Cleaning up carbon footprints: Insights from our 2021 Power & Utilities Conference

Reducing carbon footprints and finding opportunities to leverage emerging, cleaner technologies were major topics of discussion at our annual Power & Utilities Conference. Leaders in the energy generation and provider industries came together to discuss the road to net-zero, the costs of producing clean energy and growth areas for 2022 and beyond.

"TD Securities is focused on building a clean future and the companies that presented at our conference are key players in the transition to a low carbon economy", says Harold Holloway, Managing Director and Head of Power & Utilities in Canada. "The momentum coming from the combination of changes in political environment, corporate will, and the cost competitiveness of new technologies has created more opportunities for investment and growth than ever before in the sector."

Here are some major themes observed at the conference by Linda Ezergailis, Sean Steuart and John Mould of our Equity Research team:

Transitioning to a lower carbon future

Utility and power companies have been transitioning to a lower carbon future for some time, but the urgency to translate goals to concrete plans appears to have accelerated. Utilities recognize the importance of continuing to provide reliable and affordable energy to customers while transitioning to lower carbon emissions and clean energy.

Working with stakeholders and policy makers to ensure the regulatory compact facilitates this transition is a priority for utility management teams. Ongoing global decarbonization trends are expected to continue to drive demand for additional renewable power capacity, including growing appetite from corporate buyers.

Increased costs of renewable equipment components

For independent power producers (IPPs) within the renewable power sector, inflation for renewable equipment components over the past year (e.g., steel, copper, and polysilicon) was among the most topical developments. Speakers generally downplayed the potential pass-through implications for wind turbine and solar module costs indicating that capital spending budgets have substantial contingencies for cost inflation and noting that the impact will be muted given ongoing efficiency gains and embedded price escalators for most contracts.

Growth outlook

Utilities see visibility long-term for rate base growth beyond economic growth related to transitioning to a lower carbon energy future, modernization, and bolstering grid resilience. Most IPPs noted an increasingly competitive environment for acquisition and organic opportunities but indicated an ability to sustain acceptable returns by investing in emerging technologies and regions and through company-specific expertise (e.g., operating, marketing, financing).