How are energy security concerns shaping an “all of the above” approach to energy development?
Robert Kwan: The outlook for these sectors is broadly positive. Rising power demand is driving an “all of the above” approach to energy development, creating tailwinds across every form of generation and delivery.
Several years ago, the sector was moving quickly toward a zero-carbon resources world and away from conventional energy. The war in Ukraine shifted the focus toward greater policy balance, particularly in Europe. The war in Iran has put an even stronger spotlight on energy security, reinforcing the need for an “all of the above” approach on a global scale.
How are Iran and energy security concerns shaping affordability?
Kwan: It’s easy for policymakers and people in general to look at the visible price markers, such as the price of gas at the pump. The war in Iran has brought the broader and more indirect impacts of energy supply constraints front and center. It has demonstrated that energy is such an integral part of what we do on a day-to-day basis, from the price of groceries to petroleum products like naphtha, which is used as a feedstock for a number of petrochemicals and things that we as consumers see in our everyday activities – in the form of plastics, rubber, solvents, and more. These topics are permeating almost every facet of our daily lives.
"The war in Iran has brought the broader and more indirect impacts of energy supply constraints front and center. It has demonstrated that energy is such an integral part of what we do on a day-to-day basis."
Robert Kwan, Head of Global Power, Utilities and Infrastructure Research, RBC Capital Markets
How are platform nations reshaping the energy trilemma?
Maurice Choy: When you think about infrastructure, companies are effectively trying to find a balance between energy security, energy affordability, energy transition – or clean energy. What we often term as the “energy trilemma”.
One very relevant theme from the RBC Imagine report is the rise of the 8th continent – specifically how digital platforms are already starting to rival countries in terms of the power they wield. In energy terms, big tech platforms and hyperscalers could become the largest consumers of electricity on the planet, and some of these could go beyond country borders. That would give these companies the power to drive future demand growth. They could also use that reach to deliver demand-side management services for utilities. Of course, all this raises questions for regulators and governments, who are already trying to balance affordability and energy resilience.
Companies, regulators, and governments now need to ensure that their policies accommodate these platform nations, as failure will not only risk losing investments to other nations, but potentially risk losing the global AI race.
How is volatility changing infrastructure investment?
Choy: In the energy infrastructure sector, where companies own really critical assets that are essential to the daily lives of many North Americans, preparation for instability has long become a norm.
The name of the game will be to position oneself to quickly adapt and benefit from uncertainty or volatility, while also mitigating risk – because we know the instability will happen, and it's unlikely that the base plan will proceed as we all envisaged.
We are seeing many of the North American utilities firms allocating a lot of capital toward protecting against a growing list of risks. And we’re also seeing an outsized set of investments in decentralized energy systems, such as modular grids, micro grids, distributed generation, and behind-the-media solutions – all aimed at allowing for more redundancies in case these instabilities and volatilities do indeed happen.
“The name of the game will be to position oneself to quickly adapt and benefit from uncertainty or volatility, while also mitigating risk – because we know the instability will happen, and it's unlikely that the base plan will proceed as we all envisaged.”
Maurice Choy, Canadian Energy Infrastructure Analyst, RBC Capital Markets
What role do you see developing technologies playing in the evolution of the sector?
Kwan: Synthetic technology could have wide-ranging benefits for energy infrastructure – particularly as we think about improving efficiency – as well as securing supply chains, given the reliance on rare earth minerals in geographically challenging locations.
Another relevant use case is the National Energy Technology Laboratory, which has developed a self-healing coating to prevent pipeline corrosion. That could further improve the safety of new and existing pipelines.
How are energy demand and resource security reshaping global influence?
Choy: Big picture, we believe that Canada is now in an opportune time to better supply the global energy market with its products, from crude oil and natural gas to LPG and electricity. The long-term winners are likely to be nations – such as Canada – with significant conventional energy resources and high standards of living in democratic societies.
We expect the utilities to continue investing in their jurisdictions. But not just in a traditional sense. Also by creating partnerships with some of the high electricity consumers, such as tech companies, to ensure that the demand requirements are met on a timely basis.
Meanwhile, from a renewable energy perspective, we can perhaps expect to see some of these firms partnering or integrating with more domestic mining companies to ensure that the raw materials essential to their day-to-day operations and development are better secured closer to home.
