A shadow hangs over Capital Power's ambitious Genesee repowering project, and it's not just the ballooning costs. While the company valiantly attempts to spin the narrative of progress and clean energy, a closer look at the Q1 2024 earnings call transcript reveals a far more troubling story – a tale of faltering confidence in Alberta's commitment to decarbonization.

The company proudly announced the commissioning of the simple cycle phase of Unit 1 at Genesee, marking the end of coal-fired generation at the site. However, this victory is tainted by the simultaneous abandonment of the planned $2.4 billion Carbon Capture and Sequestration (CCS) project. Capital Power, after "a detailed review," concluded the project's economics were simply not viable.

While the company cites multiple factors contributing to this decision, including capital costs, dispatch outlook, and contract for differences, their explanation feels remarkably vague. The omission of any concrete data points further fuels the suspicion that this decision reflects a deeper malaise – a growing unease about the future of carbon pricing in Alberta, particularly in light of the upcoming provincial election.

Let's examine the numbers. The current federal carbon tax trajectory, crucial for incentivizing CCS projects, is set to rise to $170 per tonne by 2030. However, with a federal election looming next year, the stability of this policy is far from assured. A change in government could lead to a significant revision, or even outright cancellation, of the carbon pricing regime. This uncertainty directly impacts the financial viability of any large-scale CCS project in Alberta.

Furthermore, Capital Power's hedging strategy offers a glimpse into their own anxieties. While their current Alberta power hedges for 2025 and 2026 are priced favorably above forward market prices, their natural gas hedge volumes for the same period remain significantly high at 60,000 TJs and 35,000 TJs respectively. This aggressive gas hedging could be interpreted as a defensive move, a hedge against the potential for lower carbon prices leading to increased reliance on natural gas generation in the future.

This brings us to the crux of the matter – the political undercurrents swirling beneath the surface of Capital Power's pronouncements. Alberta Premier Danielle Smith's United Conservative Party has publicly opposed the federal carbon tax, and its platform includes promises to challenge its implementation within the province. If re-elected, their actions could dramatically alter the carbon pricing landscape, rendering CCS projects like Genesee financially untenable.

Capital Power, keenly aware of this political volatility, has chosen to play it safe. Their decision to shelve the CCS project, while couched in the language of "economics," is likely a strategic retreat, a tactical pause until the political dust settles.

The question remains – is Alberta truly "open for business" when it comes to ambitious decarbonization projects? Or is the province, under the weight of political pressure, retreating from its climate commitments? Capital Power's CCS conundrum serves as a stark warning – a canary in the coal mine, highlighting the fragility of investor confidence in the face of political uncertainty.

While the company's pivot towards U.S. expansion and their ongoing Genesee repowering project signal continued growth, the shadow of the abandoned CCS project lingers. It's a reminder that true progress on climate change requires more than just technological innovation and economic incentives – it demands a stable and predictable policy environment, one that fosters investor confidence and encourages bold action.

Capital Power's Hedging Strategy: A Glimpse into the Future?

The chart below compares Capital Power's hedged power prices for 2025-2027 with the current forward market prices. The significant difference suggests Capital Power is anticipating higher power prices, potentially driven by increased natural gas costs due to carbon pricing. However, their high natural gas hedge volumes for the same period could also indicate a backup plan in case carbon pricing policies falter.

"Fun Fact: Capital Power's Genesee Generating Station, once fully repowered, will be the largest combined cycle power plant in Canada, capable of producing enough electricity to power over 800,000 homes. However, the plant's true legacy may ultimately be defined by what it *doesn't* produce – millions of tonnes of carbon emissions, thanks to a CCS project that now hangs in the balance of Alberta's political future."