Provincial power utilities in Canada are seeing reduced revenues from shrinking electricity exports as low reservoir levels cut hydroelectricity output.
More than half of Canada’s electricity is generated by hydroelectricity: Quebec, British Columbia, Manitoba, and Newfoundland and Labrador all rely on it as their dominant power source. They export surplus electricity to other provinces or to the United States to generate revenue that is crucial for repaying debt and controlling costs for ratepayers, reports the Globe and Mail.
But shifting weather patterns have reduced the amount of water available to generate electricity in Canada. Total electricity generation in the country was at its lowest in years in 2023, and experts fell to their lowest level since 2010, mostly because of a drop in hydropower output. Canadian customers are prioritized when allocating available electricity, so when supplies are low utilities cut exports.
Falling exports mean lower revenues and weaker performance for utilities in provinces like Manitoba and Quebec.
“Export revenue definitely is a significant part of what makes Hydro-Québec such a big powerhouse in the market,” Tom Li, an energy analyst at the Morningstar DBRS bond rating agency, told the Globe and Mail.
Utilities say hydroelectric capacity remains within manageable levels, that domestic customers and contractual export commitments will be met, and cut export cuts will be for those that hold no firm contractual obligations. Hydro-Québec spokesperson Lynn St-Laurent told the Globe that hydroelectric producers have been dealing with fluctuating water levels since the 1960s.
“In 2004 and 2014, for example, the energy stock was lower than it is today,” she said.
But given the growing influence of climate change on global weather patterns, the ongoing decrease in hydroelectricity generation prompts the question of whether these utilities are facing the same natural variability they’ve dealt with for years, or if they are encountering a “new normal” with more frequent droughts, writes the Globe.
“Our view is that it [drought] might happen more frequently, and it could be a little more severe,” said Li, but added that “utilities are experts at managing these conditions.”
Nor are those impacts limited by artificial borders. The U.S. Energy Information Administration (EIA) is forecasting that power generation from U.S. hydropower plants this year will fall 13% below the 10-year average, hitting its lowest threshold since 2001.
“Extreme and exceptional drought conditions have been affecting different parts of the United States, especially the Pacific Northwest, which is home to most U.S. hydropower capacity,” the EIA writes this week. “As of the end of September, 72.6% of the continental United States was experiencing drier-than-normal to exceptional drought conditions, according to the U.S. Drought Monitor. By the end of October, this value increased to 87.2%.”
The Globe says Ontario “stood out last year for having escaped serious drought impacts,” with output from Ontario Power Generation’s 66 hydroelectric dams increasing slightly over the previous year. The province is exploring ways to increase its electricity supply to enhance its role as a net exporter. Although not all exports have been advantageous, says the government, there is an opportunity to sell clean electrons to neighbouring states committed to reducing fossil fuel use.
“The truth is there is massive demand for clean energy around the world,” wrote Energy Minister Stephen Lecce. “Not only will we meet our own domestic demand, our government sees a chance to become an exporter of clean energy and clean tech to our neighbours and allies, which will lead to lower costs for our families and businesses, reduce emissions beyond our borders, and promote North American energy security.”
