Energy Policy Deep Dive with Nicholas Rivers (Part 2)
Jun 10, 2024
Get to the bottom of how policy is ushering along the energy transition. In part two of the series, Associate Professor Nicholas Rivers shares how energy policies are helping shape the actions taken to address climate change. From decarbonizing buildings and transportation to the hard-to-tackle parts of Canada’s economy and its major industries. Plus policy’s role in supporting distributed energy and resources. Dive back into the conversation in episode 139 of thinkenergy.
Related links Listen to part one: https://thinkenergypodcast.com/episodes/energy-policy-deep-dive-with-nicholas-rivers-part-1/
More about Nicholas Rivers: https://uniweb.uottawa.ca/members/969
uOttawa Institute of the Environment: https://www.uottawa.ca/research-innovation/environment
The Canadian Climate Institute: https://climateinstitute.ca/
Trevor Freeman on LinkedIn: https://www.linkedin.com/in/trevor-freeman-p-eng-cem-leed-ap-8b612114/
Hydro Ottawa: https://hydroottawa.com/en
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Transcript:
Trevor Freeman 00:07
Welcome to think energy, a podcast that dives into the fast-changing world of energy through conversations with industry leaders, innovators and people on the frontlines of the energy transition. Join me Trevor Freeman, as I explore the traditional, unconventional and up and coming facets of the energy industry. If you have any thoughts, feedback or ideas for topics we should cover, please reach out to us at think energy at hydro ottawa.com. Hi, everyone, welcome back. Okay, so this is part two of my conversation with Nicholas rivers about policy, and specifically how policy is and will in the future, shaping the different solutions and different actions that we can take to address climate change and to usher along the energy transition that has already started. As a refresher, Nicholas rivers is a Professor of Public Policy and International Affairs from the University of Ottawa. And his area of focus is really the sort of research into an evaluation of environmental policies. So, this is a great conversation. And if you haven't listened to the previous episode with Nicolas, I really encourage you to do that it kind of lays the groundwork and really helps feed into this part of the conversation. On today's episode, we're going to talk about decarbonizing buildings, decarbonizing transportation, about some of those hard to tackle parts of our economy, kind of those major industries, as well as the role of policy and supporting distributed energy resources. So solar panels and batteries and things like that. So, it's really a great conversation, start with the previous episode, if you haven't already. And then thanks for joining us here for this one. And happy listening. Okay, so we've talked about generation at the grid level, but let's talk about what we call distributed energy resources. And for our listeners, just a reminder, this is things like rooftop solar behind the meter storage, so having batteries at homes or businesses, which we are going to need a lot more of in the future. And we're going to see a lot more of on our grid in the future. What policy tools are out there that could help ramp up the implementation of these resources? Is it as simple as you know, incentives to lower the upfront cost?
Nicholas Rivers 02:21
Okay, good question. Maybe I'll just start out by giving some broader perspective about why we why we might want to go down the distributed energy route. So, as you mentioned, a distributed energy resources are things like rooftop solar, right on the kind of residential building or a battery pack in the garage of your residential building. And this is a different approach than the way we normally approach the electricity sector, where our generation and storage infrastructure to the extent we have any is centralized, right. So, in a centralized system, if it's solar, it would be a big utility scale solar project in a field somewhere, or now we're starting to see the ISO just approved a bunch of battery storage projects that are going to be you know, big centralized resources, really big batteries, or it could be pumped hydro, or you know, compressed air storage that that are not in someone's garage, they're, you know, these big sites that are that are well away from people's homes typically. So why would we want to change the paradigm and, and go towards this kind of decentralized type of approach where the where the resources are in people's homes or on people's homes? I'd say there was a couple of reasons we might want to go that route. One is that the distributed resources if they're in people's homes, well, they're close to the demand. Right? So, if people you know, ultimately, the reason we have electricity generation is to meet people's and industries demands for electricity. And putting those resources right at the source of demand means that we don't need so many wires to connect the resources to the to the demand centers, and potentially that there's less congestion on the wires and, and less losses getting from the source of supply to the source of demand. So that's one reason. Another big reason I think, that will become more important in some areas of the world and more important as we scale up decarbonization is land use, and then, you know, we got all these rooftops that are just sitting there. And putting solar panels on those, basically wasted surfaces is a way of conserving land as opposed to to putting new solar panels in a field that has other uses. So, I see that as being a potentially really important reason why we might go down that decentralized route. It's important to say that land use constraints are not binding in Ontario today for, especially for zero carbon resources, right? There's we're lucky in Ontario that we've got a fair amount of land per person. And we've also not got that many solar or wind or battery resources currently. And so, the pressure that we're putting on our land from those types of centralized resources are pretty small. But certainly, as we try to go further on that decarbonization route, thinking about land constraints is going to be important. I would say that there is a downside to going the decentralized route. And that's that it's more costly. So, generating electricity at a home, is storage of storing electricity at home is typically quite a bit more expensive than doing it at a utility scale, in a in a kind of centralized manner. And that's just because, you know, a solar panel cost what a solar panel cost. So, you're getting, I think, the same basic solar panel, solar module, and a centralized system, compared to a decentralized system. But all the side costs, the cost of planning and installing, and all the racking that has to go for solar panels, same with batteries, is a lot more expensive, when it's done kind of on these boutique, individual roof projects, compared to what it's done in a centralized approach. And so, what we're going to do as we think about, you know, do we go down this more decentralized route or more centralized route? So, we've got to think, are these land benefits and the benefits we get from having the resources close to the demand? Are they outweighing the extra cost that we're paying from, from going this more decentralized route?
Trevor Freeman 02:25
Yeah, so it's kind of an economies of scale question of obviously, investing in the infrastructure for a large-scale solar installation gives you that, you know, more bang for your buck on a kilowatt hour basis, then each individual rooftop project, but I guess there's that aspect of, you know, customer control and customer preference of, you know, I like the idea of having my own power generated on my roof, it gives me some control, it gives me some redundancy. It also kind of protects and let me know what your thoughts on this it. It locks me into cost for energy, at least for a portion of my energy for the life of that equipment, rather than sort of being at the whim of rising utility costs over time. Is that a fair assessment?
Nicholas Rivers 07:15
Yeah, I think that's right. Solar panels and batteries, both have a free long lifetime. So, once you've paid for them, you know, what you paid, and you're going to be able to amortize them over the length of the investment. Of course, that assumes that you're going to be living in the same house for the 20 or 30 years of the investment.
Trevor Freeman 07:31
Exactly. Yeah.
Nicholas Rivers 07:32
So, I think there is still a risk there. But I do agree with you that it does put more control in individuals’ hands more, it gives people an ability to kind of choose their own destiny with respect to energy, it allows them to make a zero-carbon investment that, you know, they maybe feel really strongly about, and that isn't being made on their behalf at the central level. So, I think you're right that it does give more autonomy to households.
Trevor Freeman 07:58
Yeah. And the current way that we I guess, sort of funder incentivizes, if you will, on rooftop solar, for example, is just through the rates, so you're offsetting your rates. And that is how you get your payback on your panels. I know you and I have chatted previously about the model in Australia. Can you tell us a little bit about how they've approached this?
Nicholas Rivers 08:20
Yeah. So, South Australia also uses this net metering approach. So basically, net metering means when you're consuming electricity, you can think of like an old analog meter, the meters running one direction. And then when you generate electricity, and return it to the grid, when you're not using as much as you're generating, the analog meter runs the opposite direction. Of course, these meters aren't analog anymore. They're digital, but they're allowing you to kind of reverse the meter at times when you're generating.
Trevor Freeman 08:50
Yep.
Nicholas Rivers 08:51
South Australia has been a real leader in getting solar on people's rooftops. Now, you might think, oh, it's super sunny in South Australia, and it is super sunny in South Australia. So, it makes sense to have solar in people's rooftops. But there are lots of areas in the world that are super sunny, that have had not nearly the success that South Australia has had in putting solar on rooftops. And I would think one of the big reasons is, is program design. So, they have designed a program that makes it really easy to access the program and access the incentives that are part of the program, and that lets household navigate it pretty seamlessly. So, my understanding of the program is it's an incentive, which is the typical way we kind of provide incentives for people to undertake these novel technologies. It provides households with a you know, an upfront payment for putting solar on the roofs. But I think that the real trick is that it's not provided to the household. And there's not an onerous application process that happens. It's provided to the to the companies that install solar panels on people's roofs and they pass through the incentive. Have to the household. So, all of the paperwork and the planning is undertaken by the company. And the household, basically, just, as my understanding just says, Yeah, I want some solar panels on my roof. And, you know, tomorrow the solar panels are on the roof. And they don't have to go through the kind of extensive paperwork and the qualifying and the waiting for the, the incentive to be paid. It's all done upfront. And it's all done with a minimum of paperwork.
Trevor Freeman 10:23
Yeah, so from a homeowner perspective, in Canada versus in South Australia, South Australia is just seeking a much cheaper cost for solar, they don't have to jump through the hoops. That's all kind of done taken on by the government and by the industry.
Nicholas Rivers 10:39
Yeah, and we do have incentives for solar here. In some provinces anyway, and there have been incentives federally, but they're there, they're more onerous to apply for. And they put the homeowner in the position of having to pay for the system upfront, and then waiting for the rebate. And it's a big outlay for homeowners and the rebate is uncertain, right? You can put the paperwork in. And of course, you think you're going to get it back. But there's always that chance that something went wrong, and you didn't do it quite right. You don't get the rebate. Yeah, there's a risk there. So, I think this this kind of upfront payments program that's processed by the company is as a real, you know, something we could learn from in Canada.
Trevor Freeman 11:16
Right. So that's potentially a key role. And this may be applying to other programs, as well of, of government have policies to take on that administrative burden take on that risk, if you will, away from the end user to make it seamless and streamlined for the end user and easier to do
Nicholas Rivers 11:33
People have better things to do than think about energy. And so, I think that
Trevor Freeman 11:38
Or fill out paperwork,
Nicholas Rivers 11:39
yeah, fill out paperwork, and just, you know, they don't want to spend their time, you know, trying to figure out if the incentive is going to cover their net metering benefits, they want to be they want to be added be as easy as possible.
Trevor Freeman 11:52
Okay. Yeah, that makes a lot of sense. Okay, moving along, then to transportation. This is something of course, that Canadians will be pretty familiar with. We've seen a big move toward electrifying personal vehicles, there are more EVs out there today than ever before, you know, going back into even recent memory, it seemed like a rare thing to see an EV on the road. And now it's not at all, but there's still a long way to go. As much as we've got a lot more, we still are overwhelmingly using fossil fuels for our personal transportation. What kinds of approaches will help speed that transition up? We have a federal rebate when it comes to buying electric vehicle. Is that enough? Or are there other tools that we can use to speed up that transition?
Nicholas Rivers 12:36
Yeah, we're at about 11% of new cars that are sold are electric these days, and about one and a half percent of our fleet, because it takes our fleet a long time to turnover, right. So even if we get to 100% sales, we could still be waiting another 20 years before we get to 100% of our fleet be electric. So, this is not going to be something that resolves itself really quickly. Because it does take a long time to turnover and longtime for car manufacturers to change the kind of vehicles they're making. I'm convinced we're on the transition, and that it is underway no matter what we do in this sector, that that these cars will be eventually be as cheap or cheaper than internal combustion engine cars, and will deliver the range that we want and the performance that we want. We're not there yet. So, what do we do in the meantime, I would say one of the things we should be doing as governments is fixing kind of the chicken and the egg problem of electric vehicles and governments are very active in this area. But the chicken and egg problem is who wants to build a charging station if there's no electric vehicles, and who wants to buy an electric vehicle if there's no charging stations. And so, I think government has been playing an active role there, although arguably, it's still behind where we want it to be. People still experienced troubles with charging electric vehicles. And reliability of chargers is an issue. It turns out that the economics of operating a charging station don't look very good. And so perhaps there needs to be more of a public role in figuring out how to get these systems up and running more of the time. I'm not exactly sure what that would look like. But I do think the problem isn't going to solve itself entirely on its own, especially in more remote or Northern or rural areas. This probably along a lot of roles for government support for charging. In terms of a policy approach. I really like the zero-emission vehicle standard. This is just a standard that says okay, manufacturers, it's targeted. The manufacturer is not a retailer or not customers. And it says manufacturers you have to sell a certain proportion of the fleet you sell is zero by zero emission by this year and a bigger percentage by this year. And that's something that Quebec and BC and California and a number of other places have implemented zero emission vehicle standard, and the Canadian federal government has announced that it's going to go the same route.
Trevor Freeman 15:05
Gotcha.
Nicholas Rivers 15:06
And so, what that says is, in 2026, in Canada, major vehicle manufacturers will have to sell 20% of their fleets as electric vehicles. Were at about 11% today. And that number will ramp up every year until it hits 100% by 2035. Now, again, I think this transition is happening anyway. So, I think that that will help speed up the transition. But at it, it's not dramatically different from kind of what we expect, even without that kind of policy. And so, I do think that's a that's a really nice policy, because it gives automakers a target, it gives them some certainty. And it helps to ensure that they make vehicles available to Canadians where they want them.
Trevor Freeman 15:48
Yeah, I think, I mean, we've all heard those stories of people that wanted to buy an electric vehicle on it wasn't ready, or the price point wasn't there. And I think by requiring more stock, requiring those targets to be hit, it's going to help move people along in the direction that a lot of people already want to go. And we're seeing that as those numbers tick up.
Nicholas Rivers 16:08
Yeah. Let me say a little bit more about this policy, because I think it's cool. It's one of those examples, which is a regulatory policy, which has a market based or carbon pricing kind of component to it. So, it's regulatory, right? I just described that manufacturers have to hit, let's say, a 20% target in the year 2026. So, the rule is, if you sell a lot of vehicles in Canada, 20% of them have to be electric by 2026. But then it's got this kind of hybrid component, not a hybrid car hybrid policy. So, the it's kind of, it's got a carbon price kind of built in, which says, Hey, if you can't do it, well, you can trade with some other company that can. So maybe it's going to be going to make up some names here, maybe it's going to be that company X says, oh, you know, we're really, you know, we really don't want to make the transition quite so quickly, we're going to sell internal combustion engine cars for a few more years. And Company Y says, well, we're actually way ahead of that curve, it's going to be able to sell some of its credits, Company Y is going to sell some credits to Company X. And so, Company X could keep doing what it's doing. But pay a penalty, that company y can get a benefit from being ahead of the curve.
Trevor Freeman 17:17
Gotcha. And to the consumer, the overall stock of options is still where the government wants it to be. There's still enough electric vehicles out there that we can purchase.
Nicholas Rivers 17:27
That's right. I think I mean, the availability is less of a concern now than it was when supply chains were all snared up during the pandemic. I think if you went out and you had the money, and you were willing to, you wanted to go buy an electric car, you would get one relatively quickly today.
Trevor Freeman 17:42
Yeah
Nicholas Rivers 17:43
That's, that's I think that was that's a legacy problem that fortunately, we don't have so much anymore.
Trevor Freeman 17:47
So, I mean, that's personal transportation, we're also seeing a move to make public transportation more carbon free and more electric here in Ottawa, where I'm based where we're both based. We've seen our city make that transition to electric buses, we're bringing on you know, a portion of the fleet in the next couple of years is going to be electric buses, we've seen our new LRT system is at least partially electrified, what are some of the policies out there that are helping municipalities or operators and public transit systems make this shift from traditional fossil fuel systems?
Nicholas Rivers 18:27
Yeah, so this is a procurement policy. So, it's government saying, we're going to create a new market for this technology that doesn't really exist yet. And help to drive technology along right. So, this is something we talked about a little while ago. And I think that this will help, you know, these vehicles, big vehicles with heavy duty cycles. There's certainly parallels in kind of goods transport. So having some of that kind of exposure to new deployment in the public sector, I think will help with decarbonizing goods transport later on. So, this is one of the cases where governments kind of creating this niche role for each policy or niche, I guess, nice role for this technology to be deployed first. And it's accepting the higher cost of these policies of these technologies initially, and will help drive down the costs as they get some experience with these technologies. Okay, so what's it what's it doing in Ottawa? Ottawa has promised to not buy any more fossil fuel buses, it's going to slowly transition its bus fleet to electric. And I guess that's a procurement policy. It's supported by funds from the federal government. So, the Canadian infrastructure bank supports this policy. And so, the way that it works is the federal government's pay the additional cost that the electric bus costs relative to a normal diesel bus, and the city just pays the same as it would for the normal diesel boss with the feds picking up the rest of the tab.
Trevor Freeman 19:58
Right
Nicholas Rivers 19:58
The city's original expense. response has been really positive, it's found that maintenance costs are lower that fuel costs are lower, and the performance is at least as good in the electric buses compared to the, to the diesel buses. So, it's experiencing a cost savings. And at least in the initial reporting, this seems like a really positive experience.
Trevor Freeman 20:17
So, it's essentially the policy there is helping buy down that initial upfront jumping costs. So that, you know, yeah, municipal budgets can remain the same.
Nicholas Rivers 20:26
Exactly.
Trevor Freeman 20:26
But we get that better technology, and we're moving forward on our emissions reduction.
Nicholas Rivers 20:30
Yeah. So this is really a federal and city policy.
Trevor Freeman 20:33
Gotcha. Okay, so let's talk about buildings, which are a major source of emissions, especially here in Canada, primarily because we are a cold climate, and we have to heat those buildings, or else they wouldn't be comfortable. And traditionally, this has been done with fossil fuels, you know, we burn natural gas, to heat our buildings is a large majority of Canadians. That's how they heat their space. In Canada buildings account for over 100 million tons of GHG emissions a year. So, this is definitely a sector that we need to see some transition in how we approach them. What is the role of policymakers to help us decarbonize our buildings? And I want to split this question into two pieces, the first being residential buildings. And then we'll talk about commercial and institutional after because I think they're kind of different cases here. So, let's talk about residential first.
Nicholas Rivers 21:25
Okay, residential buildings, I think heard at some of this is going to apply to both residential and commercial but of residential buildings, you're totally right to say that the big source of emissions is natural gas. And we do have other fuel uses as well like oil and propane, but the big one is gas. And I think a special challenge for residential buildings. And it applies to commercial buildings as well, but especially residential is that they last a really long time. And then, so it's not like cars where you know, after we have got all the new cars to be zero emission, you got to wait maybe 10 or 15, or maximum 20 years, and the entire fleet is zero emission. Because cars only last 15- or 20-years buildings last, we don't even know how long they last hundreds of years. 100 years.
Trevor Freeman 22:14
Yeah, exactly.
Nicholas Rivers 22:15
And so, we don't just have to tackle new buildings and then wait for them to kind of percolate through in the same way as we do for light bulbs or cars or something, we have to figure out a way to decarbonize existing buildings. And this turns out to be difficult. But let me start by saying the first thing we should do is make sure that the new buildings that we're building are not producing carbon emissions, that's the easiest thing to do. Getting a tackling a building or decarbonizing building, once it's already built, and part of the building stock is relatively difficult compared to taking a new building and designing to be zero carbon from the outset. And my view is that the best thing we can do there is to not connect new homes to the natural gas network, or at least pass the full costs of the natural gas network onto these new homes as they're built so that homeowners can make and developers can make an informed decision about the most effective way to produce those new homes.
Trevor Freeman 23:13
Yeah, I think like even that concept is something we talk about, you know, when we're working with our customers on equipment choices, as well, as you know, the decision you're making today on, you know, let's say your boiler will last with you for the life and that equipment. And in the case of a boiler, let's say that's 25 years, but to your point, in the case of a home, deciding to start down that path of fossil fuels, that building is going to live with us for you know, who knows how long and we will then have to get off those fossil fuels later. So, I think for that new construction piece, yeah, that makes a lot of sense of making sure we're making the right decisions today, because we know we have to electrify
Nicholas Rivers 23:50
Right. Yeah, we do not what we don't want to do is build a gas home. And then 10 years later say, oh, let's actually make this home an electric home.
Trevor Freeman 23:58
Yeah, totally.
Nicholas Rivers 23:59
Because now we've spent twice on one thing. So if we know we're going to go zero emission, then we should be building new homes as zero emission homes. And we'll save money doing it.
Trevor Freeman 24:08
Yeah, and we know how to do that today.
Nicholas Rivers 24:10
We know how to do it. The harder problem is existing homes. And that's, you know, most of the homes that are around today that are part of our housing stock today will still be part of our housing stock in 2050. So we don't get to do over. We've got to tackle these existing homes. And it's relatively difficult compared to other sectors. Because if you want to take an existing home and decarbonize it, you really have to do it on a home-by-home basis. You have to invite you know, an auditor in and figure out what's wrong with it, or the cheapest way to decarbonize that home is most effective way to decarbonize at home, maybe get some engineers to help figure out what the interventions look like maybe get a consultant in to put some new windows or doors or insulation or air sealing into the home and so but I adds up to a lot, a lot of people being touching the home, it's not something where we can go to a factory typically and pull out an identical component that, you know, might get cheaper over time, and strap it to the home. So, I think that's part of what makes this challenge difficult. Luckily, we do have some kind of economies of scale in homes when it comes to heating systems. And this is heat pumps that can be adapted to most homes as a replacement for a furnace, or even a boiler. And Heat pumps are a technology that I think people have heard a lot more about over the last couple of years, they're basically an air conditioner that can run in reverse. So, we can move heat out of a house and also move heat into a house. And these are getting more common for a cold climate, like we're in. And getting cheaper and contractors are getting more experienced with them. And so, I think that we will start seeing more penetration of heat pumps in residential sector. Having said that, it's not a it's not a slam dunk. Right now, heat pumps, in some cases are cost effective compared to gas. But they're right at the margin, right? So, you don't save a whole bunch of money by switching a gas furnace to heat pump. In, for example, in Ontario. Now that'll change. If our carbon price keeps going up every year, eventually, it'll become something where the carbon price makes heat pumps make easy financial sense that it becomes a more straightforward decision. But right now, they're kind of similar cost to operate compared to a natural gas furnace. And so, we're not seeing a whole bunch of penetration of them in Ontario.
Trevor Freeman 26:50
Yeah, I mean, I think that even just that fact that actually, coincidentally, the previous episode on this, we actually talked about heat pumps and went through a bit of a case study with someone that installed one, but you're right, like right now, you're kind of comparable, and your energy costs, maybe you save a little bit of kind of depends on the rest of your context as well. But that highlights the value of the role in policy of helping to drive down that upfront cost. And by helping get more of them out there. And letting as we've talked about already, in this conversation, letting the market forces drive down the cost of heat pumps, because we're going to be putting more of them out there in the manual manufacturing process, the supply chain process, that's all going to find those efficiencies so that putting that heat pump in becomes comparable on an upfront cost basis to a furnace, for example, which today it's not.
Nicholas Rivers 27:44
Yeah, I would say the other challenge is that the whole HVAC or heating ventilation air conditioning ecosystem is set up around natural gas furnaces and natural gas water heaters in Ontario. And so, the contractors are used to it, people are used to it. And it's it makes it kind of when your furnace or your hot water heater fails, and you panic a little bit because it's the winter and you don't want to get cold the next day, the easiest thing to do is to call your company and get them to put in the same thing as you've already had it's safe, you know it works. And by doing that, you've locked yourself into another 20 or 25 years of heating with natural gas. And so, I think one of the things is just kind of the human dimension of this problem that heat pumps remain kind of is unconventional technology. They work really well they've been demonstrated to work really well in Ontario, but it's not widely known. And certainly, the supply chain isn't there in the same way as it is for furnaces, and the contractors are, I think less comfortable with installing them as they are for furnaces. And so, people get guided towards furnaces at the time of furnace failure or water heater failure. And it's only like this kind of, I think if the people that really want heat pumps that end up going towards that route right now. Because you really have to you have to want them for that to be the outcome. It's not something that's going to happen on its own. And unfortunately, in this moment of panic, you don't get the time to kind of reflect on on what you might want over the next couple of decades.
Trevor Freeman 29:25
Yeah, totally. And I've thought about this a little anecdote on this show before my own experience with having a furnace die in January as I was starting my research into heat pumps and ended up being able to get a heat pump but not in the manner that I wanted, not the system that I really wanted. And, and yeah, I ended up because of that, having to do all the research myself and being someone that works in the energy space. That's, you know, that's what the reality was.
Nicholas Rivers 29:50
I would say the other thing is I heat pump provides both air conditioning and heating. And it turns out that heat pump is basically cost competitive with a new furnace, and a new air conditioner. So, if you if you, if you take a new house, and you either decide to put in a furnace and an air conditioner or heat pump, it's a wash, you'll pay the same for both. But very rarely does a house have a furnace and an air conditioner fail at exactly the same moment. So that they're making this kind of apples-to-apples comparison of a system that can provide both heating and cooling with another system that could provide both heating and cooling. And so, this is like this coordination problem that heat pumps provide. And so, I think when we're thinking about public policy, we should be thinking about not this kind of rational decision maker that's weighing the pros and cons of these two systems. But really, the person who's in a panic because their furnace failed in the middle of the night. And we got to think about how to make the Low Carbon solution, the easy solution for that person.
Trevor Freeman 30:50
Yeah, 100%. I mean, this goes back to the, I guess, the intro of what will be part one of this conversation that I gave and talking about, you know, the policy piece is kind of that foundation, that bedrock upon which the technological solutions the societal solutions are built, and exactly what we talked about with solar. How can we use policy to make this an easy path, make it the easiest path so that when someone doesn't want to think about it, when their furnace dies in the middle of the winter? This is the logical and easy and the path that they're going to choose.
Nicholas Rivers 31:23
Yeah, I think in many cases, choices are problematic, right? I'm a believer that that's not that's not universally true that more choices are often better. But also, that we can get paralyzed by choices. So having to choose between a heat pump and a furnace is difficult for most people. Most people don't want to spend your time thinking about that. And I think, eventually, I'm of the view that we want to take a regulatory approach that we don't want to just allow everyone to be kind of deliberating especially at a panic about this choice themselves. Probably eventually, when heat pumps become good enough universally, that we want to have that be the regulated solution.
Trevor Freeman 32:02
Yeah, gotcha. Especially when to your point. It is the it becomes that clear, best choice. It's the most efficient.
Nicholas Rivers 32:09
Exactly, yeah.
Trevor Freeman 32:10
And we're working towards that we're getting
Nicholas Rivers 32:12
we're not quite there yet. There are places where heat pumps are not as effective as furnaces. And so I think that's why we haven't seen regulation in this space yet. But I think that should be an end goal.
Trevor Freeman 32:23
Gotcha. Okay, so that was residential buildings. As I said, commercial and institutional are kind of a different beast altogether. These are bigger buildings systems are bigger and obviously, more expensive ownership structure can be complicated. You have owners of buildings and tenants; you have investment companies that are sort of investing in the building as an asset as a way to make money. Help us tackle this beast, what is the role of policy and helping commercial buildings decarbonize here in Canada?
Nicholas Rivers 32:56
Yeah, good question. Again, I wouldn't say this kind of tenant and owner issue also applies if the residential sector, right, so there are renters that want to have a more efficient building, and that don't have any power to make investments in their building. So similar dynamic there, I think. I won't talk about specific technologies in the commercial sector, although there are lots of places that are experimenting with innovative new heating and cooling technologies, again, heating and cooling as the big greenhouse gas source in the commercial building sector, like it isn't residential. But I will just say that, I think the types of decisions that are made and the way that they're made, it is quite different in the commercial sector to the residential sector. In a bigger commercial building, there'll be a building manager that's responsible for making decisions about, about heating and cooling investments in that. In that building, there'll be lots of tools that they have access to building management software, that that kind of optimizes building energy use, and costs, and helps them to make these kinds of decisions. So, whereas the residential consumer doesn't necessarily want to think about what their what types of investments they should make to maximize their comfort and minimize their energy costs. That's what this building manager in a building is paid to do. And so, they are going to be really thinking about this, these decisions carefully, and they're not going to be you know, they are going to be highly engaged in these decisions about what types of energy to be using in the building. And as a result, I would say that carbon pricing can be quite effective in this sector, that policies that shift the relative costs of heating with gas compared to heating with electricity. They're going to hit the bottom line in that building manager for that building manager really quickly and allow them to kind of pivot if there are technologies available that can help them reoptimize in response to these changing prices, I will say that it's important to think about designing rebates for that carbon price. So, we don't end up digging, our commercial buildings say we've designed rebates for, for residential households and for big industry. But I do think that this kind of pricing tool can be effective, probably more effective in the commercial sector than it can be in the residential sector. Because there are people whose job it is to pay attention to building energy costs.
Trevor Freeman 35:31
Yeah, and I mean, you talk about rebates, I think, if there's a way to direct those rebates or direct that reinvestment into the types of solutions that are going to help people double down on the savings, and reduce their carbon consumption, and you know, then the next time around, it's even better and even better, I think that's definitely impactful.
Nicholas Rivers 35:51
Right? Yeah. So combinations of incentives and a kind of carrots and sticks approach. I agree.
Trevor Freeman 35:57
I do want to mention, and partly this is a bit of a plug here on the hydro Ottawa side of, you know, one of the initiatives that the federal government's taken on in terms of deep retrofits for commercial buildings is something they call their deep retrofit accelerator initiative. It's a program that hydro Ottawa is a part of two builds, build support services for commercial customers to identify pathways to decarbonize. So this isn't, you know, going out and paying for boilers or electric boilers or things like that, but it's helping building owners create a plan to tackle these complex, these complex retrofits. And that's something that the federal government is investing in. So I mean, for our listeners in our area, definitely keep your eyes and ears open for more information coming on that because it's early days yet. Okay, so my last question for you, Nick. And just looking at the time, I know we've taken a lot of time here chatting, it's been great. But I do want to touch on quickly before we wrap up, kind of what might be one of the trickiest areas, which is this idea of kind of heavy industry resource heavy industry, things like you know, the manufacturing of steel and chemicals and cement. There's a lot of emissions associated with this. They have kind of pretty unique demands in terms of high heat, high temperatures, things that are easily achieved with burning fossil fuels, maybe not so easily achieved with an electric option. What are we doing in that sense? What is the government doing to try and help those industries pursue decarbonization?
Nicholas Rivers 37:28
Yeah, so we've kind of I'm in the climate world climate policy world. And we have called these sectors for a long time, in quotes, the hard to decarbonize sectors, so, so it's been something where it's the kind of prevailing idea has been, let's all work on the stuff that's relatively easy today, like buildings and electricity, and vehicles. And eventually we'll find solutions for these hard to decarbonize sectors. And these are decarbonized sectors are things like cement, and steel, like you pointed out are chemicals, for example of pulp and paper, these big industrial sources, and it's not just that they require a lot of heat, or a lot of energy. In many cases, it's that carbon is released as part of the process for producing these materials. So, for example, when you produce cement, I'm not a chemist here, but my understanding is you take limestone and turn it into lime as part of the cement making process. And the chemical reaction releases co2. Same thing with the typical way for making steel. You're reducing iron ore, and the reduction process that takes place in a blast furnace takes the poles the I'm going to get in trouble here, I don't quite know what the reaction is. It releases co2 from the iron ore reduction process, in concert with coal. So, they do require a lot of heat, but they're also releasing co2, just as part of the kind of process of producing these materials. So, no matter how efficient they get that co2 is still coming out. And so that's part of the reason they're referred to as these hard to decarbonize sectors, I would say, well, let me say that the thought that we've had as a community thinking about how to transition the economy is that it should be possible to do a lot of this easy stuff, almost 100% Man company easy, almost in quotes, here. decarbonizing buildings will be talked about is not actually easy. It's hard. It's easy relative to these hard to decarbonize sectors. So, if we can get the easy sectors more or less decarbonized. One approach to dealing with these hard to decarbonize sectors would be to use, carbon capture and storage. So, it would be to take the co2 that's coming out of these fixed processes, and capture it before it goes into the atmosphere and try the sequester it permanently, let's say in a depleted oil and gas reservoir. So that's one approach, we're also seeing a lot of a lot of innovation in this sector, away from some of these fixed process emissions. And so, I'll give you an example. In Ontario, the federal and provincial governments recently put big investments into some of the steel facilities in Ontario. And these are our biggest point sources of co2 emissions in the province. These steel facilities, they're especially scattered around Southern Ontario around Hamilton. And, and they use this reduction process to turn iron ore into steel. And then the big investments the province and federal government have put in how they are transitioning some of these steel producing facilities from electric RBO blast furnaces to electric arc furnaces. So, it will take the coal out of the process basically. And the these, these facilities when they're up and running, will produce big savings and greenhouse gas emissions. By eliminating this kind of important source of co2. We're seeing lots of innovation in the cement sector as well. So, using different materials, in as part of this, the cement production. We're seeing a big project, for example, underway in Edmonton, it's a big cement facility that will have a lot of efficiencies built into it. But we'll also have CCS carbon capture and storage, it will be adapted for carbon capture and storage so that the co2 that's produced from this facility won't be released from to the atmosphere, it will be it will be sequestered underground. So I would say the role for government and these nascent, I would say projects is a direct support role to help these industries demonstrate the viability of some of these alternate pathways for producing basic materials with less carbon. And what we're seeing is government supporting these through either direct subsidies, or tax credits. And in some cases, we're seeing when these projects are starting to be produced materials, we're seeing government potentially have a role in procurement saying we're going to buy lower carbon cement for this new set of government buildings, we're not going to source it from usual suppliers, we're going to reach out and try to create a niche market for this new cement or this new steel. So I think that's the right role. We're not at the stage yet where we can mandate these kinds of innovative technologies, because we're really just at the demonstration phase. But I would say that over the last decade, we're moving from thinking of these sectors as hard to decarbonize, to thinking maybe, to, you know, possible to decarbonize, so it initially seemed like there wasn't really a pathway and we're starting to see some light in the tunnel. Now some potential pathway for decarbonizing these sectors.
Trevor Freeman 42:58
Gotcha. Yeah, I mean, similar to how we have most, if not all the answers we need. Now, for some of those other industries, we talked about personal transportation, buildings, etc. There may come a day when we look back and say, yeah, now we've got all the answers we need for the heavy industry. It's just a matter of deploying them. But we're not there yet.
Nicholas Rivers 43:18
Exactly. We're not there yet. You know, it may turn out that these are not the hard sectors. Right, that if these technologies come along, there's only I don't know exactly the number. But let's say on the order of a dozen cement factories in Canada. So, if we can figure out the technology, rolling it out to a dozen factories, institutionally is maybe not as hard a problem as rolling out building retrofits to 15 million buildings. So right now, this seems like the hard to decarbonize sector, but maybe we'll be surprised.
Trevor Freeman 43:47
And to your point, I mean, pretty good bang for buck, maybe when we talk about just the amount of emissions from single points from these from these industries.
Nicholas Rivers 43:56
Yeah, I think the steel sector numbers in Ontario, these two facilities are we're going to see a 3 million tons per year greenhouse gas reduction, well, from the investments that Ontario and the feds have made in and converting them to electric arc furnace.
Trevor Freeman 44:11
Great. Well, Nick, I think that's the list of questions I had for you. So thanks very much. I really appreciate the time and your thoughts on these matters. It was great to having this conversation with you. We do always end our conversations with a series of questions that I asked all of our guests. So as long as you're ready to go, I'll jump into those.
Nicholas Rivers 44:30
Let's do it.
Trevor Freeman 44:31
What is a book that you've read that you think everyone should read?
Nicholas Rivers 44:34
This year, I read fire weather by John Vaillant. I've read a number of his books in the past. I love the way he writes. He's a Canadian author. He writes both nonfiction and fiction. This is about the big fire that took place in Fort McMurray in 2016. And it's a nonfiction book, but it's gripping. He's such a good writer. And it's such an important thing for us to understand exactly what's happening again, this year we've seen Fort McMurray threatened just last week by wildfires. So I really recommend this book. It sounds dry. It's about forest fires, but it's not at all. It's really good.
Trevor Freeman 45:09
Yeah. Okay, great. That's a good one. Same question, but for a movie or for a show.
Nicholas Rivers 45:14
I am. I'm a pretty slow TV watcher. I don't get a ton of time. But I am watching Showgun right now and loving it. Don't tell me the end, because I'm not through. But it's excellent show.
Trevor Freeman 45:26
Yeah, so I haven't started it yet, because I read that book as a teenager and haven't read it since. So I'm rereading it right now. And then I'm going to watch the show after
Nicholas Rivers 45:35
I didn't read it. So I'm my wish with fresh eyes.
Trevor Freeman 45:39
I remember liking it, but I can't remember kind of how it ends. So, I'm as excited as you are to see the end of that. If someone was to offer you a free round-trip flight anywhere in the world, where would you go?
Nicholas Rivers 45:52
Well, I am a little sensitive about flying long ways, just because of the nature of this conversation but my kids, I have a 13-year-old and a 10-year-old. And they're super into comics and Nintendo and really want to go to Japan. So I would go to Japan for a few weeks with them.
Trevor Freeman 46:13
Who is someone that you admire?
Nicholas Rivers 46:15
This was hard. I set out you gave me these questions a couple of days ago. And I sat out on the front porch and the first nice day we had in a while with my wife and my kids. And I was telling them about this. And I said I was stuck on the Who do I admire? And they said, you should admire us. So, I admire my kids. They're really optimistic. They're super fun. They're loving life. And I think it's a great set of characteristics.
Trevor Freeman 46:41
Yeah, that mean, that is never a bad answer. That's a great answer, and good for them for self-awareness to call you out. Finally, what is something that you are excited about when it comes to the energy sector or this transition that we're in what excites you about the future where we're going?
Nicholas Rivers 47:00
Well, let me give a two pronged answer here. I'll start by saying that I'm nervous.
Trevor Freeman 47:04
Yeah
Nicholas Rivers 47:04
I think the stakes are high. We're learning more and more as a society about, you know, what climate change looks like. And it's not pretty. And the I think the big thing that we have to keep in mind, and the thing that keeps me optimistic is that we still have a lot of roles to play in determining where we ended up here. And, and we're seeing really dramatic changes in Technologies, and in people's engagement and policymakers’ engagement on this file. So, we've talked about how fast some of the technologies have moved over the last couple of decades or decade in particular, solar and vehicles and batteries and all these things. We're also seeing policy change really dramatically, right? It would have been inconceivable to say that we would have a high carbon price and a mandate for zero emission vehicles and phase out of coal fired power and potential clean electricity regulation and an oil gas cap, and all this stuff on the books 10 years ago, and now we're there. So, I feel like not only is technology changing quickly, but the policies are also changing quite quickly. And it looks like they're all changing in the right direction.
Trevor Freeman 48:19
Yeah, I definitely can relate to that. As someone who's been in this industry, this sector for a little while, at least, it feels like there's momentum now it feels like the pace of change is finally starting to really pick up and not where we need it to be. There's lots of work to do, as you say, but yeah, maybe we're starting to see things move a little faster
Nicholas Rivers 48:42
Yeah, exactly. So there's certainly reason for optimism. That's kind of guarded optimism.
Trevor Freeman 48:47
Yeah, that's a that's a fair point to end on. I think that's a good space then. Nick rivers. Thanks very much. I really appreciate you coming on the show and chatting with us today. And I've really enjoyed our conversation.
Nicholas Rivers 48:59
Thank you so much for having me. I enjoyed it, too.
Trevor Freeman 49:00
All right. Take care. Thanks for tuning in to another episode of The think energy podcast. Don't forget to subscribe wherever you listen to podcasts, and it would be great if you could leave us a review. It really helps us spread the word. As always, we would love to hear from you. Whether it's feedback, comments or an idea for a show or guests. You can always reach us at think energy at hydro ottawa.com