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Transforming Canada’s Energy System: A Challenge & Opportunity for Alberta

Transforming Canada’s Energy System: A Challenge & Opportunity for Alberta. David Layzell, PhD, FRSC . Professor and Executive Director Institute for Sustainable Energy, Environment & Economy, University of Calgary, Calgary, Alberta. Transform Alberta Summit,

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Transforming Canada’s Energy System: A Challenge & Opportunity for Alberta

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  1. Transforming Canada’s Energy System:A Challenge & Opportunity for Alberta David Layzell, PhD, FRSC. Professor and Executive Director Institute for Sustainable Energy, Environment & Economy, University of Calgary, Calgary, Alberta Transform Alberta Summit, Banff, Alberta. November 8, 2012

  2. What is an Energy System? What People Want: What Energy System Developers Create: What Nature Provides: Service Technologies Harvesting Technologies Services Sources Currencies • Transportation • Communication • Illumination • Healthy food • Health care • Heating/cooling • Clean water • Information • … • Coal • Oil • Natural gas • Sunlight • Wind • Uranium • Biomass • Geothermal • … • Oil Refinery • SAGD facility • Hydraulic fracturing • Anaerobic digester • Pipeline • Nuclear power plant • Coal power plant • Gas turbine • Fuel Cell • Solar panel • Wind turbine • … • Automobile • Telephone • Light bulb • Refrigerator • X-ray machine • Computer • Furnace • … • Gasoline • Diesel • Electricity • Methane • Ethanol • Hydrogen • … Adapted from “Smelling Land” by David Sanborn Scott

  3. Forces for Energy System Transformation Economy Declining conventional oil and gas More reliance on unconventional oil & gas Rapidly rising global energy demand (esp. Asia) High oil price Low natural gas price (esp. in NA) Energy Systems Energy Security Concerns (esp. in USA & E. Canada) Jobs & tax income Environment Climate Change Societal Impacts Water and land use Air pollution & health impacts Risk/benefit assessment and relative ranking of each ‘Force’ differs widely among individuals and groups.

  4. How to Transform our Energy System should be the Focus of a “Canadian Energy Strategy”? My definition of a Canadian Energy Strategy: Inter-provincial or multi-provincial cooperation around key components of Canada’s Energy Systems to achieve: Energy Security Healthy Environment Economic Growth As Canada’s energy province, Alberta needs to take a leadership role in the next energy system transformation.

  5. Canada’s Energy System (2006) Domestic Energy use Energy Service Energy Source Transportation Oil • Note: • Large exports; • ~85% of primary energy from fossil fuels; • Large waste from conversion & transport Residential & Commercial Gas Oil & Gas Industry Other Industry Coal Waste Hydro Electricity Exports Waste * Estimate of useful vs. wasted energy in energy services from NRCanSankey (2006).

  6. Outline for Talk Domestic Energy use Energy Service Energy Source Transportation Summarize key features / peculiarities of the Canadian energy system; Identify Questions to explore opportunities for Transforming the Cdn / Alberta Energy System; Conclusions Oil 1. Oil Residential & Commercial Gas Oil & Gas Industry 2. Natural Gas Other Industry Coal 3. Electricity 4. Energy Efficiency Waste Hydro Electricity Exports Waste * Estimate of useful vs. wasted energy in energy services from NRCanSankey (2006).

  7. 1. Oil

  8. Trends in Cdn Oil Production & Import Crude Oil Production Exports to the USA Domestic use [CDN production] Totaldomestic usein refineries Imports Source: StatcanCansim126-0001

  9. Alberta Dominates the Production of Crude Oil in Canada (2011) Oil Production

  10. Most (76% or 2.2 mil. boe/d) of the Oil Canada Produces is Exported to USA. Oil Production Oil Transport

  11. Only 57% (0.9 mil. boe/d) of Cdn Crude Oil Production is Refined in Canada… Refine Petroleum Products (RPP) …but Canada also refines 0.7 mil. boe/d of Imported Oil (42% of Total Oil Refined) Oil Production Oil Transport In balance, Canada is a Net Exporter of Refined Petroleum Products (RPP).

  12. Canada is on Track to Greatly Increase Oil Production in the Next 20 years Oil Sands Sources: StatcanCansim 126-0001 (historical data) and adaptation from CAPP forecast (Crude Oil: Forecast, Markets and Pipelines, June 2012)

  13. …and Shale Oil Production in the USA is Threatening Existing Markets for Cdn Oil USA Annual crude oil production (1985-2011) Kboe/d This new production will compete with CDN oil for US markets. Source: U.S. Energy Information AdministrationNote: Production data includes crude oil and lease condensate

  14. Questions… Can we move AB oil to E. Canada at competitive prices with Brent crude? Should we refine more AB oil in Canada? Can we get access to the Pacific to open up markets in Asia? How can we address the environmental cost? Available for new markets Production in excess of Cdn needs CDN oil (Kboe/d) Estimated US import Source: Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012

  15. 2. Natural Gas

  16. After Years of Rising NG Production & Export, Both are Declining as US Imports Rise Canadian production Exports Natural Gas in Canada (EJ/yr) Total Domestic use Domestic use [of CDN production] Imports Source: CANSIM tables 128-0009 and 128-0002

  17. Over 50% of Cdn Gas Production was Exported to USA in 2009 Natural Gas Production While E. Canada imported gas equiv. to ~11% of Cdn production. Natural Gas Transport Natural Gas Import

  18. US production of gas has been increasing sharply… US Natural Gas Production in EJ/yr US Shale Gas is taking market share from Cdn Natural Gas production. NG Price is low compared to oil: $ / GJ • Nat Gas: $3-4 • Oil (@$80/barrel) $13 What are the NG reserves in Canada? Source: EIA Annual Energy Outlook 2012 (early release)

  19. Canadahas Vast Natural Gas Resources… • 865 EJ • equivalent to 290 years of current natural gas use in Canada** * Total amount of gas hydrates in Canada could be 18 times higher ** Current Natural Gas demand in Canada is ~ 3 EJ/yr. Sources: IEA, Golden Rules for a Golden Age of Gas: World Energy Outlook Special Report on Unconventional Gas, 2012 Energy content conversion factors used: 38,430 k}J/m3 (IEA values for Canadian natural gas) * Council of Canadian Academies, Energy from Gas Hydrates: Assessing the Opportunities and Challenges for Canada, 2008

  20. Questions… • Does it make sense to transform the energy system towards natural gas? • LNG exports to Asia? • Replace coal power with cleaner gas? • CNG/LNG vehicles? • Expand fertilizer & plastics industries? • How can we address the environmental costs? • Recovery & Processing? • Use? Predicted NG Supply & Demand for Canada & USA Available for new markets Exports EJ/yr Source: Adapted from Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012

  21. 3. Canada’s Electrical System

  22. Provinces Vary in Sources for Power Production Hydro Nuclear Power Generation Coal Note: Average values between 2005 and 2009

  23. Most is used within each province, but ~78% of Canada’s electricity tradeis N-S, not E-W Labrador trade with Quebec is the primary exception Power Generation Power Transport Notes:- Trades lower than 0.5 TWh removed- Average flows values do not consider years without trade- Share calculation based on all flows values

  24. Provincial greenhouse gas (GHG) emissions affected by source of power. GHG Emissions Power Generation Note: Average values between 2005 and 2009

  25. Canada’s GHG Emissions from Power Generation GHG emissions** associated with power production in Canada 119 Mt CO2/yr Gas 18 • Equivalent to: • ~3X the GHGs from oil sands recovery and processing (well to pipe)* Oil 8 Coal 93 *** In 2009, oil sands recovery accounted for 6.5% of GHG Canadian total emissions (source: NRCan)

  26. Questions… • Should provinces switch from Coal to Natural Gas? • Reduce GHGs by 40 Mt CO2/yr • Should provinces switch from fossil fuels to large hydro / renewables for power generation • Reduce GHG emissions by ~119 Mt CO2/yr • Create an W. Cdn Power Grid? Coal Kg CO2 / TJ power Natural gas* Large Hydro Oil * Assuming combined cycle units An opportunity for inter-provincial cooperation…

  27. Canada has the hydro potential to displace fossil fuel power generation …and hydro is a great base load / storage for wind and solar Undeveloped hydro potential Developed hydro Notes:- Trades lower than 0.5 TWh removed- Average flows values do not consider years without trade- Trade newer than 2007 not considered

  28. Dollars of Revenue per t CO2e Emissions ($/CO2e) for Canada’s Primary Industries Per tCO2, coal power generates less economic activity than other primary industries. Plus we have other alternatives. Should not this be the first place to look for GHG reductions?

  29. 4. Energy Efficiency

  30. Per Capita Energy use in Alberta, Canada and Northern Europe Energy use (GJ/capita) 49% higher than the CdnAvg! Agricultural & Fishing Why is Alberta be so much worse than other provinces? Commercial & Institutional Residential Transport Industry Canada: CanSimTable 128-0002, Table 128-009, Table 128-0016. Supply and demand of primary and secondary energy in terajoules, annual (terajoules); Canada. Table 051-0005 - Estimates of population, Canada, provinces and territories, annual (persons); European Countries: Eurostat. Supply, transformation, consumption - all products - annual data [nrg_100a]; Eurostat. Population on 1 January by age and sex [demo_pjan]

  31. Question Why? • Should not Alberta strive to be the Canadian Leader in: • Energy efficiency? • Renewable energy? • Low carbon communities? • ISEEE is working on this… • We have some of the answers, but there is still a lot we don’t know. • Clearly, there is much that can be done to improve. Gas 18 Oil 8 Coal 93 “My government will put energy efficiency at the top of the agenda. It is the fastest and most cost effective measure to improve on sustainability; it is the "low-hanging fruit.” Alison Redford, Leadership Campaign Materials (2011)

  32. Conclusion • Energy Efficiency is the ‘low hanging fruit’. Alberta has the potential to move from last place to first place in the transformation to a low carbon community: • Population growth (new communities); • Financial resources; • Impressive technology and innovation workforce; • Willing public. • Success is critical to ‘rebranding’ Alberta, and creating an industrial base that can carry the province through its boom/bust cycles. • Build Partnerships with other Provinces to realize the energy system transformations that will better achieve energy, environment and economy objectives: • Oil (pipelines east?, new refineries? Pacific access? Better recovery technologies?) • Gas (LNG terminals? Replace coal? Replace diesel? Fertilizer/plastic? Better recovery technologies?) • Electricity (W. Canadian grid? Renewable integration? Electrification of oil sands?)

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