Overview of Electricity Sector

Due to its abundant hydro resources, Newfoundland and Labrador (NFLD) relies heavily on hydroelectric generation to meet its electricity needs. The majority of islanders are served by a large interconnected system with approximately 1,966 megawatts (MW) of net capacity. Much of this is generated at hydro facilities as well as the Holyrood Thermal Generating Station, a heavy oil-fired plant of several hundred megawatts [i]. The Labrador system draws most its power from the 5,428 MW (Upper) Churchill Falls Generating Station, Canada’s second largest hydro project. NFLD’s hydro capacity will be increased even further with two large developments of the Lower Churchill river: Muskrat Falls (in development) and Gull Island (proposed). Together, these installations will total roughly 3,000 MW [ii]. In addition to hydro and oil, NFLD generates electricity at four gas-fired plants and several diesel plants. In particular, remote communities along the coast rely on small diesel systems that operate independently of the main grid. In recent years, a small amount of generation has also come online from non-hydro renewable energy sources, mainly wind and biomass.

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Over 90% of the province’s electricity is supplied by Newfoundland and Labrador Hydro (Hydro), a provincial crown corporation and the fourth largest utility in Canada [iii]. Hydro is a subsidiary of Nalcor Energy, created by the province in 2007 for the purpose of managing its energy assets. While Hydro is the main supplier, investor-owned but publicly regulated Newfoundland Power plays the primary retailer, responsible for the transmission and distribution system throughout the island [iv].

Given its relatively small population and vast hydro resources, NFLD produces more electricity than it consumes. The vast bulk of generation from Upper Churchill Falls is sold to Hydro Québec for an extremely low flat rate of $2/MWh, which Hydro-Québec then sells to US markets at a much higher rate. This controversial deal made several decades ago in 1969, and set to expire several decades from now in 2041, has been a continued source of controversy between the two provinces and a hindrance to NFLD’s ability to economically benefit from its surplus hydro resources [v]. Without acceptable terms to transmit its power from the Lower Churchill developments through Québec, NFLD aims to export it to Nova Scotia, and potentially beyond, via the Maritime Link, a 170-km subsea transmission cable that will run under Cabot strait [vi]. The Ontario Ministry of Energy has also been in talks with Nalcor Energy to explore opportunities for importing hydroelectricity from the Gull island facility in central Labrador, that once constructed, will be 2,250 MW in capacity [vii].

 

[i] Newfoundland & Labrador Department of Natural Resources, 2015. “Electricity”, retrieved 23 November 2015 from http://www.nr.gov.nl.ca/nr/energy/electricity/

[ii] Nalcor Energy, 2015. “Lower Churchill Project”, http://www.nalcorenergy.com/Lower-Churchill-Project.asp

[iii] Newfoundland and Labrador Hydro, 2015. “Power Your Knowledge”, http://www.poweryourknowledge.com/

[iv] Newfoundland Power, 2015. “What we’re all about”, http://www.newfoundlandpower.com/AboutUs/Default.aspx

[v] Yakabuski, K. “Revenge is a bad business plan, Newfoundland”, The Globe and Mail, 27 July 2013, http://www.theglobeandmail.com/globe-debate/revenge-is-a-bad-business-plan-newfoundland/article13464882/

[vi] Newfoundland & Labrador Department of Natural Resources, 2015. “Focusing Our Energy: Energy Plan Progress Report 2015”, retrieved 23 November 2015 from http://www.nr.gov.nl.ca/nr/energy/electricity/

[vii] Ontario Ministry of Energy. “Ontario and Newfoundland and Labrador Agree to Evaluate Clean Electricity Trade Opportunities”, News Release 20 July 2015, https://news.ontario.ca/mei/en/2015/07/ontario-and-newfoundland-and-labrador-agree-to-evaluate-clean-electricity-trade-opportunities.html

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