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U.S. Energy Information Administration releases International Energy Outlook 2010 - long-term assessment of world energy markets through 2035

The U.S. Energy Information Administration (EIA) today released its report entitled International Energy Outlook 2010 (IEO2010). The report consists of the latest edition of the agency's long-term assessment of world energy markets. IEO2010 includes projections of world energy demand by region and primary energy source through 2035; electricity generation by fuel type; and energy-related carbon dioxide emissions. Among other topics, the report provides the EIA's view on long-term petroleum and other liquids fuel supplies, projections for global natural gas markets, prospects for worldwide growth in the use of renewable energy, and energy demand growth among the developing nations.

According to the Reference case projection included in IEO2010, world marketed energy consumption is expected to grow 49 percent between 2007 and 2035, driven by economic growth in the developing nations of the world.

In a statement discussing some of the report's key findings, EIA Administrator Richard Newell stated that "Renewables are the fastest-growing source of world energy supply, but fossil fuels are still set to meet more than three-fourths of total energy needs in 2035 assuming current policies are unchanged [...]"

The EIA's report confirms previously-released data which found that the global economic recession that began in 2007 and continued into 2009 has had a profound impact on near-term prospects for world energy demand. Total marketed energy consumption contracted by 1.2 percent in 2008 and by an estimated 2.2 percent in 2009, as manufacturing and consumer demand for goods and services declined.

In the Reference case, as the economic situation improves, most nations are expected to return to the economic growth rates that were projected prior to the downturn. Total world energy use in the Reference case rises 49 percent, from 495 quadrillion British thermal units (Btu) in 2007 to 739 quadrillion Btu in 2035.

China and India are among the nations least impacted by the global recession, and they will continue to lead the world's economic and energy demand growth into the future. In 2007, China and India together accounted for about 20 percent of total world energy consumption. With strong economic growth in both countries over the projection period, their combined energy use more than doubles by 2035, when they account for 30 percent of world energy use in the IEO2010 Reference case. In contrast, the projected U.S. share of world energy consumption falls from 21 percent in 2007 to about 16 percent in 2035.

The report looks back at average world oil prices which had increased strongly from 2003 to mid-July 2008, prior to a sharp decline over the rest of 2008. In 2009, oil prices again trended upward and this trend continues in the Reference case, with prices rising to $108 per barrel by 2020 (in real 2008 dollars) and $133 per barrel by 2035. Total liquid fuels consumption projected for 2035 is 28 percent or 24.5 million barrels per day higher than the 2007 level of 86.1 million barrels per day.

Conventional oil supplies from the Organization of the Petroleum Exporting Countries (OPEC) contribute 11.5 million barrels per day to the total increase in world liquid fuels production, and conventional supplies from non-OPEC countries add another 4.8 million barrels per day. World production of unconventional resources (including biofuels, oil sands, extra-heavy oil, coal-to-liquids, and gas-to-liquids), which totaled 3.4 million barrels per day in 2007, increases nearly fourfold to 12.9 million barrels per day in 2035.

Other IEO2010 highlights include:

• From 2007 to 2035, total world energy consumption rises by an average annual 1.4 percent in the IEO2010 Reference case. Strong economic growth among the non-OECD (Organisation for Economic Cooperation and Development) nations drives the increase. Non-OECD energy use increases by 2.2 percent per year; in the OECD countries energy use grows by only 0.5 percent per year.
• Petroleum and other liquid fuels remain the largest energy source worldwide through 2035, though projected higher oil prices erode their share of total energy use from 35 percent in 2007 to 30 percent in 2035.
• World natural gas consumption increases 1.3 percent per year, from 108 trillion cubic feet in 2007 to 156 trillion cubic feet in 2035. Tight gas, shale gas, and coalbed methane supplies increase substantially in the IEO2010 Reference case-especially from the United States, but also from Canada and China.
• In the absence of additional national policies and/or binding international agreements that would limit or reduce greenhouse gas emissions, world coal consumption is projected to increase from 132 quadrillion Btu in 2007 to 206 quadrillion Btu in 2035, at an average annual rate of 1.6 percent. China alone accounts for 78 percent of the total net increase in world coal use from 2007 to 2035.
• World net electricity generation increases by 87 percent, from 18.8 trillion kilowatthours in 2007 to 35.2 trillion kilowatthours in 2035. Renewables are the fastest growing source of new electricity generation, increasing by 3.0 percent per year in the Reference case; followed by coal-fired generation, which increases by 2.3 percent per year.
• In the IEO2010 Reference case, world industrial energy consumption grows 66 percent, from 184 quadrillion Btu in 2007 to 262 quadrillion Btu in 2035. The non-OECD economies account for about 95 percent of the world increase in industrial sector energy consumption in the Reference case.
• Almost 20 percent of the world's total delivered energy is used for transportation, most of it in the form of liquid fuels. The transportation share of world total liquids consumption increases from 53 percent in 2007 to 61 percent in 2035 in the IEO2010 Reference case, accounting for 87 percent of the total increase in world liquids consumption.
• In the IEO2010 Reference case, energy-related carbon dioxide emissions rise from 29.7 billion metric tons in 2007 to 42.4 billion metric tons in 2035-an increase of 43 percent. Much of the increase in carbon dioxide emissions is projected to occur among the developing nations of the world, especially in Asia.

Copies of the International Energy Outlook 2010 report will be made available in July 2010, however highlights of the report as well as the underlying data can be found here.

Ontario's Chief Medical Officer concludes that wind farms do not cause adverse health effects

"According to the scientific evidence, there isn't any direct causal link between wind turbine noise and adverse health effects," concludes Dr. Arlene King, Ontario's Chief Medical Officer of Health, in a new report.

The report was based on a literature review of existing scientific evidence on the potential health impact of wind turbines. Its main conclusions are the following:

• While some people living near wind turbines report symptoms such as dizziness, headaches, and sleep disturbance, the scientific evidence available to date does not demonstrate a direct causal link between wind turbine noise and adverse health effects.
• The sound level from wind turbines at common residential setbacks is not sufficient to cause hearing impairment or other direct adverse health effects. However, some people might find it annoying. It has been suggested that annoyance may be a reaction to the characteristic "swishing" or fluctuating nature of wind turbine sound rather than to the intensity of sound.
• Low frequency sound and infrasound from current generation upwind model turbines are well below the pressure sound levels at which known health effects occur. Further, there is no scientific evidence to date that vibration from low frequency wind turbine noise causes adverse health effects.
• Community engagement at the outset of planning for wind turbines is important and may alleviate health concerns about wind farms.
• Concerns about fairness and equity may also influence attitudes towards wind farms and allegations about effects on health. These factors deserve greater attention in future developments.

Similar conclusions drawn in an earlier study prepared for the American Wind Energy Association and Canadian Wind Energy Association. The authors of that study were somewhat more pithy than Dr. King, concluding that "annoyance is not a disease."

While helpful, the Chief Medical Officer's new report will likely not placate wind farm opponents in the province. We anticipate that the alleged health effects of wind turbines will remain at issue as developers seeking renewable energy approvals ("REAs") and may be asserted as grounds for appealing REAs before the Environmental Review Tribunal.

Bill 72, Water Opportunities and Water Conservation Act, 2010 posted for comment

Further to our posting yesterday, Bill 72, Water Opportunities and Water Conservation Act, 2010 passed first reading in the Ontario legislature on Tuesday.

The full text of the bill and its status is available on the Ontario Legislature website.

A proposal notice in respect of the bill has been posted to the Environmental Registry (ERB 010-9940). It is open for comment for 60 days beginning May 18, 2010 and ending July 17, 2010. We expect but have not yet confirmed that the Ministry of the Environment will hold public consultations on the bill at some time in the coming weeks.

Ontario to table Water Opportunities and Water Conservation Act today

The Ontario government is expected to introduce a new water bill today. The Water Opportunities and Water Conservation Act (the "Proposed Act") is expected to create new business opportunities for water technology companies while improving water infrastructure planning and promoting water conservation. Blending economic and environmental objectives in an effort to promote a green economy in Ontario, the Proposed Act has many of the hallmarks of last year's Green Energy Act.

While the text of the Proposed Act is not yet available, several backgrounders have already been posted on the Ministry of the Environment's ("MOE") website. These backgrounders reveal that the Proposed Act will have three main thrusts:

1) Making Ontario the North American leader in developing and selling new technologies and services for water conservation and treatment at home and around the world

The government intends to establish a Water Technologies Acceleration Project ("WaterTAP"), a non-Crown corporation governed by a variety of water industry stakeholders and policy makers. WaterTAP's mandate would include:

• Becoming a trusted source of information about Ontario's water sector by creating an asset map of Ontario water companies, technologies, researchers, users, needs and regulations;
• Being a source of credible advice and guidance to large industrial and municipal water users and governments on emerging technologies, and their applications to conservation efforts;
• Helping to identify opportunities for co-operation, co-ordination and growth within the industry
• Helping to identify research, commercialization and demonstration opportunities; and
• Developing international market intelligence.

It is expected that the government will provide WaterTAP with $5 million in funding over three years.

2) Creating an integrated approach to water infrastructure planning to achieve long-term sustainability

The Proposed Act is expected to promote integrated planning of water use and water infrastructure at the municipal level. Regulations to be promulgated under the Proposed Act would require municipalities to develop long term water sustainability plans. The plans would cover water supply, wastewater and stormwater services. Municipalities would be required to report prescribed performance measures to allow the province to monitor compliance with water sustainability plans.

In March of this year, the government introduced Bill 13, Sustainable Water and Waste Water Systems Improvement and Maintenance Act, 2010. The primary purpose of Bill 13 is to create a new Ontario Water Board, which would be an independent economic regulator of water and waste water services in Ontario (analogous to the Ontario Energy Board). If both the Proposed Act and Bill 13 are passed, it may be the case that the new Ontario Water Board will be charged with approving municipal water plans and tracking performance thereunder.

The government has also indicated that it will continue its Ontario Small Waterworks Assistance Program, which provides capital funding assistance to help small communities improve water conservation and make operations more efficient in their water and wastewater systems.

No doubt the government expects that public investment by municipalities in water infrastructure will help drive demand for private sector products and services in the province. Like the Green Energy Act, the Proposed Act appears to be designed to promote green infrastructure investment as a way of creating green collar jobs in the province. It will be interesting to see if the Proposed Act contains anything like the domestic content requirements of the Green Energy Act, which are intended to keep the broader economic benefit of infrastructure investment captive in Ontario.

3) Helping Ontarians use water more efficiently

The Proposed Act is expected to implement a variety of measures to reduce water consumption in the province.

To address demand by residential consumers, the Proposed Act may amend the Ontario Water Resources Act and Building Code Act, 1992 to introduce more stringent water efficiency standards for consumer products sold in Ontario such as toilets, faucets and showerheads. It may also introduce new water consumption labelling requirements.

Industrial and commercial water takers may also be asked to manage consumption more directly. The Proposed Act may require the MOE to develop a regulation to require non-municipal water takers to develop and adhere to water conservation plans.

We will post a link to the full text of the Proposed Act once it becomes available. As it did for the Green Energy Act, the government will likely undertake significant public consultations as the Proposed Act moves through the legislature. We will provide updates as they become available.

Ontario launches programs to encourage community and aboriginal renewable power development

The Ontario government, through the Ontario Power Authority, recently launched the long-awaited Aboriginal Energy Partnerships Program ("AEPP") and the Community Energy Partnerships Program ("CEPP"). While the two initiatives were first announced as part of the Ministry of Energy and Infrastructure's 10-step countdown to renewable energy last September, their details were only recently made public.

As detailed below, AEPP is intended to promote and facilitate aboriginal participation in renewable energy projects. The CEPP has a similar goal for community participation. The programs are in addition to the rate adders available under the Feed-in Tariff ("FIT") program, which increase the price payable for power from qualifying aboriginal and community renewable energy projects.

AEPP

At the core of the AEPP is the Aboriginal Renewable Energy Fund (the "Fund"). The Fund will assist aboriginal groups in developing renewable power projects by providing grants of up to $500,000 per project. The grants are available to support pre-development work up to the point where the project receives a Notice to Proceed ("NTP") from the OPA under the FIT. Grants are available for pre-development work as follows:

• 80% of expenditures up to a maximum of $20,000 for pre-feasibility work, including initial resource identification, preliminary connection availability, identification of sites and developing a basic business plan and economic assessment;
• 60% of expenditures up to a maximum of $250,000 (in aggregate) for design and development work, including the completion of an environmental constraint analysis and the development of an outline of the regulatory approvals required for the project, as well as certain engineering work, the development of a business plan and economic analysis, and the obtaining of site/resource control;
• 40% of expenditures up to a maximum of $500,000 (in aggregate) for regulatory approvals, including studies required for a Renewable Energy Approval or other regulatory approvals.

The Fund will consider applications for projects over 10 kW in Ontario that have received the support of an aboriginal community falling into one of the following categories:

• a First Nation that is a "band" as defined by the Indian Act (Canada)
• the Métis Nation of Ontario or any of its active Chartered Community Councils
• a person, other than a natural person, that is determined by the Government of Ontario for the purposes of the FIT Program to represent the collective interests of a community that is comprised of Aboriginal individuals
• a corporation that is wholly owned by one or more Aboriginal Communities as described above.

Full program rules for the Fund are available online from the OPA.

In addition to the Fund, the AEPP also includes:

• the Aboriginal Renewable Energy Network, a web-based resource that is intended to help Aboriginal communities learn about developing renewable energy generation facilities and share knowledge and best practices; and
• a Aboriginal Community Energy Plan program, which is still under development, that will help aboriginal communities develop conservation and demand management plans.

The AEPP is managed by an Aboriginal Advisory Committee comprising eight members: five Ontario First Nations representatives, two Ontario Métis representatives, and one OPA representative. The Committee's role is to provide advice and guidance on various aspects of the AEPP, including sharing feedback received from the First Nation and Métis communities.

CEPP

The CEPP is predominantly (if not exclusively) a source of grants of up to $200,000 for community-based renewable power projects.

Unlike the AEPP Fund, CEPP grants are not available for pre-feasibility work. However, AEPP grants are available for both:

• design and development work; and
• regulatory approvals (as described in the context of the AEPP, above).

The maximum amount of grants available for a given project depends on its size and its renewable power source. Only certain design and development and regulatory approvals activities qualify for funding. CEPP grants will cover up to 90% of the actual costs of each eligible activity.

CEPP funding is only available to "communities" in Ontario, where a "community" is an entity that falls into one of the following categories:

• one or more individuals resident in Ontario;
• a registered charity with its head office in Ontario;
• a not-for-profit organization with its head office in Ontario;
• a "co-operative corporation", as defined in the Co-operative Corporations Act (Ontario), all of whose members are resident in Ontario;
• a private corporation whose shareholders all fall into the first four categories above, and for whom commercial electricity generation is not their primary business or employment;
• a partnership or limited partnership whose partners all fall into the first four categories above, and for whom commercial electricity generation is not their primary business or employment; or
• any legal entity that would be considered to have a 100% Community Participation Level under the FIT rules.

Additionally, CEPP grants are available only for renewable projects over 10 kW and under 10 MW located in Ontario that are not already funded by the OPA and that would be eligible for a FIT contract. Proponents must also be able to demonstrate the their projects are "economically viable," meaning that the project has a positive internal rate of return, inclusive of any benefits to the Applicant's community. This last requirement underscores the need for proponents to have completed pre-feasibility work before applying for CEPP funding.

Full CEPP program rules are available online.

CEPP will be holding a series of webinars to inform potential applicants about the grant process. The first webinar will be held on May 19.

BC tables Clean Energy Act

On April 28, the government of British Columbia announced the introduction of a new Clean Energy Act. According to the press release, the Clean Energy Act "sets the foundation for a new future of electricity self-sufficiency, job creation and reduced greenhouse gas emissions, powered by unprecedented investments in clean, renewable energy across the province." Like Ontario's Green Energy Act, the proposed legislation will substantially revamp BC's electricity sector, including BC Hydro and the BC Utilities Commission ("BCUC"), and introduce several new programs, including a Feed-in Tariff, to promote the development of clean energy in the province.

A full copy of Bill 17, which would enact the Clean Energy Act, is available here. Backgrounders and other information are available here. The remainder of this posting is based primarily on these materials. More in-depth analysis will follow.

The Clean Energy Act defines 16 energy objectives for BC:

• to achieve electricity self-sufficiency;
• to take demand-side measures and to conserve energy, including the objective of the authority reducing its expected increase in demand for electricity by the year 2020 by at least 66%;
• to generate at least 93% of the electricity in British Columbia from clean or renewable resources and to build the infrastructure necessary to transmit that electricity;
• to use and foster the development in British Columbia of innovative technologies that support energy conservation and efficiency and the use of clean or renewable resources;
• to ensure the authority's ratepayers receive the benefits of the heritage assets and to ensure the benefits of the heritage contract under the BC Hydro Public Power Legacy and Heritage Contract Act continue to accrue to the authority's ratepayers;
• to ensure the authority's rates remain among the most competitive of rates charged by public utilities in North America;
• to reduce BC greenhouse gas emissions: (i) by 2012 and for each subsequent calendar year to at least 6% less than the level of those emissions in 2007; (ii) by 2016 and for each subsequent calendar year to at least 18% less than the level of those emissions in 2007; (iii) by 2020 and for each subsequent calendar year to at least 33% less than the level of those emissions in 2007; (iv) by 2050 and for each subsequent calendar year to at least 80% less than the level of those emissions in 2007; and (v) by such other amounts as determined under the Greenhouse Gas Reduction Targets Act;
• to encourage the switching from one kind of energy source or use to another that decreases greenhouse gas emissions in British Columbia;
• to encourage communities to reduce greenhouse gas emissions and use energy efficiently;
• to reduce waste by encouraging the use of waste heat, biogas and biomass;
• to encourage economic development and the creation and retention of jobs;
• to foster the development of first nation and rural communities through the use and development of clean or renewable resources;
• to maximize the value, including the incremental value of the resources being clean or renewable resources, of British Columbia's generation and transmission assets for the benefit of British Columbia;
• to be a net exporter of electricity from clean or renewable resources with the intention of benefiting all British Columbians and reducing greenhouse gas emissions in regions in which British Columbia trades electricity while protecting the interests of persons who receive or may receive service in British Columbia;
• to achieve British Columbia's energy objectives without the use of nuclear power;
• to ensure the commission, under the Utilities Commission Act, continues to regulate the authority with respect to domestic rates but not with respect to expenditures for export, except as provided by this Act.

The following provides some additional detail about some of the key initiatives:

Clean and renewable power development

The Clean Energy Act will enable BC Hydro to re-price the existing Standard Offer Program to reflect the results of recent power calls, includes the option to increase the maximum project size above 10 MW, and allows for technologies to be specified.

The Act also sets the stage for a Feed-In Tariff program to foster the development of emerging technologies in renewable power production. The program will focus on supporting emerging technologies that can supply power from B.C.'s diverse renewable resources. The details of the program, that will be developed by the government and BC Hydro in consultation with industry, will be established through regulation. BC will no doubt look to Ontario's Feed-in Tariff program, which has been widely lauded as a world class program, for inspiration.

The Act also contemplates net metering, which would allow customers who generate less than 50 kilowatts from their own renewable sources could get credit on their bills for the power they generate.

Energy efficiency and conservation

BC Hydro and the government plan to implement a number of programs and reforms to promote conservation and efficiency, including:

• new and increased programs and financial incentives for businesses, industry and individuals;
• conservation rates to provide incentive to use less electricity and save more money; and
• Amendments to building codes and product standards to increase the efficiency of buildings and consumer goods.

Heritage assets

The low-rate benefits that come from B.C.'s existing and future heritage assets will flow exclusively to British Columbians and will not be used to subsidize foreign power sales. The Clean Energy Act adds the following new and proposed projects to the list of protected heritage assets: the Waneta dam and generating facility, Site C, Mica Dam expansion, Revelstoke Dam expansion, and Northwest Transmission Line.

Stengthening BC Hydro

The government will strengthen BC Hydro to help deliver the Province's clean energy objectives. The Clean Energy Act will consolidate BC Hydro and BC Transmission Corporation to provide a single entity that will plan and deliver the clean energy required to meet British Columbia's growing demand for electricity while fostering job creation throughout the province and helping reduce greenhouse gas emissions.

The strengthened BC Hydro will be responsible for a number of initiatives under the Clean Energy Act, including:

• preparing an Integrated Resource Plan that will consider B.C.'s electricity needs over the next 30 years and will be submitted for government approval within 18 months of the Act coming into force;
• updating the terms for the Standing Offer Program an introducing a Feed-In Tariff program;
• advancing the Northwest Transmission Line, continuing to plan for an extension of the clean electricity grid to northeast B.C., and establishing a new distribution extension policy to help connect rural and remote communities to BC Hydro's clean electricity grid;
• delivering Power Smart programs to help reduce greenhouse gas emissions;

Modernizing the BCUC

The Clean Energy Act will reform the BCUC to ensure that the manner in which the BCUC oversees the electricity market is aligned with provincial energy objectives and the manner in which BC Hydro has been charged to implement those priorities.

The Act also exempts a number of "marquee" clean energy projects and programs from obtaining BCUC approval, including:

• Northwest Transmission Line;
• Mica units 5 and 6;
• Revelstoke unit 6;
• Site C;
• Bioenergy Phase 2 Call for Power;
• BC Hydro's Integrated Power Offer;
• Clean Power Call;
• Standing Offer Program;
• Feed-in Tariff; and
• BC Hydro's Smart Metering and Smart Grid program.

The BCUC will also be required to consider and be guided by the Integrated Resource Plan prepared by BC Hydro, once that Plan has been approved by the government.

Smart Meter deployment and Smart Grid upgrades

BC Hydro will replace all of BC Hydro's 1.8 million customer meters with digital, solid state, smart electricity meters. Equipped with two way communications capability, smart meters will enable in-home display of information and provide customers with more detailed information about their electricity use than a conventional electro-mechanical meter. Smart meter data will also help BC Hydro and local distribution companies plan infrastructure upgrades and implement conservation and efficiency incentive programs.

BC estimates that the cost of the Smart Metering Program and initial Smart Grid Program will be $930 million, but that the positive net present value of the initiatives will approach $500 million over the next 20 years.

Exporting clean energy

Under current policy, BC Hydro does not contract for long-term export power sales. Under the new Clean Energy Act, BC Hydro will be able to secure long-term export power agreements at market rates that make the best use of available clean energy. BC Hydro will fill those contractual energy needs with clean power calls that produce new power from renewable power projects in regions across B.C. BC Hydro will also use its grid management infrastructure and expertise to firm and shape power to ensure a reliable supply of power for export.

Stay tuned for developments.