There was a spark during the election when François Legault proposed to build new dams. Then, a jolt at the beginning of the year with the resignation of the CEO of Hydro-Québec, Sophie Brochu. Now, with the parliamentary session set to begin, tensions are rising. The looming debate on Quebec’s energy future could have a major impact on business.
The National Assembly reconvenes on Tuesday, and the Coalition avenir Québec government’s decisions on energy will be closely watched during the parliamentary session.
Thanks to its rich hydroelectric resources, Quebecers enjoy some of the lowest electricity rates in the world. Industrial consumers benefit from an even lower rate. This abundance of power has attracted many companies such as aluminum smelters over the past few decades.
Premier François Legault’s ambition is to close the wealth gap between Quebec and Ontario. He wants to attract new investment in emerging sectors such as batteries, green aluminum and green steel. To achieve this, he is counting on affordable, low-carbon electricity generated in Quebec’s dams and wind farms.
However, it has become clear in recent months that Hydro-Québec’s 63 power plants, 29 large reservoirs and 684 dams, including 92 control structures, will not be enough to meet demand. In its latest annual report, the public utility confirms it will have to increase its production capacity by 50%.
Two other factors are further complicating the situation: electricity export contracts to New England and the expiry in 2041 of the agreement with Newfoundland that allows Hydro-Québec to pay a very advantageous fee for power produced in the Churchill Falls plant.
Mr. Legault wants to renegotiate the Churchill Falls contract and is proposing to build new dams to carry out his economic development vision. But that idea has been met with resistance from Hydro-Québec, which favors energy efficiency. This fall, CEO Sophie Brochu expressed concerns that Quebec could become “Dollarama of electricity” (Dollarama is a popular dollar-store chain in Quebec). She announced her departure earlier this year.
In his inaugural speech, Mr. Legault called on Quebecers to have a “real societal debate” on Quebec’s energy future. His government will hold a consultation during the parliamentary session. He also plans to introduce a major bill to reform Hydro-Québec and the Régie de l’énergie, the independent body that sets electricity tariffs.
In recent days, the Premier said he intends to review industrial tariffs. He wants companies that contribute to reducing greenhouse gases, or that generate significant economic spinoffs, to benefit from lower prices.
This will be an emotional debate. In Quebec, electricity is not just a form of energy. It is an essential component of Quebec’s identity. The nationalization of electricity, completed by the government of Jean Lesage in the early 1960s, is a source of great pride. Lesage’s election slogan, “Maîtres chez nous”, still embodies Quebec’s passage into modernity and the affirmation of its unique culture in North America.
Moreover, building new dams is not something that can be done with a snap of the fingers. Quebecers are increasingly concerned about protecting the environment and creating hydroelectric reservoirs destroys natural habitats. Projects will also require the support of First Nations and municipalities. Not to mention the labor shortage that could slow down projects and increase costs.
Many companies have chosen to locate in Quebec in part because of its attractive power rates. But how can this competitive advantage be maintained as the Legault government seeks to attract investments in batteries, green aluminum and green steel, to name a few? As the National Assembly reconvenes, these questions will be at the heart of the economic and political debates in Quebec for months, possibly years to come.