A new coalition of energy industry associations in Canada this week called on that country’s energy ministers to encourage investment in energy supply along with increasing energy efficiency to meet Canada’s future energy needs in a sustainable manner.
The coalition of energy associations — the Energy Dialogue Group — on Monday submitted a report, “Time for a New Focus for Energy in Canada,” to the country’s Council of Energy Ministers. The group represents 14 associations within the energy sector covering production, transmission, delivery and end use of electricity, natural gas and oil.
The coalition said that although Canada has abundant energy resources, new energy supplies “are more expensive to develop, especially in ways that are environmentally acceptable both to local communities and to Canadians at large.” At the same time, the coalition noted that the country’s delivery infrastructure is aging and needs to be renewed. “All of this will require great increases in investment capital to accomplish.”
Moreover, the group of associations said that “we seem to have moved into a new era of higher energy prices. The stresses on energy in Canada are mirrored in international energy markets; supply systems are pressed to keep up with growing demand. Geopolitical uncertainty adds to the stress. Energy prices are increasingly determined in world and regional markets, and energy prices across the board are at higher levels than we have experienced for the past two decades and may get higher.”
The coalition said that one of the reasons that capital needs in the next 30 years will be significantly greater than the past 30 “is that we are approaching the end of the lifespan of a very large stock of capital built between 1950 and 1980.”
The report notes that the post-war boom “meant energy consumption grew at an exceptionally high rate and led to a wave of major projects such as hydro mega projects like Churchill Falls, the first round of nuclear facilities, the vast expansion in conventional oil and natural gas exploration and development of associated transmission and distribution facilities.”
Much of this capital was financed from public budgets, and the private and foreign capital that has replaced public financing “is very sensitive to the nature and stability of government policies.”
In the case of electricity, capital expenditures from 1980 to 2000 fell by roughly two-thirds. “Although oil and gas development tripled and will likely continue at historically high levels, new reserves are increasingly high cost and high risk. So, in essence, we are living off the capital of an earlier era, much of which will now need to be replaced.”
The coalition said that for capital markets to view projects in Canada in a positive light, a number of important factors need to be aligned. “To begin with, the overall policy framework for the energy industry needs to be clear, sensitive to investors’ priorities and stable. A reaffirmation of our market-based model and a fully functioning continental marketplace within North America is a key starting point.”
The group of associations said that the Canadian market itself “is too small to justify the extraordinarily expensive major projects underway in the oil sands and remote northern and offshore oil and gas fields. Similarly, major electrical generation projects, particularly hydro and nuclear, require significant regional markets to allow for a sharing of risk and a phasing in of domestic consumption for the output of large blocks of power.”
In this context, “Canada is an integral part of the overall North American marketplace for both energy and investment.”
To download the entire report, go to the website of the Canadian Gas Association (CGA) at: https://www.cga.ca/. CGA is a member of the Energy Dialogue Group.
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