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Transforming Canadas Energy System: A Challenge & Opportunity for Alberta Transform Alberta Summit, Banff, Alberta. November 8, 2012 David Layzell, PhD, FRSC. Professor and Executive Director Institute for Sustainable Energy, Environment & Economy, University of Calgary, Calgary, Alberta

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What is an Energy System? Sources Services Transportation Communication Illumination Healthy food Health care Heating/cooling Clean water Information Coal Oil Natural gas Sunlight Wind Uranium Biomass Geothermal W HAT N ATURE P ROVIDES : W HAT P EOPLE W ANT : Harvesting Technologies Currencies Service Technologies Automobile Telephone Light bulb Refrigerator X-ray machine Computer Furnace Gasoline Diesel Electricity Methane Ethanol Hydrogen Oil Refinery SAGD facility Hydraulic fracturing Anaerobic digester Pipeline Nuclear power plant Coal power plant Gas turbine Fuel Cell Solar panel Wind turbine W HAT E NERGY S YSTEM D EVELOPERS C REATE : Adapted from Smelling Land by David Sanborn Scott

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Forces for Energy System Transformation Energy Systems Rapidly rising global energy demand (esp. Asia) Jobs & tax income Declining conventional oil and gas High oil price More reliance on unconventional oil & gas Low natural gas price (esp. in NA) E CONOMY Climate Change Air pollution & health impacts Water and land use E NVIRONMENT Societal Impacts Energy Security Concerns (esp. in USA & E. Canada) Risk/benefit assessment and relative ranking of each Force differs widely among individuals and groups.

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My definition of a Canadian Energy Strategy: Inter-provincial or multi- provincial cooperation around key components of Canadas Energy Systems to achieve: How to Transform our Energy System should be the Focus of a Canadian Energy Strategy? As Canadas energy province, Alberta needs to take a leadership role in the next energy system transformation. Energy Security Healthy Environment Economic Growth

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Canadas Energy System (2006) Oil Gas Coal Hydro Electricity Exports Residential & Commercial Oil & Gas Industry Other Industry Transportation Domestic Energy use Waste Energy Service Energy Source * Estimate of useful vs. wasted energy in energy services from NRCan Sankey (2006). Note: Large exports; ~85% of primary energy from fossil fuels; Large waste from conversion & transport

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Outline for Talk Oil Gas Coal Hydro Electricity Exports Residential & Commercial Oil & Gas Industry Other Industry Transportation Domestic Energy use Waste Energy Service Energy Source * Estimate of useful vs. wasted energy in energy services from NRCan Sankey (2006). 3. Electricity 2. Natural Gas 1. Oil 4. Energy Efficiency 1. S UMMARIZE KEY FEATURES / peculiarities of the Canadian energy system; 2. I DENTIFY Q UESTIONS to explore opportunities for Transforming the Cdn / Alberta Energy System; 3. C ONCLUSIONS

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1. Oil

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Trends in Cdn Oil Production & Import Exports to the USA Domestic use [CDN production] Imports Total domestic use in refineries Source: Statcan Cansim 126-0001 Crude Oil Production

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

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

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Only 57% (0.9 mil. boe/d) of Cdn Crude Oil Production is Refined in Canada but Canada also refines 0.7 mil. boe/d of Imported Oil (42% of Total Oil Refined) Oil Production Oil Transport Refine Petroleum Products (RPP) In balance, Canada is a Net Exporter of Refined Petroleum Products (RPP).

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Canada is on Track to Greatly Increase Oil Production in the Next 20 years Sources: Statcan Cansim 126-0001 (historical data) and adaptation from CAPP forecast (Crude Oil: Forecast, Markets and Pipelines, June 2012) Oil Sands

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and Shale Oil Production in the USA is Threatening Existing Markets for Cdn Oil Source: U.S. Energy Information Administration Note: Production data includes crude oil and lease condensate This new production will compete with CDN oil for US markets. USA Annual crude oil production (1985-2011) Kboe/d

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Source: Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012 Production in excess of Cdn needs Estimated US import CDN oil (Kboe/d) Available for new markets 1.Can we move AB oil to E. Canada at competitive prices with Brent crude? 2.Should we refine more AB oil in Canada? 3.Can we get access to the Pacific to open up markets in Asia? 4.How can we address the environmental cost? Questions

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2. Natural Gas

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After Years of Rising NG Production & Export, Both are Declining as US Imports Rise Source: CANSIM tables 128-0009 and 128-0002 Natural Gas in Canada (EJ/yr) Exports Domestic use [of CDN production] Total Domestic use Canadian production Imports

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Over 50% of Cdn Gas Production was Exported to USA in 2009 Natural Gas Transport Natural Gas Production Natural Gas Import While E. Canada imported gas equiv. to ~11% of Cdn production.

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US production of gas has been increasing sharply US Shale Gas is taking market share from Cdn Natural Gas production. Source: EIA Annual Energy Outlook 2012 (early release) US Natural Gas Production in EJ/yr What are the NG reserves in Canada? NG Price is low compared to oil: $ / GJ Nat Gas: $3-4 Oil (@$80/barrel) $13

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Canada has Vast Natural Gas Resources Sources: IEA, Golden Rules for a Golden Age of Gas: World Energy Outlook Special Report on Unconventional Gas, 2012 Energy content conversion factors used: 38,430 k}J/m3 (IEA values for Canadian natural gas) * Council of Canadian Academies, Energy from Gas Hydrates: Assessing the Opportunities and Challenges for Canada, 2008 865 EJ equivalent to 290 years of current natural gas use in Canada** * Total amount of gas hydrates in Canada could be 18 times higher ** Current Natural Gas demand in Canada is ~ 3 EJ/yr.

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Source: Adapted from Rising US Energy Independence, what does it mean for Canada?, Special Report, TD Economics, May 2012 Exports Predicted NG Supply & Demand for Canada & USA EJ/yr Available for new markets 1.Does it make sense to transform the energy system towards natural gas? A.LNG exports to Asia? B.Replace coal power with cleaner gas? C.CNG/LNG vehicles? D.Expand fertilizer & plastics industries? 2.How can we address the environmental costs? Recovery & Processing? Use? Questions

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3. Canadas Electrical System

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Provinces Vary in Sources for Power Production Hydro Coal Nuclear Note: Average values between 2005 and 2009 Power Generation

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Most is used within each province, but ~78% of Canadas electricity trade is N-S, not E-W Notes: - Trades lower than 0.5 TWh removed - Average flows values do not consider years without trade - Share calculation based on all flows values Labrador trade with Quebec is the primary exception Power Generation Power Transport

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Provincial greenhouse gas (GHG) emissions affected by source of power. Note: Average values between 2005 and 2009 Power Generation GHG Emissions

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Canadas GHG Emissions from Power Generation GHG emissions** associated with power production in Canada 119 Mt CO 2 /yr Oil 8 Gas 18 Coal 93 Equivalent to: ~3X the GHGs from oil sands recovery and processing (well to pipe)* *** In 2009, oil sands recovery accounted for 6.5% of GHG Canadian total emissions (source: NRCan)

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1.Should provinces switch from Coal to Natural Gas? Reduce GHGs by 40 Mt CO 2 /yr Kg CO 2 / TJ power Coal Oil Natural gas* * Assuming combined cycle units 2.Should provinces switch from fossil fuels to large hydro / renewables for power generation Reduce GHG emissions by ~119 Mt CO 2 /yr Create an W. Cdn Power Grid? Large Hydro An opportunity for inter-provincial cooperation Questions

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Canada has the hydro potential to displace fossil fuel power generation Developed hydro Undeveloped hydro potential Notes: - Trades lower than 0.5 TWh removed - Average flows values do not consider years without trade - Trade newer than 2007 not considered and hydro is a great base load / storage for wind and solar

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Dollars of Revenue per t CO 2 e Emissions ($/CO 2 e) for Canadas Primary Industries Per tCO 2, coal power generates less economic activity than other primary industries. Plus we have other alternatives. Should not this be the first place to look for GHG reductions?

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4. Energy Efficiency

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Energy use (GJ/capita) 30 Industry Why is Alberta be so much worse than other provinces? Canada: CanSim Table 128-0002, Table 128-009, Table 128-0016. Supply and demand of primary and secondary energy in terajoules, annual (terajoules); Canada. Table 051-0005 - Estimates of population, Canada, provinces and territories, annual (persons); European Countries: Eurostat. Supply, transformation, consumption - all products - annual data [nrg_100a]; Eurostat. Population on 1 January by age and sex [demo_pjan] Transport Residential Commercial & Institutional Agricultural & Fishing Per Capita Energy use in Alberta, Canada and Northern Europe 49% higher than the Cdn Avg!

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Why? Oil 8 Gas 18 Coal 93 ISEEE is working on this We have some of the answers, but there is still a lot we dont know. Clearly, there is much that can be done to improve. Question Should not Alberta strive to be the Canadian Leader in: Energy efficiency? Renewable energy? Low carbon communities? My government will put energy efficiency at the top of the agenda. It is the fastest and most cost effective measure to improve on sustainability; it is the "low-hanging fruit. Alison Redford, Leadership Campaign Materials (2011)

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Conclusion 1.Energy Efficiency is the low hanging fruit. Alberta has the potential to move from last place to first place in the transformation to a low carbon community: Population growth (new communities); Financial resources; Impressive technology and innovation workforce; Willing public. Success is critical to rebranding Alberta, and creating an industrial base that can carry the province through its boom/bust cycles. 2.Build Partnerships with other Provinces to realize the energy system transformations that will better achieve energy, environment and economy objectives: O IL (pipelines east?, new refineries? Pacific access? Better recovery technologies?) G AS (LNG terminals? Replace coal? Replace diesel? Fertilizer/plastic? Better recovery technologies?) E LECTRICITY (W. Canadian grid? Renewable integration? Electrification of oil sands?)