There is a lot of talk about decarbonizing the Quebec economy, particularly in the debates between the Quebec government and Sophie Brochu, CEO of Hydro-Quebec, who will leave her post in April. The government must, in fact, try to respond to industrialists eager for our clean, reliable and cheap electricity in this context of energy transition. Thousands of additional megawatts are expected.
However, these debates and questions about the Quebec energy situation should not make us forget the situation prevailing in the United States. For what ? Because it is changing rapidly and strongly, especially because of the adoption by the American Congress, last August, of the Inflation Reduction Act (IRA). This landmark, misnamed law is nothing less than the most far-reaching climate and energy legislation ever passed in the United States.
The media here have certainly covered this new law and its consequences, but little. With its approximately US$370 billion which will be paid out in various credits with the aim of reducing greenhouse gas emissions by 2030, the IRA will nevertheless have major effects in terms of energy and others.
It will significantly boost annual investment in renewable energy deployment in the United States. These are expected to rise from $64 billion in 2022 to nearly $114 billion by 2031, according to Wood Mackenzie. It’s colossal.
Americans have a reputation for moving very quickly when it comes to energy, especially since the oil crisis of the 1970s. This sector is indeed considered to be intimately linked to national security.
A recent example of this velocity: the shale hydrocarbon revolution, made possible by an innovative approach to extraction: horizontal drilling combined with hydraulic fracturing. However, the atmosphere was gloomy in the early 2000s in energy circles in the United States. The country foresaw shortages of oil and gas, which it therefore had to obtain in large quantities from abroad. But thanks to a rain of billions coming from private investors and intended to extract vast quantities of fossil fuels hitherto inaccessible, the “revolution” began. The United States thus became the largest oil and gas producer in the world in record time.
The same thing happened with liquefied natural gas. Only seven years ago, the United States exported no natural gas. And in 2022, with the war in Ukraine, the country’s exports to Europe took off, to the point that it became the largest exporter of liquefied gas in the world.
With the IRA, generous credits available until 2032 are allocated in particular to the local production of carbon-free energy. The declared objective is to reduce the dependence of the United States on China in the production of solar panels, wind turbines and batteries, as well as in the supply of the minerals necessary for the marketing of this equipment.
These amounts are so large that Canada and Europe are concerned, and rightly so. The favors granted to American industry may encourage their companies to deploy their planned renewable energy investments in the United States.
Suddenly since the adoption of the IRA, these historical allies of the United States are lagging behind in terms of incentives for transition. Europe responded to this this month with a Green Deal Industrial Plan, focused on faster deployment of clean energy projects and access to finance through tax breaks.
The Canadian government certainly retaliated as well in its 2022 fall economic statement with investment tax credits for clean technology and emission-free hydrogen. But many are following him so that he commits himself more during his next statement in the spring of 2023, with, for example, a commitment of spend 2% of GDP investments related to decarbonization.
The next federal budget will most likely be a turning point in Canadian ambitions in this area.