HYDRO-QUÉBEC’S SUPPLY PLAN – MANAGING NEW DEMAND FOR ELECTRICITY

Hydro-Québec’s 2023-2032 Supply Plan highlights the green shift in the Québec economy. The utility’s plan anticipates massive energy demand growth stemming from widespread adoption of electric vehicles, along with the development of the province’s battery sector. In addition, Hydro-Québec expects to see continued healthy demand from data centers. Taken together, Hydro-Québec’s plan highlights structural shifts in the provincial economy, which should be supportive of future industrial space demand.

The Boom In Electric Vehicles

In the second quarter of 2022, 6.5% of new motor vehicle sales in Québec were battery electric vehicles. The fact that over 5% of Québec – and Canadian – new motor vehicle sales are now battery electric represents a stunning transformation of the auto market over the past several years. In fact, HydroQuébec estimates that Zero Emission Vehicles will represent 39% of the entire provincial automobile fleet by 2032.

The utility estimates that it will need to generate an additional 7.8-terawatt hours of electricity to support the electrification of transports over the next 10 years. Assuming its forecast is correct, Québec will likely witness an explosion of EV charging stations across the province to meet the needs of these vehicles. This will be an opportunity for real estate owners and operators to cater to this accelerating transportation trend. This could mean, for example, including charging station access as

Ev Sales Are Rising Rapidly

Canada Québec

Qu Bec Ev Sector Energy Needs

an amenity for condo or apartment dwellers, or adding charging stations as part of retail parking –something many developers are already doing.

New Needs To Be Met

Given its abundant clean energy, coupled with rich mineral wealth, Québec is eager to ensure that it becomes an integral part of global battery supply chains. Already, numerous companies have announced plans to invest in the province in this sector. Hydro-Québec estimates that 175 megawatts of energy will be needed in the winter of 2032 to support this industry.

The growth of these sectors is likely to fuel increased demand for industrial space across the province. For example, mining companies will need space to transport and store various ores. Industrial infrastructure will also be needed for battery manufacturing and recycling. Diverse ancillary supply chains will need to be put in place to support these projects, creating additional demand drivers for industrial space across these emerging sectors.

Data centers energy needs are expected to grow by a 20% CAGR between 2024 and 2032, based upon winter megawatt usage estimates. While a slower growth pace than the electric vehicle or battery sectors, with compound annual growth rates of 34.7% or 74.9%, respectively, the forecast trend is nonetheless quite strong. This underscores the continued attractiveness of Québec for data centre providers given that the electricity is inexpensive relative to many jurisdictions - and clean - which ticks the ESG box for many cloud providers.

Assuming this estimate is correct, it suggests that the province is likely to see continued strong growth in demand for data centre space. Data centre operators may also want to take a page from OVH, which operates a water-cooled facility in Beauharnois. Thanks to its use of a liquid coolant, the company can reduce operational expenses related to air conditioning. Innovative ways to cool servers in an environmentally friendly and cost-effective manner is likely to become more important, as Hydro-Québec focuses on supplying other sectors; this policy shift may signal somewhat less advantageous electricity rates in the future for data centres.

The electric vehicle sector and emerging sectors like batteries are likely to further fuel structural demand for the province’s industrial space. This suggests that long-term industrial leasing fundamentals should remain quite healthy, especially as existing demand trends - like e-commerce and omni-channel retail - also continue to grow.

Paul Lewis was until recently a professor in the Faculty of Planning at the University of Montréal. From 2014 to 2018, he served as its Dean, and from 2018 to 2020, he served as Associate Vice-Rector for Alumni Relations. He has been doing urban photography for the past few years as an extension of his years of teaching urban planning. His photography can be seen at paullewis.photos.

After The Storm

The night this picture was taken, the day after a snowstorm, it was very cold, minus 20° Celsius. There were few people in the streets of Old Montréal, and those we passed did not linger. As in this picture, they were walking as fast as possible as they crossed a parking lot.

Winter can be beautiful, despite the cold. Some appreciate winter, others less so. Winter is seen by many as an inconvenience, even a problem, if only because travel becomes quite difficult at times. Here in Québec we like to say that "our country is winter", that winter is at the heart of our identity, which is how foreigners see us. But especially in urban areas, we often cope badly with winter, we do not always assume our winterness. Thus we try to erase as much as possible all traces of it. We can't do much about the cold, but when it comes to snow, we know what to do. We remove it, so that a few days after a storm there's usually not much left.