Quote:
Originally Posted by DoubleK
What company would invest in a market like that?
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Great post.
I agree that coal has to go, and fast, but describing the NDP approach as ham fisted is an insult to the gracefulness of the majestic pig. I really wonder how much of this was part of a grand strategy to make nice with the environmental movement's resistance to oil sands development, with the NDP braintrust assuming green policies would lead to a green light to measured expansion and export of Alberta's resources. Interesting idea but it could never be enough to balance increased corporate tax, royalty regime uncertainty (although I will admit they seem to have done a reasonable job so far in the absence of clarity on the "value add" projects they will be backing), questionable investments by the CCEMC and AIMco (not really an NDP issue but they have influence to do better now and aren't), and finally capped off by weak efforts with the US and other provinces to establish distribution lines to markets with demand. Especially when most outside of the environmental groups look at the carbon tax as a major negative, and those inside the environmental movement's making the most noise against AB oil are either puritan's who won't be satisfied until we live in dung huts or are paid by protectionist US oil interests bent on blocking Canadian imports. Yeesh.
But to address your question... who would invest in this market?
The caveat here being that I assume the coal plants will be shut in before their scheduled end of life. Which apparently may not happen (as an aside, doesn't this defeat the entire purpose of the carbon related legislation?), but let's assume it does.
In this case, three types of investors will act. True innovators, rent seekers, and siphoners.
The first type (and in my opinion, the proper) of investments to be made will be in generating assets that comply with or beat the carbon targets, and do so at a cost equal to or lower than coal/CCGT with carbon capture so they can ride out uncertainties in product price as the market rebalances. This would exclude renewables on economics. Everybody and their dog can guess what I am implying here, but those technologies are not yet commercially ready or accepted by the public. Hopefully they will be accelerated as viable options... utilities are like big oil companies in that they don't like to break new ground on their own. I fear there will be little to none of these actors in our little play.
The second will be investments made in technologies that comply with the carbon targets and can receive fixed prices subsidized by taxes, aka renewables. A slow step back towards regulated markets. This is how it has worked in Ontario and Germany and it does nothing to reduce carbon emissions or improve costs for the consumer. Brutal, and terribly predictable. There will be many of these actors.
Lastly, these companies do not have to operate assets in Alberta. That neat little district heating cogeneration plant on 9th Ave by the king eddy that enmax has is a pilot that is being used to explore building and operating similar plants outside of the province. More outflow of capital from AB generated revenues. Sad. There will be a lot of this as well.
It's a huge mess. Not reading the PPA contract language before putting the carbon legislation into place has to be a joke. Is that even possibly true? I am Joe schmoe and was aware of that exit the utilities had, it was a major point of discussion before the carbon tax was made law in my circles. So was the precedence of what happened in Washington state when their hippie government shutdown their coal plants early (hint hint: major payouts). How on earth were the people entrusted with making law unaware of the f-ing law they were directly challenging!?
So really what we are witnessing here is the concrete evidence that there is incompetence in the party. Not just a difference of opinions and philosophies, but flat out incompetence. I'm assuming this means ministers could be relieved of their titles or caucus positions, and that this gives great ammunition to opposition parties in the next election. Which is really... potentially the most damaging thing of all becuase public opinion could swing so far the other way that the coal plants don't get shut down, and there will be even more instability while laws race back the other way.
What a black hole this entire thing could become.