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Article

Québec’s New Regulation Regarding the Procurement of 450 MW of Wind Power

Date

August 28, 2013

AUTHOR(s)

Daniel Bénay
Louis-Nicolas Boulanger
Mathieu LeBlanc


On August 28, 2013, the Québec government published a draft regulation under An Act Respecting the Régie de l'énergie setting out a framework for the procurement of an initial 450-MW block of wind power of the previously announced 800 MW of wind power to be procured.

In summary, the core provisions of the draft regulation deal with the following:

  • Location of the Projects. The 450-MW block of wind power to be procured itself consists of two blocks. The first block of electricity, 300 MW, will be generated by projects located in the Bas-Saint-Laurent and Gaspésie-Îles-de-la-Madeleine regions. The second block of 150 MW will be generated by projects located in the province of Québec.
  • Timing of Deliveries. From this 450-MW block of wind power, Hydro-Québec Distribution will obtain 225 MW of capacity by December 1, 2017, and an additional 225 MW of capacity by December 1, 2018.
  • Price. Hydro-Québec Distribution would pay for electricity at a price not to exceed 9.5¢/kWh in 2014 dollars, to be increased annually on the basis of changes in the CPI. This price will also include complementary load balancing services which will be provided by either Hydro-Québec Production or another Québec electricity supplier.
  • Community Involvement. Local communities (which may include a regional county municipality, a local municipality, a First Nation or an inter-municipal board) will be required to hold an interest representing more than 50% of the control in each of the projects.
  • Timing for Call for Tenders. Hydro-Québec Distribution is required to issue a call for tenders for the 450-MW block of wind power within 90 days of the publication of the regulation in its final form.

Key takeaways:

  • It will be interesting to analyze the reactions of the industry to the maximum electricity price established by the Québec government, especially in light of recent positions in the media against further development of wind power projects in Québec. The Québec government had capped the price of electricity in 2008 for its community wind power call for tenders. While initially deciding to establish it at 9.5¢/kWh, the maximum price of electricity was subsequently increased to 12.5¢/kWh.
  • The requirement for local communities to hold a controlling interest in the projects may pose challenges for private developers in the structuring of their projects. In 2008, the Québec government had imposed a similar requirement in connection with First Nations projects.
  • The regulation only serves as a framework for a subsequent call for tenders to be issued by Hydro-Québec Distribution. This call for tenders should provide more details on the procurement of electricity, including as it relates to the inclusion of load balancing services in the maximum electricity price established by the regulation.
  • Interested persons are invited to submit their comments on the draft regulation to the Deputy Minister of Natural Resources within the next 45 days, after which the regulation may be published by the Québec government. As mentioned above, Hydro-Québec Distribution will thereafter be required to proceed with the call for tenders within 90 days from the publication of the regulation in its final form.

Do not hesitate to contact our Energy Group lawyers to assist you and your business in connection with this important development in the wind energy industry, including to discuss and identify the opportunities which may arise in connection with the proposed wind power procurement.

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