Newfoundland and Labrador may possess significantly more leverage in negotiations over the Churchill Falls hydroelectric resource than conventional wisdom suggests, according to economists who point to rapidly changing electricity markets that are placing a premium on reliable, storable power.
Background of the Churchill Falls Deal
The province has for decades lacked the capital, transmission access, and bargaining power needed to fully control one of North America’s largest hydroelectric resources. A 1969 deal with Quebec became a regional symbol of lost leverage and missed opportunity. Now, as the current contract approaches its 2041 expiration, a memorandum of understanding (MOU) signed in late 2024 with Quebec is being reconsidered.
The proposed MOU would establish a new pricing framework for existing power and pave the way for roughly $25 billion in new hydroelectric development in Labrador, including the Gull Island project and a Churchill Falls expansion. The province estimated the broader agreement could generate roughly $225 billion in benefits over its lifetime.
Criticism and Independent Review
Critics argue those figures are projections, not guarantees, and depend on assumptions about electricity prices and market conditions stretching decades into the future. After an independent review commissioned by Premier Tony Wakeham concluded the agreement negotiated by his predecessor was not in the province’s best interests, the government reopened negotiations with Quebec.
Much of the debate has focused on the terms of the proposed deal, but economists say a more fundamental question deserves attention: whether rapid changes in electricity markets have increased the value of Churchill Falls enough to strengthen the province’s bargaining position.
Changing Energy Landscape
“There are a number of things that have changed since the original MOU was negotiated, including data centres that now seem to be much more prominent in ongoing discussions, especially given the emergence of AI,” said Wade Locke, an economist and professor emeritus at Memorial University in St. John’s, NL.
He said the debate extends beyond simply calculating future cash flows from electricity sales. “We can look at this particular exercise as a flow of revenues from one entity to another entity. We can look at it as the ability to facilitate resource exploitation in Labrador. We can look at how much employment might be created or business activity might be created,” Locke added.
Growing Value of Hydroelectric Assets
Doug May, an economist at Memorial University, said the growing corporate demand for power is increasing the value of large hydroelectric assets, so resources such as Churchill Falls are “becoming much more valuable.” He points to artificial intelligence, data centres, industrial electrification, and broader decarbonization efforts as key drivers. Unlike wind and solar, hydroelectric reservoirs can store energy and respond to changing demands.
The sheer scale of Churchill Falls and its proposed expansion underscores its value. The facility has an installed capacity of roughly 5,428 megawatts and generates more than 34 terawatt-hours of electricity annually—enough to power several million homes. At wholesale electricity prices of roughly $75 to $100 per megawatt-hour, that’s worth about $2.5 billion to $3.4 billion per year.
