The federal government is forging ahead with plans for an energy and climate partnership with the United States and Mexico amid heightened uncertainty over President Barack ObamaÂ’s ability to deliver on his key policy for driving down carbon emissions.
Natural Resources Minister Jim Carr on Friday met in Winnipeg with U.S. Energy Secretary Ernest Moniz and MexicoÂ’s Pedro Joaquin Coldwell, and agreed the three nations should heighten their joint efforts to meet clean energy and climate challenges.
Prime Minister Justin Trudeau is expected to highlight the importance of North American co-operation on energy and climate when he meets Mr. Obama on a state visit to Washington next month. The two leaders – plus Mexican President Enrique Pena Nieto – will then gather for the “three amigos” summit in May.
At their two-day meeting in Winnipeg, the energy ministers signed a memorandum of understanding that established working groups covering: low-carbon electricity clean energy technologies energy efficiency carbon capture, use and storage climate change adaptation and reducing emissions from the oil and gas sector.
“We’ve always known that co-operation is key to make us all stronger and more competitive internationally,” Mr. Carr said on a conference call. The agreement “builds on the important strides we’ve made over the years towards a continental energy strategy and it expands our relationship towards an even more ambitious clean energy and environmental agreement.”
Their meeting comes just days after the U.S. Supreme Court issued a stay on Mr. Obama’s signature Clean Power Plan until it hears arguments from states and business groups that are challenging its constitutionality. Administration officials – including Mr. Moniz on Friday – expressed confidence that the court will uphold the climate plan, which would force states to reduce emissions from coal-fired power and expand the use of natural gas, hydro and renewable sources.
But several states have indicated they will slow their implementation efforts, and financial analysts from Citigroup Inc. said the courtÂ’s decision to temporarily suspend Mr. ObamaÂ’s executive order suggests the administration faces a tough battle when it comes to arguing the merits of the case.
Canadian electricity producers are already major exporters to the United States, and sales hit record numbers last year. But hydro-based utilities and renewable power producers are eager to increase sales of low-emission electricity in the coming years to states that are looking for options to comply with the Clean Power Plan. A study by the North American Electric Reliability Council suggested Canadian electricity exports could triple by 2030 under the Obama plan.
Power producers on this side of the border are looking at the U.S. Supreme Court decision “as a speed bump rather than a signal to turn back,” Sergio Marchi, president of the Canadian Electricity Association, said in an interview from Winnipeg, where he participated in a trilateral business-government energy forum. Several states are continuing their work on the Clean Power Plan, and others are moving on their own to replace coal-fired power.
“Clean energy is the future,” he said. “So, there are two options: Either embrace that future and work for it now, or cling to the past and miss that future‎.”
The agreement signed Friday in Winnipeg builds on work done by the previous federal government, which signed a similar memorandum on co-operation in December, 2014.
However, environmental advocates said the difference this year was the level of commitment by the Canadian government, and the absence of discussion on cross-border oil pipelines after Mr. ObamaÂ’s decision last November to kill TransCanada Corp.Â’s proposed Keystone XL pipeline. Indeed, Mr. Carr said there was no discussion of Enbridge Inc.Â’s proposed Alberta Clipper cross-border pipeline expansion, which is awaiting U.S. approval.
B.C. LNG Electrification embeds clean hydro and wind power into low-emission liquefied natural gas, cutting carbon intensity, enabling coal displacement in Asia, and opening grid-scale demand for independent power producers and ITMO-based climate accounting.
Key Points
Powering LNG with clean electricity cuts carbon intensity, displaces coal, and grows demand for B.C.'s clean power.
✅ Electric-drive LNG cuts emissions intensity by up to 80%.
✅ Creates major grid load, boosting B.C. independent power producers.
✅ Enables ITMO crediting when coal displacement is verified.
B.C. has abundant clean power – if only there was a way to ship those electrons across the sea to help coal-dependent countries reduce their emissions, and even regionally, Alberta–B.C. grid link benefits could help move surplus power domestically.
Natural gas that is liquefied using clean hydro and wind power and then exported would be, in a sense, a way of embedding B.C.’s low emission electricity in another form of energy, and, alongside the Canada–Germany clean energy pact, part of a broader export strategy.
Given the increased demand that could come from an LNG industry – especially one that moves towards greater electrification and, as the IEA net-zero electricity report notes, broader system demand – poses some potentially big opportunities for B.C.’s clean energy independent power sector, as those attending the Clean Energy Association of BC's annual at the Generate conference heard recently.
At a session on LNG electrification, delegates were told that LNG produced in B.C. with electricity could have some significant environmental benefits.
Given how much power an LNG plant that uses electric drive consumes, an electrified LNG industry could also pose some significant opportunities for independent power producers – a sector that had the wind taken out of its sails with the sanctioning of the Site C dam project.
Only one LNG plant being built in B.C. – Woodfibre LNG – will use electric drive to produce LNG, although the companies behind Kitimat LNG have changed their original design plans, and now plan to use electric drive drive as well.
Even small LNG plants that use electric drive require a lot of power.
“We’re talking about a lot of power, since it’s one of the biggest consumers you can connect to a grid,” said Sven Demmig, head of project development for Siemens.
Most LNG plants still burn natural gas to drive the liquefaction process – a choice that intersects with climate policy and electricity grids in Canada. They typically generate 0.35 tonnes of CO2e per tonne of LNG produced.
Because it will use electric drive, LNG produced by Woodfibre LNG will have an emissions intensity that is 80% less than LNG produced in the Gulf of Mexico, said Woodfibre president David Keane.
In B.C., the benchmark for GHG intensities for LNG plants has been set at 0.16 tonnes of CO2e per tonne of LNG. Above that, LNG producers would need to pay higher carbon taxes than those that are below the benchmark.
The LNG Canada plant has an intensity of 0.15 tonnes og CO2e per tonne of LNG. Woodfibre LNG will have an emissions intensity of just 0.059, thanks to electric drive.
“So we will be significantly less than any operating facility in the world,” Keane said.
Keane said Sinopec has recently estimated that it expects China’s demand for natural gas to grow by 82% by 2030.
“So China will, in fact, get its gas supply,” Keane said. “The question is: where will that supply come from?
“For every tonne of LNG that’s being produced today in the United States -- and tonne of LNG that we’re not producing in Canada -- we’re seeing about 10 million tonnes of carbon leakage every single year.”
The first Canadian company to produce LNG that ended up in China is FortisBC. Small independent operators have been buying LNG from FortisBC’s Tilbury Island plant and shipping to China in ISO containers on container ships.
David Bennett, director of communications for FortisBC, said those shipments are traced to industries in China that are, indeed, using LNG instead of coal power now.
“We know where those shipping containers are going,” he said. “They’re actually going to displace coal in factories in China.”
Verifying what the LNG is used for is important, if Canadian producers want to claim any kind of climate credit. LNG shipped to Japan or South Korea to displace nuclear power, for example, would actually result in a net increase in GHGs. But used to displace coal, the emissions reductions can be significant, since natural gas produces about half the CO2 that coal does.
The problem for LNG producers here is B.C.’s emissions reduction targets as they stand today. Even LNG produced with electricity will produce some GHGs. The fact that LNG that could dramatically reduce GHGs in other countries, if it displaces coal power, does not count in B.C.’s carbon accounting.
Under the Paris Agreement, countries agree to set their own reduction targets, and, for Canada, cleaning up Canada’s electricity remains critical to meeting climate pledges, but don’t typically get to claim any reductions that might result outside their own country.
Canada is exploring the use of Internationally Transferred Mitigation Outcomes (ITMO) under the Under the Paris Agreement to allow Canada to claim some of the GHG reductions that result in other countries, like China, through the export of Canadian LNG.
“For example, if I were producing 4 million tonnes of greenhouse gas emissions in B.C. and I was selling 100% of my LNG to China, and I can verify that they’re replacing coal…they would have a reduction of about 60 or million tonnes of greenhouse gas emissions,” Keane said.
“So if they’re buying 4 million tonnes of emissions from us, under these ITMOs, then they have net reduction of 56 million tonnes, we’d have a net increase of zero.”
But even if China and Canada agreed to such a trading arrangement, the United Nations still hasn’t decided just how the rules around ITMOs will work.
Nova Scotia Energy Modernization Act proposes an independent system operator, focused energy regulation, coal phase-out by 2030, renewable integration, transmission upgrades, and competitive market access to boost consumer trust and grid reliability across the province.
Key Points
Legislation to create an independent system operator and energy regulator, enabling coal phase-out and renewable integration.
✅ Transfers grid control from Nova Scotia Power to an ISO
✅ Establishes a focused energy regulator for multi-sector oversight
✅ Accelerates coal retirement, renewables build-out, and grid upgrades
Nova Scotia is poised for a significant overhaul in how its electricity grid operates, with the electricity market headed for a reshuffle as the province vows changes, following a government announcement that will strip the current electric utility of its grid access control. This move is part of a broader initiative to help the province achieve its ambitious energy objectives, including the cessation of coal usage by 2030.
The announcement came from Tory Rushton, the Minister of Natural Resources, who highlighted the recommendations from the Clean Electricity Task Force's report to make the electricity system more accountable to Nova Scotians according to the authors. The report suggests the creation of two distinct entities: an autonomous system operator for energy system planning and an independent body for energy regulation.
Minister Rushton expressed the government's agreement with these recommendations, while the premier had earlier urged regulators to reject a 14% rate hike to protect customers, stating plans to introduce a new Energy Modernization Act in the next legislative session.
Under the proposed changes, Nova Scotia Power, a privately-owned entity, will retain its operational role but will relinquish control over the electricity grid. This responsibility will shift to an independent system operator, aiming to foster competitive practices essential for phasing out coal—currently a major source of the province’s electricity.
Additionally, the existing Utility and Review Board, which recently approved a 14% rate increase despite political opposition, will undergo rebranding to become the Nova Scotia Regulatory and Appeals Board, reflecting a broader mandate beyond energy. Its electricity-related duties will be transferred to the newly proposed Nova Scotia Energy Board, which will oversee various energy sectors including electricity, natural gas, and retail gasoline.
The task force, led by Alison Scott, a former deputy energy minister, and John MacIsaac, an ex-executive of Nalcor Energy, was established by the province in April 2023 to determine the needs of the electrical system in meeting Nova Scotia's environmental goals.
Minister Rushton praised the report for providing a clear direction towards achieving the province's 2030 environmental targets and beyond. He estimated that establishing the recommended bodies would take 18 months to two years, and noted the government cannot order the utility to cut rates under current law, promising job security for current employees of Nova Scotia Power and the Utility and Review Board throughout the transition.
The report advocates for the new system operator to improve consumer trust by distancing electricity system decisions from Nova Scotia Power's corporate interests. It also critiques the current breadth of the Utility and Review Board's mandate as overly extensive for addressing the energy transition's long-term requirements.
Nova Scotia Power's president, Peter Gregg, welcomed the recommendations, emphasizing their role in the province's shift towards renewable energy, as neighboring jurisdictions like P.E.I. explore community generation to build resilience, he highlighted the importance of a focused energy regulator and a dedicated system operator in advancing essential projects for reliable customer service.
The task force's 12 recommendations also include the requirement for Nova Scotia Power to submit an annual asset management plan for regulatory approval and to produce reports on vegetation and wood pole management. It suggests the government assess Ontario's hydro policies for potential adaptation in Nova Scotia and calls for upgrades to the transmission grid infrastructure, with projected costs detailed by Stantec.
Alison Scott remarked on the comparative expense of coal power against renewable sources like wind, suggesting that investments in the grid to support renewables would be economically beneficial in the long run.
ADNOC Hydrogen Export Projects target global energy transition, courting investors and equity stakes for blue and green hydrogen, ammonia shipping, CCS at Ruwais, and long-term supply contracts across power, transport, and industrial sectors.
Key Points
ADNOC plans blue and green hydrogen exports, leveraging Ruwais, CCS, and ammonia to secure long-term supply.
✅ Blue hydrogen via gas reforming with CCS; ammonia for shipping.
✅ Green hydrogen from solar-powered electrolysis under development.
✅ Ruwais expansions and Fertiglobe ammonia tie-up target long-term supply.
Abu Dhabi is seeking investors to help build hydrogen-export facilities, as Middle Eastern oil producers plan to adopt cleaner energy solutions, sources told Bloomberg.
Abu Dhabi National Oil Company (ADNOC) is holding talks with energy companies for them to purchase equity stakes in the hydrogen projects, the sources referred, as Germany's hydrogen strategy signals rising import demand.
ADNOC, which already produces hydrogen for its refineries, also aims to enter into long-term supply contracts, as Canada-Germany clean energy cooperation illustrates growing cross-border demand, before making any progress with these investments.
Amid a global push to reduce greenhouse-gas emissions, the state-owned oil companies in the Gulf region seek to turn their expertise in exporting liquid fuel into shipping hydrogen or ammonia across the world for clean and universal electricity needs, transport, and industrial use.
Most of the ADNOC exports are expected to be blue hydrogen, created by converting natural gas and capturing the carbon dioxide by-product that can enable using CO2 to generate electricity approaches, according to Bloomberg.
The sources said that the Abu Dhabi-based company will raise its production of hydrogen by expanding an oil-processing plant and the Borouge petrochemical facility at the Ruwais industrial hub, supporting a sustainable electric planet vision, as the extra hydrogen will be used for an ammonia facility planned with Fertiglobe.
Abu Dhabi also plans to develop green hydrogen, similar to clean hydrogen in Canada initiatives, which is generated from renewable energy such as solar power.
Noteworthy to mention, in May 2021, ADNOC announced that it will construct a world-scale blue ammonia production facility in Ruwais in Abu Dhabi to contribute to the UAE's efforts to create local and international hydrogen value chains.
ITER Nuclear Fusion advances tokamak magnetic confinement, heating deuterium-tritium plasma with superconducting magnets, targeting net energy gain, tritium breeding, and steam-turbine power, while complementing laser inertial confinement milestones for grid-scale electricity and 2025 startup goals.
Key Points
ITER Nuclear Fusion is a tokamak project confining D-T plasma with magnets to achieve net energy gain and clean power.
✅ Tokamak magnetic confinement with high-temp superconducting coils
✅ Deuterium-tritium fuel cycle with on-site tritium breeding
✅ Targets net energy gain and grid-scale, low-carbon electricity
It sounds like the stuff of dreams: a virtually limitless source of energy that doesn’t produce greenhouse gases or radioactive waste. That’s the promise of nuclear fusion, often described as the holy grail of clean energy by proponents, which for decades has been nothing more than a fantasy due to insurmountable technical challenges. But things are heating up in what has turned into a race to create what amounts to an artificial sun here on Earth, one that can provide power for our kettles, cars and light bulbs.
Today’s nuclear power plants create electricity through nuclear fission, in which atoms are split, with next-gen nuclear power exploring smaller, cheaper, safer designs that remain distinct from fusion. Nuclear fusion however, involves combining atomic nuclei to release energy. It’s the same reaction that’s taking place at the Sun’s core. But overcoming the natural repulsion between atomic nuclei and maintaining the right conditions for fusion to occur isn’t straightforward. And doing so in a way that produces more energy than the reaction consumes has been beyond the grasp of the finest minds in physics for decades.
But perhaps not for much longer. Some major technical challenges have been overcome in the past few years and governments around the world have been pouring money into fusion power research as part of a broader green industrial revolution under way in several regions. There are also over 20 private ventures in the UK, US, Europe, China and Australia vying to be the first to make fusion energy production a reality.
“People are saying, ‘If it really is the ultimate solution, let’s find out whether it works or not,’” says Dr Tim Luce, head of science and operation at the International Thermonuclear Experimental Reactor (ITER), being built in southeast France. ITER is the biggest throw of the fusion dice yet.
Its $22bn (£15.9bn) build cost is being met by the governments of two-thirds of the world’s population, including the EU, the US, China and Russia, at a time when Europe is losing nuclear power and needs energy, and when it’s fired up in 2025 it’ll be the world’s largest fusion reactor. If it works, ITER will transform fusion power from being the stuff of dreams into a viable energy source.
Constructing a nuclear fusion reactor ITER will be a tokamak reactor – thought to be the best hope for fusion power. Inside a tokamak, a gas, often a hydrogen isotope called deuterium, is subjected to intense heat and pressure, forcing electrons out of the atoms. This creates a plasma – a superheated, ionised gas – that has to be contained by intense magnetic fields.
The containment is vital, as no material on Earth could withstand the intense heat (100,000,000°C and above) that the plasma has to reach so that fusion can begin. It’s close to 10 times the heat at the Sun’s core, and temperatures like that are needed in a tokamak because the gravitational pressure within the Sun can’t be recreated.
When atomic nuclei do start to fuse, vast amounts of energy are released. While the experimental reactors currently in operation release that energy as heat, in a fusion reactor power plant, the heat would be used to produce steam that would drive turbines to generate electricity, even as some envision nuclear beyond electricity for industrial heat and fuels.
Tokamaks aren’t the only fusion reactors being tried. Another type of reactor uses lasers to heat and compress a hydrogen fuel to initiate fusion. In August 2021, one such device at the National Ignition Facility, at the Lawrence Livermore National Laboratory in California, generated 1.35 megajoules of energy. This record-breaking figure brings fusion power a step closer to net energy gain, but most hopes are still pinned on tokamak reactors rather than lasers.
In June 2021, China’s Experimental Advanced Superconducting Tokamak (EAST) reactor maintained a plasma for 101 seconds at 120,000,000°C. Before that, the record was 20 seconds. Ultimately, a fusion reactor would need to sustain the plasma indefinitely – or at least for eight-hour ‘pulses’ during periods of peak electricity demand.
A real game-changer for tokamaks has been the magnets used to produce the magnetic field. “We know how to make magnets that generate a very high magnetic field from copper or other kinds of metal, but you would pay a fortune for the electricity. It wouldn’t be a net energy gain from the plant,” says Luce.
One route for nuclear fusion is to use atoms of deuterium and tritium, both isotopes of hydrogen. They fuse under incredible heat and pressure, and the resulting products release energy as heat
The solution is to use high-temperature, superconducting magnets made from superconducting wire, or ‘tape’, that has no electrical resistance. These magnets can create intense magnetic fields and don’t lose energy as heat.
“High temperature superconductivity has been known about for 35 years. But the manufacturing capability to make tape in the lengths that would be required to make a reasonable fusion coil has just recently been developed,” says Luce. One of ITER’s magnets, the central solenoid, will produce a field of 13 tesla – 280,000 times Earth’s magnetic field.
The inner walls of ITER’s vacuum vessel, where the fusion will occur, will be lined with beryllium, a metal that won’t contaminate the plasma much if they touch. At the bottom is the divertor that will keep the temperature inside the reactor under control.
“The heat load on the divertor can be as large as in a rocket nozzle,” says Luce. “Rocket nozzles work because you can get into orbit within minutes and in space it’s really cold.” In a fusion reactor, a divertor would need to withstand this heat indefinitely and at ITER they’ll be testing one made out of tungsten.
Meanwhile, in the US, the National Spherical Torus Experiment – Upgrade (NSTX-U) fusion reactor will be fired up in the autumn of 2022, while efforts in advanced fission such as a mini-reactor design are also progressing. One of its priorities will be to see whether lining the reactor with lithium helps to keep the plasma stable.
Choosing a fuel Instead of just using deuterium as the fusion fuel, ITER will use deuterium mixed with tritium, another hydrogen isotope. The deuterium-tritium blend offers the best chance of getting significantly more power out than is put in. Proponents of fusion power say one reason the technology is safe is that the fuel needs to be constantly fed into the reactor to keep fusion happening, making a runaway reaction impossible.
Deuterium can be extracted from seawater, so there’s a virtually limitless supply of it. But only 20kg of tritium are thought to exist worldwide, so fusion power plants will have to produce it (ITER will develop technology to ‘breed’ tritium). While some radioactive waste will be produced in a fusion plant, it’ll have a lifetime of around 100 years, rather than the thousands of years from fission.
At the time of writing in September, researchers at the Joint European Torus (JET) fusion reactor in Oxfordshire were due to start their deuterium-tritium fusion reactions. “JET will help ITER prepare a choice of machine parameters to optimise the fusion power,” says Dr Joelle Mailloux, one of the scientific programme leaders at JET. These parameters will include finding the best combination of deuterium and tritium, and establishing how the current is increased in the magnets before fusion starts.
The groundwork laid down at JET should accelerate ITER’s efforts to accomplish net energy gain. ITER will produce ‘first plasma’ in December 2025 and be cranked up to full power over the following decade. Its plasma temperature will reach 150,000,000°C and its target is to produce 500 megawatts of fusion power for every 50 megawatts of input heating power.
“If ITER is successful, it’ll eliminate most, if not all, doubts about the science and liberate money for technology development,” says Luce. That technology development will be demonstration fusion power plants that actually produce electricity, where advanced reactors can build on decades of expertise. “ITER is opening the door and saying, yeah, this works – the science is there.”
NL Hydro electricity credit delivers a one-time on-bill rebate from the rate stabilization fund, linked to oil prices and the Holyrood plant, via the Public Utilities Board, with payment deferrals and interest relief for customers.
Key Points
A one-time on-bill credit from the rate stabilization fund to cut power costs as oil prices remain low.
✅ One-time on-bill credit via the Public Utilities Board
✅ Funded by surplus in the rate stabilization fund
✅ Deferrals and 15 months interest assistance available
Most people who pay electricity bills will get a one-time credit as early as July.
The provincial government on Thursday outlined a new directive to the Public Utilities Board to provide a one-time credit for customers whose electricity rates are affected by the price of oil, part of an effort to shield ratepayers from Muskrat Falls overruns through recent agreements.
Electricity customers who are not a part of the Labrador interconnected system, including those using diesel on the north coast of Labrador, will receive the credit.
The credit, announced at a press conference Thursday morning, will come from the rate stabilization fund and comes as many customers have begun paying for Muskrat Falls on their bills, which has an estimated surplus of about $50 million because low oil prices mean NL Hydro has spent less on fuel for the Holyrood thermal generating station.
Normally a surplus would be paid out over a year, but customers this year will get the credit in a lump sum, as early as July, with the amount varying based on electricity usage.
"Given the difficult times many are finding themselves in, we believe an upfront, one-time on-bill credit would be much more helpful for customers than a small monthly decrease over the next 12 months," said Natural Resources Minister Siobhan Coady at the provincial government's announcement Thursday morning.
"We have requested that the board of commissioners of the Public Utilities Board, even as Nova Scotia's regulator approved a 14% increase recently, adopt a policy so that a credit will be dispersed immediately," Ball said.
"This is to help people when they need it the most.… We're doing what we can to support you."
The provincial government estimates someone whose power costs an average of $200 a month would get a one-time credit of about $130. Details of the plan will be left to the PUB.
Deferred payments allowed Ball said the credit will make a "significant impact" on customers' July bills.
Both businesses and residential customers will also be able to defer payments, similar to Alberta's deferral program that shifted costs for unpaid bills, with up to $2.5 million in interest being waived on overdue accounts. Customers will be required to make agreed-upon monthly payments to their account, and there will be interest assistance for 15 months, beginning June 1.
Coady said customers can renegotiate their bills and defer payments, with the province picking up the tab for the interest.
"You can speak to a customer service agent and they will make accommodations, but you have to continue to make some version of a monthly payment," Coady
"The interest that may be accrued is going to be paid for by the provincial government, so if you're a business, a person, and you're having difficulty and you can't make what I would say is your normal payment, call your utility, make some arrangements."
Labrador's interconnected grid isn't affected by the price of oil, but those customers can take advantage of the interest relief.
Relief policies already put in place during the pandemic, like not disconnecting customers and providing options for more flexible bill payments, will continue, as utilities such as Hydro One reconnecting customers demonstrate in Ontario.
Credit not enough to support customers: PCs While Ball said his government is doing what they can to help ratepayers, the opposition doesn't believe the announcement does enough to support those who need it.
Tony Wakeham, the Progressive Conservative MHA for Stephenville-Port au Port, said in a statement Thursday the credit simply gives people's money back to them, after the NL Consumer Advocate called an 18% rate hike unacceptable, and Newfoundland Power stands to benefit.
"The Liberal government would like ratepayers to believe that they are getting electricity rate relief, but in reality, customers would have been entitled to receive the value of this credit anyway over a 12-month period. Furthermore, in providing a one-time credit, Newfoundland Power will also be able to collect an administrative fee, adding to their revenues," Wakeham said in the statement.
"People and businesses in this province are struggling to pay their utility bills, and the Liberal government should help them by putting extra money into their pockets, not by recycling an already existing program to the benefit of a large corporation."
Wakeham called on government to direct the PUB to lower Newfoundland Power's guaranteed rate of return to give cash refunds to customers, and for Newfoundland Power to waive its fees.
COVID-19 Impact on U.S. Power Demand shows falling electricity load, lower wholesale prices, and resilient utilities in competitive markets, with regional differences tied to weather, renewable energy, stay-at-home orders, and hedging strategies.
Key Points
It outlines reduced load and prices, while regulatory design and hedging support utility stability across regions.
✅ Load down in NY, New England, PJM; weather drives South up.
✅ Wholesale prices fall 8-10% in key markets.
✅ Decoupling, contracts, hedging support utility earnings.
On March 27, Bloomberg New Energy Finance (BNEF) released a report on electricity demand and wholesale market prices impact from COVID-19 fallout. The model compares expected load based largely on weather with actual observed electricity demand changes.
So far, the hardest hit power grid is New York, with load down 7 and prices off by 10 percent. That’s expected, given New York City is the current epicenter of the US health crisis.
Next is New England, with 5 percent lower demand and 8 percent reduced wholesale prices for the week from March 19-25. BNEF says the numbers could go higher following advisories and orders issued March 24 for some 70 percent of the region’s population to stay at home.
Demand on the biggest grid in the US, the PJM (Pennsylvania/Jersey/Maryland), is 4 percent lower, with prices dropping 8 percent, as recent capacity auction payouts fell sharply. BNEF believes there will be more impact as stay at home orders are ramped up in several states.
California’s power demand for March 19-25 was 5 percent below what BNEF’s model expects without COVID-19 impact. That reflects a full week of stay-at-home orders from Governor Newsom issued March 19.
Health officials in Los Angeles and elsewhere expect a spike in COVID-19 cases in coming weeks. But BNEF’s model now actually projects rising electricity load for the state, due to what it calls "freakishly mild weather a year ago."
Rounding out the report, power demand is up for a band of southern states stretching from Florida to the desert Southwest, with weather more than offsetting public response to COVID-19 so far. BNEF says the Northwest’s grid "has not yet been highly impacted," while the Southeast is "generally in line" with pre-virus expectations.
Clearly, all of this data can change quickly and radically. Only California and New York are currently in full shutdown mode. Following them are New England (70 percent), the Midwest (65 percent), Texas (50 percent), PJM (50 percent) and the Northwest (50 percent).
In contrast, only small parts of Florida, the Southeast and Southwest are restricting movement. That could mean a big future increase for shut-ins, with heightened risks of electricity shut-offs that burden households and a corresponding impact on power demand.
Also, weather will play a major role on what happens to actual electricity demand, just as it always does. A very hot summer, for example, could offset virus-related shut-ins, just as it apparently is now in states like Texas. And it should be pointed out that regions vary widely by exposure to recession-sensitive sources of demand, such as heavy industry.
Most important for investors, however, is the built in protection US utility earnings enjoy from declining power demand, even amid broader energy crisis pressures facing the sector. For one thing, US power grids in California, ERCOT (Texas), MISO (Midwest), New England, New York and PJM have wholesale power markets, where producers compete for sales and the lowest bidder sets the price.
In those states, most regulated utilities don’t produce power at all. In fact, companies’ revenue is decoupled entirely from demand in California, as well as much of New England. In the roughly three-dozen states where utilities still operate as integrated monopolies, demand does affect revenue, and in many regions flat electricity demand already persists. But the cost of electricity is passed through directly to customers, whether produced or purchased.
A number of US electric companies have invested in renewable energy facilities as part of broader electrification trends nationwide. These sell their output under long-term contracts primarily with other utilities and government entities.
This isn’t a risk free business: For the past year, generators selling electricity to bankrupt PG&E Corp (PCG) have had their cash trapped at the power plant level as surety for lenders. But even PG&E has honored its contracts. And with states continuing aggressive mandates for renewable energy adoption, growth doesn’t appear at risk to COVID-19 fallout either.
The wholesale price of power from natural gas, coal and many nuclear plants was already sliding before COVID-19, due to renewables adoption and low natural gas prices, even as coal and nuclear disruptions raise reliability concerns. But here too, big producers like Exelon Corp (EXC) and Vistra Energy (VST) have employed aggressive price hedging near term, with regulated utilities and retail businesses protecting long-term health, respectively.
Bottom line: It’s early days for the COVID-19 crisis and much can still change. But so far at least, the US power industry is absorbing the blow of reduced demand, just as it’s done in previous crises.
That means future selloffs in the ongoing bear market are buying opportunities for best in class electric utilities, not a reason to sell. For top candidates, see the Conrad’s Utility Investor Portfolios and Dream Buy List in the March issue.
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