Hydro-Québec Issues Calls for Tenders for 780 MW of Renewable Energy

On December 13, 2021, Hydro-Québec issued calls for tenders for a 480 MW block of renewable energy (A/O 2021-01) and a 300 MW block of wind energy (A/O 2021-02) in order to meet long-term electricity demand in Quebec. According to the progress report on Hydro-Québec’s 2020-2029 Electricity Supply Plan, electricity demand in Quebec is expected to increase by 12 per cent, reaching 20 terawatthours (TWh) by 2029.

In response to the anticipated increase in electricity demand, the Government of Quebec adopted the Order-in-Council 906-2021 (as amended by the Order-in-Council 1442-2021) and Regulations calling on Hydro-Québec to issue two new calls for tenders in accordance with terms set out therein.

Parties interested in submitting bids under A/O 2021-01 or A/O 2021-02 should note that these calls for tenders and the evaluation criteria summarized below may be modified according to the decision of the Québec Energy Board in response to Hydro-Québec’s request for approval of the evaluation grids for A/O 2021-01 and A/O 2021-02, submitted on September 10, 2021 (Request for Approval).

300 MW BLOCK OF WIND ENERGY

The tender criteria for the 300 MW block of wind energy includes various local participation and regional content requirements aimed at maximizing social and financial benefits for local communities in Quebec.

Local Participation

Projects submitted in the context of the call for tenders for the 300 MW block of wind energy will require a “local sector” participation of approximately 50 per cent at the time of the tender and throughout the duration of the project. We note that a project with a “local sector” participation of over 50 per cent will earn the bidder additional points on the evaluation grid.

The “local sector” is defined as a regional county municipality (RCM), a local municipality, a band council, an intermunicipal board, a cooperative where the majority of the members are domiciled in the same administrative region as the project, a Cree or Northern village municipality, the Naskapi village municipality or the Kativik regional government.

Regional Content

Quebec content should account for 60 per cent of the overall project expenses, while 35 per cent of such expenses should be incurred in either the RCM where the project is located, the Matanie RCM or the administrative region of Gaspésie-Îles-de-la-Madeleine.

Quebec content above 60 per cent and regional content above 35 per cent will earn the bidder additional points on the evaluation grid, while projects with a Quebec content below 60 per cent and a regional content below 35 per cent will be penalized.

Bids submitted in response to A/O 2021-02 will also require a commitment from the bidder to transfer the annual sum of C$5,700 per MW (indexed annually) to the local authorities administering the territory where the project is located.

480 MW BLOCK OF RENEWABLE ENERGY

The call for tenders in respect of the 480 MW block is open to all suppliers of renewable energy, defined by the Québec Energy Board as electricity generated from non-fossil energy sources such as wind, solar, geothermal, tidal, wave, hydro, biomass, biogas and thermal energy sources that use at least 75 per cent renewable fuels.

Sustainable Development Criteria

The evaluation grid for the 480 MW block tender sets out clear targets aimed at satisfying sustainable development requirements. Notably, to encourage the use of renewable fuel in the generation of electricity, the following three indicators will be taken into consideration:

• GHG emissions associated with the proportion of non-renewable fuel used

• Source of supply for natural-gas renewable fuels

• Recovery of thermal waste

The sustainable development criteria in the evaluation grid for the 480 MW tender also includes a social indicator evaluated based on the following:

• Support for the project from the local community

• The bidder’s community integration plan

• The economic benefits of the project for the local community

We note that the sustainable development criteria in the evaluation grid for the 300 MW tender includes a similar social indicator.

ELECTRICITY PRICE AND TERM OF POWER PURCHASE AGREEMENTS

The recommended term for power purchase agreements for the 300 MW block is 30 years from the date on which the project begins delivering electricity. Projects submitted with a proposed term of 30 years or more will earn two points on the evaluation grid, while the projects submitted with the minimum term of 20 years will be penalized by two points.

As for the 480 MW block, the term for power purchase agreements is a minimum of 20 years, with no impact on the evaluation grid.

Delivery of electricity for the 300 MW block and the 480 MW block will begin by no later than November 30, 2026.

Hydro-Québec also intends to include a renewal clause in the contracts for both blocks of energy that it may exercise at its own discretion, the terms of which will need to be negotiated between Hydro-Québec and the supplier and, subsequently, approved by the Québec Energy Board. The Regulations do not provide for a maximum cost for the supply of electricity under A/O 2021-01 and A/O 2021-02.

Our team will continue to monitor the evolution of the tender process as we await the Québec Energy Board’s response to Hydro-Québec’s Request for Approval. In the meantime, potential bidders should note the following important dates in the tender process for A/O 2021-01 and A/O 2021-02:

• Pre-bid conference dates for potential bidders:

  • For the 300 MW block – virtual session: January 26, 2022

  • For the 480 MW block – virtual session: January 27, 2022

• Registration period: January 28, 2022, to March 16, 2022, 4 p.m. (Montréal time)

• Period to submit questions: January 28, 2022, to July 7, 2022, 4 p.m. (Montréal time)

• Deadline for submissions: July 21, 2022, 4 p.m. (Montréal time)

• Bid opening: July 22, 2022, 1 p.m. (Montréal time)

For additional information, please reach out to a member of our Power group or your usual Blakes contact.