In the energy markets, the centre of gravity is shifting away from fossil fuels around the world. Over the past decade, extraordinary progress has been made with renewables and energy storage solutions that promise to overhaul our energy mix and accelerate the transition to a cleaner energy future and a healthier planet. Propelled by technology advancements, solar and wind power are now the cheapest new sources of electricity in several countries that make up more than two-thirds of the world’s population(1). Renewables stand committed to weaken the position of long-standing fossil fuels, coal and natural gas. In 2019, 40 percent of all new electric capacity added to the US grid came from solar, the largest such share in the past, attributable to solar’s increased competitiveness against other technologies. Bundled with energy storage, renewables have the potential to provide a reliable and stable source of energy for electricity and for other high carbon-emitting sectors, such as transportation, that are also being decarbonized in tandem.
2019 was a tipping point for the US energy sector as the annual energy consumption from renewable sources exceeded energy consumption from coal for the first time in 130 years(2). Coal, which in the past has been the go-to choice for power generation, has seen a rampant decline in demand in the US, owing to fierce competition from low-cost natural gas and now cheaper renewables and increased policy focus on the environmental concerns associated with coal consumption. This has naturally stunted the growth of new coal plants and has led to retirements at a massive scale, as evidenced in the map below(3). Closer to home, in Canada, the trend is moving in tandem and is further supported by the Federal Government through a policy framework set up in 2018(4) that put in place strict emissions requirements that will require coal-fired power plants to be shut down at the end of their useful life. Currently 4 provinces operate coal power plants: Alberta, Saskatchewan, New Brunswick, and Nova Scotia and each of whom are deploying various, long-term strategies to replace retiring coal-fired power generation. In Canada today, 9 percent of electricity is generated with coal.
The transition to a clean economy future received a formalized international commitment and target in 2015 when 195 countries signed the Paris Agreement to strengthen the efforts to limit the global average temperature rise to well below 2°C and pursue efforts to limit the increase to 1.5°C. Although, the US withdrew from the Paris Agreement in 2017, state governments across the country are taking meaningful steps against climate change and toward building a clean energy economy. Thirty states plus the District of Columbia have a mandatory RPS program(5). These programs vary widely from state to state in terms of target percentages and dates. In Canada, although several provinces generate a bulk of their energy from hydro power – collectively 60 percent, local or regional governments across British Columbia, Ontario, Saskatchewan, Quebec and Prince Edward Island have taken steps to increase renewable energy in their energy mix.
Source: Center for American Progress
We believe that the improved economics of renewable energy sources coupled with a strong regulatory support can accelerate the transition to a clean economy. We are committed, alongside other stakeholders, to support this transition by investing in next generation business models to decarbonize energy and transportation.
Author: Geetanjali Kanwar, Analyst @ MacKinnon, Bennett & Company Inc.