Hydro-Québec Doubles Electricity Rates for Data Centers
The government of Quebec is positioning itself strategically in the data center sector, but not without increasing electricity costs. Recently, Hydro-Québec announced a new rate of 13 cents per kilowatt-hour for data centers. This rate is nearly double the average residential rate.
Increased Rates for Cryptocurrency and Data Centers
Additionally, activities related to cryptocurrency mining will face even steeper charges, set at 19.5 cents per kilowatt-hour. This decision comes as part of the government’s strategy regarding the energy supply for data centers and cryptocurrency operations, as outlined in a recent decree. The government has requested approval from the Régie de l’énergie for these new rates.
Cost Analysis of Electricity Supply
- The production cost for existing Hydro-Québec facilities is approximately 3.5 cents per kilowatt-hour.
- For new energy production, costs range from 11 to 12 cents per kilowatt-hour.
- The proposed rates reflect these new supply costs rather than the average production costs used for other electricity rate categories.
These rate adjustments are anticipated to take effect before the year ends, pending regulatory approval. A transition period will be established for existing facilities, setting the stage for higher electricity bills.
Demand for Green Electricity
The government has acknowledged a significant demand for green electricity from data centers. Some centers are reportedly willing to pay up to 15 cents per kilowatt-hour, which is double the current residential rate. Cendrix Bouchard, Hydro-Québec’s spokesperson, stated that the new rates are designed to ensure that these sectors cover their electricity costs while benefiting from competitive pricing compared to the rest of North America.
The rate of 13 cents per kilowatt-hour will apply to data centers consuming at least 5 megawatts. This move aims to prevent rising electricity demand from impacting costs for all consumers.
Implications for the Crypto Sector
The increased rate for cryptocurrency operations may hinder growth in this sector. Analysts predict no consumption growth for cryptocurrency activities through 2023, according to Hydro-Québec. The decision has raised concerns among industry representatives about the potential negative signal it sends to innovators in Quebec.
Electricity Demand Projections
Currently, cryptocurrency activities use about 115 megawatts of power, while existing data centers require between 190 and 200 megawatts. If the government’s plans are successful, total electricity demand from data centers could rise to 1,000 megawatts by 2025.
The government’s objective, led by Premier François Legault, is to enhance the growth of data centers focused on artificial intelligence, which tend to have higher energy requirements and seek cleaner energy sources.
In contrast, British Columbia has opted to auction its green energy to maximize pricing, a strategy that Quebec has chosen to avoid while pursuing its own goals for attracting data centers.
