ENERGY IN CANADA S ECONOMY

Transcription

1 2015 Canadian Energy Summit: Telling the Energy Story ENERGY IN CANADA S ECONOMY Nancy Olewiler SCHOOL OF PUBLIC POLICY, SIMON FRASER UNIVERSITY 1

2 Three Key Words that Reflect Major Shifts in Global Energy Economics Efficiency Environment Competitiveness shape energy in Canada s economy 2

3 Energy in Canada s Economy up to 2013 Canada ranks 6 th in renewables investment Natural Resources Canada, Energy Markets Fact Book,

4 GDP, Employment, Wages Natural Resources Canada, Energy Markets Fact Book, Average annual wage in oil & gas sector in 2013 = $130,000 4

5 Energy, Clean Tech & Benchmark Share Price Indices,

6 Energy Trade in 2013 Energy Council of Canada Natural Resources Canada, Energy Markets Fact Book,

7 Tax & Royalty Revenue, 2003 to 2012 Natural Resources Canada, Energy Markets Fact Book,

8 Today s Energy Economics: Oil & Gas Peak Oil: an historical footnote? Shale Oil & Gas: game changers Geo-economics: US will be world s largest oil producer? Its output has 85% since 2008, tech change Has capacity that is current prices with DUCs in the wings (huge efficiency gains) US (& other producers ) LNG developing faster than ours LNG capital costs while market prices (Japan weighted average price forecast for 2015 = US $10MMBtu, down from $16 in 2014) Greenfield LNG project needs FOB price of US$10-12MMBtu Markets at work: prices reflect scarcity & culling the high cost producers, investment $ on standby 8

9 Renewables: Solar s Global Growth Globally ½ total renewable investment Total capacity 2004 to 2014: 3 to 165 GW New investment 2014 = $100b Economics: 10X efficiency Utility scale not just distributed gen: e.g., 600MW plant in CA being built Canada IHS Energy Week, Klein, WSJ 21 April 2014 Renewables added more global electricity capacity in 2014 than fossil fuels 9

10 Coal: Yesterday s Fuel? Energy Council of Canada Coal s environmental impacts contribute to its phase out as a generator of electricity Closure of Ontario s coal-fired generation Federal performance regs take effect July 2015 Ageing assets A significant carbon price greatly competitiveness China: substituting to renewables & gas, piloting carbon markets & instituting carbon taxes US: increasing regulatory stringency Japan/Germany: temporary (?) resurgence Improvements in CCS efficiency/costs? 10

11 What this means for Energy in Canada s Economy For energy producers markets dictate focus on competitiveness through: Efficiency improvements, cost cutting Need environmental policies to sustain access to markets & address local/global environmental impacts For energy consumers: Boon to manufacturing (along with depreciation of Canadian dollar) Energy efficiency gains mean lower price elasticity & less response by households to low prices 11

12 Are We Doing Enough; the Right Stuff? Natural Resources Canada, Energy Markets Fact Book, Federal energy R&D = 8% of total Fed R&D Prov/Territorial R&D = 64% of total P/T R&D Over to our panel 12

13 2015 Canadian Energy Summit: Telling the Energy Story Energy in Canada s Economy: Alberta Jennifer Winter SCHOOL OF PUBLIC POLICY, UNIVERSITY OF CALGARY

14 Alberta s Fiscal Situation Million dollars Natural Resource Revenue Other Revenue NRR share of total revenue 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000-45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

15 Energy Export Shares Share of Canadian Energy Exports Crude Oil Refined Products Petroleum Gases Other

16 Energy Exports by Region (2012) Prairies Central Atlantic BC and Territories 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Crude Oils Refined Products Petroleum Gases Coal Electricity Coke Other

17 Energy Imports by Region (2012) Prairies Central Atlantic BC and Territories 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Crude Oils Refined Products Petroleum Gases Coal Electricity Coke Other

18 Shares of Emissions, GDP, and Population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% GHGs GDP Population BC AB SK ON QC Others

19 Emissions Sources (2013) Alberta Canada INDUSTRIAL PROCESSES 6% AGRICULTURE 7% WASTE 1% STATIONARY COMBUSTION 56% AGRICULTURE 8% INDUSTRIAL PROCESSES 7% WASTE 4% STATIONARY COMBUSTION 45% FUGITIVE EMISSIONS 14% FUGITIVE EMISSIONS 8% TRANSPORTATION 16% TRANSPORTATION 28%

20 Electricity Generation (2013) Alberta Canada Other fuels Hydro Wind Natural Gas Oil Natural Gas Coal Coal Nuclear Wind Hydro

21 Policy: Specified Gas Emitters Regulation 300 Alberta's Emissions by Facility Size 250 Million Tonnes Emissions, Facilities < 50K Emissions, 50K <= Facilities < 100K Emissions, Facilities >= 100K

22 Policy: Specified Gas Emitters Regulation Coverage: Percent of Emissions by Sector (Facilities with Emissions > 100K tonnes) Mining & Oil and Gas Extraction 70% 71% 81% 85% 85% 86% Fossil Fuel Production and Refining 17% 18% 18% 20% 21% 18% Electricity and Heat Generation 96% 93% 99% 99% 95% 98% Manufacturing 49% 51% 39% 40% 40% 41% Construction 0% 0% 0% 0% 0% 0% Commercial & Institutional 0% 0% 3% 3% 4% 4% Residential 0% 0% 0% 0% 0% 0% Agriculture & Forestry 0% 0% 0% 0% 0% 0% Transportation 10% 8% 8% 7% 7% 8% Waste 0% 0% 0% 0% 0% 0%

23 Main Take-Away Points Emissions are not just from oil and gas Lots of variation across Canada in terms of sources Current policies are ineffective and inefficient Carbon pricing?

24 2015 Canadian Energy Summit: Telling the Energy Story Energy in Canada s Economy: Ontario Donald N. Dewees UNIVERSITY OF TORONTO, DEPARTMENT OF ECONOMICS

25 Short Ontario Energy History Small oil and gas production Southern Ont. Cheap hydro electricity s. Welland, Niagara, other large rivers near consumers water generated 70% Ontario electricity Prices < Great Lakes neighbours. Added coal, nuclear, gas water generated 50%. Nuclear high costs, problems; shutdowns Prices increased faster than neighbours. Post 2000 restructuring, environmental, gas plant cancellation, bungling raised prices more.

26 Average Residential Bill : Low Cost to High Cost in 4 Decades cents/kwh Nominal Cost Cost in 2010 dollars Year Dewees U of Toronto 3

27 Nukes, Environmental Policy, Bungling Raised prices restructuring blown up Nov. 2002, probably increased costs. Promised coal phase-out early, often. Finally ended low-cost coal gen Procured wind & solar slowly to Green Energy & Economy Act 2009 FIT paid high prices for wind, solar. Implied value of CO2 as high as $500/tonne. Cancelled 2 gas plants, ~$1bn ransom.

28 Current Issues Cap and Trade for GHG announced Talked about since 2008 Discussion Paper bill 185/2009 required monitoring. No details yet but WCI is based on C&T, auctioned allowances. Nuclear Refurbishment Darlington (4), Bruce (7) refurbishment to be serial, cautious, exit if going badly. Many think Quebec power cheaper. Partial Sale of Hydro One Brampton distribution OK. Share of transmission cash grab or efficiency?

29 Main Take-Away Points Growth may whittle away your natural advantages. Using the electricity sector for industrial policy & job creation can be costly. Ministerial micro-management may not be more efficient than expert management. Unwise environmental policy may be costly. What benefits of government ownership?

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31 45% Primary Electricity Production 2013, % of Canadian total (482 TWh) 40% 35% 30% 25% 20% 15% 10% 5% 0% Atlantic provinces Statistics Canada (2015) Quebec Ontario Manitoba Saskatchewan Alberta British Columbia 2

32 2012 per capita consumption (kwh) 25,000 Electricity Consumption per Capita by Average Industrial Price (2012) 20,000 MB QC SK NB NL 15,000 AB 10,000 BC PEI NS ON 5,000 Statistics Canada (2014) Cents per kilowatt-hour (average price) 3

33 $ per kwh 6 Residential Price Ontario & Québec /kwh Debt Retirement Charge Rural Rate Protection Charge Wholesale Market Service Charge Energy (weighted average) Distribution Rate 0.04 Connection Service 0.02 Network Service 0 ON QC (real) QC (paid) 14.9 /kwh 8.9 /kwh 7.2 /kwh 4

34 MERN (2015) Energy Council of Canada Oil & Gas Exploration Permits

35 North American LNG Export Terminals (Potential) Saguenay QC: 1.6 Bcfd 13. Goldboro, NS: 1.4 Bcfd 15. Melford, NS: 1.8 Bcfd 26. Port Hawkesbury, NS: 0.5 Bcfd 28. Saint John, NB: 0.67 Bcfd FERC (2015) 6

36 Regional Cap and Trade Programs 7

37 Electrification of transportation 393 charging stations May 19, pm 8

38 Main Take-Away Points Quebec s energy story: Significant economic gains to be realized in the electricity sector Oil & Gas production development could happen but many uncertainties: price & social license LNG developments in transportation and export Hard carbon constraint: Quebec leads (in partial improvisation) Electrification of transportation is taken too seriously by many