Posted at 5:00 am
For years, surplus electricity from Quebec was exported at a very low price to the US market. The situation is changing and by next winter, electricity exports will probably be the most profitable in Hydro-Québec’s history.
The price of natural gas in northeastern North America, which determines the price of electricity in Hydro-Québec’s export markets, has doubled since the beginning of 2022. Between January and June, that is, during the first half of the year, the most expensive exported kilowatts were sold and generated a 45% increase in profits compared to the same period of the previous year.
Although electricity needs are significant in Québec during the winter months, Hydro-Québec manages, year after year, to export between 8 and 9 terawatt hours per year to neighboring markets during the cold season. In a whole year, exports reach about 35 terawatt hours, or 17% of total electricity sales.
The price of natural gas should remain high for several more months, estimate the specialists interviewed by Press.
Even if the war in Ukraine ends, Russia is unlikely to ever again be a supplier of natural gas to Europe.
Simon Langlois, associate researcher at the Trottier Energy Institute of Polytechnique Montréal
Global demand, which continues to rise, will support gas prices around the world, including in North America, which has benefited since the gas boom from an abundant and cheap resource. In liquid form, natural gas travels more and more, which makes its price international.
Since the start of the European crisis, the United States has increased its exports of liquefied natural gas (LNG), to the point of becoming the world’s largest exporter of LNG, ahead of Qatar and Australia.
The opening of the world market allows natural gas producers to take advantage of higher prices in Europe and Japan, but its price also increases in the North American market.
“Natural gas at $2 [US par MBTU]it’s over,” said Professor Sylvain Audette, HEC Montreal Professor and Associate Chair in Energy Sector Management.
A temporary windfall
The big winners in this new energy environment are North American gas producers. “Several of them had reduced their production or even ceased their activities because the prices were too low,” recalls Professor Audette. High prices put them back to work.
Hydro-Quebec, for its part, benefits indirectly from this windfall by selling its kilowatts at a higher price on the New York and New England markets.
The Quebec state corporation has always benefited from rising gasoline prices, in summer during heat waves or in winter when extreme cold ravages the northeastern continent. But these price spikes were most of the time very short-lived, while prices seem to want to stay at the current high for a while, according to Sylvain Audette.
Given that the water level in the reservoirs is adequate and prices in the US market are expected to remain high for the next few months, exports will remain very profitable, Jean-Hugues Lafleur, executive vice president and chief financial officer, said last month. of Hydro-Québec, during the publication of the results of the second quarter.
Simon Langlois of the Trottier Energy Institute at Polytechnique Montréal points out that this grace period enjoyed by Hydro-Québec will not last forever. “With the high-volume contracts with New York and Massachusetts, which are fixed-price contracts, Hydro-Québec will have less energy to export to the spot market and fewer opportunities to profit if prices stay high, he says. In the meantime, yes, it works in your favor. »
The supply contract signed by Hydro-Québec with Massachusetts should come into force in 2024 for a period of 20 years. The agreement signed with New York provides for deliveries from 2025 for a period of 25 years.
Robust prices, good yields
- Average price obtained in winter 2021: 5.1¢/kWh
- Average price obtained in winter 2022: 7.4¢/kWh
- Average cost of production: 1.93¢/kWh
more expensive for all
Heating will cost more in Quebec, but not only for reasons related to the international context. Overview.
Natural gas: +7.8%
After agreeing to a historic 15.6% increase in their rates last year, Quebec natural gas consumers face another significant increase of at least 7.8% this fall.
Énergir’s rate increase request currently being examined by the Régie de l’énergie refers only to the company’s transmission and distribution services, to which will be added an increase in the cost of natural gas, which will vary according to consumption . The price of natural gas for Énergir and its customers has risen 40% since last year.
Some 100,000 Quebec homes use natural gas for heating.
Heating fuel: + 18%
Residential oil consumers are increasingly rare in Quebec, but those who still use this energy source will have to pay more for heating this winter. The rise in the price of crude oil has brought with it derivative products such as fuel oil. The average price of a liter of fuel oil, which was $1.40 in Quebec last winter, is now $1.65, according to the Régie de l’énergie.
Electric rates increased by 2.6% last April. Therefore, it is from the winter that they will have a full impact on the heating bill of Quebecers, the majority of whom use electricity to heat themselves.
They announce another increase in electricity rates for the 1Ahem next April, which should be 3%. The increase in electricity rates, which was supposed to follow inflation, had to be limited to 3% by the government due to a much higher rate of inflation than expected.
When we compare…
Residential Electricity Rates
- Boston: 26 US cents/kWh
- New York: 24 US cents/kWh
- Montreal: 7.1 CAN cents/kWh
Sources: US Bureau of Labor Statistics and Hydro-Québec
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