The energy related events of 2010 raise questions and point to the obvious for the Canadian energy industry next year.  Canada really needs to develop and adopt an energy strategy.  Our federal, provincial and territorial governments need to get on the same page and work together on developing our enormous resources of hydrocarbons and electrons.  I see this as coherence on energy.  If it can be achieved, we will have the best and only way to ensure fairness among future generations of Canadians and a guarantee of long term prosperity and social unity. 

Let me explain what I mean by coherence among levels of governments and how we could get there.  It is a case of defining what is not happening. 

Hydrocarbons got a lot of media attention in 2010.  In fact, it was a tough year and our federal government was largely absent from the media coverage and the public debate.  The provinces carried the discussion and the fallout from the issues.  When the spring coverage of the gushing Deepwater Horizon oil well in the Gulf of Mexico finally ended, there was a perceptible shift in attitudes as Canadians became more aware of where oil comes from and how that commodity impacts on the economy and environment.  The development of oil sands as a resource and the importance of Fort McMurray to the Canadian economy also got a lot of play as the oil sands industry responded to environmental criticism.  Media attention around the exploration for shale gas in Central Canada brought natural gas into sharper focus for consumers who had never thought about the impact of the exploration and extraction of that fuel.  In all cases, the provinces carried the issues.

Same thing occurred for the electron side of the energy industry.  Electricity received some unfavourable attention because of the delays and costs of nuclear reactor refurbishments and the unanswered question of what will eventually happen to Atomic Energy of Canada Limited (AECL), the federal government`s crown corporation that designs and refurbishes nuclear reactors.  We still await word from the federal government on the fate of AECL.

Electricity got sparse attention as a subset of the aforementioned energy policy conversations, writ large. But the electricity industry does need to invest in environmentally sound options for generation, transmission and distribution. And here again, the federal government is not engaged.  On the positive side, many provinces found their footing with either the release of longer term development strategies for electricity and/or with confirmation that major projects will move ahead.  As we approach the end of 2010, consider the following as food for thought in 2011.

  • In 2010, the media started looking at the longer term with a better perspective on how electricity and climate change fit together.  While some progress has been made in building energy literacy, there is still a long way to go before Canadians can be deemed to be fully informed on energy.  The future price of electricity is finally being discussed.
  • The mid-term US election results made cap-and-trade legislation an improbability.  The US EPA will likely take a substance by substance (Criteria Air Contaminants) approach to deal with emissions from coal-fired generation.  Other emitting sectors will also be dealt with in this slow, awkward, inefficient and costly manner.  US industry will push back on the EPA and the Administration.  But what will Canada do?
  • Environment Canada is presently writing a regulation for CO2 emissions from coal-fired generation but could stop there and not target other sectors with regulations.  Are the cement, steel and forestry sectors just too trade exposed to be targeted in this way until the US takes action?  This idea of addressing one sector out of so many prompts me to question whether the regulation for coal-fired generation will be promulgated as proposed.  Also, while Canada is bragging at COP-16 in Cancun about being the first country to deal with the CO2 emissions from coal-fired generation, it has not made available real alternative options such as large hydro, nuclear and natural gas.  The industry needs a clear path to such options and that simply does not exist at the moment.
  • 2011 will either be an election year in Canada or part of the long lead up to the fixed date for the next general election in October 2012.  The overarching priority for the federal government will be job creation without committing federal tax dollars as the motor.  This means looking for major industrial and commercial projects to generate economic activity and for short-term job creation opportunities.  This is very political and must be regionally equitable and fair.  Electricity infrastructure projects could be the answer.
  • It is not clear what role if any the federal spending power would play in electricity infrastructure projects.  At one level, generation projects are strong regional economic development tools and they bring investment and jobs where they are needed most.  Some of the electricity projects could be launched sooner with some federal help directed at enabling transmission for example.  Conversely, the government of Prime Minister Stephen Harper has rarely ventured into provincial jurisdiction and is loath to do so. When, where, under what circumstances and under what conditions would the federal spending power be used?  We may have an answer in the next Federal Budget due in February 2011. In the end though, it will be vagueness of politics that determines if federal spending will land on electricity projects.

 

There is a new card about to be played that could help answer some of these questions.  The US President, the Canadian Prime Minister and the Mexican President are due to meet in Ottawa early in the New Year and cooperation on electricity is expected to be part of the agenda.  Much like the Clean Energy Dialogue and Action Plan that resulted from the February 19, 2009 visit to Ottawa by President Obama, an action plan will be produced as a result of this tri-lateral meeting.  

I expect this file to play out in December and in January leading up to the tri-lateral meeting in February-March.  The exact date is not as yet announced.  The federal government may see the tri-lateral meeting as reason enough to get involved in electricity projects that strengthen the grid.  In the end, this could be our best route to a Canadian energy strategy and coherence among the various levels of government.  Imagine that, an international driver leading to a much needed domestic strategy and framework on energy.  

 

Pierre Guimond

President and CEO

Canadian Electricity Association