Ciao wrote: Worth a good read.
Not only will the agreement save Quebecers $ 1.5 billion, but it will also reduce greenhouse gases (GHGs) by 540,000 tonnes per year by 2030, the equivalent of the emission of 150,000 cars.
In addition, it requires the natural gas distributor nergir to accept a significant drop in its business volume, which is unnatural. Wow!
What is it about ? A tripartite agreement between the government, Hydro-Qubec and nergir (the former Gaz Mtro) to offer dual energy to Quebecers. The news was announced on July 14.
His particuliarity ? nergir allows half of its Quebec customers to massively reduce their consumption of natural gas in favor of greener energy from Hydro-Quebec. More specifically, the agreement provides that 100,000 residential, commercial and institutional nergir customers will reduce their gas consumption volume by 70% by 2030.
How is it possible ?
First, you should know that the Quebec government will subsidize nergir customers to convert their facilities into dual-energy units, which run on natural gas and electricity. Quebec will pay up to $ 125 million to possibly finance between 75% and 100% of the conversion.
The investment is attractive for the government, insofar as it will reduce GHGs by 540,000 tonnes at an average cost of only $ 26 per tonne, or the equivalent of the price of carbon on the market.
In comparison, subsidies for electric cars amount to between $ 200 and $ 400 per tonne of GHG saved. Another comparison: the Eastern REM will help reduce GHGs by 35,000 tonnes per year, or 15 times less than the Hydro-Qubec – nergir – Qubec initiative.
Next, you have to understand the dynamics of Hydro-Qubec's costs. For the crown corporation, serving a customer is very inexpensive during the spring and summer, when its dams are full and demand is low. On the other hand, the peak winter period (100 to 400 hours per year) is extremely expensive.
Under the agreement, essentially, Hydro-Qubec will supply customers with energy during the months when it has surpluses (70% of the total), while nergir will take over during the winter peaks (30% of the total). In doing so, Hydro will make big savings at peak, which it will share with nergir.
Compared to a 100% conversion to electricity, the agreement will provide net savings of $ 1.5 billion for all parties by 2030. Still!
That said, despite Hydro's compensation, the transaction will have the effect of reducing nergir's profits. Not very much, since the other half of nergir's Quebec customers who are not covered by the agreement - mainly manufacturers - contribute the bulk of the organization's business volume. But all the same, there will be a drop.
Why accept to lose money? On the one hand, nergir will be able to pass on the loss - the excess costs - to all of its customers with an increase in rates, as permitted by the rules of the Rgie de l'nergie. The increase will be modest, the equivalent of inflation, and will be made in a context where natural gas is much cheaper than other energy sources.
On the other hand, nergir calculates that it would eventually have lost a large part of the targeted customers, given Canadian and global GHG reduction ambitions. And that this loss, in the long term, would have been more damaging to her.
“We want to be part of the solution to decarbonize the economy. To do nothing would have been worse, ”explains nergir spokesperson Catherine Houde.
According to Ms. Houde, the transaction was approved by nergir's board of directors, and therefore by its controlling shareholder, the Caisse de dpt et placement du Qubec.
Even the oil company Enbridge - an indirect shareholder in nergir - supported the agreement, specifies Ms. Houde. “The board is very comfortable with the decision, which is part of our strategy to diversify our energy sources and green our natural gas. "
At the beginning of June, the Caisse announced the possible repurchase of the indirect interest of the oil company Enbridge in nergir for the sum of $ 1.14 billion. The transaction, once approved in a few months, will make the Caisse the indirect shareholder at 65.7% of nergir. Among the other shareholders is also the Fonds de solidarit FTQ.
For Hydro-Quebec and nergir, the dual-energy partnership is unique in the world, the press release points out. Would such a transaction have been possible had it not been for the proximity of the parties and their public or quasi-public nature?
“The fact that these are two companies with collective or quasi-collective ownership was a winning condition, which made it possible to discuss openly from the start. It would have been more complicated with two companies listed on the stock exchange, ”said Marc-Antoine Pouliot, spokesperson for Hydro-Quebec.
In short, the kind of agreement that makes us appreciate the Quebec model, in a way. Hats off!