Finding the Mix: The Choice of Generation Technologies in Canada

The Conference Board of Canada, 98 pages, September 1, 2015
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This report examines several of the challenges facing electricity generators in five provinces: Alberta, Saskatchewan, Manitoba, Ontario, and Quebec. Alberta and Saskatchewan are the primary focus of the report.

Document Highlights

Canada’s electricity generation sector is in a transformational process. During this transitional period, the Government of Canada has enacted regulations that set a maximum level of greenhouse gas emissions from individual stations. As a result, Canada’s electricity generation sector faces a requirement to invest at record levels to replace and expand its capacity. This report examines several of the challenges facing electricity generators in five provinces: Alberta, Saskatchewan, Manitoba, Ontario, and Quebec. The report applies a tool from a financial portfolio analysis (Mean Variance Portfolio Theory) to the generating technology choice. The results can help inform investment decisions because they provide a benchmark for the optimal generation mix. And, the results also identify the risk/return implications of investing in any given technology—taking into account the existing mix as well as the new build options available.

Table of Contents

Executive Summary

Chapter 1—Introduction

  • Traditional Planning Approaches
  • Mean-Variance Portfolio Theory
  • Applying the Theory

Chapter 2—Optimal Portfolios for Alberta

  • The Current Situation
  • Reference Results
  • Sensitivity Analysis
  • Carbon Pricing
  • Summary of Alberta Results

Chapter 3—Optimal Portfolios for Saskatchewan

  • The Current Situation
  • Reference Results
  • Sensitivity Analysis
  • Carbon Pricing
  • Summary of Saskatchewan Results

Chapter 4—Optimal Portfolios for Other Jurisdictions

  • Ontario
  • Manitoba
  • Quebec

Chapter 5—Conclusions

  • Benefits of a Diverse Portfolio
  • Inertia
  • Thermal Versus Hydropower
  • What Isn’t Considered
  • Implications for Decision Support

Appendix A—Methodology

  • Basic Inputs
  • Levelized Cost and Discounted Cash Flow Analysis
  • Data Assumptions
  • Monte Carlo Simulation
  • The Efficient Frontier
  • Sensitivity Analyses

Appendix B—Bibliography

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