Montreal, December 15, 2004  /  No 149  
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Harry Valentine is a free-marketeer living in Eastern Ontario.
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by Harry Valentine
          During the latter part of 2004 several significant events occurred that pertained to the generation of electric power in Quebec. One was the cancellation of a proposed natural gas fired thermal power station that was scheduled to be built southwest of Montreal. It was intended to supplement the shortfall in hydro-generated electricity in Western Quebec, but encountered opposition from environmentalists. A second event involved lower than expected water levels in Quebec's James Bay hydro-electric dams, reducing their power output. A third event was an announcement about a privately-funded wind farm being built in Eastern Quebec and intended to supplement Quebec's need for clean electric power. The fourth event was the revelation that the Quebec government had the highest per capita debt in Canada.
Changed weather patterns 
          The reduced water levels in the James Bay hydro dams indicate a possible shift in Northern Quebec's weather patterns, caused by climate change. Much of this region's precipitation results from winds picking up moisture over southern Hudson Bay and James Bay, then depositing it as precipitation across Northern Quebec. As year-round water temperatures rise in both bays, winds will pick up more moisture. In the event that climate change warms land temperatures at lower altitudes, the extra precipitation may be concentrated at the higher elevations in Northern Quebec, located east of the James Bay hydro-electric watershed catchment area.  
          Water volumes may subsequently rise in rivers flowing south and east from the higher elevations in Northern Quebec, into the St. Lawrence River between Trois-Rivières and St. Augustin on the Gulf of St. Lawrence, also into Labrador's Churchill River. Severe flood conditions have occurred on two of Quebec's south-flowing rivers in recent years, conditions that could occur more frequently in the future on more of these rivers. Changes occurring in Northern Quebec's weather patterns may warrant the building of extra dams along several south-flowing rivers, to provide flood control as future peak water levels rise above previously recorded peak levels. These dams may also generate hydro-electricity. 
          Unpredictable changes in weather patterns would likely reduce Quebec's ability to generate enough hydro-electric power for export to the American Northeast and hydrogen (generated from electricity) to Europe, as well as sustain Quebec's economic future. The sheer magnitude of Quebec's government debt may prevent additional public funding from being allocated to new electric power-generation projects. Quebec's economic future may require that the provincial government return more electric power generation to unregulated private ownership. Privately-owned generation of electric power prevailed in Quebec until some 40 years ago, when it was nationalised by then provincial Liberal Energy minister René Lévesque.  
          Lévesque's intention of making Quebec economically independent as well as self-sufficient in electric power led to the James Bay hydro-electric mega-project. The James Bay region was believed to possess such an abundance of electric power potential, that Quebec would be able to earn revenue by exporting electric power to the American Northeast, export hydrogen (produced from electric power) to Europe, provide power for a future transportation system powered by electricity and develop a hydrogen-based economy. After the Quebec government enthusiastically embraced the Kyoto Protocol, it was revealed that James Bay's abundant hydro-electric generation potential could be vulnerable to shifting weather patterns. A mid-winter power shortage occurred during early 2004, requiring Quebec to import electric power from outside. To offset a possible shortfall in electric power from Quebec, Americans may have to build new nuclear power stations in the New England states.  
     “To assure that Quebec will have sufficient domestically generated electric power, the cash-strapped provincial government will have to abandon the regime of economic regulation, state ownership and central control over electric power generation.”
          To assure that Quebec will have sufficient domestically generated electric power, the cash-strapped provincial government will have to abandon the regime of economic regulation, state ownership and central control over electric power generation. Changing weather patterns could remake Quebec's economic future, even end Quebec's era of government-funded hydro-electric mega-projects. The downside of such mega-projects was the concentration of most of the hydro-electric power generation capacity at a limited number of multi-megawatt power stations located in a small geographical region. Much of this generating capacity may now become vulnerable to the effects of climate change.  
Private alternatives 
          Private people operating on private capital in a regulation-free environment could more easily and more rapidly adjust to such changing and adverse conditions, to meet the demands of customers. Quebec industries using steam may install steam turbines on their premises to generate electricity for internal use as well as for sale to customers. The reject heat from these turbines could heat buildings during winter and cool them by using steam-driven vacuum refrigeration during summer. Privately-owned hydro-electric dams that also provide flood control may be built along rivers flowing south from Northern Quebec. But even these industrial steam turbines and the additional hydro-electric dams may not be able to generate enough electric power to meet future market demand. 
          The electric power market could include a proliferation of privately-owned micro- and mini-power installations generating and marketing electricity in a regulation-free environment and serving mainly local markets. Across a province like Quebec, the total combined power output of a proliferation of unregulated micro- and mini-power stations operating on such energy sources as low-grade geothermal energy, micro/mini hydro, wind energy or solar energy, could equal the power output of one or more full-sized mega-power installations. Some of these micro- and mini-power stations may be located inside populated areas and operate seasonally, offering nearby neighbors electricity generated from solar, wind or even from low-grade geothermal energy. 
          Components of engines able to generate electricity from low-grade geothermal heat already exist. This energy is found near the bottom of bore holes drilled deep into the bedrock, deep in the water table under private property, swamps and bogs, also in subterranean caverns and abandoned mines filled with ground water. During winter, low-grade geothermal installations could heat buildings and generate from 2-Kilowatts to over 1,000-Kilowatts of electric power. During summer, heat rejected from various types of micro- and mini-thermal power stations, whether they operate on low-grade concentrated solar thermal energy or on a variety of low-cost combustible fuels, can be deposited into underground geothermal storage reservoirs, for re-use during winter.  
          During coming power shortages, Quebec may not be able to purchase electric power from Ontario, which is scheduled to retire over 50% of its (state-owned) electrical generation capacity within the next 10 to 15-years. Declining water levels in the Great Lakes threaten to reduce future hydro-electric generation potential in Ontario. New Brunswick and the Northeastern American states may not have enough generation capacity to sell power to Quebec. The governments of Ontario and Quebec are likely to deal with the impending electric power shortages by remaining firmly committed to the regime of central control and economic regulation in electric power generation.  
          Such a regime may prevail despite two eminent economists (University of Chicago professors George Stigler and Ronald Coase, Nobel laureates in 1982 and 1991) having undertaken very extensive research using econometric methods that conclusively prove that the regime of economic regulation ultimately and consistently fails to achieve its intended ends over the long term. Despite the existence of a plethora of such research, elected and non-elected officials in both provincial governments remain firmly committed to the economically destructive regime of control and regulation. As a result, future power shortages may be expected as demand increases. Any move toward deregulation under such circumstances could either result in price escalations in an unrestricted free-market, or power shortages and malinvestment in a partially-regulated (price-controlled) market.  
          Almost consistently, post-deregulation price escalations of electric power were preceded by government ownership/control over electric power production. Government action kept pre-deregulatory electric power prices artificially low despite the state power utility operating at or near the limit of its generating capacity. A market demand for extra electric power makes post-deregulatory power price escalations almost unavoidable. This is what happened in Alberta and to an extent, in Ontario under Premier Eves. The choice in Ontario and in Quebec will either be power shortages or higher power prices. A total economic deregulation of mini- and micro-power installations of under 10-Mw each, including allowing private power lines to be connected across property lines, could bring needed electric power (and heat and/or cooling) to market without causing major power price increases. But it is still unrealistic to expect that governmental elite in either province will choose this route.