Engineering a Collaborative & Clean Energy Future. Remarks By The Honorable Sergio Marchi President & CEO of the Canadian Electricity Association

Transcription

1 Engineering a Collaborative & Clean Energy Future Remarks By The Honorable Sergio Marchi President & CEO of the Canadian Electricity Association 29th Mexican National Congress of Engineering Mexico March 6, 2018

2 Introduction Thank you so much for the warm welcome. Muchas gracias por la cálida bienvenida. It s always a pleasure to be back in Mexico. Since assuming the role of President and CEO of the Canadian Electricity Association, I have had the occasion to participate in several energy trade missions to your country, which I found enormously valuable. I want to thank the Mexican Society of Civil Engineers for their kind invitation to address you this afternoon. And I commend them for their work in organizing this impressive Congress. I am also flattered that Canada is the only featured country during these talks. That says something about our relationship. By way of background, the Canadian Electricity Association (CEA), for over 126 years, has been the national voice of the electricity sector in Canada. Our utility members represent the entire spectrum of generation, transmission and distribution. We also have the major sector suppliers as Corporate Partners. Canadian electricity is reliable, safe, and one of the cleanest in the world. Our generation stands at over 80% GHG emissions free. For more than 70 years, Canada and Mexico have shared a vibrant, multi-faceted relationship. One that has been characterized by deep people-to-people ties, rich cultural connections, and growing trade and investment. Canada and Mexico have become important strategic partners. We engage in high-level consultations, inter-parliamentary meetings, and more institutionalized mechanisms, such as the Canada-Mexico Partnership (CMP). The CMP, established in 2004, aims to promote collaboration between the public and private sectors, through a series of working groups consisting of energy; agri-business; labour mobility; human capital; trade, investment and innovation; environment; prosperity; mining; and forestry. 1

3 And of course, Canada and Mexico have cooperated closely when it comes to strengthening our North American institutions, starting with NAFTA in an effort to promote our security, environment and competitiveness. Our trade relationship is strong. In fact, it has doubled, since the entry into force of the North America Free Trade Agreement (NAFTA). We are each other s third largest trading partner. Investment has grown even more. Canadian investment in Mexico, has tripled since the adoption of NAFTA. A significant number of major Canadian companies are now active in your marketplace, including two of our CEA members - ATCO and TransCanada. Over 100,000 direct jobs and the same number of indirect positions, are generated by Canadian firms operating in your country, in fields that include energy, banking, aerospace, automotive, telecommunications, and in your favourite area, construction. Moreover, some 2 million Canadians visit Mexico every year for both business and pleasure, and Mexico is Canada s 10th largest source country for international students - we host more than 5000 of your Mexican students every year. I recite these facts and figures, because you directly benefit from this close and productive relationship. You are all builders. And your work is critical for the continued progress and prosperity of your country. Moreover, your efforts are helping to build and connect a broader community, one that stretches from Canada s northern frontier, across the United States, to cities and towns across Mexico. Every time you complete a cross-border transportation, communications, or energy project, you are helping to construct an increasingly integrated, mutually beneficial North America. It is imperative that our two countries continue to strengthen our regional community, based in part on our increasingly shared values and aspirations. 2

4 One of these is our commitment to free trade. Not as an end game, but as a tool to improve the lives of our respective citizens, and create the economic opportunities and growth they expect and deserve. These trade ties also serve as strong bridges between our peoples, thus carrying much more than just commerce. Trade has brought our two countries closer together, allowing us to get to know one another much better. This is not some fake news. It is a reality that defines the economic lifeblood of our two countries every single day. And in so doing, it establishes a shared agenda. Energy infrastructure is an integral part of that agenda, and this is what I would like to address this afternoon. Specifically, let me touch 4 issues; First up, is our common goal of building reliable, secure and affordable energy infrastructure. By way of some important context, many of you will undoubtedly recall the two oil crises in the 1970 s, and the Gulf War later in the 1990 s. These two significant geopolitical events inspired the calls, beginning in the US, to guarantee North America s energy supply. This concern shot to the top of the political radar, and it became the number one energy priority. Today, however, North America is awash in natural gas and oil, and the electricity system is well supplied. Priorities have changed. Today, the primary challenge has shifted from energy security to systems security. 3

5 In other words, how to ensure the safety, reliability, and security of our energy and electricity systems, as they come under pressure from increasing cyber-attacks. Unfortunately, these attacks have become a growth industry, and the electricity sector in Canada is the number one target for hack attempts within the energy community. As a result, our members have had to continually increase their investments in the latest technologies, and in the hiring the best cyber security experts. This menace definitely keeps our CEO s up at night. But beyond cyber hacks, our systems are also challenged by more extreme weather events, and the pace of technological change. Facing this unprecedented storm of threats, no company, or country for that matter, should go it alone. The challenge is just too big. Instead, we should strive to work through these problems together and coherently, as a unified continent. It is precisely for this reason that CEA has been calling for our three governments to establish a North American Energy Strategy. A Strategy that would: foresee shared innovation, and shared research and development efforts, so that we can leverage our collective brains and stretch limited funds contemplate more shared infrastructure builds, and lessen the red tape in the permitting and approval of this construction ensure that our shared grid has the best tools for combating the growing industry of cyber-attacks, that I just referred to make sure that our most vulnerable citizens, in the more remote areas of our nations, are not left behind, including those living on Indigenous lands 4

6 And finally, the strategy should incorporate a Business Advisory component, so that public and private sector leaders can work in unison Secondly, in building such infrastructure, we must learn from the past, and from each other. Since 2013, Mexican energy reforms have been the talk of the North American energy community. Over the last decade, the complete restructuring and deregulation of your sector, has led to a significant wave of private investment across your country s energy system. Some $80B US thus far. The overhaul of systems, processes and policies has renewed your energy sector, offering a dynamism not seen in many years. These changes were needed. They are dramatic. And above all, they are instrumental in paving the way for Mexico to realize its domestic energy promise, while contributing to a more sustainable energy future for our continent. Back in 2013, your President announced a bold infrastructure plan another example of this progressive shift. As you well know, the government invested some $315B US dollars to modernize roads and highways, build rail lines, expand seaports and airports, upgrade telecommunications, and boost your energy sector. All with the goal of improving Mexico s competitiveness and productivity. The energy sector is expected to take the biggest share of these investments. Implementing this Infrastructure Program will, undoubtedly, face its own potholes. Be they political, financial or negative public opinion. Towards this end, it is best to avoid over-politicization, because too much politics not only runs the risk of questionable judgement calls, but it also operates on a much shorter and more immediate cycle than the projection of large, transformative infrastructure builds. 5

7 Let me give you a concrete Canadian example. In spite of the fact that Canada has among the cleanest and most affordable electricity in the world, we have seen a sharp increase in the politicization of electricity markets. Electricity rates have become a top-of-mind issue for Canadians in many parts of our country. This heightened attention naturally places great pressure on provincial governments, who have the jurisdiction to regulate prices. In turn, this pressure gets transferred to the actual regulators where, at their rate application public hearings, the overwhelming objective becomes: KEEPING COSTS DOWN! Consequently, innovation pilot applications by our members, for instance, get routinely rejected by regulators, all in the name of reducing costs. Now, of course, our utilities must be frugal and keep rates as low as possible. No one likes paying more for their electricity! Homeowners don t like it and neither do businesses But we must also try to avoid quick fixes and short-term thinking, because the fundamental drivers behind higher electricity rates are real and relevant. We must also resist the temptation to simply choose the least expensive solution. Because, quality and reliable power cannot be done on the cheap. As the saying goes, you get what you pay for. That is why we have an obligation to pass onto future generations an electricity infrastructure that is at the very least, as good as the one we were fortunate to have inherited from our forefathers. We must build the best and strongest system, not the cheapest. You in Mexico and we in Canada, must find a balance. A balance between providing affordable electricity, and factoring in the intrinsic value that this magic plays at the heart of our society, - for families and businesses alike. And it is in getting this balance right, that we will be building responsibly for the future. 6

8 Moreover, the electricity sector operates on a long-term trajectory. Our respective companies plan decades ahead. This therefore requires political and policy stability and predictability, which contrasts sharply with the immediacy of politics and at times, the rollercoaster ride of public opinion. Processes must also be inclusive and transparent. They need to meaningful engage the average citizen. People in our cities, residents in our rural areas, and Indigenous people on our reserves, must all be consulted. And most importantly, they must have trust in their public institutions. Customers must be at the center of all of our activities. They need to be educated and informed about all their options, and our decisions must be accountable to them. Simply put, they need to know where we are going, how we will get there, and what it will cost. Thirdly, our infrastructure for the future must respect mother nature s powerful forces. Climate change is real. Once infrequent, high impact weather events are now happening with greater regularity and severity. We must therefore build well, which means building differently, if we are to successfully withstand these forces. We must plan for adaptive measures now, because the costs of inaction are far greater. In Canada, our electricity sector will spend approximately $350 billion, between 2010 and 2030, to update aging infrastructure. Massive capital projects are underway in every part of Canada, and climate adaptation considerations are part of these builds. We are all encountering a more complex and uncertain environment, so our risk management strategies must also be continuously revised. This means that we have to: Develop a national adaptation strategy Support scientific research and climate data at a regional level 7

9 Ensure cross-border coordination and risk management Strengthen building codes and standards, and Update flood plain maps Taking action to respond and adapt to climate change requires understanding and support from every level of government, and all stakeholders and citizens must be part of the conversation and solution. And we must maintain such a consensus for the long term. Because the battle against climate change will be a marathon. My final point deals with the elephant in the room the renegotiation of NAFTA. When NAFTA was under consideration back in 1993, there were political jitters among all Three Amigos. Since then, governments, political leaders, economists, and a healthy majority of our respective citizens have pointed to the trade deal as an economic boon for all three countries. The election of President Trump, however, has clearly changed the dynamics on the US side. During and since the election campaign, he has been a tough critic of NAFTA. Of course, he has the right to take such a view. But, it should not be surprising that, as a result, after seven rounds of negotiations, the US tone continues to be harsh. It has also introduced a level of uncertainty that we have rarely experienced in our trilateral relationship. Yet many US Congressmen, US Governors and Big City Mayors remain enthusiastic friends of NAFTA. 8

10 What we don t know is whether the harsh tone of this US Administration is purely tactical, or, whether this tough talk is for real, and perhaps a prelude to pulling the plug. Thus, the negotiations continue, under this cloud of uncertainty. Energy, through Chapter 6, is an important part of NAFTA. Accordingly, before the talks began, CEA submitted to our relevant Canadian Ministers and negotiators, an Electricity NAFTA Position Paper. It outlined our issues and priorities as a sector, both defensive and offensive. At the core of our message, was: please, do no harm. We believe that NAFTA has worked well for the energy sector over the past twenty-five years. So, if it ain t broken, let s not have politicians rushing to fix it. Instead, our trade negotiators should seek to strengthen and modernize our Agreement. For CEA, this means: Protecting zero tariffs and duties for energy commodity trade Preserving Chapter 6 Having Mexico sign as a full Party to that Chapter Ensuring better regulatory alignment between the three countries, especially as it pertains to: permitting cross-border energy infrastructure; improved labour mobility; and strong investor protections. Prohibiting discrimination against foreign energy sources Lastly, as I previously mentioned, bolstering the security standards of energy infrastructure. 9

11 The energy discussions are part of a larger, more unpredictable and moving platform. It is one of 28 negotiating working groups. Progress has been slow. Painfully slow. The 7th round of negotiations just wrapped up yesterday in Mexico City, not far from where we are. What we know is that the talks are stressed, as many tough issues remain unresolved. As well, President Trump s proposed tariffs, including against Canada and Mexico, on steel and aluminum, which add new tensions to the mix. Moreover, last night, he linked those tariffs to the NAFTA negotiations. In other words, his ultimatum was sign my NAFTA deal, or else I will hit you with tariffs. With respect, our two countries cannot and must not accept those kinds of terms. Trade deals and trade negotiations are about setting rules, and not going back to the days of the wild west. Twenty-five years on, NAFTA is naturally showing signs of age. It s not perfect. But it has been a tried and proven path. With continued support and modern adjustments, I am confident that it can continue to generate future economic prosperity for all three countries. However, time is running out for our political friends and leaders in Washington. While NAFTA has been front page news in both Mexico and Canada, it s been a very different story in the US. It s difficult to compete with all the other political priorities and goings-on of official Washington. Always has. Always will. 10

12 But CEA has called on US political leaders, who value NAFTA, to find their voices and break through the political noise. To provide leadership on, and airtime for, NAFTA. The American President desperately needs to hear these voices. He needs to see them on cable tv, talking about the positive, productive and profitable NAFTA partnerships that our three countries share. Otherwise, we run the risk of the President making a decision in relative isolation. And whether it s the President of the United States, or the President of Mexico, or the Prime Minister of Canada, an isolated leader, making a critical decision that will impact millions of lives and three national economies, can never be a good thing. That said, the US isn t the only country with political headwinds Your national elections are looming. And as a former politician myself, there s one thing I know for sure elections can be unpredictable and disruptive. It is my hope, therefore, that your political campaign will be guided by a mature and reasoned discourse when it comes to the fate of NAFTA. Closing In closing, in a recent speech to the Ronald Reagan Library, in California, our Prime Minister said and I quote; If Canada-US trade was a bad idea, then there are no good ideas. Prime Minister Trudeau went on to explain, that a generation ago, visionary Mexican, Canadian and American leaders literally and figuratively, invented the idea of North America. In just a few powerful words, my Prime Minister managed to say a lot. Similarity, a few months ago, in an open letter that was published in Canada s leading newspaper, your President, was equally as elegant, when he wrote, and I quote; 11

13 The government of Mexico will keep working constructively with Canada to further strengthen our relations, achieve mutual benefits and contribute to reaching our shared goal: to make North America the most prosperous and competitive region in the world. Reversing this tremendous accomplishment would come at a cost that would go far beyond simple economic terms. There would be serious, unintended consequences that are not entirely predictable today. Just look at what a twisted political pretzel that Brexit has become for the British! If we are to jointly win the future, our task is to learn from our parents generation, accept the baton they passed to us, and continue the never-ending work of nation building. And when it comes to building, who are better placed to do so than engineers? Who better than engineers to understand the challenges before us? Who better to speak the real language of progress? And as all of you build, we should adopt a vision that would move us from a North American free trade area, to a North American community. A community that would be made more secure, more prosperous, and more competitive in relation to the rest of the world. A community built on shared values. Thanks for your attention. Muchas gracias. 12