Where is New Brunswick’s Green Vehicle Policy?

These are interesting times.  A remarkable historical event is unfolding before us at breakneck speed – the beginning of the end of the oil era and the gasoline car.  On a superficial level we get emotionally involved with our cars and it’s such a pain.  Either there’s a repair bill, or higher operating expense these days with gas going through the roof.  It makes you want to reach out and sign on the dotted line for a new shiny reliable model.  But wait a minute.. Let’s think about this a little deeper.

My car just cost me $73 to fill up and it isn’t a large tank.  My sister’s van with a 90-liter tank costs $125 to fill each time.  She recently bought a small car.  The saving in gas bills makes their payment.  The older van sits in her driveway and is used sparingly.  Such is the discipline of higher prices.

The Federal government introduced the ecoAUTO Rebate program for two years.  Penalties are being levied on big gas-guzzlers and bonuses given for vehicles that sip fuel.  Looking closely, it seems to have been the proverbial horse designed by a committee (ends up as a camel).  It has selections that are totally illogical unless one realizes that the domestic auto industry has a powerful lobby.

Take the example of the Honda Fit, 6.6 L/100 km, not being included in the 2007 Federal government ecoRebate program by .1 liters / 100 km.  Honda was not impressed as it’s competitor, Toyota’s sales took off and their figures dropped.  As a result of quick re-engineering by Honda, it now qualifies for 2008.

Under the flex fuel category, the Chevrolet Impala at 12.3L/100 km, and the Chrysler Sebring, at 13L/100 km, is eligible for a $1000 rebate.  The Sebring uses double the fuel of the Honda Fit.  Impala is made in Oshawa, Sebring from Illinois, and the Fit is from Japan.

The federal program ends in December as Transport Minister Lawrence Cannon indicates that “it has served its purpose in raising consumer awareness of fuel-efficient models”.  Can you follow that reasoning?  A recent CBC story says higher than expected buyer interest will result in overspending of the program budget.

There are five provinces that offer a sales tax rebate for hybrids – BC ($1,000) PEI ($3,000), Quebec ($2,000 for vehicles under 6L/100 km), Ontario ($2,000), Manitoba ($2,000).  A number of these programs will be phased out in coming years, presumably as the technology evolves and price differentials decline.  If you buy a hybrid in Ontario, the combined rebates are $4000.

The rationale for these programs had been primarily reduction of greenhouse gas, and not peak oil.   In the last year, the peak oil theory has made the jump from blogosphere to some main stream media.

As gas price rises, all of the usual suspects (declining US dollar, speculation, and instability in oil producing countries) have been rounded up but will be eventually released.  The idea that we are at the peak of oil production will eventually gain credence in the general population.

The International Energy Agency (IEA) recently indicated that world oil prices were “justified by fundamentals…  Often it is a case of political expediency to find a scapegoat for higher prices rather than undertake serious analysis or perhaps confront difficult decisions.”   It’s very startling to hear such clarity from that organization.

In a column last October, I indicated that when gas rose to about $1.60 a liter, replacing a gas guzzler vehicle with an efficient model would pay for itself from reduced gas bills.  Well, we are almost there!  If the tendency continues we could be there within several months.

If you have to buy a new car in the near future, you might consider the future cost of fuel.  It could be at $3 a liter in the next several years or even higher.   We just don’t know.   Consider the case of a full size vehicle like the Dodge Avenger, or the Chevy Impala.  At roughly 12 L / 100 km, that’s 2400 liters for the average driver (20,000 km).  Annual fuel cost of $7200 a year ($600 per month) is higher than your car payment.

The alternative would be something like the Toyota Prius or Honda Civic hybrid at roughly 4.5 L / 100 km. Only 900 liters are used annually, which translates into $2700 ($225 / month).

The former CIA chief James Woolsey drives a hybrid and compares the local gas station cash register to a collection box for al-Qaeda.  Whether a link as direct as that can be drawn is difficult for me to say.  However, the best way to moderate prices for gas will be for all people to use less.

Do we have a plan in New Brunswick to ensure that most vehicles sold have excellent fuel economy? The life of vehicles is typically 12 years.  Are we planning for a transportation alternative after the personal car era is finished?

We’re about two years into the mandate of Shawn Graham’s government but I haven’t seen an energy policy and little transparency.   We do hear the phrase “Energy Hub” quite often, describing private sector energy investments for export.  At what point will “peak oil”, a once in the lifetime of this planet event, sink into the consciousness of this government?

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Will wood replace oil?

The cost of oil is rising and will continue to rise. At what price do we say enough is enough and abandon oil as a home heating fuel? That’s a decision that each person has to make. Do governments have a role to play in ensuring warm homes via reasonable heating choices in Canada? Most of us would say yes.

Governments may be still unaware of the nature of this emergency. They can recognize hurricane or flood damage. If there were no fuel it’s would be easy to understand. But rising prices can be tricky. Is it a permanent condition? How bad will it get? The funny thing is that world oil production hasn’t even started to decline yet. It’s just a little less than demand. Imagine when the real decline starts. So let’s talk about our vulnerabilities.

80% of homes in PEI, 25% in New Brunswick and roughly 65% of Nova Scotia use oil as the heat source. Approximately 1.3 billion liters of fuel oil are burned each year in Atlantic Canada. At last years price of 91 cents, that was $1.2 billion. At present day prices of $1.43 / liter, the new bill is $1.86 billion, a difference of $660 million. Next year, who knows? If families locked in a good price last fall, the sticker shock will only hit them later this year.

Over the next few years there will be a large-scale migration from unaffordable oil to other sources of heat due, as peak oil becomes a reality. There will be a burning platform with people diving to another fuel. The key question is what the alternate heating source will be and what are the implications of this massive shift?

First of all, we should realize that the limited Enbridge network will provide little relief outside of portions of Fredericton, Moncton and Saint John. Unfortunately, Efficiency NB hasn’t existed long enough to make a dent in the efficiency levels of our antiquated housing stock. Elizabeth Weir and Enbridge recently announced that they are contributing $2250 / $7,000 towards a $10,000 per person conversion program from electric heat to natural gas.

To put our oil refugee’s plight into perspective, 1.3 billion liters of fuel oil is equivalent to 11.5 billion kWh’s or 11 times the annual usage of Saint John Energy. It is 61% of the output of NB Power’s system. The peak that it would create on the Atlantic grid would be 2500 MW or more, which is equivalent to four new Lepreau 1 units or 2.5 units of the new AECL 1000.

Looking at a wood alternative, we would have to cut 2.8 million cords of wood to replace this volume of oil. To compare, the existing residential usage of hardwood in New Brunswick is roughly 500,000 cords each year.

But what about New Brunswick? My guess is that 60,000 homes are heated with oil. Assuming an average usage of 2500 liters per home, that’s 150 million liters or $214 million out of NB consumers pockets annually at today’s price. The replacement of this energy by electricity would require 1.4 billion kWh’s, from a power station of 420-Megawatt capacity, which is similar in size to the Belledune coal station. Note that this oil is consumed in the winter causing a large peak load. The cost of Belledune plant was $1 billion, if I remember correctly.

Francis McGuire, chairman of NB Power’s board indicated recently that even if the private sector doesn’t build Lepreau 2, then NB Power could proceed on it own by 2022. Has NB Power considered where New Brunswickers using oil heat are going to jump when the price of oil is $250 a barrel? Last time, it was towards NB Power. How would NB Power make up for the kWh shortfall? By burning heavy oil at Coleson Cove at a loss?

Jack Keir, Minister of Energy, has been suggesting Lepreau 2 as an economic development tool leveraged by private investment. Are the promoters presently waiting for government to meet some conditions? It’s a moot point as its completion date is too far into the future for application to the present problem.

Using wood as a solution requires an additional 332 thousand cords to be harvested annually to displace the New Brunswick fuel oil requirement. This shouldn’t be a problem with mills shutting down. Pellets and briquettes can use softwood that is compressed to provide the same heat density of hardwood, with less moisture content.

Wood heat could very quickly meet the requirements of a conversion program. The reduction of oil purchases of 943,000 barrels would retain $137 million a year in the New Brunswick economy as opposed to sending it offshore. Over the years, this would be the equivalent of investing over a billion dollars in the local economy. If Efficiency NB extended their offer of $2,250 to oil heat customers converting to wood, it would go a long way toward alleviating the problems of oil prices. The cost of the providing stoves would be $135 million (60,000 x $2,250), probably spent over a number of years.

The use of EPA rated stoves ensures an efficiency of 70% and emissions that are less than 10% of previous generation stoves. In urban areas, the use of pellet or briquettes may have to be mandatory with round wood as a rural option.

We are at the beginning of an emergency, perhaps a low intensity war. This change from low cost energy to high cost energy will sap our resources, leave us poor and eventually cold. If we fail to adapt to the heating oil challenge as well as the other aspects of peak oil, we lose. Do you see the leadership that we need to ensure that we don’t freeze in the dark?

What will you burn this winter?

How are you going to heat your home this winter? If you’re heating your house with oil and about 25% of New Brunswickers do, you may have noticed that the regulated price of fuel oil is up to a maximum of $1.43 per liter. That’s quite a change from June 2007 when it was 57% lower (91 cents per liter).

What would be a good forecast (guess) for next year’s price? At this moment the world supply doesn’t quite meet demand so the price is trending upwards. It may reach as high as $1.80 per liter and perhaps as low as $1.20 if we get very lucky.

First of all, the recent announcement by the Saudis that they would open the tap by 500,000 barrels a day didn’t drop the price. The increase is only ½ of one percent of the daily supply, it may be heavy crude that not all refiners want, they probably can’t turn the tap any further and certainly no one else can. It may be time to review your options.

Could your house be more efficient and use less energy? Perhaps an energy audit by Efficiency NB is in order. If you could save 25% on your costs, it would stabilize your bill for a short time. They’re waiting for your call and want to help you.

I like to use examples and real numbers to illustrate costs. Let’s assume a home that takes 80 million BTU’s annually to heat. Your house may use more or less fuel depending on size, insulation level and other factors. The costs of different methods are:

Oil – With an 85% efficient furnace, 94 million BTU’s are required, which is 2580 liters. The cost last year (at $.91) would have been $2,347, at $1.43 it would be $3,689 and next year it could be $4,644 or more. Some people lock in their oil rates and this can be helpful when rates are rising. Adding up your liters from the fuel company bill can let you know how your house compares. In the next five years, the cost of fuel oil will increase greatly and make it too expensive to use to heat your home. The only question is how quickly does that happen and what can you do?

Electric –80 million BTU’s divided by 3413 is 23,439 kWh’s, which at the second block rate of $.0861 would cost $2018 per year. The rate structure is changing soon and the second block will be same or higher than the first block. As well, NB Power burns a lot of heavy oil, natural gas and coal, which are all rising in price. When the retrofit of Lepreau is finished in 2010, the $1.4 billion cost will be part of the annual debt repayment and cost roughly $140 million per year. That’s a 14% rate increase.

But using oil, natural gas and coal to create electricity to space heat is not as efficient as burning at the source and should be discouraged, perhaps by installing a carbon tax on the fuels of NB Power that create CO2. Electric heat also causes a peaking problem, which cause additional power plants sooner than if other heating options for residences were used. It’s an unfortunate fact that low electric rates attract heating customers and fear of public revolt prevents rate increases to properly price electricity for conservation, environment and future energy shortages.

Natural Gas – The gas distribution network is new and not yet everywhere in New Brunswick. In fact, will it go beyond the major centers in the golden triangle? Given an 85% efficiency furnace, we would require 94 million BTU’s or 99 GJ. For those converting from electric to gas, the cost of the Enbridge SGSRE rate would be $1872 per year ($1401 for the gas, $279 for delivery and $192 service charge). For those converting from oil, the SGSRO rate applies and you would pay $2557 ($1401 for the gas, 965 for the delivery, and 192 service charge). Enbridge prices their delivery charge based on the competition and loses money on electric heat customer conversions to build a customer base. Because natural gas prices track oil to some degree, we can expect the gas price to climb rapidly so that it will be higher than electric at some point. Gas supply is declining in North America so LNG from offshore countries will be essential as a supply source. How secure and price stable are those countries?

Wood heat – The old standard for many people is wood heat. In this case, with a 70% efficient stove, we would need 114 million BTU’s. A cord of hardwood would provide at least 20 million BTU’s to be conservative, so we should buy 6 cords. If it costs you $200 per cord, then that is $1,200 each year. There is a considerable investment in time and energy involved with wood – stacking, moving it to the stove and tending the fire so it’s not for everyone. The use of an EPA rated stove is recommended for round wood as it reduces the smoke to 10% (2 – 5 grams / hr) of previous stoves.

Some prefer the convenience of wood pellet stoves, which have automatic feed mechanisms. They could be delivered by truck and blown into a container in the home as it is done in Europe. Briquettes are another option providing consistently dry wood that burns with little pollution, no insects and is a stackable product. Manufactured items like pellets or briquettes are more expensive than split round wood.

I’ve considered heat pumps to be in the electric category as they are essentially electric in the coldest weather. Geothermal systems provide low annual costs, but are very expensive in the front-end installation resulting in fewer users. Solar collector heating as well hasn’t yet developed a prime time audience.

Is there a constructive role for government in assuring warm homes in this province? Nobody wants to see people freeze in the dark.