Steve Snyder, TransAlta President and CEO, and Professor Gwyn Prins speaks, author of The Hartwell Paper: A New Direction for Climate Policy, presented at the 2010 Global Business Forum about the crucial global economic issues surrounding climate change. Focusing on the Canadian energy sector, Steve emphasized that the future of clean energy relies heavily on breaking the “Triple-E Equation”: public attitudes and behaviours, technology and government policies. These remarks were given in Banff, Alberta on September 16, 2010.
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Good morning ladies and gentlemen.
It’s interesting how much change can happen in a year.
A year ago at this Forum, we were in that volatile and heated period that led up to Copenhagen, with all the rhetoric and posturing that went with it.
Last year world forces pit:
- Country versus country;
- Province versus province;
- Fuel versus fuel;
- Industry versus industry;
- Technology versus technology; and
- The environment versus the economy.
All of which made it difficult to have a meaningful and productive discussion about how best to balance the competing imperatives of economic growth, energy demand and environmental sustainability.
That was reflected in the outcomes from Copenhagen, which many found disappointing. I have a more positive view of that session.
It demonstrated the need for a more balanced focus on the need for economic growth AND environmental sustainability, I believe we can have a much more realistic conversation about where we are, where we need to be and how best to get there.
As I sit here today, I can clearly envision a future by 2050 where society has transformed our balance of energy demand, the economy and the environment.
In fact, if we get started today and do things right, I see the potential with technology to make coal-fired power generation carbon neutral in the next 10 to 20 years.
That’s right … coal-fired electricity … carbon neutral.
But we won’t get from 2010 to that new energy future unless we are realistic and practical about our resources, our energy use and our environmental impacts.
Since the dawn of the Industrial Revolution, we have lived according to an equation that has been a reality in Canada and much of the world. At TransAlta we call this reality “The 3E equation.”
That is, economic development = energy consumption = environmental impact.
In other words, our quality of life and economic health are directly tied to our consumption of energy. In turn, our energy consumption has environmental impacts.
But think about what it would mean if we could look at fossil fuels in the same way we look at so-called “clean” energy sources – wind, solar, hydro, nuclear. All the environmental benefits of the latter in terms of fewer emissions AND all the economic value delivered from fossil fuels – low cost, dependability, intensity, transportability – all the while leveraging existing energy infrastructure.
It’s not as far-fetched as it might seem.
At TransAlta, we believe reducing emissions and other environmental impacts should not – and need not – equate to curtailment of economic activity. That’s why TransAlta is determined to play a role in making “The 3E Equation” obsolete by breaking the link between energy development and consumption and its environmental impacts.
So how do we break “The 3E Equation?” I believe the transition to a clean energy future lies down these paths:
- Public attitudes and behaviors;
- Technological innovation; and
- Government policies.
Climate change is a global issue that requires bold policy reform, with new technologies and collaboration and action from all stakeholders – including governments, industry and consumers.
As producers, we will have to change our technologies. As citizens, we need to help our political leaders find smart government policies to support the realistic and successful transition to a cleaner future. As consumers, we will have to change our behavior – and we’ll probably have to be willing to pay more for power.
So let’s start there first, by being realistic and practical about public attitudes and behaviours.
Today, low-cost and highly-reliable electricity is a given in any developed or even developing country. It’s always on. It’s always there. We don’t see it and we don’t think about it. We just flip the switch to turn on the lights and power up our iPads, iPhones, TVs, dishwashers, washing machines, factories, schools, traffic lights, hospitals and so on.
We all do our best to turn off the lights when we leave the room, to buy Energy Star appliances and to conserve where we can – but for most people, the total interest in power is in the two minutes it takes to pay our bill at the end of the month. Pay it and forget it.
As consumers, we need to understand better how our demand for energy impacts supply – and as a result, impacts the environment.
Simply put, when a light comes on in most places in the world, someone must throw another lump of coal in the furnace. There is no escaping that.
We believe in conservation and efficiency. I believe in conservation and efficiency. But if most of our solution for climate change is to say the world should use LESS energy, then we are condemning those who don’t today enjoy the economic benefits, the health outcomes and the quality-of-life that electricity provides to continue to go without.
That – from a practical, social, economic and geopolitical perspective – is not sustainable.
Energy demand is not going to go away. It’s going to increase. Our attitudes, our technologies, our policies need to reflect that reality.
I believe we need to move towards technological innovations such as smart metering and smart grids in order to have smart energy consumers. Smart choices about energy demand can assist us – as individual consumers and as a society – to make better, more efficient use of our existing energy infrastructure.
Adjustments in consumer behavior can have an affect on energy demand – and that in turn has an affect on energy supply. It won’t be the answer to all our needs, but energy efficiency – not only through conservation but through smarter consumption – can have a positive impact on breaking “The 3E Equation.”
So let’s talk about technological innovation. That includes being realistic about our fuel choices.
Technology in the power sector has helped to unlock new energy sources in recent decades – such as wind, solar and geothermal power. And more work continues to be done to advance the technology of biogas, biomass and tidal power. Technology has been good for the development of renewables and has helped Canada to diversify its energy supply mix.
A diversified, portfolio approach to energy supply is a prudent policy that will pay dividends for decades through more stable pricing, greater availability and a reduced environmental footprint.
We believe that strongly at TransAlta.
By adding to – and not substituting – the fuels we use, we can increase overall energy adequacy for society.
Renewables are part of the answer, but they will never be THE answer. That’s because, as we saw this year out west, the wind doesn’t always blow and the sun doesn’t always shine. Renewables are intermittent, so they can’t be counted on for baseload power. That is a pretty fundamental challenge in a system where the power has got to be there. Not 98% of the time. Not 99.9% of the time. But 99.9999% of the time.
Even if developers such as TransAlta continue flat-out with new wind power development, wind power is expected to only meet 5% of Canada’s electricity needs by the end of the decade.
So renewables are part of diversifying the energy mix, but they aren’t the substitution for an energy transition. I believe the world needs all its available energy resources. And honestly, that includes fossil fuels such as coal.
Today, fossil fuels provide 81 per cent of the world’s energy and the power behind our livelihoods. In the global power sector, coal is the largest single source of electricity – and its share is growing. In fact, about 50 per cent of North America’s electricity is generated from coal. The world simply cannot meet its growing energy needs without growing its reliance on fossil fuels.
Much of the world, particularly Alberta, is fortunate to have huge reserves of coal – more coal than oil, in fact. Alberta’s proven coal reserves of 33 billion tonnes means Alberta has more coal than all its conventional and unconventional oil and gas resources combined.
Now Professor Prins and I may disagree about the future role of fossil fuels in the global energy supply mix … but I believe that technological innovation is just as important for traditional energy supplies such as coal as it has been for renewables.
Coal is reliable and relatively low cost. So why don’t we invest in and deploy low-emissions technology such as Carbon-Capture-and-Storage to extract the value of coal while mitigating its impacts? Put another way, can we really afford not to?
To simply say “no” to coal without first exploring every avenue possible to eliminate its emissions cost effectively would be a flawed approach. So I believe CCS is essential if Canada and the world are to address the carbon challenge and not waste natural resources.
Albertans agree. A recent Ipsos-Reid poll found that 75% of Albertans would support the expanded use of coal in Canada, if using CCS meant it would have no greater impact on the environment than other ways of producing energy. That is the goal.
We’ve got coal. Everyone in the world has coal. And it’s the world’s cheapest fuel. So let’s use technology to make coal work better for all our needs – energy, economic and environmental.
Technology can certainly transition us to a cleaner energy future – but there is no silver bullet. A transition will take time. It will take innovation. And it will take money…
So let’s talk about costs.
Did you know Canada has the lowest power prices in the world?
Households and businesses in Canada pay less for power than their counterparts in any of the G-8 countries. The price to power our homes is about a quarter of what it costs in Britain and about half of what it costs in the United States.
That’s a source of tremendous economic advantage.
Can renewables ever become as cheap and as reliable as traditional fuels such as coal? Maybe. Maybe not.
I know that today every renewable source of energy is subsidized. That causes me two major problems.
First, it creates expectations for consumers that these low-emission fuels are just as reliable and just as affordable as traditional power generation. They are not.
Second, I know the subsidies can’t last. At some point they will become prohibitively expensive for governments. And then they’ll be cut.
So we need more transparency to power prices to drive smart consumer choices and smart investment choices.
Want to pop in your Avatar-3D Blu Ray into your HDTV after a hard day at the office? How are you going to pay for that luxury?
- With dependable coal at 4-cents kwh?
- With natural gas at nearly twice the price, 7-cents kwh?
- With wind power at twice that price – 14-cents kwh?
- With large-scale hydro at 15-cents kwh?
- With new nuclear power at up to 20-cents kwh?
- Or with solar power, at 44-cents kwh?
Electricity might just be a commodity, but that doesn’t mean it’s all the same. Sure, one electron works as well as the next. But the costs are not the same. You just can’t substitute one fuel for another. You have to pay for it.
That’s why I believe we need a price on carbon. But the purpose of a carbon price is not to punish the producer, but to promote technological investment and smarter consumption. A realistic and practical carbon price should both encourage conservation AND to transform the technology in our energy economy.
The longer we go without making costs transparent and universal, the more we avoid the issue. It’s hard for me to see success unless economic, social and climate change policies are clearly linked.
So let’s be honest here – low energy prices drive economic development and increase living standards. High energy prices dampen economic growth and reduce living standards.
No politician is ever going to campaign on a platform of higher energy – and therefore higher living – costs.
A pure environmental agenda sacrifices emissions for economics. A pure economic agenda sacrifices sustainability for growth. A singular lens isn’t going to work. We’ll all lose.
All of this leads me to the final path for breaking “The 3E Equation” – government policy.
Government policies can help to break the 3E equation. Governments can institute a carbon price. Governments can spur the development of renewables to broaden our energy mix. Governments can accelerate the development of technologies to eliminate CO2.
But government policies can also hinder the transition to a clean energy future. The best example is competing greenhouse gas plans.
It’s a good thing to see so many governments wanting to move on climate change. But that’s also a lot of competing plans with different targets, different tools and different timelines.
If we are to break “The 3E Equation” and move towards a cleaner energy future, government rules and regulations on the environment must be clear, realistic and integrated. The harmonization of these rules across provincial, federal and international borders is essential in order for us to move forward efficiently.
If we don’t harmonize environmental rules, Alberta energy companies will continue to face a complex, costly and uncertain regulatory climate that threatens to torpedo the development of energy infrastructure needed for the continued economic growth of Alberta, Canada and the world.
A lack of clear policy negatively impacts industry just as much as bad policy does. If governments provide one clear set of rules and objectives, industry will marshal the human, financial and technological resources to meet the challenge.
Transitions of this magnitude take time – but despite what the naysayers claim, I believe we have the time to get it right. What we don’t have time for is to get it wrong.
I believe TransAlta is a symbol for this practical and steadfast transition. We have evolved as technology, market and consumer demands have evolved.
We started out 100 years ago as a hydro-electric company not far from this very spot in the Rockies. Over time, we have moved into coal, then natural gas, and most recently into renewable fuels.
Next year we’ll celebrate the 100th birthday of our first hydro plant – and at the same time, we will commission our most-advanced new hydro plant at Bone Creek in B.C.
We have one of Canada’s oldest coal plants in Sundance, but next spring we’ll commission Keephills 3, the world’s most technologically-advanced coal plant. Keephills will advance CCS technology that should make it possible to get the economic benefits of coal without its environmental drawbacks.
Transition takes capital, technology, leadership, sound policy and time. I believe we have the ingredients for success if we get realistic and practical about the issues now and work in an honest and co-ordinated fashion to solve this enormously-complex problem.
So where does this leave us?
Against this backdrop, I think the following strategies make sense to me:
- Accept the science that says if we start now and do things right, we still have the time to get it right. Be realistic that we can accomplish a lot – both today and by 2050.
- Ease off subsidies for renewables and introduce a universal and escalating carbon price – so consumers see it on their monthly bills and are aware of the truer costs of energy, as well as their choices, as choice has always been good for consumers
- Support selective technology development where Canada has natural competitive advantages. There are many worthy of investment.
Neither the economics nor the physics of electricity lend themselves to rapid, ill-planned changes. Steel and concrete in our business remains in the ground for decades – so we can’t change overnight.
But we can do a lot more, a lot faster, than we’ve done in the past.
We need to continue moving down the path to break “The 3E Equation” steadily, smartly and deliberately with long-term goals in clear sight, but with achievable and realistic short-term milestones.
I am optimistic that collectively we can break “The 3E Equation” and find ways to maintain our economic prosperity with energy sources that don’t harm our environment. We can’t point our fingers at any one group and task just them with the solutions. There is far too much at stake to go down that path.
The causes and implications of “The 3E Equation” are far-reaching. So are the solutions. Ultimately, they will require the courage to try what hasn’t been tried before – by industry, by governments and by consumers.
We’ve started. Now we’ve got to drive it.
Thank you again for your kind invitation to speak this morning.
Steve Snyder – President & Chief Executive Officer
Banff, AB – Sept. 16, 2010