Nation

Ontario's Electricity Exports: Are They Really a Bargaining Chip?

2025-03-16

Author: Emma

Introduction

In a surprising turn of events, Ontario Premier Doug Ford’s bravado over energy exports has shifted dramatically, revealing the limitations of what many thought would be a potent asset in trade negotiations.

Ford's Initial Threat

Initially, Ford threatened to impose a 25-percent surcharge on electricity exported to the United States, declaring this measure would remain until the “threat of tariffs is gone for good.” However, following U.S. President Donald Trump's announcement of escalating tariffs on steel and aluminum, Ford quickly retracted the surcharge just hours after a meeting with U.S. Commerce Secretary Howard Lutnick—a move that some perceive as a retreat rather than a strong diplomatic stance.

Questioning the Efficacy of Electricity Exports

This reversal raises questions about the efficacy of using electricity exports as a bargaining tool. Ford and other provincial leaders, including those from British Columbia and Quebec, had assumed that Ontario's electricity could leverage power in negotiations. However, the reality appears more complex. Evidence suggests that Ford and his administration may have overestimated how dramatically U.S. states rely on Ontario's power.

Misrepresentation of Dependency

Ford cited that 1.5 million homes in states like New York, Michigan, and Minnesota receive power from Ontario, even claiming those residents might see up to $100 added to their electricity bills. Yet, an inquiry by the Globe and Mail revealed that the Premier's numbers reflect overall potential rather than a direct dependency. In actuality, these homes do not directly rely on Ontario’s exports, meaning the potential consequences of a surcharge might not be as severe for American consumers as initially suggested.

Electricity Trade Dynamics

In broader terms, while Canada has consistently exported more power than it has imported from the U.S., this statistic can be misleading. Electricity trade between the two countries is relatively small, accounting for less than 1% of total generation on either side. Even states like New York, known for depending on Canadian electricity, have enough reserve resources to weather a cut in imports from Ontario without significant concern.

Reactions from State Officials

Minnesota Governor Tim Walz expressed worries about the surcharge affecting local power bills, yet the Michigan Public Service Commission indicated that state utilities typically do not import Canadian electricity directly. Michigan, described as a "pass-through" state, mainly facilitates transfers to other markets, emphasizing a lack of dependency on Ontario’s power.

Current Export Strategies

Additionally, Ontario's current approach primarily involves selling surplus electricity on a short-term “spot” market. This method offers limited financial leverage. In contrast, securing long-term contracts, known as "firm exports," could yield greater stability and profit, but also require more significant commitments—a strategy Ford hopes to explore further with potential buyers in the U.S.

Comparison with Hydro Quebec

Looking at Hydro Quebec—a Canadian powerhouse that has long positioned itself as a major electricity exporter—the contrast with Ontario becomes more evident. Hydro Quebec has successfully built a reputation for reliability and stability in exports, with long-standing agreements that have bolstered its revenues significantly compared to Ontario's sporadic sales.

Challenges Faced by Hydro Quebec

However, even Hydro Quebec faces challenges as its export revenues have dwindled in recent years due to lower output levels. Political concerns are also present, as the desire to protect local interests often places obstacles in the way of increased electricity trade with foreign markets.

Interdependent Energy Markets

Experts assert that both Ontario and Quebec play crucial roles in U.S. power markets, with their combined imports helping to stabilize the electrical grid. The interdependencies in electricity networks illustrate that cooperation ultimately benefits both nations, particularly during peak demand seasons in the summer, when U.S. states often rely on Canadian imports to mitigate shortages.

Conclusion

In short, the idea of using electricity exports as a bargaining chip may be more of a fantasy than a feasible strategy. As Ontario navigates its energy diplomacy, it must confront the reality of a complex trading relationship that favors stability over aggression. In the grand landscape of cross-border energy relations, cooperation may just be the key to ensuring reliability and economic stability for both Canada and the United States.