Wind energy is set to play a central role in Quebec’s transition to a low-carbon economy, but as the last few projects contracted over a dozen years of steady and predictable requests for proposals (RFPs) come online, developers and equipment suppliers are looking for a clear plan from the government that will maintain the industry’s momentum over the short term.
The Quebec government’s latest energy policy, released last year, set some ambitious goals that will help drive wind’s continued growth in Quebec. The policy aims to increase renewable generation in the province by 25% and decrease fossil fuel use by 40% over the next 14 years. Renewable energy will meet 61% of Quebec’s total energy needs by 2030 – up from 47% today.
Meeting those targets will require a transformation in how energy is produced and used in the province, with clean electricity increasingly replacing hydrocarbons as a fuel for transportation and industry. And as a cost-competitive and scalable source of emissions-free power, wind energy will undoubtedly be part of the mix.
What is not clear, however, is how the province expects to get from where it is now to where it wants to be.
Hydro-Québec Distribution currently has more electricity than it needs and has no plans to procure new supply until it whittles that surplus down to a margin of 2.5%. But by then, it may be too late to meet the energy policy objectives.
A Canadian Wind Energy Association (CanWEA) analysis conducted in 2016 found Quebec will require anywhere from 24 TWh to 41 TWh of new renewable electricity by 2030 to meet its decarbonization goals. It is a lot of energy in a relatively short period of time, and CanWEA believes the province needs to start planning now for the new generation it will require.
Quebec already knows the benefits of an orderly and transparent approach to meeting its energy and economic goals.
When it set a 4,000 MW wind energy target in its 2006-2015 energy strategy, the province’s plan was not just to procure new clean electricity supply. It also wanted to build a new industry from the ground up, and backed by a clear and deliberate strategy, it succeeded. The Gaspésie has become the center of a thriving wind manufacturing sector, while Montreal has emerged as a hub of commercial activity, with many Quebec, Canadian and international companies establishing offices there. The province’s wind energy ambitions also provided a springboard for Quebec-based companies such as Boralex, Innergex and Kruger to become major players in North America’s renewable energy market. All told, wind energy contributes hundreds of millions of dollars a year to the province’s gross domestic product.
The focus now needs to be on consolidating these gains and providing the industry with a stable platform for growth.
The new energy policy does take some important steps in that direction by specifically targeting the construction of wind farms in Quebec for the export market. Hydro-Québec is a major supplier to the New England and New York electricity markets, and the province’s wind energy industry has long argued that bundling wind with hydro to sell to neighboring jurisdictions represents a significant economic opportunity for Quebec.
The first test of that opportunity is under way right now. Massachusetts recently issued an RFP for 9.45 TWh a year of clean energy – part of its plan to replace aging coal and nuclear generation and meet the state’s target of reducing greenhouse-gas emissions by 25% from 1990 levels by 2020.
The state and its investor-owned utilities will accept bids for hydro, new renewable energy capacity or new renewables firmed by hydro and have made it clear that they prefer the latter. That has brought wind energy developers, hydro producers and transmission companies together to develop joint bids in time for the RFP’s submission deadline, which is slated for the end of this month.
It is a very competitive environment. Although the details are sparse, we’re confident at least some of those bids will include Quebec-based wind energy projects.
There are a number of reasons why. Although a wind-hydro combination clearly fits what the customer is looking for in this case, it is not the only driver.
Although hydro provides the base load supply Massachusetts needs, it does not qualify to receive state renewable energy credits. Wind energy does, providing an additional income stream that a recent analysis, conducted by Power Advisory for CanWEA last year, values at $35/MWh to $50/MWh. That study also found that even with the $0.024/kWh production tax credit (PTC) factored in, higher capacity factors, easier permitting and social acceptability mean Quebec wind energy can compete alongside wind and solar projects located in New England and other neighboring jurisdictions.
With some of the industry’s biggest players active on both sides of the border and in multiple technologies, Massachusetts can look forward to procuring a diverse portfolio of resources that will provide clean electricity to consumers at the lowest-possible cost.
The opportunity for Quebec wind to play a role in meeting U.S. clean energy targets does not end with Massachusetts either. In the study, Power Advisory found renewable energy mandates alone will put the six New England states in the market for at least 8.8 TWh of renewable energy over the next 10 years – equivalent to about 2,500 MW of wind. Only one state, Vermont, will accept large hydro to meet its goals. New York’s state energy plan has established a goal of generating 50% of the state’s electricity from renewable sources by 2030, opening a market for about 30 TWh by 2030.
Quebec’s wind turbine manufacturing sector is also looking to export markets as it works to keep plants operating, without any concrete plans for new domestic wind energy procurement. A good example is LM Wind Power’s new four-year contract to supply blades from its Gaspé factory to the U.S. in the rush to build out projects before the PTC expires. It will see LM’s workforce grow from 185 to 450 employees, making the company the largest private employer in the region.
Although such one-off manufacturing contracts are good news, and the export of wind energy from Quebec is a promising new market opportunity, they are not a foundation that will support what the province has already built.
That is especially true in a global wind energy market where the competition for investment is intense. The Global Wind Energy Council’s latest projections show global installed wind energy capacity increasing by nearly 68% over the next five years to reach 817 GW by the end of 2021. Companies have a lot of places to invest their capital and will not remain in Quebec without a good reason. A steady domestic market and a clear plan that gives companies the confidence to continue to advance their project development portfolios and that gives manufacturers a base from which to pursue new growth opportunities are also required. These developers and manufacturers will be needed to reach the energy policy’s 2030 targets, and without a strong, short-term signal to investors, Quebec is placing its long-term energy and environmental goals at risk.
Next year’s provincial election, planned for October, gives the province’s major political parties an opportunity to send that signal. CanWEA and Quebec’s wind energy participants will be pressing their campaigns to outline ambitious, detailed plans for the province’s transition to a low-carbon economy and the role wind energy will play.
The good news is that no matter what their political stripe, all of the major parties recognize that wind energy does provide positive solutions to the economic, environmental and energy challenges Quebec faces. And if they forget, the many communities that have benefited from wind energy development over the past dozen years, and those that are lining up to be part of future projects, will remind them.
Jean-Frédérick Legendre is the Quebec regional director for the Canadian Wind Energy Association. He can be reached at email@example.com.