Does Quebec have surplus electricity, yes or no?
The government decided, 20 years ago, to reserve part of the electricity produced by Hydro-Québec for the Quebec market, namely 165 terawatt-hours (TWh) at the advantageous price of 2.79 cents per kilowatt-hour. The rest of the electricity produced by Hydro-Québec can be used to attract investment or export to the American market.
This so-called heritage block of electricity has been more than sufficient to meet Quebec’s needs until now and has therefore generated surpluses. It is these surpluses that are coming to an end and that will be completely exhausted in 2026.
This is why Hydro-Québec will launch two calls for tenders for the purchase of the additional 780 megawatts needed to meet the increase in demand, which exceeds the heritage pool.
The price of electricity purchased through a call for tenders is higher than the price of the heritage pool, which is indexed annually.
There are therefore two kinds of surplus. Those in the Quebec market which are in the process of disappearing and those which Hydro-Quebec still has at its disposal to be able to export or grant rebates to companies investing in Quebec.
How big are the “real” surpluses?
This question is considered commercial information that must remain confidential, says Hydro-Quebec. However, it is possible, by cross-checking public information, to estimate the size of these “real” surpluses.
“Overall, the production capacity of Hydro-Québec power plants and its other sources of supply exceeds the company’s needs by more than 40 TWh of available energy per year. As this enviable situation should continue over the next few years, Hydro-Québec will continue to have enough energy to fuel Québec’s economic development while further contributing to the decarbonization of neighboring markets by signing new export contracts at long term, ”the company said in a report filed with the Régie de l’énergie.
“This figure is an order of magnitude,” specifies Maxence Huard-Lefebvre, spokesperson for the state corporation, regarding the 40 terawatt-hours of annual surplus, which includes the electricity produced by Churchill Falls.
This quantity of available energy corresponds to twice the 20-year supply contracts concluded with Massachusetts (9.45 terawatt-hours) and New York (10.4 terawatt-hours). These surpluses are stored in Hydro-Québec’s 28 large reservoirs, which, when full, contain one and a half times the annual electricity consumption that the six New England states can contain.
Is this a good strategy?
Hydro-Québec therefore reserves most of this 40 terawatt-hour surplus for investment promotion and exports. Is this a winning strategy for Quebec? Yes, says Professor Sylvain Audette, associate member of the Energy Sector Management Chair at HEC Montréal, “as long as Quebecers do not pay more than Americans for electricity”.
The situation is changing, and the energy transition could require significant investments from Hydro-Quebec, he said.
For the time being and for the foreseeable future, the Crown corporation obtains a much better price in neighboring markets than in Quebec, and export revenues are in US dollars. The average cost of producing 1 kilowatt hour is 2.11 cents. This kilowatt hour is sold for 3.1 cents on the Quebec market. On short-term markets, Hydro-Québec obtained an average selling price of 4 cents this year.
Massachusetts plans to pay 4.8 US cents per kilowatt hour from Hydro-Quebec in the first year of its 20-year supply contract.