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Federal budget news for the utilities sector

Perspectives on the government’s ecoACTION plan, with

The 2008 federal budget, tabled by Finance Minister Jim Flaherty on February 26, allocates some $669 million through to 2009-10 “to establish and strengthen a handful of targeted environmental initiatives.” Stakeholders in the utilities sector can look forward to this funding with satisfaction, according to  Jane Allen , national leader of Deloitte’s  Power & Utilities  group. “The funding is a good example of government performing a role that is right for government – helping to accelerate the development of new technology and making it easier for companies to invest,” says Allen.

Utilities tend to be the largest industrial emitters of climate change-related greenhouse gases in Canada, but they’re also typically very alert to environmental concerns. The more progressive firms are even taking great strides to reduce their emissions, not only to comply with regulations but because they recognize that adherence to environmental policies tends to lead to greater performance overall.

Budget highlights – part of what the federal government is calling its “ecoACTION” plan – relevant to utilities include:

  • $240 million for Saskatchewan in 2007–08 for the development of a full-scale commercial carbon capture and storage (CCS) facility;
  • $300 million investment in Atomic Energy of Canada Limited (AECL) in 2008–09 for the development of a next generation nuclear power reactor, the advanced CANDU reactor, and the maintenance of safe operations at Chalk River Laboratories;
  • $66 million over the next two years to create a regulatory framework for industrial air emissions;
  • $10 million over two years for scientific research and analysis to set biofuel emissions regulations;
  • $3 million to Natural Resources Canada for the development of a pilot program to demonstrate ethanol-gasoline fuelling and promote its commercialization.

“Power and delivery companies have been waiting for this kind of investment,” says Allen, “the CCS facility and the AECL investment in particular.”

Carbon capture and Saskatchewan coal
Allen observes that SaskPower, which took a leadership role in the CCS pilot project, couldn’t make it economically viable. “But we need a CCS project,” she says. “Coal, for instance, is bountiful and relatively inexpensive – before emissions are factored in.”

According to the  Coal Association of Canada , the country holds approximately 10 billion tonnes of coal reserves. Every year, Canadian coal is exported to over 20 countries on five continents with a value in excess of $3 billion. Meanwhile, more than 60% of electricity generated in Saskatchewan is coal-fired. “It’s important to develop technology that allows us to use our coal resources in a way that is not environmentally harmful,” says Allen. “Government is doing the right thing by allocating this funding.”

"The more progressive firms are taking great strides to reduce their emissions, not only to comply with regulations but because they recognize that adherence to environmental policies tends to lead to greater performance overall."

Investing in nuclear technology
On the other side of the emissions scale is nuclear power. Rejected by some over waste disposal concerns, there is no question that nuclear energy is far cleaner than any fossil fuel. And while not all of the pledged $300 million will go toward designing the new AECL reactor, development would take considerably longer without the funding.

“We really need to speed up the development of new nuclear plants,” Allen says. “This is another good example of government injecting a targeted investment where it’s needed. It’s absolutely appropriate: nuclear is one of the cleanest and most cost-efficient sources of power and we need more of it in Canada.”

Especially encouraging to Allen is that most of the announced funding is to be directed to actual projects rather than to developing regulations. “I’m happy to see the majority of the investment is going into concrete demonstrations and projects and that the smaller proportion is going to establishing the regulatory framework.”

Regulatory certainty for sounder investment
Not that regulation is inherently onerous – it just has to be appropriate. “Government is clearly recognizing that it needs to establish the right framework to maximize investor confidence in new technology,” says Allen. “Investors facing regulatory uncertainty are unlikely to invest.”

On the question of whether the federal investment is enough, Allen is optimistic. “It’s exactly the kind of thing government should be doing,” she says. “No matter what the endeavour, there’s always room for improvement and growth. But this is definitely a step in a positive direction.”

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