Canada Says Goodbye to Coal Generation by 2030

David Fessler By David Fessler, Energy and Infrastructure Strategist, The Oxford Club

Alternative Energy

This past March, Scotland burned its last chunk of coal to make electricity. After 115 years of burning it, the country is now coal-free.

 When I heard the news, I knew it was only a matter of time before another country announced the end of coal-fired generation. The real surprise was when it turned out to be our northern neighbor.

On Monday, November 21, the Canadian government announced an end to coal-burning power plants by 2030. It intends to replace them with renewable energy sources like solar, wind and hydro.

Canada’s decision creates huge investment opportunities for green technology companies and individual investors. But more on that in a moment.

Right now, coal-fired power plants emit 75% of greenhouse gas (GHG) emissions from the Canadian power sector. That’s equal to 8% of all of Canada’s GHG emissions. Getting rid of them goes a long way in reducing the country’s GHG emissions.

While the U.S. has eliminated or is in the process of eliminating 44% of its coal-fired plants, it has a lot more work to do.

Canada is well out in front of the U.S. In fact, it’s well on the way to the complete decarbonization of its power generation.

Why is it so far ahead of the U.S.? Canada has a lot to lose if global warming continues unchecked.

  • The habitat of the polar bear could all but disappear.
  • The way of life for Canada’s indigenous Inuit population depends on cold winters with lots of ice.
  • Many of Canada’s northernmost villages are accessible only by ice roads in the winter.

So it’s no wonder that Canada now has some of the world’s most advanced climate change policies.

Getting rid of coal-fired power plants is equal to taking 1.3 million cars off its highways. But this is just the start…

About 80% of Canada’s electricity comes from non-emitting sources. Only four of its 10 provinces have coal-fired power plants.

Its decision to kick the coal habit is a big invitation to solar, wind, hydro and other clean energy technologies. Once Canadian coal-fired plants are history, more than 90% of its power generation will be non-emitting.

 That will be impressive.

That said, there is an exception to Canada’s ban on coal-fired plants… plants that use carbon capture and storage (CCS) technology will still be allowed.

And there’s good reason. CSS technology captures the carbon dioxide, and pipelines transport it to oil producers who purchase and use it in enhanced oil recovery operations.

Canada’s Boundary Dam CCS coal-fired power plant produces 115 MW of baseload power.

But its CO2 production is zero.

SaskPower, the major power producer in the province of Saskatchewan, operates the plant. The system has been in operation since 2014. It captures and stores approximately 1 million tonnes of CO2 annually.

This is all part of another big move Canada made this fall. Not only did Canada pass stronger GHG regulations, but it also took the wraps off a $22 billion, 11-year investment in green energy infrastructure. CSS technology is a small part of that $22 billion investment.

It also includes interprovincial transmission lines to reduce reliance on local coal-fired power plants. Expansion of smart grid initiatives to make better use of existing non-coal-fired power plants and the development of renewable power are also part of the plan.

Investors Take Note

 When looking for an example of green energy fast-tracking, most people think of California. But over the last decade, Canada’s adoption of clean energy has made that country the real superstar.

For example, over the last 10 years, Canada’s wind capacity has increased 20-fold. Solar adoption has exploded, too. It’s up 125-fold in the last decade.

 One of the best ways to play the renewable space in Canada is through one of my favorite types of investments… master limited partnerships.

Brookfield Renewable Partners L.P. (NYSE: BEP) is an MLP that’s based in Hamilton, Bermuda. Brookfield is one of the world’s largest public, pure-play renewable generating businesses.

It has 2,000 employees and more than 100 years of power generation experience. Brookfield owns and operates a portfolio of 260-plus renewable energy-generating plants.

More than 180 of them are in the U.S. and Canada. Together, they provide clean power to more than 2 million homes.

Its generating facilities are worth a total of $25 billion. Together, they total 10.7 gigawatts of generating capacity.

About 90% of the power produced by its assets is backed by long-term (16-year blended age) contracts. This provides stable cash flows.

That’s important, because Brookfield, like many of the great MLPs I’ve looked at in the past, pays a healthy 6.02% dividend yield. Even in today’s rising interest rate environment, 6.02% is hard to beat.

But what I really like is Brookfield’s distribution growth. How about a healthy 6.5% compound annual growth rate since 2011?

Unit holders who reinvest their distributions have generated five-year returns of 15%. That’s not bad, and there’s every reason to assume those will continue.

With Canada saying goodbye to coal, it will be saying hello to more renewable generation. Income-oriented energy investors should consider adding companies like Brookfield Renewable Partners to their energy portfolios.

Good investing,

Dave