America’s new power broker?

Quebec has ambitious plans to sell green electricity to the U.S.


America’s new power broker?Though it might have looked decent enough on paper, Hydro-Québec’s original pitch to buy New Brunswick’s power corporation fell victim to a uniquely Canadian brand of realpolitik rife with governmental hand-wringing, chest-thumping New Brunswick nationalism, and a soupçon of anti-French sentiment. Still, the new deal, announced last week, which would see Hydro-Québec take over New Brunswick’s power generating plants (but not its transmission lines), is hardly a setback for Quebec’s electricity giant. Even under the new agreement, Hydro-Québec has further entrenched itself in Atlantic Canada.

Yet for all the noisy clamour, New Brunswick is only part of Hydro-Québec’s master plan to become a literal power broker for much of Eastern Canada and, more importantly, the Eastern and Midwestern United States. Already, Hydro-Québec powers a sizable portion of New England and New York state. In the next four years, the corporation plans to move further into the American Midwest, a market of over 66 million people where electricity rates are nearly triple those of Quebec’s. The plan is raising concern in the U.S., but promises a huge windfall for the ambitious corporation; buying up NB Power’s generating capacity only gives it more power to throw around.

Hydro-Québec may be on a tear, earning $2.7 billion last year, but it’s also been the recipient of a serendipitous turn in U.S energy policy. This past summer, the U.S. House of Representatives adopted a bill mandating electricity suppliers to increase their renewable energy sources by 20 per cent by 2020. (Currently, roughly 65 per cent of America’s electricity is generated from fossil fuels.) With its vast reserves of clean hydroelectricity, Quebec is arguably the only supplier big enough to meet the demand. “[The bill] is good news for Hydro-Québec and its partners,” the company’s recent strategic plan reads.

“The market, which is very good for Hydro-Québec right now, will continue being very good in the future,” says Pierre-Olivier Pineau, a professor at the Hautes Études Commerciales business school in Montreal. “Any restrictions on greenhouse gases are beneficial for Hydro-Québec.” (Hydro-Québec is also investing heavily in wind power, further burnishing its green image.)
Delivering more power to the American Midwest doesn’t require big modifications to the existing power grid—at least on this side of the border. Hydro-Québec finished a new transmission line in Ontario last fall, most of which is used to then pump electricity over the U.S. border. The network of 13 lines connecting Quebec to its Canadian and American neighbours is extensive and largely unencumbered: according to Pineau’s analysis, the two busiest lines in Quebec, those flowing to New York and New England, operate at only 50 per cent capacity on average.

Moreover, Hydro-Québec sells the bulk of its power in the summer, when domestic demand is low and U.S. rates are high. Its sales to Ontario are just as advantageous. Quebec buys Ontario’s surplus at night, when rates are low. This allows Hydro-Québec to conserve water levels in its dams and ramp up electricity production for sale to Ontario during the day, when demand is high.

Hydro-Québec’s stateside expansion has drawn the ire of certain Americans. Angie O’Connor, president of the New England Power Generators Association, recently said the corporation’s ubiquity in New England was “a monopoly in the purest sense” that would likely hinder the development of smaller renewable energy projects on both sides of the border. In an interview with Maclean’s, O’Connor says the association will continue to lobby against the corporation’s “vertically integrated, government-owned” expansion into the U.S.

Still, it seems the biggest immediate threat to Hydro’s southern swoop is of the bricks-and-mortar variety. Overburdened, bottlenecked and regulated by a veritable fiefdom of state authorities, the U.S. power grid often can’t handle what Quebec is selling once power leaves the main transmission lines. According to a recent North American Electric Reliability Corporation report, instances of power interruptions and equipment failure nearly doubled between 2002 and 2007, usually because of system overloads. (As well, state regulation of electricity transmission makes power more expensive every time it crosses a state line.)

And then there is the matter of what the corporation can’t sell at market rates. Cheap power for Quebecers has been a sacred cow ever since the provincial government nationalized electricity production in 1962. It is obligated to sell power within its borders—about 90 per cent of its output—at a set rate, which is currently at about half the market rate. The result: Quebecers are among the most voracious energy users in the country—second only to Alberta, according to the Calgary-based Centre for Energy. Selling power at drastically reduced rates to its main customers, says HEC’s Pineau, “costs” Hydro-Québec $5 billion a year in lost revenues.

Significantly raising electricity rates within Quebec is politically dicey, and Premier Jean Charest has shied away from his stated intention to do so since taking office in 2003. For Charest, selling Hydro-Québec power outside the province has been a much easier proposition. New Brunswickers and Americans alike might grumble about the source, but these days everyone needs to keep the lights on as cleanly as possible.


America’s new power broker?

  1. Green schmene

  2. There's a small problem with the central thesis of this article (and Hydro Quebec's plan): none of the US states recognise large hydro as "renewable energy" so while they may buy more Quebec power to meet demand growth in the decades to come (since demand has dropped over the last two years), it won't be to meet renewable mandates.

    • But, if carbon taxes or cap and trade is imposed, higher CO2 emitting generating facilties in the US (and industries that use their power) will be economically penalised – so HydroQuebec power becomes even more economically attractive.

      I'm not sure "buying up NB Power's generating capacity only gives it more power to throw around" but it would give HQ more flexibility in managing its ystem stability, and in guaranteeing a larger market for its hydro generated power (if conditions are such that it is cheaper to generate electricity from hydro than existing NB gas/oil/coal, they will probably keep the NB facilities more idle than if they didn't own them).

      • What's the tariff on a tonne of methane under Cap & Trade? After all, if you're going after GHGs, you might as well go after the really noxious ones.

        • On existing hydroelectric facilities, nothing. On newly flooded land? Would the release from decaying vegetation be any different, overtime, than if it wasn't flooded? You tell me.

        • Also, do you differentiate hydroelectric generating facilities in say Amazon forest in Brazil vs. faciilties in northern Quebec where the climate for growing vegetation is quite dissimilar and the latter all falling within the Canadian Shield?

          What's your point?

          • Well, I thought it was obvious. Hydro generation creates large emissions of methane from the decaying material trapped within the headponds. Its why hydro isn't recognised as "green energy" by the UN or as renewable in the US (as Rob noted above).

            Installed generation and new generation both emit huge amounts of methane, a much more toxic (roughly 20 X) greenhouse gas than CO2. The difference in emissions between Quebec and Brazil isn't related to the type of vegetation as much as its a function of the rate of decay. Colder water slows down the rate of decay of underwater vegetation and ice cover traps released methane below the surface. Correspondingly dams in the tropics generate greater levels of methane than dams in the shield over the course of a year but the total amount of methane remains the same for headponds of a similar volume. Dams in the shield just release their trapped methane over a greater time period.

          • Well, I thought it was obvious. Hydro generation creates large emissions of methane from the decaying material trapped within the headponds.

            Well, the only thing that is obvious to me is that by flooding land you are removing a carbon sink – the size of the sink will depend upon the nature of the soil and the climate – ie if you're in a tropical rainforest the amount of vegetation/cover is much greater than in northern Quebec.

            Its why hydro isn't recognised as "green energy" by the UN or as renewable in the US (as Rob noted above)

            I'm not so sure about the latter point, and not sure the arguments hold for northern Canada. I bet if you looked closer into the US decisions (which I assume are limited to state by state), much of it would have been due to pressure from special interest groups in the N.E. who would not survive competition from HQ.

            Whether the rate of decay of the transient vegetation is slow or accelarated is irrelevant, as youacknowledge, so it should be removed from the equation. If there was no flooding of lands, the vegetation would still grow, die, and decompose, the only difference is that the it may be accelarated with flooding, and not replenished.

          • The point of all that is that if Cap & Trade comes into effect, HQ will wind up having to pay a tariff for the methane released from its headponds. If HQ doesn't do this voluntarily, you can bet your bottom dollar that its US competitors will seek to have the tariffs collected on energy imports from Quebec to reflect its emissions of methane. (They'll call it "levelling the playing field".) Either way, it's going to present a real challenge to HQ's long-term planning.

          • How cap and trade comes into effect has yet to be determined. I could see that there may be some upfront penalty to be paid for the methane released (one time) when the land is flooded. Harvest the timber clear the bush etc and the penalty is lowered. Makes sense.

    • Actually the energy is renewable because the dams are medium size compared to other dams in the world. Much of the time in Quebec the scenario is many smaller dams interconnected. The claims from Hydro-Quebec are that the energy is renewable and there aren't any solid efforts on behalf of environmental agency's proving otherwise.

  3. Where's the soupcon of anti-French sentiment?

    • It's when the premier says anyone who doesn't agree with me is a bigot.

      Meanwhile, on Planet Earth, the plan to give awayl Engerie NB Power wasn't any more popular in among francophone NBers than it was among anglophones.

  4. "As well, state regulation of electricity transmission makes power more expensive every time it crosses a state line"

    Which is entirely why FERC's mandate has been ever expanding, going beyond just reliability standards and matters of interconnectivity, and wading driectly into the construction of lines, and even the siting of future power generation.

    If the answer to an inefficient hodge-podge of state regulation south of theborder is found in moving to a more national approach to power distribution with federal oversight, isn't it about time we considered moving in the same direction in canada?

    Or would that simply result in "a uniquely Canadian brand of realpolitik rife with governmental hand-wringing, chest-thumping nationalism" of another variety?

  5. Article fails to mention what a slap in the face the whole process is to Newfoundland and Labrador where all this power is actually generated

  6. This "(As well, state regulation of electricity transmission makes power more expensive every time it crosses a state line.)" simply is not true. It may be true that a new transmission charge is incurred when crossing RTO/ISO boundaries, but not when crossing state boundaries. Currently there is no additional charge for PJM-Midwest ISO flows.

    However, having said all that, there SHOULD be additional charges for crossing ISO boundaries–if you are using more of the transmission system, you should be charged more accordingly.

  7. Typical arrogant national reporter blaming "nationalist chest thumping" for why the original deal got killed in New Brunswick.

    That glosses over the fact that the provincial gov't sprung this on us with no warning, no consultation, and no rationale. Just "eat this" without any discussion of why. It wasn't anti-french either… it was worries about jobs, lack of trust in our own provincial government, and a lack of understanding why another province (any) would be better at running our own provincial utility than we are.

    The deal died, as will the new deal, because NB'ers are not idiots, and we don't trust our provincial government. You do a disservice to journalism when you gloss over important issues and opposition as mere "anti-French" or nationalistic.

    Nice try though.

  8. It can't be overlooked that Prince Edward Island and Nova Scotia have some concerns with Hydro Quebecs plans as well. Largely the dictation of who gets to sell green energy to the states. With Wind and Tidal power being pushed heavily for the purposes of exportation rather than domestic use. PEI still reply's on Point Lepreau or other New Brunswick power stations for energy even with Wind Turbine expansion.

  9. I wish people would realize that flooding 160,000 sq kms of forest is NOT GREEN. And the buy out or contracting of most of NBPower's generation and transmission capacity is to prevent NB and the Atlantic provinces from getting into the electricity export market with tidal power, wind energy and natural gas.

    • "natural gas" fired electricity generation is "NOT GREEN". What's "to prevent NB and the Atlantic provinces from getting into the electricity export market with tidal power, wind energy and natural gas" ? NB Power will still retain the wires. Or are you looking for huge subsidies for thesesources by gov't edict?

  10. Sorry,I meant to delete that last paragraph but forgot. Repetitive of what I rewrote earlier.

  11. Hmm…datacentres/supercomputers use lots of electricity. Perhaps Quebec and New York state will build massive "cloud", computer-power-using buildings that stradle the border. Can almost imagine the pitch/proposal: "Google, Microsoft, Yahoo, IBM, EDS, Oracle…build your hundred(s) megawatt datacentre/supercomputer in Quebec…string some fibre optics to where you need to send the information…super cheap electricity rates!". Actually, why isn't Quebec a world leader in computer cluster technology?

  12. As an NBer, I will be shocked if this deal, in any form, goes through. To say that it is massively unpopular is an understatement. Anyone with half a brain realizes that the sole reason it is being done is so Quebec can monopolize transmission and shut out Newfoundland from the US market.

    If the Liberals do push it through, they will lose all but a handfull of seats in this fall's election. Shawn Graham has probably already lost his seat in Kent Co., which has been held by him and his father before him for the last 43 years.

    • Absolutely JimD… I feel the same way you do. The Liberals have disgraced NB with this plan and you can see it in every conversation you have on the street. People are disgusted and feel like they've been slapped in the face.

  13. Green energy my ass. There are few things as disruptive to wildlife and the landscape as a hydroelectric dam. Wind farms are not much better.

    If you really want low environmental impact, build nuclear power plants.

  14. Wind farms are not much better? Some talk of bird kills, cannot see the methane issue though and sound complaints have not been substantiated very well. I like nuclear but seems to be big issue politically and there are factors like it works best when full on continuously so not a stand alone solution without mix of supply. True natural gas is CO2 source but in the example at this web site, with co-generation it has interesting possibility: http://www.spiegel.de/international/business/0,15… Probably needs quite high population density, but also this type of setup would be good compliment to wind. I wonder what are economics of small nuclear units like used on ships?

  15. I'm producing a film (Stream Quest) that addresses the hydroelectricity's real costs and the green alternatives; and Quebec is ready for a green revolution, the Hydro-Québec machine is essentially holding this back. We are one of the 4 windiest place on Earth (with England, Patagonia and Greenland), not doing wind mills would be like not drinking the water that flows from our rivers. And this I was told by the retired wind specialist of HQ. Hydro is out and a 20th century approach that is now more expensive than windmills – economically and environmentally.

  16. Should people expect a rise or fall on their electricity bills.

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