Wedge Advisory Note – Section 5
Advice on a Long-term Strategy
on Energy and Climate Change
Section V: Strategic Priorities
– Near-term action for long-term impact
The first and perhaps most important finding of the NRTEE’s
analysis is that existing technology is sufficient for
Canada to significantly reduce GHG emissions by mid-century
even if the future examined here is similar to the present
and takes into account population and economic growth.
The
second major finding is that both energy use and energy
production activities must be involved. Doing only one
or the other is not sufficient for Canada to make a
significant dent in its GHG emissions.
The
final set of findings deals with identifying which technologies
must be encouraged now. The wedge diagram shows that
the broad deployment of all potential GHG reduction
technologies – at heretofore unseen levels –
will be necessary to achieve the 60 per cent reduction
target. Because this scenario is only one potential
pathway to achieve this level of GHG reductions, the
relative size of many wedges could be varied to achieve
the same result. However, a few of these wedges are
of such great importance that they effectively become
“make or break” issues for Canada –
failure to start implementing the technologies associated
with these wedges would greatly impede Canada’s
ability to significantly reduce GHG emissions, even
in the long run.
Therefore,
the NRTEE recommends that near-term action on these
strategic priorities is needed to help set Canada on
a long-term trajectory towards a low emission energy
future.
These
key “must have” measures have been grouped
into three areas which will be discussed below:
- With
respect to energy use: Energy efficiency improvements
in the industrial sector, the transportation sectors,
and to residential and commercial buildings. - With
respect to energy production:
• Carbon sequestration and storage in the oil
and gas sector
• Reducing the carbon intensity of electricity
generation
Strategic
Priority 1 – Energy Efficiency Improvements
Prior
to the oil shock of the 1970s, increases in energy consumption
and therefore emissions of greenhouse gases grew in
tandem with growth in GDP. Since the 1970s GDP growth
has often grown faster than the rate of GHG emissions,
reflecting the productivity gains that have been achieved
in the economy. The good news is that the dollar value
of goods and services produced in the Canadian economy
is growing faster than our energy consumption-related
emissions. But as this study clearly shows, to achieve
the necessary reductions in emissions, the energy efficiency
of the Canadian economy will have to improve at a much
greater rate than in the past.
The
area of energy efficiency highlights two key differences
that emerge when examining significant GHG reductions
on a longer time frame. This first is that unlike the
current debate on climate change, the question is not
which technologies to deploy, but how to deploy nearly
all of the potential GHG reduction technologies. How
to effectively deploy many different energy efficiency
technologies in several different sectors then becomes
an important policy issue.
Examining
GHG emissions on a longer time frame also shifts the
relative importance of different energy use sectors.
While the industrial sector (excluding the oil and gas
sector) remains an important source of emissions, the
influence of residential, transportation and commercial/service-related
activities all become greater over the course of the
next 45 years. The emphasis on reducing energy use in
these three sectors therefore becomes more and more
important.
Increasing
energy efficiency in all of these sectors is key. In
this section we will look at the implications for the
industrial, commercial and residential and transportation
sectors that are the primary energy consumers in Canada.
These findings are based on an historical analysis of
Canadian energy use that examined the period between
1990 and 2003.
Industrial
sector
The
industrial sector, which in this study includes mining,
manufacturing and agriculture[4],
is normally front and centre when there is a discussion
of reducing GHG emissions because of the volume of their
emissions and the visibility of their operations. The
track record of this sector has been quite good. From
1990 to 2003 GDP for the sector grew at 24 per cent,
while energy use grew by only 11.7 per cent and emissions
grew by only 1.3 per cent. These accomplishments represent
a combination of energy efficiency improvements and
fuel switching, particularly in the pulp and paper sector,
where wood waste has become an increasingly important
fuel source for firing boilers.
These
improvements have been driven generally by issues of
competitiveness rather than government regulation, since
it is not unusual for companies in this sector to have
energy represent 20 per cent of their operating expenditures.
For companies that are selling their products on the
international market, managing these operating costs
is often the difference between profitability and not.
This is also an area where there has been investment
in co-generation and more conventional combined heat
and power (CHP) to maximize the benefit of fuel combustion.
There
are, however, additional gains that can be made. This
study assumed that energy intensive industry continues
to improve its efficiency at rates similar to those
achieved between 1990 and 2003. Specifically:
- Pulp
and paper – Energy intensity increases 10 per
cent/tonne/yr. By 2030, 80 per cent of energy comes
from wood wastes. - Iron
and steel – energy use per tonne declines 20
per cent by 2050 - Smelting
and refining – as above - Chemicals
– energy intensity declines 2.5 per cent per
year. - Cement
– energy intensity declines 0.1 per cent per
year. - Mining
(excluding oil and gas) – energy intensity declines
1 per cent per year.
From
a policy perspective the important factor to note is
that major technology investments are aligned with capital
stock turnover. Most plants have an operating life of
25 to 40 years, and although upgrades and improvements
are made constantly, the kinds of investments that will
contribute to an 80 per cent reduction in emissions
(as envisioned with pulp and paper) are made when the
plant is replaced. Decisions are being made continually
to replace and upgrade facilities. It is important that
these decisions be informed by a clear policy framework
designed to optimize the energy efficiency of new facilities.
It
is also important to realize that heavy industry as
defined in this study will play a smaller role in terms
of energy consumption in the future, since it has been
assumed that domestic based industry will need to produce
higher value-added products in order to grow and prosper.
For example, Dofasco Inc. produces the same volume of
steel that it did 15 years ago but its sales volume
has tripled because of changes to its product line.
This is a trend that will prevail in Canadian heavy
industry with the result that energy consumption in
this sector will remain largely static and will decrease
as a percentage of overall energy consumption.
Service
and residential sectors – Renewing Canada’s
building stock
Canada’s
building stock is a long-lasting component of its energy
use infrastructure: 66 per cent of the buildings that
will be standing in 2050 are already built. This means
that there will be a major renovation effort needed
to bring these buildings up to the standards necessary.
It also means that 34 per cent of the buildings have
not been built yet, and these provide the opportunity
to improve building codes and standards so that they
will not be additions to the inventory that needs to
be retrofitted. The results of this study show that
while Canada’s building stock can be renewed and
improved over the years, setting better standards soon
is key.
In
the residential sector there is good news and bad news
with regard to the history of energy use and energy
efficiency. On the good news side there have been improvements
of 13 per cent in energy use per square foot over the
period from 1990 to 2003. This, however, has been offset
by the increase in average living space as our affluent
society opts for larger homes. Also, home entertainment,
information technology and appliances are increasing
the electricity load. Air conditioning is still a relatively
small load, but is increasing rapidly. The net effect
is that residential energy use increased over that same
time period.
The
60 per cent reduction scenario made several assumptions
with regard to the residential sector. Some of major
assumptions, listed below, illuminate the need for early
action:
- That
90 per cent of the existing 6.6 million single family
homes and the 5.6 multi-family dwellings will undergo
an energy audit over the next 50 years and that the
identified savings can be made through air sealing,
insulation upgrades and other will be carried out.
This implies that 2.5 to 3 per cent of Canadian homes
will need to be audited and retrofitted each year,
or approximately 165,000 homes per year. - That
virtually every furnace in service today will be replaced
by 2050 with high efficiency furnaces (greater than
90 per cent) becoming standard equipment by 2008.
Of the approximately 3.5 million homes in Canada using
electricity to heat their homes, some 520,000 electrically
heated homes in Alberta, Saskatchewan and the Atlantic
provinces (which all use a large proportion of coal
to generate electricity) will need to be converted
at a rate of about 26,000 homes per year. In areas
where natural gas is not accessible, these homes would
be converted to high efficiency propane furnaces. - That
the 4.1 million new single family dwellings projected
to be built by 2050 will be 30 per cent more efficient
than current standards by 2010. Similarly, the 3.4
million multi-family dwellings projected to be built
between 2010 and 2050 will be 60 per cent more efficient.
New
homes would be better insulated and sealed, with higher
quality windows and doors. They would be heated with
high efficiency furnaces where setback thermostat controls
are standard and designed to take greater advantage
of available solar gain in winter. It is expected that
many of these upgrades are already cost effective for
homeowners and result in more comfortable homes –
and energy bills – with homeowners enjoying energy
costs at least 30 per cent lower than they would otherwise
have been.
The
service sector referred to in this study consists of
office, commercial and institutional space. As Canada
has become increasingly a service-based economy it is
not surprising that the service sector grew by 36 per
cent between 1990 and 2003 while GDP only grew by 25
per cent over the same period. There was no correlation
between changes in the price of energy and demand: over
the period of the study, gas prices rise significantly
but there is no corresponding decrease in demand. This
speaks to the demand being structural and once the decision
is made to use gas for space heating it is both expensive
and disruptive to change. This furthers the argument
that it is important to influence these decisions on
buildings before they are built.
The
service sector is therefore growing rapidly and must
therefore become a key focus for reducing GHG emissions
in the long term. Some of the assumptions that have
implications for short-term action include:
- A
heavy emphasis on renovation, since commercial buildings
are renovated more frequently than residential homes:
some commercial buildings may undergo several major
renovations between now and 2050. This study assumes
that over the next 40 years, 50 per cent of buildings
are retrofitted to reduce energy use by 25 per cent.
The balance are renovated to the equivalent of the
LEED platinum standard, which reduces energy use by
50 per cent. - All
new buildings constructed after 2010 are required
to meet the LEED Platinum standard which reduces energy
use by 60 per cent over current standards.
Transportation
Sector
As
with the residential and service sectors, the trend
in personal transportation between 1990 and 2003 shows
that energy intensity per passenger-kilometre improved
modestly, by 8 per cent. But the overall level of activity
(in this case kilometres traveled) increased by 27 per
cent, creating an overall increase in GHG emissions.
This trend has been further driven by the popularity
of light trucks and SUVs. The 60 per cent reduction
scenario shows that significant gains in this sector
coming from new technologies such as hybrids that increase
the efficiency of personal vehicles. To a lesser extent,
it also emphasizes improved access to and use of public
transit.
One
of the assumptions that has implications for short-term
action is related to a gradual increase of the average
energy efficiency of the fleet:
- 2005-2014,
efficiency increases 2.25 per cent/year - 2015-2020,
efficiency increases 2.40 per cent/year - 2021-2050
efficiency increases 2.55 per cent/year.
This
results in an average energy efficiency of 3.01L/100km
by 2050 (78 mpg).
The
role of freight transportation is of great importance
in this study. The evolution of just in time manufacturing
as the norm has placed increased pressure on freight
transportation. This is borne out by an increase of
46 per cent in volume in tonne/kms compared to a GDP
growth of 26 per cent from 1990 to 2003. This growth
in volume was only somewhat offset by energy efficiency
improvements that reduced trucking energy intensities.
The result was a significant 42 per cent increase in
GHG emissions during this time period.
Truck
efficiency improvement is the second largest single
GHG reduction wedge in this study, after carbon capture
and sequestration. The study assumes that light and
medium trucks will triple their fuel efficiency by 2050,
and that heavy trucks will double fuel efficiency by
2050.
These
assumptions are based on the US 21st Century Truck Program
that has set the goal to develop by 2010 the technologies
to triple, among other things, the fuel efficiency of
light and medium trucks. In its 2005 annual report,
this group seemed to be reporting reasonable progress;
however, this is not currently demonstrated technology.
In the meantime, a number of existing, demonstrated
and cost-effective technologies exist today that could
increase energy efficiency of small and medium trucks
by 50 per cent.
Strategic
Priority 2 – Carbon capture and sequestration
in the oil and gas sector
This
study showed that Canada’s growing role as a major
energy exporter is compatible with deep GHG emissions
reductions by mid-century, but only if the carbon intensity
of oil and gas production is reduced through the use
of carbon capture and sequestration (CCS). However,
while carbon capture technology is mature, carbon storage
with permanent sequestration is not yet a widely proven
technology. The development and use of this and other
emission reducing technology is possibly the single
greatest issue determining whether or not Canada can
significantly reduce GHG emissions in the long-term.
In
the Canadian oil and gas industry, the oil sands are
the dominant factor in future development. Currently
producing just over a million barrels a day, that production
is forecast to grow five-fold over the next 45 years.
The potential emissions implications of that level of
production would dwarf all other considerations in trying
to reach the GHG reduction target explored in the NRTEE
scenario. At the same time, there is a global demand
for the output of the oil sands, and the billions of
dollars of investment in developing these properties
is critical to the health of the Canadian economy.
Fortunately
carbon capture and geological storage holds the potential
to virtually eliminate these emissions and also has
a series of important collateral benefits. From a “wedge
perspective”, the 191 Mt/yr of emissions that
could be reduced represents 18 per cent of the overall
target and is the largest single wedge in Figure 3.
This assumes that CCS reduces emissions from the oil
and gas industry by 30 per cent by 2030, and by 60 per
cent by 2050.
Once
the CO2 is separated it can be used for enhanced oil
recovery in the Western Sedimentary Basin. Conventional
drilling will only recover about 40 per cent of the
oil, at which point the pressure in the formation is
insufficient to continue production. The carbon dioxide
can repressurize the well and increase recovery. A similar
approach can be taken to enhanced gas recovery. The
key point is that not only are emissions being reduced
by pumping the CO2 back into the geological formations
but a valuable resource is being recovered. In addition,
water is currently being used for enhanced oil and gas
recovery and water is a limited resource in Alberta
and Saskatchewan. This technique can also be important
for recovering coal bed methane, tight gas and other
non-conventional reserves.
The
potential value of carbon capture and storage is widely
recognized for many of the reasons noted above. Canada
has the opportunity to be on the leading edge of deploying
this technology. This not only has significant benefits
for Canada in terms of resource development but it also
becomes an important exportable expertise. Given the
outlook for growth in the production and consumption
of fossil fuels internationally, and in particular the
impending development of the vast coal reserves of China
and India, carbon capture and storage technology will
also have a critical role to play in global scenarios
for GHG emission stabilization. There will be significant
global opportunities for those who can demonstrate the
ability to deliver effective carbon capture and storage
technology.
This
is one of the key underlying themes of this paper, that
environmental and economic objectives can achieved in
a manner that produces incremental economic and export
benefits for Canadian industry.
Strategic
Priority 3 – Electricity generation
As
noted above, the NRTEE’s scenario implies that
that the electricity sector will be transformed between
now and 2050.
The
measures with the greatest immediate strategic importance
are:
Co-generation
Canadian
industry requires significant volumes of process steam
provided by industrial boilers. That same steam can
drive a turbine producing electricity before it is used
for process purposes. The emissions associated with
the fuel used to fire the boiler are already occurring
so the power generation occurs with no net increase
in fuel consumption. Historically, difficulties in interconnecting
to the electricity grid have discouraged the full development
of combined heat and power (CHP) potential but advances
in control technology combined with standardization
and downsizing of co-generation technology expand the
potential contribution of this option.
The
large proportion of co-generation implies that the Canadian
electricity sector will become a much more distributed
one. Industrial co-generation, as well as micro turbines
and CHP in the residential sector (apartment and condominium
buildings) and commercial sectors must all be deployed.
The increase in capacity – a total of 2010 MW
per year between now and 2050 – provides a sense
as to the urgency surrounding this measure.
Clean
coal with carbon storage
Canada
has sufficient proven deposits of coal to fuel our coal
fired power generation fleet for the next 500 years.
“Clean coal” technology offers the potential
to exploit these coal reserves and at the same time
to minimize the environmental impact. In the clean coal
process, the coal is first gasified, the sulphur is
removed, the gas is burned in a turbine in an oxygen
enriched atmosphere and the NOx is removed. The exhaust
gas is almost pure CO2 that can be captured and stored
as discussed previously. This technology can result
in a 95 per cent reduction in GHG emissions, and the
virtual elimination of SO2, NOx and mercury emissions
with the resulting benefits of cleaner air.
One
of the by-products of coal gasification is hydrogen
produced in an environmentally sustainable manner. If
our transportation sector moves towards hydrogen as
a future fuel source this production method will be
important.
This
study assumes that all coal-fired generation in Alberta,
and Saskatchewan will use clean coal and CCS by 2050.
Wind
All
renewables feature in the 60 per cent scenario, including
wind, solar, bio-mass, hydro, geo-thermal, ground source
heat pumps, and tidal power. The contribution by wind
is particularly important. In May 2006, Quebec Hydro
announced that it plans to build 4,000 MW of new wind
capacity, in addition to the 3,000 MW already committed.
Ontario has indicated its intention to acquire 5,000
MW of wind by 2025. This wedge envisions just over four
times that amount of capacity being added in the next
40 years, in other words 40,000 MW of wind by 2020 rising
to 50,000 MW of capacity by 2050.
This
additional capacity would result in approximately 33,000
additional turbines to be installed (assuming 1.5 MW
turbines, which is currently a common size, but which
are rapidly being replaced by larger turbines on wind
farms being built today).
© 2013