Canada’s economy is heavily reliant on the energy industry. Last year, roughly 40% of Western Canada’s exports were oil and gas, worth around $185 billion. Nearly a million Canadian jobs are tied to the success of the energy sector.
The loonie is also inextricably connected to the success of oil and gas companies. When oil prices fell by 50% in 2008 and 2009, the loonie shed nearly 20% of its value. When oil prices cratered in 2014, the currency again shed around 20%.
Swings in energy markets will impact your life, whether or not your livelihood directly depends on it. If you live in Canada, your investments, assets, and financial future likely hinge on long-term demand and pricing for fossil fuels.
Twice in the past decade, weak demand and pricing has sent the country into recession. If you want to protect your portfolio, now is your chance.
Renewables are real
Renewable energy isn’t a passing trend. Nor is it simply an option for environmentally conscious users. In reality, renewable energy is taking over the grid based on pure economics.
Canada already generates roughly 17% of its energy from renewable sources. The average Westernized country generates only 10% of its energy from renewables. Canada’s lead is thanks to its widespread water resources that fuel large hydro projects from coast to coast. In fact, roughly two-thirds of Canada’s renewable energy generation stems from hydro, with less than 10% coming from higher profile sources like wind and solar.
Renewable energy is expected to continue taking market share over the next few decades and beyond. That’s because clean energy sources are often driven by Moore’s law, not resource economics. Resource economics is what drives pricing for oil and gas.
While the trajectory can be very bumpy, resource companies almost always target the lowest-cost projects. And because fossil fuels don’t replenish themselves quickly, the cheapest end of the cost curve gets used up first. Long term, that means prices will generally rise, making fossil fuels increasingly less competitive.
Moore’s law, the principle that makes technology cheaper and cheaper year after year, also applies to renewable energy. That’s because in most cases, renewable energy is technology. Since 1980, the cost of wind and solar has fallen by 90%! Almost every year, these technologies get even cheaper. Eventually, that means renewable energy will be more economically viable than fossil fuels. We’ve already seen this tipping point happen around the world.
Due to pure economics, renewable energy will be the future. Don’t get left behind.
Ahead of the pack
Take a look at the Canadian energy sector and you’ll realize one thing: utilities are investing billions of dollars into renewable energy. For example, earlier this year, Canadian Utilities sold its entire fossil fuel portfolio for $835 million, opting instead to focus completely on low-emission projects.
Plenty of other companies are taking the same approach.
Brookfield Renewable Partners LP already owns nearly nearly 900 renewable energy projects around the world that generate 18,000 megawatts of clean power. Northland Power Inc. has more than $10 billion of clean power assets in operation, all of which have generated 17% annual returns for shareholders over the past decade. Finally, Innergex Renewable Energy Inc. has just 3,238 megawatts of installed capacity, but has one of the most impressive growth stories in the industry.
If you want to make sure you’re generating consistent wealth through age 50 and beyond, ditch fossil fuels and dive into the renewable revolution.
