ARCHIVED - 2009 Reference Case Scenario: Consultation Sessions Feedback

April 2009

Table of Contents

Background

Introduction

Macroeconomic and Price Assumptions

Energy Demand

Crude Oil, Natural Gas and Natural Gas Liquids Supply

Electricity Supply

Conclusions

List of Participants and Contributors

Background

In developing the 2009 Reference Case Scenario: Canadian Energy Demand and Supply to 2020, the NEB sought the views of Canadians interested in energy matters. In April 2009, the preliminary results of the NEB analysis were distributed to over 550 stakeholders, including representatives of industry, government, non-governmental organizations (NGOs) and academia. Stakeholders were asked to review and comment on preliminary findings by providing written comments and/or by attending one of two public consultations. One session was hosted in Calgary, Alberta and the other was in Ottawa, Ontario. Other methods of gathering stakeholder input were also explored, including video conferencing.

The objective of the stakeholder consultations was to provide stakeholders with an opportunity to comment on the Board's methodology and analysis of energy supply and demand in Canada to the year 2020.

This report serves to reflect stakeholder feedback received on: macroeconomic and price assumptions as well as energy supply and demand results. This summary focuses on aspects of analysis where a large number of stakeholders suggested further exploration of issues for the final report. This feedback does not necessarily mirror the NEB's views or individual stakeholder comments, but instead provides a summary of the input heard from across the country.

The NEB would like to thank the many participants who we met with, whose observations have been both constructive and welcomed. Without the thoughtful participation of our many stakeholders, our quality of analysis would not be possible.

Introduction

The NEB has updated and extended the Reference Case analysis contained in the 2007 report entitled Canada's Energy Future: Reference Case and Scenarios to 2030. The update reflects changes to future energy price expectations, the global economic recession and additional government programs introduced since the release of the 2007 report. The final report was released in the Fall of 2009.

Prior to releasing the final numbers, the NEB sought peer review of the analysis through national stakeholder consultations. The NEB circulated the preliminary results of the 2009 Reference Case Scenario in April 2009. The feedback from stakeholders was very constructive. Stakeholders reported an appreciation of the NEB's comprehensive, all energy supply and demand outlook, especially in the face of server economic and energy uncertainty. There was tremendous support for an update of the Reference Case Scenario analysis to reflect rapidly changing economic conditions and price expectations. Some stakeholders expressed a preference for an update to the Triple E scenario, contained in the 2007 Energy Futures report^[1] and additional details on greenhouse gas emissions associated with the Reference Case projection. Finally, stakeholders were supportive of the methodology proposed to explore low and high energy price cases within the 2009 report.

[1] The Triple E scenario was one of the potential outcomes considered and in this scenario society was increasingly attempting to balance energy, environment and economic factors.

The following sections discuss in more detail comments made on the key assumptions and quantitative results of the preliminary analysis.

Macroeconomic and Price Assumptions

In April 2009, the global economy was in the midst of the most synchronous economic recession in 50 years. These economic conditions create challenges to forecasting future economic growth with significant uncertainties, such as the timing and speed of the economic recovery, as well as questions about how industries might evolve over the longer-term. Despite the economic uncertainly, stakeholder comments focused little on the treatment of the economic downturn, implying stakeholder satisfaction with the NEB strategy to align near-term economic changes with the Canadian consensus forecast. Rather comments focused on the share of overall Canadian economic growth for each province as well as the evolution of the goods producing industry versus the service producing industry in Canada over the next decade. These comments are particularly meaningful when developing an energy supply and demand outlook for Canada as the regional availability of fuel, energy prices and end-use demand activities play a large role in determining the mix and absolute demand of fuel consumption in Canada.

The years leading up to the consultation sessions saw large swings in oil and natural gas prices. The NEB selected a wide range of energy prices to reflect potential future outcomes. There was general support for the oil price assumptions in the Reference Case, Low Price Case and High Price Case. However, stakeholders pushed to see lower natural gas prices in the Reference Case Scenario and in the Low Price Case.

One of the key questions posed by the NEB in the consultation sessions was how can we expect the Canadian exchange rate to change given various price tracks in the three cases considered. Stakeholder feedback suggested that one could expect the exchange rate to be positively influenced by the price of energy, with the exchange rate appreciating as oil prices rise and depreciating as they fall.

Finally, stakeholders suggested that upside risks, such as higher than expected growth should also be identified as a potential uncertainty rather than only focusing on downside risks.

Energy Demand

The key focus of comments surrounded Canadian residential electric demand projections. The preliminary results suggested negative growth for electric demand in the residential sector, influenced by announced government policies for new building codes, retrofits subsidies, new minimum energy efficiency standards for appliances, stand-by limits on common household items and phase out of inefficient lighting by 2012. Stakeholder comments suggested that this level of Canadian demand was understated. Overall, stakeholder expectations see a slowing of residential electric demand growth. However, electric demand growth will remain positive.

A few comments were also received regarding transportation sector energy demand, particularly petroleum product demand. Stakeholders felt that transportation energy demand growth could be lower. The key areas influencing this result would be the potential implications of looming legislation in the United States on the Canadian vehicle fleet as well as future Canadian legislation. For example, improvements in vehicle fuel economy requirements could serve to reduce overall fuel demand and/or fuel standards, such as California's Low Carbon Fuel Standard, could encourage fuel switching away from petroleum products and into other fuels (e.g., ethanol, biodiesel, electricity, etc.).

Crude Oil, Natural Gas and Natural Gas Liquids Supply

Generally, comments received from stakeholders surrounded the need to provide energy market context to the reader in the final report, with many stakeholders suggesting that the ‘story' is as or more important than the projections presented. Requests for information include:

• Situating Canadian oil and natural gas supply and demand into the global context,
• Providing cost estimates for oil and gas production,
• Identifying labour shortages as a potential future issue,
• Discussing technologies and fuel choices for future oil sands development (e.g., gasification, cogeneration, geothermal), and
• Highlighting impacts of potential environmental policies (e.g., cap-and-trade legislation).

In terms of the supply outlook, concerns were raised about the likelihood of an in-service date of 2019 for as of yet unknown, large East Coast offshore oil field.

Electricity Supply

The projection for nuclear facilities was the main area for stakeholder feedback. The preliminary analysis calls for the development of two new nuclear facilities in New Brunswick. Some stakeholders felt that the development of one or more of these facilities would not be possible within the timeframe of the analysis given the long lead times for the Environmental Impact Assessment. The preliminary analysis also forecasts a nuclear facility in Alberta. Some stakeholders thought that other technologies would be more likely to go forward, including natural gas or clean coal. Other stakeholders felt that if a nuclear reactor were to go ahead in Western Canada that it would most likely be situated in Saskatchewan.

Wind capacity was also an area of feedback. Some participants felt that the amount of installed wind capacity projected by 2020 was optimistic. This was based on the fact that Canada has to compete globally for the supply of wind turbines. Another concern raised was the uncertainty surrounding integration costs of wind on transmission lines.

Stakeholders also drew attention to unintuitive results for power generation in 2009-2010. Preliminary results show a decrease in hydropower generation in this timeframe coinciding with the economic recession and falling electricity demand. Given the low incremental cost of hydropower, it is more likely that other, less economically-efficient plants would be impacted.

Finally, stakeholders noted that they would like to see the need for additional investment in transmission highlighted in the final report.

Conclusions

The Reference Case Scenario consultations afforded the NEB the opportunity to gather valuable insights from a wide cross-section of Canadians. The input received was enlightening and provided significant value to the final report. In response to the feedback received, revisions to the Reference Case analysis were undertaken. The NEB thanks the many interested participants who again contributed to the success of the final report.

List of Participants and Contributors

Date modified:

2023-08-22