BMI View : We maintain our overall positive outlook for the Canadian power sector , based on Canada's robust macroeconomic trajectory, vast hydropower project pipeline and growing focus on natural gas-fired power and new transmission lines to export e xcess power to the US. While the renewabl es sector will continue growing in provinces which offer incentives to developers, coal-fired and nuclear generation will decrease as a result of stricter emission regulations and reactors being retired or refurbished.
In line with the mature state of the Canadian power market, we expect total generation in the country to expand by an annual average of 0.9% during our 10-year forecast period. This slow growth reflects a reduction in coal-fired generation for environmental reasons and the retirement and refurbishment of Canada's aging nuclear reactors. However, those reductions will be more than offset by growth in hydropower, natural gas-fired and renewables generation. As a result, we forecast shifts in the country's power generation mix, with the share of coal and nuclear to decrease and renewables and natural gas taking up the slack.
Our Country Risk team expects Canada's real GDP to grow at an average annual rate of 1.8% between 2015 and 2024, a marginal deterioration compared to last quarter's forecast (1.9%) due to the continued negative impact of lower oil prices on the Canadian economy - namely a sharp drop in investment and widespread lay-offs in Canada's extractive sector. This economic slowdown accounts for our downward revision of our forecast for average annual power consumption over the coming decade, from 0.86% to 0.79%.
Key T rends A nd D evelopments
Progress in the development of multiple power transmission lines between Canada and the US creates potential for electricity trade between the two countries to see sizeable growth over the coming years. On May 14, electric utility Minnesota Power obtained approval from the Minnesota Public Utilities Commission for the 500-kilovolt Great Northern Transmission Line, a project expected to be completed by 2020 and deliver at least 383-megawatt (MW) of hydropower generated in Canada's Manitoba province. Moreover, on April 23, the US Army Corps of Engineers approved the Champlain Hudson Power Express project, a transmission line developed by Transmission Developers Inc. and expected to deliver 1000MW of wind and hydropower from Quebec to New York; construction is expected to start at the beginning of 2016 at the latest and require three-and-a-half years.
On June 12, it was announced that the 335MW expansion of the existing Waneta hydropower plant was commissioned in British Columbia - a project valued at around USD900mn. The new facility was developed by Waneta Expansion Ltd. Partnership, a joint venture of Canadian electric utilities Fortis Inc. and Columbia Power and Columbia Basin Trust. Works on the project were carried out by SNC-Lavalin and its sub-contractor Voith Hydro.
At the end of May, the development of the 1100MW Site C hydropower project moved one step ahead, with owner BC Hydro and provincial union BC Building Trades reaching an agreement on the construction of the facility. The project has an estimated value of USD8.76bn and is expected to enter commercial operations in 2024.
On March 16, the closing of financing for the 81.4MW Upper Lillooet River and the 25.3MW Boulder Creek hydropower projects was announced. The two facilities - which are being developed by a joint venture of Innergex Renewable Energy and Ledcor Power Group and are expected to come online by the end of 2016 - will receive USD491.6mn in project financing from the international insurer Manufacturers Life Insurance Company, the Caisse de Depot et P lacement du Quebec and the Canada Life Assurance Company.
In February 2015, US-based Matrix North American Construction won a contract from TransCanada Energy to build the 900MW Napanee combined cycle gas-fuelled power plant in Ontario. Moreover, in March Canadian firms Capital Power and ENMAX started operations at the 800MW gas-fuelled Shepard Energy Centre in east Calgary, Alberta.