Hydro-Québec keeps hitting roadblocks in its efforts to power northeastern U.S. states as the transmission projects needed to import electricity from Canada run up against opposition from a motley coalition of rural residents, environmentalists and non-renewable energy producers.
Meanwhile, proposals for a pan-Canadian energy grid aimed at getting provinces with electricity systems still reliant on coal and natural gas to switch to renewable power from other provinces remain stuck at the conceptual phase.
The situation illustrates the enormous forces renewable power producers are up against as they seek to displace fossil-fuel-based electricity in Canada and the United States. And it leaves Hydro-Québec scrambling to find alternatives as it aims to double its profit by 2030.
A referendum held last week in Maine is just the latest setback the Quebec government-owned utility and its U.S. partners have faced in their attempts to build new cross-border transmission links. Almost 60 per cent of Mainers voted to force the state legislature to rescind permits for a 233-kilometre transmission line from Canada that is already under construction.
The New England Clean Energy Connect (NECEC), as the transmission project is called by its U.S. promoters, would wheel hydroelectric power from Canada through Maine to Boston under a 2018 clean-energy contract awarded to Hydro-Québec by authorities in Massachusetts.
The 20-year contract, worth $10-billion, is a big deal for the Quebec utility as it attempts to capitalize on efforts to decarbonize the U.S. energy grid. Hydro-Québec is currently sitting on large surpluses that it has been able to only partially liquidate on the volatile U.S. spot market. Locking in future power sales at a premium price is critical to its long-term business plan and to ensuring it can deliver ever-increasing dividends to its only shareholder, the Quebec government.
Opponents organized and financed a signature-gathering campaign to force a statewide referendum on NECEC that, by the time the ballots were counted on Tuesday, had seen both sides spend an eye-popping sum of almost US$100-million to sway Mainers, making the vote the second-most expensive in the state’s history after last year’s U.S. Senate race.
The project’s opponents ranged from right-wing commentators to left-leaning ecologists, and from hunters to vacation property owners. Fox News host Tucker Carlson, who owns a home in Maine, weighed in with a report that described NECEC as a “corrupt green energy scam” that could “destroy the last large standing forest east of the Mississippi.”
The Natural Resources Council of Maine called on leaders in Massachusetts “to honor this electoral outcome by selecting an alternative option for meeting its climate goals without imposing significant environmental harm on another New England state.”
NECEC’s main promoter, Avangrid Inc., a U.S. subsidiary of Spain’s Iberdrola SA, announced it would seek to have the referendum results nullified by the Maine Superior Court. But more legal delays will only inflate the project’s US$1-billion price tag. If it all drags on too long, Avangrid, which has already spent US$350-million on NECEC, may simply decide to pull the plug.
That is what happened in 2019, when the promoters of a proposed New Hampshire transmission line that was to be the conduit for Hydro-Québec to supply power to Massachusetts gave up on the project, known as Northern Pass. The line’s U.S. promoter, Eversource Energy, was forced to write off much of the US$300-million it had spent on Northern Pass after the New Hampshire Supreme Court nixed the plan.
Quebec Premier François Legault insisted after last week’s Maine referendum that Hydro-Québec has a “Plan B” in the works, saying: “There are different routes you can take to get to Massachusetts.”
One potential alternative to NECEC involves piggybacking on the proposed Champlain Hudson Power Express (CHPE), a US$3-billion transmission line aimed at transporting Quebec hydropower to New York through New York State. In September, Hydro-Québec was selected by the New York State Energy Research and Development Authority to negotiate a 20-year renewable power contract. But the Quebec utility still needs to clear several hurdles before winning final approval for an eventual contract from the New York Public Service Commission.
The 550-kilometre CHPE, whose backers include private equity player Blackstone Group, would be buried under Lake Champlain and underground farther downstate, avoiding the visual pollution that often generates opposition to transmission lines. But several opponents have nevertheless lined up against the project, including the North American Megadam Resistance Alliance, which has allied with some Quebec Indigenous groups to decry the environmental damage caused by Hydro-Québec’s massive hydroelectric dams on their traditional territories.
Yet another project Mr. Legault is eyeing to eliminate Hydro-Québec’s transmission bottlenecks involves the Atlantic Loop that Prime Minister Justin Trudeau’s government has touted as a way to help New Brunswick and Nova Scotia eliminate their reliance on fossil-fuel-based electricity.
Promised in the 2020 Throne Speech, the Atlantic Loop would expand transmission links to New Brunswick and Nova Scotia from Quebec and Newfoundland and Labrador, encouraging the joint development of the Gull Island hydroelectric project in Labrador by Hydro-Québec and Newfoundland and Labrador Hydro. The new lines could also provide Hydro-Québec with an alternative route through New Brunswick to supply northeastern U.S. states in case NECEC and CHPE fall through. So far, however, the Atlantic Loop has not moved beyond the planning stage.
The Massachusetts and New York contracts are critical to Hydro-Québec’s business plan as it seeks to boost its annual profit to more than $5-billion in 2030, from $2.3-billion in 2020. Electricity sales outside the province fell 8 per cent last year to about $1.4-billion, because of slumping demand during the pandemic. Overall prices in the northeastern U.S. spot market remained soft during the first half of 2021, though a recent spike in natural gas prices will likely allow Hydro-Québec to reap juicier margins on its short-term U.S. electricity sales this winter.
Doubling its electricity exports through stable long-term contracts would go a long way to enabling Hydro-Québec to meet its profit targets. But opposition to its transmission projects keeps short-circuiting its plans.
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