The Green Heat Debate: Insights from FortisBC CEO Roger Dall’Antonia
This week, our guest is Roger Dall’Antonia, President and CEO of FortisBC. FortisBC is a leading energy provider in British Columbia (BC), Canada. The utility serves about 1.1 million natural gas customers and 185,000 electricity customers.
Roger explains the benefits of using natural gas to meet the peak winter heating demand and the challenges of using electricity to do the same. Because of the unique ability of gaseous fuels to flex up and meet demand, even on the coldest days, Roger sees a long-term future for gas. He explains how natural gas can become cleaner over time through a broad set of measures, such as increasing the amount of renewable natural gas (RNG) and clean hydrogen and efficiency measures that use less natural gas.
Here are some of the questions that Peter and Jackie asked Roger: What is the outlook for the supply and demand of electricity in BC? How will Site C hydroelectric demand change the market? Is BC too reliant on hydro, considering concerns around drought? Why has BC recently decided to launch a call for renewable power from large-scale wind and solar farms? What is RNG and how much potential supply is there? How are you involving Indigenous partners in your projects? What are your thoughts on the Clean Electricity Regulations targeting net zero electricity by 2035? Considering Atlantic Canada’s exception from the retail carbon tax for heating oil, could this be the beginning of the end for the retail carbon tax in Canada?
Other content referenced in this podcast:
- The Canadian Association of Petroleum Producers (CAPP)’s Data Centre
- FortisBC’s Clean Growth Pathway to 2050
- BC Renewable and Low-Carbon Gas Supply Potential Study
- Pathways for British Columbia to Achieve its GHG Reduction Goals
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Episode 225 transcript.
Speaker 1:
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.
Speaker 2:
This is the ARC Energy Ideas Podcast with Peter Tertzakian and Jackie Forest. 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. And welcome back. Jackie, we’re in an era where everybody has an opinion. Everybody’s an armchair quarterback. Everybody makes conjectures and notions, and it’s even clouded more now because joining the armchair, I’ll call them virtual armchair or the AI bots that can generate all sorts of information. So it seems to me that data and actual data that represents factual events, factual dynamics is really paramount. Jackie, there’s a new source of data from which we can draw from.
Jackie Forrest:
I wanted to bring it to people’s attention. We’ll put a link in the show notes. But CAPP, the Canadian Association of Petroleum Producers has a new data center, and you go onto it and there’s a whole bunch of PowerPoint slides around things like the production, the takeaway capacity of Western Canada, history of the industry. There’s more coming. They had a press release only about 40% of what’s going to be up there later on this year is up already. But we will put a link in the show notes because I’ve found it really helpful, and I’m sure folks that are presenting things around the Canadian oil and gas industry will find it a useful resource. I just wanted to flag that because it came out right before Christmas when I’m sure people were going to their Christmas parties, so we’ll put a link to it.
Peter Tertzakian:
That’s already useful information. And speaking of energy dynamics, I want to introduce our special guest today because this is someone that leads a company that is involved in supplying all the behind-the-scenes energy to customers in British Columbia. And so, we are delighted to have with us to talk about British Columbia, the President and CEO of FortisBC, Roger Dall’Antonia. Welcome, Roger.
Roger Dall’Antonia:
Thanks, Peter. Thanks Jackie. Pleasure to be here. Very much looking forward to today’s discussion.
Jackie Forrest:
Yeah, it’s great to have you on the show. Well, maybe to start, let’s talk about your background and how you became the leader of FortisBC.
Roger Dall’Antonia:
Yeah, sure. I’ve been fortunate. I’ve spent pretty much my entire career here in British Columbia, and that’s going now 30 years in the energy space in BC. I actually started my first job in the industry outside of.. my undergrad was with BC Hydro. Went back, got my graduate degree, and then started at Westcoast Energy. Spent about 10 years with them, now owned by Enbridge of course. And then for about last 19 years, I’ve been with FortisBC in various roles and became CEO in 2017.
Jackie Forrest:
Okay. Lots of change over that time, I’m sure. Maybe just to give our listeners a background around FortisBC, who you are, what you do, and maybe how you fit into the larger Fortis group.
Roger Dall’Antonia:
Sure. In BC, we’re a natural gas and electric utility. Predominantly natural gas. We serve about 1 million customers, 1.1 million customers and the natural gas side of the business. And then on the electric side, we serve about 185,000 customers. On the electric side, we’re vertically integrated. We have our own hydro facilities, transmission and then distribution. And on the gas side, we have transmission distribution as well as LNG storage on our system. And we also have a smaller business, but we’re in the low carbon thermal energy business as well here in BC where we’re serving high-rises with thermal energy, air source heat pumps, geo technologies like that.
As far as a Fortis Inc. group of companies, so for those who don’t know Fortis, we’re based out of St. John’s, Newfoundland. We are 10 independently run utility operations throughout North America, Canada, US, and the Caribbean. FortisBC is one of those utility companies. Fortis is listed on the Toronto Stock Exchange as well as the New York Stock Exchange. It’s about 85% on the electric side of the business, 17% on the gas side, pretty much all delivery of energy. We do have some generation in certain of our utilities, but predominantly transmission and distribution of energy, electricity, and natural gas. What I’d say is unique about Fortis is really its governance structure. We run each of the utilities substantially autonomously. A key feature there is that each utility has its own board of directors where the majority of those directors are local to the jurisdiction and are independent, and it really places a high value on local perspectives and relationships at the utility company level. One thing that we’re quite proud of is that in 2022, the Globe and Mail ranked Fortis number one among 220 odd companies on the TSX for best practices in governance.
Peter Tertzakian:
For those outside the province, let’s carry on with the theme of your customers’ natural gas, 1.1 million, electrical customers, 185,000. Talk about the growth that you’ve seen in the demand base and what it looks like, residential versus industrial versus commercial. We know that there’s a lot of immigration and population growth, the economy continues to grow. How is that affecting the consumption side of the equation?
Roger Dall’Antonia:
Yeah, I would say we see growth on both gas and electric, and we see quite a bit of demand growth over the last five years, upwards of 10%. Some of that is obviously immigration, economic expansion. BC is home to many of Canada’s largest or fastest growing communities. One of those is Kelowna, where we supply both gas and electricity. I would say that we’re seeing demand across industrial, commercial as well as residential. We’re seeing, obviously, quite a bit of work on energy efficiency where I would say use per customer may be going down. But overall, system growth through just expansion, immigration is going up.
Jackie Forrest:
Well, let’s talk about the supply side. I mean, for a long time there wasn’t a lot of growth in energy demand, especially electricity. Now we’ve got the growth. Tell us a little bit about FortisBC, do you generate and what type of generation do you provide?
Roger Dall’Antonia:
Yeah, so on the electric side, we’re just over… it depends on the year, weather patterns, things like that. But we’re just over 15% of the total electricity consumed in BC. Obviously, BC Hydro is the dominant electric utility. If you take a step back for us, most of that electricity that we deliver is hydro based. We have our own hydro facilities. We actually run the oldest hydro facility in British Columbia, first commission in 1907 and still operating. Very proud of that fact. About 40% of our electricity supply comes from our own facilities. We have supply arrangements with BC Hydro and others that make up, I would say the other 55%. And then we probably import in any given year, 5 to 7, 6 to 8% from the regions.
If you look at the gas and electric together, FortisBC, we deliver more end use energy than anybody else in the province. The gas side being the bulk of that, but a fairly large energy provider across the province.
Peter Tertzakian:
So you’re bigger than BC Hydro and use energy?
Roger Dall’Antonia:
On a total combined basis when you add the gas and electric together.
Peter Tertzakian:
All joules together. Yeah.
Roger Dall’Antonia:
Yeah. I think what’s interesting about that is, I think some people will find that a bit of a surprise, but I think one of the things that people don’t understand, or maybe they just haven’t given a lot of thought, is the difference in the load curve, especially when you consider that British Columbia is still a winter peaking energy system. More energy is delivered in the winter than in the summer for the most part. And when you think about the way the electric system and the gas systems are designed, our gas system has a significant ability to flex and deliver five to seven times more on a winter peak than this gas system does in an average summer day.
Whereas the electric system, we are still a winter peaking system on electric as well. But the differential between what the electric system can deliver in the winter versus a summer, probably one and a half times. So, when you look at it on an annual average, the systems are similar. Electric is about 18 to 20% of end use energy. Our gas system is a bit more than that, but I think what’s really unique is that you deliver most of that gas in a shorter timeframe being the winter, the fall, winter, early spring period, whereas the electric system is delivering a more consistent across the 12 months.
Jackie Forrest:
Right.
Peter Tertzakian:
Yeah. I think the important thing that you’re highlighting here is that gas has a far greater deliverability, the energy density of gas, the ability for it to respond quickly to really cold weather, such as we’ve had recently, as much greater than electricity, yet we’ve got a big push to electrify.
Roger Dall’Antonia:
Yeah, I think that’s something we’ll definitely get into here, I’m sure. But it is one of the things that frustrates us in the industry the most, I think, is while everyone’s got strong desire to take action on climate, I think you have to really understand how the systems are incumbent, energy systems are currently designed, and what it’s going to take to transition over the next 25 years or so, 27 years, 26 years now as we head to 2050.
Jackie Forrest:
Well, let’s get to that in a bit, Roger. But first, let’s get back to the electrical generation in BC. Site C dam is scheduled to come on soon. Can you tell us a bit about that project? Where’s it going to go to the power? Is there a big transmission line, and how do you think it’s going to change the electricity mix in BC?
Roger Dall’Antonia:
Yeah. Site C is BC hydro acid, and I think it’s a critical asset for the province. As somebody who’s in the energy infrastructure space, we support those types of investments. I think Site C will be a legacy project for the province. I think it’s about 5,100 gigawatt hours is what it’s going to produce about 1,100 megawatts, which is a nice addition to the mix of generation in the province. There’s definitely a need. We’ve seen with economic and population expansion as well as industrial opportunities, as well as climate action, where we’re going to be using more electricity over time, there’s definitely a need for investments like Site C, so we’re fortunate to have that coming online.
Where does it go to? I think this is really going to be one of the interesting discussions to have because there’s a lot of demands on electricity right now. 40% of emissions in BC come from transportation. It’s the single largest source of emissions in the province, and electrifying transportation is one of the near-term opportunities to take action on climate. So we see a significant demand for electricity and transportation. Also in the province, we’ve got industrial expansion opportunities, LNG opportunities, other types of expansion, decarbonization of oil and gas production. So there’s an industrial need for further electricity. So I think one of the debates we’re going to have as we transition is, what is the priority for firm dependable electric generation resources?
Peter Tertzakian:
Do you think we’re over reliant on hydro in BC? We’re over reliant? I mean, there’s a water shortfall, dry conditions affecting the power situation. Site C, I’ve heard that the reservoir is taking much longer to fill than expected. So, using hydro as the incremental base load seems to be amplifying the concentration of this energy asset.
Roger Dall’Antonia:
Yeah, no, that’s a great question, Peter. I would say that we’re actually really fortunate in BC. We got a phenomenal endowment of renewable energy. I think it’s the envy of many provinces given how much of our, what I would say, base load dispatchable energy comes from hydro. I think the question you’re asking is, we have to think about generation across much different climate patterns. Your comment on drought is an interesting one. You’ve seen what’s happened on the Peace River system. You’ve seen what’s happened in the Colorado River system, Columbia River systems. When you have low water years, you have a summer peak, and then if you have a prolonged winter peak right after, you do end up having a situation where you have a finite resource. When the reservoir is down, it doesn’t fill up as quickly, right? So, one of the challenges is not so much are we over-reliant on hydro, it’s understanding how you’re bringing on new resources. Are they intermittent? Are they dependable? What’s that going to do to the deliverability of the electric system through, say, a coincidental peak period?
So it’s not so much over reliant. It’s more to make sure that we’re thinking about diversified resources and we’re thinking about the profile of those resources on what type of load they’re going to have to serve. I do think the power situation across the Pacific Northwest is interesting. So what you’ve seen is the power producers in the Pacific Northwest. We’re sitting here, talking early January. When people listen to the podcast, it’ll probably be a week hopefully past what’s been the January cold snap. It’s a cold snap that’s hit BC, Alberta, the Pacific Northwest. The system is working from a regional perspective, but what you’re seeing is flows are going in different directions, and we’ve been fortunate that this cold snap was delayed. It didn’t happen in November, and it hasn’t been prolonged to the point where we’re sitting in January with less hydro to draw on. So I think the concern on hydro is we cannot take for granted that we’ll always have plentiful hydrology, which is what we’ve seen the last couple years in what are near-drought conditions for the most part.
Jackie Forrest:
So Roger, in June, BC announced they’re preparing to have a new procurement for wind and solar. They have very little wind and solar today, and there was a view that BC didn’t need it because they have so much hydro. Do you think that looking at more alternatives of having more diversity is a driver behind why this procurement for wind and solar now?
Roger Dall’Antonia:
I would say two things. When you look at large scale hydro facilities, there’s not that many sites left in BC that are going to give you an asset similar to Site C. There are some other sites we’ve looked at, some sites in our service territory. We serve, for those who don’t know, the Okanagan and the Kootenay area of British Columbia, which is the interior over to the eastern part of BC. So when you’re looking at renewable, wind and solar is the next opportunity. I think there’ll be quite a bit of interest in it. As a province, BC has been able to rely on renewable energy in the form of hydro. We haven’t had to necessarily move towards wind and solar yet like other jurisdictions have. But as we look at the need for greater and greater electric generation from a renewable point of view, wind and solar is the next sector for BC to look at.
I think there’ll be quite a bit of interest in this call. I think what’s interesting is that two things I’d point out, I think there’ll be a lot of interest because there’s a number of indigenous communities, First Nations here in British Columbia that are very focused on participating in leading the energy transition. So, I think it’ll be a really good opportunity for First Nations participation in this call. They’re eager to build all sorts of energy projects, not just renewable. They’re also in the LNG space, but for sure there’ll be interest in this one. It’s also what’s interesting, this is a call for energy, not capacity. So, when we think about BC’s energy mix, there’s a need for energy, but we’re also going to start to think about how are we building capacity into the electric system if you are not able to build as easily or as large-scale hydro facilities, pump storage type facilities. So, this I think will be the first of a few calls that BC will be looking at, both through BC Hydro, and we’ll also be looking at some calls in our electric service territory in the near future.
Jackie Forrest:
Well, let’s move into natural gas. So what is the makeup in terms of how much natural gas is used in BC for residential and commercial?
Roger Dall’Antonia:
We talk about natural gas in BC. I think people don’t appreciate just how much of the market we serve. We’re probably in 65% of the buildings in British Columbia and 65% of the homes we serve. I would say it depends on the year, weather patterns, things like that. But probably a third of our gas supply goes to residential, a third goes to commercial, and a third goes to industrial. We’re probably just over 20% of end use energy.
I think what’s really interesting is, if you look at emissions profile, we’re probably just under 15% of end use emissions, but we deliver more than that as far as end use energy. Again, speaking to the density and the efficiency of the gas system to deliver energy, I would say if you look at the entire residential throughput, we’re probably 6% of end use submissions in British Columbia, which is not an insignificant amount. But when you think about how do you decarbonize, if you were to replace or remove natural gas from all residential, 6% of end use emissions, the cost to do so, and the risk to the energy systems to do that without a very thoughtful transition is quite significant around the resiliency and reliability to people’s homes.
If you think about what’s going on right now as we record this, I just saw three different energy alerts in Alberta. We had some issues down south, and there’s real-world implications if energy systems fail. I remember sitting with one of the senior economists of the IEA, International Energy Association, probably six, seven years ago. He said, “It’s fine to disrupt your taxi ride,” referring to Uber, “or your hotel stay,” referring to Airbnb, but he said, “you never want to disrupt your energy systems.” It has critical, critical implications if we don’t get this right from a reliability and resiliency point of view.
So when you think about we have to decarbonize, this is not a comment to say that we don’t change. We’re strong believers in taking climate action and leading on climate action from the gas side as well as electric side of the system. But you have to understand again the load curves, right? So last year, if I use the data from December 27th, 2022, our BC Hydro and our electric system combined delivered about 11,500 megawatts on the coldest hour, peak hour on December 27th. The gas system delivered about twice that, close to 22,000 megawatts electric equivalent. If you did that math in Alberta and Saskatchewan, it’s actually more than that. I don’t know the number specifically, but it’s more than, it doubles probably four times to six times.
Jackie Forrest:
Yeah. I think ATCO has a chart that they put out on the weekend that was somewhere like five to eight times larger demand for natural gas than electricity on equivalent units.
Roger Dall’Antonia:
Yeah.
Peter Tertzakian:
Mm-hmm.
Roger Dall’Antonia:
And that’s not just going into the natural gas generation, that’s into the furnaces that heats people’s homes, right? So we looked at this issue. We serve gas and electric in the city of Kelowna. Kelowna has, I want to say, about 65 to 70,000 electric customers, about 45 to 50,000 gas customers. The population of the Greater Kelowna area is 150,000, 200,000 people. Because we have both systems, we see the peak energy use on a daily basis. We did a study at greater, greater levels of electrification. We looked at different levels of efficiency of heat pumps, broader and broader heat pump adoption, broader and broader electrical adoption.
We ran it out to say, what would full electrification look like? And on an average basis, heat pump technology, things like that help. But on a peak basis, you’re more than tripling the energy load on a peak winter day. And the cost to serve that peak through generation, but more importantly, physical transmission at peak, you’re talking about a tripling of the energy system, electric system to serve a town of a couple hundred thousand people. That’s, in excess, a couple of billion dollars. So when you start thinking about the risk and the relative cost, we have to really think about this on an integrated basis.
Jackie Forrest:
You’re a big provider of gas in BC, and there is some limits in terms of winter peak load and things like that in terms of how much gas is required and the ability to electrify of that. Can you just tell us realistically how much RNG is being used in the gas system today? What do you think it could get to? Because people that are skeptics of this say, “Well, there’s only so much bio feedstock and you’re not going to be able to replace all that natural gas with clean fuel.”
Roger Dall’Antonia:
You mentioned renewable natural gas, so I would give credit where it’s due. The BC government has been at the forefront of charting climate ambition. We have the ability to buy up to 15% of our gas commodity throughput from renewable natural gas. That’s about 30 petajoules. We have about 18 petajoules under contract. I think last year we delivered between three to four petajoules onto our system, so just over, trying to do my math here, a couple percent of our load now is RNG. So we’re making really good progress. We have a stated goal of 15% of RNG by 2030.
Peter Tertzakian:
So actually Roger, I’ll just back up for a second. For our audience, RNG renewable natural gas, so this is effectively gas that has been produced by fermenting biomass like wood, crops and other types of biological material, gets gasified, and so then therefore it’s considered renewable because it’s from above ground biological plants and matter.
Roger Dall’Antonia:
Yeah, that’s right. The carbon that is used in the production of natural gas is already in the carbon cycle. It’s already contributing to the carbon inventory, if you will, of the environment. We’re getting renewable natural gas from three primary sources, agricultural waste, cow manure. We’re getting it from landfill gases, so landfill gases that we then collect and scrub and turn into pipeline quality methane. We’re also seeing it from wastewater treatment facilities as well.
Peter Tertzakian:
Good sources, I mean, they’re all good sources, but if you think about all those sources from landfills and what have you as a fraction of what BC’s very prolific and high quality natural gas reservoirs produce, it’s relatively small, isn’t it?
Roger Dall’Antonia:
Yeah, so we supported a study that was done in concert with the BC government as well as the BC Bioenergy Network. They looked at what we’d call the 2050 potential for renewable gases in BC. That’s including all forms of renewable natural gas, wood waste, methanization, hydrogen, syngas, lignin based fuels. Based on cost curves and technological advances by 2050, the theoretical potential is about 400 petajoules.We move about 200 petajoules through our system today, so doubling.
Now, that’s assumption rich, as we like to say, when you look at cost curves, technological advancements, but we’re still at the very front end of renewable natural gas. We’ve been at this for about a decade. We’ve signed our first RNG deal here in BC back around 2010, ’11. Since then, we’ve signed over 20 deals, close to 30 deals from producers in BC, in Alberta in the US. So this market is growing.
You’re starting to see greater and greater opportunity at collecting various sources of biogas to turn into renewable natural gas. But again, we’re not saying here, and I want to make it clear, we’re not saying that it’s business as usual and we’re just going to replace natural gas with renewable natural gas. One of the big things that we’re focused on is greater and greater deployment of energy efficiency, focused on deep energy retrofits, focusing on hybrid heating systems, gas heat pump deployment, to really reduce the overall throughput of natural gas in our system.
We’re looking at hydrogen, low carbon to carbon-neutral hydrogen to displace industrial use of natural gas as well as blending into our system. We’re looking at an overall reduction in throughput, and then with that reduced throughput. Okay, how do we turn that into a lower and lower carbon fuel? So we really are thinking about how does the gas energy system support the energy transition as trying to say, how do we just keep things the way they are.
Jackie Forrest:
Roger, that gives us a perspective of through a whole bunch of means efficiency, some alternative fuels. You think there’s a path forward for gaseous fuels, including some blending of hydrogen to be achieving net zero. Now, the CleanBC Roadmap to 2030 does have some pretty aggressive things in it, including sectoral targets that even affect natural gas generation in the province. Do you think that’s helpful for you achieving these goals or are you concerned by some of the targets they have especially in the 2030 timeframe?
Roger Dall’Antonia:
I would say directionally we’re supportive of the province’s climate ambition. We definitely support the 40% target by 2030, and we think we have a key role in further decarbonization as we head to 2050. We actually think we’ll be leading this clean energy future from an energy perspective in the province. I do think there’s debate to be had on the pathways. We see a critical role for the gaseous energy system. I think policy makers, be it federal, be provincial, really do have to think about how do you ensure the integrity and the viability of both energy delivery systems when you’re setting these targets so they can work in conjunction. I don’t think any serious thinker on energy systems believes you can electrify everything. I really don’t.
I think when you consider where we are right now at a Canadian level and at a provincial level, electricity is 20%, although there’s about of end-use energy, think about what do you do with the other 80%? That’s a massive, massive lift to triple the energy delivery system and preserve capacity as well as energy needs and try to replace other incumbent systems. So I think you got to think about the pathways to preserve each system, do what they do best. So supportive of the province’s direction with CleanBC, but think there needs to be a very careful consideration of how we approach it, so we’re making sure that we’re not risking reliability and resiliency as we decarbonize.
Peter Tertzakian:
Yeah, so what we’ll do is we’ll post your Clean Growth Pathway to 2050 on the podcast Jackie, and it’s already on the Fortis website.
Jackie Forrest:
We’ll also have some of those papers that Roger referred to. I’ll post those as well.
Peter Tertzakian:
Yeah, and speaking of the website, it also discusses indigenous reconciliation and Fortis species initiatives. Maybe tell us a little bit about that and how do you involve indigenous groups in your projects?
Roger Dall’Antonia:
Yeah, so I think this is something that the energy industry can be extremely proud of. I think that we’re uniquely positioned to be a key driver on indigenous economic reconciliation. We serve a hundred thirty-five communities across British Columbia. We serve fifty-eight indigenous communities. Our combined gas and electric assets touch 150 or so traditional territories. So we’ve been very focused on advancing our relationships with indigenous communities.
We go back 2011, we created a structure where our Mount Hayes electric-fired natural gas facility in Vancouver Island. It actually has two First Nations directly invested as equity partners. We put that in place 10, 12 years ago. Well ahead of a lot of discussion now about how do we engage indigenous communities. We’re very proud of that opportunity. We have a major agreement with the Musqueam Indian Band. They have the ability to invest in our expansion of our Tilbury LNG facility subject to getting some environmental and other permits approved, and then got a number of significant agreements with nations in support of our infrastructure.
One I’ll point out is we’re building expanding our Eagle gas pipeline from Coquitlam to Squamish go 50 kilometers. It’s going to serve the wood fiber liquefied natural gas export facility. What’s unique there is we have four agreements with the Squamish, the Musqueam, the Saulteau, and the Coquitlam nations, which gives them quite a bit of input into how that line is going to be constructed. They’ll participate in that construction, and what’s really unique is that we submitted to an environmental assessment process led by the Squamish.
One of the first environmental assessments led by a nation in Canada of energy infrastructure where they reviewed the environmental application side by side, not subject to the BC Environmental Assessment Office. So we have a BC environmental assessment certificate. We also have one from the Squamish Nation. They came up with 27 conditions, and I would say that submitting to that process did not only address environmental concerns, it allowed us to address cultural concerns.
I think we have a better project because we submitted to that project. So when I think about the opportunity, First Nations are very much going to be at the forefront of energy transition. So I think this is going to be a really important opportunity. I also would like to point out one other project we’re really proud of Fortis Inc. is an investor in the Wataynikaneyap power line. For those who don’t know that project, it’s a project that’s going to bring power through a high voltage electric transmission line to serve 17 northern communities in Ontario. It’s 51% owned by 24 nations, and it’s going to be allowing those communities to transition off of diesel to a more reliable, cleaner electricity.
Jackie Forrest:
Let’s Roger, talk about some broader Canadian topics, get away from BC as you’ve got a unique perspective there as you’re on the board of directors of Electricity Canada, the industry association, and you were recently the chair and you were involved with the Natural Gas Association nationally as well.
So I want to talk about this Canada electricity regulation, and you saw the draft in the summer of 2023 with the goal of getting to net-zero electricity by 2035, which puts quite strict rules on natural gas generators with the need to install carbon capture and storage or just not run very many days a year. I know you said BC, things are looking good there, but what do you think of this when you think about all the jurisdictions across Canada and how hard it will be to comply with these rules?
Roger Dall’Antonia:
Yeah, this is a really interesting and critical discussion. What I will say the government should get, I think, credit to set a vision, but as utilities, we’re very much at the forefront of implementing and ensuring this change occurs. I think there are some concerns with the first draft of the regulations. Admittedly, those are the first draft and the government has taken quite a bit of feedback.
I think when you think about the Canadian electricity regulations, you’ve got to take a step back, and again, level set. Canada’s in a very good starting position. 82% of our electric system is already non-emitting. So we are in a pretty good position relative to other advanced economies. But electricity is only 18% to 20% of end-use energy. So this isn’t about getting rid of just the last 18% that’s emitting if you think about that 82%, it’s also, at the same time, how do we massively double or triple our electricity systems?
As a utility operator, we provide a critical service in the form of energy, gas, or electric. You cannot compromise reliability or resiliency. It has real-world implications, physical implications, but also economic implications. Ask anybody right now dealing with this recent cold snap in early January, and you’re seeing mid-sea prices go to a thousand dollars. You also have concerns about what happens if you don’t have the energy to heat your homes in a -40 snap. These are the things that keep utility folks up at night. It’s making sure that failure’s not an option, and we do a really good job at it.
So, when we think about the CERs, the Clean Electricity Regulations, not debating directionally the action, I think we need to ensure that we’re not sacrificing two legs of the stool for one leg of the stool being climate. We do have to take action on climate. I think we’re in a good spot. I think we’ll make great progress. But the things that we’re concerned about is that this discussion, looking at a national perspective, we need to make sure the modeling on what are the true impacts is much more granular, because there are very specific regional constraints.
We just talked about the different systems, BC, Alberta, Saskatchewan, different peak requirements, different embedded energy systems, different ways to approach dealing with energy demand. Because there are regional differences, this has to be very coordinated with provincial policy. We do think there’s going to be the need for much greater flexibility in implementing. It can’t be a Canadian approach when there are very different specific factors in each jurisdiction.
We’d love to see greater coordination provincially and federally, as opposed to the federal government stating the regulation when there’s clearly some debate between the provinces and the feds on how to approach it. I also think that there’s some unnecessary barriers, like the owner’s liabilities, that are potentially being opposed with how are you approaching non-compliance with the CERs? There’s been quite a bit of discussion around criminal provisions of environmental legislation.
What I will say though is that draft one is out. I think the federal government has gotten a lot of feedback from broad industry, but more specifically, Electricity Canada, Canadian Gas Association, various other utilities have put in specific recommendations. We expect there’ll be a second draft coming out and there will be some modification to ensure that while we’re taking climate action, utilities very much are in a position to ensure the reliability and resiliency of the system, which we cannot compromise on.
Jackie Forrest:
Yeah, so people in Alberta understand that after living through that cold spell about a week ago. So it’s good to hear you think there’s going to be revisions to the draft. Peter and I just did our projections for 2024, and I said, “I didn’t think there’d be very many,” so I hope you’re right.
Roger Dall’Antonia:
I’m hoping too.
Peter Tertzakian:
Well, we’re on the subject of federal policies, and we’re running out of time here on the podcast, but love to get your views on something less technical than the Clean Electricity Regulations, and that is that of the carbon tax on consumers. In fact, let’s just go full circle because we talked about consumption and consumers at the front end of the podcast.
So Atlantic Canada got a break on its heating oil carbon tax late in 2023. Meanwhile, in Western Canada, there is no such reprieve on natural gas heating for consumers, and natural gas is actually a cleaner burning fuel than heating oil.
So love to get your thoughts of where this is going. Trying to understand whether this Atlantic Canada event is just the start of a thread being pulled, that it’s going to unravel much wider the whole carbon tax issue, because the carbon tax is set to rise by 15 bucks per ton per year. Originally, it was 65 bucks last year and it’s going to 170. And at 65 bucks, we already have people in an uproar and all sorts of things happening. So what’s going to happen going forward?
Roger Dall’Antonia:
Yeah, I think two things. I think the applicability of higher and higher carbon taxes at the residential level, at the consumer level, I think you are seeing that there is a real issue on preserving affordability when we think about energy policy and economic and environment policy coming together. There’s an old adage, you can only go as fast as your customers can afford. And if you start having a blanket approach to carbon tax without understanding that it has real implications on folks and in different parts of the economy, I do think this is going to be an issue where there’s going to be a revision, or at least I would say a more targeted application of carbon tax.
So, for instance, if you’re going to keep the carbon tax at 65 to $80, how do you direct that carbon tax to ensure that those who have to pay it on their heating, if you will, be it gas or oil, can it be directed specifically to move people to natural gas? Or can you subsidize the cost of renewable natural gas to ensure that you’re still getting the benefit of your embedded heating system?
So I think what you’re going to see is a broader discussion on the level of carbon tax and what are you doing with the proceeds. The proceeds, in my mind, should be helping to advance lower carbon gaseous: energy, hydrogen, renewable natural gas.
I’m going to pivot. I think industrial application, output-based pricing systems, cap and trade on industrial, I think there’s an opportunity for that to continue. Because I do think the sophisticated industrial user, the ability to deploy capital, the ability to change processes over time, the trade imposed taxes, for instance, Europe has a carbon border adjustment price, things like that. I think it may be a way when you’re dealing with export industries, international trade. When you think about the ability to invest longer term in energy systems and be more granular in your approach, I think there may be a distinction between residential and industrial. So I think that debate is also going to evolve. But what we’re seeing right now as far as the residential piece, I do think there’s going to be a rethink on how it’s deployed and how it’s used, for sure.
Jackie Forrest:
All right. Yes, I tend to agree with you.
Well, it’s been a wide-ranging conversation. Thank you so much, Roger, for your insights and joining our podcast. I’ve learned a lot about BC, about gas, about Canadian policies. Thanks for joining us.
Peter Tertzakian:
Yeah, thank you. Roger Dall’Antonia, President and CEO of FortisBC, thanks.
Roger Dall’Antonia
It was a pleasure. Thank you.
Jackie Forrest:
And thank you to our listeners. If you liked this podcast, please rate us on the app that you listen to and tell someone else about us.
Speaker 1:
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