From energy transition to energy expansion
As he mingled with fellow delegates at RBC’s Global Energy, Power and Infrastructure Conference, Avik Dey found one topic recurring: AI and data centers. Growth in this area has become an increasingly significant theme in the energy landscape and will require upwards of thousands of megawatts of power supply to run effectively.
“The single biggest bottleneck to building out data centers actually isn’t semiconductors – it’s access to power,” says the President and CEO of Capital Power. Investors have been keen to hear how his company could provide solutions for this fast-growing market.
Dey once believed that global carbon markets would unlock decarbonization of the world’s critical, heavy-emitting industries. That seems less likely, he says, as demand grows – not least from data centers – while reliability and affordability move up the agenda.
“That puts it back to industry and capital markets to find solutions that are economic. We really have to take on this pivot with urgency,” he says.
Now that we’re moving to a world of energy expansion, where demand is forecast to be greater than supply, solutions providers like Capital Power have got to work that much harder to find commercial solutions that make economic sense, he notes.
“The single biggest bottleneck to building out data centers actually isn’t semiconductors – it’s access to power.”
Avik Dey, President and CEO, Capital Power
Mixed sources add up to reliability
Capital Power is striving to play its part in this response. The independent power producer’s assets are split equally between the U.S. and Canada. Its three core businesses – Flexible Generation (consisting of natural gas and storage), renewables, and energy trading and origination – aim to provide balanced energy solutions for its large commercial and industrial customers.
After great progress in introducing renewables, says Dey, the world now needs to secure reliability, to ensure grids can perform around the clock.
The firm uses natural gas to help facilitate renewables. Batteries are also a key part of the mix, storing any excess renewable capacity that can minimize the need to fire gas turbines. “It’s why we’re so focused on Flexible Generation business, because we see an increasing need for gas-fired power generation plus batteries to help decarbonize and firm grids,” Dey explains.
Nuclear is part of the mix too. Capital Power is partnering with Ontario Power Generation to explore the viability of nuclear power in Alberta. Besides the technological aspects, the project will explore regulatory and permitting requirements for establishing small modular reactors (SMRs) in the province.
“We have a long history of buying plants, optimizing them and expanding them. It’s been a cornerstone of our value creation story for shareholders for a decade.”
Avik Dey, President and CEO, Capital Power
Bringing new life to existing plants
Other current projects include the repowering of the Genesee plant in Alberta. The roughly C$1.5 billion investment will see it transformed from a coal-powered plant to a gas-fired one. “We are reducing emissions by approximately 3.4 mega tonnes on this facility, while also increasing our capacity of dispatchable firm power by nearly 50%,” says Dey. “We’ve been focusing on cleaning our grids; we also need to firm our grids.”
The company acquired a further three plants in 2023, in Washington, California, and Arizona. “We have a long history of buying plants, optimizing them and expanding them,” Dey says. “It’s been a cornerstone of our value creation story for shareholders for a decade.”
Dey believes electric vehicle growth, electrification, and reshoring, alongside AI and data center demand, will contribute to a doubling of electricity demand in North America over 25 years. “The opportunity to buy these critical assets, that have tremendous and growing scarcity value, that are currently connected to the grid, is something we want to build upon,” Dey concludes.
