Kelvin Shepherd, President and CEO of Manitoba Hydro Discusses Energy Delivery in Manitoba

Kelvin Shepherd, President and CEO, Manitoba Hydro. Image courtesy of Manitoba Hydro.

Kelvin Shepherd, President and CEO, Manitoba Hydro. Image courtesy of Manitoba Hydro.

You have been in this role for just over a year, give us your thoughts on how it is going so far?

It’s been a year with a lot of change and we have made a lot of progress on many fronts.  With the change in provincial government last spring, a new Board of Directors was appointed and we worked with them to take a fresh look at our business and strategies.   The new Board undertook what I would term an accelerated “strategic review” with support from independent outside experts, which resulted in important decisions to continue with several major investments – our BiPole III HVDC transmission line, the Keeyask Hydro-Electric Generating Station and the Manitoba Minnesota Transmission Project.  The review also pointed to the need to take stronger action to strengthen our long-term finances, given the significant amount of debt we are incurring to fund both new projects and sustainment of our existing infrastructure. I feel we are moving in the right direction and making real progress on our priorities, but we do have some challenges and a lot of work ahead of us over the coming year.

Looking at the next year, what are some of the main priorities for Manitoba Hydro?

We’ve established four strategic priorities: restoring financial sustainability; delivering an excellent customer experience; engaging employees in our transformation, and respect and support for indigenous peoples in all aspects of our business.

We are investing over $14B in major capital projects to strengthen the reliability of our electrical system and enhance our ability to supply clean, renewable electrical energy to Manitobans. At the same time, we will continue to focus on improving our operating cost, structure and delivering strong customer service.

We continue to work with indigenous communities, including the Metis who are an important part of the Manitoba fabric. We are a leading indigenous employer with nearly 19 per cent of our employees corporation-wide self-identifying as indigenous.  In the north, over 45 per cent of our staff are indigenous. We continue to work with indigenous communities, whether as partners on major hydro developments or though enhancing our procurement policies to better engage indigenous people in all aspects of our business.

While it sometimes doesn’t get the same profile as our electrical business, natural gas is a very important part of what we do. About 60 per cent of homes in Manitoba heat with natural gas, and reliable cost-effective natural gas service is important for many of our commercial and industrial customers.

With natural gas prices expected to remain low and stable, natural gas is the most affordable option for heating our homes and businesses. Manitoba Hydro actively promotes natural gas in areas of the province where gas service is available to increase customers’ awareness and understanding of the economic advantages of natural gas for both space and water heating. Through these efforts, we’ve realized over a 40 per cent increase in customers understanding that natural gas is a lower cost option compared to electricity for heating and we’ll continue to educate our customers so they can make informed choices.

This summer a provincially legislated ban on the use of coal for heating comes into effect. Manitoba Hydro has been and continues to work closely with existing coal users to help them migrate to cleaner energy sources — natural gas, electricity or biofuels. It is important customers know their fuel options so they can make an informed decision. Since the ban was announced in 2011, 29 Hutterite colonies have converted and connected to our natural gas system. There are currently about 30 large coal users remaining in the province and we’ll be working with them to find the right solution to meet their energy requirements.

Many smaller communities and rural regions are reliant on higher cost and/or higher emissions energy sources. How can the availability of natural gas offer greater opportunities for these areas?

From a greenhouse gas (GHG) emissions perspective, it is important to note that in Manitoba, about 97 per cent of the electricity Manitoba Hydro produces each year is generated through hydroelectric generating stations.   However, even with Manitoba having some of the lowest electrical rates in Canada, heating with natural gas is still less expensive than heating with electricity.

The cost to extend natural gas over long distances creates an economic barrier to certain communities. A number of smaller communities and rural customers are not connected to natural gas as they are not located close to existing natural gas mains and/or don’t have a density large enough to economically support the cost of extending gas services. Recognizing this, Manitoba Hydro works to leverage larger customer requests to extend natural gas services to other customers in the area. This approach has been very successful with two recent natural gas expansion projects.

“We are also currently working with six municipalities and 13 communities in south central Manitoba who are seeking to have natural gas services extended to their region.” Image courtesy of Manitoba Hydro.

“We are also currently working with six municipalities and 13 communities in south central Manitoba who are seeking to have natural gas services extended to their region.” Image courtesy of Manitoba Hydro.

In 2016, a commercial manufacturing company located near the community of Woodlands contracted with Manitoba Hydro to receive natural gas service. Due to the proximity of the facility to Woodlands, Manitoba Hydro proactively engaged the rural municipality and hosted open houses to determine the community’s interest in natural gas service. With this expanded project, 22 km of main will be installed and its estimated customers will save over $305,000 on their annual energy bills.

In 2014 a Hutterite Colony approximately 15 km from natural gas services in MacGregor, Manitoba planned to connect to our system. Manitoba Hydro worked with the rural municipality of North Norfolk and as a result was able to extend 24 km of main to serve four commercial customers and four residences. These customers are expected to save $247,000 annually on energy costs.

We are also currently working with six municipalities and 13 communities in south central Manitoba who are seeking to have natural gas services extended to their region. These communities understand the cost savings associated with natural gas can stimulate economic development by increasing competitiveness of existing businesses and allowing residents to reinvest their savings in the local economy. Gas service may also attract new businesses, which insist upon natural gas service as part of their site selection criteria. This particular project is quite large, with approximately 500 km of main at an overall cost of $54 million. The municipalities recognize that provincial and federal government funding will be required to move this project forward, similar to larger past expansion projects.

Manitoba recently hosted a roundtable discussion around the topic of energy and natural gas expansion. What do you think were the main takeaways from this meeting and how will it improve the natural gas distribution system in Manitoba?

The Pan-Canadian summit held here in Winnipeg focused on reducing diesel generation in remote communities using renewable alternatives. The summit was part of the efforts of the Pan-Canadian Task Force, announced in July 2015 and co-chaired by Manitoba and Ontario, to reduce the use of diesel fuel for electricity generation in off-grid communities.

There are almost 300 off-grid communities in Canada, including four in Manitoba – Brochet, Lac Brochet, Tadoule Lake and Shamattawa. Options to reduce diesel fuel usage in off-grid communities across Canada vary widely, depending on factors such as what local resources may be available, road access, distance from other currently serviced communities, etc. While some jurisdictions in Canada are looking at LNG or CNG as an option for supplying electricity generation to their communities currently served by diesel generation, this is typically a more economic option where there is year-round road access or where a large potential user such as a mine or industrial plant is located in near proximity.

In contrast, the four diesel served sites in Manitoba can only be accessed by winter road for six to eight weeks per year or by air.  The remoteness of the communities, long distance from the existing grid and the need for solutions to address both the growing need for electricity and cost effective heating make it economically challenging.  As a result a 100 per cent renewable energy solution that can address the full needs of these communities doesn’t seem likely to materialize in the near term.

The Pan-Canadian Task Force is preparing a joint report that will capture the results of activities undertaken to reduce diesel fuel usage, identify best practices, and provide recommendations for next steps.  My understanding is that there was a strong sense at the roundtable that there is a need to move forward with action, but also it seems clear that there is no single solution.  I think engagement is needed with each community to understand their views and requirements, and it will require consideration of a range of options including both renewable and other fuel options.

Many First Nation communities are looking for cleaner and more affordable energy solution. How is Manitoba Hydro working with these communities to help them reach this goal?

With the exception of the four diesel-served sites, other First Nation communities are supplied by Manitoba Hydro with reliable, renewable hydroelectricity from our central grid.  However, Manitoba Hydro regularly explores opportunities to expand natural gas where economically feasible. Unfortunately, most First Nation communities are a significant distance from existing natural gas infrastructure making extending natural gas to these communities very costly.

Reducing the demand for energy is often the most cost effective form of “energy supply”, and we are working closely with First Nations to make energy more affordable in their communities. Manitoba Hydro offers a variety of programs to help First Nation communities implement energy efficiency measures to reduce their utility bills and can provide a tailored “community energy profile” for each individual community to serve as a roadmap to improving overall energy use.

Through our Indigenous Power Smart Program, a dedicated Indigenous Energy Advisor works directly with First Nations to complete energy efficiency upgrades, including free insulation for qualifying homes and direct installation of basic energy savings measures such as LED light bulbs, low flow showerheads, etc. Funding is provided to employ local members of the community to complete the installations.

“Reducing the demand for energy is often the most cost effective form of ‘energy supply’.”

“Reducing the demand for energy is often the most cost effective form of ‘energy supply’.”

Manitoba Hydro also supports tribal councils and individual First Nations on passive, low-energy, culturally-appropriate housing design through its Power Smart New Home Program. For commercial facilities in these communities, the Power Smart Shops program — which targets opportunities for small business customers offering direct installations of low-cost measures, as well as more in-depth lighting upgrades — is being rolled out to First Nation communities.

Additionally, through the Community Geothermal Program, Manitoba Hydro provides funding and financing to support the installation of geothermal heat pump systems to reduce customers’ electric space heating costs. Through a partnership with AKI Energy and the participating First Nation community, the program creates jobs and training for First Nations to install and maintain the geothermal systems themselves. As of January 31, 2017, 317 geothermal residential retrofits have occurred in five participating First Nation communities.

There has also been growing interest from First Nations in Manitoba Hydro’s Solar Energy Program, which offers an incentive towards the installation of a solar photovoltaic (PV) system, enabling participating customers to generate their own electricity and reduce utility bills.

Manitoba Hydro is very involved in research and development and investigating in applications for new technologies. What are your thoughts on the importance of developing innovation in the energy market and describe the role it plays for your company.

Innovation is critical to stay abreast of industry best practices and new technology opportunities. We have invested in research and development of new natural gas technologies through the CGA, CGA members, with NRCan at their Canadian Centre for Housing Technology (CCHT) in Ottawa, and with the Natural Gas Technologies Centre (NGTC) out of Montreal.

Manitoba Hydro building in Winnipeg, MB. Image courtesy of Manitoba Hydro.

Manitoba Hydro building in Winnipeg, MB. Image courtesy of Manitoba Hydro.

Seeking innovation in materials and inspection techniques allows Manitoba Hydro to maintain the integrity of its pipeline system for the benefit of customers in the future. The application of existing and new technologies can provide better information on the condition of our existing systems and help with decisions on when assets need to be replaced.

We also invest when a new technology represents a viable new demand-side management opportunity or where a new technology represents a new energy delivery method that could enhance our gas system. Some samples of new energy technology innovation which Manitoba Hydro has been involved in are:

Manitoba Hydro has co-sponsored demonstrations at the NRCan CCHT of natural gas fueled residential scale Sterling Engine micro Combined Heat and Power (CHP), and natural gas fueled residential scale Fuel Cell micro CHP.

More recently through the CGA, Manitoba Hydro co-sponsored Low-Cost Condensing Economizer, Compact Furnace for multi-unit residential buildings and multi-family dwellings, Ultra-Small Scale (USS) LNG Production for Off-Pipe Applications, and Combination Space and Water Heating (Combo) Performance Assessment.

Manitoba Hydro has co-sponsored two field demonstrations with NGTC: Ecovent Smart Venting system and Natural Gas Absorption Heat Pumps.

Any last thoughts on where you see the natural gas delivery industry going over the next 5-10 years?  

Natural Gas prices are forecast to remain cost competitive with other energy options, even with the Federal Carbon Tax anticipated to begin in 2018, so the demand for service should remain strong. In addition, Manitoba continues to have steady economic and population growth, so I expect the number of natural gas customers will continue to grow. However, with increasing equipment efficiencies and investments in improved building envelopes, the overall volume of natural gas sales is expected to remain relatively flat.

With the continued concern about climate change, and the focus of government policy to reduce GHG emission, Manitoba Hydro is continuing to invest in natural gas demand-side management (DSM) initiatives and plans to achieve a reduction of 115 million cubic metres (after interactive effects) by 2030/2031. Combined with savings achieved since introducing our DSM program in 2001, total natural gas savings of 227 million cubic metres (after interactive effects) will be realized by 2030/2031. These combined savings are expected to result in an overall reduction of GHG emissions of 0.43 million tonnes by 2030/31, — on average, equivalent to removing 87,000 cars from the road.

The industry is looking for ways to bring renewable natural gas into the energy mix, and I believe we are going to see more interest develop in that area.  In Canada, we have a strong natural gas delivery infrastructure, one that is modern and already is well positioned to meet even more stringent safety and environmental legislation.

There should be no question that natural gas can provide significant cost savings to customers and business, and as a result it will remain an important energy source for Canadians for years to come. In fact, many areas are adopting new regulatory approaches so that more customers can access natural gas services.

We can’t forget that natural gas is a relatively clean, economical, reliable and safe energy source that can help Canada meet our climate change goals while supporting a strong economy.  It’s clearly part of our future energy solution – a message we need to continue to communicate to government, business and community leaders.