President Donald Trump’s promise to impose tariffs on Canada is altering electricity flows in the Northeast, as furious Canadian officials vow to respond by slapping levies on power exports to the U.S. or withholding them altogether.
The flaring trade war risks causing electricity costs to soar while upsetting decades of regional climate planning in the Northeast, as leaders on both sides of the border have sought closer ties to cut carbon emissions and bolster electric grids.
Signs of the rift intensified last week when Trump threatened tariffs, then paused them, on a majority of Canadian exports. On Monday, Ontario Premier Doug Ford imposed a 25 percent surcharge on power exports to Michigan, Minnesota and New York, saying the levies were necessary to emphasize the costs of a trade war with Canada. His counterpart in Quebec, François Legault, has said he is exploring the idea of breaking existing power contracts with northeastern states.
“We will never be able to trust the United States in the same way that we did three months ago,” Jonathan Wilkinson, Canada’s minister of energy and natural resources, told the CBC last week. “Not to say we won’t trade with them, but we need to be more resilient moving forward.”
Electricity has been traded between the U.S. and Canada for decades. In the 1980s, a 932-mile transmission line was built between James Bay, in Quebec, to suburban Boston, to carry hydropower into New England. It was the region’s attempt to diversify its electricity mix and buy some of the cheapest power in North America. Last year, roughly 5 percent of New England power came from Canada, nearly all of it from Quebec.
New York also has deep ties to its northern neighbors. It imported 7.7 terawatt hours of power from Ontario and Quebec last year — more than any other state.
New England and New York are heavily dependent on natural gas for power generation, making them “vulnerable to higher energy prices when spot gas markets spike,” the power tracking firm, GridStatus.io, wrote in a recent analysis. “Imports have helped to drive cost reductions for consumers, by reducing reliance on internal gas fired generation, particularly during peak demand events in the winter and summer, while also reducing carbon emissions.”
Plans to confront climate change have increased the importance of cross-border power. Massachusetts paid for a transmission line through Maine that would carry hydropower from Quebec. New York City has pushed for a similar line. Both projects are under construction after years of delay. They stand to increase the maximum amount of energy that can be shared between Quebec and the U.S. by 36 percent, according to GridStatus.
Advocates had hoped the two lines would form the basis for stronger cooperation by turning Quebec’s vast network of reservoirs into a massive battery for the region. They also wanted to see new offshore wind farms in New England and New York send surplus power to the north, enabling Canada to hold back water for times when solar and wind production are low.
“Besides nuclear, Hydro Quebec is the only other source of low carbon baseload electricity that you can count on,” said Paul Hibbard, a former Massachusetts utility regulator and a principal at the Analysis Group, a consulting firm.
Tariffs, he added, will “affect our ability to achieve our climate goals, and it’s going to likely increase the costs for us to meet our energy needs.”
‘Bad public policy’
Trump’s trade war is driving the countries farther apart. In a press conference Monday, Ford said the electricity surcharge in Ontario was needed to drive home the consequences of the president’s policies.
“I feel terrible for the American people who didn’t start this trade war,” he said. “It’s one person who is responsible, it’s President Trump.”
Quebec has so far declined to go that far. But when asked last week if the province would follow in Ontario’s footsteps, Legault said his government was assessing the legal feasibility of breaking its power supply contract with New York and Massachusetts.
“We must not rule out anything,” he told reporters.
Serge Abergel, chief operating officer for Hydro-Quebec Energy Services U.S., said the power company is committed to its American contracts, adding that the relationship between Quebec and northeastern states continues to be strong.
Electricity has not traditionally been subject to tariffs. Electrons don’t stop at the local customs office to be inspected. While grid operators in New England and New York said they did not believe electricity would face tariffs under Trump, they were worried enough to ask the Federal Energy Regulatory Commission for permission to collect the trade levies in the event they are imposed.
In the fiercely liberal Northeast, many state leaders are placing blame on Trump as they anxiously wait to see how the Canadians respond. New York Gov. Kathy Hochul, a Democrat, declined to criticize Ford on Monday for imposing a surcharge on Ontario’s exports. Instead, she pointed at Trump and called his tariff’s “poorly conceived from the start.”
“This is a textbook example of bad public policy and I’m calling on President Trump to immediately rescind his tariffs before they inflict further damage on working families,” she said.
ISO New England, which oversees power in the six New England states, estimated that a 10 to 25 percent tariff by Canada would amount to $66 million to $165 million in annual import duties.
“It’s definitely very destabilizing,” said Phillip Bartlett, chair of the Maine Public Utilities Commission. “If we end up subject to significant export tariffs from Canada, or they’re unwilling to send energy, that certainly impacts the reliability of the grid here.”
Kerrick Johnson, a member of the Vermont Public Service Commission, said the region could likely handle the economic shock of tariffs. He estimated that they would cost less than what New England consumers paid to keep an aging natural gas plant outside Boston open for several years.
But he expressed worries about the long-term damage to the United States’ relationship with Canada.
“What’s much more problematic is the impact on the relationship and forward-looking agreements,” Johnson said. “What might be next? What can we build on?”
Regional leaders on both sides of the border have struggled to follow through on promises to enhance electricity flows between eastern Canada and the northeastern states, said Pierre-Olivier Pineau, a professor who studies power markets at HEC Montreal. He pointed to fierce opposition to the transmission project in Maine as the type of barrier that has prevented better integration.
At the same time, he said there was recognition in Quebec that many Americans oppose the president and his economic agenda. That could keep the door open to future projects.
But, he added, “Trump is making the case for collaboration even harder.”
This story also appears in Energywire.
