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Hydro-Québec will not be able to keep industrial rates so low: CEO

Sophie Brochu says the smaller environmental footprint associated to hydroelectricity means Hydro-Québec is experiencing unprecedented industrial demands.

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Hydro-Québec president and CEO Sophie Brochu believes it’s time to reflect on the cost of electricity for industrial players, because the corporation won’t be able to offer the same rate indefinitely without “digging itself into a financial hole.”

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The smaller environmental footprint associated with hydroelectricity means Hydro-Québec is experiencing unprecedented industrial demands, Brochu said during an address before the Montreal Council on Foreign Relations on Monday. She explained production capacity for the industrial sector in Quebec is 8,500 megawatts, compared with 5,000 megawatts in Ontario.

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“Today, there are more than 10,000 megawatts of people who want to come and settle in Quebec,” she said. “Big projects — 100, 200, 300 megawatts. In the last 10 years, not a single 50-megawatt project has come to Quebec.”

The demands come as the state-owned corporation estimates it will need new electricity supplies beginning in 2027. Quebec will need an additional 100 terawatt-hours of energy if the province is to reach carbon neutrality by 2050, according to Hydro-Québec’s 2022-2026 strategic plan, unveiled at the end of March.

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The new supply sources are also expected to cost more; the cost of a heritage block is three cents per kilowatt-hour. The average cost of post-heritage supplies is 11 cents.

“If we buy supplies at 11 cents and we have an industrial rate of five cents, well, that doesn’t work,” Brochu said.

It will be up to the government to decide whether it’s worth selling electricity at a loss in certain cases by factoring in the economic benefits of a project, such as innovation, job creation or tax benefits, Brochu said.

Asked about the situation at the beginning of the month, Economy Minister Pierre Fitzgibbon mentioned it would be necessary to prioritize industrial projects in Quebec because of the narrowing of electricity surpluses.

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“Certain projects, maybe, in the future won’t see the light of day because the allocation of hydroelectricity would be more beneficial for Quebec to put elsewhere,” he said. “That’s clearly an issue that needs to be addressed.”

Quebec intends to prioritize two areas for projects requiring high energy consumption: greenhouse gas reductions and the creation of collective wealth, Fitzgibbon said.

The electrification of transport, hydrogen, the battery sector, aluminum and green steel are all among industries that are “consistent” with these priorities.

We must, however, question the relevance of selling our electricity at a low price, Brochu said at a press briefing.

“We don’t want to stay in the paradigm of ‘we sell for cheap’ knowing that our marginal supply costs are much higher than our historical costs, so we won’t dig a financial hole for life,” she said.

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Hydroelectricity has environmental advantages that justify higher billing for businesses, Brochu added.

“If you’re able to sell a product, and you’re able to sell it for more because you’re clean, that means you’re able to pay more for your electricity because it’s clean,” she said.

Hydro-Québec is not going to decide the rates paid by businesses, Brochu said. It’s a societal decision.

“What I think isn’t important, it’s what Quebecers will think,” she said. “Our job is to bring the facts.”

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