Energy production in Quebec has long been the exclusive prerogative of Hydro-Québec, whose production objectives coincided with those of the Quebec government and thereby resulted in Quebec's (informal) energy policy. How does the emergence of new private sector energy producers -- first in wind energy, and soon in oil and gas -- change this equation? That is the question that we will consider in this article, on the basis of an analysis of the present energy balance in Quebec and its probable evolution.

The Current Balance

Quebec has an overall annual energy consumption of approximately 40 Mtoe1. Its annual per capita consumption, approximately 5 Toe, is lower than that of the rest of Canada and the United States, but is higher than that of Sweden or Norway.

In terms of production, Quebec produces around 220 TWh of electricity per year2, representing approximately 19 Mtoe. However, Quebec currently has no domestic oil or gas production.

Quebec's current energy balance is clearly negative: Quebec's total production amounts to only half of the energy it requires. In fact, this negative balance is even more pronounced since, of the 220 TWh of electricity produced each year, only 195 TWh is consumed locally (representing 100% of domestic electricity demand, however), the surplus being sold to neighbouring provinces and to the United States.

Furthermore, on a sector by sector analysis, two things stand out. First of all, Quebec clearly satisfies its own demand for electricity, which represents 41% of its overall energy consumption. Secondly, Quebec is completely dependent on imports to satisfy its oil and gas demands, representing respectively 38% and 13% of its total consumption.

The Projected Balance

We now turn to the factors that are likely to influence the evolution of the energy balance in Quebec in each of the electricity, gas and oil sectors.

According to the projections in the Government of Quebec's strategic plan for 2006-20153, Quebec's self-sufficiency in electricity is likely to continue. The opening of new plants in the coming years will allow Quebec to respond to the increase in demand, which requires, on its own, an annual increase in capacity of 250 MW.

Wind energy will be called to play an important role in this projected growth, with installed power from wind farms projected to increase from 100 MW to 4,000 MW by 2015. However, hydroelectricity, currently representing 97% of total input, should remain Quebec's dominant mode of production, since Hydro-Québec is contemplating a portfolio of hydroelectric projects projected to increase output by an additional 4,500 MW by 2015. Even when these projects are operational, however, the province will still be far from realizing its full hydroelectric potential, currently estimated at 45,000 MW.

As for nuclear energy, it is likely to remain one of Quebec's least favorite options, possibly even disappearing altogether as no new nuclear plants are contemplated, and the future of Gentilly-2, the province's only nuclear plant still in service, is doubtful.

In the natural gas sector, the possible production of shale gas in Quebec would completely transform the energy balance. According to the Quebec Oil and Gas Association (the "QOGA"), reserves of shale gas in Quebec could represent "many trillions cubic feet" of natural gas, representing the domestic demand for 41 to 190 years, based on Quebec's annual consumption of 215 million cubic feet. Depending on the profitability and efficiency of such production, these outstanding reserves would allow for the satisfaction of all or part of the domestic demand. They would also allow for the reduction of Quebec's dependency on imports, which currently originate from Western Canada, and even possibly allowing producers to export shale gas outside of Quebec. Furthermore, the price of natural gas in Quebec, currently 6 times higher than its equivalent in Alberta, would likely decrease. These factors would likely combine to stimulate demand for natural gas in Quebec, where demand has fallen since 2000 from 5.7 Mtoe to 4.3 Mtoe in 2008. Any such increase would likely come at the expense of biomass, coal and heating oil.

Finally, in the oil sector, the possible exploitation of oilfields in the Gulf of St. Lawrence would satisfy a portion of Quebec's demand, the size of which is difficult to assess at this stage4. Quebec's oil energy balance would thus be transformed in a similar manner than the gas sector. Quebec would therefore have the opportunity to reduce its dependency on oil imports, which currently come from Algeria, the United Kingdom, Norway and Eastern Canada (not from Western Canada, as one might think, from which Quebec has not imported since 1997). It could even (profitability and efficiency permitting) start exporting a portion of its production.

The New Energy Balance of Quebec

In light of these projections, it is now possible to envision Quebec enjoying a positive energy balance in the near future. It will be interesting to see how, in the event Quebec starts producing oil and gas, two contradictory energy strategies -- the first based on the production of energy from renewable resources, the second based on the production of (non-renewable) oil and gas -- will coexist.

Beyond this apparent contradiction, however, two factors should make us consider these strategies as being separate rather than in opposition. The first factor relates to time, or rather, timing. Exploitation of shale gas or oil can only occur until all reserves are exhausted, and therefore is temporary in nature. Furthermore, Quebec will have only a limited window of opportunity to extract and sell oil and gas since the demand for these two types of energy, more than for electricity, is threatened by the prospect that oil-based and gas-based technology will be rejected or become obsolete. In contrast, Quebec's electricity production relies almost entirely on renewable resources, which, by definition, cannot be exhausted. From that angle, the long-term future of Quebec's energy production is naturally geared towards the increase of electricity output until achieving full capacity. However, it is possible that, concurrently with this long term strategy, a few successive generations of Quebecers would opt for a limited engagement in oil and gas production, in order to profit from the economic opportunity they are being offered.

The second factor making the production of electricity and the production of oil and gas independent from each other is the rigidity of energy demand. This rigidity is best illustrated by the fact that 99.7% of transportation is fuelled by petroleum products, and that, conversely, 70% of all of Quebec's oil consumption is destined to the transportation sector. What this illustrates, in the domain of transportation as well as in other domains, is that an increase in the attractiveness of electricity supply will not "poach" demand for oil and gas, unless several barriers, mostly technological, have been struck down.

Conclusion

By analyzing Quebec's energy balance and the mechanisms that affect it, we can see that Quebec consumes more energy than it produces, and that the realization of its huge capacity in electricity production will not, on its own, correct that fact, given its dependency on oil and gas. The potential exploitation of shale gas and oil in Quebec would temporarily reduce this tendency, but the key to transforming Quebec's energy balance in the long term resides in making energy demand migrate to electricity, a change which is difficult to achieve due to the rigidity in demand caused mostly by technological barriers.