Canada Pension Plan Investment Board and Ocean Winds, a Madrid-based company specializing in offshore wind, jointly put up US$150.3-million to secure a lease off California’s central coast.Stefan Wermuth/Reuters
One of the next frontiers for clean energy that is attracting investment dollars from Canada’s largest pension plans is just out of sight to the naked eye onshore, in an expanse of ocean water 32 kilometres off California’s central coast.
In early December, Canada Pension Plan Investment Board and Ocean Winds, a Madrid-based company specializing in offshore wind, jointly put up US$150.3-million to secure a lease covering 32,544 hectares of deep ocean waters. The lease site and four others auctioned off by the U.S. Bureau of Ocean Energy Management are earmarked as the future home to floating offshore wind farms.
The floating variant of offshore wind technology that CPPIB is investing in is both promising and complex: It aims to build wind turbines as tall as 120 metres fixed to floating platforms, which in turn are anchored by cables to the sea bed hundreds of metres below. The technology to create such floating farms to generate clean power is advancing and getting cheaper. But it is still novel, and years away from widespread deployment.
“There’s a growing level of experience that’s being applied to offshore wind. It’s moved from onshore to offshore to floating offshore,” said Bruce Hogg, CPPIB’s head of sustainable energy, in an interview. “We’ve seen the scale and the size of the projects increasing over time. And the cost curve has actually come down significantly.”
Some of Canada’s largest pension plans, already established investors in wind power generated on land, are ramping up their bets on offshore wind. CPPIB announced its California joint venture two weeks after the official opening of the Saint-Nazaire wind farm off France’s west coast, which was also backed by the Canadian pension investing giant.
Also this month, Ottawa’s Public Sector Pension Investment Board put up US$250-million to back Norwegian wind farm equipment owner Havfram in building a fleet of vessels to install massive offshore wind turbines embedded more conventionally in the sea floor.
CPPIB’s 50-50 joint venture with Ocean Winds – which is itself jointly owned by Spanish-based EDP Renewables and France’s Engie SA – is years away from completion, but could eventually generate up to two gigawatts of energy. That would power the equivalent of 900,000 homes, adding to CPPIB’s offshore wind portfolio of about 16.9 gigawatts. The pension investor’s pipeline of further projects to be developed would total 35 gigawatts.
The Ocean Winds project is part of the first floating offshore lease sale in the United States, and one of the first offshore wind leases of any kind awarded off the West Coast. It is on step in California’s plan to generate 140 gigawatts of renewable energy by 2045, including 10 gigawatts from offshore wind. The rest is expected to come from a constellation of clean energy sources, including solar power complemented by long-duration energy storage, as well as conventional wind energy, some of it transferred from New Mexico.
Offshore wind is most advanced in Europe, but “you’ve seen a rapid catch-up in the U.S.,” Mr. Hogg said. “You kind of need the whole package of [clean energy sources] to achieve those targets.”
CPPIB chose Ocean Winds as a partner for its expertise over a decade in offshore wind, which included a role in the pioneering Windfloat Atlantic project near Portugal.
CPPIB also has significant investments in Calpine Energy Solutions, a producer of gas and geothermal energy, and in Pattern Energy Group LP, which specializes in wind and solar energy.
Interest in floating wind farms has been growing in countries such as Britain, France and Japan. While conventional offshore wind is limited to shallow waters with sea beds suitable to installing turbines, floating platforms open the door to moving the turbines much farther offshore, where winds are higher and more consistent, and the environmental effect could be lower.
Because they’re largely out of sight from shore, they also help dodge potential opposition from coastal communities that consider them an eyesore.
There are still significant technical challenges to floating offshore wind, “but they’re getting tackled systematically,” Mr. Hogg said. The different floating platforms to support turbines, distributing their weight in the water, are typically based on existing technologies that are often drawn from the offshore oil and gas industry.
There are also hurdles in California in the form of regulatory approvals and permits to win approval to transfer the power onshore and connect it to the state’s energy grid. There are contracts to be negotiated, such as power purchase agreements with local utilities, to ensure a return on the upfront investment. And environmental groups have raised concerns about the effect the cables and turbines could have on sea life and birds.
But the most complex engineering problem for floating offshore wind is not keeping the turbines stable and upright in windy conditions. It is building floating substations at sea to gather power from turbines at a single point so it can be transported to shore.
“That’s the last technological piece they’re working through,” Mr. Hogg said. “It’s actually not the very large, skyscraper-sized buildings that are floating in the ocean that’s the complex bit.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
