Canada needs to become more attractive for power market investment

Oct 06, 2004 02:00 AM

For the doors to open to bring in new capital to grow Canadian power markets, Ontario needs to demonstrate its commitment to meaningful private sector involvement as investors carefully measure Canadian risks and opportunities against those in other North American markets, London Economics International President A.J. Goulding said in a presentation at the 2004 Power Canada Conference in Toronto.

Key factors in Canadian power investment decisions, Goulding told the conference's "Electricity Market Restructuring in Canada" session, include understanding that:
-- While Canadian markets show greater need for new generation than US counterparts, market dynamics differ substantially;
-- Canadian provincial governments have greater propensity and ability to intervene in power markets than do US state governments;
-- While Power Purchase Agreements (PPAs) are generally honoured in Canada, they may lead to further stranded costs for consumers;
-- Siting and environmental concerns vary greatly from province to province; and
-- Ontario's future needs are largely a function of provincial decisions regarding coal shut-down and large capital projects OPG is asked to undertake.

Goulding also presented London Economics' analysis of the key characteristics shaping the investment potential in each of the 19 North American power markets, including each market's status in terms of:
-- Institutional autonomy
-- Private sector roles
-- Government roles
-- Unbundling
-- Supply-demand balance, and
-- Political risk

In general, Goulding concluded that Canadian power markets lack institutional independence from provincial policymakers.
"Private investors ask themselves: 'Is California or Ontario really any less risky (or more rewarding) than investing in Mexico?'," he said.

Source: PEI
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