The debate on the expansion of independent electricity production deserves to be conducted on a sound basis. Unfortunately, since the news leaked, we have been treated to little thoughtful analysis, and a lot of verbal puffery.
The ACEF of North Montreal, for example, went so far as to claim that this change “endangers Hydro-Québec’s fundamental mission, which is to provide Quebecers with access to affordable electricity.” This is not the case. Just like the government is not preparing to put Hydro-Québec on Kijiji, by the way.
In fact, what the government is proposing is to allow independent electricity producers to sell the electricity they produce directly to industrial or commercial consumers.
The context in which this legislative change takes place is one where electricity needs in Quebec are growing, while Hydro-Québec’s capacity to meet them is not growing at the same rate.
For example, there would remain 500 megawatts of capacity available for industrial development by 2028 at Hydro-Québec. We are talking here about availability for mines, aluminum smelters, the manufacture of green hydrogen or even electric vehicle batteries, for example.
When we look at the companies that would like to invest here and contribute to the prosperity of the people here, the estimated needs for all the projects to be carried out are more like 30,000 megawatts.
And although Hydro-Québec has submitted a plan to increase its supplies, the company plans to increase them by at most 9,000 megawatts by 2035.
Even if each of these new megawatts of capacity were used to power industrial projects, there would still be more than 20,000 megawatts of projects that could fail for lack of electricity.
It is to respond to this lack of production capacity that the provincial government wishes to untie the hands of independent producers. They would thus act in complementarity with Hydro-Québec, which would prevent us from losing good projects for our regions due to lack of power.
Some will wonder why Hydro-Québec would not do these projects itself instead of letting others carry them out. The fact is that, in the coming years, the state corporation will already have its hands full with its projects.
Its plan to increase production will cost it at least $90 billion by 2035. Added to this is $45 billion for projects to improve its network which aim to reduce the number of outages, as well as $20 billion more in additional operating costs over the period.
In short, the state-owned company plans to spend a minimum of $155 billion on its projects over the next decade. Another way of seeing it is that these projects will cost Hydro-Québec the equivalent of $17,300 per Quebecer.
Whether from a financial point of view or from a project management point of view, the task facing Hydro-Québec is colossal, and it would be very surprising if the state corporation had the internal resources to efficiently carry out an even larger project load.
Others fear that if independent producers are allowed to sell energy directly to industrial consumers, they will monopolize the best sites and indirectly increase the rates of residential customers.
However, by letting independent companies produce electricity for industrial use, we would reduce the increase in Hydro-Québec’s average cost.
This comes from the fact that, for Hydro-Québec, new supplies already cost 11 cents per kilowatt hour on average. This is twice as much as what is billed to industrial customers, or 5.55 cents per kilowatt hour.
If this rate is still profitable for Hydro-Québec, it is because the company can draw on the immense reserve of low-cost electricity that comes from large dams.
However, each time supply needs to be increased to meet growing industrial demand, this profitability declines, while the cost of production increases with each new megawatt. And who says declining general profitability also says higher increase in Hydro-Québec rates during the five-yearly evaluations of the Régie de l’énergie.
In other words, each new electricity supply for businesses that does not go through Hydro-Québec reduces the pressure on rates.
Ultimately, the expansion of independent generation is nothing more than a legislative change made necessary by a lack of electricity generation capacity. It is not the dismantling, sale or even denationalization of Hydro-Québec, whatever its opponents would have you believe.