The robust demand for clean energy is proving resilient against rising tariffs and rapid advancements in artificial intelligence. Brookfield Renewable Partners (BEP-UN-T) CEO Connor Teskey highlighted this during a recent address, stating that increased costs stemming from trade barriers would be transferred to their clientele.
Amidst the backdrop of potential 25% tariffs on goods from Canada and Mexico, as indicated by the White House, Mr. Teskey conveyed confidence in the renewable energy sector’s enduring profitability. He emphasized that the escalating need for renewable power, fueled by the expansion of AI models and data-intensive applications like cloud computing and cryptocurrencies, significantly surpasses current supply capabilities, even considering the ongoing development of numerous wind and solar projects.
This supply-demand dynamic, according to Mr. Teskey, ensures that the economic rationale for investing in new renewable energy infrastructure remains strong, maintaining healthy profit margins. While tariffs may elevate the price of certain equipment and materials essential for power generation projects, these incremental costs are expected to be ultimately absorbed by corporate entities purchasing electricity through power purchase agreements (PPAs), and potentially by end consumers utilizing their services.
“Should tariffs increase the cost of equipment for renewable projects, we intend to reflect these expenses in adjusted PPA pricing,” Mr. Teskey informed investors during the conference call. “The current demand landscape is exceptionally favorable. This robust demand provides ample room to adjust project economics and seamlessly incorporate cost adjustments into PPA agreements.”
Brookfield Renewable Partners has proactively diversified its procurement strategy, forging partnerships with a wider network of equipment manufacturers both within the U.S. and internationally. This strategic diversification equips the company with the flexibility to optimize material sourcing as trade policies and disputes evolve.
“Regardless of the trajectory of tariff negotiations, our diversified procurement approach will enable us to prioritize equipment acquisition from the most tariff-advantageous regions,” Mr. Teskey explained.
Brookfield Renewable Partners, the renewable energy division of Brookfield Asset Management Ltd. (BAM-T), has become a leading provider of clean electricity to major U.S. technology corporations. These tech giants are heavily investing in infrastructure to support the rapidly evolving and energy-intensive demands of AI models, facing increasing pressure to secure reliable and sustainable energy sources. A landmark agreement for Brookfield Renewable is their framework deal with Microsoft Corp., finalized last year. This agreement secures funding for 10.5 gigawatts of renewable energy capacity to be brought online between 2026 and 2030, providing Microsoft with a critical influx of renewable energy to power its expanding data center operations.
While Brookfield Renewable is confident in exceeding its delivery commitments under the Microsoft agreement, Mr. Teskey acknowledged the inherent timelines in renewable energy project development. Obtaining permits and approvals for new projects, coupled with the multi-year construction phases, presents a significant bottleneck in expanding renewable energy capacity.
“The primary constraint within the system is not demand or customer willingness, but rather the time required for project development and regulatory approvals,” he clarified.
This dynamic of robust demand amidst supply constraints is anticipated to sustain the momentum for clean energy adoption, even considering the emergence of potentially more energy-efficient AI models. The recent introduction of DeepSeek, a cost-effective AI model developed by a Chinese company, sparked discussions about the energy consumption of current AI technologies.
Mr. Teskey views advancements in AI energy efficiency favorably. He posits that more efficient AI models would reduce operational costs, leading to broader adoption and increased prevalence across various sectors. This, in turn, would stimulate faster growth within the AI industry and consequently drive overall electricity demand. “Even considering these technological advancements, the fundamental imbalance between energy supply and demand remains significantly in our favor,” he concluded.
In their recent financial report, Brookfield Renewable Partners announced robust fourth-quarter results, including a 19% surge in funds from operations, reaching US$304 million. For the three months ending December 31st, the company reported a net loss of $9 million. Demonstrating financial strength and commitment to shareholder returns, Brookfield Renewable also increased its annual distribution by 5% to US$1.492 per unit.
