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EXECUTIVE UPDATE

Key Takeaways from 2019-2020 Research

Published on: July 22, 2020

CERI’s body of work considers research questions over the long-term, typically within a 10 to 20-year time frame. Even with this approach, results of our analyses demonstrate that the evolution of Canada’s energy systems is moving at a slow pace. It is important to consider, however, the various factors that impact the composition of today’s energy systems; from investment needed for large and small-scale projects, to the ongoing COVID-19 pandemic.

It goes without saying that discussions around energy systems in Canada are complex. CERI’s analyses offer key indicators of economic considerations necessary to inform those conversations.

In 2019-20, we conducted eight primary research projects. The projects and associated insights are listed below.

Canadian Oil Sands Production Outlook (2020-2039)*

  • The production forecast shows a short-term reduction due to the pandemic’s impacts on the economy.
  • New production emissions intensity levels are declining.

Canadian Crude Oil & Natural Gas Production Outlook (2020-2039)*

  • Conventional oil production is impacted in the short-term due to the pandemic; longer term production regains its historical levels.
  • Natural gas production has stayed relatively flat with some impact due to the pandemic; longer term LNG remains a key consideration for production growth.

Ribbons of Steel 2: Ensuring an Economic Future for Petrochemicals and Petroleum Fuels

  • $Billions in investment needed in Western Canada’s rail network to meet future capacity requirements. Construction of additional oil pipelines could alleviate much of this pressure to increase capacity.
  • Rail transportation represented nearly 10% of the total transportation and warehousing sector in 2018 or $8.4 billion in GDP contribution.
  • Collaborative system planning is a key challenge in meeting new capacity requirements.

Competitiveness of Canada's Regulatory Framework for the Oil and Gas Sector

  • Compared to US regulatory processes, Canada’s processes are 13 to 19 months longer on average for interprovincial energy projects.
  • For well drilling and other smaller projects, regulatory approvals in Canada are similar to the US.
  • The cost of a delay to a project can be as high as 15% of the overall capital cost in the first year and results in a negative impact to the competitiveness of major Canadian oil and gas projects.

Industrial Competitiveness and Energy Efficiency

  • Canada’s energy intensive and trade exposed industrial sectors can reduce production costs with investment in energy efficiency measures.
  • The pulp and paper and steel making sectors have the largest opportunity to reduce energy and production costs.
  • At least half the options assessed are not economic from a private sector investment perspective. Third party financial support would be needed to implement all the measures identified.

Opportunities and Challenges for Distributed Electricity Generation in Canada

  • Privately owned distributed generation (DG) investments are cost effective and earn a reasonable return for the investor. This is predicated on proponents being able to avoid all electricity system charges.
  • Except in unique circumstances, there are no net public economic benefits of even high levels of DG penetration.
  • Over 90% of DG systems in Canada are solar photovoltaic (PV).

The Economic Effectiveness of Different Carbon Pricing Options to Reduce Carbon Dioxide Emissions*

  • Emissions trading frameworks are more effective than carbon taxes at reducing economy wide carbon emissions.
  • In a side by side comparison over 10 years, economies with carbon management policies performed similarly to those without.
  • Fuel prices have a significant impact on GDP performance.

Economic Impacts of Value-Added Oil and Gas Products*

  • There are opportunities to create value-added products for natural gas in Canada. These are petrochemical products, mainly methanol and ammonia.
  • There are no clear pathways to create additional value from crude oil. There are also no medium-term technology innovations that would change this perspective.

COVID-19 recovery will be a key consideration for CERI in 2020-21. The pandemic has devastated the Canadian and global economies, highlighting weaknesses in the global economic system which negatively impact societal well being. While short term measures put in place to “keep the lights on” will provide some relief, once through the crisis, Canada must resume our important discussions that address both environmental stewardship and aspirations for economic prosperity. CERI’s long-term analyses will continue to provide critical information for industry, government, and other energy stakeholders as they determine the path(s) forward.

*Study not yet publicly released