Published in The Embassy and the Hill Times. Full pdf here: All great parties come t...oreign Policy Newspaper
Original text follows:
The fossil fuel party has been great. Plentiful, low-cost hydrocarbons pulled humans out of the muck and into the 21st century. For many Canadians, life is grand - we fly on vacation, drink wine from Australia, and watch TVs made on the cheap in China in homes that are warm in winter and cool in summer. Our ability to export abundant fossil fuel resources means Canadians doubly benefit. Nobody in their right minds wants the party to end - but end it must.
Such radical environmentalists as Mark Carney, Governor of the Bank of England, have confirmed that almost three-quarters of known fossil fuel reserves must be left the ground to avoid 2C of warming. The warning to investment funds and fossil-fuel dependent economies alike is stark: the risk of stranded conventional energy assets is not negligible, and will only increase as global economies face pressure to reduce climate risk.Canada can and should hedge our energy bets.
It’s not just climate policy that increases the risk of stranded assets. The cost of low-carbon energy follows a technology curve, not a conventional resource curve. Competition to oil, coal and natural gas is moving much faster than Canadian energy incumbents might realize. The initial phase of clean energy’s exponential growth curve feels linear … until it doesn’t.
Solar, in particular, hit an inflection point in 2008. Since then, panels have dropped four-fifths in price. High-profile casualties, like Solyndra, point to a maturing industry: consolidations bring economies of scale. Subsidies seeded the industry but Deutsche Bank has now identified nineteen jurisdictions in which solar competes without training wheels, including Mexico and China. New installs blew past forty GW last year (a gigawatt – GW - is like a large nuclear or coal plant).
Canada has lots of emerging clean energy stars. Morgan Solar will produce solar energy for less than 5c/kwh this year in the oil-rich Mideast. Woodland Biofuels can produce clean renewable transport fuels from wood and agricultural waste for less than the gasoline it replaces. And Hydrostor’s grid-scale energy storage makes renewable energy robust and reliable. Diesel generation can’t compete with the combination of Hydrostor and wind or solar.
Canadian cleantech companies are mainly small and medium-sized companies (SME’s), off the radar of mainstream economic analyses. But they employ more people than Alberta’s oil sands, and are growing fast. They’re also more likely than their peers in other sectors to be export-oriented. That shouldn’t be surprising: they’re exporting technology into the fastest-growing energy market in the world.
Sustainable Development Technology Canada (SDTC) played a crucial role in the birth of these companies. SDTC needs a strong, renewed mandate. Institutions like the Export Development Canada (EDC) and the Advanced Energy Center at MaRS now play a critical role in their growth into global markets. And pricing carbon in Canada doesn’t just lower our emissions – it unleashes market forces to adopt and develop solutions the rest of the world needs too.
Two low-carbon sleeping giants are next-generation nuclear (NGN) and enhanced geothermal systems (EGS). Canada can and should step up to support their development, as it currently does Carbon Sequestration and Storage (CCS).
Canada’s Terrestrial Energy has developed a molten-salt reactor design, based on technology left on the shelf at American Sandia National Labs. These modular reactors burn plentiful thorium, or even better, existing nuclear waste – turning a problem into a vast energy source. By extracting an order of magnitude more energy from the pellets coming out of the CANDU, the half-life of resulting waste is measured in decades not millennia. A passive safety design eliminates the possibility of melt-down. Canada can regain a lead in advanced nuclear.
Enhanced geothermal means drilling deep – 8-10km down – to find hot, dry rock (200-300C). By fracking that rock – in the same way we do for shale gas – drillers create a loop through which water extracts heat. The potential is enormous – extracting just one degree from a cubic kilometer of rock provides the energy equivalent of seventy thousand tonnes of coal. Canadians know how to drill and frack, and we can lead on EGS design.
The risk of Canadian energy incumbents facing unburnable reserves is not negligible. Hedging our bets is good risk management. How Canada responds to the shared global challenge of climate disruptions depends largely on the big energy incumbents. ‘Us’ and ‘them’ doesn’t work anymore – it’s just ‘us’. The federal government has a key role to play in ensuring our policy framework encourages our traditional energy companies to use their capital, engineering skills and market access to accelerate clean energy adoption.
Canada will always produce fossil fuels, and the world will need them for the foreseeable future. But the assumption of growth in production is likely a myth.