Here's how a new Churchill Falls deal might power a surge in Labrador West mining
Labrador needs more power to unleash the full potential of the region's mining industry, say Hydro execs
Top officials with N.L. Hydro believe a proposed new deal for energy sales to Hydro-Quebec, and the development of additional hydroelectric capacity on the Churchill River, will power a fresh surge in mining activity in Labrador, generate significant jobs and revenue for the province, and help meet the growing global demand for so-called "green" steel.
That's in addition to the billions of dollars in investment and thousands of new construction jobs over the next decade as energy production on the river expands by nearly 4,000 megawatts.
Such a scenario was part of the sales pitch used by N.L. Hydro CEO and president Jennifer Williams and vice-president Walter Parsons in the House of Assembly last week, during a special session on the Churchill Falls memorandum of understanding.
Both Hydro executives told MHAs that iron ore companies are showing great interest in either expanding their existing operations, or developing new mines, in Labrador West.
Proof of this, they said, is an ongoing study reviewing options for transmitting more electricity from Churchill Falls to Labrador West. It's being financed by mining companies, has reached an advanced stage in terms of front-end engineering and design, and proposes the construction of a new transmission line at a cost of more than $1 billion to "supply their decarbonization needs," said Parsons.
The current twin line between Churchill Falls and western Labrador runs about 240 kilometres.
The transmission study is expected to be completed this year, and Parsons is confident the mining companies will proceed with the project.
"All signs are certainly pointing in that direction. So we would expect that should they take that decision in the coming year, inside of 2025, then we would begin that process of actually constructing the line," he said.
But these plans can only become a reality, said Parsons, if the current availability of non-emitting, renewable hydro power is greatly expanded.
"Without having access to additional generation, there's no business case to build that line," he said.
That's why the MOU with Hydro-Quebec was carefully negotiated to ensure that new blocks of power from the existing Churchill Falls station become available on a staggered basis to N.L. Hydro over the next decade, said Williams.
"That's very much was part of how we approached this MOU," said Williams.
Current energy availability 'nearly fully used up'
Currently, 525 of the 5,400-plus megawatt capacity at the Churchill Falls power station is allocated to N.L. Hydro to energize the power grid in Labrador, and roughly 312 megawatts of that is sold to mining companies, specifically the Iron Ore Company of Canada in Labrador City and Tacora Resources in Wabush, via two transmission lines from Churchill Falls.
The remainder of that power is sold to Hydro-Quebec at just 0.2 cents per kilowatt hour under a lopsided agreement that's been in place since 1969, and is not set to expire until 2041.
The MOU, which was signed on Dec. 12 and is set to replace the '69 contract, proposes Hydro-Quebec pay gradually higher prices for that electricity, starting at 1.63 cents in 2025, and increasing to 7.84 cents by 2041.
Premier Andrew Furey has said the provincial treasury will rake in an average of $1 billion a year from the proposed new Churchill Falls power purchase agreement up to 2041. Under the existing contract, the province takes in about $20 million.
Meanwhile, Walter Parsons said that 525 megawatts currently available to N.L. Hydro from Churchill Falls is "nearly fully used up," and the capacity levels are so tight in Labrador West that any new developments above 200 kilowatts must get an exemption order from the province's utility regulator, the PUB.
Without a new contract, Labrador power levels will 'hit a wall,' says Williams
Without the MOU, the current bottleneck will remain unchanged until 2041, said Williams, and economic growth will be hindered.
"Basically, you can hook up a house, but even that at some point could probably hit a wall … because we just simply do not have access to the power," she said.
The MOU proposes that N.L. Hydro will be able to recall an additional 305 megawatts in 2031, and growing to a total of 1,490 megawatts by 2041. That's nearly twice the maximum output of the Muskrat Falls project.
The recall blocks were strategically staggered to coincide with the increasing power demand in Labrador West from potential mining growth, Williams explained.
Construction of the new transmission line, for example, is expected to take five years.
"The amount of power that we have included in this MOU for the periods coming in the upcoming decades we believe is a balanced amount of power to hold in reserve for the needs that we believe will be possible," she said.
Investment will go elsewhere, said energy minister
Iron ore deposits in Labrador have been described as world class because of their purity, and existing infrastructure such as a railway and port facilities have also caught the attention of global investors.
Energy Minister Andrew Parsons said the demand for iron ore is expected to increase by 40 to 50 million tonnes annually in the coming years, and the push to produce steel using environmentally friendly and sustainable methods is yet another advantage in Labrador.
But if additional power cannot be made available for the mining industry, Parsons said the investments will go elsewhere, along with the jobs, royalties and other spinoffs.
"In order to do all this, we need power. We need transmission," said Andrew Parsons.
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