CEEPR Working Paper 2020-003, February 2020

Emil Dimanchev, Joshua Hodge, and John Parsons

CAMBRIDGE, Mass. (February 12, 2020): States in the Northeastern U.S. can transition to low-carbon electricity at a lower cost by using hydropower reservoirs in Quebec for energy storage, says a new MIT study. Countering conventional wisdom, the study argues that Quebec’s hydropower reservoirs are best seen by Northeastern states as a virtual energy storage resource rather than a continuous source of energy.

In a low-carbon future, the value of Quebec hydropower is maximized when used to balance and store renewable electricity generated from variable U.S. wind and solar resources. Adding further cross-border transmission lines can facilitate the two-way power flows needed to leverage these benefits further.

As a growing number of U.S. states commits to 100% clean electricity or net-zero emissions, power generation will increasingly rely on renewable technologies such as wind and solar photovoltaic. Because these technologies are intermittent and cannot be dispatched as needed, they require a backup source to ensure the stability of the electricity system across hours, days and seasons.

Hydropower resevoirs in the Canadian province of Quebec offer a potential backup source for variable wind and solar generation in the U.S. What is more, by importing energy from the U.S., Quebec can accumulate additional energy in its reservoirs to release when wind and solar energy in the U.S. is scarce. Currently, however, hydropower is seen as a source of continuous generation, substituting for clean energy in the U.S.

Instead, the MIT study concludes that Quebec hydro is best seen as a complement to building wind and solar plants in the U.S. Northeast. Using a capacity expansion and dispatch model to simulate a power system covering New England, New York, and Quebec, researchers at the MIT Center for Energy and Environmental Policy Research show that two-way trading between the U.S. Northeast and Quebec can help reduce overall power system costs, decrease dependence on natural gas in the U.S., and lower the need for carbon capture and sequestration in a decarbonized electricity system.

For Canadian hydropower to serve as a virtual energy storage resource for the U.S. Northeast, however, several conditions have to be met. Utilization of hydroelectric generation and transmission assets has to shift away from one-way electricity exports from Canada to the U.S., and instead needs to facilitate two-way trading of electricity.

Existing constraints in cross-border transmission capacity also limit the ability of Northeastern states and Quebec to benefit from trading. As the study shows, expanding transmission lines between Canada and the U.S. can substantially decrease power system costs as the region decarbonizes. The authors estimate that the addition of 4 GW of new transmission between New England and Quebec would lower the costs of a zero-carbon electricity system in these regions by 17-28%. The study also finds that the existing hydropower resource is sufficient to provide these balancing services to the Northeast without necessitating new hydropower reservoirs.



Dimanchev, Emil, Joshua Hodge, and John Parsons (2020) “Two-Way Trade in Green Electrons: Deep Decarbonization of the Northeastern U.S. and the Role of Canadian Hydropower”, MIT CEEPR Working Paper 2020-003.


Further Reading: CEEPR WP 2020-003


John Parsons is a Senior Lecturer at the MIT Sloan School of Management and the Head of the MBA Finance Track. He is also the Co-Director of MIT’s CANES Low Carbon Energy Center which explores new avenues for nuclear fission, and a Research Affiliate at MIT’s Center for Energy and Environmental Policy Research.


About The Authors

Emil Dimanchev is a Research Affiliate at MIT CEEPR and a PhD Candidate in Electric Power Engineering at the Norwegian University of Science and Technology (NTNU). He has testified before legislators and advised government officials on climate policy in the U.S. and the European Union. He was previously a Senior Carbon Market Analyst at Thomson Reuters Point Carbon, where he advised Members of the European Parliament and member state officials on the reform of the European Union Emissions Trading System. He holds a master’s degree from the MIT Technology and Policy Program (SM ’18).

Joshua Hodge is the Executive Director at the MIT Center for Energy and Environmental Policy Research (CEEPR) and a Lecturer at the MIT Sloan School of Management. His areas of expertise include domestic and international climate and energy policy, with a focus on energy transition and renewable energy policies in the United States. Joshua’s recent work has included assisting rural electric cooperatives in the U.S. with decarbonization strategy. He is also a member of the MIT Net-Zero by 2026 Faculty Review Committee.

John Parsons is the Deputy Director for Research of MIT CEEPR. His research focuses on the valuation and financing of investments in energy markets, as well as the problems of risk in energy and environment markets. Recent publications have touched on the value of changing the utilization of transmission to maximize the value of hydro assets and expanded penetration of renewables, the value of investments in life extensions of nuclear power plants, the economics of new microreactors, and the impact of decarbonization on generation assets in the U.S. midcontinent. Dr. Parsons serves as an Associate Member of the U.S. Commodity Futures Trading Commission’s Energy and Environmental Markets Advisory Committee. He has been a Visiting Scholar at the Federal Energy Regulatory Commission. He holds a Ph.D. in Economics from Northwestern University and an A.B. from Princeton University.