Canadian Power – Key Developments in 2019, Trends to Watch for in 2020: Quebec - Overview

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The following is a chapter from our Power Group's fifth annual Canadian power industry retrospective Canadian Power Key Developments in 2019, Trends to Watch for in 2020. A PDF request form is available at the end of the article.

While Québec’s electricity industry made the headlines a few times in 2019, both within the province and in its main export markets, Hydro-Québec remains in a transition period following the objectives set last year by the new Government of Québec: no new hydroelectric projects after the completion of the 245 MW Romaine-4 plant in 2021, no significant private renewable energy procurement programs, a focus on exporting Québec’s current energy surplus and contributing to energy transition and the fight against climate change.

Hydro-Québec issued its 2020-2024 Strategic Plan, announcing experimental solar projects and confirming its support of transport electrification within Québec. It innovated by launching an RFP for potential clients wishing to benefit from a new tariff specifically aimed at the blockchain industry. Hydro-Québec’s efforts to build the Northern Pass transmission line through New Hampshire met a dead end, but an alternative route reaching Massachusetts through Maine made progress, in addition to discussions with New York City’s municipal government.

Among notable developments, in June 2019, the Québec Court of Appeal sided with Hydro-Québec in another round of the ongoing dispute with Newfoundland over the power generated at Churchill Falls. This particular dispute was about Hydro-Québec’s right to purchase additional power from the second-largest power station in Canada in addition to its basic monthly allocation, thus ensuring Québec’s flexible and continuous supply until 2041.

On the consumer side, after significant debate in the course of 2019 over Hydro-Québec’s tariffs and alleged overcharges in past years, the National Assembly of Québec passed a bill setting electricity prices for consumers for the next five years in line with inflation and limiting the Régie de l’énergie’s oversight powers.

Hydro-Québec’s Strategic Plan

Hydro-Québec’s 2020-2024 Strategic Plan brands Québec as the “battery of North America.” After spending the last decade investing in additional generating capacity with wind power projects, small hydro plants and the 1,550 MW Romaine complex (whose fourth plant will be commissioned in 2021), the public utility is now looking at ways to make the most of its generating capacity.

For the next years, Hydro-Québec wants to make better use of its surpluses by increasing exports and increasing electricity’s share of Québec’s energy mix above the current level of 35% in order to decarbonize Québec’s economy. This includes electric mass transportation, starting with Montréal’s Réseau électrique métropolitain and Québec City’s upcoming tram network, but also expanding Québec’s charging stations circuit for electric vehicles, and continuing to invest in its Dana TM4 venture to develop electric power trains. Hydro-Québec is also looking at the development of greenhouses and at ways to produce hydrogen as an alternative green fuel source. It also intends to take advantage of synergies between Québec’s cold climate and cheap electricity to develop data centres and cryptocurrency mining.

Hydro-Québec also intends to improve the integration of remote communities to its TransÉnergie power grid. The two wind turbines under construction in the Îles-de-la-Madeleine as part of the Dune-du-Nord project will eventually be complemented by an undersea cable linking the islands with the mainland network. The northern village of Inukjuak will be supplied with hydroelectric power by 2025, advancing Hydro-Québec’s goal of phasing out the remaining thermal generation facilities in remote communities.

Solar Energy in Québec

Hydro-Québec announced in February 2019, that it will build two solar pilot plants on the Montreal south shore, in an attempt to familiarize itself with the solar sector. The 36,000 panels and 10 MW capacity plants are expected to be commissioned in 2020, with investments reaching $40 million. Both projects will be developed by Hydro-Québec Production, the generation arm of Hydro-Québec, and will be built within Hydro-Québec’s Research Centre in Varennes and on the site of a former thermal plant in La Prairie. This is not Hydro-Québec’s first foray in the solar sector, as it previously installed a solar power demonstration system in the northern village of Quaqtaq in 2017.

This announcement is in line with the 2030 Québec Energy Policy, which provided that Hydro-Québec would develop expertise in solar electricity centralised production through a pilot plant. Under the plan, Hydro-Québec is also to assess the capacity of decentralized photovoltaic panels technology to improve the operation of the electricity network.

Québec’s Electricity Export Strategy

As Québec’s power generation capacity continues to significantly exceed its consumption needs, 2018 saw record exports of 36.1 TWh to neighbouring provinces and U.S. states, and both Hydro-Québec and Premier François Legault renewed their efforts to convince Ontario, New England and New York to increase the share of Québec’s green power in their supply.

After winning a bid to supply Massachusetts with 9.45 TWh of electricity each year, Hydro-Québec considered various options to increase Québec’s transmission capacity to export electricity to New England. The Northern Pass project was abandoned in 2019, after being blocked in New Hampshire.

Hydro-Québec is now focusing its efforts on the New England Clean Energy Connect (“NECEC”) 142-mile transmission line, a joint project with Central Maine Power. NECEC achieved significant milestones in 2019, including approval from Maine’s Public Utilities Commission, while Hydro-Québec’s agreements with Massachusetts distributors received approval from the state’s Department of Public Utilities. If construction proceeds according to schedule, NECEC will be commissioned in 2022, in time for increased deliveries to Massachusetts to begin.

New York City’s mayor Bill De Blasio also announced a plan to import “zero-emission Canadian hydroelectricity” and Hydro-Québec is in discussions with U.S. partners to build a new transmission line along the Hudson River.

On the domestic front, following repeated initiatives by the Government of Québec, Ontario Premier Doug Ford indicated in December that Ontario also has electricity surpluses and therefore, has no intention to increase its supply from Hydro-Québec (which amounted to 6.8 TWh in 2018), preferring instead to explore the use of small modular nuclear reactors with New Brunswick and Saskatchewan.

Hydro-Québec’s Strategic Plan does not provide for any clear indication as to Hydro-Québec’s intentions regarding future energy projects or procurement programs. It merely states that, over the next few years, Hydro-Québec will decide on future energy projects to meet long-term needs for clean electricity and indicates that several variables will influence Hydro-Québec’s choice, including the costs associated with each generating option, future capacity and energy needs, the expiry of Hydro-Québec’s contracts with the Churchill Falls (Labrador) Corporation in 2041, the storage capacity of Hydro-Québec’s reservoirs, market adoption of home automation, self-generation and energy efficiency measures, as well as the impact of climate change.

Hydro-Québec RFP for Blockchain Projects

On June 5, 2019, Hydro-Québec launched a RFP intended at supporting blockchain projects in the Province of Québec. A 300 MW block of power was allocated based on new tariffs approved by the Régie de l’énergie specifically for cryptographic use applied to blockchains. Of that block, at least 50 MW will be reserved for projects of 5 MW or less of power and all admissible projects must require at least 50 kW of power. This RFP is the most recent step taken by Hydro-Québec to address the increasing demand for power by the blockchain industry. In 2018, Hydro-Québec had put a hold on the processing of new power supply demands from that category of customers and adopted a temporary dissuasive tariff for those already serviced, until complete terms of service were approved by the Régie de l’énergie.

The new blockchain tariff is based on the existing M and LG tariffs which provide for electricity rates (as of 2019) ranging between 3.46 and 9.90 1/kWh. The blockchain tariff will be a non-firm supply service which may be curtailed by Hydro-Québec for a maximum of 300 hours per year at any time between April 1st and March 31st of each year. Selected bidders will bear the costs of connection of the project to Hydro-Québec’s grid.

As part of their bid, proponents will be required to make commitments with respect to economic benefits and the environmental performance of their projects. For the economic benefits component, Hydro-Québec will look at the number and payroll of direct jobs created in Québec as well as capital investments in the province. For the environmental component, proponents will be required to commit to recover and reroute a portion of the thermal energy produced by their project. In each case, the commitments must be maintained for a period of five years from the commencement of service and failure to comply with those commitments will result in the application of a penalty intended to recoup in whole or, in part, the difference between the blockchain tariff and Hydro-Québec’s dissuasive tariff(which is equal to 151/kWh).

At the initial stage of the selection process, bids will be analyzed to confirm that they meet the applicable minimum requirements. They will thereafter be ranked based on the economic benefits and environmental criteria. Hydro-Québec will then determine the optimum combination of projects in order to meet the quantity offered, with the aim of maximizing sales of electricity for the period from January 1, 2020 to December 31, 2024. Proponents were required to submit their bids by October 31, 2019 and the results are expected to be announced in January 2020.

Click here to request a PDF copy of the publication: McCarthy Tétrault’s fifth edition of Canadian Power 

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