Canada's clean machine expands

Utilities Unbundled - Issue 14

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Canada has a long history of producing clean energy – something four leading companies are continuing at home and abroad.

“The good news is once you invest the capital then we don't pay an escalating cost per megawatt hour — we don't pay any cost per megawatt hour.”

— Nancy Tower, CEO, Emera Newfoundland and Labrador

Nalcor and Emera: hydro power with undersea link

Canadian utilities Nalcor Energy of St. John's and Emera Inc. of Halifax are teaming up to build a new hydroelectric power development to bring clean power from Muskrat Falls, Labrador to Nova Scotia. The US$7.6b project will include:

  • An 824 MW capacity hydroelectric facility at Muskrat Falls
  • A roughly 1,100 km transmission link from Labrador to the island of Newfoundland
  • An undersea Maritime Link from Newfoundland to Nova Scotia, delivering up to 500 MW of power to the rest of eastern Canada and the northeastern United States (see Figure 1)

Figure 1: The Muskrat Falls project

Expected to be operational in 2017, the Muskrat Falls project provides a low-cost solution to meet stringent federal requirements and local renewable targets by:

  • Enabling the shutdown of an oil-fired generation facility
  • Making the province's system 98% clean
  • Meeting future load growth

Gilbert Bennett, Vice President for the project with Nalcor, says that a Canadian Government loan guarantee will reduce Nalcor's cost of borrowing by hundreds of millions of dollars.

“The good news is once you invest the capital then we don't pay an escalating cost per megawatt hour — we don't pay any cost per megawatt hour,” says Nancy Tower, CEO of Emera Newfoundland & Labrador, formed by Emera to develop the Maritime Link.

Algonquin: tripling the asset base

At the end of 2009, Algonquin Power & Utilities Corp. CEO Ian Robertson and his colleagues came up with an audacious goal: to double Algonquin's asset base in five years.

In fact, they nearly tripled assets to US$2.78b by the end of 2012. Their approach was two-pronged:

  • Utilities: focusing on US$100m to US$300m utility systems
  • Power generation: selling power under long-term contracts to Canadian utilities

“It's easier to develop a power project in Canada if one has a power purchase contract because generally the counterparty is a highly credit-worthy organization,” says Robertson.

In his opinion, running both regulated and deregulated businesses gives Algonquin the best of both worlds. “With a 50/50 split, we get the benefit of the stability that comes from the utility side, but also get the sizzling upside that comes from the Independent Power Producer space both in Canada and the US.”

Brookfield Renewable: world's largest pure-play renewable power company

Having been in the hydroelectric business for 100 years, Brookfield Renewable Energy Partners is now the largest pure-play renewable power company in the world.

It owns 5,800 MW of capacity, including US$17b of hydroelectric and wind assets in Canada, the US and Brazil.

Sachin Shah, Brookfield Renewable's CFO, sees distinct advantages in its balance of 85% hydropower, including:

  • Flexibility, because hydropower can be used immediately or stored
  • Long-lived assets
  • Plentiful supply

A 2012 International Energy Administration report forecast global hydropower capacity will double to 2,000 GW by 2050.

Shah is bullish about Brookfield's markets, particularly Brazil, where it has operated for over 50 years: “Brazil is a market we like a lot and we're considered a local company there.”

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