Quebec needs to build new hydro dams to strengthen its position in Churchill Falls negotiations, Legault says

Quebec must press ahead with plans to build new hydroelectric plants to boost its bargaining power in upcoming talks with Newfoundland and Labrador on a power purchase agreement at Churchill Falls, Premier François Legault says.

“If we want to be in a good negotiating position with Newfoundland, we need to have a Plan B for Churchill Falls. And that means new dams,” Mr. Legault said Wednesday in Quebec City. He said he doesn’t want to be “obligated to accept whatever tariff” is being proposed by Newfoundland Premier Andrew Furey.

The comments are among the clearest yet from Mr. Legault on how his government is thinking about the future of energy development in Quebec, a topic fueling vigorous debate in the province following the surprise resignation of Hydro-Québec chief executive Sophie Brocha last week. They indicate that Mr. Legault is determined to build new dams regardless of the cost. He has already ordered the provincial Crown corporation to update its feasibility studies on possible dam locations.

Any new construction would require approval from First Nations communities whose lands would be affected, and they are in a more powerful position than they were when Quebec and Newfoundland struck their original Churchill Falls agreement in 1969. Environmental concerns are also much greater and Quebec will have to demonstrate that it can minimize the destruction of forests and natural habitats that often comes with hydroelectric development.

But Quebec is also facing increasing pressure on its energy resources, most of which is generated by Hydro-Québec’s network of dams and hydroelectric plants in the province’s north, which were built decades ago. About 15 percent of the electricity the company sells also comes from the Churchill Falls hydroelectric plant in Labrador, one of the largest in the world. Hydro-Québec is a minority owner of the site.

Hydro-Québec predicts the end of its electricity surpluses by 2026 and says the province will need more than 100 terawatt-hours (TWh) of additional energy – more than half of its current annual generation capacity – if it wants to achieve carbon neutrality by 2050. one priority solution set out in the energy company’s five-year strategic plan is to increase energy efficiency. It also wants to renovate existing hydroelectric plants to produce more power and develop more wind power projects.

It is now clear that Mr. Legault sees the new dams as part of the solution as well, not only to meet projected demand but also to strengthen Quebec’s hand in negotiations with Newfoundland and cement its position as a major producer of renewable energy. The premier is keen to expand the province’s hydropower resources to attract investment and boost growth, particularly to attract companies in transformative industries such as developing batteries for electric vehicles.

“It’s important to understand that you can’t serve all of our needs well with just wind or solar,” Mr. Legault said in English on Wednesday. “The beauty of dams is that you have a kind of battery, which is water that you can use … when you have peak periods.”

Mr. Legault’s government is preparing to negotiate a renewal of Hydro-Québec’s 1969 contract to buy electricity from Churchill Falls. Under the current contract, which expires in 2041, Quebec buys more than 5,000 megawatts of electricity from Churchill Falls for 0.2 cents per kilowatt hour, a tiny fraction of the energy’s resale value.

The pact sparked decades of resentment in Newfoundland and Labrador, and successive Newfoundland governments pushed for a better deal, but to no avail. But now the province’s position has been unexpectedly strengthened by Quebec’s own looming supply problems — something Mr. Legault appears determined to address.

Building new dams in Quebec could be challenging. Such megaprojects are much more difficult to build now than in the past because construction costs are higher and First Nations and environmentalists are more active. The Innu of Labrador are suing Hydro-Québec for $4 billion in damages from when their traditional lands were flooded decades ago due to reservoir construction. “It’s not ethical,” said Etienne Rich, Grand Chief of the Innu Nation.

Hydro-Québec’s older dams generate power for 3 cents per kilowatt-hour, but new dams cost at least four times as much. The company’s latest hydro project is the Romaine River project, which was built in four phases starting in 2009 and completed late last year.

Hydro-Québec told The Canadian Press in December that it has no more dam projects on the horizon, citing long construction times and high costs. Other renewable energy sources such as wind have also become more feasible, the company said.

In Newfoundland, Prime Minister Furey’s government recently created the Churchill River Energy Analysis Team with a mandate to “strengthen Newfoundland and Labrador’s negotiating position before 2041” and explore opportunities for future hydro development on the river.

The province’s experience with its own implementation of the 824-megawatt Muskrat Falls hydro project, which ran billions of dollars over budget and led to a federal bailout, underscored the government’s need to attract outside partners to proceed with any further development, including the much larger 2,250 MW Gull Island hydro project downstream from Churchill Falls.

One obvious partner is Quebec, given that Hydro-Québec has a 34 percent stake in the Churchill Falls project and that the sale of Gull Island power will likely mean transmission lines through Quebec. But partnering on any new water development would mean putting aside any lingering bad feelings.

That’s exactly what the two provinces should do as they prepare for talks, according to Ed Hollett, a public policy commentator who served as an aide to then-Newfoundland Premier Clyde Wells.

“The expiration of the Churchill Falls contracts in 2041 is an opportunity for Quebec, Newfoundland and Labrador to fundamentally change their relationship and forge a pact that will truly benefit both parties,” Mr. Hollett recently wrote in La Presse. “However, to achieve this, Quebec will obviously have to give up getting another ridiculous tariff on the one hand, and the Newfoundlanders will have to put aside their vindictive hostility on the other.”

With a message from Konrad Yakabuski