Quebec needs to build new hydroelectric dams to strengthen position in Churchill Falls talks, Legault says

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Quebec needs to push ahead with plans to build new hydroelectric dams to strengthen its bargaining power in coming talks with Newfoundland and Labrador over the Churchill Falls electricity purchase contract, Premier François Legault says.

“If we want to be in a good negotiation position with Newfoundland, we need to have a Plan B for Churchill Falls. And it means new dams,” Mr. Legault said Wednesday in Quebec City. He said he does not want to be “obliged to accept whatever tariff” Newfoundland Premier Andrew Furey proposes.

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

Any new builds would require consent from First Nations communities whose lands would be affected, and they are in a more powerful position than they were when Quebec and Newfoundland concluded their original Churchill Falls agreement in 1969. Environmental concerns are also much greater, and Quebec will have to prove it can minimize the destruction of forest and wildlife habitat that often comes with hydro development.

But Quebec is also facing mounting pressure on its power supply, most of which is generated by Hydro-Québec’s network of dams and hydroelectric stations in the province’s north that were built decades ago. About 15 per cent of the power the utility sells also comes from the Churchill Falls hydro site in Labrador, one of the world’s largest. Hydro-Québec is a minority owner of the site.

Hydro-Québec is predicting an end to its electricity surpluses by 2026, and says the province will need more than 100 terawatt hours (TWh) of additional power – more than half of its current annual generating capacity – if it wants to achieve carbon neutrality by 2050. To deal with that situation, one priority solution laid out in the utility’s five-year strategic plan is stepping up energy efficiency. It also wants to refurbish existing hydroelectric stations to generate more power and develop more wind-power projects.

It’s clear now that Mr. Legault sees 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 stature as a major producer of renewable energy. The Premier is keen on expanding the province’s hydropower resources to lure investment and drive growth, particularly to attract companies in transformative industries such as electric vehicle battery development.

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

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

The pact has generated decades of resentment in Newfoundland and Labrador and successive Newfoundland governments have pressed for a better deal, to no avail. Now however, 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 prove challenging. Such megaprojects are much harder to build now than in the past because construction costs are higher, and First Nations and environmentalists are more active. The Innu of Labrador have sued Hydro-Québec for $4-billion in damages from when their traditional territories were flooded to build reservoirs decades ago. “This is not ethical,” said Etienne Rich, Grand Chief of the Innu Nation.

Hydro-Québec’s legacy dams generate power for 3 cents per kilowatt-hour, but new dams face costs at least four times greater. The utility’s most recent hydro development is the Romaine River project, which was built in four phases starting in 2009 and finished late last year.

Hydro-Québec told The Canadian Press in December it didn’t have other dam projects on the horizon, citing lengthy construction periods and high costs. Other renewable energy sources, such as wind, have also become more feasible, the utility said.

In Newfoundland, Premier Furey’s government recently created the Churchill River Energy Analysis Team with a mandate “to strengthen Newfoundland and Labrador’s negotiating position in advance of 2041″ and to explore opportunities for future hydro development on the river.

The province’s experience in undertaking on its own the 824 megawatt Muskrat Falls hydro development, which has gone billions of dollars over budget and led to a federal bailout, has underscored the need for the government to attract outside partners to proceed with any other 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-per-cent stake in the Churchill Falls project and that selling Gull Island’s power will likely mean transmission lines through Quebec. But partnering on any new hydro development would mean putting aside any lingering bad feelings.

That’s exactly what two provinces should do as they get ready for talks, according to Ed Hollett, a public policy commentator who served as an assistant to then Newfoundland premier Clyde Wells.

“The expiration of the Churchill Falls contracts in 2041 is an opportunity for Quebec and Newfoundland and Labrador to fundamentally change their relationship and enter into a pact that will truly benefit both parties,” Mr. Hollett wrote recently in La Presse. “To achieve this, however, Quebec will clearly have to give up on obtaining another ridiculous tariff, on the one hand, and Newfoundlanders will have to put aside their vengeful animosity, on the other.”

With a report from Konrad Yakabuski