Boston, MA -- (SBWIRE) -- 11/15/2013 -- BMI View:. External headwinds and a slowdown in domestic consumption continue to weigh on Canada's economic performance. With power demand highly correlated to economic activities, we estimate that the power generation contracted by 0.3% in 2012. However, in the medium-to-long term and long term, we expect that the country's mature electricity market will see a positive but moderate rise in generation and consumption. Key drivers of this growth will be a combination of economic, demographic and industryspecific dynamics and the replacement of old and polluting power stations.

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Our fundamental assumptions of the market continue to be relevant, and thus our short and long-term forecasts remain mostly unchanged. Canada enjoys the advantage of a diverse and balanced electricity mix, thanks to its abundant indigenous resources. Yet, and despite Canada's decision to withdraw from the Kyoto Protocol, environmental concerns are likely to weigh heavily on the country's energy agenda. Hence, in a picture similar to the one of its Southern neighbour, we anticipate that planned shifts in the share of various fuels will be among the key drivers of new investment in the power sector. That said, there have been a number of positive developments across every segment of the power sector during 2013:

- We have long held the view that, although Canada's heavy reliance on coal for electricity generation and its withdrawal from of the Kyoto agreement would imply the expansion of greener technologies is not at the forefront of government policy, stringent government carbon emission regulations suggest that electricity generation from coal will decrease over our 10-year forecast period.
- Canada lost the appeal against the WTO over Ontario's green energy programme. The WTO Appellate Body has upheld the complaints from the EU and Japan, stating that Ontario's Feed-in Tariff (FIT) programme discriminates against foreign suppliers of equipment and components for renewable energy. The decision has lead Ontario to drop its FiT programme and slash US$3.7bn-worth of electricity that was to have been produced from wind or solar projects.
- Ontario plans to build a US$1bn underwater transmission line that would carry surplus electricity from Ontario in Canada across Lake Erie to the US' energy hungry north-eastern states are clearly ambitious, but could hold appeal for both investors and electricity generators alike. The Lake Erie CleanPower Connector (LECPC) will reportedly carry 'cleaner' energy generated from renewables, hydropower capacity and nuclear facilities to the 13 north-eastern US states, many of which are reliant on polluting coal-fired generation. As such, we believe the project could hold longer-term appeal for Ontario, which hopes to sell the surplus electricity, while at the same time boosting the green credentials of the US states that would use the electricity.

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