Newfoundlanders and Quebecers have been at loggerheads for four decades over the Churchill Falls contract. Despite everything, today, they have every interest in agreeing on its renewal. They are probably even doomed to it. Here’s why.
On the Newfoundland and Labrador side, first of all, the options are not very numerous. A government-mandated committee has identified three options for the power that will become available after the contract ends in 2041. These options are set out in a document released by the committee on Tuesday, called the Churchill River Expert Panel (CREP).
The document describes very briefly the issues of the report they submitted to the government on February 6. The report is kept confidential in the context of the discussions undertaken this Thursday by François Legault and his counterpart Andrew Furey1.
PHOTO PAUL DALY, THE CANADIAN PRESS
Andrew Furey, Premier of Newfoundland and Labrador
Three options, therefore, are presented by the committee under the heading “Recommendations for maximizing value”, and in that order. One: increase electricity sales in Newfoundland and attract businesses. Two: increase sales in export markets. Three: initial a new agreement with Hydro-Québec.
These three options, the committee says, are not “mutually exclusive.” In other words, Newfoundland could, for example, opt for all three or only one of the three. However, it is unlikely, in practice, that Newfoundland will be able to do without the third option, namely to reach an agreement with Hydro-Québec.
The contract with Hydro is for a huge amount of energy, 85% of the 5,428 megawatts (MW) plant, which produces 34 terawatt hours (TWh) of energy each year.
With such energy, Newfoundland could supply a dozen aluminum smelters like that of Arvida, Rio Tinto, in Saguenay-Lac-Saint-Jean. Rio Tinto, it should be remembered, has seven aluminum smelters in Quebec, which produce about half of its global aluminum.
Another comparison: the energy made available (29 TWh) after 2041 far exceeds the needs that Newfoundland would have if it wanted to green its entire economy – road transport included –, ie the equivalent of 19.4 TWh.
In short, the option for Newfoundland to keep all of this energy for its own needs is illusory.
Export certain surpluses to the United States? Not impossible, but difficult.
Admittedly, Newfoundland is entitled to use the Hydro-Québec transmission system to do this, as required by the rules of the Federal Energy Regulatory Commission (FERC) of the United States, to which Hydro-Québec had to adhere. to export to the south.
The FERC is also very strict with discriminatory policies and could intervene if Hydro-Québec blocked access to its network to another player, such as Newfoundland and Labrador.
Except that our state-owned company can invoke its right to use its electricity network as a priority for its own local needs, an argument it has successfully argued in the past at the Régie de l’énergie.
As for the possibility for Newfoundland and Labrador to export via its submarine cable to Nova Scotia (Maritime Link), nothing is less certain. First, the cable does not have this capability, and more importantly, there are still problems to fully activate this connection.
In short, Newfoundland has no choice but to enter into a new pact with Quebec, especially since Hydro holds a 34.2% block in the plant, which, even without being a majority, gives it certain rights.
That said, Quebec can hardly do without its neighbor either. The stake is equivalent to 14% of Hydro-Québec’s annual energy needs.
To replace Churchill Falls, it would be necessary to build 4 dams like the Romaine or even 50 wind projects like Apuiat, on the North Shore. These projects should be added to the many others that François Legault wishes to see hatch to electrify our economy and feed the new needs of large companies. François Legault speaks of half a Hydro more by 2050, so it would be even more.
Not to mention that if we had to do without the energy coming from Newfoundland, hundreds of kilometers of transmission lines in Quebec coming from Labrador would become useless.
Another consideration: the Churchill River holds enormous potential for additional energy for Quebec and Newfoundland. The current plant has a potential expansion of 1300 MW, to which could be added the new Muskrat Falls plant (824 MW) and the possible Gull Island plant (2215 MW), further east.
In short, it is no longer just the current 5428 MW of Churchill Falls that are at stake, but almost double, or 9767 MW. Gigantic!
It is not for nothing that François Legault will notably be accompanied by three vice-presidents of Hydro-Québec for his visit to Newfoundland, namely Pierre Despars (strategy and development), Dave Rhéaume (planning of energy needs) and Julie Boucher (sustainable development and communications).
The game will be long and difficult. The two governments are starting negotiations now so as not to be taken aback if things ever go wrong, knowing that it would take years to add such an amount of energy.
On Wednesday, Francois Legault said he would be willing to increase payouts to Newfoundland well before 2041 if he got a good rate after that. It should be understood that the low tariffs still in force between now and 2041 (0.2 cents per kilowatt hour) would thus be merged with those expected after 2041, to be negotiated.
One thing is certain, Quebecers will have to expect an increase in their own rates, in the end. The advantageous Churchill Falls contract represents a third of Hydro-Québec’s profits, all the same, profits which amounted to 4.6 billion in 2022. Phew!
Clarification on the Caisse de depot
In my column published on Monday, it was indicated that the Caisse de depot et placement is the controlling shareholder of seven major commercial enterprises. In fact, there are about ten of them, excluding the financial and real estate sector. In addition, it should be noted that the Caisse has reduced its stake in Datamars to 30%, according to the most recent statement available. The text has been modified accordingly on lapresse.ca.