Hydro-Québec expects to invest up to $185-billion by 2035 to upgrade the grid and improve its resilience, increase production and total power capacity, and control demand with energy efficiency measures.Ryan Remiorz/The Canadian Press
Normand Mousseau is a professor of physics at Université de Montréal and scientific director of the Institut de l’énergie Trottier at Polytechnique Montréal.
Pierre Fitzgibbon’s resignation last week as Quebec’s economy and energy minister has occurred at an inopportune time. The National Assembly hearings on Bill 69, a massive proposal prepared by Mr. Fitzgibbon to set up the province’s approach to energy transition is set to start on Tuesday.
The challenges that this transition represents for the next minister and the province as a whole must not be underestimated. Across the country, most projections, including those presented in the third edition of the Institut de l’énergie Trottier’s Canadian Energy Outlook, estimate that, to support the electrification of vehicles, building heating and industry, utilities will have to increase electricity production by at least 35 per cent by 2040 and double it by 2050, reflecting worldwide trends.
Last November, Hydro-Québec, under the leadership of its new chief executive officer, Michael Sabia, presented an ambitious plan to help the utility face up with fast-increasing demand for its clean electricity. A year later, it is still the only serious plan of all Canadian utilities to be aligned with the growth in electricity demand needed to support efforts by citizens and corporations to reach climate goals.
But this will not come cheap: Hydro-Québec expects to invest up to $185-billion by 2035 to upgrade the grid and improve its resilience, increase production and total power capacity, and control demand with energy efficiency measures.
This means that, if Hydro-Québec’s clients benefit today from one of the cleanest and cheapest electricity in the world, the scale of these investments will put considerable pressure on rates. This could affect Quebec’s competitiveness, especially as the current government is heavily counting on cheap electricity for its economic development, as well as anger citizens, who are being pushed to electrify.
This plan by the provincial utility represents tripling current annual investments, which is not a small task, especially as part of that goes to correct past misguided decisions. Hydro-Québec has grossly under-invested in the transport and distribution grid. It has also signed important multi-decade firm deals with the states of Massachusetts and New York to export 20 terawatt hours (TWh), which amounts to about 10 per cent of Quebec’s production.
As demand increases in the coming years, Hydro-Québec will need to set aside a significant part of its production for firm exports. Even though the transport lines are not yet completed, this reduction in future capacity is already felt in the industrial sector, where only a handful of the electricity hungry projects presented to the government have been approved in the last year, as capacity cannot be guaranteed for many years.
To compensate for these decisions, Hydro-Québec plans to add major new production infrastructure in the next decade, including 10 gigawatts of wind. It has already announced, a few weeks ago, one of the largest wind farms in the world that will be built in collaboration with First Nations and local communities. With 2,000 MW of wind turbines, this farm should provide about 6 TWh additional energy yearly.
If this new production infrastructure will add net electricity to Quebec consumers in the coming years, a failure to renew the Churchill Falls contract between the province and Newfoundland and Labrador – which delivers more than 30 TWh (15 per cent of Quebec current electricity need) and ends in 2041 – could soon wipe out any expected capacity margin.
Such a failure is likely. While Quebec has been slow to open negotiations, Newfoundland and Labrador, still mulling from the historic contract conditions (which set electricity at a paltry rate of 0.2 cents per kWh), is not very open to negotiations, adding another stumbling block that limits the province’s capacity to attract industry on the longer term.
Access to electricity is not the only challenge facing Hydro-Québec. In addition to building wind farms and other supply, the utility must also get the electricity to its clients. This means that it will need to build infrastructure at all scales, including new transport line and distribution stations, while strengthening and upgrading its distribution system at a rate not seen in decades.
The impact on the rates people pay is hidden at the moment. To limit public debates about rates, the province has capped yearly residential rate increases to 3 per cent.
But while that can work for a few years, it is untenable and can only lead to disturbances when rates will have to catch up with reality. That requires a real public discussion about the energy transition.
Editor’s note: A previous version of this article incorrectly stated that Hydro-Québec's wind farm to be built in collaboration with First Nations and local communities will have 2,000 GW of wind turbines. It will have 2,000 MW of wind turbines.