François Legault must think twice before taking action. Because Sophie Brochu is serious: she plans to resign if the government forces Hydro-Québec to bet on energy-intensive projects to the detriment of those favorable to the environment.
Posted at 5:00 a.m.
According to my information, the one who has just been named CEO of the year by The Globe and Mail had tense discussions with Minister Pierre Fitzgibbon last spring when it came to adopting the approval process for major industrial projects.
And a turning point could occur if, as my colleagues report, the Ministry of Energy comes under the control of an economic superministry headed by Pierre Fitzgibbon, during the ministerial appointments of October 20.
PHOTO ROBERT SKINNER, LA PRESSE ARCHIVES
Pierre Fitzgibbon, outgoing Minister of the Economy
In short, Sophie Brochu does not rule out leaving Hydro if the current Minister of the Economy takes control of the energy strategy, a strategy which would then be subordinated to the imperatives of economic development to the detriment of the enormous decarbonization needs of the economy.
My information, obtained from sources that demand confidentiality, matches the insinuations made by Mr.me Brochu during an interview on Paul Arcand’s show, Wednesday morning, on 98.5 FM.
“As long as the governance framework within the Hydro-Québec government is sound and we are able to assert the major prerogatives of the energy system’s needs, I will be there. But if for some reason I saw that this system was at risk, well, I would have serious discussions with my shareholder, ”she answered a question from the host on the rumors of his departure next spring.
However, precisely, the industrial projects that could be approved soon are likely to put our energy system at risk.
About fifty projects have been submitted by companies here and abroad that require huge blocks of energy. In total, these projects exceed 15,000 megawatts (MW), or nearly 40% of all of Hydro-Québec’s installed capacity.
Several of these projects relate to the development of green hydrogen. Experts consider this sector unprofitable in Quebec, except for limited specific needs, since more electrical energy is needed to produce energy than hydrogen obtained from water provides. If the green hydrogen is exported, this energy is even equivalent to a subsidy to the buyer countries.
The aluminum smelters in question
Also part of the files that arouse reservations at Sophie Brochu are the expansion projects of a few aluminum smelters in Quebec, according to my information.
These projects have come back on the table over the past year with the explosion in the price of aluminum. Its price reached US$3,400 a tonne last March – a 25-year high – before falling back to US$2,355 this week. Even in decline, this price remains significantly higher than the average of the last 10 years.
The list of energy-intensive projects also includes server warehouse projects.
The issue concerns the selling price of our electricity. The rate for major industrial projects is around 5 cents per kilowatt hour – aluminum smelters have historically benefited from a lower rate – while the cost for new electricity supplies from Hydro-Québec can reach 11 cents per kilowatt hour.
This kind of unfavorable difference between the cost of energy and the price obtained is the equivalent of a Hydro-Québec subsidy to businesses. It has the effect of raising the rates of other Hydro-Québec customers – residential and other – since the government corporation has performance requirements1.
In doing so, Hydro considers in its strategic plan that priority should be given to essential projects, especially in the context of energy scarcity and climate issues.
New dams
The dispute between Sophie Brochu and the government is not so much about the construction of new dams as about their future use.
PHOTO MARTIN TREMBLAY, THE PRESS
Manic-5 hydroelectric dam, on the North Shore
In its strategic plan, Hydro-Québec estimates that it will be necessary to add approximately 100 terawatt hours (TWh) of new energies in Quebec by 2050, which would constitute a jump of 50% compared to the current level, as argued by François Legault. in the election campaign.
However, according to Hydro’s plan, this increase must above all be used to reduce the carbon footprint of businesses and to electrify transport.
This week, for example, Rio Tinto announced a $737 million investment in its energy-intensive Sorel plant. But this money will be used to reduce the plant’s greenhouse gas emissions and increase the production of minerals critical for the energy transition.
The additional 100 TWh by 2050 do not include new energy-intensive industrial projects, such as aluminum smelters, green hydrogen or data warehouses. The sector of electric batteries, not yet very energy-intensive, would not raise any disagreement between Sophie Brochu and Pierre Fitzgibbon.
The “Dollarama” of electricity
Sophie Brochu explained the situation well to Paul Arcand: “What should not be done is to attract an undue number of industrial kilowatt-hours who want to pay a low price, and after that, to build dams to supply them because we lack energy,” she explained.
The CEO of Hydro wants to prevent Quebec from being the “Dollarama” of electricity. She finds our low rates problematic, not representing the fair value of our electricity.
Hydro-Quebec did not want to comment on my information on the possibility of a resignation of Sophie Brochu, referring me to her comments on the Paul Arcand program.
No comments either from Pierre Fitzgibbon, although his ministry assures me that it does not want to make our energy the equivalent of the iron mines of Maurice Duplessis, in the 1950s, whose ore was sold at a discount to the Americans.
Hydro-Québec is a Crown corporation 100% owned by the Government of Quebec. The company nevertheless has its decisions and its strategic plan approved by its board of directors, made up of 16 directors, most of whom come from the private sector, in addition to Sophie Brochu.
One of the members is the Deputy Minister of Energy and Natural Resources and she could eventually report, ultimately, to Pierre Fitzgibbon, depending on the cabinet reshuffle in sight.
Sophie Brochu received the mandate to lead Hydro-Québec in April 2020 and her mandate is for five years.
1. Admittedly, contracts with aluminum smelters often link the price paid for electricity, in part, to the price of aluminum, but the large variations in the price of aluminum make profitability very uncertain for Hydro-Québec.