Why Cheaper Solar Power Isn't the Answer to Everything

On the surface, this appears to be a major energy success story. Yet profit margins have plummeted, companies are closing, and some of the electricity generated is simply being wasted. Last January and February, approximately 9% of China’s solar output found no takers anywhere on the grid, compared to 6% the previous year.

Quebec operates in a different context: an energy mix dominated by hydroelectricity, the absence of a local solar industry, and limited installation capacity. But the lesson remains relevant: deploying solar power without considering the system that must absorb it risks replicating, in part, the Chinese paradox.

Hydro-Québec is aiming for 3,000 MW of solar capacity by 2035. An initial call for bids for 300 MW is currently underway, with grid connection scheduled by December 2029 at the latest. The long-term goal involves diversifying the energy mix, and the success of this effort will determine the credibility of the 2035 plan.

The pitfall that most discussions on this topic fall into is confusing installed capacity with usable energy. Adding 3,000 MW of solar power depends on when those panels generate electricity, the demand at that time, and the grid’s capacity to transmit or store what is generated. Two main challenges deserve attention.

First, seasonality. Solar power generates little in the winter, precisely when demand is highest. In the summer, it generates more, but the grid is under less strain. Every megawatt installed here contributes less to the system’s effective capacity than a megawatt installed in California or Australia.

Next, transmission. The value of a solar farm depends largely on its proximity to consumption centers. The greater the distance, the higher the transmission losses and the more costly the investments in transmission infrastructure become. Deploying solar power where it is technically optimal does not always coincide with where the grid can effectively absorb it. This tension between site-based and grid-based considerations lies at the heart of the issue of social acceptability: the best locations are often agricultural or suburban, and therefore sensitive.

The real question, then, is: “Under what conditions does solar power create real value for Quebec’s grid?”

Quebec has an asset that Australia, Germany, and Sweden envy: massive hydroelectric capacity that can be used as a large-scale balancing resource. When solar power is generating, the reservoirs fill up. When solar generation stops, hydro takes over. It is the only jurisdiction in the world where this complementary relationship is available on a large scale, without relying on additional storage technologies, the large-scale deployment of which remains costly and unevenly mature.

But this complementarity requires integration at the grid level, appropriate dispatch rules, and strategic siting of solar projects relative to existing transmission lines. A solar farm connected to an overloaded transmission line does not realize this benefit, regardless of its unit cost.

Three key challenges deserve to be clearly identified.

First, dependence on China. The global solar industry is vertically integrated in China to an unparalleled degree. Panels are now cheaper than they have ever been, precisely because China has overinvested in production capacity. Purchasing low-cost Chinese panels exposes Quebec’s energy strategy to concrete geopolitical risks: trade uncertainties, export restrictions, and components that may be vulnerable from a cybersecurity perspective. Some jurisdictions have begun to address this risk through equipment certification frameworks and supply chain traceability requirements. Quebec would be well advised to define its own position on this matter as we aim to scale up our efforts.

Next, social acceptability. Large ground-mounted solar farms, which are less expensive to deploy, compete directly with agricultural land. The Union of Agricultural Producers has clear positions on this issue. Ignoring this tension during the planning stage sets the stage for a stalemate when it comes time for deployment.

Finally, there are installation costs. In Quebec, they remain about three times higher than in Australia: nearly $3 per watt here, compared to less than $1 there. The panel itself accounts for only a fraction of a project’s total cost. Labor, connection, permits, and engineering account for just as much, if not more. Without a reduction in these costs, the competitiveness of Quebec’s solar industry will continue to rely on public support rather than its own economic viability.

What This Means for Hydro-Québec

The deployment of the first 300 MW will serve as a large-scale test of the model. To scale up to 3,000 MW, the issues will no longer be technical but strategic: where should the projects be deployed to maximize the synergy between hydro and solar power? How can the installation process be optimized to reduce costs? What approach should be taken regarding dependence on China? How should relationships with farmers, municipalities, and First Nations be structured to avoid roadblocks?

These questions require in-depth planning, involving difficult trade-offs and aligned stakeholders.

These strategic issues alone justify the full relevance of this first call for proposals, as part of an iterative learning process and the development of local expertise.

Solar power can be a real driver for Hydro-Québec. But its value to the system depends less on the cost of the panels than on the quality of the decisions made regarding the grid, the sites, the supply contracts, and the local ecosystem. That is where the real strategy lies, and it will be built through learning.

Sources : OPIS APAC Solar Market Report, Hydro-Québec Plan d'approvisionnement 2025-2034, CanREA, État de l'énergie au Québec 2025 (HEC Montréal), RenewEconomy (coûts d'installation Australie), recherches et analyses Volume Dix