Living Better Electrically?

When General Electric Corporation coined that slogan in the late 1950’s it is unlikely that they envisaged a world where virtually all energy end use would be fully dependent on electricity. But that is the vision now dominating many climate change discussions as societies look to what a very low or zero carbon future might look like. Does this make any sense? Maybe, but it depends a lot on how you go about it and when.

The case for is simple: A lot of GHG emissions come from so-called distributed combustion – multiple sources in transport, buildings and industry - and if the combusted fuel is a hydrocarbon there is no plausible GHG mitigation technology aside from increased efficiency. On top of that electricity at end use is very clean, usually very efficient and flexible.

The case against starts with the fact that electricity only delivers about a fifth of end use energy  in Canada today so the transformation, including completely remaking our energy delivery infrastructure, would be massive and unprecedented. Conventional fuels, especially natural gas, are also flexible and clean and they are often very efficient at end use, especially in heating equipment. And they are economical. And there is the real rub.

The new clean electricity system of the future doesn’t look like it is going to be cheap. Cheap hydro is a thing of the past and other renewables are still expensive. In a world of rampant “social licence” the timing and cost of new electrical infrastructure is going to shock a lot of people. And if that infrastructure has to expand to provide all the energy value now accounted for by fossil fuels then the economy may end up being electrocuted before it is electrified.

So let’s all take a deep breath and think this through. Electric cars may well start to take a big piece of the market with lots of potential benefits but they won’t do it without an argument from the people leading technological change in internal combustion engine technology including hybrids. Electric heat may make sense if you have the physical conditions that allow you to enjoy the efficiencies of a ground source heat pump or if it is make up heat in a super high efficiency building. Electricity for process heat may or may not make sense for many industries but that decision probably belongs with their management.

Forcing the electric revolution through technological determinism is – simply put – a really bad idea. Driving it through pricing mechanisms is quite the opposite.

In the face of a carbon tax of – say -$50/tonne escalating gradually to twice that, there will be a race between the electrics and the conventional engine proponents and may the best technology win. Or the bio-fuels community may get there first, at least if they can get over their habit of relying on public subsidies. Faced with meaningful carbon pricing and reputational challenges, industries such as oil and gas may opt for new energy sources including new hydro from throughout western Canada as outlined by CERI in a research report issued last January. Most heating applications are a long way from shifting to electric; recent calculations from the gas industry suggest that the implied carbon price could be well north of $1000/tonne. Even the Ontario government with its appetite for fabulously high implicit carbon pricing on its electricity system appears to be climbing down from that idea. 

Electricity will most likely take a growing share of end use energy markets over the coming decades provided that costs and challenges to building new infrastructure can be managed. But it won’t get the world or Canada anywhere close to zero carbon by 2050 or even well beyond and it is time that governments faced up to that inconvenient truth.

Forced by governments making technology choices or trying to ramrod infrastructure into reluctant communities, the electric transformation could come about even more slowly as the mistakes pile up and public and consumer resistance actually grows. On the other hand, driven by carbon pricing that is visible and understood by consumers and investors, who knows what might happen? The revolution might be made up of much higher efficiency, bio fuels and even carbon capture as well as more electric applications. But I would rather bet on markets and technology developers than on governments to make that call even if it means we don’t look like we are trying to meet targets that we won’t likely meet anyway.

Questions for a Productive Energy Dialogue in Canada

Facing a multitude of stresses, strains and opportunities, Canada needs a productive energy dialogue. Yet, if we want to make real progress in such a dialogue, there are some tough questions that we need to be willing to ask. How do we generate an honest public debate on climate and energy in place of the denial of energy realities every bit as much as climate realities? How do we respect the role of citizens and local communities in determining our energy future while restoring public confidence in provincial and federal institutions?

Start with climate change. Almost thirty years after the emergence of the climate debate, the public discussions on energy and climate continue as if they were being conducted on different planets. At the international level we have, on the one hand, a base case outlook from the International Energy Agency that sees emissions growth of 16 percent from 2013 to 2040. On the other, the same governments who are members of the IEA have cheerfully adopted a goal of holding warming to 1.5 degrees Celsius by 2050 which would mean a drastic reduction in emissions worldwide with correspondingly reduced demand for coal and oil and even natural gas. Very rarely can one find a conversation in which those two realities are connected. Canada is not an exception.

Somewhat refreshingly, earlier this month Canadian environment ministers noted that the underlying trend in Canadian emissions implies growth (albeit modest), not decline. What the environment ministers did not say was that to meet any of the 2030 national targets being bruited about implies a significant change in trajectory. At the very least Canada would have to very quickly adopt policy action of much greater weight than we have seen even from Ontario with its coal phase-out or BC and Alberta with their carbon taxes. 

If governments find the political will to act in ways commensurate with their aspirations and commitments, then we are looking at radical increases in carbon costs either directly through carbon prices or indirectly through regulation. Yet are we willing to tell consumers that their energy prices will need to go up by 100 percent or more to meet our 2030 GHG commitments? Are we willing to absorb or mitigate the effects on high energy intensity industries that are already subject to pressure from cost and global competition?

If the political will does not follow the stated ambitions, that may compound the already malign effects of low public confidence in both the energy industry and in policy makers.

Indeed, public confidence or “social licence” has become the issue du jour in Canadian energy circles. The old way of doing things necessarily had to change. Canadian communities had clearly reached the point where they would not be passive hosts for energy projects whether pipes, power lines, power plants (of any sort) or oil and gas operations. But a necessary corrective risks turning into a rout in which “communities” become the granters of “licence”; and traditional permission granting authorities – governments and regulatory bodies – are reduced to being observers or simply one of the steps along the way to a wildly risky future.

Meanwhile the centrifugal tendencies in Canada seem to be growing. Provincial and municipal government leaders – in many parts of Canada - make pronouncements about energy infrastructure that appear to belie any familiarity with Canada’s 1867 constitution. What if the bargain of Canadian confederation included a provision along the lines of the following?

“All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces” (implicitly, such a clause would guarantee transport across and through other provinces equally free of unreasonable hindrance)

It turns out that we have such a provision, just no agreement that it matters any more.

If every province and every “community”, including several hundred increasingly “sovereign” First Nations governments all find themselves with an effective veto on energy projects then we are hardly a country any more.

Our challenge with respect to public confidence is to restore confidence in the institutions that actually make this country work, starting with the constitution.

The federal government’s announcement on temporary measures respecting energy approvals was probably a necessary antidote to the growing chorus of vocal opposition to the National Energy Board. The five principles[1] outlined by the government , if used the right way, could help guide Canada to some common sense outcomes - although they could also lead us down some blind alleys.

In any event, the deeper problem is the need to rebuild confidence in the whole institutional structure both within provinces and at the national level and do so while keeping processes functional and efficient. All energy regulators in Canada know this and most are hard at work looking for solutions. 

For some time into the future most energy decision processes will be slower, more costly and more uncertain. Yet rebuilding public confidence in public institutions, sustaining investor confidence in Canadian energy resources, reducing greenhouse gas emissions and moving closer to the leading edge of technological change are actually mutually compatible objectives as long as we approach them with common sense and realism about what is achievable through deliberate policy and in various time frames.

Finding the path forward will require a certain amount of political courage and that in turn requires a public debate which generates more light and less heat.

This blog post is based on Mike Cleland’s speech at the Energy Council of Canada: Canadian Energy Industry Updates and Insights on 2 February 2016.

[1] The five principles consist of:

     No project proponent will be asked to return to the starting line — project reviews will continue within the current legislative framework and in accordance with treaty provisions, under the auspices of relevant responsible authorities and Northern regulatory boards;

     Decisions will be based on science, traditional knowledge of Indigenous peoples and other relevant evidence;

     The views of the public and affected communities will be sought and considered;

     Indigenous peoples will be meaningfully consulted, and where appropriate, impacts on their rights and interests will be accommodated;

     And, direct and upstream greenhouse gas emissions linked to the projects under review will be assessed.