Montreal, Monday, June 17, 2013 – Invoking “obvious economic reasons,” i.e., annual savings of $24 million, the Quebec government cancelled six small hydroelectric power projects this past February. In April, however, it announced new supply contracts for wind power, a sector that is already guaranteed to receive an implicit subsidy of $695 million a year until 2020. For Youri Chassin, economist at the MEI and the author of the Economic Note released today, we have an urgent need for rational decisions based on our actual energy requirements and not on artificial support of various energy sectors.
“Quebecers pay literally hundreds of millions of dollars a year to produce electricity from wind turbines that they don’t need. This energy is 2.5 times more expensive than hydroelectricity. Even if they account for only a small proportion of the electricity produced here, Hydro-Québec has indicated that the most recent rate hike was due almost entirely to these new projects,” explains Mr. Chassin.
In addition to the purchase price for electricity for each energy sector, the author included other fees paid by Hydro-Québec related to transportation, distribution and integration, as well as network losses. Taking these parameters into account, he estimates that wind power is the most expensive at 14.14₵ per kWh, compared to biomass (13.40₵) and electricity from small hydroelectric power plants (11.53₵). Patrimonial hydroelectricity costs just 5.55₵ per kWh.
As a Crown corporation, Hydro-Québec is obliged to make a block of “patrimonial” energy available to all Quebecers, so that they can enjoy very low electricity rates. However, this historical benefit is in the process of being eroded. Indeed, due to the new influx of electricity produced at high prices, mostly from wind turbines, Quebecers are being deprived of a portion of this patrimonial energy.
With Quebecers having to consume energy that is very expensive to produce, Hydro-Québec is in a position to export more hydroelectricity, a type of energy that is green, renewable and inexpensive, which increasingly benefits Americans, concludes Mr. Chassin.
The Economic Note entitled The Growing Cost of Electricity Production in Quebec was prepared by Youri Chassin, economist at the MEI. This publication is available on our website.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its publications and conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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