Quebec Premier François Legault is facing an unlikely skeptic as he eyes the prospect of building new megadams to meet soaring demand for renewable power and to attract big industrial energy consumers to his province with cut-rate electricity prices.
Hydro-Québec chief executive officer Sophie Brochu said last week that the province should avoid seeking to become “the world’s dollar-store of electricity.” She made the comments amid speculation that Mr. Legault’s newly re-elected government may try to fast track new hydroelectric projects as part of its strategy to make Quebec “the battery of North America.”
The province has long relied on massive hydroelectric dams built decades ago to lure energy-intensive industries with among the cheapest electricity rates on the continent. Mr. Legault’s Coalition Avenir Québec wants to cement that competitive advantage as industrial users seek to replace fossil fuels used in their operations with cleaner energy and to create electric-battery-component and green-hydrogen hubs in the province. But the strategy could require building new hydroelectric projects whose costs would exceed by several times those of existing dams.
In a radio interview last week, Ms. Brochu, who was appointed in early 2020 by Mr. Legault to head the provincial Crown corporation for a five-year mandate, did not deny rumours that she disagrees with parts of the Premier’s plan – and that she could resign if the government forces the utility’s hand. Mr. Legault will unveil his new cabinet on Thursday amid rumours that current Economy Minister Pierre Fitzgibbon, who has championed an industrial strategy based on cheap power, will inherit an expanded portfolio that includes overseeing energy policy.
It remains to be seen how far Quebec will to go to lure big electricity consumers such as data centres, critical-minerals processing plants and hydrogen producers. Such a strategy implies selling power for less than Hydro-Québec’s marginal cost of production. The utility’s legacy dams generate power for about three cents per kilowatt-hour. New dams would face costs of at least four times that level.
Hydro-Québec’s most recent hydro development, the 1550 megawatt Romaine River project built in four phases starting in 2009 and slated for completion this year, was projected to produce power for about 6.5 cents per kwh. But its overall costs are likely to end up closer to 10 cents per kwh.
During the recent election campaign, Mr. Legault said Quebec will need to build new hydroelectric dams if the province is to become carbon neutral by 2050. He directed Hydro-Québec to update feasibility studies from 2009 that proposed new dams on the Magpie River and Little Mécatina River on Quebec’s North Shore. The projects, which would have generated more than 2,000 megawatts of electricity by 2015, were subsequently put on ice.
But Hydro-Québec now projects an end to electricity surpluses by 2026 and a 50-per-cent overall increase in demand by 2050. So Mr. Legault is keen to lock in new hydro supply within the province before undertaking talks with Newfoundland and Labrador to renew the 1969 contract under which it purchases almost 5,000 MW of power from the Churchill Falls project for less than a quarter of a cent per kilowatt-hour. The contract does not expire until 2041, but both provinces are already preparing for hardnosed negotiations.
“I don’t want to have my hands tied behind my back negotiating with Newfoundland, obliged to sign no matter the price,” Mr. Legault said on the campaign trail in September.
In its most recent five-year plan, released in March, Hydro-Québec said it would focus on energy efficiency, new contracts with wind-power producers and the refurbishment of existing hydroelectric stations to ensure it has sufficient supply until 2030.
“Depending on the evolution of demand, we could need new hydroelectric production capacity in the future,” it added.
Environmentalists and some Indigenous groups oppose building dams on the Magpie and Little Mécatina Rivers. But Mr. Legault’s CAQ nevertheless won the Duplessis riding in which the two proposed projects would be located, with candidate Kateri Champagne Jourdain becoming Quebec’s first female Indigenous MNA. During the campaign, she refused to take a stand for or against the projects, saying: “We owe it to ourselves to look into the potential.”
Meanwhile, Ontario appears to have ruled out turning to its neighbour for additional electricity supply as it refurbishes its fleet of nuclear reactors. Premier Doug Ford’s government signalled last week that it would not renew a 2015 purchase agreement with Quebec for a firm supply of two terawatt-hours of hydropower annually, as it announced plans to procure additional natural-gas-fired generation from plants within Ontario.
The province’s total electricity imports from Quebec steadily increased from about 4.7 twh in 2015 to about 7.5 twh in 2021. The bulk of those purchases were made on the spot market, where rates have spiked this year in line with rising North American prices. Ontario hopes to save money by turning to local gas-fired power producers.
Indeed, Hydro-Québec saw its average export price soar to 7.2 cents per kwh in the first half of 2022, from 4.6 cents in the same period in 2021. The utility’s overall export revenue increased 45 per cent to almost $1.3-billion, even though it sold 8-per-cent less power outside the province.
Power exports could become even more lucrative for Hydro-Québec as several northeastern U.S. states move to meet legislated requirements to decarbonize their grids. That may explain why Ms. Brochu is not so keen on selling more cheap power at home.
Unfortunately for her, Mr. Legault has the final say in the matter.