Let’s talk about culture. Not the one who wears an arrow belt, guitar in hand, but the one which helps finance the generous social programs of a state that is still quite interventionist like Quebec. Let us illustrate this culture thanks to its most remarkable economic flagship: Hydro-Québec.
We now know the action plan that will guide Hydro-Québec’s decisions at least until 2035. We also know that this plan represents investments of $185 billion, unheard of in the province. Hydro-Québec will have to at least double its spending over the next twelve years.
How to finance this action plan? We don’t quite have the answer yet. We assume that Hydro-Québec will have to cut into its royalties from the government, which will have to help it. You will have to borrow. Maybe cut back on spending elsewhere. And so on.
If, in Quebec, we really relied on innovation to grow the economy, it would have been possible to do differently. Quebec talks about innovation when it comes to signing checks, but it only very marginally reaps tangible benefits.
Not even a drop of water
Hydro-Québec will not finance its plan using revenues from its patents and intellectual property. They are almost non-existent. In 2022, on a record net profit of $4.6 billion, the state-owned company reported intellectual property revenue of $8.8 million. They were 9.3 million in 2021.
The intellectual property owned by Hydro-Québec represents 0.2% of its revenues. Two tenths of one percent. This is half less than the Canadian average, where intellectual property revenues — $6.5 billion — accounted for approximately 0.4% of total business revenues in 2020.
Fasten your seat belt (arrowed) if you don’t want to fall out of your chair: in the United States, intellectual property revenues in 2019 amounted to 7.8 trillion US dollars. This represented a third of the value of the GDP of the United States that year.
Third !
It must be said that in the United States, intellectual property is an integral part of the strategy of almost all large companies. They are often associated with intangible assets, such as software or services, but manufacturing sectors also benefit from them. For example, in the aerospace manufacturing sector, two out of three U.S. aerospace companies generate up to 50% of their revenue from their intellectual property.
Innovate elsewhere
Canada has tried, but it has never developed a culture of wealth creation based on innovation and intellectual property. In the energy sector, we stubbornly refuse to innovate. Alberta oil companies produce the dirtiest oil on the planet and are doing nothing to fix it. Ontario electricity producers want nuclear energy to be considered a green and clean energy, since its polluting effects will only be felt in tens of thousands of years.
In Quebec, given the availability of abundant electricity at very low prices, we have accumulated a huge delay in energy innovation. Almost all houses in China or Germany are equipped with solar collectors to partially meet their energy self-sufficiency. In Quebec, most houses are not even insulated enough to endure the winter without overheating.
Hydro-Québec timidly tried to stimulate innovation by creating programs like InnovHQ and Hilo, but we quickly backpedaled. It’s expensive. To ensure their survival, Quebec start-ups who already have a foot in the energy of the future must look elsewhere.
However, manufacturers of electric vehicle terminals that already integrate bidirectional charging are doing excellent business abroad. It’s the kind of technology that reduces electricity demand at peak times through grid-connected vehicles. Above all, it is – and very predictably – a huge potential future market.
A society that promotes innovation would give pride of place to technologies like these.
Culture of innovation
Hydro-Québec is one of the most important economic levers in Quebec. Electricity is the tool with which François Legault and Pierre Fitzgibbon hope to leave their mark on the province — in the same way as Jean Lesage and René Lévesque did.
Their action plan is ambitious. There is only negligible room for innovation. And it will not achieve the objective that the two politicians have set for themselves: catching up with Ontario’s standard of living. The even greater wealth gap that separates Quebec from the United States is likely to continue to grow. At least that’s what economists think.
It’s a question of productivity. In macroeconomic terms, it’s quite simple: the most productive economies are those that derive the most value from their intellectual property.
It is also a question of culture: Quebec prefers to calculate its wealth in terms of the number of jobs. The province probably has the financial capacity to carry out Hydro-Québec’s ambitious action plan. Does it have the means to leave aside one of the only solutions that would allow it to really catch up with its neighbors and create more wealth from the same resources?