Transcript
Transcript: Exploring Energy in Canada Series: Comparing International Energy Contexts
[00:00:00 The CSPS logo appears onscreen.]
[00:00:06 The screen fades to Debbie Scharf in a video chat panel.]
Debbie Scharf (Clean Growth, Privy Council Office): Hello and welcome everyone to today's event, Comparing International Energy Contexts. My name is Debbie Scharf and for the last three years, I've been the Assistant Deputy Minister of Energy Systems at Natural Resources Canada, and I'm very happy to moderate today's event.
I'd like to first start by recognizing that I'm speaking to you from the traditional unceded territory of the Algonquin Anishinaabe people. I want to express my gratitude to the generations of Algonquin people past and present as the original caretakers of the space that I occupy. I'm very grateful to be here. I recognize that those of you working today or watching today are from all different parts of the country and therefore you may work in a different Indigenous territory. I encourage you to take a moment to think about the territory you occupy and your relation to it.
Now, much of Canada's history is tied to energy, both from our economic prosperity perspective as well as being a reliable and stable supplier to the world. However, our country is far from the only one that depends on energy as a natural lifeline… as a national lifeline. And with the global energy landscape constantly changing, so too are the priorities and profiles of other nations. To better understand Canada's energy context in an interconnected world, we need to look beyond our own borders and take important lessons from countries that differ from us regionally and politically to gain some important perspectives. So, today, I'm super pleased that we are joined by experts in energy in China, Germany, and Cuba to discuss each country's unique position in the shifting global energy landscape. Our panelists will share key factors and strategies influencing each nation's energy context as well as how citizens interact with energy on a day-to-day basis. So, I'm now very pleased to be able to introduce our excellent group of speakers.
[00:01:57 Philippe Rheault appears in a separate video chat panel.]
I'm going to start with Philippe Rheault who is the Director of the China Institute at the University of Alberta. His earlier career in the Canadian diplomatic service spent 25 years in China and Asia and featured five postings in China. He has served as the general counsel… sorry, the Consul General of Canada in both Chongqing and Gwangju, and as principal advisor for Asia to two different federal ministers of international trade. Welcome, Philippe.
[00:02:25 Christine Wörlen appears in a separate video chat panel.]
Next, we have Christine Wörlen, who is the founder of the Berlin-based energy consultancy firm Arepo, and the former head of the renewable energies department at the German Energy Agency. She was also a lecturer at the Technical University of Berlin on solar markets and business models, and at the University of Applied Sciences, HTW Berlin, on project management and evaluation. Her current company focuses on the evaluation of energy and climate policies and programs across the world. Dr. Wörlen specializes in renewable energy policies and energy system integration as well as economic impacts of renewable energy deployment, and I welcome Christine.
[00:03:01 Jorge Piñon appears in a separate video chat panel.]
Last, we have Jorge Piñon who is a senior research fellow at the University of Texas at Austin's Energy Institute and former director of the UT Centre for International Energy and Environmental Policy, as well as its Latin America and Caribbean energy program. He's also worked at Shell, BP, and was the President of Amoco Oil Mexico and Amoco Oil Latin America. From Cuba originally, he is the co-author of Cuba's Energy Future Strategic: Approaches to Cooperation and Contemporary Cuba: The Post-Castro Area.
I thank all three of our speakers for joining us today. And with that, I'm sure everyone's very interested in hearing what they have to say. So, I'm going to turn the floor over to Philippe to get us started with the presentations. Over to you, Philippe.
Philippe Rheault (Director of the China Institute at the University of Alberta): Well, thank you, Debbie, for that kind introduction and also for the opportunity to speak a little bit about this very timely and rapidly evolving subject, right? I also very much look forward to hearing the observations from Christine and Jorge, my co-panelists. Lots to learn for all of us here today. But even when it comes to just the narrow subject of China, there's lots to consider. And so, I'll do my best to cover a fair amount of ground in the next ten minutes or so. And in order to try to do that, I think I'm going to jump right in now, if that's okay, right?
So, maybe I'll start with two or three context-setting remarks, right? I think it's important right off the top to say that, as we will see from my presentation, China is really clearly committed to the green transition and is actually already a global leader in clean tech and climate change efforts, right? But at the same time, just like every other major economy in the world, it's going to be needing to conjugate that with the challenge of maintaining economic growth, right? If we look at the way the Chinese governance system works, there's… to oversimplify a little bit, there's a bit of an unwritten social contract between the Chinese Communist Party and the citizens whereby as long as economic growth is ensured and sustained and a decent quality of governance is also provided, the citizens are really willing to kind of give up a little bit of their voice in terms of participation in the governance of the country, right? So, at all times, the Communist Party is going to be laser focused on making sure that there's a minimum level of economic growth happening in China, right? And I think all of us who follow China a little bit know that right now, the Chinese economy is facing some headwinds and those are being exacerbated by the current kind of travails of the U.S.-China relationship and the U.S. tariffs on Chinese exports (inaudible), right? So, I think the commitment is clear but there may be some headwinds in terms of the pace at which China is able to move forward on some of its plans, right?
The second point I think that's important to keep in mind right off the top is that China might not be a leader in every area of tech around the world. Certainly, in the West, we're still leading in many key areas. But when it comes to clean tech and renewables, China is really in pole position and it's a major powerhouse. And so, for China, it's not just about trying to achieve carbon reductions as a function of being a responsible global citizen, it's also a source of opportunity economically for China to continue to be in that pole position, right? Other countries need to recognize this reality and either seek ways to cooperate with what is the global leader in the sector or up their own competitive edge and soft power projection in order to be a viable competitor, and I think that that's an important point to keep in mind for Canada and a lot of other Western countries as well.
The third point, which is I think also useful to keep in the back of your mind as we look at a little bit more of the detail of this, is that the green transition is also accretive to China's national security posture in a major way. China, it's a big economy but also it's a net importer of energy which is a critical supply issue both for economic and national security, and a lot of that energy flows through a very small number of choke points. So, for example, most of their energy that's coming from the Middle East has to go through the Straits of Malacca which are very vulnerable to geopolitical tension, and a lot of the rest of their energy equation is a function… I'm talking about imports now, not just domestic production, is a function of their reliance on Russia as a supplier, right? And we can get into this a bit later in more detail but it's important as well to keep in mind that there's all this rhetoric about limitless partnerships between China and Russia but it's not necessarily such a comfortable relationship as we might perceive it to be from the outside. There's a little bit of mistrust there, and certainly China will be keen to diversify away from Russia. It's very fearful of being over-reliant on Russia as a major supplier of energy, notwithstanding the fact that they're in a position to perhaps force Russia to supply that energy at a very attractive price.
So, I think those are three very important points to keep in the backdrop. So, what I'd like to do now in the next seven, eight minutes max is just a really quick hit on some of the major kind of aspects of what the energy situation looks like in China. And normally, you would probably think I would start with supply or consumption or energy generation but actually, I'm going to start with tech actually and just because it's such an important component of what's happening in China right now. So, a few quick hits, right? On EVs for example, China is the world's largest EV producer. In 2024, it sold 11.5 million EVs which is roughly half of its auto sales and basically two-thirds of the entire global total of EV sales, right? And it's kind of… to put it into context, I mean, I was in China from 2019 to 2023, lived through COVID, the two Michaels, a lot of very kind of interesting bilateral and global issues were happening at the same time. But one thing that's germane to this particular panel is when I arrived in 2019, you could already tell that this trend of electrification of vehicles was happening in China, was happening fast and it was happening well, and to the point where by the time I left China for Canada in 2023, when I was driving around town, I would notice internal combustion engine vehicles, right? Those are the ones that would actually attract my attention, right? Whereas I think it's fair to say that in Canada and much of the West, while EVs are more and more prominent, we still kind of notice an EV on the road, whereas in Canada… in China, you're already noticing the combustion engine vehicles on the road because the EVs are so prevalent, right? And you talk about 11.5 million new vehicles a year. That's a staggering number in terms of production, right? 62% of the world's EVs are now Chinese. And of course, on batteries, it's even more dominant because some of the Western EV producers are actually relying on Chinese battery production and technology as well.
I mentioned, anecdotally, but in terms of numbers, the domestic adoption is quite high. Actually, 50% of new vehicle sales across the board in China in 2024 were electric vehicles. The adoption is also helped by initiatives such as incentives, such as decreased wait periods for license plates and some tax incentives in terms of registrations, etc., and it's not just about domestic consumption, it's also about exports, right? Four million cars were exported, EVs, abroad including… and you might find this interesting, this is going to be shifting in the coming years, but several hundred thousand EVs were shipped to Canada in the last couple of years, right? We don't know that because they're Teslas, right? So, in the United States, because of the incentive structure there, Teslas sold in the U.S. are actually manufactured in the U.S. but the Teslas sold in Canada until recently were eligible for kind of the green rebates even if they were made in China. So, the Teslas that we bought in Canada were actually made in Shanghai, right? Which is something we may not have realized, right? It's kind of interesting. These exports continue. They're at the cutting edge of innovation.
And I think it's also important to note, it's easy to kind of write off some of that success and say, well, China's success in the EV sector is really a function of large state subsidies playing fast and loose on intellectual property over the years with the West, etc. Some of that might have been true in the past and there's still certainly some state support but having met some of the leaders of industry in China over the years, I can tell you these folks are… they're mad scientists, hard driving entrepreneurs like in the mold of a Steve Jobs or a Jeff Bezos, and to simply attribute their success to external factors that don't take into account the assets that they bring to the table is a bit short-sighted, right? And so, we need to be very aware of all this. Whether we want to work with them or compete with them, we need to be aware of what the dynamic is there. Okay, so that's enough on EVs but it gives you a sense of where things are going.
On power generation, China is by far the world's largest power producer, so it's got a voracious appetite. Interestingly, the per capita energy footprint of electricity usage in China is now higher than the per capita usage in the EU, which is actually surprising, right? And on the whole, I think that over the short to medium term, to be honest, the solution to China's dependency on coal is going to be more coal but cleaner coal. So, there's actually a little bit of a good news story there in the sense that most of these new coal-fired power plants that we hear about that are going online in China are actually much cleaner than the old ones. So, from many metrics, that's an improvement. But also, I mean, to oversimplify for the sake of time, the Chinese are making a bet, right? The bet is that their leadership and the pace of innovation when it comes to clean tech, not just EVs but solar power, smart grids, etc., etc., is going to be such that ten years from now, those technologies are going to be not only cost competitive but cost advantageous vis-à-vis traditional sources of energy. And in the meantime, in order to assure that continued economic growth that I was talking about, they're going to continue to rely on coal, right? So, I think the bet is, yes, we're still quite carbon intensive, let's say up to 2030, 2035, but if we look at 2060, by then, basically coal will be almost gone and we'll be close to net-zero, right? That's actually a credible argument but I'd also note that there are some structural factors that might create friction. Some of the coal-fired power plants are owned by SOEs. They're not evenly regionally distributed. There's a lot of entrepreneurs as well that have… that are stakeholders in the status quo. So, there's going to be… it's not going to happen in a straight line, but look to the next Chinese Five-Year Plan which is coming out in about a year from now to get a sense of how serious China is in terms of trying to meet that target.
The other thing that I'll mention very quickly, and I think I mentioned it again, but even in the case of power generation, as China develops those technologies and renewables, it's not just about virtue signaling or making a global contribution, it's about being the dominant global player in technologies that are extraordinarily pertinent, right? So, I think I've kind of touched on coal. We're going to talk a little bit about geopolitics later, but it's interesting to take a look as well at China's kind of external footprint. On the national security side, it's very reliant on the Middle East and on Russia and it's going to be really desirous of finding ways to diversify away from those two sources. It might be an opportunity for Canada. Our institute has been doing a really deep dive in terms of what's been happening since the TMX, Trans Mountain expansion pipeline, has gone online. Contrary to many people's expectations, the expectations were that that oil that was going to make it to Pacific tide water was all going to end up in Californian refineries. But actually, the vast… after a year, a year in, the majority is going to Asia and the majority of that majority is going to China at a much higher kind of delta in terms of price per barrel, and it's actually even having an ancillary effect on how much the Americans need to pay for their oil that we're sending directly south, so some very interesting dynamics that are happening there. And as a country that has 14 land neighbours and is in a fairly unstable neighbourhood and is so reliant on a small number of suppliers and also vulnerable to U.S. sanctions on some of those suppliers, I think Canada can be a very interesting kind of alternative from that perspective.
There's a lot more I could talk about, Debbie, but I think I'm running close to the end already so I've deliberately skipped a few remarks knowing that we'll probably have a chance to get back to those in the Q&A. So, if that's okay, I'll hand it back to you.
Debbie Scharf: Amazing, and thank you, Philippe. I really appreciate your remarks, and I think you've picked up on a few threads that we will in fact come back to afterwards, in particular some of the interdependencies between our two countries and some of the enabling features you need to have in place to have a successful energy system and decarbonization, as you mentioned. You still have to have economic growth, there's geopolitical and energy security issues, and so very important thematics for China and for Canada as well. So, thank you for that. And with that, I think I will now turn it over to Christine to make a few remarks from her vantage point. So, over to you.
Christine Wörlen (Founder of the Berlin-based energy consultancy firm Arepo): Thank you, Debbie, and very exciting and interesting things that you say about China, Philippe. I look forward to the discussion already. We have many of the same observations from our perspective. But I first will introduce you a little bit to the energy scenery in Germany.
So, you all know Germany is this tiny little country in the heart of Europe, 85 million people and about the size of the Canadian province of Newfoundland & Labrador. So, three of your provinces are smaller than our whole country but the rest of your provinces, every… each and every single one is bigger than Germany, just to give you some kind of geographic dimensions? And also, in terms of energy policy, Germany is very much in the situation of a Canadian province rather than a whole country because in Germany, a lot of our energy policy is influenced by the European Union, just like in Canada, the provinces have a considerable say about their own energy policies and the kind of framework conditions are developed out of Ottawa. And if you look at Germany in terms of energy policy, autonomy, compare it in your mind with a Canadian province. Much of our policy is made in Europe. This is reaching from climate targets all the way to power sector trade regulations, product regulations, and also the rules, how governments can disperse subsidies and what is in line with competitive law of the European Union or not. So, this is a very big influence on German energy policy. Still, even without this big backyard of Europe, we are by now the third largest economy of the world and our economy is comparatively energy-intensive. We have a lot of automotive, industrial manufacturing, machine-making, chemicals, pharmaceuticals.
All of these industries consume a lot of energy and which we don't have because by our nature, we are actually a very resource-poor country. We have relied traditionally on wood since the fifth century. We're mining coal but we don't have big and good coal deposits. Our good quality coal is buried deep in the ground and we actually stopped mining for it because it can also become so expensive and it's so deep down. It actually was not economically competitive in my lifetime. We do have open pit mining but the coal that comes out of those mines is not very good. It's low in calorific value but high in sulfur, so it produces a lot of acid rain. We do still rely on coal a lot but even the coal we have to import. We have to import all our gasoline and most of our natural gas. We actually have, until very recently, also had a very unhealthy relationship with Russia in that respect but we have weaned off of this to a considerable degree, not completely unfortunately but that's a complicated matter and I think we are going to talk about that later, but coal is really the traditional backbone in Germany of the energy sector and was also the engine of our industrial revolution. Only in the 1970s, nuclear power was built a little bit. Germans did not like nuclear power at all, which is actually very… if you look at it from the global perspective, very peculiarity of Germany. It's not something that other countries can understand. Not even our European neighbours understand it. Historically, this does have to do with the Second World War, after which we were disarmed, and nuclear power in Germany also always had the connotation of nuclear armament. So, in the 1970s, there was a big movement against this from that perspective. People were also afraid of nuclear accidents. And last but not least, people were also aware of the fact that nuclear leaves a lot of this hazardous and dangerous waste, and we don't have a way of disposing of it in Germany.
We have a process for finding a nuclear waste deposit but this process is so complicated, because the country is so small and we have so many people, that it is already predicted to last until 2070, just the process for identifying a site for that nuclear deposit. And after that, we can only start with the permitting processes and the building processes. So, we are a long, long, long way away from any nuclear deposit. This is one of the reasons why one of the governments previously decided to phase out of nuclear, because they just didn't know where to put the waste. And by now, the last nuclear power plant in Germany also has been closed. We have not built a new nuclear power plant since 1985 because in 1986, the accident of Chernobyl actually put a lot of the country under a big shock. So, no nuclear power plants were built. And actually, the nuclear phase-out was also terminally decided only after the Fukushima accident in 2011. So, this is… tells us something about how the German public registers these accidents, takes note, and also influences the democratic decisionmakers of their will and says, no, no, we don't want this anymore. So, after 1986, again, we were back to adding coal power plants to our grids but people were not happy about that and started looking for alternatives. In the 1970s when I was going to school, my teachers told me 4% of energy in Germany is renewable. We don't… we're not able to do more. We don't have the resources.
But since some smart regulations were put in place, we have an enormous expansion of wind and solar power. The technological development of the wind power, particularly in the 1990s and early 2000s, and solar photovoltaics in the early 2000s until now, put us in a position where even we as a landlocked… more or less landlocked country or country with a very small shoreline and very poor quality of sun and wind, are able to produce 60% of our electricity from renewable energies. This was really not put in the realm of the possible when I started to busy myself with energy politics but we are here and we should celebrate the moment a little bit. We are quite excited to have reached that stage, yet there is also still a quite steep way ahead of us because we want to be carbon neutral by 2045 which means we only want to produce as many emissions as we have sinks for carbon dioxide. That means we now have to systematically decarbonize not only our energy sector but also our heat transport and industrial sectors. For the transport sector, Philippe already has discussed the solution. China has actually determined for us that we will also now go for electric vehicles. There was a very long discussion within the German car manufacturers and German politics, I'm happy to talk more about that, but we suddenly understood that if China decides to go electric, we also need to go electric just because German car manufacturers are also very dependent on the Chinese market. So, for transport, electrification is the way to go.
We have a very large heating sector because Germany is a comparatively cold country. We do have house heating in every house, which is not the case in southern Europe for example, but we have… we need it. Many houses are heated with oil or natural gas heating. Natural gas was actually put in… we don't have a lot of natural gas grids in cities where natural gas comes with a pipe to your house. But of course, this is also emitting carbon dioxide, so we need to decarbonize the heating sector as well. We now have a process in place where every municipality is asked to come up with a municipal heat plan so that the heat… that is clear, what is the technology that's suited in the respective location to produce heat and home comfort without carbon dioxide emissions? And the largest unsolved riddle at this point though is, again, our industrial sector. We have industries like cement factories, steel factories, and also the refineries or chemical factories that emit carbon dioxide, not only through their energy consumption but also from their processes. For example, cement factories emit carbon dioxide that's actually bound in the calcite that is used as an input material. For these, we are now developing and designing solutions, and one of the solutions for some of these sectors will be in hydrogen. We have a very ambitious plan of expanding our hydrogen pipeline system in Germany and across Europe. We have some plans of producing hydrogen domestically but we will also need to import hydrogen to a significant amount from other countries, including potentially Canada. But also, we are expanding a lot of initiatives in Africa and other countries in the Global South.
The public discourse in Germany is a little bit tense these days because like in many other countries, we have a lot of populist movements and they are just against everything. It's easy to say that. A couple of communicative failures of the last government made it more difficult to achieve a big consensus on how to change, for example, heating our homes, and we are at risk of losing significant political and demographic momentum on the energy transition. This is not a nice situation because also it will effectually not change a lot of things. A government that stops some of these favourable regulations will put a little bit of a brake on the expansion of renewable energy and on some other factors that lead to some change in the carbon footprint. But overall, as Philippe kind of alluded to, the technological pathways are set to a degree that government policy is not able to do much good with that. The big risk of that government policy, however, is to lose technological leeway and leadership, and we are currently having this discussion on that level. How much velocity or how much should we slow down in the energy transition? We recognize that it is a big change in everybody's living circumstances but we would like to work towards a situation where it doesn't mean a big change in everybody's energy bills, and this is the level at which this is currently being fought out. Many more things that I can talk to you about, including global trade things or also domestic issues. I'm looking forward very much to have more of the conversation.
Debbie Scharf: Thank you so much, Christine, very interesting. I hope later we could pick up on the thread of energy costs. This is a big issue in Canada in the transition. So, I'd love to get your perspectives on that a little later in terms of how the German population is viewing that and how the government's managing it. But before we get to the questions, Jorge has his turn. So, we will turn it over to him to share a few remarks from his perspective. And then, I anxiously await our Q&A session together.
Jorge Piñon (Senior research fellow at the University of Texas at Austin Energy Institute): Thank you, Debbie and also for Christine and Philippe as being co-presenters.
During the first half of the 20th century, Cuba was one of the top three sugar producers and exporters of the world, between three to five million tons a year. But in 2002, the Cuban government decided to rationalize its sugar industry and dismantled and closed half of its 156 sugar mills throughout the island. As a result, of course, of the collapse of the Soviet Union and also the end of a trade barter deal that Cuba had with Russia of sugar for oil, Cuba decided at that time that production of sugar was going to be around 700,000 tons, just what was needed to meet domestic demand. As we finish the milling season for 2025 here in the next few months, for the first time since the 19th century, Cuba's annual sugar production will fall below 300,000 metric tons with only 25 mills operating. In fact, for the second year, this year and last year, Cuba will have to import sugar to meet its domestic demand. Let me go ahead and repeat that for a minute. Cuba will have to import sugar to meet its domestic demand. For generations, it has been the island's engine of economic growth. I remember my grandmother when she put two teaspoons of sugar in her coffee, she would also take an extra teaspoon and put it in the saucer and she would say, (speaks in Spanish), "Without sugar, there is no country." So, we can then show that the collapse of the sugar industry in Cuba, it's very important. Why am I talking about sugar cane in an energy conference? It happens that sugar cane today is an energy fuel. Sugar cane not only produces sugar and alcohol but also produces fuel ethanol and then it can generate electricity by using biomass and feel the breeze.
Not a better example for the biodiversity of sugar cane than Brazil. Brazil's package of ethanol, sugar, biomass represents about 31% of the total global combination of those products. In fact, in Brazil today, car manufacturers only produce automobiles that run on 100% ethanol. In fact, there are no automobiles in Brazil today that can run on gasoline. 22% of the transport energy in Brazil is fuel ethanol and 8% of the electricity generated by Brazil is from sugar cane. Under the Paris Agreement, Cuba committed to generating 24% of its electricity from renewable sources by the year 2030. Of that, 755 megawatts of electric power generation was supposed to be sugar cane, representing 35% of the 2030 renewable objective. Now, you can see why I'm focusing my introduction on sugar cane, because certainly the direction is not going very well. Cuba's sugar cane and agricultural land have been abandoned. I mean, 60+ year-old sugar mills are broken. They're technologically obsolete and inefficient. In fact, the examples that I have are perfect for Philippe and I'm going to be looking forward to his comment because Cuba's three keystone projects in renewables are all Chinese projects. In 2012, the Cubans began building a 62-megawatt biomass facility that cost $186 million in the sugar mill Ciro Redondo. This was Chinese financing, Chinese technology, Chinese personnel. That facility today is idle. It's not working. Why? Because there's no sugar cane. How can investors come to Cuba and invest in building 750 megawatts of biomass generation if there's no sugar industry?
I'm bringing sugar cane because it's a mirror image of Cuba's electric power sector challenges, reflecting two things; mismanagement and what a centralized economic system can do. In fact, Philippe, Cuba's president, Miguel Diaz-Canel, was very transparent when he came back from China in November of '22 after having a meeting with his Chinese counterparts, including President Xi, and he came back with a very strong message, a very strong message that, in fact, for the first time, it got published throughout the Cuban press, and I'm going to read it because you have to listen to what the Diaz-Canel is talking about, what the Chinese told him. He, meaning Xi, warned that a commitment must be fulfilled, including how we do things well, how we take advantage of opportunities, how we are efficient, how we don't waste resources, how we ensure that investments have an adequate return. He also warned that we must be increasingly serious and effective in the project we propose and continue expanding cooperation. We have to be very strict, very rigorous, very professional, especially when we're working with friends who are supporting us. We have to work with a sense of commitment and ethics that helps our friends feel confident in what we are doing. That was a speech that Xi and the delegation, the Chinese delegation, gave to Cubans, "Get your house in order, put your things together, because our patience is running dry."
By the way, the Cubans have exhaustively looked at the Vietnam model. In 1986, as you know, Vietnam implemented Đổi Mới which was basically an agricultural reform which they decentralized the agricultural sector, allowing Vietnam eventually to become among the top three rice producers and rice exporters in the world. By the way, and we'll talk about the U.S. embargo later, this during a U.S. sanctioned embargo that lasted 20 years from 1975 to 1996. Cuba's electrical power grid is broken, structurally broken, and it threatens the social and economic development of the island. And now, it threatens the political stability of the country. This morning's (inaudible), which is Cuba's energy monopoly report, shows that there was a demand of 3800 megawatts, availability of 1850 megawatts, and Cuba today faces a deficit of 2,000 megawatts. 50%, less than 50%, of the thermal electric sector is working. So, tonight, between eight and 16 hours, Cubans will be without electricity, and this is happening every single day. In fact, first time yesterday, Granma, the state newspaper, published a full-page article, followed also by a national television program, warning people about this summer that they're trying, they got solar, they got a bunch of projects going on, but they're already warning folks of what's going to happen this summer. In Cuba, we have still June, July, and August of 35, 37, sometimes 40 degrees sea temperatures, and we also have hurricane season. So, the situation for the government is getting very, very critical to the point that they're telling people, warning of what's coming. First of all, they have never done this before. There is no short-term solution to Cuba's structural electric power generation challenges. A lot of these plants are over 40 years old. They haven't had any capital or operational maintenance. The distributed generation is falling apart. One of the only good stories, by the way, is natural gas, which is run by a Canadian company. Energas is a joint venture between the Cuban oil company and Sherritt, and that today is about 10% of electric power contribution but it's a reliable contribution. So, that's good news. But to rebuild and re-capitalize Cuba's electric power system, it will take between three or five years and between eight to ten billion U.S. dollars. There are two obstacles; time and money. And to overcome these obstacles, the U.S. have to do two things. I mean, I'm sorry, the Cubans have to do two things. First of all, they have to decentralize their economy. They cannot continue the way they are. At number two, they have to sit down with Washington and settle the embargo and settle the economic and financial restrictions that the embargo puts on Cuba.
What's interesting at the end here (inaudible), along with Mexico, Canada was one of only two countries in the Western Hemisphere that maintained uninterrupted relations with Cuba after the 1959 revolution, Canada and Mexico. Canada today has extensive mining, energy, and tourism trade with Cuba, and I think, many of us think, by the way, that Canada could certainly play a role. Cuba lost a huge opportunity when President Obama opened the window… excuse me, not a window, opened a door to Cuba and the Cubans decided not to take it. There are some powers within Cuba, particularly within the armed forces, that control tourism and other trades, that really don't want decentralization of the economy. But again, my example of sugar is that it represented 750 megawatts. It represented 35% of Cuba's 2030 goals for renewable energy and they're nowhere to be seen. Another project that the Chinese have led is a wind farm, 50 megawatts, over $100 million. It's been there. It's been going. They've been working on it for over 15 years and it's still not finished. So, the Chinese are there with wind. The Chinese are there with solar. The Chinese are there with biomass. So, we can't blame the embargo, by the way, and the Cubans in these cases are very smart. They don't blame the embargo because it doesn't impact any of these three keystone projects. This is going to be a very hot summer, 95, 97 degrees F. Hurricanes, by the way, is coming. They're predicting already that there's going to be four major hurricanes this year, and the presentation last night on national television was, to me and many of us that have talked this morning after we saw it, extremely shocking. For the first time, they're warning of what's headed their way.
So, a lot to talk about. I'd love to get some feedback on the Chinese and why are they doing it, why are they still in Cuba, Canada, the role that Canada has to play, and then the role of the embargo, is that real or not? Thank you, Debbie and the rest of the panelists, looking forward to the conversation.
Debbie Scharf: All right. Thank you so much, Jorge. I mean, it's really fascinating just hearing some of the things that you're saying because one of the things I always remark in Canada is that we actually take our energy security for granted. I don't know what time in history where on an average day you wouldn't turn on your light switch in your home and you didn't have electricity or go to the gas station and not have gas to put in your car. So, as Canadians, I think we almost take our energy security for granted because it's never been something we've had to worry about. And so, it's a very different dynamic in Canada that I think both Germany and Cuba have experienced in very different ways. I'd say almost the latter, whether it's natural gas in Cuba or hydrogen in Germany or oil into China, Canada's actually providing that secure power or energy to other jurisdictions. So, it really speaks to, I think, the intersection between the countries, the country of Canada and some of the countries that we're talking about here today. We'll pick up on some of those threads in the questions. And so, thank you so much for the three presentations.
There's so much to chew on here but I am going to start by picking up on China, where Jorge left off, but more from a Canada-China-U.S. perspective. So, here in Canada, of course, the Canada-U.S. dynamic is front of mind for all Canadians. We have always been friends and neighbours, and those commercial ties, including with energy, is fundamentally changing with those… the Americans down South, and it's occurring at a time where China is becoming a greater destination for Canadian energy exports, Philippe, as you mentioned, more oil going out of the Trans Mountain pipeline to Asia and to China, then to the United States, and so China emerging on the field. Soon, we're going to have large LNG off the West Coast of Canada, also destined to Asia. So, really interested in hearing some of your perspectives on how Canada should balance its conventional energy partnerships with the United States against these growing opportunities with China. So, I'd love to hear some of your reflections on that.
Philippe Rheault: Well, thanks, Debbie. That's a very topical question. I think it's one that is top of mind for many. And with the new government that we now have in Canada, the new Prime Minister, I think, has made it very clear that… he said many times that he expects Canada to move towards becoming an energy superpower. What that means in the detail, I think, remains to be seen. But certainly, it sets the stage for some renewed thinking about these questions, right? If I may, I mean, I would maybe rephrase or reframe the way you positioned this. I think it's not really balancing one against the other. I think it's really more for Canada about creating optionality, right? I think, as I mentioned, by simply having a second customer for our crude oil, we're getting a better price from our first customer in addition to being able to diversify, but it's not necessarily an either-or situation. I mean, I would defer to experts on the actual kind of extractive side of things but I do believe it's fair to say that there's a certain elasticity in Canadian supply dynamics, right? And so, if we increase our export capacity, it's not necessarily a zero-sum game, right? So, I would say that.
The second thing is, and maybe we can talk about this more later but I want to make sure I put it out there because I think it's very relevant, it's not just about economics. It's also about diplomacy, and when we look at Canada becoming more significant and a more desirable, both on… a more courted supplier of our critical energy input, that's going to increase our diplomatic attraction and relevancy writ large, right? Both with the U.S., with China, and arguably with the Indo-Pacific or the Asia-Pacific countries more generally, right? And so, there are some diplomatic dividends that can be reaped from this, that if you assume that Canada becomes a reliable supplier of a critical energy and security input for Country X, I think it's fair to assume that then our ability to advance some other aspects of that bilateral relationship will also be improved, right? So, I think that's a really important thing to keep in mind. But if we want to get to that point, we can't get there, I think, without looking at infrastructure, right? And so, there's still a lot of work to do. I think the TMX is an example of what could be. You mentioned LNG Canada. That's another really good one.
If I may, Debbie, I think an interesting anecdote, like I was… having been in China, most of the infrastructure that's in Kitimat now was built in South China, right? It's very expensive, very precise, very large-scale infrastructure, and there's only one place in the world that it can be built and that's in China. It's now all in Kitimat. It's going online. But more importantly, if you look at the shareholders of that project, right? So, there's five shareholders, basically. It's the Chinese, the Koreans, the Japanese, the Malaysians, and the Brits, and Canada by ricochet, we're providing some infrastructure support, etc. So, there's six players there, right? If you look over the last ten years… because this project's been going on for at least ten years, right? Over the last ten years, Canada and China have certainly had their ups and downs. China and Japan have had their ups and downs. China and Korea have had their ups and downs. Korea and Japan have had their ups and downs, right? There's lot of diplomatic problems there, and yet… from what I understand from speaking to the CEO and others that have been involved, this project has been smoothly executed. It's basically on time. It's basically on budget. Why? I think because they all need the energy, right? And so, I think it's a really good example of how if we double down on our energy export capabilities, we may actually become a much more significant player diplomatically and really provide (inaudible) to our Indo-Pacific strategy and the objectives they're in, right? So, I think it's something that's very important to keep in mind. Maybe I could… let's see if there's anything else I'd like to mention. I think maybe I'll stop there.
Debbie Scharf: Okay.
Philippe Rheault: If there's other opportunities to talk about these topics.
Debbie Scharf: Great. Can you still hear me?
Philippe Rheault: Yeah.
Debbie Scharf: Okay, great. Sorry, I thought my microphone got disconnected for a moment. Well, thank you. That was a super insightful answer. And you're right, having so many commercial companies from these various countries all invested in LNG, Canada One, being such a critical piece of infrastructure and a piece of energy security for all those countries as well, it's just a great example, and maybe in the future, in LNG Canada too, if they choose to make that investment.
I just wanted to continue on this thread because I think there's something that can be learned from Germany here as well. Christine, I'd love for you to comment on this. The United States receives 92% of Canada's energy… oil exports today, so apart from all the things we just talked about, I think the future may look different from the past, but as it stands today, 92% of our oil exports. And again, with this dynamic with the United States, Germany having to face up against having a very reliant relationship on Russia, needing to think about how to expand its base of cooperation, is there anything that you can share from a Germany perspective that Canada can think about as we also think about how to broaden our energy base?
Christine Wörlen: Yeah, of course. I mean, within Germany, the renewable energy has gotten a lot of additional support due to the threat to our supply provided by Russia. So, that's definitely one thing to keep in mind. So, renewable energies are something that you can use for being autonomous. Although, of course, if you are looking to replace your exports, I mean, you're looking for income rather than for autonomy, you don't… you have a lot of energy anyway, supplied to you on your own, but diversification is a good key tech to use here, because what we did when we were trying to get off Russian gas was we shut down one pipeline and the other pipeline was exploded. There was still for a long time, a third pipeline going into Central Europe. But of course, we didn't… we weren't supposed to purchase Russian oil and gas anymore. For oil and gas, we now… for oil anyway but for gas more than earlier, we now go to the global market. We built five, a total of five, LNG terminals on the North and Baltic Sea coasts. We purchased a lot of (inaudible) capacity and also some… a lot of gas, natural gas from LNG that was then supposed to onshore there, and this helped us to become more independent of Russian supplies and of Russian price-setting, and we would then take to the global markets for gas. So, we also needed to manage the global price hike that was caused by a global demand hike on natural gas. That hike was actually quite critical for many countries. So, I heard the CEO of Shell actually explaining that he now has to expand his gas exploration capacity because during the crisis, he could not supply important and crucial markets like Pakistan and Bangladesh at prices that they would be able to pay.
Well, Germans could pay but the government was then also subsidizing this payment quite significantly. So, this is a costly strategy for us to diversify our import but the infrastructure is there. So, for now, in the short term, I would say Canadian gas is more welcome to us than Russian gas or U.S. gas for that matter. We are currently having a debate that much of this Russian gas purchase was replaced by U.S. purchase and we're now obviously also afraid of what's coming down the pipe on the U.S. natural gas exports. So, for us, diversifying our imports is a very important strategy but I would put a little bit of salt in that pot of coffee and say in the long run, we want to decarbonize. So, don't build on us for hydrocarbons for a very long time. Also, there is a big tendency to judge gas and oil as well as hydrogen by their carbon footprint in the production. So, fracking gas or oil sand derived oil is facing the risk of being deprioritized in the European market or slashed with carbon adjustments. So, I would… this is not something that's actively discussed. Currently, this is mainly actively discussed though for hydrogen. Hydrogen, we have very strict rules in the European Union. We support only what the European Union calls green hydrogen. This green hydrogen has very strict additionality criteria. It needs to be produced in facilities that are fueled by renewable energy facilities. These renewable energy facilities cannot be also supplying other purposes. The lawmakers went a little overboard on this regulation. They wanted to make sure that we're not producing hydrogen on the back of renewable energy subsidies.
But this also limits, of course, the supply of hydrogen to Europe. So, what is happening now is that in Brussels, there's a big discussion on whether or not to relax that rule and how far to relax that rule. In addition, there is a big discussion on whether or not so-called blue hydrogen is also supposed to be admitted to the European market. Blue hydrogen in the European colour scheme is hydrogen that's derived from natural gas and produced under carbon capture and storage conditions so that the carbon is not emitted to the atmosphere but it's still derived from natural gas. So, the European and particularly German public look at this very critically, but I foresee that at least some blue hydrogen will be imported into the European market, always with a perspective to move to green hydrogen sooner or later. On the other hand, I think there is no way around it and the European Union will also not be able to avoid that or prevent that, that there will be a global commodity market for hydrogen, just uncoloured hydrogen, or in the power market, we would call it gray hydrogen but probably (inaudible) gray hydrogen means something else. And then, sooner or later, European markets will also absorb that uncoloured hydrogen. Yet at this point, there are no regulations and also no support mechanisms for that hydrogen in place, but this is one thing where I think European-Canadian collaboration could be explicitly started and also be very beneficial in terms of not only diplomatic relationships. I don't think they need… I think they are splendid anyway, but also, economic cooperation and also looping Canada into the movements on the European markets, because I speak for Germany and we have 26 more European countries plus the U.K., so lots of diplomacy to be done here.
Debbie Scharf: Christine, super fascinating, and I have to say I think we could spend the next hour just talking about hydrogen and how you build an entire new market around a new commodity and product which has different carbon intensity characteristics, different vectors for how it could be transported, and different infrastructure required, and I worked in hydrogen for a number of years myself. I'm very fascinated by it but I do know that Canada and Germany are engaging in a partnership, trying to figure that out, all of these challenges out, so a really fascinating, fascinating field. But before I leave some of the sort of partnership questions, I did want to just go over to Jorge with a bit of a similar question around Canada-Cuba energy prospects. We talked a little bit… or you had mentioned Canada having a bit of a role in the Cuban energy market in terms of natural gas, I think you noted, providing one of the more stable supplies of energy in the country. Is there anything further that could be done to encourage the energy partnership between these two countries?
Jorge Piñon: It's been a very difficult time for the Cubans in the last 10, 15 years, particularly during, for example, the Obama administration. The Cubans have been approached by many, many individuals and key countries that could play a role and nothing has happened. Raul Castro is 93 years old. There's only two other historical leaders left from the revolution, from the 1957 attack in Santiago de Cuba. So, while those three individuals, particularly Raul Castro, is no longer around, the question that many of us will have, will that be the catalyst? Will that be what Cuba needs to all of a sudden recognize we need to do something? Somebody has to be ready then to fill in that role. So, the Canadians might very well not get a welcome right now but they need to start that role now so that when those events happen in the next two or three years, there is an organization, there is a group, there is a country that can take the role of mediator of sitting between the Americans and the Cubans, particularly to take care of the Helms-Burton law which certainly is an obstacle. So, again, yes, there's a role for Canada but Canada has to have patience. It's not going to be overnight but I welcome it. I think many of us will welcome to have that role played by Canada, certainly.
Debbie Scharf: Thank you, Jorge. I did want to come back. I wanted to pick up on the issue of energy costs, and for lack of better words, sort of social license from the populations of the various countries around facing higher energy costs in the context of some of the transitions that we're talking about. This is certainly an issue in Canada where Canadians have come to expect quite low energy costs and as you think about the very significant investments that need to be made. Christine talked a bit about it, Philippe, you talked a little bit about it, and Jorge, of course, almost rebuilding the entire system in Cuba, it sounds like. How have the governments of these three countries sort of grappled and managed changing energy costs or increasing energy costs with the population in these countries to be able to successfully advance those policies? And I would love to hear some perspectives around that. Jorge, you're big on the screen. So, I'm going to start with you and then maybe hear a bit from Philippe and Christine on that.
Jorge Piñon: Well, the Germans, actually Siemens and along with Total, the French, spent about a year in Cuba in 2018 looking at a number of projects, LNG projects. And at the end, the projects were feasible. They were good. They made sense. Everybody was on board until the question came, who's going to pay for it? The government is bankrupt so the Cuban government doesn't have any money, and the consumer in Cuba is also bankrupt. They don't have any money to pay for the true cost of clean, reliable energy. So, Cuba has a very, very big challenge, a mountain ahead of them to be able to afford clean, reliable energy. Again, remember now, this is greenfield. One of the things that Siemens and Total found is that many of these sites where the current Cuban thermoelectric power plants are, they're so polluted. The ground is so polluted by metals like vanadium, for example, that they won't even touch it. So, most of the large future projects, again, let's assume that they are LNG projects, are greenfield projects, because none of the existing eight facilities really can be used again because of the risk of contamination in the soil and subsoil. So, it's very challenging. And again, Cuba cannot go to the World Bank or the IMF or the Inter-American Development Bank because they're not allowed and they don't meet what the rules of the banks are. It'll take years for Cuba to get their house in order to let this multi-national or multilateral financial institution loan them the 5 to $8 billion that they need.
Debbie Scharf: Well, those are some very, very significant challenges, Jorge, for the country. So, thank you for those remarks. Christine, maybe I'll turn it over to you if you have any reflections with respect to energy costs.
Christine Wörlen: We had the price shock, of course, due to the Russian war and the government had to react very quickly. They did, so as I told you, in diversifying into LNG, building these five LNG terminals. They also did so by a not very elegant measure which is promising enormous amounts of subsidies to consumers so that consumers were comforted and were not… didn't need to be afraid of having to face a cold winter. I think this was good for the general feeling. Anyway, the war was a huge disruption and still is, and a huge kind of risk and a factor of fear. So, at least on that end, people were feeling satisfied. Unfortunately, as it is fashion in Germany, the mechanism through which this was rolled out was extremely complicated and bureaucratic. So, I'm not sure that many people actually felt this subsidy. It was not done in a way that was recognizable to most people. So, overall, the price shock for the people was high and strong but manageable for most… for all. The industry is still suffering from that price shock. The reason for the density or the depth of the shock is also that the marginal power plant on the German power market is a gas power plant, meaning a gas power price hike is translated 1:1 on every kilowatt hour of electricity that's sold in the German market. So, against power price shock, it produces electricity price shock as well, and the industry is still suffering from both these shocks and also calling the new government for more subsidies. A more elegant way was actually proposed by the European Union. The European Union said, we will put a purchase price cap on gas, we'll just signal to the global markets that we will not purchase gas higher than a certain price. The German government did not trust this measure. I don't know why. We see that as soon as… and so, they blocked this measure for a long time. We see that as soon as the Germans gave up their resistance against this measure, the price hike on the global market for gas slowed down, indicating that the European Union does have a demand-side price-setting power and should use it if it needs to do that.
Secondly though, in Germany specifically, we are going for… and all over Europe, we are going for a long-term target of purely renewable electricity markets, 100% renewables on the market. And due to reasons of how the power system is set up now, we cannot have a price signal then anymore when we have a 100% renewable electricity market. So, the current market for power needs to be reformed anyway and I'm not sure that people are thinking about that already in a strategic enough way. We see some aspects of a discussion going to a new power market setup but this is something that the German government should take on with much more thrust than it currently invests in that. We need a power sector market… power market reform. We also need grid fee reform. But still, even with these two reforms, we will face large investments in the transformation of our infrastructure. For that, we also should develop some capital market instruments that help us keep the cost of capital low. I mean, Germany is a very safe, secure investment environment. Infrastructure is a very safe and secure investment. Most infrastructure is actually even regulated, and where it's not, we should regulate it because that lowers capital costs. And ultimately, it lowers the cost for the consumer. So, we have developed a couple of models for that. And currently, for example, the state of Schleswig-Holstein within Germany, is developing a local energy capital fund with the intention of keeping capital available for the investments into, for example, district heating grids or power grids, but at the same time at an affordable and low cost of capital so that ultimately, the energy markets will not go crazy and people will be able to afford energy.
Debbie Scharf: Very interesting. For another time, picking up on financing and different investment tools, it's another really interesting thread, but I'm really curious to hear, very different kind of country, China. We talked a little bit about what the population is willing to give versus what it gets from the government. So, how does this idea of energy costs play out in a China context?
Philippe Rheault: It's a crucial variable, right? First of all, for Chinese economic competitiveness, right? I mean, China is like the largest exporter of manufactured goods in the world. Germany is a big player as well but China is still number one. It's the factory of the world in many areas, right? And so, if the cost of energy goes up, that competitiveness… competitive position goes down, and it's not like China has such a long runway. I mean, there's a lot of other countries that are trying to reach for some of what China has to offer, especially in Southeast Asia as a significant competitor. So, that's a key area. And if the economy slows down, then you're into national security and social stability issues, right? So, even just from that perspective, it's a key, key variable, right? And as we mentioned earlier, the government is making a gambit, right? This gambit is that by 2060-ish, the value proposition of renewables and clean tech is going to be such that we won't be talking about this question anymore. But in the meantime, they need to figure out that transition phase and they're not going to make that transition at any cost, right? So, what does that mean in the short term? It means continued reliance on coal-fired power. It also means trying to secure as much cheap oil as possible, not just from Russia but from places like Venezuela and Iran that because of U.S. sanctions are a pretty good value proposition from the Chinese perspective, right?
I'll just add though, since you were talking about how China is a different place, I mean, it's also interesting to take a look at… there's also costs to the way the Chinese are doing their clean energy transition, right? Because it's state-driven, right? It's central government-driven. And so, the upside of that is that the Chinese have proven in the past that when they have national priorities that are set, the whole system aligns in order to deliver them but not necessarily in the most efficient way, right? And so, what you're having now is like overinvestment. You have subnational governments that have kind of taken the cue from Beijing and they're competing with each other in terms of trying to develop different projects. State-owned enterprises have their own agendas and they're trying to advance those state-owned enterprise agendas on the back of their national priorities, etc. And so, you end up with perhaps a lower ROI on your capital in terms of getting to the end game, right? So, it's an interesting gambit. I think that that is the flip side of the cost equation when it comes to China, right? So, it's kind of like the mirror image of the challenges we have in Germany or Canada. And I think as we reflect on our own kind of trajectory, maybe we want to try to find some… maybe this is a conversation for another day, but try to find ways to pick and choose some aspects of the Chinese model that we could integrate into our system but still having that kind of market discipline that allows for a more efficient kind of rollout.
Debbie Scharf: Yeah, and you picked up on another question I had but I think you've answered it really, really nicely, which is about some of the benefits and shortcomings of market-led approaches versus state-led approaches, and there certainly seems to be some good and bad that comes with each one, and hearing from you a bit of, how do you find the sweet spot of how you could take the best of each type of model to find the right pathway? And that actually really leads in nicely to my next question, because we've talked a lot about the challenges of today reacting to the dynamics globally. But looking forward 20 years, maybe even it's 2060, 2050/2060, we'd love to hear some perspectives on how you think the energy future in China and in Germany and in Cuba will unfold based on your understanding of the context of the countries in which you are experts in. And so, what does 2050 look like in China? How did that unfold? Did it unfold in a measured way? Was it a bit chaotic? So, we'd love to hear some perspectives. And Philippe, you get to go first because you're big on the screen.
Philippe Rheault: Thank you. Okay, well, I may re-emphasize a couple points I made but I think there's a couple of new ones as well. So, first of all, as we've kind of explored already, I think China is indisputably right now a tech leader in many aspects of this, and it'll be… and it's well on the way to a dominant position, right? And so, that means it's going to reap commercial benefits as well as soft power benefits as well as influence benefits in the Global South and all sorts of fringe benefits from trying to maintain that position. There may be some ways for Canada, North America, and Europe to play and stake out some ground. But certainly, there's got to be a sense of urgency when we look at where China's going on this, right? So, if you look 20 years down the road, I think it's fair to say that it'll be really one of the energy transition leaders. I think the data is clear. Even in more pessimistic scenarios, you'll be seeing at least 50% of Chinese energy coming from non-fossil fuel sources. Coal use has already peaked. The carbon footprint in China has actually peaked earlier than expected. So, the IEA has actually kind of endorsed these projections, that they're already kind of starting a downward trajectory. So, that's excellent.
We mentioned hydrogen. I won't elaborate but Germany is certainly an important player, but China's also a tech leader in that area. And having worked with companies like Ballard and others who are also involved in China, when you see it first-hand, you realize that China's a formidable player in that area as well, and also if you look at some other factors that I'll just mention because they help inform the broader picture, demographics, right? So, in China, you're going to be… 20 years from now, you're looking at a China… I don't have the numbers but let's say it's going to be close to… it'll be under a billion people, perhaps maybe not 20 but in 30 years, it will have lost three or four hundred million people, right? And so, that's going to reduce kind of the ecological and energy kind of pressure that the country is facing. It's one of the most advanced countries in terms of robotization and automation of manufacturing with increased energy efficiency, etc. So, there's a lot of kind of tailwinds actually in some ways, right? So, those are all kind of interesting.
And if I may, I might add one last point, right? Which is climate change. Because we only have so much time, I haven't really talked too much about hydropower in China or nuclear in general but hydro is still a key part of the equation as well. For China… and where does it get its hydro? Most of it it's getting from these big rivers that flow from the Tibetan plateau. And those rivers, some of them like the Yangzi or the Yellow River, stay in China but others like the Mekong or the headwaters that go into India are going into other places. The Mekong Delta region is heavily dependent on that water, both for energy and sustenance, food, etc. There are some projections where those water flows are pretty substantial right now but it's because of the heavy glacier melt, right? And 20 years from now, that might have reversed, difficult to speculate what might happen but you can see some geopolitical tensions on the horizon if China holds the keys to energy and food supply indirectly into India and into all of Southeast Asia, right? So, climate change is (inaudible) in terms of hydropower and how that fits in the mix and some of the geopolitical ramifications as well. So, lots to think about.
Debbie Scharf: Absolutely. I mean, I think China, from everything you've said, is going to play an outsized role in just about every aspect of the energy system in whether it's from a tech perspective, a generation perspective, a GHG emissions perspective. Certainly, it will continue to play that outsized role globally. So, thank you for that. Maybe I'll just turn it over to Christine for some reflections.
Christine Wörlen: Yeah, let me just continue on that also on an information perspective and a scientific perspective. We recently had some publications, I believe it was in The Financial Times, that Europe has, and I believe even the U.S. has, lost all elements of leadership, all individual technology leaderships in the clean tech sectors, to China. It is not something that we talk about very often but we should. In fact, even electrolysers, Philippe, I don't think that Germany necessarily has the tech leadership on that one. It's all in China. Batteries, as you mentioned, but also (inaudible), automatic driving, even the way how they perceive a car is different now since electric vehicles are so much more pertinent there than in, for example, Europe. The attitude to a car and the demands that you have of a car have changed. So, now, the car is a moving entertainment space for them while in Germany, people are still very about gears and having enough rounds per minute. That's not something that the Chinese driver is worried about anymore. Anyway, as for Europe, I think the development will be less chaotic than one might think. We have had a couple of chaotic years and still we're still standing and still functioning. Everything, as you said, energy security, is given. We have put in a couple of safety measures including more gas storage and we will need to do these reforms that I talked about. We will have a better integrated European power grid. We will have more and additional infrastructures, including the hydrogen grid that I've talked about. We will probably also have a carbon dioxide… I'm not sure if it's a grid but some kind of pipeline system that will bring carbon dioxide to safe storage places even though CCS is highly debated. That's also somewhere, if Canada has safe storage for carbon, that also would be an area for cooperation.
We will have a level use of nuclear power, although many people talk about a rise in nuclear power. It takes a long time to plan, permit, and build a nuclear power plant. So, in 20 years from now, we might have two more plants. Other plants might retire. There's no nuclear boom that people are predicting right now but what we will have is we will have a very different situation in terms of who produces renewable electricity, for example. Because with renewable electricity, particularly solar PV, everybody can produce renewable electricity on their roof. And for Germany, this offers opportunities that we have not elaborated upon. We have not even looked at them closely because we are so tightly regulated that it's very hard to get into a lot of a bureaucratic jungle if you do too much on that, but we certainly will have to reduce this red tape and move into an area where PV solar photovoltaics are sitting on every roof and feeding into a lot of heat systems also. So, we will have a lot of heat storage, also another thing that nobody talks about, which also will be seasonal heat storage. We will take heat and solar radiation as an energy source from the summer into the winter, also lots of infrastructure necessary for that. But overall, it will look just the same as it does now.
Debbie Scharf: Fantastic. Jorge, to predict Cuba's energy future.
Christine Wörlen: I see a good and a bad vision.
Debbie Scharf: (laughs)
Jorge Piñon: I know, I know. Well, I'll tell you, Debbie, if I had a crystal ball, my problem is not five, ten years from now. My challenge is, what are we going to have at the end of this year? That's how critical and difficult the situation is. You have a total collapse of the system and anything that you bring in could be outmoded technology in the next five or ten years. You guys are talking about hydrogen. That's just like me talking about going to Mars. Remember, even with the 24% of renewables, you're talking about still 60% of fossil fuels. That's the alternative, by the way. So, no, our situation is totally different.
Philippe Rheault: But there might be a silver lining there, Jorge, just to maybe try to put a silver lining on things, right? Some of the reasons why China is so successful in renewables now is because it had the opportunity to leapfrog some of the legacy approaches that we had in the West, right? Whether it's in terms of not spending all the time to develop the expertise in internal combustion engines that, for example, Germany has, not making the same mistakes in terms of rolling out the grids, adopting mainly early adopters without some of kind of the costs of transitioning. So, I wonder… sorry, Debbie, but just I'm trying to be optimistic here for Cuba because my first posting as a diplomat was in Havana and I sympathize very much with some of the problems there. I wonder if this is not also an opportunity because there's not a lot of sunken costs. And maybe as countries like China and the West move to newer, more effective green technologies, Cuba can just jump right in without some of the headwinds. Do you think that's possible?
Jorge Piñon: Philippe, that was the problem with the Chinese. I mean, the Chinese were frustrated with the Cubans and they are still frustrated with the Cubans because two of the Keystone projects, the wind project and the biomass project, that could be the catalyst that will begin this whole process of building the pyramid that we needed, have been going on for over ten years and they're still not online. And again, I underscore the fact that these are 100% Chinese-financed, 100% Chinese technology. There was no outside influence holding back those projects, and the Chinese were very, very frustrated. We have a mindset in Cuba today on its top leadership, that it's going to be very, very difficult to change, and I think the next two or three years, the question is… and by the way, there's no bench. Cuba doesn't have a bench as far as this leadership is concerned. Who can you bring in? The only two; the church or the army? Those are the only two institutions in Cuba today that can play some sort of a role within the next three, five, ten years, and I underscore again, one more time, Canada. Canada has a role. You have to be patient. But when the change happens, when that vacuum begins to open up, someone has to be there to hold their hands and I think that could very well be Canada.
Debbie Scharf: Jorge, what a great way to end our Q&A session because we are just at time. It has been so interesting to be part of this conversation. I feel really privileged to have been able to be the moderator here today. This does, in fact, conclude today's discussion. I did want to say, both on behalf of myself and the organizing team at the Canada School of Public Service, I want to personally thank Philippe and Christine and Jorge for being part of this really important conversation. I think, Jorge, Canadian public servants will be watching the Cuban energy sector with an added level of interest that they may not have had before after, in particular, some of the insights you've shared today. So, I would just say to those who are listening into this broadcast, if you're hoping to learn more about the key role energy plays in Canada and the energy challenges and opportunities facing our country, keep an eye out on the School's website for future events and products that will be part of this series, and I just wanted to note that the speakers' presentations and supplementary briefing document in particular on the Cuban energy situation, for those that are interested, will be available in Brightspace under Resources. So, with that, I want to just say, once again, thank you so much for joining us and I wish you all a wonderful day.
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