By February 20, 2017 0 Comments Read More →

Canadian Energy Politics for Dummies, a refresher for the rest of us

wind powerAlmost all senior Canadian governments base their policies on the energy transition model

Canadian energy politics is intense – and growing more intense every year – and confusing, partly because the Alberta-based oil and gas industry is fighting a rearguard action against governments and voters, who largely support the long-term transition from fossil fuels to clean energy technology.

energy transition

Prof. Vaclav Smil, author of numerous books on energy, agrees the energy transition has begun.

Not everyone agrees an energy transition has begun, especially Alberta fossil fuel boosters. But I do (as I’ve argued here and here and here), as does every scientist, economist, and researcher that I’ve interviewed on the subject.

The foundation of the energy transition is new clean energy technology: solar, wind, tidal, and other renewable energy sources; the electrification of transportation (think electric vehicles); battery storage technologies for both utility-scale and residential/commercial; the decarbonization and electrification of industry; and a public policy and business emphasis on energy efficiency.

Plus many, many associated technologies that support and make possible advances in other areas (think software, materials, chemistry).

The energy transition is not a neat, easily quantifiable process. It’s incredibly complex, especially in the global context, and there are many cogs in the machine.

But my reporting on the energy transition suggests the global economy is about five to 10 years into a 75 to 100 year process. Developed economies will likely make the transition quicker, developing economies will be slower.

The energy transition model has also become the dominant worldview of global governments, including Canada.

alberta

Minister of Environment and Parks Shannon Phillips.

Several weeks ago I interviewed Alberta Environment and Climate Change Minister Shannon Phillips for a Markham On Energy webinar. She confirmed that the NDP government of Rachel Notley has based its Climate Leadership Plan explicitly on the idea of the energy transition.

When I interviewed Canadian Natural Resources Minister Jim Carr last year, he told me, “[W]e must continue to generate wealth from our abundant natural resources to fund this transition to a low-carbon economy.”

Prime Minister Justin Trudeau said last year, “The choice between pipelines and wind turbines is a false one. We need both to reach our goal.”

With the exception of a few holdouts, like Saskatchewan’s Brad Wall, most other Canadian provincial governments have also accepted the energy transition as the basis for their energy and climate policies.

What are some of the most obvious characteristics of this energy transition?

One, falling cost curves that already make some technologies (e.g. wind energy) cost-competitive with fossil fuels and suggest that others (e.g. solar) are not far behind. Perhaps more importantly, the value provided by the new technologies is growing (consumers will pay more for better tech if it provides a lot more value).

ev

Chevrolet Volt Battery.

Two, significant capital investment to overcome technical hurdles, such as electric vehicle battery chemistry. Getting the science right, commercializing new discoveries, then taking them to market, is a slow and laborious process, but in laboratories and startups across North America it is happening in earnest.

Three, many of the technologies are starting to show up on the diffusion S-curve. At the very bottom, admittedly, but they are beginning the decades long (a typical new technology takes 50 years to reach market dominance of 70% to 80%). For instance, EVs now make up one per cent of annual American auto sales and are forecast to grow steadily in coming years.

So how does the energy transition affect Canadian energy politics?

There are three primary groups involved in the public debate:

One, eco-activists who oppose coal, oil and gas development and the infrastructure that supports it. Their rallying cry is “100% renewables today!” Examples are David Suzuki and Vancouver Mayor Gregor Robertson. This group makes up maybe five or 10 per cent of Canadian voters, but its message resonates with the larger electorate and it has had a great deal of influence over the past decade.

Two, oil and gas industry boosters. This group is mostly located in Alberta and has a ready audience because of the large presence of the industry there. Boosters want pipelines approved now (or sooner), clean energy subsidies reduced or eliminated, and complain loudly that Canadians don’t understand or appreciate the contribution Alberta makes to the national economy. Boosters include Ezra Levant, Brett Wilson, and Gwyn Morgan. This group also makes up about five to 10 per cent of the electorate.

Three, the rest of the Canadian electorate (about 70%, according to Calgary communications expert Doug Lacombe, but I think it’s closer to 80% or more), which an Oct. Abacus Data poll says have accepted the seriousness of global warming and support policies to hasten the energy transition, but are also supportive of oil and gas development until the transition makes clean energy tech affordable and practical.

Canadian energy politics are dominated by the first and second groups.

Eco-activists, thanks to generous funding from American environmental charities, are able to organize, protest, and spread their message widely; they are very influential. Industry boosters have coalesced around a few astroturf organizations like Calgary realtor Cody Battershill’s Canada Action; they are also supported by Canada’s business media, which still has plenty of influence upon public attitudes to energy issues.

The third group, the oft-referred to silent majority, sits in between the first two and tries to make sense of the strident partisan shouting.

pipelines

Tim McMillan, CAPP president.

Thus far, the eco-activists are winning the battle. Not as decisively as they often claim, but the trend is clearly toward climate change mitigation of the sort championed by the Liberal government of Justin Trudeau. As a press release from the Canadian Assoc. of Petroleum Producers trumpeted last fall, Canadians overwhelmingly support Ottawa’s approach to energy policy.

This presents a big challenge for industry and the boosters, who are reluctant to yield an inch (preferring to double down on the position that if Canadians only understood how great the oil sands and pipelines are they would hop on the band wagon), but yet are forced to rely upon the political support of the silent majority for energy infrastructure development in BC, Ontario, Quebec, and the Maritimes, where public sentiment is friendlier to the eco-activists.

Boosters keep yelling into their echo chamber, not realizing they’re only talking to themselves. To illustrate the point, keep in mind that when Trudeau approved two pipelines for Alberta in Nov., he said approval had been made possible by the climate mitigation policies of Alberta NDP Premier Rachel Notley.

He pointedly said little about how much capital investment is provided by the oil sands or how many workers it employs or any of the multitude of other economic benefits that are the favourite talking points of industry and its boosters.

Which leads to the inevitable conclusion that if industry and boosters continue with the current strategy, they will slowly lose influence with public policy-makers and Canadian voters.

netherlandsThe only alternative for industry to get back in front of the parade is to adopt the energy transition model – which assumes that as new clean technologies emerge they will compete for decades, 50 years or more in my estimation, with the dominant technologies based on oil and gas – as the basis for a new political strategy.

The structure of the industry is slowly evolving in this direction anyway.

Enbridge, for instance, is investing $1.7 billion for a 50 per cent share in a North Sea wind far. Other pipeline companies have growing renewable energy portfolios. And the Petroleum Services Assoc. of Canada is accepting renewable energy service companies (e.g. solar installers) because they can see the writing on the wall.

But industry most evolve faster and more substantively with its political strategies and messages.

Each year that it continues with its tired old boosterism approach will make it harder to compete for the hearts and minds of those middle of the road Canadians whose support is critical to government approval of energy infrastructure and industry expansion.

Trans Mountain

Trans Mountain Expansion pipeline route.

In the short-term, industry has won some battles, most prominently the approval of Kinder Morgan’s Trans Mountain Expansion pipeline from Alberta to Burnaby, BC. But those victories were predicated on Canada, Alberta, and industry accepting climate policies (e.g. Alberta’s carbon tax, which is still very unpopular in the oil patch).

But in the medium to long-term, momentum is not on industry’s side and it must be more clever if it is to get out in front instead of lagging behind.

Is industry capable of change? Can it embrace the energy transition worldview and adopt political strategies more in tune with modern reality?

A few encouraging signs include four Big Oil CEOs on stage with Notley in 2015 when she announced the Alberta Climate Leadership Plan.

But where were other industry leaders? Still supporting antiquated ideas about the primacy of fossil fuels and the far right political parties that think climate change is a hoax and burning noxious coal is a pretty neat way to generate electricity.

The Canadian oil and gas industry can be a political leader or it can continue to be a laggard, the choice is up to the C-suite executives ensconced in downtown Calgary.

They need to make a decision before it’s too late.

len webber

Posted in: Markham on Energy

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