Tuesday, April 16, 2024

New deal between Ontario and Quebec to swap electricity in excess capacity periods

Ontario and Quebec are supporting a new 600 megawatt (MW) trade agreement between Ontario’s Independent Electricity System Operator (IESO) and Hydro-Québec that will optimize the use of existing electricity generation capacity in both provinces.

Today, during the Energy and Mines Ministers’ Conference, Ontario Minister of Energy Todd Smith and Quebec Minister of Economy, Innovation and Energy, Minister Responsible for Regional Economic Development and Minister Responsible for the Metropolis and the Montréal Region Pierre Fitzgibbon were joined by IESO Vice-President of Corporate Relations, Stakeholder Engagement and Innovation Carla Nell and Hydro-Québec Senior Director – Energy Transactions and Commercial Activities Simon Bergevin, who signed a Memorandum of Understanding as both parties work towards a final binding agreement.

This agreement is possible because the two provinces have complementary seasonal peaks in electricity demand. Ontario’s peak demand occurs in the summer, driven mainly by air conditioning on hot days, and Quebec’s peak demand occurs in the winter, driven mainly by electric heating on cold days. As a result, both provinces have excess capacity during the other province’s electricity peak period that can be exchanged to reduce the need for new generation capacity.

Under this preliminary deal, the IESO and Hydro-Québec will carry out an annual capacity swap of 600 MW. The IESO will provide 600 MW to Hydro-Québec in the winter and Hydro-Québec will provide 600 MW to the IESO in the summer. Ontario will also have the opportunity to bank any amount of the 600 MW of summer capacity provided each year for use in any future summer period during the agreement, allowing the province to save capacity until it is required.

The term of this agreement is up to 10 years. The deal will be a straight swap of capacity with no payments required by either party, protecting ratepayers in both provinces. Subject to the terms of the final agreement, the new deal could start this upcoming winter season.

The IESO and Hydro-Québec have also agreed to collaborate in exploring opportunities to both strengthen and increase the number of transmission connections between Ontario and Quebec. A priority would be meeting increasing loads in the Abitibi and Timmins region, as well as exploring the potential for new capacity between Montreal and Toronto.

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