Hydro-Quebec: wind raising costs

Hydro-Quebec’s electricity distribution arm has filed for a 3.9% rate increase just four months after the prior one went into effect, again citing the cost of the province’s controversial wind energy investment as a key reason.

“The commissioning of wind farms under purchasing programs established by the Quebec government is putting upward pressure on overall electricity supply costs for the Quebec market,” Hydro-Quebec says in a statement.

It notes that wind power costs it more than 10 cents per kWh versus the utility’s mean three cent per kWh supply cost for all energy, mainly hydro. “New wind power supplies therefore drive up rates,” it adds.

If the Quebec Energy Board approves the rate change, it would take effect on 1 April 2015.

According to Hydro-Quebec, government wind investment is more than half of the proposed rate hike, which it estimates will cost an average household about C$62 ($56.80).

The utility says it also needs a rate increase to cover investments in the distribution network to cover growth in power demand, and the inflation cost of providing power to Quebec customers. The province keeps electricity rates in this so-called “heritage pool” below those it charges when exporting excess power to other provinces and the US.

The utility, the largest in Canada, used the same arguments last year when it sought a 5.8% rate increase. The energy board approved hikes of 4.3% for residential customers and 3.5% for industrial users that took effect last 1 April.

Consumer groups argued the proposed rate hike was unjustified given Hydro-Quebec had a record C$2.9bn net profit in fiscal 2013, up from $860m in 2012.

Despite having some of the world’s most abundant and low-cost hydroelectric resources, there has been broad political support in Quebec that the province needs a local wind industry.

The main drivers have been job creation and expanding a manufacturing presence in the Gaspe Peninsula in eastern Quebec, a region with high unemployment and heavy dependence on tourism.

Quebec had 2.39GW of installed wind generation capacity as of July this year, behind only Ontario.

Unlike in Ontario, the sector faces much-reduced local organized opposition to wind development in Quebec. Still, critics there have questioned why wind is necessary when it is not as cost-effective as hydro (which supplies most of the province’s power) and when Quebec has an energy surplus.

The Montreal Economic Institute, a non-profit research group, says its research shows that wind is the most expensive energy source in Quebec after the costs of grid distribution and integration are factored in.

The Canadian Wind Energy Association disagrees, arguing that wind power built today can compete on cost with any new generation source. It also supports diversity of power generation sources.