Offshore wind power in New England could alter electricity trade balance between Canada and the United States

A flood of cheap electricity generated by planned offshore wind projects in the United States could find its way onto Canada’s electricity grid, reversing a long-standing trend of mostly one-way trade that sees massive exports of Canadian hydropower to United States

The recent approval by the Biden administration of the first major wind farm off the coast of Massachusetts has kicked off a plan to install 30 GW of offshore wind capacity by 2030. The offshore wind project of 800 MW from Vineyard Wind LLC and subsequent projects could disrupt a captive clean energy market for provincial company Hydro-Quebec, which has been exporting electricity from its dam system to New York and New England for decades. Infrastructure expansions are already underway to meet renewable energy portfolio standards in U.S. states, including Central Maine Power Co.’s New England Clean Energy Connect transmission line, which would carry electricity produced by the Quebec to Massachusetts. Central Maine is a subsidiary of Avangrid Inc., itself a partner in the Vineyard Offshore project.

Even if offshore wind fails to meet President Joe Biden’s lofty targets, with 30 projects proposed in U.S. waters, there will likely be enough power sources to disrupt the traditional import-export market with Canada. , said industry experts. Although Bloomberg NEF’s forecast of 23 GW offshore wind installations by 2030 falls short of the U.S. government’s forecast, Melina Bartels, a Bloomberg NEF associate, said the volume of electricity going to the northeastern United States will be high enough to lower winter prices and create the opportunity to send electricity north of the border. The additional electricity in New England could lead to winter electricity prices 40% lower than seen in recent years in five years, Bartels said, and multiple transmission connections could create favorable conditions for sending electricity in Canada.

“Traditionally, when we think of this connecting relationship with Canada, we think of hydroelectricity coming from Quebec and supplying these two different markets in the United States,” Bartels said during a recent virtual conference of the Association. Canadian Renewable Energy. “I think when that offshore wind starts to flood New England, we might also see electricity flowing in the opposite direction.”

The level of exports would depend on daily price signals, said Bartels, who heads Bloomberg NEF’s mid- to long-term North American power system forecast, but the amount of offshore wind that would be available would be enough to disrupt the market. supply-demand balance. certain months. Exports would require coordination between regulators in the two countries.

Better infrastructure

Increased business activity would also require better infrastructure, including increased storage at interconnection nodes, greater transmission availability and the integration of carbon pricing, said Lisa DeMarco, senior partner and CEO of Resilient LLP, a Toronto-based law firm specializing in climate change, remediation energy and Indigenous law. The integration of carbon and electricity markets would also strengthen fair trade in electricity.

Increased electricity trade will be vital to the Biden administration’s goal of decarbonizing the U.S. electricity grid, but could run into a problem if Canada’s national carbon tax creates a disadvantage relative to U.S. generation at higher emissions before the national grid is decarbonised. Trade deals, including the US-Mexico-Canada deal, require access for sellers of electricity in both countries. The federal carbon tax, now set at C $ 40 / tonne, is expected to rise to C $ 170 / tonne by 2030 and could create a situation that would make electricity produced from fossil fuels in the United States attractive to consumers. Canadian entities at the new or existing border. interconnections in the Northeast and Midwest.

“If you consider the emission rates along the border states, just on the southern edge of Canada, on average in Ontario, Quebec and Manitoba, we have emission rates between 4 kilograms / MWh and 40 kilograms / MWh, and in the United States, on average, we’re at around 638 kilograms / MWh, “DeMarco told the conference.” This is something that needs to be looked at very carefully to make sure we don’t wind up not with perverse and unintended consequences of a Canadian carbon price that would subject clean Canadian activity to dirty US electricity imports. “

Government support

The Government of Canada could play an increased role in cross-border transportation networks, according to an official at the Canada Infrastructure Bank. The government agency recently announced that it has agreed in principle to invest up to C $ 655 million in ITC Holdings Corp.’s Lake Erie Connector project, which would allow Ontario to trade electricity. electricity with the PJM interconnection grid in the United States.

“We are interested in having further discussions on similar projects and transmission between the two countries, but there must be an appetite from provinces, US states or US markets as well as the private sector to try to come together.” Sashen Guneratna, chief investment officer of the bank said, “Interprovincial and cross-border transmission is a priority for the bank, and we are willing and able to help make that happen.”

Regardless of where the connections are made, the boom in offshore wind power in the United States will play an important role in the exchange of electricity between the two countries, said Bartels of Bloomberg NEF.

“The most significant impact on the energy relationship between the United States and Canada will be the growth of offshore wind in New England,” Bartels said. “On time, [the electricity] will come from offshore wind generation, sometimes from hydropower imported from Canada, and I think at times those two power sources will work in tandem, and I think sometimes they will have to compete with each other. “