A New Energy Partnership for Newfoundland and Labrador and Québec
January 8, 2025
Newfoundland and Labrador and Québec have signed an important Memorandum of Understanding (MOU) for hydroelectric generation in Labrador. The resulting proposed partnership will create a significant and immediate increase in value for Newfoundland and Labrador and make a substantial contribution to Quebec’s energy security.
The non-binding memorandum has two components: new contracts with Churchill Falls (Labrador) Corporation (CF(L)Co) and both Hydro-Québec and Newfoundland and Labrador Hydro for existing Churchill Falls generation at a new price; and the development of new generation projects in Labrador. Over time, total generation will reach 9,190 MW of which 7,200 MW will be purchased by Hydro-Québec and 1,990 MW will be available to Newfoundland and Labrador Hydro.
Hydro-Québec will also pay Newfoundland and Labrador Hydro an option payment of $3.5 billion net present value for the right to co-develop new projects in Labrador. The combined option payments and the resulting provincial dividends and water rentals will result in approximately $1 billion in annual payments to Newfoundland and Labrador starting in 2025. The average cost of power from Churchill Falls under this agreement will be approximately 6 cents/kWh. Hydro-Quebec will direct dividends from its ownership to reduce the impact to its customers to 4 cents/kWh.
Existing Generation from Churchill Falls
The memorandum provides for the termination and replacement of the current contract for the existing generation from Churchill Falls. The MOU forecasts payments from Hydro-Québec to CF(L)Co of $33.8 billion net present value between 2025 and 2075. According to the terms of the MOU, Hydro-Québec will pay CF(L)Co energy prices that are forecast to increase over time depending on markets in Quebec and elsewhere as pricing will be linked with various market indices.
New developments
- Gull Island: The Gull Island hydroelectric power generating facility project will be constructed along the Churchill River and will generate 2,250 MW.
- Churchill Falls Expansion: A second facility will be constructed near the current Churchill Falls site. The new facility will contribute 1,100 MW of installed capacity.
- Churchill Falls capacity increase: The capacity of the existing Churchill Falls facility will be increased, adding 550 MW to the total installed capacity.
Newfoundland and Labrador Hydro will lead the project to increase capacity at the existing Churchill Falls facility. Given its proven track record with major projects, Hydro-Québec will act as the project lead for Gull Island and the new facility at Churchill Falls and will manage the financial and construction risks associated with them. Each utility will lead the construction of new transmission in their respective jurisdictions enabling the transfer of the increased electricity generated in Labrador.
Prices for the production from the new developments will be based on actual construction and operating costs and will escalate over time. On average, the price is expected to be 11 cents/kWh.
- 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 the Action Plan 2035 (13 cents/kWh).
- Together, the average cost of all electricity from Labrador will be 6 cents/kWh, which is half the price of the renewable alternatives available to Québec.
Partnership with Indigenous Communities
This memorandum will fully respect existing agreements with the Indigenous communities of Labrador. Both Governments and utilities commit to meaningful engagement with Indigenous peoples right from the start of projects and at every step in their development. We will engage in this dialogue in a spirit of openness, transparency and collaboration. Newfoundland and Labrador Hydro and Hydro-Québec will work together to this end.
The non-binding MOU signed today is an important step towards a new Newfoundland and Labrador – Quebec partnership on hydroelectric generation in Labrador. Over the coming months, signatories will continue their analysis of new projects with a view to reaching a definitive agreement. Until such an agreement is reached, the existing contract remains in force.
You can read the Hydro-Quebec announcement on this agreement HERE
