The future of the Hydro-Québec subsidiary dedicated to energy efficiency is uncertain. In addition to failing to attract enough customers, Hilo is the costliest winter peak management tool, according to internal documents obtained by The duty. So much so that the state-owned company took over the reins of its board of directors two weeks ago.
Not only did Hydro-Québec recently thank Hilo’s general manager, Sébastien Fournier, but it also took control of the company. The state-owned company is thus ensuring that it has control over the future of a subsidiary which, until now, has not allowed it to reduce electricity demand during extreme cold weather as much as it had planned. .
Indeed, the chairman of the board in office since 2019, the independent member Carl Cassista, has not sat on the board since mid-October. Ditto for the independent director Frédéric Bastien, who left the group on October 17th. Both were replaced by leaders from Hydro-Quebec. It is now 4 of the 10 vice-presidents of Sophie Brochu’s team who ensure the destiny of the independent subsidiary employing 150 people.
Hydro-Quebec is now not ruling out restructuring and absorbing Hilo. “At the moment, we are carrying out an evaluation which will last about three months,” said spokesperson Cendrix Bouchard in an email. “Hilo has been a definitive success since its creation”, he adds, specifying that it is “an indispensable tool” to face the growth in the demand for electricity.
Concretely, the team of Mme Brochu — who has already orchestrated the merger of the production, transmission and distribution divisions of Hydro-Québec — already holds the reins of Hilo. “In principle, and in practice, who controls a company’s turnover controls the company and its strategic orientation,” recalls Michel Magnan, professor and researcher at Concordia University’s Jarislowsky Chair in Governance.
Efficiency issues
The time is over for electricity surpluses in Quebec. Hydro-Québec underestimated the magnitude of the peak in demand last winter, revealed The duty last week. It had to start up its Bécancour natural gas plant 18 times. Its procurement plan tabled Thursday is based on “significant efforts” in energy efficiency, in which Hilo plays a central role, without which it will be impossible to decarbonize the province.
Created in 2019, Hilo is a subsidiary of Hydro-Québec that aims to reduce household electricity consumption during extreme cold weather. To subscribe to Hilo, interested customers must have smart thermostats and switches installed in their homes. A mobile application then suggests “challenges” to them during peaks in demand; if they accept, their heating decreases in intensity and they pocket a credit.
Hydro-Quebec cultivates great ambitions for its subsidiary: it believes that Hilo will release more than 600 megawatts (MW) of power during peak periods as early as 2029. This is far from the cut. According to internal documents obtained by The dutyHilo only released an average of 10 MW of power during peaks last winter, compared to its parent company’s expectations of 28 MW.
For next winter, Hydro-Québec has set itself the objective of almost quintupling Hilo’s output, ie increasing it to 47 MW, and rallying 33,500 subscribers, according to the documents we obtained, dated July. It will be tough. Last week, a spokesperson for the state corporation told Radio-Canada that Hilo had 20,000 customers.
An expensive tool
The information obtained by The duty also show that Hilo is the most expensive tool per kilowatt (kW) in Hydro-Québec’s arsenal to reduce demand during peak periods. On average, gains from Hilo last winter cost $136 per kW. Other tools, such as the “winter credit” for residential customers or the “power demand management” program for industrial customers, cost $60 or less per kW.
Why is the cost of Hilo so high? “Hilo was launched three years ago, the cost of erasing will decrease over the years”, answers the spokesperson for Hydro-Québec. He adds that the subsidiary aims to be a “virtual power plant” that provides power regulation that is more predictable than other programs. The other less expensive peak management options “will of course be used to the maximum, but their potential has a limit”.
To reach its objective of more than 600 MW of load shedding in 2029, the state-owned company would need to rally hundreds of thousands of participants to Hilo. Last year, the few thousand subscribers to the service each cut an average of 2.64 kW per “challenge” – a power equivalent to that required by a washing machine.
“The problem with this program is that it is not designed for scaling up,” explains Normand Mousseau, scientific director of the Institut de l’énergie Trottier and professor of physics at the ‘Montreal university. However, an expansion of the pool of subscribers is necessary to reduce costs.
The specialist also says he has “zero interest” in the challenges offered by Hilo. “Imagine families with three children…” he underlines.
“Quebec has no plan,” continues Mr. Mousseau. What we need is regulation and a real strategy to bring down the cost of travel solutions [de la puissance électrique en pointe] and ensure integrated management in heating systems. In particular, he believes that smart thermostats that moderate heating during peak consumption should be mandatory in new buildings.