Thursday, February 16, 2012

Low Cost Natural Gas

The following piece was actually published in a newspaper. I'm learning to tone down the rhetoric.

FP Letters: ‘Low cost energy is Achilles’ heel of sustainability movement’

Special to Financial Post Feb 14, 2012 – 11:20 AM ET



Low electricity prices and extremely low natural gas prices in Canada mean that the majority of even the most viable clean tech solutions available to Canadians are not very attractive economically. In BC for example, a standard 6 square meter solar hot water heating appliance with 100 gallons of storage for a typical home costs 70 to 100 times more than the energy it is expected to deliver annually in natural gas dollars. There’s no better way to reduce hot water energy use in the home aside from reducing hot water use through conservation.

It’s not easy to find a sustainable appetite for many clean tech solutions like this. The low cost of energy is the Achilles’ heel of the sustainability movement.

The mistake has always been to try to do too much too soon. Converting Canada’s electricity grid to 100% renewable is a lofty goal that feels like a great idea but we have barely begun applying cost effective clean tech solutions appropriately. By starting the process aiming at 100% renewable electricity we automatically force ourselves into the most expensive solutions.

Instead we need to create a political climate where the financial incentive to pursue clean-tech initiatives exists starting with the most cost effective. Then we need to support development efforts along with demonstrating and quantifying competing technologies. As an example consider that only 2% of all public pools are solar heated yet this is one of the most proven and cost effective solar energy schemes available. In so many ways we have not yet begun. The major reason we have yet to begin is the low cost of fossil fuel and electricity in Canada. When we jump too quickly toward a bold far reaching solution we miss out on the low hanging fruit like solar swimming pool heating.

Ontario’s FIT for PV (photovoltaics) systems is a big success. Ontario Hydro pays $0.80/kwhr for electricity generated with PV. Electricity consumed normally costs $0.08/kwhr. This ten fold cost imbalance on the shoulders of ratepayers and taxpayers indirectly creates an economic climate where the energy from a PV system covers the mortgaged capital cost of the installation. It’s a wonderful program and a big success but compared to the cheap electricity its quite a costly endeavor.

Ontario slipped the program through the same way BC established a small carbon tax but these were challenging political tasks and now that we have an ongoing recession, there is even less appetite for this kind of energy policy elsewhere in the country.

In fact BC’s new energy policy relieves BC Hydro of the requirement to be self sufficient. Through simple regulation premier Christy Clark has assured British Columbians of lower cost electricity and ensured more jobs in the fracking and LNG industries. More natural gas to Asia does mean less coal burned globally but this works against Canada’s own goals toward energy sustainability. The focus politically is on jobs and the economy and a sustainable energy policy is taking its usual seat at the back of the bus.

The obvious first step is to level the playing field somewhat by addressing the fact that fossil fuels have the environment as a free dumping ground for their pollutants. A carbon tax would be very helpful of course and many have tried including Stephan Dion, leader of the federal liberal party, just before his political demise.

A far easier sell to the public would be the removal of subsidies for oil and gas exploration. This would create volatility in the energy marketplace. Energy price volatility is what the sustainability movement needs. Clean tech solutions are not volatile. They are an insurance policy against volatility. When a home is built sustainably it is sustainable for 100 years and conversely if it is built without sustainability in mind, its likely to stay that way for 100 years.

When we include some longer term thinking with some volatility we have a formula for a much quicker uptake of all things clean tech. Energy price volatility creates enormous long term financial incentive for a sustainable building approach. The reason Germany has a stronger clean tech industry is their electricity is ten times more expensive. Financial reality has provided the necessary motivation for energy consciousness and a culture of sustainability. A carbon tax bringing our electricity costs up to theirs would not go over well here. The risk that energy prices could go much higher could serve the same purpose.

We all want to act sustainably but with gasoline less expensive than bottled water, how can we blame anyone for drinking it up. Step one is to recognize the realities of the marketplace and come up with a realistic approach to energy policy that factors in the environment as well as our collective sustainability goals. We could all do our part by trying to get past the notion that the luxury of cheap energy is somehow a birthright of all Canadians. Then it would be OK for politicians to resist the oil and gas company lobbyists who fund politics in Canada in exchange for their subsidies. Without oil and gas exploration subsidies the resultant energy price volatility would do as much for the clean tech industry as energy prices that actually reflected their effects on the planet.

Ken Wright is President of Burnaby, BC-based Hot Sun Industries Ltd, a manufacturer of solar thermal technology

Posted in: Energy, Your Energy Tags: clean energy, Hot Sun Industries, Ken Wright

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