with different costs and potentials for commercialization. Moreover, enabling the exchange of information between new and existing technologies is a “substantial” technical challenge, as pointed out by the Ontario Smart Grid Forum.[43] According to Joanne McKenna of BC Hydro, smart grid technologies “are all in the future… potentially 10 to 20 years out.” Nevertheless, Ms. McKenna points out that current community planning must account for such futuristic developments.[44]

Land-Use and Infrastructure

In Canada, the layout of most communities, which is an integral factor in determining energy-use patterns, materializes in “cookie-cutter” plans according to development and building codes, property taxation, and land-use zoning. Conventional practices lead to inefficiencies in both energy supply and demand. For example, more distant electricity supply sources result in larger losses in energy transmission, and buildings are typically bound to the role of “energy consumers” and do not often contribute to energy supply. Alternative combinations are difficult to achieve with conventional planning.[45]

Many communities, including small towns, provide a context for shared systems and conservation opportunities, with the exception of residential suburban and rural sprawls.[46] According to Thomas Mueller, President of the Canada Green Building Council, per capita greenhouse gas emissions from Canadian cities rank higher than their European counterparts, mainly due to Europe’s generally more compact and integrated urban structures.[47] Penny Ballem of the City of Vancouver confirms that compact, mixed-use planning enables public and active transportation[48] and justifies the economics of district heating and renewable district energy systems.[49] The sprawl of urban regions is a central contributor to inefficiencies in energy supply and demand patterns and to greenhouse gas emissions.[50]

The existing regulatory framework of most communities is a hindrance to integrated land-use and energy planning. According to Christopher Bataille, Director of M.K. Jaccard and Associates Inc., property taxation systems favour sprawl over intensification by not accounting for the added costs of low-density housing (i.e. sewers, water pipes, and electricity infrastructure).[51] Glen Murray, President of the Canadian Urban Institute, reiterated the same view, adding that supporting low-density, unserviced developments—which are also less economical to service—undermines the competitive advantage of high-density, mixed-use districts, and by extension, the feasibility of integrated energy systems. In New Zealand, property taxation encourages taller building and retrofit projects by taxing lands and collecting unit charges on services, while leaving buildings “virtually untaxed.”[52]

Other recurrent issues confronting integrated energy planning include “unclear” provincial policies and standards; federal stimulus packages that target specific technologies and require “de-bundling” when applied to integrated projects; and monopoly issues with utility companies that discourage connecting individual power sources to the grid.[53]

Economic Considerations

As pointed out by Atif Kubursi (Economics Professor at McMaster University), integrated energy systems result in direct, indirect and induced economic impacts that should be analysed in consideration of numerous factors and consequences, including capital expenditure, avoided costs, the creation of employment opportunities, induced investements, etc. For example, a study prepared for the Ontario Power Authority demonstrates that conservation savings represent avoided costs that could be reinvested in the economy through general consumption when realized by consumers, and through increased investments when realized by businesses. These investments would in turn stimulate employment opportunities. As figure 3 illustrates, an economic impact analysis of four elements of an integrated energy system (energy efficiency, demand management, fuel switching, and customer based generation) shows that the sum of equipment and program costs (front) and total avoided costs (back) yield a positive net avoided cost (middle).[54]

Figure 3: Avoided costs, equipment and program costs of conservation programs

Source: Economic Impact Analysis of Integrated Energy Systems, presentation by Atif Kubursi presented to the Committee, March 31, 2009.

Despite the inherent economic benefits of conservation and efficiency, the financial viability of an integrated energy system depends on the cost and integration of available technologies. From a pure economic standpoint, the initial cost of some leading-edge technologies may be too high in the short-term, especially since capital cost tends to rise with efficiency.[55] For municipalities, where capital and operating budgets are separate, payback time is a particular challenge since savings on capital expenditure to purchase inefficient technologies would always be at the expense of costly life-cycle operations from a different budget and visa-versa.[56] While some technologies are closer to commercialization than others, the right combinations of options could reduce the total payback period.[57]

To facilitate the implementation of integrated energy systems, carbon pricing has been referred to by witnesses as a mechanism to encourage low-emission technologies. Jamie James argued that assigning a value to carbon would urge the private sector to add incremental financing to green projects which could advance the development of integrated energy systems. Jonathan Westeinde also supported the mechanism by outlining its potential to level the playing field and create a competitive landscape for both energy conservation and renewable energy sources, as observed in the European Union.[58]

Tim Weis argued that given the diverse provincial energy policies across Canada, the mechanism would yield unequal benefits in different regions of the country. For example, in provinces such as Quebec and British Columbia, where low-emission hydro power is already predominant, the development of other renewable energy technologies would require additional incentives.[59] Alan Meier added that getting the price right is crucial. If the carbon price is too low, it would result in lower effects on renewable energy than recently observed fluctuations in energy prices.[60] According to Glen Murray, an effective carbon pricing system must be part of a broader policy framework that includes cap and trade.[61]

Employment and Training

The diverse labour demands of integrated energy systems present a wide range of employment opportunities. In British Columbia, for example, the Energy Efficient Buildings Strategy is projected to create about 10,000 new jobs per year over 12 years (excluding re-spending due to efficiency savings), and a preliminary analysis of BC Hydro’s Distributed Generation projects estimates between 5,000 and 15,000 potential employment opportunities over 10 years through:[62]

• Direct impacts: onsite (e.g. construction, management, etc.) and offsite (e.g. fuel/fleet management, offsite assembly, equipment suppliers, etc.)
• Indirect Impacts: in supporting businesses (e.g. bankers, contractors, manufacturers, etc.)
• Induced Impacts: due to spending on goods and services (e.g. groceries, child care, etc.)

The lack of trained labour is a human resource challenge for the green building industry. As pointed out by Andrew Pride of the Minto Group, “there's a real lack of capacity in the [green building] industry today to provide the necessary equipment and the necessary labour to build high-performance buildings.”[63] Shortages in skilled workers also challenge the renewable energy sector, as illustrated by the Geoexchange Coalition which actively trains numerous industry stakeholders to meet the rapidly growing demand for geothermal energy systems. According to Elizabeth McDonald, the deployment of sustainable technologies or renewable energy generates economic activity by creating long-term local employment.[64]

Federal Programs

Natural Resources Canada undertakes a number of initiatives to advance community integrated energy planning, including:[65]

• Research and development (e.g. on technologies such as solar storage systems);
• A joint federal, provincial and territorial initiative to develop a cross-Canada “road map” of policies and programs with potential to support integrated energy approaches, and to think of ways to address the barriers facing areas in most need of additional support. The road map would act as a “guide” to communities of all sizes on how best to approach integrated community solutions in their different circumstances;
• A plan to develop a standard way to measure community-level energy use across 12 Government of Canada departments.

The Government of Canada supports a number of individual technologies and practices through the ecoENERGY Program (e.g. renewable heating, building retrofit, and renewable energy), although it is unclear how these individual subsidies would benefit integrated energy approaches and technologies.[66] The government also granted $550 million to the Federation of Canadian Municipalities to establish the Green Municipal Fund, which supports some integrated energy projects (e.g. community energy planning and district heating) through “below-market loans and grants, as well as education and training services.” Demand for the Fund across Canada exceeds the program’s limited resources.[67]

Throughout the Committee’s study, witnesses have suggested numerous approaches to improving existing federal policies and programs in order to make them more applicable to integrated energy systems. In particular, there has been a distinction between integrated funds such as the Green Municipal Fund and technology-specific subsidies as applied by the ecoEnergy program. The vast majority of witnesses indicated that technology-specific subsidies are difficult to use in an integrated energy context, mainly due to their limited flexibility.