Deal with New York might be last of its size: analysts

Hydro-québec's biggest-ever export contract promises to work wonders for the province's finances, but the state-owned company may be hard-pressed to replicate the feat absent new generating capacity.

New York State tentatively agreed Monday to buy 10.4 terawatt-hours of electricity from Hydro-québec under a 25-year pact that could start as soon as 2025. Premier François Legault said the accord could generate more than $20 billion in revenue over the period.

Coupled with a 2018 agreement to sell electricity to Massachusetts, the New York contract will limit Hydro-québec's future capacity to sign other large export deals because demand inside the province is expected to climb substantially over the next decade, said Pierre-olivier Pineau, a professor at the HEC Montréal business school who specializes in energy policy and electricity markets.

“With this latest deal, we're reaching the limits of the traditional export model as we know it,” Pineau said Tuesday in a telephone interview. “It's unlikely that Hydro can sign another contract of this size in the current context, given that internal demand is going to increase.”

While Hydro-québec has been generating electricity surpluses for several years, its distribution arm has said it may need to tap new power sources starting in 2027.

Greenhouses, data centres and electric cars are expected to drive a nine-per-cent jump in energy demand by 2029, Hydro-québec Distribution said last year in its long-term forecast. Quebec is aiming to have 1.5 million electric cars on the road in 2030, more than 10 times the size of the current fleet.

“Those electric car targets seem quite ambitious to me, so I think Hydro-québec is going to be all right for the next 10 years,” said Jean-thomas Bernard, an economics professor at the University of Ottawa who specializes in energy demand. “It would be a different story if climate change resulted in much lower rainfall, but otherwise I don't think we need to worry too much.”

Hydro- Quebec will “undoubtedly” be able to meet demand in the province for the foreseeable future, spokesperson Lynn St-laurent said Tuesday. The utility has added about 5,000 megawatts of generating capacity in the past 20 years, while various energy-efficiency measures have unlocked savings of about 10 terawatt-hours, she said. Other measures are planned to make generating stations even more efficient.

Once transmission lines have been built, New York and Massachusetts will together soak up about 10 per cent of Hydro-québec's 200 terawatt-hour annual production capacity, chief executive officer Sophie Brochu told Ici Radio-canada Première in an interview Tuesday morning.

Financial terms with New York have yet to be finalized, though Brochu is adamant Hydro- Québec will make a profit on the venture. For example, the 20-year deal with Massachusetts calls for the utility to sell power at 8.8 cents per kilowatt-hour, compared with production costs of three cents per KWH, the CEO said.

While work on the Massachusetts project is already underway, the venture faces a number of hurdles.

After a proposed route through New Hampshire was blocked, voters in Maine — which the transmission line is now due to cross — will be asked to vote Nov. 2 in a referendum aimed at prohibiting construction.