Posted on February 20
I wonder about the Hydro-Quebec program which consists of crediting 50 cents per kilowatt hour not used to its customers registered in the program to reduce consumption during peak periods during severe cold weather. Even if I take advantage of this program, these 50 cents seem high to me since Hydro-Québec sells us this same kilowatt hour for 9 cents if we are not part of this program. Does Hydro find its profit there? Or is it a way of making us aware of the scarcity of the resource?
Marcel M.
Hello,
The short answer is: yes, Hydro-Québec gets its money’s worth with its dynamic pricing offers that encourage electricity savings in cold weather.
“We have avoided costs that are higher than what is remunerated in dynamic pricing,” summarizes Frédérik Aucoin, expert in energy efficiency and supply at Hydro-Québec.
The long answer is quite complex.
Hydro-Québec’s great challenge is to respond to peaks, those periods of extreme cold when consumption explodes. The problem is that when it’s cold in Quebec, it’s also often cold in Ontario and New England. Everyone then fights for the same electricity. Unsurprisingly, prices are skyrocketing.
Well before winter, Hydro-Québec signs contracts with various producers guaranteeing that it will be able to meet the needs of Quebecers during peak periods. “These guarantees are relatively expensive,” says Mr. Aucoin.
How much exactly? This is where it gets complicated. The rewards offered to consumers are in kilowatt hours, a measure of energy. However, during peaks, Hydro-Québec thinks more in terms of power – the quantity of energy per unit of time that must be sent to the network.
According to Mr. Aucoin, the 50 cents per kilowatt hour offered to consumers represents roughly what Hydro-Quebec is currently paying for its power contracts which guarantee it will not run out of electricity during extreme cold weather.
“What we anticipate is that this price signal [pour les garanties de puissance] going to be much higher in a few years. That’s why we say it’s profitable for Hydro-Québec. In three or five years, it will be necessary to call for tenders for power and the price will be significantly higher than what is given in dynamic pricing,” says Mr. Aucoin.
The reduction in consumption also means that Hydro-Québec is less in a hurry to improve its own network to meet peak periods. This means less pressure to put out tenders for wind or hydroelectric power.
Many options
Hydro-Québec offers three options to consumers to help them reduce the electricity peak during very cold weather. The first, Hilo, involves the installation of smart thermostats. The second, the winter credit option, rewards customers who reduce their consumption during peak periods. The third, the Flex D rate, offers discounted off-peak rates, but these rise to 50 cents per kilowatt hour during peak times.
And does it work? Yes. To understand the orders of magnitude, take the example of last January 27 when, at 7 am, consumption shattered an all-time record in Quebec by reaching 40,510 megawatts (MW). Of this, 2000 MW had to be imported.
By asking industries, cities and consumers to reduce their consumption, Hydro-Québec can recover approximately 1,600 MW during severe cold weather. Of this number, approximately 190 MW comes from individuals (30 MW from Hilo customers and 160 MW from winter credit programs and the Flex D tariff).
It’s not huge. But by 2029, Hydro-Québec plans to greatly increase these figures by recovering 600 MW with Hilo and 400 MW through dynamic pricing options (winter credit and Flex D rate). These savings represent approximately half of the power of the LG2 plant.