Developments regarding Hydro-Québec’s upcoming calls for tenders to supply 780 MW of renewable energy
On July 14, 2021, the Quebec government published, in the Gazette officielle du Québec, the draft Regulation respecting a 480-megawatt block of renewable energy (“Regulation 480”) and the draft Regulation respecting a 300-megawatt block of wind energy (“Regulation 300” and, collectively with Regulation 480, the “Regulations”), as well as the Décret 906-2021 concernant les préoccupations économiques, sociales et environnementales indiquées à la Régie de l’énergie à l’égard du Plan d’approvisionnement 2020-2029 d’Hydro-Québec (in French; its title can be translated as: Order in Council 906-2021 respecting the economic, social and environmental concerns submitted to the Régie de l’énergie with respect to Hydro-Québec’s 2020-2029 Electricity Supply Plan, the “Order in Council”).
The Regulations create an obligation for Hydro-Québec to issue two calls for tenders (unless Hydro-Québec decides to combine them into one)1 for a total of 780 MW of renewable energy. Regulation 300 has the distinguishing feature of reserving a block of 300 MW for wind energy. In contrast, Regulation 480 makes no distinction as to the source of energy and power as long as it is renewable. Accordingly, it is reasonable to expect that solar, hydroelectric, biomass or biogas projects could be submitted, subject to the final terms and conditions of the call for tenders under Regulation 480. Hydro-Québec will have to issue these calls for tenders no later than December 31, 2021.
According to the press release from the Minister of Energy and Natural Resources,2 the energy supplies covered by the Regulations are intended to meet Hydro-Québec’s long-term energy and power needs as early as 2026, in the context of the development of new markets such as agricultural greenhouses and electric vehicles. Producers can therefore expect the upcoming calls for tenders to require a commercial operation date in 2026, even though the Order in Council and the Regulations are silent on this matter.
Furthermore, in light of the Order in Council, which applies only to the 300 MW block covered by Regulation 300, the call for tenders for this block is expected to include additional requirements to maximize the social and economic benefits for the host communities and Quebec as a whole. Such requirements would be similar to those in Call for Tenders A/O 2013-01 issued on December 18, 2013, for 450 MW of wind energy. These included a local participation requirement of approximately 50%; a requirement that Quebec content make up 60% of overall project expenditures; and a requirement that at least 35% of overall expenditures be incurred in the RCM where the project is located, in the Matanie RCM, or in the administrative region of Gaspésie-Îles-de-la-Madeleine. A sum of $5,700 per MW installed (indexed annually) must also be paid to the local community administering the territory where the project is located.
One difference from the most recent comparable call for tenders is the term of the contracts, which would be 30 years, as opposed to the 20-to-25-year terms of the contracts offered in Call for Tenders A/O 2013-01.
It should be noted that, unlike in A/O 2013-01, the Quebec government does not currently stipulate a maximum cost for the supply of electric power in any of these documents. The absence of a maximum price is likely due to the fact that the wind energy prices obtained in the most recent comparable call for tenders were very competitive and significantly below the maximum price.
As the Regulations are in draft form, any interested person may submit comments to the Ministry of Energy and Natural Resources until August 28, 2021, at which time the Quebec government may proceed with adopting the Regulations.
If they have not already done so, developers should start securing the land rights required to submit one or more projects to the tendering process and, in the case of a wind energy project, begin discussions with the local community to agree on the terms of their participation in the project, which must be approximately 50% pursuant to the Order in Council.
Our team will monitor the evolution and progress of the Regulations, and in particular the issuance of the call for tender documents, which will certainly be of interest to members of this industry. We invite you to contact us if you have any questions or concerns related to this article.
The authors would like to thank Joanie Baker, articling student, for her assistance in drafting this article.
1 For the purposes of this article, it is assumed that Hydro-Québec will issue a separate call for tenders for each of the energy blocks.
2 Ministry of Energy and Natural Resources, Nouveaux approvisionnements d’énergie renouvelable – Le ministre Julien place la filière éolienne au cœur de la transition énergétique (press release in French; the title can be translated as follows: “New renewable energy supplies – Minister Julien puts wind power at the heart of the energy transition”).