New Tenders for Solicitations to Be Issued by the End of 2022: Quebec Is Once Again Taking Steps for Wind and Renewable Energy Supplies

Stikeman Elliott LLP

On April 27, 2022, draft Regulation respecting a 1,000-megawatt block of wind energy (“Regulation 1000”) and draft Regulation respecting a 1,300-megawatt block of renewable energy (“Regulation 1300”, together with Regulation 1000, the “Regulations”) were published in the Gazette Officielle du Québec by the government of Québec. This was followed, on July 13, 2022, by the publication of Order-in-Council 1189-2022 respecting the economic, social and environmental concerns submitted to the Régie de l’énergie with respect to a 1,000-megawatt block of wind energy (the “Order-in-Council”).

The Regulations are the first step towards the launch by Hydro-Québec of calls for tenders for new energy supplies to meet long-term energy and power needs as early as 2027. These new supplies are part of Hydro-Québec’s Strategic Plan 2022-2026, which foresees a significant increase in energy and power requirements, particularly due to the growing electrification of the economy and the greenhouse gas (GHG) emission reduction targets set by the government of Québec. To this effect, the Regulations issued by the government of Québec create the obligation for Hydro-Québec to issue two calls for tenders (i) a 1,000-megawatt bloc of wind energy; and (ii) a 1,300-megawatt bloc of renewable energy. These steps follow the other calls for tenders launched in 2021 for a block of 300 megawatts of wind energy (“A/O 2021-02”) and a block of 480 megawatts of renewable energy (“A/O 2021-01”) whose bid opening was last July 22.

In his Memorandum to the Cabinet on the Draft Regulation respecting a 1,000-megawatt block of wind energy and draft Regulation respecting a 1,300-megawatt block of renewable energy (the “Memorandum”), the Minister of Energy and Natural Resources explains that he had considered tendering a single block of 2,300 megawatts of wind energy given the advantages of this type of power, such as the possibility of very competitively priced projects and the easy integration of wind energy into the hydroelectric grid. However, this option was set aside because of the variable nature of wind energy, which prevents it from always providing additional power. Thus, the government has once again opted for tenders that include a second block of renewable energy in order to diversify its energy supply sources to have a mix of energy from several renewable sources[1].

1,000-megawatt block of wind energy

The Order-in-Council, which only applies with respect to the 1,000-megawatt block under Regulation 1000, sets forth objectives determined by the government of Québec to maximize the social and financial benefits in the local communities and in Québec. The objectives are identical to those in A/O 2021-02, except for the fourth item listed below, which is an additional clarification specific to the Order-in-Council:

  1. a participation of the local environment in the project at a level of approximately 50%[2];
  2. maximization of the Québec content, which shall account for 60% of the overall project expenses;
  3. maximization of the regional content, whereby 35% of the overall expenses shall be incurred in the RCM where the project will be located, in the RCM of Matanie or in the administrative region of Gaspésie-Îles-de-la-Madeleine;
  4. the development and maintenance of harmonious relations with Indigenous communities; and
  5. long-term supply with thirty-year contracts.

As with the A/O 2021-02, a project submitted in the context of the call for tenders for the 1,000-block covered by Regulation 1000 will be required to make a payment to the local community that governs the area in which the project is located[3]. This payment has been increased to an annual amount of $5,850 per megawatt installed (indexed annually).

In addition, Regulation 1000 establishes deadlines for the connection of the 1,000-megawatt block reserved for wind energy to Hydro-Québec's main grid in order to provide predictability to the industry. In fact, it is provided that the project submitted must be connected to the main Hydro-Québec grid within the following deadlines:

  1. 400 megawatts by December 1, 2027;
  2. 300 megawatts by December 1, 2028; and
  3. 300 megawatts by December 1, 2029.

The Minister of Energy and Natural Resources states in his Memorandum that there are advantages to allowing for delays in connecting to Hydro-Québec's main grid, including the avoidance of "boom and bust" cycles (order books filled to capacity, followed by an off-peak period).

Neither the Order-in-Council nor the Regulation 1000 currently stipulate a maximum cost for the supply of electric power.

1,300-megawatt block of renewable energy

Regulation 1300 provides that Hydro-Québec shall issue a call of tenders for a 1,300-megawatt block of renewable energy. As opposed to Regulation 1000 which reserves the 1,000-megawatt block for wind energy only, Regulation 1300 is not limited to wind energy, but rather applies to all types of renewable energy. Projects tendering wind energy as well as solar, biomass or biogas or other forms of renewable energy will therefore be able to participate in the call for tenders under Regulation 1300, subject to the final terms of the call for tenders.

As for Regulation 1000, Regulation 1300 does not currently stipulate a maximum cost for the supply of electric power.

Tender for solicitations for the 1,000-megawatt block of wind energy and the 1,300-megawatt block of renewable energy must be issued by Hydro-Québec not later than December 31, 2022.

It is reasonable to expect that the steps that follow will be similar to those undertaken by the Government of Québec and Hydro-Québec in recent months under A/O 2021-01 and A/O 2021-02 given the significant similarities between the legislative documents.

As stated in the Memorandum, all of these steps are part of the government of Québec’s efforts to make more room for wind energy in order to ensure greater electrification of the Québec economy and to help the government achieve its targets in terms of the fight against climate change while meeting the growing demand for energy. In addition, the Memorandum states that when Hydro-Québec's 2023-2032 Supply Plan is tabled, the need for additional supply will be reviewed and it is possible that this will lead to the launch of additional calls for tenders to meet this demand.

 

The authors would like to thank Mariane Gagné, Student at Law, for her collaboration in the writing of this article.

[1] Québec, Minister of Energy and Natural Resources, Draft Regulation respecting a 1,000-megawatt block of wind energy and draft Regulation respecting a 1,300-megawatt block of renewable energy. (Memorandum to the Cabinet), by Jonatan Julien.

[2] Local environment is defined in the Order-in-Council as an environment that consists of one or more of the following organizations: a regional county municipality; a local municipality; a band council; an intermunicipal board; a cooperative with a majority of members residing in the administrative region where the project is located; the Cree village municipality or a Cree landholding corporation; a Northern village municipality or an Inuit landholding corporation; the Naskapi village municipality or the Naskapi landholding corporation; the Kativik Regional Government or the Cree Nation Government.

[3] The local community is defined in the Order as a community represented, as applicable, by: a local municipality; a band council; the Cree village municipality or Cree landholding corporation; a Northern village municipality or Inuit landholding corporation; the Naskapi village municipality or Naskapi landholding corporation; the Kativik Regional Government; the Cree Nation Government or the Regional Government of Eeyou Istchee Baie-James.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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