The Globe and Mail
February 2, 2016
What is the future for energy innovation in North America? Representatives from government, industry and the research community gathered this past weekend at the Vail Global Energy Forum (VGEF). The ideas generated here will help prime the North American energy ministers’ meeting later this month in Winnipeg.
There were two main takeaways from this year’s VGEF. First, that carbon pricing, at a suitably high level, stimulates both innovation and efficiency. Second, that energy innovation advances national, economic and personal security.
Stanford University’s Precourt Energy Institute provides the brain trust for VGEF discussions. Stimulation comes from the natural beauty of the Rocky Mountain highs that natives joke now has a new dimension, Colorado being one of 13 states that has decriminalized marijuana.
Now in its fifth year, the conference takes stock of developments in the North American oil and gas sector including water use, future electricity generation and transmission, and next generation transportation, including autonomous cars.
Autonomous cars could go a long way to reducing traffic, fuel consumption and minimizing accidents. The average North American car is currently parked 95 per cent of the time, spends 2.5 per cent of its time sitting in traffic and only 2.5 per cent in actual movement. Vehicles driven by humans are also a leading cause of death with 1.3 million annual deaths globally.
Cars without tailpipes and steering wheels may be as close as five years away, say Tesla and Google. The traditional auto makers are not far behind. The system challenges will result in a whole new urban redesign – parking places rather than parking lots and charging stations rather than gas stations.
The Canadian focus at Vail in previous years was on achieving the Keystone XL pipeline. While all still agreed that the U.S. permitting process needs reform, this year’s discussion on Canadian issues was more constructive. The election of Justin Trudeau’s government has moved Canada from laggard to putative leader in climate change. Alberta’s new royalty regime won general industry approval. There was also recognition of Canadian hydro power’s potential to help the U.S. meet its renewable energy commitments.
The oil and gas industry in all three nations is bootstrapping and focused on cash flows. Nonetheless, there is cautious optimism that a recovery will come and, through applied innovation and efficiencies, so will better margins for successful profit-taking.
Technology and policy innovation are central to achieving our Paris commitments.
There was general acknowledgment that policy ambition needs to be greater and that it will be enabled by breakthrough technology driving down costs and creating new kinds of services. Recent years have seen cost reductions of 40 to 70 per cent for onshore wind, solar energy, storage batteries and LEDs, and created thousands of jobs for their associated deployment. The U.S. solar industry employs 200,000 – more than the coal industry.
Perhaps the biggest U.S. shift is the replacement of coal with natural gas for electricity generation. The Chinese are pointing the way in re-engineering nuclear energy and a nuclear renaissance may yet happen in North America, Within North America, Mexico has been the most consistent in its forward-looking climate policies, dating back to Kyoto. President Enrique Pena Nieto’s energy reforms, opening the previously closed energy industry to competition, are well under way. With its emphasis on harmonizing to North American regulatory practices, Mexico is now seeking the best-in-class practices and it has turned to Alberta’s energy regulator for advice.
The eccentricities of this year’s unconventional American presidential campaign generate a lot of noise, including Donald Trump’s promise to get “a piece of the profits” of Canadian oil exported through the U.S.
A more realistic development is the energy efficiency legislation that Ohio Senator Rob Portman told the VGEF that Congress could pass this year. It would clean up outdated regulations, expedite natural gas export projects, and improve pipelines and the electric grid infrastructure.
In each of these areas, especially given the Canadian government’s infrastructure initiatives, Canada and Mexico should be working to align with the U.S. Energy infrastructure should be on the energy ministers’ agenda in Winnipeg.
Technology innovation and smart regulation are the keys to de-carbonization. Like the agreements on acid rain and the Montreal ozone protocol, the Paris agreement is smart insurance on climate change. In Winnipeg, the energy ministers need to set the policy parameters permitting the private sector to get on with practical innovation, especially in the transportation and electricity sectors.
Attend the Vail Global Energy Forum and you can’t help but feel optimistic about the future of North American sustainable energy progress. Happily, the human propensity to get itself into a terrible fix is only surpassed by our ability to figure a way out.
Colin Robertson is a former Canadian diplomat who participated in the Vail Global Energy Forum as a moderator and panelist.