2023-08-30 05:14:37
(Quebec) This is the end of a “historic” agreement for Quebec with Ontario. The neighboring province is not renewing the electricity purchase contract entered into with Hydro-Québec in 2016.
Posted 1:14 a.m. Updated 5:00 a.m.
The new Quebec-Ontario agreement, which will be announced on Wednesday, provides instead for the exchange of a power block of 600 megawatts (MW) between the two provinces during peak periods of electricity consumption, learned The Press.
Thus, the Independent Electricity System Operator of Ontario (IESO) will supply this power to Hydro-Québec during the winter; the Quebec government corporation will do the same in the summer for its Ontario partner.
The two parties will exchange power for free; power is the most expensive element in short-term markets. A price will be set for the energy, and the operation will be at zero cost for both parties if they consume the same quantity of electricity from their partner.
The Quebec and Ontario governments will insist on this aspect of the agreement when they announce it. They will be satisfied with securing the supply of electricity when demand is very high. It is also less expensive to have such a block of power at one’s disposal under an agreement than to be forced to buy it on the short-term markets.
This new agreement is for a period of seven years, with the possibility of extending it for three additional years.
A “historic” contract
In December 2016, Premier Philippe Couillard described as “historic” the conclusion of an agreement with his Ontario counterpart Kathleen Wynne on the sale of hydroelectricity. It was an export contract for 14 terawatt hours (TWh) over seven years, from January 1, 2017 to December 31, 2023. Hydro-Québec earned around $1 billion.
Under this contract, Quebec exported 2 TWh of hydroelectricity per year to Ontario, enough to supply a city of 200,000 inhabitants like Kitchener. But in addition to this firm purchase of electricity, the neighboring province has been supplied by Hydro-Québec – and will continue to do so – on the short-term markets, approximately 5 TWh per year.
Hydro-Québec’s total exports reached 35.6 TWh in 2022. In addition to Ontario, its customers are New England, New York State and New Brunswick.
The 2016 agreement also provided for the exchange of a block of energy – 500 MW – between the two provinces for their respective peak consumption periods. This is the only aspect of the agreement that is included in the new agreement.
PHOTO FRANÇOIS ROY, LA PRESSE ARCHIVES
Philippe Couillard
It is a historic agreement, the first of its kind. Quebec has energy available for its neighbours.
Philippe Couillard, December 15, 2016
That year, when he was in opposition, but also when he came to power in 2018, François Legault also had the ambition to sell even more electricity to Ontario. “I still intend to discuss the possibility that Quebec can serve a good part of Ontario’s needs,” he said in November 2018, while adding that it would be better, in his view, for the neighboring province to obtain supplies from Quebec than to build and renovate its nuclear power plants.
Things have since changed. The context has changed rapidly: the era of energy surpluses is coming to an end, Quebec lacks electricity for the future. The government needs at least 100 TWh of additional energy to achieve carbon neutrality by 2050. That’s 50% of Hydro-Québec’s current production.
In this context, the energy that will no longer be sold in Ontario will easily be used elsewhere. There is no shortage of companies with feed requests for projects.
Alliance project
For its part, Ontario estimates that the demand for electricity might more than double by 2050. To meet its needs, the province announced this summer a plan calling for the construction of new nuclear power plants, the addition of small reactors modular nuclear power plants in certain power stations, the optimization of a hydroelectric structure to increase its production and the storage of energy by pumping. It also relies on the development of wind and solar energy. Natural gas remains an important source of its electricity grid.
At the beginning of his reign, François Legault raised the idea of proposing an energy alliance to Ontario, of creating with it a new state corporation to build new hydroelectric works. There was never a sequel. His counterpart Doug Ford chose to develop the nuclear industry instead.
François Legault still wants to build new hydroelectric plants. Hydro-Québec is considering a project on the Petit Mécatina River (Côte-Nord). Quebec wants to accelerate the development of wind energy. Hydro-Québec is also evaluating the possibility of reopening the Gentilly-2 nuclear power plant, whose reactor was shut down in 2012 under the Marois government.
Another agreement with a neighboring province will attract attention in the coming months and years. Quebec and Newfoundland and Labrador renegotiate the power purchase contract for Churchill Falls, an extremely profitable contract for Hydro-Quebec, which obtains a lot of energy at a derisory price. The discussions will be difficult. The neighboring province has always felt cheated and has tried in vain to break the agreement in the past. Concluded in 1969, this agreement expires in 2041. François Legault also wishes to develop a hydroelectric dam project in Labrador – the Gull Island project, a 2250 MW structure. The subject is part of the negotiations.
François Legault began talks with his counterpart Andrew Furey during a two-day official visit to St. John’s last February.
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