Those ambitions hinge on the Crown corporation\u2019s ability to leverage its massive hydro capacity to build new electricity corridors into the northeast U.S. \u2014 a region that has a huge appetite for new sources of emissions-free power as it looks to meet stringent climate goals.<\/p>\n
But Hydro-Qu\u00e9bec\u2019s expansion won\u2019t come easy. It has met fierce environmental resistance by U.S. interest groups, First Nations and some municipal authorities, who say its proposed transmission lines would be disastrous for ecologically sensitive areas.<\/p>\n
Moreover, a flood of cheap natural gas supplies from within the U.S. and falling costs of renewable energy sources such as wind and solar threaten to elbow out large-scale hydro imports that require long-term contracts, thus dampening Martel’s abilities to meet his company’s ambitious goals. <\/p>\n
“Without exports, our profits are in trouble,” he said.<\/p>\n
![\"\"](\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/quebec_hydro_hq.jpg?w=640&h=480\")
<\/p>\nThe Hydro-Quebec headquarters in Montreal.<\/p>\n<\/div>\n
The company has proposed three separate 1,000 MW projects to deliver power to Massachusetts, entering the U.S. through Vermont, New Hampshire and Maine. It has also submitted a fourth proposal to New York state that could include the Champlain Hudson Power Express transmission line, which would deliver around 1,000 MW to New York City and cut its way under Lake Champlain in Vermont. <\/p>\n
Hydro-Qu\u00e9bec\u2019s plans to supply 9 terawatts of power into Massachusetts now start with its $950-million New England Clean Energy Connect project, after its Northern Pass transmission line proposal was rejected by state regulators.<\/p>\n
No To Northern Pass, a coalition of community associations and environmental groups, called the transmission line an \u201cunnecessary gamble New Hampshire can\u2019t afford,\u201d citing all the ecologically sensitive waterways and other areas it would cross. In particular, a vocal coalition objected to the project going through the White Mountains National Forest. <\/p>\n
Hydro-Qu\u00e9bec’s partner on the project, Eversource Energy, tried to appease concerns by promising to bury large sections of the project underground, which inflated projected costs of the $1.7-billion transmission line. <\/p>\n
The new project, developed with U.S.-based Central Maine Power Co., will deliver 1,200 MW to markets in Massachusetts by way of Maine. Regulators are currently assessing the bid. <\/p>\n
\u201cIt\u2019s about to happen,\u201d Martel said of Clean Energy Connect. \u201cIt\u2019s all going in the right direction.\u201d<\/p>\n
Hydro-Qu\u00e9bec’s approach of proposing three separate projects into New England was unusual, but reflects a broader resistance in the region to large-scale energy infrastructure of any kind. <\/p>\n
For example, Spectra Energy Corp., now owned by Calgary-based Enbridge Inc., last summer pulled out of a $3-billion natural gas pipeline project in the region after enduring severe environmental criticism. <\/p>\n
But New York and the New England states remain potentially lucrative markets for Hydro-Qu\u00e9bec, which has among the lowest power generation costs in Canada.<\/p>\n
In 2017, the company\u2019s exports generated profits of $780 million, or 27% of net income, despite accounting for just 17 per cent of the electricity volume sold.<\/p>\n
Pierre-Olivier Pineau, a professor at HEC Montr\u00e9al, said the company can generate power from its reservoirs at around two cents per kilowatt hour (KWh). By comparison, it is estimated that it would cost Ontario at least eight cents per KWh to extend the life of its two nuclear facilities. Buyers in New England currently pay between four and six cents per KWh.<\/p>\n
Meanwhile, demand for emissions-free power generation is in high demand as various states look to meet stringent climate targets set by the United Nations.<\/p>\n
Some U.S. states are establishing plans to phase out nuclear and coal facilities \u2014 including two reactors at the 2,000-MW Indian Point nuclear facility in New York \u2014 and need to replace energy supplies with cleaner alternatives.<\/p>\n
\u201cCarbon constraints in the northeastern U.S. are going to raise the value of Canadian hydro,\u201d Pineau said.<\/p>\n
The Clean Energy Connect project would be a critical project to help some New England states meet their targets, Martel said, which include reducing emissions by 25 per cent from 1990 levels within the next two years.<\/p>\n
\u201cThis one transmission line alone will help them reach half of their objective,” he said.<\/p>\n
In the longer term, New England and New York aim to reduce emissions by about 80 per cent from 1990 levels. <\/p>\n
That’s good news for Hydro-Qu\u00e9bec, since its expansion plans come at a time when electricity demand in Quebec, and, more broadly, Canada, is predicted to remain flat, or possibly even taper off. <\/p>\n
Following widespread asset sales in the first half of last decade, during which Hydro-Qu\u00e9bec sold power generation facilities and transmission developments in China, Peru, Costa Rica, Panama and elsewhere, the utility refocused its efforts on developing assets closer to home.<\/p>\n
![\"\"](\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/charest_eastmain_20120628.jpg?w=640&h=480\")
<\/p>\nThe Hydro-Quebec Eastmain 1A hydroelectric power plant in Eastmain, Que.<\/p>\n<\/div>\n
That focus did wonders for its domestic portfolio, adding around 5,000 MW of capacity since roughly 2005. But \u2014 as is often the case for large utilities \u2014 the rapid expansion overshot domestic demand, which has slumped due to a combination of higher energy efficiency, lower population growth and the shutdown of several high-energy-intensive facilities such as pulp and paper mills.<\/p>\n
\u201cWe\u2019ve plateaued,\u201d Martel said. \u201cThis is putting a lot of pressure on our financials.\u201d<\/p>\n
Hydro-Qu\u00e9bec\u2019s plans to grow exports in response to that tepid domestic demand outlook mirror a broader push among hydro utilities in Manitoba, Newfoundland and even smaller wind producers in Ontario to distribute more clean energy to the northern U.S. <\/p>\n
Canadian electricity sales to the U.S. grew to more than 73 TWh worth $2.9 billion in 2016, from 57 terawatt hours (TWh) in 2012, according to the National Energy Board.<\/p>\n
Manitoba Hydro said 25 per cent of its revenues came from U.S. exports between 2007 and 2016. It is now looking to extend contracts as new capacity comes online at its Keeyask and Conawapa facilities. <\/p>\n
In Newfoundland, some analysts say the embattled Muskrat Falls hydro dam, owned by Nalcor Energy, the provincial energy corporation, could eventually export emissions-free power to the U.S., though the 1,600-MW project remains well behind schedule and over budget. The province’s much larger 2,250-MW Gull Island project, which could supply power to New England, is facing similar resistance. <\/p>\n
There is certainly plenty of room to grow Canada\u2019s already sizable hydro footprint. The country currently has roughly 73,000 MW of hydro capacity, second only to China worldwide, and experts say that could double to around 160 MW if it invests in new large-scale developments.<\/p>\n
But there’s still the question of whether the U.S. will accept a major flood of Canadian hydro. Opponents of Hydro-Qu\u00e9bec\u2019s transmission lines often argue coal and nuclear capacity can be replaced by wind and solar developments, coupled with more efficient energy storage technologies.<\/p>\n
\u201cWe just want to go pedal to the metal with energy storage,\u201d said Emily Norton, director of the Sierra Club’s Massachusetts chapter, which opposed Hydro-Qu\u00e9bec\u2019s Northern Pass development.<\/p>\n
However, energy economists generally agree that wind and solar generation needs to be complemented by a dependable \u201cbackstop\u201d source to fill in during times of low output. Martel, for his part, likes to refer to the company\u2019s reservoirs as a sort of \u201cnatural battery.\u201d<\/p>\n
The dependability of hydro was also underlined by a North American Electric Reliability Corp. report in 2015 that warned a widespread shift to wind and solar could strain the U.S. grid. Hydro, unlike nuclear power, is unique in its ability to be turned off during times of low or no demand. <\/p>\n
\u201cAs you get a higher penetration of wind and solar as a resource, you need resources that are flexible and can back them up,\u201d said Ed Wojczynski, interim president of the Canadian Hydropower Association. \u201cThis is a well-known fact of the electricity sector \u2014 it\u2019s not disputed.\u201d<\/p>\n
But hydro will also face competition from natural gas-fired supplies, which, despite spewing greenhouse gas emissions, have been a highly affordable source of power since the U.S. energy revolution began 15 years ago. <\/p>\n
New production techniques have unlocked massive formations of oil over the past decade in the U.S., which has in turn opened up vast new resources of natural gas, particularly in the Utica and Marcellus formations in the northeast.<\/p>\n
The new supplies have driven down natural gas prices and caused a number of new gas-fired plants to be commissioned. At least three new natural gas facilities totalling roughly 1,800 MW could come online in New Jersey and New York in the next few years, according to the New York Independent System Operator.<\/p>\n
Martel is adamant that emissions-free energy sources will remain in high demand in the U.S., despite threats by the Donald Trump administration to yank the country away from its UN environmental commitments. <\/p>\n
Already, many environmental groups say the country is well behind on its plans to clean up its electrical grid, its single-largest source of emissions, and it’s unclear if or when that will happen.<\/p>\n
![\"\"](\"http:\/\/wpmedia.business.financialpost.com\/2018\/04\/transmission.jpg?w=640&h=211\"){kind=spacer}
<\/p>\nOpponents of Hydro-Qu\u00e9bec\u2019s transmission lines argue coal and nuclear capacity can be replaced by wind and solar projects, coupled with more efficient storage technologies.<\/p>\n<\/div>\n
Martel\u2019s ability to meet his stated targets remains similarly unclear.<\/p>\n
Despite posting its highest-ever export volumes in 2017, Hydro-Qu\u00e9bec\u2019s profits slumped slightly to $2.85 billion compared to $2.86 billion in 2016.<\/p>\n
Some have criticized Martel’s specific focus on revenue generation rather than other metrics.<\/p>\n
\u201cIt\u2019s a bit of a silly goal,\u201d HEC\u2019s Pineau said. \u201cWhen he arrived, I think he wanted to have an ambitious plan to grow, but it\u2019s always better to be realistic. He might double the revenue, it will be very hard to double the profit.\u201d<\/p>\n
Martel, however, believes the key to meeting Hydro-Qu\u00e9bec\u2019s goals is to wrest the company away from its stubbornly old-fashioned ways.<\/p>\n
He started by putting a friendlier and more transparent face on the company, speaking more regularly to the public and publishing internal customer satisfaction surveys \u2014 something long held close to its chest. He increased investment in the customer services department, which appears to have raised the overall satisfaction rate of Quebecers since 2015, according to company surveys.<\/p>\n
Martel also opened up new lines of communication with employees, and now hosts monthly video conferences with around 1,000 managers, vice-presidents and directors spread around the province to stay up to date on operations.<\/p>\n
\u201cIf I could do it with 20,000 people, I would,\u201d he said.<\/p>\n
Martel concedes it could take several more years to realign the utility. But he said establishing new export ties into the U.S., Ontario and elsewhere requires a fresh outlook on the market.<\/p>\n
\u201cWe used to be a more conservative company, happy to provide electricity under the status quo,” he said. “Now, we are much more entrepreneurial.\u201d<\/p>\n
\u2022 Email: jsnyder@nationalpost.com<\/a> | Twitter: jesse_snyder<\/a><\/em><\/p>\n","protected":false},"excerpt":{"rendered":" MONTREAL — Éric Martel took over as Hydro-Québec’s chief executive in mid-2015 when the company’s troubles were apparent to even casual observers. Internal surveys showed employee engagement was at its lowest in years, public opinion of its customer services division was spiralling downward, and future profitability was threatened by a projected flattening of electricity demand, which […]<\/p>\n","protected":false},"author":578,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/6191"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/578"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=6191"}],"version-history":[{"count":6,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/6191\/revisions"}],"predecessor-version":[{"id":6261,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/6191\/revisions\/6261"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=6191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=6191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=6191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}