More money, more power, but how good is the new Churchill Falls deal for Newfoundland?

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“We needed markets, electric power markets, not the consumer price index,” he said.

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François Bouffard, an associate professor of engineering at McGill University in Montreal who studies electricity systems, takes a broader view.

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“They made the pie bigger,” he said.

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Newfoundland and Labrador’s allocation from the existing Churchill Falls plant will more than triple to 1,630 megawatts from 525 megawatts, while Hydro-Québec’s share would fall to 3,660 megawatts from 4,765 megawatts.

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The province could use that power domestically or sell unused electricity back to Hydro-Québec at 150 per cent of the base contract price, with three years’ notice to change its allocation.

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Does the province finally get access to outside markets?

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For decades, one of Newfoundland and Labrador’s biggest disadvantages has been geography. Moving large quantities of electricity to customers elsewhere in Canada or the United States generally means going through Quebec.

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The government said the new agreement provides 985 megawatts of access to export markets, but that figure requires some unpacking.

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Of that amount, 240 megawatts will receive pricing that is equivalent to Hydro-Québec’s New York contract and another 200 megawatts will be priced at an equivalent to its New England contract. A further 280 megawatts would receive a synthetic price based on markets in Ontario, New York and New England.

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In those cases, Newfoundland and Labrador only delivers electricity to the Quebec border rather than selling it directly into those markets. The government said the remaining 265 megawatts will be used for direct market access using transmission rights Newfoundland and Labrador Hydro already holds.

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Vardy said the crucial test is whether the province can directly negotiate with customers outside Quebec, pay Hydro-Québec a reasonable fee for using its transmission system and retain the remaining value of the sale.

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“We’re probably never going to get market price unless we can deal directly with the final customer,” he said.

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Why build a bigger Gull Island if it doesn’t produce more electricity?

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The proposed Gull Island development would grow to 2,700 megawatts from about 2,250 megawatts, while the expected annual energy production remains around 12 terawatt-hours.

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Megawatts measure how much electricity can be produced at a given moment; terawatt-hours measure how much is produced over time.

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Vardy questions whether the added value justifies a larger, more expensive plant. Bouffard said the extra turbines could allow Gull Island to produce more electricity when demand — and the value of electricity — is highest.

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“Spot on. That’s it,” he said when asked whether that was the benefit of the additional 450 megawatts.

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The same principle helps explain the potential value of combining hydroelectricity with wind power, Bouffard said.

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Reservoirs can effectively store water when wind generation is plentiful and produce hydroelectricity when the wind isn’t blowing or demand is higher. Bouffard described the combination as producing “premium electrons” that are both low-carbon and reliable.

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What does Quebec get?

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Why would Hydro-Québec agree to pay substantially more years before its bargain-basement contract expires? Bouffard said the answer is certainty.

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Waiting until 2041 would allow Quebec to continue buying Churchill Falls power at extremely low prices for another 15 years. But major dams and transmission lines take years to plan and build, while Quebec is already looking for large amounts of additional electricity.