How Energy Production is Structured
The federal government shares responsibility with the provinces for energy, environmental protection, and trade. The main federal energy regulatory agencies are the National Energy Board (NEB) and Canadian Nuclear Safety Commission. The NEB regulates hydrocarbons, pipelines and international power lines as well as exports of oil, gas, natural gas liquids and electricity, and imports of natural gas. The NEB also oversees approximately 100 pipeline companies in Canada. Intra-provincial pipelines (within a province) are regulated by each province and include smaller natural gas distribution lines which go directly to residences with natural gas furnaces or water heaters. Utility boards regulate transmission rates. Most provinces have a stake as operators in electrical markets. Utilities are Crown corporations operating as regulated monopolies. The Canadian Environmental Protection Act avoids duplication in regulatory activity. Ontario and Alberta deregulated their electric industry/markets over the last decade. A number of municipalities operate local distribution systems, such as EPCOR in Edmonton. Electricity reliability is coordinated at a North American level between provinces and the USA. Federal R&D energy technology priorities include: cleaner fossil fuels, clean electricity, and end use (industry, communities, etc.). Conventional gas production totals are set by the provinces and cannot exceed reserves.
Canadian electric utilities account for 92% of Canada’s total production; the remaining 8% of production is by industry for their own use, primarily mining, metal-processing, and pulp and paper. Except in Alberta and PEI, provinces play the dominant role in generating capacity. Investor-owned utilities dominate Alberta and PEI, and they play a smaller but significant role in BC, Ontario, and Newfoundland. Municipal ownership is a minor element in BC, Quebec, and PEI but is significant in Alberta, Manitoba, and Ontario. Investor-owned utilities produce about 9.5%, municipalities 1.4%, and the two territories 0.2%. There are also about 364 smaller utilities; 87% are in Ontario, and most are owned by municipalities. Many don’t own generating capacity, instead purchasing power from the major utility. Several small investor-owned utilities, though, have generating capacity.
In 2014, electric utilities and industry in Canada generated 639 terawatt hours. Canada is the second largest producer of hydroelectricity in the world. BC, Manitoba, and Quebec rely predominantly on hydropower, whereas Nova Scotia, Saskatchewan, and Alberta use mainly coal. BC, Manitoba, and Quebec generally have better hydropower resources than wind. Wind is also along the Great Lakes and coasts of Quebec and the Maritimes. Wind is becoming predominant as a renewable resource. Solar has increased, but remains relatively small as a market. No predefined set of conventional or emerging energy sources are used in a given region; it is based more on availability.
The most important electricity source in Canada is moving water. Some provinces have moved towards a more competitive generation system with the private sector playing an increasing role, giving rise to independent power producers. Fossil fuels are the second most important source, particularly in Alberta and Saskatchewan, where several power stations are built adjacent to large coal deposits. Fossil fuel generation is also important in the Atlantic Provinces, NWT, and Nunavut. Ontario used to rely heavily on coal-fired generation; however, in April 2014, the last coal-fired generating capacity was shut down. Nuclear power is the third most important source. There are eighteen operating installations in Ontario and one in New Brunswick. Quebec shut down their plant. The industry is represented by the Canadian Electricity Association, independent power producers’ societies, and various source-specific associations.
Sources of Energy
Natural Resources Canada (NRCan) reports that Canada, in 2014, was the world’s fifth-largest oil producer and fourth-largest natural gas producer, with the third-largest oil reserves, surpassed only by Saudi Arabia and Venezuela. Canada produced nearly 3.8 million barrels/day (mb/d) of crude oil in 2014, of which 2.2 mb/d came from the oil sands and 1.6 mb/d from conventional, offshore, or tight oil production. Oil sand extraction creates large amounts of residual waste—tailings, a mix of water, clay, unrecovered bitumen, solvent, and dissolved chemicals, including some toxic organic compounds. Unconventional oil and gas production, such as the processing and upgrading of bitumen as petroleum products suitable for market, requires more energy and the CO2 concentration is higher. In 2013, 25% of Canada’s GGE came from the oil and gas sectors.
Canada has 171 billion barrels of oil reserves (sufficient to maintain the 2014 production rate for 130 years), of which 166.3 billion barrels are in the form of oil sands. In 2014, Canada exported 2.85 mb/d of its crude oil (97% to USA and 3% to Europe and Asia). Alberta (77.4%), Saskatchewan (13.7%), and Newfoundland (5.7%) account for over 96% of Canadian oil production. Given Canada’s vast geography, producers in the west export to the USA, whereas the east imports from the USA and overseas. By importing, Canada outsources emissions penalties from producing oil domestically. The David Suzuki Foundation declares that emissions from oil sands production nearly tripled from 1990 to 2006 and that natural gas emissions were over 110 gCO2e/MJ in production. The largest growth was fugitive emissions from unconventional gas due to its higher levels of CO2. In Canada, unconventional gas (shale and tight oil) development has strict regulatory frameworks. Growth requires estimating future demand, pricing, and the regulatory environment. Overall, Greenhouse Gas Emissions (GGE) increases result directly from production increases.
Canada’s portfolio of energy resources involves both domestic consumption and exports. NRCan views Canada as an energy-intensive country, given its northern climate, vast territory, industrial base, and high standard of living. The provinces access different natural resources and rely on different sources of electricity generation. Quantity of consumption is based on economy, weather, geography, and geology. Canada produced 435.1 million tons of oil-equivalent (Mtoe) of energy in 2013. Fossil fuel energy production was 44.8% oil, 30% natural gas, and 8.1% coal. Renewables included hydro-electricity at 7.7%, biofuels and waste at 3%, and emerging forms (wind, tidal, solar) at 0.2%. Nuclear energy accounted for 6.2% (the primary source is uranium, of which Canada is the world’s second-largest producer). Canada is well-positioned for global growth in nuclear demand.
Leading Energy Companies
NRCan affirmed this spring that Canadian energy companies continue to expand their assets. Of some 435 companies, 59 (14%) had assets in excess of $1 billion, 214 (49%) had interests outside of Canada in 75 countries, and 166 (38%) had assets in at least two countries. Total Canadian assets were $543 billion, of which $150 billion was outside Canada. In the USA, five large companies impacted that value by $28.3 billion—Encana Corp., Enbridge Inc., Fortis Inc., Baytex Energy Corp., and TransCanada Corporation. Big oil refineries include Imperial Oil, Irving Oil, Syncrude, and Suncor. The top five utilities buying and producing clean power in 2013 were Hydro Quebec, BC Hydro, Ontario Power Generation, Manitoba Hydro, and Ontario Power Authority.
Two companies representative of Canada’s energy production sector are Fortis Inc., which is just moving into renewables (on the east coast of Canada), and BC Hydro, which generates 98% of its electricity from renewables (on the west coast of Canada).
Fortis is an international regulated electric (70%) and gas (26%) utility holding company. It also invests in non-regulated energy infrastructure (4%) in Canada (335 MW) and Belize (51 MW). Fortis has nine independent utility operations in Canada (five utilities—Fortis BC, Maritime Electric, Fortis Ontario, Fortis Alberta, and Newfoundland Power), the USA (two—UNS Energy and Central Hudson) and the Caribbean (two—Caribbean utilities and Fortis TCI). Energy sources include coal, oil, diesel, natural gas, and biofuel, with a strong emphasis on renewables in 2014.
Utility companies regulated by Fortis serve more than three million residential, commercial, and industrial customers across Canada, the USA, and the Caribbean.
Each operating subsidiary retains autonomy given its operations, jurisdiction, size, and regulatory environment. Canadian and Caribbean sites have IS0 14001 systems, and the USA utilities both have environmental protocols. During 2014, 10.3 million tons of CO2 were generated in production using fossil fuels and natural gas losses; 4.8 million tons were generated from energy purchases of $15.1 million. Future plans include energy efficiency (EE) programs, clean energy, and reduction of their reliance on coal.
Their 2015 environmental report highlights subsidiary initiatives and efforts to address emissions. During 2014, fossil fuels accounted for 86% of production and hydroelectricity accounted for 14%. Fortis’ generating assets accounted for approximately 68% of the GGE; energy purchases accounted for the remaining 32%. A significant milestone in 2015 was a 335 MW Waneta hydroelectric generation expansion in BC to power 60,000 homes a year toward BC’s Clean Energy Act. Central Hudson’s relationship with the local solar industry made it one of the top regions in the USA in 2014. Fortis has a number of customer incentives underway, has new solar and hydroelectric power projects, and is preparing utility partners to connect to the grid.
Maritime Electric purchases all the energy supplied by PEI provincially owned wind farms, with wind energy exceeding 24% of their energy sold in 2014. Fortis has reduced fugitive emissions at compressor stations by 10% on the BC mainland and Vancouver Island, and has improved pneumatic device efficiencies, reducing 86T of vented GGE. Central Hudson is developing an aggressive gas infrastructure program to replace leak-prone pipes. Other Fortis programs include the use of biomethane, methane gas, and biodiesel fuel for fleets; water reuse; tree planting; sulphur hexafluoride management; and a broad array of EE initiatives.
BC Hydro is a Crown corporation, owned by BC’s government and residents. The sole shareholder is the province. BC Hydro serves 95% of BC’s population, delivering electricity to approximately 1.9 million residential, commercial, and industrial clients and 4 million people overall. BC Hydro became carbon neutral in its corporate operations in 2010, along with the BC public sector.
BC Hydro operates 31 hydroelectric facilities and 3 thermal generating plants, with the bulk of generation coming from dams on the Peace and Columbia Rivers. In 2015, it generated 98% of its electricity from renewable sources. Electricity is delivered to customers through over 78,000 km of transmission/distribution lines and connects to other systems in BC, Alberta, and Washington State. Independent Power Producers (IPPs)—hydroelectric, wind, gasification and biomass generating projects—account for 25% of BC Hydro’s domestic supply. IPPs include power production companies, First Nations, municipalities, and customers that provide 19,290 GW/hr electricity/yr when BC Hydro faces a gap.
Conservation/efficiency, smart meters, maintaining and expanding generation and transmission assets, and adding supply through long-term IPP electricity purchase agreements all help to meet demand. BC Hydro has biogas, municipal solid waste, Resource Smart, and natural gas in its inventory. Options not yet in commercial use by BC Hydro are geothermal, pumped storage, wave, solar, and coal with carbon capture and sequestration.
BC Hydro is investing in the energy needs of 1.1 million more people in 20 years (4.6 to 5.7 million) and in the economic activity they will generate. Much of the assets that exist were built between 1940 and 1980. Upgrading assets includes high-voltage transmission lines, dams and power generating stations. A new project, the Site C Clean Energy Project, to finish in 2024, will provide 1,100 megawatts (MW) capacity, and 5,100 gigawatt hours (GW/hr) of electricity per year to power 450,000 homes. A second project, started in 2005, is the upgrade of flood discharge gate systems (spillway gates) and control systems at 22 facilities. BC Hydro owns and maintains 41 dam facilities in its system. Spillway gates control the water discharged from reservoirs during floods when high inflows exceed the ability of the generating units to use all the water.
Five measures categorize GGE reduction options: conservation and efficiency, fuel substitution, electrification, low carbon electricity, and offsets. BC Hydro has a range of conservation programs geared to the Greenhouse Gas Reduction Targets Act. A savings equal to the needs of 425,000 homes has already been achieved.
BC Hydro reports to the province through the Minister of Energy and Mines and the following legislation, policy, and instructions: The Hydro and Power Authority Act, The Utilities Commission Act (pricing), The BC Hydro Public Power Legacy and Heritage Contract Act, and the Province’s Energy Plan. The Ministry requires a rigorous Integrated Resource Plan (IRP) submitted every five years (2013) to describe how customer needs are helping to achieve provincial GGE targets.
Submitted by Climate Scorecard Country Manager Diane Szoller