Significant Electrical Imports from the United States Expected in 2024

Quebec is experiencing a significant rise in electricity imports from the U.S., reaching levels unseen in over 20 years, amid escalating trade tensions. Hydro-Québec’s imports surged to 3.5 TWh in 2024, driven by favorable rates and a strategic move to conserve water resources during a drought. This situation has also led to reduced electricity exports and revenue losses, prompting discussions on potential tariffs as Quebec navigates its precarious position in the energy market.

Quebec Faces Unprecedented Electricity Imports Amid Trade Tensions

As tensions escalate in a potential trade war with the United States, Quebec is witnessing a surge in electricity imports from its southern neighbor, reaching levels not observed in over two decades. This unexpected shift has raised eyebrows and concerns among industry experts and policymakers alike.

According to the Canada Energy Regulator, Hydro-Québec imported approximately 3.5 terawatt-hours (TWh) of electricity during the first 11 months of 2024. This figure marks a remarkable fivefold increase compared to the same period in 2023, making it the highest level since 2003. Hydro-Québec attributes this increase to favorable market conditions, managing to secure imported electricity at an average rate of 4.1 cents per kilowatt-hour (kWh), a significant decrease from 6.7 cents in 2023. Notably, only a small portion of these imports was utilized to meet the energy demands of Quebec residents during a particularly harsh winter.

Impact of Water Shortages on Hydro-Québec’s Operations

The escalation in electricity imports has been a strategic move for Hydro-Québec, enabling the company to conserve its water reserves amid a concerning lack of precipitation in 2023 and 2024. Pierre-Olivier Pineau, a specialist in Energy Sector Management at HEC Montreal, highlights that water inflows for 2023 were recorded at their lowest levels since 1946, with 2024 not showing significant improvement either.

This drought condition has compelled Hydro-Québec to curtail its electricity exports to the United States, resulting in a sharp decline in profits. Exports during the first 11 months of 2024 plummeted to 5.1 TWh, less than half of the 12.1 TWh exported in the same timeframe the previous year. Consequently, revenue from these exports has decreased dramatically from $1.3 billion in 2023 to a mere $526 million, with the average selling price hovering just above 10 cents per kWh.

In light of the rising electricity imports and diminishing exports, Quebec’s position appears precarious as it confronts the looming threat of tariffs from the Trump administration. Pineau emphasizes that a boycott of the American market would hardly impact U.S. interests, given the already significant reduction in exports due to water scarcity. However, he notes that the repercussions could still resonate in markets like New York State and New England, where Quebec plays a crucial role in electricity supply.

In particular, Vermont’s reliance on Quebec for its electricity makes it susceptible to potential disruptions. Normand Mousseau, a professor at the University of Montreal, suggests that if tensions with Washington persist, Quebec might consider implementing tariffs on its electricity exports, using the generated revenue to support businesses adversely affected by the trade conflict.

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