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Ontario Pensions In Good Health

The majority of Ontario?pensions were generally in good health at the end of the third quarter despite economic challenges and market volatility, says the Financial Services Regulatory Authority of?Ontario's?(FSRA). Its third quarter solvency report found that most of?Ontario?pension plans are projected to be fully funded. However, while many pension plans may have surpluses, it says it is important to be aware that the funded status could change drastically and on short notice. It encourages plan sponsors and administrators to consider various stress tests and to continuously monitor plan risks. It found the median projected solvency ratio was 109 per cent, a slight decrease from the 110 per cent at?June 30. The percentage of pension plans that were projected to be fully funded on a solvency basis was 78 per cent. The percentage of plans falling below an 85 per cent solvency ratio was three per cent, unchanged from the end of last quarter. Investment returns were slightly negative for the quarter, resulting in pension funds averaging a net return of -0.4 per cent. It was also the third consecutive quarter of negative fund returns, with year-to-date net returns averaging -16.3 per cent. However, rising interest rates largely offset the impact of asset losses over the quarter. FSRA?uses solvency monitoring to improve outcomes for pension plan beneficiaries and to proactively engage in a dialogue with plan sponsors.

Storage Makes Renewable Energy Riskier

Investments in renewable energy will become inherently riskier for institutional investors without an appropriate increase in energy storage, says EDHECInfra. It argues that, as intermittent green energy sources, such as wind and solar, become central to power systems, they increase the volatility of power prices and, therefore, the risks faced by investors in the sector. Its latest report finds that?“a rapid switch to intermittent renewable generation that is not accompanied by a commensurate rise in energy storage, has non-negligible consequences for investors.” It has highlighted a raft of challenges brought about by the growing share of?intermittent renewable energy in the generation mix including rising development and construction costs; higher volume volatility; increased market price volatility as rising?exposure to intermittent wind sources adds to the variance of power prices, particularly at peak times; and cannibalization in the form of the average price captured by renewable installations becoming lower than the average wholesale price over the year. It concludes that, because greater renewable energy production leads to more volatile energy systems, the option value of gas must increase. “Hence a key beneficiary of the transition to a higher share of renewable energy generation, until enough low carbon storage capacity is available, is gas power, a readily dispatchable source of power,” it says. “Gas may, in fact, be the best hedge against more volatile green power.”

For details on these stories, visit www.bpmmagazine.com

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