Energy in Quebec: What Role for Natural Gas in the Context of Electrification?

Research Paper that seeks to quantify Quebec’s current energy production and consumption and illustrate the considerable challenges that the electrification of the Quebec economy represents

For several years, there has been talk of electrifying the entire Quebec economy. This Montreal Economic Institute publication presents the province’s energy profile, quantifies its hydroelectric potential, and identifies natural gas as a realistic solution for meeting our energy needs.

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This Research Paper was prepared by Jean Michaud, engineer, with the collaboration of Germain Belzile, Senior Fellow at the MEI.

Highlights

A common perception is that Quebec could quickly electrify its entire economy. This report will seek to quantify Quebec’s current energy production and consumption and illustrate the considerable challenges that the electrification of the Quebec economy represents, particularly the transport sector. Hydro-Québec’s production capacity is not infinite, especially during peak winter periods. Yet alternatives to hydroelectricity exist for increasing the province’s energy production. Natural gas in particular has several advantages in the Quebec context.

Chapter 1 – Quebec’s Energy Profile

• Over half (56%) of the energy consumed in Quebec comes from fossil fuels, while electricity represents 36% of the province’s energy profile.
• Hydro-Québec’s energy surplus (18 TWh in 2019) represents around 10.3% of Quebec’s annual electricity consumption, an amount that could allow electricity’s share of the province’s energy mix to increase to a little under 40%.
• However, Hydro-Québec is also in negotiations with the City of New York for the purpose of selling it a large part of its surplus, namely 8 TWh, in addition to the fact that the government is trying to attract companies whose operations use a lot of energy.
• Some 30% of Quebec energy consumption is due to the transportation sector, with around half of this energy consumed by personal vehicles, a little more than a third by the transport of goods, and the rest due to the commercial transportation of passengers (mainly by air).
• Some 5.4 million personal vehicles (cars and light trucks) were circulating on Quebec roads in 2017, driving a total of 72 billion km each year, in addition to the 823,000 trucks in service in the province.
• Quebec would need nearly 14 additional TWh per year to recharge personal vehicles if they were all electric, plus almost the same amount to electrify all trucks—supposing that this is technically feasible—for a total of 28 additional TWh.

Chapter 2 – Hydro-Québec’s Production Capacity

• Hydro-Québec’s total theoretical generating capacity, coming mainly from its hydroelectric generating stations, to which is added the Churchill Falls generating station, wind farms, and other sources, amounts to 47,926 MW.
• However, because of the wind’s intermittence, Hydro-Québec’s “reliable” electricity production cannot include wind power, and is therefore actually 44,050 MW.
• Hydro-Québec’s peak needs were expected to reach 38,387 MW in 2018-2019, plus a reserve of 3,650 MW in order to guarantee the reliability of this supply at all times, for a total of 42,038 MW (and 44,380 MW by 2025-2026).
• During periods of intense cold, heating represents a very substantial portion of electricity demand, which makes Quebec an exception.
• Almost everywhere else in North America, natural gas is widely used for heating, and as a result, peak electricity demand generally occurs in summer due to air conditioning.

Chapter 3 – The Impact of the Electrification of Transportation on the Demand for Electricity

• Supposing that the number of vehicles in circulation in Quebec remains the same as it is today, at the end of a completed energy transition, some 5.4 million personal electric vehicles would require around 37,350 MW just to recharge each day, or almost as much as the province’s peak demand in winter.
• Even if, by using smart electric meters, the recharging could be spread out over twelve hours, this would still generate an additional demand of over 3,000 MW each of these twelve hours.
• The 823,000 trucks in service in Quebec, if they were also converted to electricity, would require an additional 3,100 MW to recharge if this was spread over twelve hours, for a total increase in the demand for electricity of 6,100 MW for the duration of the charging.
• In winter, when the demand for electricity is greatest, the need to heat electric cars and trucks (which increases their consumption), combined with batteries’ faster loss of charge due to the cold, would prolong the charging time required.
• Electrifying the entire Quebec economy except for transportation would require Hydro-Québec to increase its production by around 10,000 MW per decade in order to almost double it, bringing it to around 70,000 MW in 2050.
• Since Quebec’s electrical potential is estimated to be a little over 80,000 MW in theory, harnessing all of Quebec’s rivers, rapids, and falls could fuel the entire Quebec economy, but social and political pressures, as well as the status of major rivers as aquatic reserves, are likely to be obstacles to such an objective being reached.
• Moreover, electrical energy has its drawbacks: Contrary to fossil fuels that can be stored, electricity must be used the moment it is produced, and produced the moment it is needed.
• Currently, Quebec’s energy supply is not too concentrated, with no source representing more than 40% of the province’s needs and some 64% of those needs covered by sources other than electricity that can be stored.

Chapter 4 – What Other Solutions Does Quebec Have?

• A lot is heard about the development of solar power in the American Southwest, but in southern Quebec, in December, a solar panel that followed the movement of the sun could provide energy no more than 10.8% of the time.
• Geothermal power runs 24 hours a day, twelve months a year, and is not affected by the weather outside. Its main drawback is its high installation cost, but certain public buildings should be able to accept higher initial financing costs that take into account the value of future savings.
• Doing a better job of insulating buildings, installing better windows and other similar energy efficiency initiatives are the least costly ways of reducing residential, commercial, and industrial energy demand, but the low price of hydroelectricity in Quebec reduces the benefits stemming from such measures.
• Even though the use of domestic, agricultural, and other waste for the production of biofuels is logical when economically justified, its commercialization potential is very limited for the moment.
• Next generation nuclear reactors greatly minimize the risks related to human or design errors, and certain modern technologies use nuclear waste as fuel, which reduces the problem of storing this material, but neither Quebec’s population nor its political class currently has any appetite for this kind of energy.
• Most hydrogen used comes from natural gas, and it would be better to use the natural gas itself. Another way to obtain hydrogen is through the electrolysis of water, but this is relatively expensive, which makes it uncompetitive for the time being.
• Natural gas is cleaner than coal or oil, its combustion emitting practically no fine particles. This is why it is generally perceived as a transition solution toward the decarbonization of the global economy.

Chapter 5 – Natural Gas in Quebec

• If Quebec used natural gas instead of electricity for heating, this would free up a large amount of electricity that would facilitate the electrification of other sectors of the economy.
• In 2018, Quebec imported $13.8 billion of fossil fuels. Local gas consumption for the year, at around six billion m3, represented over $1 billion of this amount.
• Reducing CO2 and methane emissions in Quebec by refusing to produce natural gas locally, all while consuming natural gas produced abroad—which produces even more harmful emissions—does nothing to improve the global balance sheet.
• Quebec’s CO2 emissions measured on the basis of annual production, some 10 t of CO2 equivalent per person, are much lower than the Canadian average. However, if we consider Quebec’s emissions based on consumption, they are closer to 15 t per person annually, due to the importation of carbon-intensive products, especially oil and natural gas.
• Quebec’s recoverable reserves of natural gas, concentrated in the southern part of the St. Lawrence Valley, are estimated to be between 250 billion m3 and 1,150 billion m3. At the current rate of consumption, Quebec would have sufficient reserves for at least 40 years.
• Given the network of gas pipelines that already exists in southern Quebec, developing the natural gas reserves under the ground in the province would require the construction of few new gas pipelines.
• However, since the start of the past decade, exploration of potential natural gas deposits in the St. Lawrence Valley has been subject to a series of moratoriums and bans.
• By importing its natural gas, Quebec “hides” the emissions that result from its consumption, for which it is ultimately responsible. In other words, we blame American and Western Canadian producers for our pollution.

Conclusion – For the Responsible Development of Quebec’s Natural Gas

If Quebec is to electrify a significant share of its transport sector, it will have to give itself some room to manoeuvre so that electric vehicles can be usable even during periods of high demand. The wider use of natural gas for heating would facilitate the electrification of the province’s economy. Moreover, Quebec has substantial reserves of gas, located close to consumers, access to which is facilitated by the existing gas pipeline network.

The benefits related to the development of Quebec’s natural gas are brought into stark relief by the almost unprecedented economic crisis that the entire world is facing. In addition to creating high-quality jobs in a time when these are becoming harder to find, the emergence of a gas industry in Quebec would increase its energy independence and place it in a better position to face future crises, if these should disturb normal supply chains.

While it is true that the revival of this industry in Quebec will probably not happen in the short term (due to the prices at which hydrocarbons are currently trading), some reflection is in order on the part of Quebec’s provincial and municipal governments. There is no reason to continue hampering the development of natural gas by imposing an arbitrary and unnecessarily burdensome regulatory process.

Introduction

For several years now, the notion of an “energy transition” has been constantly evoked in Quebec, to the point where it has even given its name to a governmental agency.(1) The common perception is also that Quebec has almost unlimited electricity surpluses that could, if we were serious about it, allow us to quickly electrify the entire Quebec economy. Many are those who believe that we could also provide substantial electrical power to our American and Canadian neighbours.(2)

This report will seek to quantify Quebec’s current energy production and consumption and illustrate the considerable challenges that the electrification of the Quebec economy represents, especially when it comes to the transport sector.

First, we will establish Quebec’s energy balance sheet in order to have a better idea of the shares of different energy sources, especially that of electricity. Then, we will look at Hydro-Québec’s production capacity and observe that it is not infinite, and during peak winter periods, no longer provides much room to manoeuvre given the level of demand.

We will then study the impact of the electrification of transportation on the demand for electricity and the Quebec electricity network’s ability to deal with it. Finally, we will examine the alternatives to hydroelectricity for increasing Quebec’s electrical production, before taking a closer look at natural gas, which has several advantages in the Quebec context.

Author’s note
Each fall since 2014,(3) HEC Montréal’s Chair in Energy Sector Management has published an in-depth report on the state of energy in Quebec.(4) This document provides a wealth of data on the province’s energy sources and its consumption by sector of activity (residential, industrial, transportation, etc.), which constitutes an excellent source of information, and it will be used extensively in the present report.

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