Jason Switzer: Greening North America's Energy Economy: A Canadian ENGO Perspective
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Jason Switzer, Director, Corporate Consulting, Pembina Institute, spoke at the CEC Joint Public Advisory Committee's forum on Greening North America's Energy Economy in Calgary on April 25, 2013. More at: http://cec.org/jpacenergy
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Jason Switzer: Greening North America's Energy Economy: A Canadian ENGO Perspective
- 1. Greening North America’s Energy Economy A Canadian ENGO Perspective for the NAFTA JPAC Jason Switzer Director, Corporate Engagement & Consulting 25 April 2013
- 2. 2 Leading Canada’s transition to a clean energy future The Pembina Institute is a national non-profit think tank that advances clean energy solutions through research, education, consulting and advocacy.
- 3. 3 X Mexico -12% (of 30%) X US/Canada -17%X
- 4. Current Oilsands Development Trajectory is Inconsistent with Canada’s Climate Commitment Environment Canada GHG Forecast 2012 3.2 Mb/d 1.6 Mb/d
- 5. Real Danger of Wasted Capital and Stranded Assets 5 Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble? Carbon Tracker Initiative, 2013 ‘using just the reserves listed on the world’s stock markets in the next 40 years would be enough to take us beyond 2C of global warming.’
- 6. Natural Gas as Share of Grid Power Mix near-term GHG benefits, but lock-in risk, uncertain lifecycle benefits IEA: Natural gas-fired power generation must decrease after 2030 to meet the CO2 emissions projected in the 2DS. Note: Natural gas-fired generation includes generation in power plants equipped with CCS units. Biogas is not included. 4 Degree Warming 2 Degree Warming40% 30% 20%
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- 10. 10 Clean Energy Intrapreneurs & Entrepreneurs: individuals and organizations that design, develop and manufacture energy technologies and/or provide supporting services that meaningfully reduce energy’s environmental footprint
- 11. 11 Push Send the right price signals • Eliminate preferential tax treatment for fossil fuel production • Establish national carbon price
- 12. 12 Pull Stimulate Demand • Deploy Public Purchasing Power • Support Technology Prizes & Golden Carrots
- 13. 13 Enhance Access to Capital • Public and Private Clean Energy Venture Funds (e.g. SDTC, Cenovus Opportunity Fund) • Government-backed ‘Green’ Bonds • ‘Flow Thru Shares’ Enable
- 14. 14 http://www.pembina.org/blog/692 1/5 of North American RE investment 2 of top 10 RE technology patent holdings Leading in geothermal, biofuels Opportunities Co-produced hot fluids Solar & Biomass for EOR Post-SAGD Heat Recovery Exploit Niche Synergies with Oil & GasAccelerate
- 15. Clean Energy Transition: “too many red lights” © OECD/IEA 2012 Cleaner coal power Nuclear power Renewable power CCS in power CCS in industry Industry Buildings Fuel economy Electric vehicles Biofuels for transport
- 16. Muchas Gracias Thank you Merci Beaucoup jasons@pembina.org www.pembina.org
- 17. PULL 17 The clean energy innovation & diffusion chain Source: modified from Jenkins and Mansur Overcome Innovation Road BlocksProblem R&D PROTOTYPE/ PROOF OF CONCEPT PILOT COMMERCIALIZATION/ MATURATION MATURITY/ PRICE COMPETITION VENTURE CAPITAL DEBT FINANCING PRIVATE EQUITY TECHNOLOGICAL VALLEY OF DEATH COMMERCIALIZATION VALLEY OF DEATH ACCELERATE LEARNING CURVE PUSH
- 18. 18 Best reserves developed first Reserve performance declines over time In-situ GHG emissions intensity generally higher than mining In situ production will overtake mining by 2015 By 2020, 3.2 M bbls/d ~ 9M bbls/d announcedFor production of 1 barrel of bitumen GHG profile for oilsands more likely to worsen than to improve
- 19. 19 Natural Gas faces serious social license challenges
- 20. Natural Gas as Share of Grid Power Mix near-term GHG benefits, but lock-in risk, uncertain lifecycle benefits IEA: Natural gas-fired power generation must decrease after 2030 to meet the CO2 emissions projected in the 2DS. Note: Natural gas-fired generation includes generation in power plants equipped with CCS units. Biogas is not included.
- 21. Natural Gas as Share of Grid Power Mix near-term GHG benefits, but lock-in risk, uncertain lifecycle benefits IEA: Natural gas-fired power generation must decrease after 2030 to meet the CO2 emissions projected in the 2DS. Note: Natural gas-fired generation includes generation in power plants equipped with CCS units. Biogas is not included. “Golden Age of Gas” (IEA, 2012): A bright future for unconventional gas is far from assured: numerous hurdles need to be overcome, not least the social and environmental concerns [which] threaten to curb, if not halt, the development of unconventional resources
- 22. 22 budget, over time, over and over again "Delusion and Deception in Large Infrastructure Projects: Two Models for Explaining and Preventing Executive Disaster." Co-authors: Massimo Garbuio and Dan Lovallo. California Management Review, vol. 51, no. 2, Winter 2009, pp. 170-193.
- 23. 23 From Middle Power to Global Powerhouse? 5th Largest Energy Producer 3rd 7th 1st 1st 50%
- 24. Planned development increasingly likely to exceed science-based limits Air: Increasing number of air quality exceedences Approved development predicted to soon exceed acid deposition limits Climate: Failing to achieve AB climate change reductions No plan in place to meet Canadian commitments No plan to reconcile projected oilsands emissions growth with targets Tailings (future production): Flexibility with tailings Directive (7 out of 9 mines not in compliance – negotiations with companies) •Biodiversity: •No emergency protection for caribou •Draft recovery plan relies on predator control vs. habitat protection 24
- 25. Our view on Oilsands 1. Pace and scale of oil sands expansion will likely trump incremental improvements 2. Science based and enforceable regulations and monitoring to cap impacts are needed, promised, slow to be implemented 3. Voluntary efforts to date have not been commensurate with challenge 4. Environmental liabilities continue to grow without a clear solution in place 5. Oilsands revenue needs to be used to position Canada for clean energy transition 25
- 26. pembina.org pembina.org/subscription Pembina eNews, Media releases, Publication alerts twitter.com/pembina facebook.com/pembina.institute
Notes de l'éditeur
- The Pembina Institute was born in 1982 out of community organizing in response to the worst sour gas blowout on record in Canada. It blew out of control for 68 days and killed three well-control specialists. [ffor comparison, Macondo in the Gulf killed 11 and flowed for 87 days]25+ year history working on Canadian energy and environment issues, as both a public interest advocate and as a values-based consultant, which includesMulti-stakeholder policy processesIntervention in public hearings of major energy projectsPolicy research and advocacyAnd because we think it is vital to bring solutions to the table, collaborative engagement and consulting with companies, governments, communitiesOur work is in climate change policy, responsible energy production as well as efficient consumption through mobility choices and efficiency.
- Canada’s most recent communication to the UNFCCC contains the answer… Oilsands growth will make reaching this target very challenging. (Freight emissions to a lesser extent). I SHOULD NOTE THAT Canada has exited both the Kyoto Protocol to the UNFCCC and the UN Convention on Combating Desertification, the single most important agreement relating to the impacts of climate change on the world’s poorest and most vulnerable. In the interest of time I wont say anything more on oilsands but am happy to come back to this if it comes up in the Q&ASource: Environment Canada's chart showing the gap between our policies and our target.Canada's Emissions Trends
- we are being told that much of the infrastructure is already in place that would lock us into a GREATER THAN 2D Scenario. This graphic from the Carbon Tracker Initiative shows how the Reserves included in stock market valuations of publicly-traded foissil fuel based energy companies would blow us well past the atmospheric limits associated with a high probability of only 2 degree warming. So the markets are valuing these companies independently from the reality that these resources cannot – must not – be combusted without CCS or other mitgation. Source: Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble? Carbon Tracker Initiative, 2013
- A quick word on Natural Gas, in light of the previous slide: The IEA shows in its projections that to stay in the low risk roulette game, we can ramp up natural gas now but need to curb it sharply in just a few years. Its necessary but not sufficient to get us on track for climate mitigation. (leaving aside the health benefits, for the moment), and there are other problems that pose a severe social license challenge to its development. happy to take questions on this as well. -----------Power generation from natural gas increases to 2030 in the 2DS and the 4DS. After 2030, generation differs markedly.In the 4DS, natural gas-fired generation increases strongly, mainly driven by economic growth non-OECD countries. Natural gas-fired power generation: Supplies base-load power Displaces generation from coal Meets rapid new growth in demand. In the 2DS: Between 2030 and 2050 global natural gas-fired generation decreases by 30% The majority of the power generation capacity needed to meet electricity demand will be very low carbon - including renewables (biomass, wind, hydro, solar, etc), coal plants equipped with CCS and nuclear power Natural gas power plants still best placed to provide peak-load and back-up capacity to balance the variability in electricity demand resulting from renewable energy sources Share of gas in electricity generation drops steadily in the OECD and in other non-OECD countries China and India rapidly build up the share of gas in their generation mix (currently quite low) by 2030 to 2035, before they gradually decrease it to 2050. Rigorous planning and construction processes essential to minimise (ideally, to avoid) stranded assets. Gas turbines and combined cycle power plants typically designed for a service life of more than 25 years.
- $1 trillion dollars is the global scale of the EMERGING TECHNOLOGY sector that the global transition to cleaner energy is creating. As recently as 2009, Prime Minister Harper said “the only way we are going to stay competitive in the global energy market of the future, is if we are also a clean energy superpower.” {click}
- The clean ENERGYsector is expected to reach $3 trillion by 2020. – which will make it the 3rd largest global industry sector – 10 times the size of the global areospace.
- Id like to draw your attention to two reports in this space that we recently completed. The first looksat the Clean Energysector in Canada, and much of it applies equally well for our cousins whom we would invite inside for dinner, the US and Mexico. Focusing on the experience of the entrepreneurs and investors in this space, Pembina’s research explores challenges and public policy options that would help create winning conditions for them. The second looks at the synergies between the Renewable Energy sector and the Oil and Gas sector. I’ll come back to that in a minute.
- Definition:The term “clean energy” spans energy production, infrastructure and conservation, and involves technologies and services that promote, enhance or advance: diversity of supply sources and distribution/transmission, efficiency in use, and reduced negative environmental effects such as greenhouse gas emissions. For the purpose of our report, clean energy entrepreneurs are those individuals and organizations, within established or emerging companies, that design, develop and manufacture clean energy technologies and/or provide supporting services.Our research finds that these folks need help. Heres some thoughts for how to help them succeed.
- To tackle the challenges that stop clean energy entrepreneurs from succeeding, our report found that: Fossil fuel energy continues to benefit from government subsidies and the externalization of costs associated with its greenhouse gas pollution.Our recommendation is to continue to remove inefficient fossil fuel subsidies as we committed to removing in at the 2009 G20 meeting in Pitsburg. We need to level the playing field at a minimum, at best – as Dr Molina suggested – to support the winners we want. Establishing a national price on carbon was the single most consistent theme running through our research. From diverse voices such as Dawn Farrell at TransAlta to Ross Hornby at General Electric to John Ruffolo at OMERS Ventures. To quote John coyne (Unilever) “The single most meaningful thing that could be done very quickly in this country that would make a material difference iin the performance of this country from an environmental point of view…..is a carbon tax”
- US military is leading the charge in renewables and efficiency. The world’s largest single buyer of fossil fuels is worried about the exposure of its troops and supply lines, and the costs and vulnerability of its assets. To cut inefficient use of, and therefore dependence on, fossil fuels in the combat theater, the military has been doing things like adding solar panels to tents,backpacks andRadio towers. through solar arrays, wind farms, and waste-to-energy, they are unplugging from the grid and diesel generators. Technology prizes are powerful motivators. Many familiar with the X Prize. Golden Carrots have been used to accelerate into the mass market not-quite-ready for prime time technologies such as high-efficiency refrigerators.
- The solutions put forward fall under 3 general themes.This first one – enhance access to capital to reward clean energy transitionFirst, developing a toolbox of financial instruments to meet meet the challenges of capital intensive clean energy technologies. Some of the examples are:Government backed debt - “Green Bonds” Flow through shares – a tax expenditure subsidy common in the extractives sectorSecond is to recapitalize SDTC. To quote Mike Brown of Chrysalix Energy Ventures” SDTC has more to do with the advancement of clean teck in Canada than any other single body’. We are recommending the Federal Government recapitalize SDTC at a rate of $100M/year for 5 years starting this budget year – 2013.
- Aside from encouragingly-rapid growth in renewables, all the major changes needed are lagging”.
- Our Competing in Clean Energy report finds that there are a lot of landmines that impede the success of clean energy entrepreneurs. First, you often need a push to force the adoption of new technologies. On this slide is a simplified view of the clean energy innovation cycle – (click)It shows the entire cycle of product development from idea through prototype and niche applications to widely commercialized product. (click)If you look at the blue boxes they identify 2 stages where capital is needed (click)If you look at the green box, it represents the movement down the production cost curve, as economies of scale and incremental improvements enable the technology to displace incumbents in major markets. Anyone remember the ‘car phone’? At the First stage of financing (first blue box) we are seeing decline early stage, venture capital investment this type of investment has decreased from $3.3 billion in 2000 to less than $1 billion in 2012. There are many reasons for this. Of course the market crash of 2008 is one reason but in addition, as identified by Andrew Heintzman (Investeco Capital Corp) is that our large institutional investors, the Pension Funds, have largely moved out of the early-stage investing game (except for Omers ventures). The second challenge for accessing capital is (particularly clean energy generation technology companies) is they fall into a gap between traditional asset classes. They have a venture capital risk profile but require infrastructure type capital (traditionally debt financing). In other words they need lots of high risk capital with the promise of lower but longer term rewards. Not fitting neatly into either box makes raising capital a daunting task.
- Double all the wells that have been drilled since early 1900s.., while stillhave existing legacy. Cumulative effects, proximity to people. While global investments in fossil fuel power generation more than doubled between 2004 and 2011, investmentsin renewables more than quadrupled over the same period
- Gas has some significant challenges – impacts on water, habitat fragmentation, induced seismicity, and that it is potentially competing as much with Renewables as Coal for access to the grid.I’ve talked about challenges but let me turn to opportunities that the clean energy transition is creating.
- Gas has some significant challenges – impacts on water, habitat fragmentation, induced seismicity, and that it is potentially competing as much with Renewables as Coal for access to the grid.I’ve talked about challenges but let me turn to opportunities that the clean energy transition is creating.
- Mega projects generally arrive late, over-budget, and fail to perform up to expectations. Cost overruns and benefit shortfalls of 50 percent are common; cost overruns above 100 percent are not uncommon. For example, in one study of major projects in 20 countries, nine out of ten projects had cost overruns.4 Similarly, a study of 44 urban rail projects—in North America, Europe, and developing nations, including London’s Tube and the metros in Washington, D.C., and Mexico City—found that the average construction cost overrun in constant prices was 45 percent; for a quarter of the projects, cost overruns were at least 60 percent.An appropriate slogan seems to be “over budget, over time, over and over again.” Rand Corporation examined 44 chemical process plants (Pioneer Pro- cess Plants), owned by firms such as 3M, du Pont, and Texaco. Actual construc- tion costs were over twice as large as the initial estimates.23 Furthermore, evena year after start-up, about half of the plants (21) produced at less than 75% of their design capacity, with a quarter of the plants producing at less than 50% of their design capacity. Many of the plants in this latter category had their perfor- mance expectations permanently lowered. As illustrated in Figure 1, the typical initial estimate is less than half the final cost. Furthermore, at every subsequent stage of the process, managers underestimate the cost of completing the con- struction of Pioneer Process Plants.
- From Middle Power to “Energy SuperpowerIn July 2006 Stephen Harper told an audience in London that Canada had emerged as a global energy powerhouseCanada, he said, was the world’s fifth-largest energy producer, ranking third in gas production and seventh in oil production. Canada was the world’s largest supplier of hydroelectric power and uranium. “But that’s just the beginning.” roughly 400 of the world’s thousand or so publicly traded energy companies are now headquartered in Calgary.About half of all mining capital in the world is raised on the Toronto and Vancouver Stock Exchanges.