Transforming Canada’s Energy System:

A Challenge & Opportunity for Alberta

Transform Alberta Summit, Banff, Alberta. November 8, 2012

David Layzell, PhD, FRSC.Professor and Executive Director

Institute for Sustainable Energy, Environment & Economy, University of Calgary, Calgary, Alberta

What is an Energy System?

SourcesServices

• Transportation• Communication• Illumination• Healthy food• Health care• Heating/cooling• Clean water• Information…

• Coal• Oil• Natural gas• Sunlight• Wind• Uranium• Biomass• Geothermal…

WHAT NATURE

PROVIDES:

WHAT PEOPLEWANT:

Harvesting TechnologiesCurrenciesService

Technologies

• Automobile• Telephone• Light bulb• Refrigerator• X-ray machine• Computer• Furnace…

• Gasoline• Diesel • Electricity• Methane• Ethanol• Hydrogen…

• Oil Refinery• SAGD facility• Hydraulic fracturing • Anaerobic digester• Pipeline• Nuclear power plant• Coal power plant• Gas turbine• Fuel Cell• Solar panel• Wind turbine…

WHAT ENERGY SYSTEM DEVELOPERS CREATE:

Adapted from “Smelling Land” by David Sanborn Scott

Forces for Energy System Transformation

Energy Systems

Rapidly rising global energy

demand (esp. Asia)

Jobs & tax income

Declining conventional oil and gas High oil

price

More reliance on unconventional oil

& gas

Low natural gas price (esp.

in NA)

ECONOMY

Climate Change Air pollution &

health impactsWater and land useENVIRONMENT

Societal Impacts

Energy Security Concerns

(esp. in USA & E. Canada)

Risk/benefit assessment and relative ranking of each ‘Force’ differs widely among individuals and groups.

My definition of a Canadian Energy Strategy:Inter-provincial or multi-provincial cooperation around key components of Canada’s Energy Systems to achieve:

How to Transform our Energy System should be the Focus of a

“Canadian Energy Strategy”?

As Canada’s energy province, Alberta needs to take a leadership role in the next energy system transformation.

EnergySecurity

Healthy Environment

EconomicGrowth

Canada’s Energy System (2006)

Oil

Gas

Coal

Hydro

Electricity Exports

Residential & Commercial

Oil & Gas Industry

OtherIndustry

Transportation

Domestic Energy use

Waste

Waste

Energy Service Energy Source

* Estimate of useful vs. wasted energy in energy services from NRCan Sankey (2006).

Note: Large exports; ~85% of primary

energy from fossil fuels;

Large waste from conversion & transport

Outline for Talk

Oil

Gas

Coal

Hydro

Electricity Exports

Residential & Commercial

Oil & Gas Industry

OtherIndustry

Transportation

Domestic Energy use

Waste

Waste

Energy Service Energy Source

* Estimate of useful vs. wasted energy in energy services from NRCan Sankey (2006).

3. Electricity

2. Natural Gas

1. Oil

4. Energy Efficiency

1. SUMMARIZE KEY FEATURES / peculiarities of the Canadian energy system;

2. IDENTIFY QUESTIONS to explore opportunities for Transforming the Cdn / Alberta Energy System;

3. CONCLUSIONS

1. Oil

Trends in Cdn Oil Production & Import

19851986

19871988

19891990

19911992

19931994

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

2011

-1000

-500

0

500

1000

1500

2000

2500

3000

3500

Exports to the USA

Domestic use [CDN production]

Imports

Totaldomestic usein refineries

Source: Statcan Cansim 126-0001

Crude Oil Production

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

Oil Production

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

Oil Production

Oil Transport

Only 57% (0.9 mil. boe/d) of Cdn Crude Oil Production is Refined in Canada…

…but Canada also refines 0.7 mil. boe/d of Imported Oil (42% of Total Oil Refined)

Oil Production

Oil Transport

Refine Petroleum Products (RPP)

In balance, Canada is a Net Exporter of Refined Petroleum Products (RPP).

Canada is on Track to Greatly Increase Oil Production in the Next 20 years

Sources: Statcan Cansim 126-0001 (historical data) and adaptation from CAPP forecast (Crude Oil: Forecast, Markets and Pipelines, June 2012)

Oil Sands

…and Shale Oil Production in the USA is Threatening Existing Markets for Cdn Oil

Source: U.S. Energy Information AdministrationNote: Production data includes crude oil and lease condensate

This new production will compete with CDN oil for US markets.

USA Annual crude oil production (1985-2011)

19851987

19891991

19931995

19971999

20012003

20052007

20092011

0

1000

2000

3000

4000

5000

6000

7000

Texas

AlaskaOklahoma

California

North Dakota

Kboe

/d

Source: Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012

Production in excess of Cdn needs

Estimated US import

CD

N o

il (K

boe/

d)

Available for new markets

1. Can we move AB oil to E. Canada at competitive prices with Brent crude?

2. Should we refine more AB oil in Canada?

3. Can we get access to the Pacific to open up markets in Asia?

4. How can we address the environmental cost?

Questions…

2. Natural Gas

-2,000,000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

Exports Domestic use Imports

After Years of Rising NG Production & Export, Both are Declining as US Imports Rise

Source: CANSIM tables 128-0009 and 128-0002

Nat

ural

Gas

in C

anad

a (E

J/yr

)

Exports

Domestic use [of CDN production] TotalDomestic use

Canadian production

Imports

Over 50% of Cdn Gas Production was Exported to USA in 2009

Natural Gas Transport

Natural Gas Production

Natural Gas Import

While E. Canada imported gas equiv. to ~11% of Cdn production.

US production of gas has been increasing sharply…

US Shale Gas is taking market share from Cdn Natural Gas production.

Source: EIA Annual Energy Outlook 2012 (early release)

US Natural Gas Production in EJ/yr

What are the NG reserves in Canada?

NG Price is low compared to oil:

$ / GJ• Nat Gas: $3-

4• Oil (@$80/barrel) $13

Canada has Vast Natural Gas Resources…

Sources: IEA, Golden Rules for a Golden Age of Gas: World Energy Outlook Special Report on Unconventional Gas, 2012Energy 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

Conventional gas (173 EJ)

Coal bed methane (192 EJ)

Tight gas (77 EJ)

Shale gas (423 EJ)

Gas hy-drates*(Min. Est: 1676 EJ)

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.

Source: Adapted from Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012

Exports

Predicted NG Supply & Demand for Canada & USA

EJ/

yr

Available for new markets

1. Does it make sense to transform the energy system towards natural gas?A. LNG exports to Asia?B. Replace coal power with

cleaner gas?C. CNG/LNG vehicles?D. Expand fertilizer & plastics

industries?

2. How can we address the environmental costs? Recovery & Processing? Use?

Questions…

3. Canada’s Electrical System

Provinces Vary in Sources for Power Production

Hydro

Coal

Nuclear

Note: Average values between 2005 and 2009

Power Generation

Most is used within each province, but ~78% of Canada’s electricity trade

is N-S, not E-W

Notes:- Trades lower than 0.5 TWh removed- Average flows values do not consider years without trade- Share calculation based on all flows values

Labrador trade with Quebec is

the primary exception

Power Generation

Power Transport

Provincial greenhouse gas (GHG) emissions affected by source of power.

Note: Average values between 2005 and 2009

Power Generation

GHG Emissions

Canada’s GHG Emissions from Power Generation

GHG emissions** associated with power production in Canada

119 Mt CO2/yr

Oil8

Gas18

Coal93

Equivalent to: ~3X the GHGs from oil sands

recovery and processing (well to pipe)*

*** In 2009, oil sands recovery accounted for 6.5% of GHG Canadian total emissions (source: NRCan)

1. Should provinces switch from Coal to Natural Gas?

Reduce GHGs by 40 Mt CO2/yr

1 2 30

20

40

60

80

100

Kg

CO

2 / T

J po

wer

Coa

l

Oi

l

Nat

ural

gas

*

* Assuming combined cycle units

2. 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?

Larg

e H

ydro

An opportunity for inter-provincial cooperation…

Questions…

Canada has the hydro potential to displace fossil fuel power generation

Developed hydro

Undeveloped hydro

potential

Notes:- Trades lower than 0.5 TWh removed- Average flows values do not consider years without trade- Trade newer than 2007 not considered

…and hydro is a great base load / storage for wind and solar

Dollars of Revenue per t CO2e Emissions ($/CO2e) for Canada’s Primary Industries

Coal Fired Power Gen.

Agriculture

Cement

Marketable Nat Gas

Crude Oil

Bitumen

Primary Metal Mfg

$0 $1,000 $2,000 $3,000 $4,000

Dollars of Revenue Per Tonne of CO2e Emissions ($/CO2e) [2008]

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?

4. Energy Efficiency

Canada Alberta Ontario Quebec BC UK Sweden Germany Finland Denmark0

100

200

300

400

500

600

2008

Ener

gy u

se (G

J/ca

pita

)

30

Industry

Why is Alberta be so much

worse than other

provinces?

Canada: CanSim Table 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]

TransportResidential

Commercial & Institutional

Agricultural & Fishing

Per Capita Energy use in Alberta, Canada and Northern Europe

49% higher than the Cdn Avg!

Why?

Oil8

Gas18

Coal93

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.

QuestionShould not Alberta strive to be the Canadian Leader in:

Energy efficiency? Renewable energy? Low carbon communities?

“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)

Conclusion1. 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.

2. 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?)