The government's generous discount to large electricity consumers is so popular that very few of them pay the basic industrial tariff, which is already among the lowest in the world.
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Last year the rebate cost Quebec nearly $180 million. This means an industrial customer can save up to 20% on their electricity bill.
Jean-François Blain, independent analyst in the energy sector, has carried out calculations to determine the proportion of industrial customers who receive the rebate.
Let us make the most conservative assumption that all beneficiaries of the discount are entitled to the maximum discount of 20%. Mr Blain then concludes that since 2020, at least 65% of electricity sold to industrial customers has been subject to the government rebate.
Just under 4 cents per kWh
By applying the maximum discount of 20%, the average cost of a kilowatt hour (kWh) at tariff L (industry) falls from 5.05 cents to just 4.04 cents (as of 2022). For comparison: The average cost of a kWh at tariff D (residential buildings) was 8.48 cents last year.
For Jean-François Blain, the government rebates send a clear “signal” to industry around the world: Quebec is an “El Dorado” where it is possible to obtain clean energy at an unbeatable price, despite the electricity shortage that plagues us expected shortly 2 years.
Jean-François Blain photo from LinkedIn
Under these circumstances, it should come as no surprise, says the expert, that Energy Minister Pierre Fitzgibbon has been buried in more than 150 connection applications in recent years with a total output of 30,000 megawatts (MW), i.e. ten times more available electricity.
Expensive for the taxpayer
The government rebate provided under the Financial Assistance for Investment Program (PAFI) has cost taxpayers more than $896 million since 2017. The total bill could exceed $2.5 billion by the end of the program, scheduled for December 2032.
Companies that want to benefit from this have until December 31st to submit an application. They “must have an allocation agreement with Hydro-Québec,” specifies a spokesman for the Ministry of Finance, Charles-Étienne Bélisle.
This summer, Mr Fitzgibbon awarded a 956 MW block to 11 projects, including that of the Northvolt battery mega-factory in Montérégie. Most of these projects should be eligible for the federal rebate.
Blain said Northvolt alone could save more than $200 million on electricity bills in eight years thanks to PAFI.
The next industrial projects selected by the government must be announced in the spring. They should therefore not be eligible for PAFI unless Quebec privately gives them the green light before the end of 2023.
“One less big tool”
The Quebec Association of Industrial Electricity Consumers regrets the announced end of government rebates. She sees PAFI as more of a way to finance investments than a way to save electricity.
“What concerns our members is: How are we going to justify projects in the next few years?” It is one less important tool in our repertoire for convincing our headquarters and pushing through our major investment projects,” says Jocelyn B. Allard, president of the major Consumer lobby.
The Financial Assistance for Investment Program (PAFI) in brief
- Come into effect: 2017
- Maximum discount on electricity: 20%
- Maximum discount duration: eight years
- Maximum repayment of investments made: 40 or 50%
Source: Finance Quebec
Average cost of electricity in Quebec (2022)
- Tariff D (living area): 8.48 cents/kWh
- Tariff G (commercial): 10.68 cents/kWh
- Rate L (high performance): 5.05 cents/kWh (without 20% discount) – 4.04 cents/kWh (with discount)
Source: Hydro-Québec
Number of Hydro-Québec customers by category (2022)
- Reside: 4.18 million
- Commercial and Institutional: 325,500
- Large industrialists: 194
Source: Hydro-Québec
Average Industrial Electricity Rates in North America (2023)
- Montréal: 5.6 cents/kWh
- Toronto: 8.8 cents/kWh
- Winnipeg: 5.9 cents/kWh
- Houston: 12 cents/kWh
- San Francisco: 23 cents/kWh
- New York: 18 cents/kWh
Source: Hydro-Québec
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