Tumbling Clean Energy Investment a ‘Good Problem’ for Canada
The bad news: investment in clean energy in Canada “tumbled by 46% last year,” to $3.16 billion, the lowest figure in more than a decade, the National Observer reports. The good news: it’s partly because our grid is so green already. And electrifying transportation may change the investment equation.
Citing data released by Bloomberg New Energy Finance, the Observer says the drop in new investment in Canada far exceeded a more general global decline. “Bloomberg’s analysis shows new investment in clean energy [not including large-scale hydro] was down 18% per cent worldwide last year. Investment heavyweights like China and the U.S. experienced investment declines of 26% and 7%, respectively, in 2016.”
Like this story? Subscribe to The Energy Mix and never miss an edition of our free e-digest.
Analysts saw both cyclical and structural reasons for the big drop in new Canadian commitments.
The expiry of a feed-in-tariff program in Ontario, and Quebec’s completion of planned wind energy additions, “appear to be the main reasons for the investment decline,” the Observer notes.
“Those policies have, for the most part, run their course,” said Amy Grace, BNEF’s head of North American research. “The better way to look at it from Canada’s perspective,” she added, “is that the last couple of years have been an anomaly, based essentially on a bunch of projects coming through the pipeline all at the same time. No other region in Canada will supplant Ontario and Quebec’s recent build.” The two provinces account for three-quarters of Canada’s electricity production and half of its consumption.
The other hurdle to investment in the sector, the Observer concedes, “is actually a good problem to have. Canada has less electricity to decarbonize than its peers in the G8.”
As Robert Hornung, president of the Canadian Wind Energy Association, observed, “the challenge is that 80% of our electricity is already non-emitting.” By contrast, half of Germany’s electricity and 67% of the United States’ is generated from fossil fuels.
Most of Canada’s clean power comes from large-scale hydro, but the country is also seventh in the world for installed wind capacity and tenth in solar. It also has significant non- emitting nuclear generation in Ontario, and one nuclear station New Brunswick. As a result, electricity generation represents only 11% of national greenhouse gas emissions. That will fall further by 2030, the federal government’s target date to eliminate most remaining coal generation from the national mix.
Meanwhile, much of the country has only limited need for new generation. Natural Resources Canada and the National Energy Board both foresee nearly flat, 1% annual growth in Canadians’ power consumption through 2040. In major power-exporting provinces like Quebec and British Columbia, projected electricity supply far exceeds anticipated demand. B.C., in fact, is in the processing of adding further unneeded capacity, in the low-carbon but highly controversial Site C hydroelectric project on the Peace River, in the province’s northeast.
Nonetheless, Canada is also “the eleventh-biggest GHG-emitting country in the world,” the Observer notes, citing the World Resources Institute. “The oil and gas and transportation sectors account for more than half of the country’s emissions.”
Addressing that problem could also address the slump in clean energy investment, said John Gorman, president and CEO of the Canadian Solar Industries Association. Once that remaining 20% of Canadians’ power supply is greened, “the only thing you can do is electrify the transportation, buildings, and industrial processes of your country.”
Although the Observer didn’t expand on the point, other outlets have projected that a breakout of electric vehicle sales in mainstream markets within the next half-decade could provide an answer to flat electricity demand and stubborn transportation sector emissions.