As an electricity shortage looms and François Legault wants to build new dams, Hydro-Québec has agreed to sell 20 TWh to Americans at low prices.
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“They tapped into the heritage block to sell the equivalent of 93% of the Manicouagan River to the Americans at a discount! protests Pierre F. Gingras, a former engineer specializing in hydroelectric projects who worked for Hydro-Québec for 32 years.
He and other former Hydro people find it absurd that Quebeckers are being invited to “energy sobriety”, as Minister Pierre Fitzgibbon has suggested, while Hydro will be selling its blue gold south of the border.
“What are we going to replace that with? It is impossible today to replace these dams. Rivers of the quality of the Manicouagan, we don’t have any more! The Americans are going to take advantage of two generations of Quebecers who have killed themselves at work so that we can have good rates,” laments the man who has evaluated more than 200 dam projects during his career.
Photo provided by Pierre F. Gingras
Pierre F. Gingras, ex-Hydro-Québec engineer.
Long-term agreements
Hydro-Québec recently entered into agreements with the State of Massachusetts and the City of New York to supply them with a total of 19.85 TWh for 20 and 25 years respectively.
In the case of the contract with Massachusetts, the price that Hydro-Québec will receive in year 1 of the contract will be 5.15 US cents per kWh (year 1 was to start in 2024, but will be postponed due to legal disputes ). In year 20 of the contract, this price will be 8.24 cents, which assumes an inflation rate of 2.5% over the life of the contract.
The problem is that the price of electricity on the market was already 8.4 cents in the last quarter of this year. Inflation is exploding and the demand for clean electricity has never been stronger. Will the Americans gain from the change?
Hydro-Québec defends itself
“It’s still excellent contracts. These are long-term commitments and market prices fluctuate a lot. The current inflation will not last,” tempers Simon Bergevin, senior director of the Energy Transactions Department at Hydro-Quebec, questioned Tuesday at a CORIM conference.
The price of natural gas (a reference for that of electricity) was $1.52 not so long ago, he recalls, even if it exceeds $7 today. Factors like the war in Ukraine are pushing the price up, but “a price of 5.15 cents in the Massachusetts contract is still a good long-term price,” he says.
Like on the stock market
“In a portfolio, you want to be diversified. Currently, the majority of our electricity exports are sold on the spot (short-term market). But in the long term, you also want a part of your portfolio that will be fixed”, illustrates Mr. Bergevin.
An opinion shared by economics professor Pierre Fortin. “The price of 5.15 cents per kWh may seem low today, but we can currently produce at 7 cents per kWh with wind, which will be our main competitor in the United States and whose the price will likely continue to decline in the years to come. »
“It’s also a good idea to have a firm presence in the United States, with business allies there, to minimize portfolio risk,” he adds.
A victory in Maine
In addition, the Supreme Court of Maine validated, Wednesday, the lease that had obtained the partner of Hydro-Quebec in the file of the NECEC project, a new line of transmission between Quebec and New England.
This is the second favorable decision of the court in connection with this project, after that rendered last August on the subject of the constitutionality of the referendum of November 2021.
Hydro-Québec is still not out of the woods in this case, because pleadings are scheduled for April 2023.