The Future of Energy

This article was initially written on February 25, 2017 before joining InvestorsFriend.

Hello All,

Yesterday I had the pleasure of attending Alberta Ecotrust’s 2017 Environmental Gathering on behalf of my employer, Capital Power, and earlier this week our CEO also made a site visit in which he discussed the outlook for energy.

According to our CEO, Canada has put together a variety of “plans” to achieve our GHG goals by 2050, and I was surprised by their conclusions:

  • Half of the plans had natural gas (NG) consumption cut to half by 2050, the other half had NG consumption cut to 0
  • In all cases, only 17% of the energy were renewables (primarily wind and solar)
  • In all cases, hydro power doubled
  • The remaining consumption was nuclear power

Now this is just the dumbed down summary; the plans also talked about how these results would be achieved, primarily by new incentives for electric vehicles and efficiency in housing, but honestly I thought the plans sounded a little optimistic, especially in regards to the major predicted cutback in NG consumption (NG powers and heats about 50% of Canada’s homes).

But after yesterday’s conference I realized that these predicted changes are very real and very grounded. 2050 is 33 years away; just think of everything that has happened in the last 33 years.  The internet was invented 34 years ago and the World Wide Web just 27 years ago… things change fast.  Let me drop a couple more facts that I learned at the conference yesterday:

  • The cost of solar energy has been reduced 100x in the last 36 years and is expected to drop another 3x by 2020 in Alberta
  • Solar energy is the world’s most broadly implemented renewable and almost 50% is produced by small-scale applications (ie. buildings)
  • Alberta has some of the best wind AND solar resources in the world and yet is being considerably outpaced in renewables by jurisdictions such as Germany with MUCH worse resources
  • The cheapest form of energy is efficiency (ie. smart thermostats for your house), but the next cheapest in Alberta is now officially wind (the speaker noted this is complicated, but regardless I can tell you that every power company is developing wind power at a rate you wouldn’t believe)
  • Alberta was the last jurisdiction in North America to implement an energy efficiency program (yes, the last)
  • China spent billions (I can’t remember/find exactly how many, but I want to say $110B) on developing coal power last year, but that was only a fifth of the amount they spent on renewables
  • Household appliance energy consumption in Alberta has been cut 3.5x over the last 45 years
  • Edmonton is one of the world leaders in “net-zero” housing and there are plans to develop a community of 30,000 people, powered and heated completely by renewables, in Edmonton
  • Net-zero homes are now being sold for comparable costs to regular homes.  For example, we were shown a 1200 sq ft. net-zero home in Edmonton that was selling for $389k; to clarify, that means you don’t ever pay an electricity bill
  • The Netherlands recently decided to convert every building in their country to net-zero

Those last 4 points are what really struck me; NG consumption is actually going to decline, and that is not optimistic, it is realistic.

Also, spoiler: the Minister of Alberta Environment and Parks (AEP), Shannon Phillips, hinted that on Monday, Alberta will be revealing a solar program for residences (finally).

I hope you found some of this insight as fascinating as I do, and more importantly, I hope that they help guide your investment decisions.

 

Cheers!

Zach
“We make a living by what we get.  We make a life by what we give.”

 


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