Climate change and shifting energy fundamentals pose the following challenges—and opportunities—for us:
GHG Reduction Regulation
As demonstrated by the international agreement reached in Paris in December 2015 at the 21st Convention of the Parties (COP) to the UN Framework Convention on Climate Change (UNFCCC), governments around the world have agreed on the need to achieve greenhouse gas (GHG) reduction targets by 2030 and 2050 that will limit any increase in average global temperature to less than two degrees Celsius. In Canada and the U.S., a variety of regulatory initiatives are under way at both sub-national and national levels. They include the introduction of emissions limits and reporting requirements; the introduction of carbon pricing and trading systems; the phase-out of coal-fired electricity; the establishment of new energy efficiency and conservation goals; and the increased availability of incentives for investment in technologies that can accelerate emissions reductions and the transition to lower-carbon and renewable energy.
On January 1, 2015, the Quebec government implemented a cap-and-trade system that requires Gazifère, an affiliate of Enbridge’s Gas Distribution business segment (GD), to purchase carbon permits on behalf of its customers.
The Ontario government is undertaking a similar policy framework and, throughout 2015, GD representatives met with Ontario members of the Canadian Gas Association and the Ontario Ministry of Environment and Climate Change to discuss proposed new carbon and climate measures.
In addition, both Quebec and Ontario are active participants in the Western Climate Initiative, a non-profit corporation formed to provide administrative and technical services to support the implementation of state and provincial carbon permit trading programs. For more information, please see the Energy & Climate Change section of this report.
In November 2015, the Alberta government announced its Climate Leadership Plan, which is a new provincial strategy and action plan on climate change based on the recommendations put forward by a Climate Advisory Panel. Details on implementation are still being developed but will include the phasing out of coal-fired electricity by 2030, introduction of an emissions limit for GHGs from oil sands production, expansion of renewable capacity and regulation designed to achieve methane reduction. For more information, please see the Energy & Climate Change section of this report.
Enbridge has publicly supported the new carbon pricing policies being adopted by Alberta, Ontario and Quebec. The governments of Manitoba and Saskatchewan are developing similar new policies to support the expansion of renewables and the reduction of GHGs. In the U.S., the federal government has introduced a Clean Power Plan to accelerate the phase out of coal-fired electricity.
It is difficult at this time to quantify the costs and opportunities that will result for all of our businesses from these and other new regulatory policies related to emissions reduction because the policies are still evolving at the provincial, state and federal levels. In Alberta, the phasing out of coal-fired electricity could impact the cost of electricity for our Liquids Pipelines business segment (LP). As renewables and natural gas expand to replace coal-fired electricity, this could create opportunities for new investment by our Gas Pipelines and Processing and Energy Services business segment (GPP&ES), and by our Green Power, Transmission and Emerging Technology (GPT&ET) group. In the longer term and depending on assumptions regarding the availability and adoption of new technologies for emissions reduction, the application of a limit on emissions from oil sands production in Alberta could impact production levels over time. In the short-term the emissions limit is not expected to influence the need for any of our currently proposed new pipelines or expansions.
Although the availability of renewable and alternative energy is growing—and we are expanding our position in that sector—we expect oil and natural gas to continue to be an importance source of energy for the foreseeable future. We are committed to contributing to the achievement of local, national and global climate goals and believe the oil and gas value chain can be managed and developed in ways that will help ensure the world stays below critical global emissions thresholds. Both renewable and non-renewable energy will be required to power the shift to clean energy during the 20- to 30-year energy transition now underway in North America that will involve re-engineering the electrical grid, addressing energy storage challenges and developing technologies that reduce climate impacts from hydrocarbons.
Both our short-term and long-term business strategies and plans are structured to enable us to meet current demand for oil for transportation needs, and as feedstock for other products required by society, while also responding to new opportunities for renewable energy, electrical transmission and natural gas. We are committed to ongoing development and execution of a business model that will enable us to meet the energy requirements of a lower-carbon world. For more information, please see the Strategy & Priorities section of this report.
Severe Weather Events
The most severe weather events that our operations have experienced to date are hurricanes along the Texas Gulf Coast, and the Alberta and Toronto floods in 2013.
However, as our systems are part of a broadly based logistics network that connects producers to consumers, all parties are aligned in their contingency planning to shut-down in advance of severe storms and resume operations and energy supply as a first priority following the storm event, thus limiting impacts. For more information, please see Maintaining the Fitness of Our Systems and Leak Detection, and the Energy & Climate Change, sections of this report.
Investor Due Diligence
A growing number of investors are assessing risks associated with how companies are managing climate impacts and the transition to a lower-carbon future. Our new Climate Policy strengthens the alignment between our corporate priorities to grow our existing businesses and develop of new platforms for diversification with our focus on ensuring safe and reliable energy supply and our commitment to managing climate risks while responding to new climate-related opportunities. For more information, please see the Strategy & Priorities section of this report.
Technological Developments, Consumer Demand and Emerging Opportunities for Further Emissions Reduction
To mitigate risk and capitalize on emerging technologies, we track technological developments, particularly those associated with improved energy delivery and efficiency, and with renewable and alternative energy generation.
Already, we have made significant investments in wind, solar and geothermal energy generation. We’ve also invested in a wide range of alternative energy projects, including waste heat recovery, run-of-river power generation and renewable energy storage. GD is also evaluating opportunities to “green the natural gas grid” through renewable natural gas (upgraded biogas) and power-to-gas energy storage. For more information, please see the Strategy & Priorities, Renewable & Alternative Energy, and R&D and Innovation sections of this report.
We recognize that consumers are also increasingly demanding improved access to affordable lower-carbon energy and renewable energy. As described in previous sections, while crude oil transportation through pipelines accounts for the bulk of our current revenues, we have strategies in place to ensure our business to aligns with changing energy market fundamentals in both the short and long-term.
As a leader in energy infrastructure systems that deliver oil, natural gas and renewable energy, we believe Enbridge is uniquely positioned to help bridge the transition to a lower-carbon future by advancing energy diversification while also ensuring the safety and reliability of energy supply. Emerging opportunities that we are acting on include:
- Helping customers of our natural gas utilities manage their emissions and improve energy efficiency: Our Gas Distribution business has recognized expertise in areas such as demand-side management (DSM), energy efficiency and conservation will provide a good platform for offering fee-for-service options to customers.
- Growing our renewable energy business: We are one of the largest investors in renewable energy for electricity in Canada and have a growing presence in renewables in both the US and Europe. New technologies are continuing to drive the cost of wind and solar energy to more competitive levels and new government targets and policies are supporting growth in renewables and electricity. Building on the $5 billion (CAD) we have invested in renewable energy to the end of 2015, we want to double our position in bringing renewable energy to scale in North America and elsewhere in the next 5 years. We are pursuing new business opportunities arising from increased consumer demand for renewable energy and new interdependencies between renewables, natural gas and electrical transmission. Because renewable energy is at the forefront of the transition to a low carbon future we are building our competitive advantage as a developer and operator of wind and solar projects and continue to selectively invest in renewable technology and innovation.
- Expanding the use of natural gas to make access to lower-carbon and renewable energy more feasible: Natural gas can create significant climate benefits while advancing local energy efficiency and sustainability. It is an important replacement fuel for coal in electricity generation, a low carbon source of home heating, a lower emission fuel for heavy-duty vehicles and large transportation fleets, and an important enabler of renewable and community scale energy. We are evolving our natural gas systems to expand the availability of natural gas in North America, which is central to making the transition to a low carbon economy both feasible and affordable across a range of GHG emissions reduction scenarios through to 2030. This expansion will include development and deployment of next generation technologies and services that can support district energy and locally distributed energy systems, and that can improve integrated energy resource planning and management at the local and regional level. It may also include investing in opportunities for renewable natural gas (such as biogas for heating), power-to-gas systems that can help store surplus renewable energy, and combined heat and power systems that can help create a path to lower emissions from home heating and power requirements.
For more information, please see the Strategy & Priorities, Energy & Climate Change and Renewable & Alternative Energy sections of this report.
Updated Policies and Strategies
Given the above-noted challenges and opportunities related to climate issues, we consulted internal and external stakeholders in 2015 to help us better define our role in the transition to a lower carbon economy. Based on feedback obtained, we updated our corporate Climate Policy and are addressing energy transition and sustainability by embedding it as a core component of our business strategy and how we will grow our business.
For more information, please see the Strategy & Priorities and Energy &Climate Change sections of this report.