Enbridge: Critical Infrastructure in the Green Revolution

The green revolution is upon us. Enbridge is a critical energy infrastructure business known for transporting oil and natural gas. It also has a sizeable renewable segment. What you might not be aware of is how well that stacks up in the renewables space and how such companies are including non-renewable power in their total outputs.

For capacity context, the International Renewable Energy Agency released its 2020 Renewable Capacity Statistics which provides insights into the sector as a whole:

I have ranked Enbridge with various renewable companies in terms of current net capacity (the maximum output of electricity a generator can produce under ideal conditions) minus natural gas capacity, which according to the International Renewable Energy Agency is an alternative fossil fuel. Definitions for what constitute renewable natural gas vary and you will see further examples below, but this number is included where available. The only outputs considered are strictly renewable: solar, water, wind, biomass, and geothermal power. I have not included energy generation statistics (how much energy is actually output) because this varies based on operating capacity and conditions (eg. weather events will lower output).

All data has been sourced from the latest publicly available ESG or Annual Reports and provided below.

CompanyNet Renewable Capacity (in MW)
Brookfield Renewable18,844
Innergex Renewable Energy2,742
Algonquin 1,456
Northland Power1,323
Transalta Renewables1,619**
**Transalta Renewables as at Dec 31 2020 listed only gross renewable MW and not net, which is significantly lower.

Let’s take a closer look in order of Net Capacity.

Brookfield Renewable: by far the largest output capacity and zero natural gas facilities. The majority of net capacity comes from Hydro and Wind.

Innergex Renewable: The majority of net capacity comes from Wind and Hydro. Again no natural gas.
Innergex has 2,742MW net capacity.

Boralex: 82% of net capacity is derived from Wind. Least diversified of the group.

Enbridge: Majority of renewable capacity generated by Wind. Renewables represent 3% of EBITDA and appx. $200MM in annual contracted revenues.

Combined Current Renewable Power Generation outputs:
• 1,392 MW is generated by North American wind facilities;
• 255 MW is generated by European offshore wind facilities;
• 80 MW is generated by North American solar facilities in operation

Electricity and transmission revenues were $180MM in 2019 and $206MM in 2018.

Algonquin: The latest data from 2021 sources showed FY19 figures. You will see coal listed here: the Asbury coal plant was closed in March 2020. Furthermore, a significant portion of their capacity is from natural gas (50%), which is from non-renewable sources and thus not included.

Northland Power: Included in their total output is ‘efficient’ natural gas, which accounts for ~60% of net capacity. While the outcome is reduced emissions, it is still not a renewable source and therefore not included in total renewable capacity.

Transalta Renewables: Similar to Algonquin and Northland, a significant portion of capacity is from natural gas (~60%). I was unable to find updated net capacity statistics, which are significantly lower than gross, thus TA ranked last.

The Enbridge context: what does this all mean?

Net capacity is an important metric in measuring where a renewable company stands, but it is not the only one. Revenues are impacted by total output and pricing, of which the weather events in Texas provided an eye-opening example. Nevertheless, what we see from the above comparison is that Enbridge is already well positioned amongst common North American “renewable” names, albeit far behind big players like Brookfield. Looking through the above company ESG and Annual Reports highlighted further forays into traditional renewable sources, while also noting investments in renewable natural gas. Let’s not forget the critical role Enbridge will play in RNG transmission alongside their own RNG production.

Infographic detailing the cycle process of RNG; starting as organic waste being digested and upgraded, then added to the system as RNG for use heating homes and businesses
With the advance of RNG, the waste sector stands to be a material beneficiary. See my article on Waste Connections for context.

And with that, Enbridge is prepared for the transition. One of their key Strategic Priorities:

Adapt to Energy Transition Over Time
We believe that diversification and innovation will play a significant role in the transition to a low carbon future. To date, we have made large investments in natural gas infrastructure and continue to see significant opportunity in renewable energy, particularly offshore wind. Enbridge’s renewable focus will be on early stage offshore wind developments for lower entry price and higher equity returns, forecasting low to mid teens. Furthermore, we have tested our existing assets for various energy transition scenarios and concluded that they are highly resilient and can
be relied upon for stable cash flow generation well into the future.

The following commercially secured growth projects are expected to be placed into service in 2022:
• East-West Tie Line – a transmission project that will parallel an existing double-circuit, 230 kilovolt transmission line that connects the Wawa Transformer Station to the Lakehead Transformer Station near Thunder Bay, Ontario, including a connection midway in Marathon, Ontario.
• Saint-Nazaire Offshore Wind Project – a wind project located off the west coast of France that is expected to generate approximately 480-megawatts (MW). Project revenues are backed by a 20-year fixed price power purchase agreement (PPA) with added power production protection.
The following commercially secured growth project is expected to be placed into service in 2023:
• Fécamp Offshore Wind Project – an offshore wind project that will be comprised of 71 wind turbines located off the northwest coast of France and is expected to generate approximately 500-MW. Project revenues are underpinned by a 20-year fixed price PPA.

Make of this information what you will. The market is currently discounting their business with the secular oil decline, and not fully considering Enbridge’s ability to innovate and partner alongside a growing global energy infrastructure network, particularly in the NG/RNG space. I am bullish.

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