RNNR Committee Report
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GOVERNMENT RESPONSE TO THE REPORT OF THE STANDING COMMITTEE ON NATURAL RESOURCES TITLED: COMBINING OUR ENERGIES: INTEGRATED ENERGY SYSTEMS FOR CANADIAN COMMUNITIES
Mr. Leon Benoit
Dear Mr. Benoit:
Pursuant to Standing Order 109 of the Standing Orders of the House of Commons and on behalf of the Government of Canada, I am pleased to transmit the Government Response to the Report of the Standing Committee “Combining our Energies: Integrated Energy Systems for Canadian Communities”.
Interest in Integrated Community Energy Solutions (ICES) has been increasing, both across Canada and internationally, as governments consider new measures to meet their climate change objectives. My department’s work in this area, in collaboration with other departments as well as with provinces and territories under the auspices of the Council of Energy Ministers (CEM), points to significant opportunities but also recognizes certain challenges associated with the wide-scale adoption of ICES, which are often complex in nature. The Standing Committee’s Report makes a significant contribution to this body of knowledge and I would like to express my appreciation to the Committee members for their contribution to this important issue.
The Standing Committee Report does an excellent job of framing the issue and rightly points out the importance of cross-jurisdictional collaboration that respects each jurisdiction’s responsibilities. As Minister responsible for federal energy efficiency and renewable energy, I am familiar with the importance of cooperation amongst levels of government to support clean energy use in key sectors of the economy. This can be illustrated in the building and housing sectors where the federal government has been providing expertise, information and tools (including model national standards and codes) that have then been used by provinces and territories as they develop their own programs and regulations. We have also been working to coordinate our respective financial incentives programs when they target the same audiences, leading to more efficient and effective programs. I see the development of interventions on ICES following a similar approach.
The Government agrees with the intent of the nine recommendations included in the Report and acknowledges the importance of providing support for the implementation of ICES. This is why the Government will consider how to best advance ICES as it continues its efforts to encourage energy efficiency and renewable energy in Canada and to build stronger communities.
I am also pleased to note that the Government can already point to a significant number of initiatives and programs that have started to address the Committee’s recommendations. This includes the recently-released CEM report, “Integrated Community Energy Solutions: A Roadmap for Action”, which defines ICES, presents a vision, acknowledges the roles of governments and of other key stakeholders, and identifies strategies and enabling tools for governments to accelerate the uptake of ICES. The Roadmap, which is a good example of cross-jurisdiction cooperation, identifies ICES as an opportunity to contribute significantly to federal, provincial and territorial climate change and energy efficiency objectives. The Government can also point to programs that already support ICES. These include the recently-announced EQuilibriumTM Communities Initiative and Clean Energy Fund, as well as many measures delivered under the suite of ecoENERGY programs and the Building Canada Plan.
The Government also intends to continue its existing work on ICES, working closely with provinces and territories as well as the large number of stakeholders that are already actively involved, many of which have contributed to the Standing Committee’s work. These include representatives from municipalities and the private sector (developers, energy associations and companies, as well as consulting firms) that have essential implementation roles to play.
On behalf of the Government, I would like to again thank members for their effort, and assure them that the issues they have raised and the recommendations they formulated have been carefully considered by the Government.
Proposed Response to the Recommendations made by the Standing Committee on Natural Resources in their Report “Combining Our Energies: Integrated Energy Systems for Canadian Communities”
Opening statement of Chapter 4 – Towards an Integrated Energy Vision for Canadian Communities: Recommendations
The role of the federal government is to solely provide information and resources to enable communities to implement best practices and share expertise on energy planning matters. Given that energy lies mostly within provincial, territorial and municipal jurisdiction, all solutions must be carried out cross-jurisdictionally, in collaboration with the provinces and territories.
The Government agrees with the intent of the opening statement of the Recommendations section in the Report. The role that is identified for the federal government and the cross-jurisdictional cooperation that is called for are in line with how the Government is already approaching its work on energy efficiency and renewable energy. For example, in the housing and building sectors, the Government has been providing expertise, information and tools (including model national standards and codes) that are often used by provinces and territories to develop their own programs and regulations. The Government has also been providing resources through various initiatives and is cooperating with provinces and territories to coordinate the delivery of programs when they target the same audiences, leading to more efficient and effective programs. This view of the Government’s role is also reflected in the report Integrated Community Energy Solutions: A Roadmap for Action (Roadmap), which was developed through cross-jurisdictional cooperation and released by the Council of Energy Ministers (CEM) in September 2009. The Government intends to continue with this collaborative approach as it works to advance Integrated Community Energy Solutions (ICES) in Canada.
The Committee recommends that the federal government, in cooperation with the provinces, territories and municipalities, formulate a definition of integrated energy systems that would establish the necessary vision and leadership for integrated energy systems as a community planning model. The vision would respect the jurisdiction of the provinces and territories and recognize the fundamental role and responsibility of municipalities in designing, implementing, and managing their own community-specific integrated energy plans and projects.
The Government agrees with this recommendation and has started to work with provincial and territorial governments as well as local governments and a variety of other stakeholders, to advance ICES in Canada. The Government recognizes the importance of continued engagement with other levels of government and of providing leadership to support implementation of ICES in Canada.
The federal, provincial and territorial governments have been working for more than a year under the auspices of the CEM to prepare the report Integrated Community Energy Solutions: A Roadmap for Action, which was published by the CEM in September 2009 and addresses key elements of the Standing Committee’s recommendations. It defines ICES and presents a vision of what communities could look like as a result of the wide-scale adoption of ICES. It identifies barriers, acknowledges the roles of governments and of other key stakeholders, and identifies strategies and enabling tools for governments to accelerate the uptake of ICES. The Roadmap identifies ICES as offering opportunities to contribute significantly to federal, provincial and territorial climate change and energy efficiency objectives. This conclusion builds on the Government’s 2008 climate change plan, Turning the Corner, which identifies smart growth, a key element of ICES, as offering opportunities for greenhouse gas emissions reductions.
While it is primarily a tool to guide federal, provincial and territorial governments in their enabling role, the Roadmap recognizes the essential implementation role of local governments and identifies the need to support them. In creating the Roadmap, federal, provincial and territorial governments consulted with a cross-section of stakeholders important to the development of ICES, including local governments. The Roadmap recognizes that local governments (municipalities, regional governments and First Nations), with their zoning, policy and investment decisions, will have significant influence on ICES developments.
In addition to local government, the Roadmap also recognizes other key players that need to be actively involved in advancing ICES in Canada. These include: developers and other private enterprises, energy companies, utilities and regulators, professional and industrial associations, education organizations, non-governmental organizations, and community members.
Building on the work of the Roadmap, the Government intends to develop a federal discussion paper to increase awareness of ICES in Canada. This paper will be developed in consultation with provinces and territories and with stakeholders and will inform future federal government actions to support ICES.
To promote collaboration and information-sharing on integrated energy planning, the federal government must work with provincial and territorial governments, as well as consumers, communities and key stakeholders of energy systems.
The Committee therefore recommends that the federal government establish dialogue between the provinces and territories on potential policy initiatives to advance integrated energy systems across Canada (e.g. feed-in tariffs and guarantees that local energy production is purchased by utility providers).
The Committee also recommends that the government provide information and educational material to consumers, communities, and key stakeholders, including practical and technical energy planning advice for different regions, based on the findings of the “road map” initiated by Natural Resources Canada.
The Government agrees with this recommendation and recognizes the importance of cooperative work with provinces, territories, local governments and other key stakeholders. Successful development of future policies and programs to support ICES implementation will depend on coordinated leadership from all levels of government because ICES initiatives are complex in nature and often involve multiple jurisdictions and sectors. For example, an ICES initiative focusing on higher density development along a public transit corridor will touch on both the building and transportation sectors and often rely on funding from all levels of government. This means that the initiative will need to comply with rules arising from a number of sector-specific programs and regulations from all orders of governments, which are typically not designed to work together nor to reflect the integrated nature of ICES.
The Government has a long-standing working relationship with provincial and territorial governments on energy-related initiatives through the CEM. The Roadmap builds on this relationship and identifies areas for future cooperation between the federal, provincial and territorial governments. The Government of Canada intends to continue this collaborative dialogue.
The Government is also providing financial support to and participating in the QUEST (Quality Urban Energy Systems for Tomorrow) collaborative to promote cooperation and information-sharing amongst a large cross-section of stakeholders with an interest in advancing the introduction of ICES in Canada. These include representatives from industry, the environmental movement, all levels of government, academia and the consulting community. QUEST has proven itself to be very effective in bringing together these stakeholders at the national level; it is now working to establish provincial and territorial chapters. In addition to the information-sharing role, QUEST is involved in addressing knowledge gaps, mitigating barriers and building a stronger community of support to advance work on ICES. We note that the Standing Committee invited representatives from QUEST as witnesses and it quotes some of QUEST’s publications in its report.
The Government, through the Program of Energy Research and Development and the ecoENERGY Technology Initiative, provides a foundation for collaboration amongst key federal departments (Natural Resources Canada, Environment Canada, and the Canada Mortgage and Housing Corporation) and other partners (including industry, academics, local governments, and provincial governments) in areas of research and development related to ICES.
The Government has provided meaningful technical and financial support to a range of innovative ICES projects. These include projects mentioned in the Standing Committee Report such as the Drake Landing Solar Community in Okotoks, Alberta and Dockside Green in Victoria, British Columbia. The engagement of the Government in these projects contributes to the knowledge base available in Canada and helps build capacity within the organizations involved in these projects. Results are then disseminated and serve as resources for other practitioners.
The Government has already initiated a dialogue with provincial and territorial governments on potential policy initiatives. Through the Roadmap, this dialogue has identified strategies and tools to promote the adoption of ICES in Canada that can be used by jurisdictions as they develop their own plans to support the adoption of ICES in Canada. The Roadmap also stresses the importance of cooperation between jurisdictions.
The Government recognizes the need to make available information and educational material on ICES. This is an important area of work identified in the Roadmap, which specifically references information provision and capacity building as essential elements of a market transformation framework.
The Government, through some of the programs mentioned above, is already providing useful material that contributes to the knowledge base and builds capacity. Other important contributions are being made by the Canada Mortgage and Housing Corporation (CMHC) and by arms-length organizations funded by the federal government, such as the Federation of Canadian Municipalities Green Municipal Fund and Sustainable Development Technology Canada.
To improve the effectiveness of existing stimulus packages, the Committee recommends that the Government of Canada consider the introduction of an ecoENERGY Program for integrated energy projects, and review existing ecoENERGY programs as potential sources of funding for the new program.
The Government appreciates the intent of this recommendation and recognizes that new initiatives may be required to support the large-scale implementation of ICES in Canadian communities. To this end, the Government will consider how to best advance ICES as it continues its efforts to provide effective and efficient support to improve and encourage energy efficiency and renewable energy in Canada and to build stronger communities. Consideration will be given to programs that would create an enabling environment for ICES through the provision of expertise, information, training and tools, as well as incentives.
The Government is already providing some funding support for ICES development and ICES-related technologies through existing funding programs. These include two recently announced programs:
Government support for ICES is also provided through:
The Committee acknowledges the concerns of rural and remote communities that rely on diesel for their energy supply and recommends that the Government of Canada review its ecoENERGY program to include integrated hybrid systems for rural and remote communities.
The Government agrees with the intent of this recommendation and recognizes the need to address the specific challenges facing rural and remote communities in moving forward on ICES. In preparing the Roadmap there was consensus on the need to consider the unique circumstances and needs of these communities. As the Government explores opportunities for new ICES programs, the Government will consider the circumstances of rural and remote communities, including the possibility of supporting hybrid systems.
While recognizing that there is more work to be done, the Government is already engaged in advancing ICES projects in rural and remote communities. For example, CanmetENERGY of NRCan is supporting a number of research projects to assist rural and remote communities. In the off-grid community of Ramea Island, Newfoundland, CanmetENERGY is supporting the development and installation of the Wind-Hydrogen-Diesel system, which will allow all diesel generators on the island to be shut down during periods of low-energy demand.
The Government, through NRCan and Indian and Northern AffairsCanada (INAC) is also helping to develop and optimize a smart grid in the remote community of Hartley Bay, British Columbia, home to the Gitga’at First Nation. This community is not connected to BC’s main electricity grid; its electricity needs are currently being supplied by diesel generators. A community energy plan was developed in 2001 that resulted in the community implementing a significant number of energy efficiency and energy saving improvements. This work augments the community’s commitment to integrate a small hydroelectric project into its electricity supply system to offset fossil fuels.
The Clean Energy Fund – Renewable and Clean Energy Demonstration Projects component will also fund energy technology demonstrations that integrate renewable energy, including hybrid systems, to lessen reliance on diesel fuel for heating and power in rural and remote communities.
The Government has also been active in promoting ICES approaches in smaller and more isolated communities in Canada through the ecoENERGY for Aboriginal and Northern Communities program, which is managed by INAC and can provide funding to aboriginal and northern off-grid communities to complete early stage activities related to ICES. For example, Qulliq Energy Corporation in Nunavut received funding from ecoENERGY to complete engineering work that has allowed five communities (Iqaluit, Rankin Inlet, Arviat, Cape Dorset and Baker Lake) to expand their district heating systems. These systems capture the residual heat from diesel generators that are used to power the communities. This heat is then distributed to local buildings using pipes, thereby reducing the amount of diesel fuel used by the communities.
The Committee recommends that the Government of Canada consider the introduction of direct rebates and tax incentives to integrated energy technologies with the goal of introducing and fostering low-emission technologies and reducing energy demand.
ICES are cross-cutting and rely on integrating a large number of energy technologies –many of which were identified by the Standing Committee. The Government recognizes that a large number of technologies that are employed in ICES may benefit from incentives to support their adoption in the market. Many of the programs mentioned in response to Recommendation 3 and 4 are providing various incentives that promote the uptake of technologies used in ICES systems.
The Government provides a tax incentive in the form of accelerated capital cost allowance (CCA) to encourage the use of clean energy generation equipment, including types often used in ICES. CCA Class 43.2 provides a 50 percent (declining balance) CCA rate for a range of equipment that generates electricity or heat by using renewable or waste sources, or by using fossil fuel efficiently. By allowing the cost of assets to be deducted more quickly for tax purposes, accelerated CCA improves the after-tax rate of return on investments in these assets, making them more attractive. Class 43.2 encompasses various technologies used in integrated energy systems, such as solar energy, wind energy, biomass and district energy distribution. Certain start-up expenses for projects using specified equipment are eligible to be financed using flow-through shares, which facilitate equity financing by allowing companies to transfer unused tax deductions to investors.
Budget 2007 extended Class 43.2 to a broader range of applications involving active solar heating, photovoltaics, stationary fuel cells and fuels from waste. It also extended general eligibility for the Class to assets acquired before 2020. Budget 2008 further extended eligibility to additional ground-source heat pump and waste-to-energy applications.
The Government will continue to examine options to assist in meeting its environmental objectives, including the treatment of energy generation technologies that have the potential to contribute to energy efficiency and the use of alternative energy sources.
The Committee recommends that the Government of Canada review and update existing federal standards and practices related to renewable energies in consideration of current market realities and ground-level challenges facing integrated energy planning, keeping in mind provincial and municipal jurisdictions.
The Government agrees with the intent of this recommendation and recognizes the need for standards and practices to support implementation of ICES. The Government is already making some contributions to advance the development of ICES related standards.
In collaboration with other industry stakeholders, NRCan currently supports a number of national and international standards related to renewable energy technologies and practices that are relevant to ICES. These include the Canadian Standards Association standards on solar domestic hot water systems, solar photovoltaic systems, wind standards (small and large wind turbines, and noise standards), grid connection, and emergency power systems. NRCan is also supporting amendments to the Canadian Electrical Code for installation of renewables.
NRCan is also conducting research on the Smart Grid of the future, and is working to develop codes and standards that will facilitate its adoption. This work, done in collaboration with utilities, universities, and the private sector, will help to increase the uptake of new renewable technologies by electric utilities.
NRCan's work supports provincial and territorial governments in their efforts to develop and implement policies and regulations that will encourage the uptake of renewable technologies in their respective jurisdictions.
The Committee recommends that the Government of Canada work with the Provinces, the Territories and stakeholders to address the issue of labour shortages with regards to integrated energy technologies.
The Government agrees with the intent of this recommendation and acknowledges the need to ensure the development and training of a skilled labour force to support the introduction of ICES in Canada while recognizing the jurisdiction of the provinces and territories in advancing work in this area. The Government recognizes the opportunity that ICES adoption offers in creating new highly-skilled jobs. Developing the human capacity to design and implement ICES in Canada works toward the Government’s objective to develop a highly skilled labour force in a changing global market.
Fostering a skilled and creative domestic workforce that is able to design and implement ICES is central to advancing its uptake in Canadian communities. The Government’s Science and Technology Strategy outlines the need to cultivate knowledge advantages in the natural resources and energy and the environmental science and technologies sectors, as well as developing opportunities in science and technology research and employment through investment in education and training. The Roadmap recognizes the need for training and the potential limiting factor of labour shortages. To address this issue, the Roadmap describes a number of possible measures including information provision and capacity building tools.
The Government supports the need to work with the provinces, territories, and stakeholders to address the issue of labour shortages with respect to integrated energy technologies. One key way in which the Government works with provinces and territories is through the Sector Council Program (SCP), the Government’s principal demand-side, industry-focused labour market policy instrument. The SCP supports a network of 34 national sector councils. Sector councils are partnerships between employers, employees, governments and learning organizations, and they operate in specific sectors to share ideas, concerns and solutions to human resources and skills issues. The SCP’s federal, provincial, and territorial Sectoral Network gathers and exchanges information on the national, regional and local labour markets, and on provincial and territorial responses to mitigate these impacts. The development of Labour Market Development Agreements (LMDAs) and Labour Market Agreements (LMAs) is another way in which the Government works with the provinces and territories to ensure the delivery of key labour market programs or services designed to address current and emerging labour market priorities, including skills development. The SCP, LMDAs and LMAs can all be valuable tools to coordinate and consult with other levels of Canadian governments, along with industry and other key labour market stakeholders, as the Government evaluates possible measures to support ICES.
Some measures to expand human capacity in ICES development are already underway, through NRCan’s research, development and demonstration activities. The recent launch of the EQuilibriumTM Communities Initiative supports skills development for practitioners through the improvement and monitoring of community projects. The ecoENERGY for Renewable Heat program addresses skills development by supporting the Association of Canadian Community Colleges as they develop a national curriculum for installers and designers of renewable energy technologies.
In order to facilitate the implementation of integrated energy systems, the Committee recommends that the Government of Canada consider carbon pricing as an important mechanism to create and foster low emission technologies.
The Government of Canada agrees that the establishment of a market for carbon – in particular through inter-firm trading and the purchase of offsets – could provide an incentive to firms to efficiently develop and deploy clean energy and low-emission technologies. Work is underway to develop a regulatory approach to reduce greenhouse gas emissions that would include emissions trading and best fit Canadian circumstances. As the United States considers its own emissions trading legislation, the Government of Canada remains committed to exploring opportunities to align our approach with that of our largest trading partner.
The Committee recommends that Natural Resources Canada continue working on enabling reliable measurement of energy use within communities.
The Government agrees with this recommendation and has been active on a number of fronts to advance work on reliable measurement of energy use within communities. The Government intends to continue this work.
The Roadmap identifies the need to develop standardized measurement methodologies for ICES initiatives.
Over the years, the Government has worked with a number of stakeholders and provided financial assistance to advance the ability of municipalities to measure energy use and greenhouse gas production at the community level. This includes funding to the Federation of Canadian Communities to establish the Green Municipal Fund, which has provided some support to develop methodologies that communities can use when developing Community Energy Plans or Local Action Plans.
At the federal level, several departments, led by NRCan, are working together as part of an initiative to advance energy measurement at the community level. This work will inform future efforts with provincial and territorial governments and with key stakeholders to develop improved methodologies for measuring energy use and production at the community level.
·  The term Integrated Community Energy Solutions, as defined in the Council of Energy Ministers’ recently released report Integrated Community Energy Solutions (ICES) A Roadmap for Action, is considered equivalent to the term “Integrated Energy Systems for Communities” used by the Standing Committee on Natural Resources in its Report Combining Our Energies: Integrated Energy Systems for Canadian Communities. The acronym ICES is used for both terms.