I am a regular (I can even say faithful) reader of your Substack posts but, there are two reasons why I was specially interested in the current post; the first reason is that I am a Canadian citizen residing in Montreal and the second is the fact that I have also posted a document on Substack whose title says a lot by itself:
“Hydro-Québec and the New York and New England contracts, Selling electricity it does not own at a cost it does not know.” I have taken the liberty of including a link to that post at the end of the present comments but briefly here is the bottom line:
- The post deals with the importance of Churchill Falls, a 5,428 MW facility located in the province of Newfoundland and Labrador; it’s the second largest facility in Canada right after the Robert-Bourassa quoted in your text but Churchill Falls has a much bigger reservoir.
- Due to a contract signed in 1969, Hydro-Québec has access to basically 100% of the annual 30 to 35 TWh production at a cost of 2 mills per kWh (this is not a mistake, this is $0.002 per kWh). Over the last 10 years basically all of the Churchill Falls output has been exported, mostly on the spot market, the only exception being years of low rainfall in Québec; in such cases HQ simply closes the export valve in order to respect the “Heritage Pool” requirements quoted in your text.
- This contract expires in 2041 but in the mean time HQ has signed fixed term annual export contracts of approximately 10 TWh each with New England and New York that have a duration of 20 years in one case and 25 in the other, thus extending past 2041 after which no one really knows how much these 20 TWh will cost or even where they will comme from.
- After my text was posted there have been direct negotiations between the governments of Québec and Newfoundland and Labrador that have resulted in the signature of a Memorandum of Understanding between the two parties; but many, many details have to be negotiated before reaching final numbers; and the Prime Minister of Newfoundland and Labrador has resigned a few weeks ago.
That’s it for the bottom line on Churchill Falls but I am also working on another post dealing with HQ’s 2035 development plan.
I'd like to know how Hydro Q's RECs compare to RECs sold by wind farms. In New York, the price of Tier 1 RECs in 2024 ranged from $31.78 to $36.37 per MWh. NYSERDA, “2024 Compliance Year”, available at <https://www.nyserda.ny.gov/All-Programs/Clean-Energy-Standard/LSE-Obligations/2024-Compliance-Year>. A 340 MW wind farm's annual generation rate (340 MW X 8,670 hrs./yr. X 25% capacity factor) results in annual revenue from the sale of RECs of $25,316,400.00.
I don't know how the cost per MWh compares for a NYSERDA REC vresus a Québec REC. I do know that the Québec price is low enough that it encourages Green Mountain Power to make money on arbitrage...selling Vermont RECs to many states, and buying Canadian RECs to be avoid double-selling Vermont RECs. Here's Green Mountain Power's page on RECs. https://greenmountainpower.com/energy-mix/
I also encourage you to buy my book, "Shorting the Grid," and read the chapter on "Vermont, the Twice-Sold State." The book is available many places, and it is less than $10 as an ebook. (Amazon, Apple Books, Barnes and Noble etc.)
As someone with a pretty good knowledge of the history of Hydro-Québec, I would have some quibbles with how you introduced some key concepts in Quebec's electricity policy (public ownership, keeping profits and retail rates under control) without placing it the context of how Quebec responded to FERC Order 888.
Hydro-Québec was functionnally separated in 1997, with generation, transmission and distribution divisions, T & D was placed under the jurisdiction of an independent Board for rate setting and investment. In the generation sector, the solution was to guarantee the supply up to the capacity of the current generation fleet (up to 165 TWh, up to 33,342 MW of capacity + reserves and ancilliary services at a set rate of $27.90/MWh) and to let the distributor get anything extra through RFP, where private operators (joined by HQ) compete. HQP (the merchant generator) also had the opportunity of developping new projects to play on the export markets and increase its resilience to dry years. This was the framework from 2000 onwards... until last year. I guess I'll come back later to see your take on that.
As for the prospect of further exports contracts, the window has closed under Sophie Brochu, back in 2022-2023. The demand for cheap electricity sold at a steady price is such that even Michael Sabia's new construction (and energy efficiency) plan is barely sufficient. But, with the trade war going on, your mileage may vary.
Hi Claude. Thank you for sharing your expertise in this area.
About FERC 888. My post was about generation, not T&D. There is always the temptation to write a long book instead of a post, but I try to stick to my subject as best I can.
In terms of HQ competition. Most of HQ output is locked into the legacy system. HQ also has some contracts, PPOs, such as the one with Vermont. I think that only a small percentage of HQ power is in the RTO-type auctions. Is this correct?
I didn't know that the window for further exports was closed several years ago. Thank you so much for this information. Do you have a link to this information?
When I wrote this post, I hoped you would comment! Thank you!
Approximately 180 TWh of HQs output is locked in heritage pool and various contracts for the supply of the domestic market. The rest (15 TWh), is provided by private operators selected through RFP. HQ has approximately 30-40 TWh to sell outside the province. Currenly, there are 3 firm contracts : Fortis Cornwall, New Brunswick and Vermont.
So 4-5 TWh are currently under firm contracts. The remaining volume is sold short term to New Brunswick and to the two markets south of the border. With NECEC and CHPE online, you can expect less power on Phase 2 and the 765 kV line to Marcy.
As for the export window closing, the signs were there after the 2021 Maine referendum fiasco. HQ has better things to do than getting sucked in US electricity politics.
The 2022-2026 strategic plan, released by Brochu in March 2022, focuses mainly on the growth of the local demand and ways to balance supply and local demand during the energy transition. The "export markets" plan was to sell some ancillary services to neighboring BA having to deal with wind power and buy some assets alone (Great River Hydro) or with Innergex, where HQ was an large investor (19.9% share) until last month.
By the way, selling power at $27.90/MWh to the Distributor has been pretty lucrative for the Generation division, since the all-around production cost of HQ's electricity is $20 for an healthy 28% net margin.
There was or is a lot of cheap hydro power in the North. In the early 80s I worked on a joint venture between DuPont and Olin in Niagara Falls, NY, to build a chlor-alkali plant. The two companies as a result of a court settlement got a combined 40 megawatts of power at 1.5 cents/kWh. Chlor-alkali is like making aluminum.. it’s all electricity.
Is there any political will in Quebec to expand natural gas generation or heating? Quebec could diversify their energy generation & heating now that the electric generation market is tightening.
Using (relatively cheap) Canadian natural gas would free up Hydro Quebec electricity. Which they could then very profitably sell to the enviro-dopes in New England (who won't build evil gas pipelines). Win-win for Quebec!
That lovely, lovely maple whiskey from Quebec sent me and several other international visitors to a Montreal convention on a hunt around the city for sealed bottles we could take home! It's so nice to hear some of HQ's history!
Thinking of New England & New York for that matter and electricity imports from Canada since Ontario at least has already threatened electricity exports as a weapon (how foolish when the US federal government is the main thing stopping Michigan for trying to close line 5)
I believe federal approve is needed to import electricity from Canada could the Trump administration declare a state of emergency to require backup capacity matching the capacity of interconnects that has on site fuel storage in case they are cut off for political reasons and use the Defense Production Act to expedite the construction of new natural gas pipelines as well as protect existing non gas fired generating capacity and study the feasibility of reopening closed non gas capacity (Does anyone know if Indian Point, Pilgrim, Oyster Creek, Vermont Yankee could reopened or would it be quick/ a new build be cheaper and what state is Shoreham in Long Island in?)
Then since much of the heating oil is imported from Canadian refineries this could also be grounds to expand the number of homes & building which can heat with American natural gas.
I think that all the nuclear plants in the Northeast were quickly destroyed after they were shut down. They were closed for political reasons (IMO) and the governors of the states wanted to be sure that they would not be reopened. I could be wrong about Oyster Creek, though.
I suspect a similar conflict of interest we had in the UK where with the exception of Drax (which is why it turned to tree burning) most of the other (now closed and probably demolished) coal power station on the island of Great Britain own other power stations & were getting into the renewable subsidy bandwagon with wind & solar farms realised they could make more money by closing to drive up the market price and assist striping (in the UK we had large transformers from a closed coal power station being sold and moved to I believe a new coal power station in Germany of all places and 1 disturbing thing that sticks in my mind was a back handed comment someone made about the speed the coal units were demolished and if they given the staff time to leave the building as there have being an alarming number of fatalities & injuries demolishing coal power stations.
I suspect what was done in the UK was illegal without being replacement dispatchable capacity and wonder if in the US crimes (especially federal ones) have being committed when it came to closing nuclear power stations particularly if the intention was to gain access to the decommissioning fund, asset strip them and make a killing from your other generating capacity with you even maxing out the former backup generation on the nuclear plants when wholesale prices are high.
I would say some of these are the politicians equivalent of the arsonist firefight while other particularly the activists are victims of a cult who have being utilised to give a number of people profit/prophetdom.
But generally its not vandalism for the sake of it and I suspect they are in it for the money - look at the number of politicians who are multi millionaires which can't be explained by their salary.
Mrs Angwin
I am a regular (I can even say faithful) reader of your Substack posts but, there are two reasons why I was specially interested in the current post; the first reason is that I am a Canadian citizen residing in Montreal and the second is the fact that I have also posted a document on Substack whose title says a lot by itself:
“Hydro-Québec and the New York and New England contracts, Selling electricity it does not own at a cost it does not know.” I have taken the liberty of including a link to that post at the end of the present comments but briefly here is the bottom line:
- The post deals with the importance of Churchill Falls, a 5,428 MW facility located in the province of Newfoundland and Labrador; it’s the second largest facility in Canada right after the Robert-Bourassa quoted in your text but Churchill Falls has a much bigger reservoir.
- Due to a contract signed in 1969, Hydro-Québec has access to basically 100% of the annual 30 to 35 TWh production at a cost of 2 mills per kWh (this is not a mistake, this is $0.002 per kWh). Over the last 10 years basically all of the Churchill Falls output has been exported, mostly on the spot market, the only exception being years of low rainfall in Québec; in such cases HQ simply closes the export valve in order to respect the “Heritage Pool” requirements quoted in your text.
- This contract expires in 2041 but in the mean time HQ has signed fixed term annual export contracts of approximately 10 TWh each with New England and New York that have a duration of 20 years in one case and 25 in the other, thus extending past 2041 after which no one really knows how much these 20 TWh will cost or even where they will comme from.
- After my text was posted there have been direct negotiations between the governments of Québec and Newfoundland and Labrador that have resulted in the signature of a Memorandum of Understanding between the two parties; but many, many details have to be negotiated before reaching final numbers; and the Prime Minister of Newfoundland and Labrador has resigned a few weeks ago.
That’s it for the bottom line on Churchill Falls but I am also working on another post dealing with HQ’s 2035 development plan.
Hoping this is useful
https://raison.substack.com/p/hydro-quebec-and-the-new-york-and
Thank you!
I'd like to know how Hydro Q's RECs compare to RECs sold by wind farms. In New York, the price of Tier 1 RECs in 2024 ranged from $31.78 to $36.37 per MWh. NYSERDA, “2024 Compliance Year”, available at <https://www.nyserda.ny.gov/All-Programs/Clean-Energy-Standard/LSE-Obligations/2024-Compliance-Year>. A 340 MW wind farm's annual generation rate (340 MW X 8,670 hrs./yr. X 25% capacity factor) results in annual revenue from the sale of RECs of $25,316,400.00.
I don't know how the cost per MWh compares for a NYSERDA REC vresus a Québec REC. I do know that the Québec price is low enough that it encourages Green Mountain Power to make money on arbitrage...selling Vermont RECs to many states, and buying Canadian RECs to be avoid double-selling Vermont RECs. Here's Green Mountain Power's page on RECs. https://greenmountainpower.com/energy-mix/
I also encourage you to buy my book, "Shorting the Grid," and read the chapter on "Vermont, the Twice-Sold State." The book is available many places, and it is less than $10 as an ebook. (Amazon, Apple Books, Barnes and Noble etc.)
As someone with a pretty good knowledge of the history of Hydro-Québec, I would have some quibbles with how you introduced some key concepts in Quebec's electricity policy (public ownership, keeping profits and retail rates under control) without placing it the context of how Quebec responded to FERC Order 888.
Hydro-Québec was functionnally separated in 1997, with generation, transmission and distribution divisions, T & D was placed under the jurisdiction of an independent Board for rate setting and investment. In the generation sector, the solution was to guarantee the supply up to the capacity of the current generation fleet (up to 165 TWh, up to 33,342 MW of capacity + reserves and ancilliary services at a set rate of $27.90/MWh) and to let the distributor get anything extra through RFP, where private operators (joined by HQ) compete. HQP (the merchant generator) also had the opportunity of developping new projects to play on the export markets and increase its resilience to dry years. This was the framework from 2000 onwards... until last year. I guess I'll come back later to see your take on that.
As for the prospect of further exports contracts, the window has closed under Sophie Brochu, back in 2022-2023. The demand for cheap electricity sold at a steady price is such that even Michael Sabia's new construction (and energy efficiency) plan is barely sufficient. But, with the trade war going on, your mileage may vary.
I have recently begun following this substack. It is very interesting. Do you have any comments on it?
https://raison.substack.com/p/hydro-quebec-and-the-new-york-and
Hi Claude. Thank you for sharing your expertise in this area.
About FERC 888. My post was about generation, not T&D. There is always the temptation to write a long book instead of a post, but I try to stick to my subject as best I can.
In terms of HQ competition. Most of HQ output is locked into the legacy system. HQ also has some contracts, PPOs, such as the one with Vermont. I think that only a small percentage of HQ power is in the RTO-type auctions. Is this correct?
I didn't know that the window for further exports was closed several years ago. Thank you so much for this information. Do you have a link to this information?
When I wrote this post, I hoped you would comment! Thank you!
Approximately 180 TWh of HQs output is locked in heritage pool and various contracts for the supply of the domestic market. The rest (15 TWh), is provided by private operators selected through RFP. HQ has approximately 30-40 TWh to sell outside the province. Currenly, there are 3 firm contracts : Fortis Cornwall, New Brunswick and Vermont.
So 4-5 TWh are currently under firm contracts. The remaining volume is sold short term to New Brunswick and to the two markets south of the border. With NECEC and CHPE online, you can expect less power on Phase 2 and the 765 kV line to Marcy.
As for the export window closing, the signs were there after the 2021 Maine referendum fiasco. HQ has better things to do than getting sucked in US electricity politics.
The 2022-2026 strategic plan, released by Brochu in March 2022, focuses mainly on the growth of the local demand and ways to balance supply and local demand during the energy transition. The "export markets" plan was to sell some ancillary services to neighboring BA having to deal with wind power and buy some assets alone (Great River Hydro) or with Innergex, where HQ was an large investor (19.9% share) until last month.
By the way, selling power at $27.90/MWh to the Distributor has been pretty lucrative for the Generation division, since the all-around production cost of HQ's electricity is $20 for an healthy 28% net margin.
There was or is a lot of cheap hydro power in the North. In the early 80s I worked on a joint venture between DuPont and Olin in Niagara Falls, NY, to build a chlor-alkali plant. The two companies as a result of a court settlement got a combined 40 megawatts of power at 1.5 cents/kWh. Chlor-alkali is like making aluminum.. it’s all electricity.
Down the road from those plants is Saint Gobain Ceramics. I think they get a similar power deal. All those plants pay their people pretty well.
In case you haven't seen this - https://www.utilitydive.com/news/iso-new-england-transmission-rfp-maine-wind/744064/
Maybe see if the wind is truly going to be built before building the lines???
Sounds like a good idea, since so many wind projects are cancelled!
Usually ISO NE is importing power/energy from Canada, Quebec and New Brunswick.
However, on November 16, 2024 to November 26 ISO NE is sending power to Canada.
See this web page:
https://www.wvwelectric.com/iso_ne/graphs/iso_external_interfaces_graph_Nov_2023_2024_Canada_notes.html
Is this how the spot market works? Or another reason?
Is there any political will in Quebec to expand natural gas generation or heating? Quebec could diversify their energy generation & heating now that the electric generation market is tightening.
Using (relatively cheap) Canadian natural gas would free up Hydro Quebec electricity. Which they could then very profitably sell to the enviro-dopes in New England (who won't build evil gas pipelines). Win-win for Quebec!
That lovely, lovely maple whiskey from Quebec sent me and several other international visitors to a Montreal convention on a hunt around the city for sealed bottles we could take home! It's so nice to hear some of HQ's history!
Thinking of New England & New York for that matter and electricity imports from Canada since Ontario at least has already threatened electricity exports as a weapon (how foolish when the US federal government is the main thing stopping Michigan for trying to close line 5)
I believe federal approve is needed to import electricity from Canada could the Trump administration declare a state of emergency to require backup capacity matching the capacity of interconnects that has on site fuel storage in case they are cut off for political reasons and use the Defense Production Act to expedite the construction of new natural gas pipelines as well as protect existing non gas fired generating capacity and study the feasibility of reopening closed non gas capacity (Does anyone know if Indian Point, Pilgrim, Oyster Creek, Vermont Yankee could reopened or would it be quick/ a new build be cheaper and what state is Shoreham in Long Island in?)
Then since much of the heating oil is imported from Canadian refineries this could also be grounds to expand the number of homes & building which can heat with American natural gas.
I think that all the nuclear plants in the Northeast were quickly destroyed after they were shut down. They were closed for political reasons (IMO) and the governors of the states wanted to be sure that they would not be reopened. I could be wrong about Oyster Creek, though.
I suspect a similar conflict of interest we had in the UK where with the exception of Drax (which is why it turned to tree burning) most of the other (now closed and probably demolished) coal power station on the island of Great Britain own other power stations & were getting into the renewable subsidy bandwagon with wind & solar farms realised they could make more money by closing to drive up the market price and assist striping (in the UK we had large transformers from a closed coal power station being sold and moved to I believe a new coal power station in Germany of all places and 1 disturbing thing that sticks in my mind was a back handed comment someone made about the speed the coal units were demolished and if they given the staff time to leave the building as there have being an alarming number of fatalities & injuries demolishing coal power stations.
I suspect what was done in the UK was illegal without being replacement dispatchable capacity and wonder if in the US crimes (especially federal ones) have being committed when it came to closing nuclear power stations particularly if the intention was to gain access to the decommissioning fund, asset strip them and make a killing from your other generating capacity with you even maxing out the former backup generation on the nuclear plants when wholesale prices are high.
The governors have the morals of vandals...
I would say some of these are the politicians equivalent of the arsonist firefight while other particularly the activists are victims of a cult who have being utilised to give a number of people profit/prophetdom.
But generally its not vandalism for the sake of it and I suspect they are in it for the money - look at the number of politicians who are multi millionaires which can't be explained by their salary.
Any interactions with BC Hydro ?
I haven't been following BC Hydro very much. AFAIK, they are still supplying Los Angeles with electricity, without any dramatic recent changes.
However, I may be wrong and I am willing to learn.
Thanks. It seems to me that, in terms of energy other than nuclear, the Western provinces have more to offer for export.
Yes, but I was not looking into coal, oil, gas etc. HQ and the Western Provinces both have lots of hydro.