Natural Gas and Energy Affordability: A Conversation with Tim Egan from the Canadian Gas Association (CGA)
While North American natural gas prices are relatively low compared to Europe and Asia – they are still over three times greater than the typical level over the past several years. Assuming a cold winter, North American prices could spike up even higher.
This week we invite Tim Egan, President and CEO, Canadian Gas Association (CGA) to join the podcast to talk about natural gas in Canada.
Here are some of the questions Peter and Jackie ask: Is affordability a concern this winter for Canadian residential and industrial users of natural gas? Are exports of LNG from Canada’s east coast economic? Why has central Canada’s consumption of American natural gas grown? Will Renewable Natural Gas (RNG) or hydrogen consumption grow in Canada? What are some examples of Canadian innovation when it comes to natural gas?
Content referenced in this podcast:
• Website with more information on natural gas and its consumption: “Fueling Canada – we can do it”
Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/
Check us out on social media:
X (Twitter): @arcenergyinst
LinkedIn: @ARC Energy Research Institute
Subscribe to ARC Energy Ideas Podcast
Apple Podcasts
Google Podcasts
Amazon Music
Spotify
Natural Gas and Energy Affordability: A Conversation with Tim Egan from the Canadian Gas Association (CGA)
In pre-pandemic days, natural gas was selling at the Henry Hub for $2.50 USD/MMBtu. These days that price has jumped to near $9. Of course, in Europe the price has gone above $70 because of the ripple effect of the war in Ukraine.
“I don’t think that the consuming public really has fully grasped the situation here and what could happen this winter,” says Peter.
On the podcast this week Jackie and Peter have someone who does have a good grasp on things, Tim Egan, the President and CEO of the Canadian Gas Association. “I don’t think Canadians are prepared for the higher energy prices across the board they’re facing. Now, the commodity price is only a portion of the consumer’s bill. Because I assume when you’re thinking, ‘Consumer,’ you’re really thinking of residential consumers. You’re thinking of each of us in our homes. In fact, that’s only one-third of the gas consumption in the country. A full two-thirds is industrial consumption, other uses. But that third in the home is over six million homes across Canada that are heating with natural gas.”
For the average residential consumer, the commodity price makes up a portion of the bill with the rest being delivery charges. So, if natural gas prices double or triple it doesn’t mean your bill doubles or triples. Likewise, when gas prices go down, your bill doesn’t go down commensurate.
But prices have gone up, and winter is around the corner. Gas bills are about to raise eyebrows in a lot of households.
“And so, who’s talking about this?” Asks Peter. “Who is talking about what’s looming for the consumer as, say, mid-December they open up their utility bill or their credit card bill, which automatically pays their utility bill, and go, ‘Whoa. What is this number here? Where did this come from?’”
“More conversation about this is better,” says Egan. “Because Canadians have been lulled into a complacency about energy. Canadians think that energy is a very easy thing to deal with. That we can go and we can address this environmental objective and that environmental objective without consequence. That we can prevent the building of this infrastructure and that infrastructure without consequence. When ultimately, it has profound consequences.”
“We have something like 100 years of resource in North America at the current consumption rates,” notes Jackies. “But the problem has been this last year even though we’ve had these high price signals, we haven’t really seen much production growth.”
“I’ve had meetings with 19 different European ambassadors,” says Egan. “Because they all want to find a way to get access to Canadian gas. They asked me what our supply picture is. They asked me what the long-term scenario is for that supply. They’re just flabbergasted. They say, ‘Why aren’t you producing more? Why aren’t you moving more?’ I think the reality is that some policy makers, and they’ve been very clear about this, are not actually keen on upping the production of gas. In fact, they want to restrict it over time. And this is something that has to be part of that public conversation.”
There’s so much more to this conversation.
Episode 169 transcript
Disclosure:
The information and opinions presented in this Arc Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.
Announcer:
This is the Arc Energy Ideas podcast with Peter Tertzakian and Jackie Forrest. Exploring trends that influence the energy business.
Jackie Forrest:
Welcome to the Arc Energy Ideas podcast. I’m Jackie Forrest.
Peter Tertzakian:
And I’m Peter Tertzakian. Welcome. Well, Jackie, we’ve got a really interesting lineup today, but I think the story of the week probably is the stock markets. Isn’t it?
Jackie Forrest:
Yes. Well, the stock markets have been quite volatile, but the S&P 500, which is a measure of 500 largest companies in the US, is down almost 20% versus the beginning of the year at this point. Of course, we had a bit of a rally this summer, if you want to call it that. Equities have actually gone up about 10%, but now they’ve given all that back.
Jackie Forrest:
The issue is that there’s just more concerns now that the inflation is not coming under control. We had some data on Monday about the US core inflation, which is when you strip out the volatile bits like food and energy. They call that the core inflation. It’s supposed to be a lot more stable. And it’s still going up more than what people would like. That caused a bit of a selloff on Monday. Down about 4% alone on Monday for the S&P 500.
Peter Tertzakian:
Well, a lot of those inflation numbers are lagged. Typically, a month. Some countries, more. But if you look at what the indicators are more recently, the FedEx deliveries are way down. There’s all sorts of other new indicators that the buyers are slowing down, in terms of things that are happening. I actually think it’s a combination of the fear of higher interest rates combined with a slowing economy.
Peter Tertzakian:
That’s all weighing on the markets. That, of course, has knock-on effects in terms of the cost of capital for public companies, and companies in general, in terms of their ability to raise money. Ultimately, it’s consequential to things like energy transition and so on. We’ll be watching it carefully. But I would also say, concurrently, the price of oil has come down. Because the demand for oil goes down in a recession.
Jackie Forrest:
Yes. But interestingly enough, natural gas prices have gone the other direction. That’s partly because of the shortage over in Europe. That’s translating to prices here in North America as well to be quite a bit higher than they’ve been over the last several years.
Peter Tertzakian:
Well, and natural gas … I think that’s a great segue into our special guest this week. Because we want to talk about natural gas prices. Whereas, the price of oil really has gone up from a base, I would call it, of a pre-pandemic $50 level. We’re in the $85 range now, US. It was double at $100 plus. But I’ve always been pointing out to people, actually, that’s not the big story.
Peter Tertzakian:
The big story is natural gas prices that have gone up from a pre-pandemic baseline of $2.50 Henry Hub. Somewhere in there. Now, we’re looking at $9. We don’t even want to talk about what it is in Europe. Well, we have talked about that. It’s like $70 plus. But there’s a ripple effect. A pull effect.
Peter Tertzakian:
I don’t think that the consuming public really has fully grasped the situation here and what could happen this winter. But, hey, we’ve got someone who can help us out with that this week. In terms of understanding gas. Especially, at the consuming end. We have Tim Egan. He’s the president and CEO of the Canadian Gas Association. We are delighted to have you. Thank you, Tim.
Tim Egan:
Thanks for having me, Peter. Look forward to the conversation.
Jackie Forrest:
Great. Well, today, Tim, we want to talk about a number of areas. We want to actually start with the Canadian consumer and a bit about affordability and gas and energy prices. Then, we want to talk a little bit about the upstream. About Canadian gas production and our role in the international markets. It doesn’t exist today, but we’re hoping that will grow.
Jackie Forrest:
Let’s start with the first part. The Canadian consumer. Now, affordability is on everyone’s minds these days, because of the higher energy prices. But also, as we were just saying, the price of everything is going up. Right now, the price of gas, it varies day to day. I think it’s closer to $8 right now in Ontario.
Jackie Forrest:
When you think about that, that’s two-and-a-half times higher than people have been used to. They don’t understand that price increase yet, because over the summer months we don’t use a lot of gas in our homes. Are Canadians prepared for much higher gas utility bills this upcoming winter?
Tim Egan:
I don’t think Canadians are prepared for the higher energy prices across the board they’re facing. I think we’ve witnessed this with what’s happened on gasoline prices. The strong reaction to how high those have gone. Now, they’ve come down a bit, but still very high relative to where they had been. And it’s the case for natural gas as well.
Tim Egan:
You noted, Jackie, that gas prices are a multiple of what they were just a few years ago. As you and Peter both know, gas markets are actually very volatile. Gas prices go up and down very regularly, because we have such a liquid market in North America. This is, I would argue, a strength of the market. Because it sends very powerful signals. In fact, gas prices have been much higher, 10, 12 years ago. Significantly higher than they are now.
Tim Egan:
But to your point, they’re higher than they were a year ago, two years ago. And that is going to affect the consumer. Now, the commodity price is only a portion of the consumer’s bill. Because I assume when you’re thinking, “Consumer,” you’re really thinking of residential consumers. You’re thinking of each of us in our homes. In fact, that’s only one-third of the gas consumption in the country. A full two-thirds is industrial consumption, other uses. But that third in the home is over six million homes across Canada that are heating with natural gas.
Tim Egan:
And so, that bill will go up, but the commodity price is only roughly a third of the overall bill. Because there are also the distribution and the transmission charges in the bill. It’s not that a doubling of natural gas is going to mean a doubling of your bill. The other thing to note is that every utility in the country does a price equalization program.
Tim Egan:
You as a consumer can opt-in to say, “All right. I want my bills to be relatively evenly priced across the year, so I pay the same amount over 12 months. Instead of watching it jump up in the winter when my consumption goes way up.” There are a number of things that are important to consider when you’re looking at the actual price and how that affects the consumer.
Tim Egan:
But back to your core point, the price is going up. That’s going to affect consumers. A point we always make is that, as a consumer of energy, you consume it in a gaseous form like natural gas in your house. You consume it in electrical form by using electrons in your house. Or you consume it in a liquid form, in the form of gasoline in your car. Gas or diesel in your car.
Tim Egan:
Those are the three principle ways you use energy. Natural gas is about 40% of that use, and it is by far the cheapest option. Even at current prices. At current prices, on average across Canada … For an energy use equivalency basis, you’re paying roughly one-third the price for natural gas that you’re paying for electricity. It’s still the most affordable option.
Peter Tertzakian:
Let me just do some simple math here. I want to feed off this two-third, one-third thing. If the price of gas was $6, just using a rough number … We’ve got $4 of that is transmission distribution and $2 was the base commodity. Four plus two, it equals six. The last time I checked. The two quadruples to eight. Now, we’ve got four plus eight equals 12. We’ve got a doubling of the gas price.
Peter Tertzakian:
Plus, over the course of the winter, of course, consumption goes up dramatically. If you’ve got furnaces and water heaters and what have you. The consumers face the doubling of price and probably a tripling of consumption anyway. Because of the seasonality. That’s not including if the European price pulls even higher over the winter.
Peter Tertzakian:
And so, who’s talking about this? Who is talking about what’s looming for the consumer as, say, mid-December they open up their utility bill or their credit card bill, which automatically pays their utility bill, and go, “Whoa. What is this number here? Where did this come from?”
Tim Egan:
Well, I think we’re all talking about it. We put out every Fall information about this for consumers to tell them what’s happening in the market. The utilities. They’re talking about it. They all talk about it to the consumers, and the utilities all have very active customer engagement programs. They’re advising the consumers of what’s happening. Of course, regulators are tracking it too, Peter.
Tim Egan:
Remember, when it comes to the consumer, the price is regulated. Because the delivery of gas is a natural monopoly. There are regulators in every province who are monitoring all of this. Like I say, all of those agents are putting in place mechanisms to level back costs. Yes. Your point about the consumption increases dramatically in the winter. It doesn’t mean your price increases as dramatically, because you level that price across the year.
Tim Egan:
Yes, the commodity price increases. But as you noted, that’s only a percentage of the bill. Now, we don’t forecast where prices are going to go. I can’t comment on how the European situation might affect the Canadian situation. But what I can comment on is … More conversation about this is better, because Canadians have been lulled into a complacency about energy. Canadians think that energy is a very easy thing to deal with.
Tim Egan:
We can go and we can address this environmental objective and that environmental objective without consequence. We can prevent the building of this infrastructure and that infrastructure without consequence. When ultimately, it has profound consequences. We just have to look at the European situation and look at what’s happening with prices there, where there has been even more intervention, to see what could happen. And so, I think conversations about what’s happening are very good.
Jackie Forrest:
Let’s talk a little bit about … You said two-thirds of the gas in Canada is used by industry, not by individuals in their homes. You look over to Europe and I recognize their prices are $70 USD equivalent per MMBtu. We’re more at $8 right now.
Jackie Forrest:
Over in Europe, by the way, they’re shutting down industry. Because those gas prices make it such that they can no longer produce their products competitively. Are there any concerns by industry here, at these types of gas prices, that it’s going to affect their ability to produce goods and deliver them at a price they can sell them at?
Tim Egan:
Well, Jackie, I made the point that gas is by far the cheapest energy option you’ve got. On average, you’re paying about one-third the price of gas that you’re paying for electricity. Most industrial consumers are actually trying to use more gas, not less, because gas is the cheaper energy input option.
Tim Egan:
In fact, what you see many industrial facilities doing that would use electricity, they’re trying to find ways to bring more gas to their facility, generate electricity in-house, and then use that electricity. Because it’s cheaper than the electricity that’s out there on the grid.
Tim Egan:
In the European situation, I think it speaks to just how bad the crisis has become. Because I can tell you, industrial consumers in Europe sure are not looking at electricity as an energy option. They’re looking at using less electricity and using more natural gas directly. The bigger challenge I think for all of us here is, “How do we get more gas into the market?”
Tim Egan:
Because what should happen when a price signal comes, like the quadrupling of the price, is a market should say, “Let’s get more gas into the market.” We should be asking and this should be part of the conversation we’re having about the impacts of this … Why aren’t we able to produce more gas more quickly to address the issue? Because believe me, there’s no shortage of supply.
Peter Tertzakian:
Right.
Jackie Forrest:
Right. We have something like 100 years of resource in North America at the current consumption rates. But the problem has been this last year … Even though we’ve had these high price signals, we haven’t really seen much production growth. We’ve seen some, but not enough to keep those inventories as full as they should be. That’s part of what’s caused the price to come up.
Peter Tertzakian:
In Ontario, Quebec … I’ll call it, “Central Canada.” A large fraction of the natural gas supply comes from the United States. Do you have a sense of what that fraction is for our audience?
Tim Egan:
As a percentage, Peter, it varies. And it varies market by market. The gas market’s incredibly integrated. When the main line was built, we were moving gas from Western Canada and Eastern Canada. But increasingly, since then, what we’ve done is we’ve built pipes going north, south, all over the place. Particularly, in the last 10, 15 years. With the development of unconventional resources in Eastern North America, Eastern Canadian markets have been able to access US gas.
Tim Egan:
Now, how is that good for consumers? It’s good for consumers, because the transmission charge is obviously going to be lower if you’re buying your gas from a place that’s not as far away. Because you don’t have to move it as far. Does that hurt the Canadian economy overall? Well, I would say no. Because overall, our gas production levels have remained more or less steady, because they’re finding other markets.
Tim Egan:
Maybe Canadian gas in the west is going into the US west. Or maybe overall consumption has increased, as in fact, has been the case. But ultimately, what it means is it speaks to the fact that there is just more and more opportunity to get gas from various points in North America. Meaning it’s a very fluid, very robust market. The challenge we have is moving Canadian gas offshore. To a point one of you made off the start, we just don’t have the export capacity.
Peter Tertzakian:
I want to come to that, but I’m arguing … If we want a designation to keep our consumers’ gas affordable, our industries competitive, we can’t even create policies to be able to allow us to have, “Made in Canada,” gas go to Canadian consumers. Don’t you see this as somebody coming here saying, “This is absurd.”
Tim Egan:
Well, I think a lot of people are making that very comment. In the last couple of months, further to the situation in Europe and the conversation it has created, I’ve had meetings with 19 different European ambassadors, because they all want to find a way to get access to Canadian gas. They asked me what our supply picture is. They asked me what the long-term scenario is for that supply.
Tim Egan:
They’re just flabbergasted. They say, “Why aren’t you producing more? Why aren’t you moving more?” To your point, why aren’t we moving more to Canadians as well as to foreign markets? You said we can’t get the policy framework right. I think the reality is that some policy makers, and they’ve been very clear about this, are not actually keen on upping the production of gas.
Tim Egan:
In fact, they want to restrict it over time. And this is something that has to be part of that public conversation. If we really want to recognize the value proposition of affordable energy for our country or for the world, then you’re right. We need to change policy framework, so we can build more infrastructure and move the product as we want to.
Peter Tertzakian:
I’m thinking that conversation is going to amplify this winter. There’s nothing like affordability and scarcity to stimulate a conversation about this issue. I’m just fearful of, as I say, people open up their utility bills in December and say, “How come I’m not getting more gas?”
Peter Tertzakian:
The corollary question is, “How come I’m not getting more Canadian gas, given that we have 100 years of supply here and some of the lowest cost gas in the world?”
Tim Egan:
I’d note that, in fact, we have several hundred years of supply. A conservative estimate is 300 years supply.
Jackie Forrest:
But that’s in North America. Not just Canada. Right, Tim? That’s overall the North American resource.
Tim Egan:
Well, Canada’s supply at our current production rates, consumption rates, both for the supply we’re putting into the US … Because we are a net exporter to the US.
Jackie Forrest:
Yes.
Tim Egan:
We’re exporting roughly half our supply. We’ve got about just under 300 years of supply. And I’d say that’s a very conservative assessment.
Jackie Forrest:
Tim, I want to just highlight something you talked about, which was about, “We need to build more infrastructure.” I looked at your website and you have posted a few articles in the May and June time period that talked about how the federal government was supportive of East Coast LNG at the time.
Jackie Forrest:
You also wrote a letter to the prime minister on August 19th, arguing that we should collaborate with Europe and send more gas their direction. As you know, Justin Trudeau had the German chancellor here. It was several weeks ago now. Talked about the fact that there’s never been a strong business case for LNG terminals on our east coast. Why do you think the message changed?
Tim Egan:
Actually, Jackie, I think if you hear the entirety of the prime minister’s remarks, he’s making the point that any LNG export project needs a solid business case. The business case for east coast LNG projects is a more difficult one to make than for west coast LNG projects. But it doesn’t mean that business case can’t be made.
Tim Egan:
The point is that if you put the conditions in place, for instance, making the regulatory framework clear and allowing for regulatory approvals more expeditiously, I think some of those east coast projects could become economic. But ultimately, when you’re talking about LNG, you’re talking about moving a liquid product into a global market. No matter what, more infrastructure for LNG in Canada is going to serve that global market.
Tim Egan:
Even if we’re building more on the west coast, that’s actually going to help Europe. Because if that’s moving gas into Asian markets, that might be displacing other supply in Asia that could then go to Europe. That helps. Wherever it’s built, I think it can help address a global situation. But in terms of the government’s remarks on this, what’s been really interesting to see is that there has been a deepening understanding of the value proposition of gas over the last six months by the government of Canada.
Tim Egan:
I see more openness to the idea of more exports from the country. The deputy prime minister has been particularly forceful on this one, so has Minister Champagne, so has Minister Wilkinson. Whereas, six months ago, the beginning of the war in Ukraine, the comment was, “There’s nothing Canada can do. What it really needs is a relationship on green energy.” That’s moved to, “You know what? There are probably some projects we could build, but they’ve got to meet these conditions.”
Tim Egan:
Now, we’re getting into conversations about specific projects. I think it speaks to a growing appreciation that there are some things that we could do. One thing I’d say about the European drilling issue. It’s really interesting. You made reference to Chancellor Scholz’s visit. He came to Toronto as part of that trip and he and the prime minister spoke in Toronto. I actually got the chance to have a very quick conversation with the chancellor directly.
Tim Egan:
He stated straight up, “Mr. Egan, we need your gas.” The bluntness of the Europeans on this point is really interesting. What I’m hoping it triggers is more of a conversation. Peter, you provide a platform here and others in other places to bring together industry players to say, “What do we do? How do we put this in place to make it happen?” Even if we can’t do things that we’d like to do for this winter. What do we do for two years out? Or five years out? Because this is not a problem that’s going away soon.
Jackie Forrest:
Hey. I’m glad you have some optimistic views on the fact that we might be exporting more LNG. We certainly hope that will be the case. Of course, we know we have a couple of projects being progressed on the west coast. We hope more will come. Quick question for you.
Jackie Forrest:
We talk about the fact that we need more gas to help our neighbors here in Europe, but also for our own consumption. But meanwhile, the federal government is proposing a cap on emissions from Canada’s oil and gas sector, which some people think could result in a curtailment of production. Does the CGA have a position on this potential policy?
Tim Egan:
The focus of the cap is on production and our membership is on the delivery side. We don’t have a position, per se, on the cap at this point, Jackie. The only point I would make on it, and this is the point I’ve made to government officials, and we’ve made in our public documentation … If we look at this just from the perspective of Canada’s emissions and Canada’s energy use, we’re going to eliminate an opportunity to do some profoundly good things to our own economic benefit and for the environmental benefit of the planet.
Tim Egan:
My point being, Canada produces one of the lowest emission molecules in the world. If it could be offsetting higher emitting molecules from elsewhere, we would be dramatically reducing emissions. And so, I’m hoping over time that there’s a deeper appreciation of that fact, so the focus on the cap turns into a focus on overall emission reductions.
Peter Tertzakian:
That’s the supplier’s side. But the reality is that the bulk of the emissions are generated when you combust them. 80% of the emissions are created when you turn on the stove or the furnace kicks in. Can you talk about, at the homeowner level, how people are thinking about transition?
Peter Tertzakian:
Earlier, you mentioned electricity is more expensive than gas now. Clearly, why would anyone switch their gas furnace to an electric one or a cook stove? Maybe give us a lens into what’s going on in the homeowner’s mind, from your perspective?
Tim Egan:
Well, apart from my own experience as a homeowner. I won’t pretend to speak for others, but I will speak from the standpoint of the delivery industry that’s serving that homeowner. Our companies have a whole host of programs in place aimed at helping the consumer.
Tim Egan:
First and foremost, energy efficiency. The largest single emission reduction in the home over the last 20 years has been the introduction of high efficiency furnaces in the home. That’s moved average household furnace efficiency from around 65% to over 90%. That’s delivered both a dramatic reduction in emissions and a big saving for the homeowner, but we’re also doing a ton of work around other ways to reduce emissions.
Tim Egan:
New appliances that are more efficient in other areas. Or integrated technologies like micro combined heat and power technology that, again, is more efficient and reduces emissions. Or alternative fuels like renewable natural gas or hydrogen. And so, I think there are a variety of things that are happening on the downstream side that help the consumer. At the end of the day, the Canadian consumer says, “I want my energy to be affordable. I want it to be reliable and I want it to be clean.” Our objective is to make sure that we’re meeting all three of those.
Jackie Forrest:
Tim, I wanted to talk about … There’s a website called Fueling Canada, and it talks about some Canadian innovation. I wanted to talk about some of the cool companies that are on there. Maybe just give us some context to that website and if you’re associated with it.
Tim Egan:
We are associated with it. We’ve helped with that campaign in a variety of ways. The whole idea of that campaign is to demonstrate how gas is used in Canada by having gas users speak about it. For instance, you’re a restaurateur and you want to be able to use gas in your restaurant. Or you’re a farmer. Or you’re a manufacturer. Or you’re an industrial consumer.
Tim Egan:
How are you using gas? How is it beneficial to you? And so, that the campaign is all about getting those voices to speak to that energy use. It’s profiled, as I think you know, Jackie, a variety of really interesting new technologies that have come forward as well. We do a ton of work on innovation.
Tim Egan:
We created something called the Natural Gas Innovation Fund a number of years ago, where we provided grant assistance to new startup companies delivering environmental improvements on gas use. We’ve since created an equity fund on the back of that. Small. Relatively speaking, it’s about $55 million in investment right now, but we’re making significant investments in all kinds of new technologies that are ultimately aimed at helping the consumer continue to reduce their environmental profile.
Jackie Forrest:
Well, let’s talk about that. Because greenhouse gas emissions is one of the concerns about using natural gas. As you know, there’s people that say we need to electrify all of our heating so that we can meet our targets the Canadian government has outlined. Consistent with the Paris agreement.
Jackie Forrest:
But I was really interested in a calorie-based company actually called CleanO2 that was on the website. We’ll put a link to the website as well as this video, but they are capturing CO2 from the furnace and turning it into soap. They’re calling it a microscale CO2 capture company. I was really interested by that, because I did an audit in my home and 75% of my energy use is for natural gas.
Jackie Forrest:
And it’s not so easy to get rid of that. For power, I can put solar panels. Or I could maybe support renewable power. But I can’t get rid of the emissions. I’m very interested if I could put this machine on my furnace and become zero.
Peter Tertzakian:
You hook it up to your furnace and bars of soap come out. This gives a new definition to clean energy. Doesn’t it?
Tim Egan:
I’d suggest you do a special podcast with CleanO2 to speak the technology, because I won’t do it justice. Peter, what they do is they recover the CO2, and then they mix it with other things. One of the byproducts out of that mixing is the soap that’s produced. And then, what they’re finding is that they’ve got a real market for the soap.
Tim Egan:
They’re actually doing very well as a soap seller, but I think it’s just one of those cool technologies that are emerging as people say, “Wait a sec. CO2. What can I do with that molecule? What can I do with that carbon atom? How can I use that carbon atom?” There are all kinds of very creative ideas coming forward about how to use it. This is one.
Jackie Forrest:
I think it’s a really cool idea. You talked about using natural gas for cooking. I think there’s been more and more that people should be concerned about using natural gas in the home. Because it’s causing poor air quality and health issues. Is that something people should be concerned by?
Tim Egan:
Well, I dispute your point that it’s causing air quality concerns. The principal cause of poor air quality in the home is cooking. It’s not what you cook with. It’s the fact that you cook. Because when you saute something or you fry something or you broil something, it generates all kinds of things. This is right on Health Canada’s website. This is irrespective of whatever technology you use.
Tim Egan:
That’s why we recommend that, no matter what, when you’re cooking, you have a hood fan and you’re properly ventilating from your cooking surface. This is the case, as I say, for any technology whatsoever. Again, go to Health Canada’s website. Natural gas is not a net contributor to air quality problems in the home. Although, there are those who are saying that. Frankly, we’re very concerned about that. We’re putting information out to try to respond to that, because we think that’s an inaccurate presentation of things.
Peter Tertzakian:
Well, I think one of the things is the gas infrastructure is so extensive. Pipes coming into people’s homes and so on. And so, the dilemma really is, do you buy completely new appliances that render that infrastructure obsolete? Or do you push cleaner fuels through the infrastructure?
Peter Tertzakian:
That brings to mind a comment. You sort of touched on it. RNG, renewable natural gas, which is generated from municipal waste. We had a guest … I don’t know. Several months ago, from Fortus, who is very keen on that.
Tim Egan:
Right.
Peter Tertzakian:
And so, can you talk a little bit about maybe repurposing the infrastructure to push through cleaner fuels? Whether it’s RNG or hydrogen dilution or whatever?
Tim Egan:
First off, I note that we consider natural gas a pretty clean fuel in the first instance. But very definitely, you’re right. There is an energy delivery pathway, which is a pipe into the home. Another energy delivery pathway is the wire into the home. Another energy pathway is you carry your propane tank or you fill the gasoline tank in your automobile in the home.
Tim Egan:
I think it’s important that people think about that. There are a variety of ways to deliver energy. Over any of those ways, you can find methods to reduce the emissions. You can find ways to be delivering lower emission cleaner fuel to the end user. In the case of natural gas, or rather natural gas infrastructure, those pipes coming in your home … You can move RNG.
Tim Egan:
The Fortus rep probably talked to you about what the picture for RNG is like in Canada. It’s a very interesting one. There’s lots of RNG out there. As you said, it’s from municipal solid waste. Peter, it’s also from wastewater treatment facilities. It can also be from any agricultural waste or even from wood waste. The interesting thing about it is that it’s the same CH4 molecule.
Peter Tertzakian:
Yep.
Tim Egan:
It’s still methane. It’s very easy to put into the pipe. And it’s consistently a more affordable renewable than wind or solar, which is the often presented as the clean way to deliver over the wire system.
Jackie Forrest:
Tim, talk a little bit about hydrogen. In some places in the world, they’re talking about blending as much as 20% into the existing natural gas infrastructure. Saying it’s going to not need any retrofits. No changing of equipment. Nothing. Do you foresee that could happen here? Or not?
Tim Egan:
Well, we’re already doing pilots with hydrogen here. There’s a significant pilot in Ontario in Markham that Enbridge, one of my members, is a part of. Companies across the country are doing pilots. ATCO is a leader on this. ATCO is looking at designing a community that could be completely isolated with hydrogen supply.
Tim Egan:
There’s lots of work going on in Canada on this right now. Jackie, you noted the blending rates. You’re right. Generally speaking, people are talking about 10%, 15%, 20% with current appliances in your gas stream. 20% of your gas might be hydrogen and the remainder would be CH4 in the stream. It all depends on its impact on the burner tip.
Tim Egan:
Because when you burn hydrogen, it burns much hotter. You’ve got to think about how you manage that fuel in the burning. But now, there’s all kinds of work being done to improve burner tips, so that they could burn higher concentrations of hydrogen. It’s an evolving technology and Canadian companies are very active in it.
Jackie Forrest:
All right.
Peter Tertzakian:
Great.
Jackie Forrest:
Do you think that one day that would be a reality here? 10 years from now? 20 years from now?
Tim Egan:
Peter’s the guy that writes books on this. I love it, Peter, when you show those pictures of the sailing ships and coal firing ships and which one is working when and why. Fundamentally, it comes down to, “What works and why,” at any time in history.
Tim Egan:
I think one of the biggest single drivers at any time is, “Can you demonstrate to me that this is affordable? Can you demonstrate to me that this is going to meet my needs reliably? Can you demonstrate to me that this is going to meet the other concerns I have like environmental performance?”
Tim Egan:
In a competitive economy, there should be a constant play of those things. When it happens, these new technologies will come forward. Right now, hydrogen is not cost competitive. But ultimately, could it be? We’ll see. We’re certainly working hard to try to make it so.
Peter Tertzakian:
Well, this has been a fascinating conversation. I think we’ve covered the waterfront from inflation to high natural gas prices. What’s going to happen this winter? Suppliers of gas to consumers of gas. Substitute gaseous fuels. And I guess we’ve talked from LNG to soap. I think there’s not much more to discuss for this week. It’s been fascinating having you. Tim Egan, president and CEO of the Canadian Gas Association. Thanks so much for joining us.
Tim Egan:
Thanks for having me. I really enjoyed it.
Jackie Forrest:
Thank you, Tim. Thanks to our listeners. If you enjoyed this podcast, please write us on the app that you listened to and tell someone else about us.
Announcer:
For more ideas and insights, visit arcenergyinstitute.com.
