Entries in energy (6)


A Renewable Energy World is not Fantasy

Margaret Wente of the Globe and Mail recently wrote that people who think renewable energy can replace fossil fuels are living in a fantasy world.                                                                                                 


Having spent the last twenty plus years in the renewable energy 'space' my husband and I couldn't resist correcting this claim so we each tried to set the record straight. I placed his response after mine.

No one who understands our fundamental dependence on fossil fuels expects solar, wind or biomass to replace oil and gas in the next few years. I agree with Ms. Wente,  we must not indulge in magical thinking. However, in the real world the transition to clean renewable fuels is already happening.

I suppose there were folks watching the Wright Brothers floundering with their new invention, tsk, tsking and eye rolling and disparaging their efforts. Did airplanes replace cars? Yet, look at how significant a role they play in society today.  We face a daunting challenge maintaining our standard of living and paying the real costs of our fossil fuel addiction.

We now have an entire planet of people who witness and desire a certain quality of life. We have, via technology, trade, and transit routes created expectations that this quality of life is achievable for all. There is no way to provide for that scenario by following the same formula we did in the West for a hundred years. That is a dangerous fantasy.  We used the initially cheap and abundant supply of energy dense oil and gas to power unprecendented economic growth. That party is over and Ms. Wente would serve her readers well by acknowledging this and not dismissing the very technologies that will be used alongside the remaining very expensive (and not just in dollars) oil and gas left to power our lives.

Let’s be clear about our present situation:

The price of oil and gas will continue to rise and cause havoc to our economy because:

An increasing share of one’s income is going to transportation. The price of using modern technology (fracking, deepwater and arctic drilling) to go to the ends of the earth, literally, to produce the last “available” oil and gas resources is very high. (filled up your tank lately?) As companies and communities are forced to deal with the expense of cleaning up the messes they create, the price will go up even further. Renting a drilling platform for deep-sea production cost at least a million dollars a day and that is only one part of the supply chain. My own three twenty something children have little desire to spend their meagre earnings participating in this situation and use public transportation as their main source of getting around. At the moment, we are a family of five adults sharing one Prius. So yes, we still rely on fossil fuels but this scenario is a far cry from the driveways dominated by 2, 3 or even 4 cars per household, and that was a blue collar one, that I grew up with.

An increasing share of one’s income will be required to buy food since modern agricultural practice is wholly dependent on ever more expensive fossil fuels. We, in the West will manage those extra costs but for most of the world it is the difference between having one meal a day or two or three. It can be argued that the “Arab Spring” and unrest in other developing nations is directly related to the sudden rise in the cost of basic food-stuffs which is directly related to the cost of fuel. 

Oil production margins are tight. There isn’t a lot of wiggle room between world daily production and world daily consumption of oil. This is great for corporate share prices which rise at the least indication of “trouble” anywhere in the world where oil is produced or shipped but it leaves consumers and businesses in a budget nightmare.

There was plenty of oil and gas supply when only a small percentage of the world’s population had access and need for it and it was basically spurting out of the ground. Now, every economy in the world has come to rely on fossil fuels. Just when supplies are tight and very expensive we have far more people consuming the product. Even the recent drop in consumption in NA and Europe (due mainly to new fuel standards and the financial meltdown) does not compensate for the growing appetite for fossil fuels in China, India and other developing economies.            

The world is increasingly dependent on electricity to power everything. Many devices and appliances, so integral to modern economies do not require massive amounts of base load supply.  The oft-cited boogieman – intermittent supply - of renewable energy sources like wind and solar are actually perfect for dealing with this. Manufacturers of appliances are finally creating products that can be synched with electricity supply versus being “on” all the time. Solar is the perfect peak electricity supply as air conditioners are used most on hot, sunny days. We’re not there yet, but given the same respect that lead to new ways to reach formerly unreachable oil and gas, the clean tech industry will be able to meet much of our electricity needs. Is it not wise to free up remaining oil supplies for food production, health care pharmaceuticals etc. and let people transport themselves around using electric vehicles?

Driving a few blocks here and there to pick up milk, or go to the mall, exhibits a sorry lack of either knowledge or respect for the energy dilemma we are in. We will transition to a much reduced fossil fuel dependent world, the question is what does that look like and how can we manage to do this is the most peaceful and fair manner? People who believe that all is BAU in terms of energy are the ones living in a fantasy. Putting forward a balanced perspective on the possibilities and promise of renewable technologies is what is required to create a future livable world. It will take great doses of knuckle whitening determination and having one’s (possibly wet) feet firmly planted in the real world; many of us are already using our time, talent and money doing this.  Eventually everyone else will too, because while facts can be dismissed, ignored and denied, reality happens!

Cathy MacLellan

And now a word or two from my husband who has dedicated the last 25 years of his life dealing with the technological challenges associated with solar energy.

In the real world….. Solar generation was the number one new generation capacity installed in Europe in 2011 where it was greater than new wind and natural gas combined. In 2012, 60% of all net new generation of Europe’s new 29GW of capacity was from solar based generation. Europe added almost all of Ontario’s current generating capacity in one year and most of it was solar!

In the real world….. in Germany, they have reached 22GW of electricity production from solar generation, which can power one third of the country during a weekday and half on the weekend.

In the real world….. Solar electricity installed is one-third the cost today compared to 2006. It is now cost effective in many regions with little or no government incentives. It would be completely cost effective if governments worldwide, according to the International Monetary Fund, eliminated the $1.9 trillion a year in subsidies to the fossil fuel and nuclear industry.  The International Energy Agency estimates that all renewable energy has a subsidy of $88 billion per year.

With the advent of the different variations of the electric car, plug-in hybrids, smart grids, centralized and distributed storage, the world is in the middle of a fundamental transition in our energy based economy. It started about 20 years ago and it will take about another twenty years to complete. This transition is happening much faster than even most solar experts had predicted let alone what the average person understood.

Welcome to the real world of the 21st century where energy will be distributed, clean, cheap and ubiquitous compared to the last century where energy was centralized, limited, dirty and not addressing issues related to the environment, people’s health, security, and price.



Ian MacLellan

President and CEO

Ubiquity Solar Inc.






Unintended Consequences of Trade Agreements 

The North American Free Trade Agreement (NAFTA) is generally viewed as making a positive contribution to the Canadian economy. With a relatively small population our standard of living most certainly would not be what it is without the benefits of excellent trading relations with the US.

Prior to the 1980s, western Canadian crude was shipped by pipeline to Ontario and Quebec where it met most of crude oil demand in these provinces. Canadians musing about why we are not using our oil resources to meet all of Canada's needs first may be unaware of the unique clauses in NAFTA that basically shifted the West to East flow of energy resources across Canada to a North-South flow into the US market.

The Proportionality Clause in NAFTA

The energy export provisions in NAFTA have encouraged the development of the tar sands and the rapid growth in the export of energy (notably crude oil and natural gas) to the United States. NAFTA is why Canada is the number one supplier of oil to the US and one could go further and say that the expansion of the oil sands has been (until lately) due to US demand.

The proportionality clause - the only one of its kind in all the world's trade agreements - requires Canada to make two-thirds of its domestic oil production available for export to the U.S., even if Canadians experience shortages. It kind of makes one think about that phrase "With friends like this...." It hasn’t dawned on most Canadians that their governments have signed away their right to have first access to their own energy supplies. For some inconcievable reason Canada is also the only member of the International Energy Agency (IEA) that does not keep a ninety day emergency supply of oil on hand.

A decade before NAFTA, Canada had a National Energy Policy that limited exports to the U.S. and a Foreign Investment Review Agency, which tried to reduce U.S. direct investment in Canada (including the energy sector).

Until recently, Canadian oil producers (unlike their brothers in the softwood lumber industry) have not had a problem with NAFTA. Unanticipated events like: US oil consumption dropping, new Bakken shale oil on the market and refinery shutdowns causing a glut of supply of crude oil in Cushing Oklahoma, where most of Alberta oil goes have changed everything. Now, Canadian oil producers have a problem. The price for raw bitumen is low. There has been rapid expansion of oil sands production. Suddenly having only one customer for Canadian crude isn't working out so well.

The low prices for bitumen in the US Midwest is a short term problem. Oil sands production is so expensive, that even a short term drop in price is problematic. Meanwhile, Canadian oil producers see a ready market for their product, at a better price, in Asia.

As the Canadian supply of bitumen to Asia increases, the proportionality clause may come into play. It may be argued that the reason for the rapid expansion of oil sands production (which Canadians concerned about the environment are raging against) is to maintain US supply according to NAFTA and meet demand in China. Canadian reserves are sufficiently large to keep Canada the main source for U.S. oil imports for years to come.

China's investment in the Canadian oil sands presents a new factor in Canada-U.S. relations.The era of oil diplomacy has come to Canada.

While I suspect the Government of Canada has been well aware of the delicacy of this situation, it is obvious that once again, they have not given due consideration to the rest of Canada who do not want their wilderness and the livelihood and culture of their First Nations to be sacrificed to satisfy Big Oil's need for continued growth and profits.

The situation is as bleak and sticky as that gooey black tar that is the source of it all.






The National Energy Board 

The Rt. Hon. John Diefenbaker opened the 1959 Parliamentary Session with a promise to his MPs: " the earliest opportunity you will be invited to authorize the establishment of a national energy board to ensure, so far as it lies within the jurisdiction of Parliament, Canada's energy resources are used effectively and prudently, to the best advantage of Canadians."

Today the National Energy Board (NEB) is an independent federal regulatory agency that regulates the Canadian energy industry. It reports through the Minister of Natural Resources to the Parliament of Canada. Its primary responsibilities include:

  • ·      Inter-provincial and international oil and gas pipelines and power lines,
  • ·      Export and import of natural gas under long-term licenses and short-term orders,
  • ·      Oil exports under long-term licenses and short-term orders      

The first NEB appointees were lead by the chairman of the Alberta Oil and Gas Conservation Board, Ian MacKinnon, a personal friend of then Alberta Premier Earnest Manning.

The first order of business was to create the National Energy Board Act.

The very busy NEB grew from five to eleven members by 1984. In it’s early years the NEB was supportive and protective of Canadian economic and environmental interests; it rejected several applications.

The Supreme Court had to deal with some shenanigans in 1976 when NEB Chair Marshall Crowe, at one time a member of the Arctic Gas management committee, the very company applying to build a gas pipeline to the Mackenzie Delta, got himself on the Arctic Gas Project review panel. A new panel was created and after a two year delay the application was reviewed and then rejected for environmental reasons with the added recommendation that construction in the Mackenzie Valley should be put on hold for at least ten years to allow for native land claims to be settled.

1981 - The National Energy Board Act is amended to include provisions for appropriating land for a pipeline right-of-way.

1982 - The Canada Oil and Gas Act is proclaimed. It includes subsidies for exploration on federally owned oil and gas properties in the North and offshore.

1991 - Finance Minister Michael Wilson announced the move of the National Energy Board from Ottawa to Calgary in his budget speech.

The NEB and various Federal Governments have often come to different conclusions. Prime Minister Pierre Trudeau created the National Energy program without NEB input. Today, we have a Federal Government that is interfering with the NEB as it processes the Enbridge Northern Gateway Pipeline application. Industry complains bitterly that the regulatory process is hurting Canadians: “The biggest single impediment is the regulatory process” says former TransCanada Corp CEO Hal Kvisle. Also, First Nations groups are not convinced that the NEB will take their concerns seriously.

I don’t envy the task that is before the NEB. Canada is the only country in the 27-member International Energy Agency without strategic petroleum reserves and the only one with no plan to deal with a sudden international oil crisis, "even though one is almost certain to hit soon," says University of Alberta political economist Gordon Laxer.

Having a plan in place would surely help the NEB make decisions that are truly in Canada’s best interest.

The biggest challenge of the Northern Gateway Pipeline lies with Alberta.Their resource is landlocked and they cannot behave like a lone ranger. Premier Redford appears to understand this very well and has called for a discussion on Canada’s energy policy.

Ultimately, the NEB, has to stick to its mandate.

The purpose of the NEB is to regulate pipelines, energy development and trade in the Canadian public interest. The NEB is accountable to Parliament through the Minister of Natural Resources Canada.

Parliament is accountable to Canadians first; not industry, not the PMO, not just one province.


The Business Piece for Pipelines

 Two of Canada’s most powerful energy companies, Kinder Morgan (KMP-N85.50-0.20-0.23%) and Enbridge (ENB-T37.84-0.16-0.42%) are laying competing plans to pipe and ship massive volumes of crude to Asia. Their projects could, for the first time, free the Canadian energy industry from its dependence on the U.S. market while at the same time fattening profit margins.

Enbridge like any other corporation has a vision: we want to be the leading energy delivery company in North America. We deliver energy and we deliver value to shareholders.This is reflected in our growing portfolio of oils sands pipeline projects…to diversify and sustain growth in the longer term in order to maintain Enbridge’s historical growth rate.

And they continue to grow. For the last 10 years Enbridge shareholders have enjoyed increased dividends year after year. Same for Kinder Morgan. If you own this stock, you have received an increase in dividend value year after year. This is the twelfth consecutive year the Board of Directors has raised the dividend. Pretty amazing considering the economic turmoil we've been experiencing.How do they do it? A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases.I guess that means more and more pipelines.

Who buys the crude in the pipelines flowing out of Alberta now? Some makes its way to a few Canadian refineries, less gets to the Port of Vancouver and is shipped to Asia but most goes to the US for refining for their use or onto the world market (via the Gulf).

There is a short term glut of oil heading toward Cushing, Oklahoma which is a hub for oil activities. The glut has occurred because the market is being flooded with Bakken shale oil, rapid expansion of the oil sands, and the shut down of some pipelines and refineries. At the same time North American demand for oil is dropping, while Asian demand is rising even faster.  Asia demand will be there for a long, long time.

How could they anticipate the 2008 meltdown,the end of the Iraq war, or refinery shutdowns?  Any good business has 5, 10, even 15 year strategic plans. Oil companies have planned badly and created the sudden need to get their product to Asia.

Well, it is the job of business to anticipate all kinds of scenarios. If they don't they soon find themselves out of business.This has played out in the solar industry, as prices for panels, cells, etc. have plummeted more than 50% in the past five years due to a number of unplanned for scenarios. Solar companies are going belly up faster than the fish in the Kalamazoo River did after the recent spill there. But that doesn't happen to oil companies. Business continues unabated, shareholder value increases, the subsidies roll on, executives receive their bonuses, lobbyist continue to lobby, and governments defend them.

Why continue to flood the market with oil sands products when there is a glut? Instead of doing the logical thing and slowing things down they cast there eyes to oil hungry Asia and come up with what any average person would consider a crazy scheme to disregard history (First Nations rights to their lands), disregard the fragile BC rainforest,the commercial fisheries, disregard a moritorium on tanker traffic, and disregard the possibility of shipping oil to Eastern Canada to deal with a short term problem. Apparently our reliance on the oil economy means that any slow down will have serious consequences.

How many pipelines is too many pipelines?

A few years ago the names TransCanada, Kinder Morgan and Enbridge would not have meant much to most North Americans. Where Middle Eastern Wars, high oil prices, economic collapse, devastating oil spills (Exxon Valdez, Gulf of Mexico) failed to stir more than water cooler conversation with your average citizen, recently proposed pipelines have ignited a fuse that will not be stomped out.

Pipelines are not at all like the "canary in a coal mine". Afterall, most of us don't have close relations with canaries and we have never set foot in a coal mine. But pipes, we are all very familiar with. If your're living under a roof, you eventually become intimately acquainted with pipes, usually pipes that have burst, leaked, frozen, or cracked and left you with a mess. So when there is talk about pipelines, we intuitively know that things go wrong.Telling us anything different just won't cut it.

Pipeline companies appear to have not taken this natural defensiveness seriously enough, because ultimately this is where the battle about bitumen will happen.

After the Keystone XL rejection?/delay, pipeline companies are battling back. They have a big task ahead of them. The fact that pipelines have been around for a very long time, means there is lots of evidence regarding the behaviour of pipeline companies. Take a look at their websites and witness the worst kind of soothing, father knows best, drivel about how much they care. Then go to YouTube and search pipelines. Actions speak louder than words and there is no industry that suffers from a more complete disconnect here than the oil industry.

Enbridge's Values

We operate with integrity, honesty and transparency in all of our dealings with stakeholders. We operate to the highest ethical standards with our customers, shareholders, employees, partners, landowners, regulators and others. We communicate openly and honestly.





The Big Oil Picture - One Puzzle Piece at a Time 

When I was an undergrad one of my favourite ways to decompress was to do a jigsaw puzzle. I bought a new one each term and there it would sit until I needed the distraction. (ok, sometimes it was a major way to procrastinate too!) It has recently dawned on me that the entire oil market is one huge puzzle with most of us focused on just a few pieces: the price we pay at the pump, easy access and maybe, the pollution we cause when we burn it. Depending on your outlook, you may also be concerned about various foreign wars/interventions in oil producing areas.

With each passing decade more of the world increasingly functions on the use of gasoline and diesel. The amount of conventional oil in the Middle East far outstrips what is available anywhere else on the Earth.We don’t know exactly how much oil there is in the Middle East because they are not transparent about anything. Conventional oil flows through a well without stimulation and through a pipeline without processing or dilution. It’s a relatively cheap process.

Global oil production appears to have leveled off. Our economies are based on continued access to cheap oil. There is not enough cheap conventional oil to go around these days.

World demand for oil continues to grow. China is experiencing a large-scale transition away from bicycles and mass transit toward private automobiles.So desperate has our need for oil become, and so willing are we to pay the necessary high price, we are now producing more and more oil from the difficult spots like the deep waters in the Gulf of Mexico, Alberta’s oil sands and shale oil deposits. The oil sands are a thick, viscous mixture of bitumen hydrocarbons combined with water, sand, heavy metals and clay. Not only is this a very expensive way to fill our tanks, it has opened a Pandora’s Box of associated hazards to our natural world and populations that depend on the largess of that natural world. We have a problem.

 China also needs to provide lots of jobs to its citizens. Not interested in just importing ready to use oil and gas China wants to do the upgrading and refining within its’ borders. This means the bulk of the jobs, and the profits from oil production will go to the Chinese. The international corporations who are gaming the oil and gas sector have no particular loyalty to any nation, other than the nation of shareholders and executives they represent.

The Keystone XL and Northern Gateway Pipeline applications are providing an opportunity for Canadians to decide how best to deal with the land locked resource we have.

Regardless of how the Harper government tries to dominate and (re?)direct the oil conversation Canadians will collaborate like no other time in history to have a say in this new oil dilemma. We all want to build the puzzle together. What remains to be seen is how responsive our business and political leaders will be to this new era of engagement.



Pipe Dreams or Pipe Lying?

O Canada, our true patriot love is really being put to the test.

The Northern Gateway Pipeline Hearings have now started and my head already hurts. Canadians are getting bombarded with rhetoric that is divisive, dismissive and downright frightening. When Minister Oliver said: “We can’t let unlawful people oppose lawful development,” he’s really engaging in the lowest form of political doublespeak. “unlawful people”? Quick, hand me a copy of 1984.

I’m surprised no-one has been called a terrorist yet. For some reason our PM is very concerned about “foreign money” and influence (as if Canada hasn’t benefitted hugely from both). We definitely want foreign money in Canada, check out  "Invest in Canada" for more on that.

Enbridge has their lawyers at the ready. Environmentalists, many 1st Nations and others are clearly stating their opposition. Visions of all that riot gear used during the G20 protest keep coming to mind.

I like facts. I like solid data. I like history. I like hearing from the trenches. If our government and the oil industry has any respect for Canadians they should respond to this list of concerns immediately.

1. Safety

Why not immediately institute a program where industry workers who witness safety problems or violations in any and all areas of work are given a bonus and recognized for helping the company be more responsible. That sounds like a serious commitment to CSR. Quite the opposite is done when people with integrity are called “whistleblowers” and end up fired or demoted like this pipeline engineer. Stop demonizing those who are trying to protect the communities affected by the industry. Calling award winning author Andrew Nikiforuk a lunatic just because he writes a book that reveals the problems of the industry does not help the situation. If I could trust that you were doing absolutely everything to encourage a culture of safety and protection I may not be so interested in fighting you on building yet another pipeline.

2. Safety (yes, a second point is necessary!)

Do not obfuscate your own history of leaks and/or other pipeline failures. Indicate that you will be fully responsible for funding any and all situations where your pipeline has failed and caused damage to communities or resources (land and water). No socializing the losses. As my mother was fond of saying: “you’ve made your bed, now lie in it.”

3. Research

Show me that you care enough about Canada by spending as much money on researching, acknowledging, understanding, and reducing the damage extraction and production etc. causes, as you do, on a legal team. I suspect that there is more value in retaining 125 scientists as there is in paying 125 lawyers.

4. Job Creation

Outline clearly what kind of jobs will be created. How many are longterm permanent positions? How many shortterm permanent positions? Defend your numbers with facts. Compare this project to other projects of similar size and scope.

Canada may have oil resources equal to those of Saudi Arabia but we certainly cannot develop that resource in the same manner that they have. After all our oil is ethical and theirs isn’t…right?