While most folks curse inflated gas, oil and power bills, they’re good news for a budding new Prairie industry. High prices are sending a powerful signal in the marketplace: economize on demand, expand supply and find exciting new forms of “green” or “renewable” energy to satisfy market needs. A new heating fuel based on the combustion of pelletized switchgrass would like to do just that.
Notwithstanding our record warm winter, millions of consumers are coping with constrained budgets by turning down thermostats, putting in new insulation, telecommuting and much more. Producers are revisiting energy processes that were uneconomic at old prices. Experimental, even totally new forms of energy production and consumption are debuting in a marketplace hungry for value and efficiency. Where prices have been allowed to rise without interference, solar, wind, and biomass energy are coming into their own, without subsidies, in a phenomenon economists call the discovery process.
Unintentionally stunted by a naïve sort of populism, the discovery process in Manitoba’s energy policy file and its potential for economic development is at a crawl. We keep prices for electricity and now natural gas artificially low in the mistaken belief that that attracts jobs and investment. In reality, it means we wallow along as a “have not” province by wasting over a billion dollars a year in lost revenue, while muffling signals to the community that energy is a valuable resource. The perverse result is that Manitoba is one of the most profligate energy consumers in the world.
From a “smart green” perspective, our policy makers need to overcome their tired romance with “power at cost.” Higher prices are the best boon for the renewable energy sector. Rather than shower it with subsidies and interventions, places with the most flexible and deregulated markets are witnessing a boom in “green” energy production based on wind and solar. That’s also where the energy infrastructure of the future is being refined and manufactured.
Manitoba is well-placed to become a major player in a variant of the solar power industry. As described in the latest Frontier backgrounder by Roger Samson, executive director of Resource Efficient Agricultural Production-Canada, an energy think tank, grass pellets can be economically converted into a low-cost, high-quality heating source. Natural prairie grasses densified or compressed into an easily transportable biofuel release their solar energy when burned, and create less air pollution than conventional fuels.
The lowest-cost place in North America to produce this pelletized grass is Manitoba, a place where grass grows in abundance, with long hard winters and no local indigenous forms of fossil energy. The timing for expansion in this green energy sector has never been better. As farm prices continue their historical decline, we can expect more land to fall out of production. Growing native grasses with a minimum of inputs uses marginal farm land in an ideal manner. This new cash crop could revitalize the rural economy by absorbing the surplus production capacity of the farm sector and cutting its own heating costs.
We already have low-cost, well-established technology to pelletize grasses. Much of the transport and storage infrastructure for grain, from hopper cars to storage bins, suits biomass energy production. The fuel can be used in commercial and residential boilers and Manitoba industries are now becoming leading North American manufacturers of this technology. Recent figures show that grass-based pelletized biofuels cost about half as much as natural gas in North America. Improved varieties of switchgrass and other warm season grasses can be developed in Manitoba and this will create a new seed industry for the province.
Pelletized biofuels would be good for the Manitoba treasury. Our old policy model encourages the relatively wasteful use of a high grade energy form, electricity, for heating. As households switched from electrical heating, currently used by 32% of Manitoba’s households, to biofuel heating systems, we could expand electricity exports into the U.S. market. And, unlike ethanol, the conservation potential for pelletized biofuels is huge. According to Samson, the energy equivalent of 1.5 billion barrels of oil could be produced each year from energy crop production on 14% of North America’s farmland, enough to displace 39% of annual U.S. oil imports. He calculates the ultimate Manitoba potential at 10 million tonnes annually—the energy equivalent of 30-million barrels of oil.
In every respect, this opportunity raises even more questions about our existing energy policy model, with its anti-green tilt towards the low-value use of high-value electricity for heating and subsidizing natural gas. Market pricing would help end such distortions and allow for the economic spin-offs and diversification from a naturally expanding pelletized biofuel industry.
If there is to be some pro-active government “help,” it should be limited to information dissemination and sharply constrained demonstration projects where a handful of public sector facilities would be encouraged to use pelletized biofuel as a heating source. It could also involve a public breeding program on warm season grasses.
Our politicians need to stay out of the way of the market’s discovery process, and not hamper its development by subsidizing established fuels.
Manitoba’s environmental and economic progress depends on that.