Will Superminister Pierre Fitzgibbon be able to resist the temptation to sell off our heritage electricity for “ closer of the deals »? Its thirst for business could have costly long-term inflationary impacts, because, at Dollarama de l’énergie, it is all Quebecers who will pay for the new energy that high-powered consumers will need to make their profits here.
In 2000, our elected officials demanded that a quantity of electricity equivalent to that then produced by the dams in operation be provided to Quebecers at a preferential price. This was done in a context aimed at partially opening up our energy market. This is called the heritage pool. It is set by law at 165 TWh and represents 94% of all electricity sales made in Quebec in 2021.
This way of partially opening our market allows us to have electricity at a price almost two to three times cheaper than our neighbors while allowing the export of electricity. However, it has a perverse effect: it is less profitable for Hydro-Québec to sell electricity here when market conditions are favorable for export. While exports represented only 17% of Hydro-Québec’s net sales in 2021, they represented 24% of its net profits. This gap will be even greater this year.
Our heritage electricity risks becoming an open bar used to attract high-power consumers. The deepening financial hole will sooner or later be bailed out by a reduction in Hydro-Québec’s profits or by an increase in rates that all Quebecers will pay.
Two heavy trends are added to this context to reflect well on the best way to valorize our green electron: firstly, the demand to come is astronomical and secondly the new supplies in kilowatts will probably cost more than the electricity of our old dams.
Starting in 2027, Hydro-Québec will need new energy supplies. To achieve carbon neutrality in 2050, Hydro-Québec predicts an additional need of at least 100 TWh of energy, and Minister Fitzgibbon mentions 150 TWh. The equivalent of the electricity production capacity of one half to three quarters of Hydro-Québec will have to be developed in less than 30 years. It’s gigantic!
Electricity supply costs, for their part, will not go down. While it costs Hydro-Québec 3¢/kWh to supply electricity from old dams in the heritage block, it costs it an average of 11¢/kWh to supply post-heritage electricity. The performance of more recent projects is improving. Wind energy from the Apuiat project should cost 6¢/kWh, while that from the La Romaine hydroelectric complex should cost 6.4¢/kWh. This electricity nevertheless costs twice as much as that of the heritage block, and it is clear that our best rivers have already been developed.
This is where the shoe pinches. It does not take Papineau’s head to understand that we are digging ourselves a financial hole by selling our new energy for less than what it costs to produce. This is exactly what Minister Fitzgibbon is doing by attracting new high-power energy consumers with a price hovering around 5¢/kWh as his main selling point.
The demand is huge. Within 10 years, the combined annual consumption of the hydrogen, battery, data center, greenhouse and blockchain sectors is estimated at 8.9 TWh. That’s more than a third of all projected new demand. This is more than what the electrification of transport will require (7.8 TWh). This is more than the production of the La Romaine complex (8.5 TWh). This represents residential consumption equivalent to twice that of Quebec City.
Our heritage electricity risks becoming an open bar used to attract high-power consumers. The deepening financial hole will sooner or later be bailed out by a reduction in Hydro-Québec’s profits or by an increase in rates that all Quebecers will pay. As its President and CEO, Sophie Brochu, says, we are really due for a collective chat about our supplies and the use of our electricity. Otherwise, our superminister Fitzgibbon could make the ill-advised choice to sell our electricity for a penny a ton.