Hydro-Québec is implementing a significant change in its pricing for energy, particularly aimed at data centers. This adjustment comes after years of advocacy from economists for a fairer pricing model that discourages energy waste. The enterprise has announced a new rate of 13 cents per kilowatt-hour for new data centers. This rate represents approximately double what they currently pay.
Details of the New Energy Pricing
The new pricing structure will affect only new data centers looking to establish operations in Quebec. Existing data centers will experience a gradual increase to the new rate over five years. Until now, Quebec had been hesitant to support data centers due to their low economic returns, like job creation. However, the surge in demand for energy driven by artificial intelligence has shifted this perspective.
Implications for Cryptocurrency Mining Centers
In addition to regular data centers, Hydro-Québec plans to impose a higher rate of 19.5 cents per kilowatt-hour on cryptocurrency mining operations, reflecting their minimal economic benefits.
Historical Context of Pricing
This shift is notable because Hydro-Québec traditionally billed clients based on the average production cost of electricity, which included older, more cost-effective power plants. This model often meant that the costs of new infrastructure were passed on to all consumers, including residential clients.
- The new 13 cents per kilowatt-hour rate reflects the marginal cost of energy production.
- This change aims to ensure that new clients cover their own infrastructure costs.
Current Energy Consumption
Currently, nine companies operating data centers in Quebec consume about 190 megawatts of power. Major players include Microsoft, Vantage, and OVH, as well as Qscale, founded by Martin Bouchard. The latter has refrained from commenting on the change but previously criticized Quebec’s moratorium on new data centers.
Future Energy Projections
The Quebec government will still oversee energy projects that require over 5 megawatts. It aims to allocate 1,000 megawatts of power to data centers by 2035, which is five times the current availability. This amount of energy could support around 360,000 homes.
Projected Energy Demand
The demand for energy is expected to quadruple for data centers by 2030, largely due to the rise of artificial intelligence. This increasing demand could lead to higher electricity prices, impacting residential tariff rates. In North America, approximately sixty new tariffs have been introduced, with around twenty specifically targeting data centers.
Comparison with North American States
A report by Dunsky, commissioned by Hydro-Québec, compared pricing across 13 states, focusing on those neighboring Quebec. It found that:
- Four states have higher rates for data centers, exceeding 20 cents per kilowatt-hour.
- Three states, including Ontario and Maine, offer lower rates, around 12 and 8 cents, respectively.
While tariff is a significant factor in competitiveness, others like network reliability and low carbon intensity also play vital roles. The anticipated new pricing policy may generate between $750 million and $1 billion in revenue for Hydro-Québec by 2030, effectively doubling potential earnings compared to previous tariff models.
This major shift in hydro pricing is designed to align with local needs while ensuring that the financial burden does not fall on existing customers. The focus on data centers serves both local economic interests and broader energy demand considerations.
