Northern wind, southern sun
With utilities in Nova Scotia as well as in southern states of the U.S., Emera has adopted very different strategies in pursuit of its net zero targets. “Solar works very well in Florida; not so much in Nova Scotia. And wind is kind of the opposite,” notes CFO Greg Blunden.
Replacement of the company’s coal-fired generation in Nova Scotia will require a combination of wind power with hydro generation from neighboring provinces, complemented by battery storage and natural gas.
In Florida, only 1% to 2% of Emera’s Tampa Electric generation is still coal-fired. That is being replaced with a build-out of solar power and natural gas-fired generation. A carbon capture project at the Polk power station aims to further reduce emissions.
“Every area will have their own solution to the problem,” says Blunden. “But the interconnection of the regions will be important as well.”
Connections critical to net zero success
Blunden foresees further integration in the industry, linking disparate projects across states and provinces. “That means more inter-provincial agreements on transmission lines – building the energy sources where it makes sense, but making sure the interconnections are there.”
Emera’s investment in the Maritime Link to import hydro from Labrador to Newfoundland is one example of such a connection. This has helped accelerate Emera’s coal plant shutdowns: it has moved its plans forward from 2040 to 2030.
Blunden expects the toughest part of the clean energy journey to come towards the end. “The execution of it is fairly straightforward. Getting from 80% to 100% might be a little more challenging and require the advancement of some developing technologies,” he says. “Think small modular reactors as an example.”
“The discipline around capital allocation in this environment, given the pressures on investing capital over the next decade, is becoming more acute than it has ever been.”
Greg Blunden, CFO, Emera
Capital squeeze demands new solutions
Emera is working hard to resolve the ‘energy trilemma’ of decarbonization, affordability, and reliability, says Blunden, while navigating new financial realities.
“The discipline around capital allocation in this environment, given the pressures on investing capital over the next decade, is becoming more acute than it has ever been,” he points out.
Utilities can no longer afford to carry incremental investments for extended period before receiving cost recovery from customers, he adds. “It’s increasingly important that there’s minimal regulatory lag, that the financing of those investments gets a timely recovery of capital,” he says. That demands spending prudence, as well as solutions such as rate riders on capital projects.
Hydro link sale frees up capital
With that prudence in mind, Emera recently sold its minority stake in the Labrador Island Link to KKR.
Emera had been a major investor in the 1,100km transmission system, which delivers hydroelectricity from dams at Muskrat Falls in Labrador to the island of Newfoundland. “It was clearly an investment that was better suited for an infrastructure player or pension plan that’s looking for a long-term stream of cash flow,” Blunden explains.
“It frees up capital for us to reinvest in our regulated utilities and support the growth that we’re seeing in support of our customers.”
