At a packed press conference today in its capital of St. John’s, Newfoundland and Labrador Premier Andrew Furey ripped up a piece of paper signifying the end of a 65-year-old contract with fellow Canadian province Québec that many argue unfairly compensated N.L. for power generated from the Churchill Falls hydroelectric plant.
“Today, everything changes for Newfoundland and Labrador,” Furey said, summoning a round of applause that lasted a full 15 seconds. “After more than 50 years of a lopsided agreement that has been such a contentious point for Newfoundland and Labrador, we finally have a new deal on the table for Churchill Falls with Québec.”
“We are ripping up the 1969 contract,” Furey exclaimed to the excitement of the room. “Not in 2041, when it expires, but today.”
In its place, Furey and Québec Premier François Legault signed a long-discussed memorandum of understanding, expected to be finalized in 2026, that would mean a staggering $200 billion for each province over the next five decades. It includes plans to develop Gull Island, recognized as one of the few remaining prime locales for hydroelectric development in North America.
What’s in it for them?
For Newfoundland and Labrador, it means at least 30 times more money from power generated at the 5,428-megawatt (MW) Churchill Falls underground power station in Labrador, the second-largest hydro facility in Canada.
Under the old deal, N.L. received just 0.2 cents per kilowatt-hour (kWh). The new proposal kicks back at least 5.9 cents/kWh.
According to CBC, N.L. will earn $1 billion per year for the next 17 years. Starting in 2041, that will double to $2 billion, then double again to $4 billion in 2056, and could increase even further pending escalation clauses in the agreement.
Premier Legault called it a “win-win” deal, noting its benefits for Québec in turn, which include securing reliable, clean, and affordable electricity in an era of soaring demand.
The agreement will guarantee access to 7,200 MW for the next 50 years at a lower price than any other renewable option in North America, according to government-owned electric utility Hydro-Québec. The agreement not only renews Québec’s access to existing Churchill Falls generation but also adds new production through increased capacity at the existing facility, the development of a new generation station on the Churchill Falls site, as well as the new proposed facility at Gull Island.
In total, the utility expects to generate 9,190 MW, 7,200 MW of which will be purchased by Hydro-Québec and 1,990 by Newfoundland and Labrador Hydro. That includes a proposed increase of hydroelectric production at Churchill Falls via a second powerhouse built near the existing reservoir that would generate 1,110 MW.
“In an increasingly uncertain world, it’s an advantage for Québec to have greater certainty over its energy security,” said Canada’s deputy minister of finance Michael Sabia. “For the next 50 years, we are assured of a realistic financial structure that guarantees the affordability of electricity and the profitability of Hydro-Québec.”
The average net cost for power from the existing Churchill Falls site will be 4 cents/kWh, in 2024 dollars. The average price for electricity from the new developments will be 11 cents/kWh, which is below the generation price forecast in Hydro-Québec’s decarbonization playbook Action Plan 2035, which is 13 cents/kWh. Together, Hydro-Québec points out, the average cost of all electricity from Labrador will be 6 cents/kWh- half the price of the renewable alternatives available to Québec.
“This agreement is an important step towards decarbonizing Québec and protecting our environment. It is an essential contribution to our collective wealth,” Sabia added. “This agreement is a win for citizens, a win for the economy, and of course, a win for future generations.”
Developing Gull Island
The second part of the memorandum of understanding between N.L. and Québec revolves around an undeveloped project downstream of the Churchill River.
In 2011, the Canadian government said it would back a loan to fund the first phase of the 3,074-MW Lower Churchill project proposed by crown energy company Nalcor Energy. The project called for an 824 MW hydroelectric plant at Muskrat Falls, a 2,250 MW facility at Gull Island, and 130 miles of subsea transmission that would carry the power around Québec’s border to Nova Scotia, where it could then be sold to the United States.
Under the new agreement, the remaining part of the project, Gull Island, would be a tag-team joint venture between N.L. Hydro (60%) and Hydro-Québec (40%). Hydro-Québec would lead and manage its construction and absorb any associated extra costs. N.L. Hydro would operate the facility and have access to 225 MW of its generation.
“If you consult any expert in North America, they will all tell you that it’s the best project in North America,” Legault told the room to its immediate cheerful approval. “I wanted to be a part of it.”
N.L. Hydro would also get access to 135 MW of the aforementioned proposed Churchill Falls expansion. The provinces are considering also upgrading existing Churchill Falls units, which would increase production to 550 MW.
In totality, today’s tentative agreement is momentous for both provinces.
“It’s a very important contract for Québec,” Legault added, noting it represents 15% of the total capacity of Hydro-Québec. “It’s really key for us.”
“Together with Québec, we are starting a new chapter,” echoed N.L. Premier Furey. “While we can’t change the past, we can use it as the opening lines of a bold new chapter of our province, and in this moment, change our future.”
