Why Is Hydro-Québec So Intent on Overselling Its Hydropower?, Part I

Christophe Courchesne

For years, Hydro-Québec—the provincially-owned Canadian utility and financial sponsor of the Northern Pass transmission project—has oversold the benefits and downplayed the costs of its large-scale hydropower. This campaign to confuse is profoundly frustrating: new imports from the north will likely be a part of our region’s energy future, and we need honesty, clarity, and integrity from our northern neighbors before we expand New England’s reliance on Canadian hydropower.

Hydro-Québec’s latest gambit: an egregiously misleading press release, directly responding to my post and op-eds on three ugly numbers that lead CLF to concerns about imported hydropower’s price, environmental benefits, and winter reliability. In its release, Hydro-Québec accuses CLF of disseminating “erroneous” information, yet can’t identify a single error in our numbers.

In this post, the first in a series of three, I will break down what Hydro-Québec’s defense of its product gets wrong—on the price of its hydropower.

Hydro-Québec

In July, CLF identified 15.2 cents per kilowatt-hour as the cost of electricity from new Hydro-Québec dams in northeastern Québec, including the costs of the dams and the transmission lines to get their power to southern New England. This is much more than the cost of new land-based wind power or of our cheapest resource—energy efficiency. The cost also has an uncomfortable similarity to this winter’s high electric prices, which is far above the annual average cost New England customers pay.

Tellingly, Hydro-Québec has no public price, or even range of prices, for the product it is offering, saying merely that its price will be “competitive.” But Hydro-Québec disagrees with CLF’s estimate:

CLF claims that the generation and delivery of Hydro-Québec hydropower to the New England market will cost New England an additional $800 million each year, and that the cost of Hydro-Québec electricity would be 15.2¢. [emphasis added] However, it is impossible for CLF to estimate any supplier’s cost or bid price because of the complexity and risk of the marketplace and because energy infrastructure is highly site-specific. This is especially true for a supplier like Hydro-Québec which is connected to four North American electricity markets…. Like other suppliers, Hydro-Québec would establish its bid price based on a range of factors in the New England and neighboring energy marketplaces.

Our calculation was quite specific—the costs, published by Hydro-Québec and Northern Pass developer Northeast Utilities themselves in regulatory filings, of generating and delivering power from Hydro-Québec’s new Romaine River facilities to New England, including the costs of transmission lines north of the border and an American transmission project like Northern Pass. The sources of every element of the calculation were provided on the second page of our fact sheet.

Hydro-Québec

Click on the image for CLF’s full fact sheet on the potential costs of new imports from new hydropower projects in Québec

Our numbers were not, as Hydro-Québec claims, CLF’s estimate of the cost of all “Hydro-Québec electricity,” nor was CLF saying that New England “will” pay $800 million of excess costs if we buy more Hydro-Québec hydropower. Indeed, Hydro-Québec now sells its power to New England over existing lines for market prices—mostly in the regional wholesale market with some energy going to Vermont under a long-term contract that tracks the market. That means CLF’s number doesn’t speak to the potentially lower-cost options for importing more or firmer power from existing hydropower facilities over existing power lines, alternatives CLF has highlighted before.

Most importantly, Hydro-Québec did not dispute the details of CLF’s calculations, which present a plausible picture of the high costs of new hydropower facilities and long-distance transmission lines that New England could pay if that combination is what Hydro-Québec is offering.

But what is it that Hydro-Québec is offering, exactly?

While we do not know for sure, we have a pretty good idea. Building new dams and stepping up exports in tandem are fundamental to Hydro-Québec’s most recent strategic plan. At every opportunity, Hydro-Québec and other hydropower boosters like Northern Pass sponsor Northeast Utilities have cited the abundance of future resources as contributing to Hydro-Québec’s capability to export additional power to the northeastern United States. In fact, Northeast Utilities’ claimed environmental benefits for Northern Pass itself are premised on the availability of power from incremental additions to Hydro-Québec’s dam system over the coming years.

With Northern Pass on the table and new dams rising on the Romaine River as part of Hydro-Québec’s strategy to expand its exports, it’s realistic to expect that, if Hydro-Québec incurs the costs of building these facilities, it will want to recover those costs, with a healthy return. And it is unlikely that the utility will try to recover all of these costs from its domestic customers in Québec, who buy most of the power from the utility’s existing hydropower facilities (and its extraordinarily favorable contract with the Churchill Falls project in Newfoundland/Labrador) and pay a much lower rate than New England electric customers. We also know that Northern Pass partner and New Hampshire electric utility PSNH has been trying to negotiate a power purchase agreement with Hydro-Québec, without success, for about five years; Hydro-Québec clearly hasn’t yet offered a price that PSNH would feel comfortable touting as a bargain that would provide meaningful economic benefits to New Hampshire.

CLF is not alone in raising concerns about the cost of Canadian hydropower; Sue Tierney of the Analysis Group made these very same points in an April white paper (written for the trade association for New England-based power plants). From CLF’s perspective, the burden of proof is on Hydro-Québec, its Canadian hydropower competitors like Nalcor, and the American transmission developers that seek to bring hydropower south; outdated studies and generic assurances of “low cost power” or “competitive” prices aren’t enough.

Before New England spends billions buying vast quantities of anything (and building the transmission projects to carry it), we need a much better understanding of what would be sold to us, at what price and on what terms. Until then, CLF’s calculations counsel greater skepticism and scrutiny of the supposed economic benefit of new hydropower imports.

Coming next in this series: why Hydro-Québec’s defense of its greenhouse gas emissions falls flat.

Focus Areas

Climate Change

Places

New Hampshire

Campaigns

Northern Pass

About the CLF Blog

The views and opinions expressed on this blog do not necessarily represent the opinions or positions of Conservation Law Foundation, our boards, or our supporters.