Canada Should Leverage its Competitive Advantage in Energy to Foster Innovation

At the Singularity University Canada Summit last October, you said, “We have not done anything to fundamentally align our energy industry with the future of energy.” What did you mean by that and what can we do today to get Canada ready for the future of energy?

Our legacy energy industry in Canada has been largely caught flat-footed. Conventionally, the industry had a 50 or 60-year timeline without any real opposition to any project. There were never any consultations and the industry largely operated in the background, as is the case with most utilities. In the past 10 years, the industry has become topical and Canadians are socially aware about energy issues. It is interesting as well as frustrating to see that our traditional fossil fuel companies have almost no exposure in the renewables and sustainable energy industries. A few players like Suncor and Enbridge have started to get involved in larger scale renewable energy deployment but that is just a fraction of their overall portfolio.

“There is an appetite for renewables; it is just the ambition that needs to go up significantly.”

In order to align our current industry with the future, the bulk of the effort in making the transition from fossil fuels to renewables should be coming from our traditional energy firms. They understand large-scale project management, project risks and long-term capital deployment. They also have the resources, the energy talent and the reputational credibility to deliver on some of these projects. So part of my message is, “Why are we not explicitly aligning these skills with the nation’s needs and requiring engagement in renewables from traditional energy companies?” If we want to be developing and deploying new pipelines, why shouldn’t that come with stipulations requiring similar levels and magnitudes of renewables deployment? We must put incentives in place that force our existing industry to fund and develop the bridge to a more sustainable energy system.

How do you assess Canada’s traditional energy industry’s appetite to develop renewable projects?

In general, the uptake has been minor. Suncor has developed a few wind and solar projects and Enbridge has offshore wind and other renewable projects. Many of these firms are all playing around in this space and have a toe in the water; they just have not jumped in and been the market leaders. When Alberta held its renewable energy auction, the majority of the program went to multinational corporations. That is a huge missed opportunity for Canadians and our companies to be masters of our own domain and to drive our own future as a country. I am happy that Enel is coming in and building large wind projects. But why are our local companies that have an understanding of the market, the marketplace and the regulatory framework, not developing and deploying these?

“If we want to be developing and deploying new pipelines, why shouldn’t that come with stipulations requiring similar levels and magnitudes of renewables deployment?”

When you look at the size and capital investment required from the energy industry, the investment in renewables pales in comparison to fossil fuel projects. For example, Inter Pipeline is building a $3.5 billion facility in Strathcona County, but if you were to build a $3.5 billion renewable project, that would be national news. There is an appetite for renewables; it is just the ambition that needs to go up significantly.

What is the future of geothermal energy in Canada and is Alberta particularly well positioned?

We started Terrapin Geothermics a year and a half ago with the belief that the market for renewable energy in Canada is expanding rapidly and that we need to recognize the need for baseload renewables.

Even in Alberta’s latest renewable auction, all 600 MW of electricity went to large wind projects, and wind’s intermittent nature is a significant grid management challenge. Over the next three to five years, a market for baseload renewables will significantly develop and geothermal is one of the most intelligent ways we can fill that gap. While some Canadian provinces such as British Columbia, Quebec and others have a great hydro resource they can tap into, Alberta and Saskatchewan have low hydro resources. So we see a market opportunity in pioneering a stable baseload form of power generation that also taps into Alberta’s legacy abilities in drilling, reservoir engineering and reservoir management. We are very optimistic about the future of this industry and are happy to be one of the first private developers pushing aggressively for its development.

What are the major barriers for renewables in Canada? Do you think we are doing enough to support and facilitate the growth of our energy innovators?

The main barrier across Canada is that our policy mechanisms have not caught up to the generation profiles of different forms of renewable energy. For example, in California, they have three different rate classifications for wind, solar and geothermal. They use this classification to flex and manage their grid, so they can increase rates to incentivize a certain form of energy and vice versa. Such a policy tool does not exist in Canada in almost any jurisdiction.

“The institutions that exist to support new innovative ideas and technologies do not operate at the speed of entrepreneurship and business.”

In terms of support for energy innovation, the legacy monopolistic utilities like BC Hydro and SaskPower operate very differently from the entrepreneurial, innovative, new technology, community generation and local ownership world. Very few support initiatives have taken on the fight to cut out the stiffness within the bureaucratic system. In the Alberta context, the transmission owner, distribution line owners and big wire operators are huge barriers to developing new projects. As an anecdote, we were looking for a map of the distribution lines in part of Northern Alberta and we were told that that information is not publicly available because of fears of terrorism. That is a ridiculous reason for which the government is preventing people from understanding how we can optimize our grid, where we can place microgeneration projects, and where we can develop and deploy renewable energy technologies. There is such a lack of understanding of the data, optimization and local ownership opportunities because information is held by some of these large monopolistic entities. I am happy to see a lot of initiatives that support and encourage energy innovation, but I would like to see more initiatives take aim at the really challenging technical regulatory barriers that prevent new innovations from taking root. Moreover, the institutions that exist to support new innovative ideas and technologies do not operate at the speed of entrepreneurship and business, and do not respond in the same language, tone and manner. We are trying to go after and develop these new innovative approaches with a very bureaucratic approach, which is really hypocritical.

What do you hope for and see in the next 20 or 30 years, and how do you think Canada’s energy mix and energy system will look?

Canada has always been a primary economy and that has put the country at a disadvantage because we have very little secondary and tertiary economic development. In some jurisdictions in Canada, energy is incredibly affordable from a global perspective. For example, at the wind auction in Alberta, power was auctioned at 3.7 cents per kWh whereas power in other jurisdictions in North America was selling for 15-18 cents per kWh. A junior gas company in Alberta is going to be doing cryptocurrency mining because it can produce electricity at such a low cost. So, we can use the backbone of our energy economy as a means to support new and interesting diversification ideas.

“It is people that are in their 20s and 30s right now who are going be the only generation that has the ability and requirement to tackle these problems head on.”

My biggest hope for the emerging generation of energy leaders is for us to be realists about the problems that are facing our energy system both domestically and globally. It is people that are in their 20s and 30s right now who are going be the only generation that has the ability and requirement to tackle these problems head on. We are not going to get there through small actions and I hope that we have the ambition to tackle the really large problems.

“My ultimate hope is that Canada can actually come together to create a cohesive national energy strategy that enables us to meet our 2050 climate and prosperity targets.”

At the moment, Canada is in total disarray in terms of regional and national strategies and we pit regions of our country against others quite frequently. My ultimate hope is that Canada can actually come together to create a cohesive national energy strategy that enables us to meet our 2050 climate and prosperity targets. Since we have a competitive advantage in energy because of an abundance of resources like wind, hydro, gas, solar and geothermal, we need to aspire to become an energy leader by 2050.