Overview
- Québec and Newfoundland and Labrador have settled the Churchill Falls file and agreed to build together, unlocking $65–70 billion of investment.
- The project provides about 8.5 GW of net new capacity: 6.5 GW of hydro, including Gull Island and a Churchill Falls expansion, plus 2 GW of wind and more than 660 km of new transmission.
- Ottawa is backing it with up to $10 billion and, more importantly, a federal guarantee behind Gull Island financing.
- The Labrador Trough corridor has been referred to the Major Projects Office (MPO), tying clean power to critical minerals and port capacity in a single package.
- This is the largest single delivery yet on the federal clean energy superpower commitment, and it works the way we argued the National Electricity Strategy works: as a growth strategy, with electricity as the enabler.
This is the Electricity Strategy in Practice
When we wrote about Powering Canada Strong, our argument was that it should be understood as an economic growth strategy that treats electricity as the enabler, rather than a clean electricity strategy with growth tacked on. The Labrador package is the clearest example so far of what that looks like in practice.
Importantly, nobody had to choose between the clean option and the economic one to make this deal work. Québec is buying hydro because it is the least expensive firm power available to it. Newfoundland and Labrador is building it because it generates revenue and unlocks industrial growth at home. The mining companies in the Labrador Trough want it because electrification lowers both their operating costs and the carbon intensity of their product, and their customers are increasingly pricing the second.
Minister Hodgson has made the point that Canada will build its way through the energy transition rather than constrain or shrink its way there. This week’s announcement shows the government delivering on that language in a major way. The agreement includes a commercial settlement between two provinces, a financing instrument that changes the cost of capital, and a corridor process that puts power, minerals and port infrastructure on a single timeline. This is electricity as industrial policy.
Each Province Gets Something Important
Québec has spent the last several years rationing access to its grid. Requests from large industrial users have run well beyond what Hydro-Québec could supply, and the province ended up choosing between projects like data centres, battery and materials plants, aluminum expansions because there were too few cheap electrons for all of them. That is a constraint on growth, and this deal loosens it at a cost per megawatt-hour that compares favourably to almost anything else Hydro-Québec could build. It also puts the utility’s plan to roughly double capacity within a generation on a much firmer footing.
Newfoundland and Labrador gets three things: a substantially better return on the existing Churchill Falls asset well before the old contract was due to expire; a block of power reserved for its own use, which is what makes industrial attraction in Labrador possible; and a route to sell the rest at market-aligned prices rather than those set in 1969.
Ottawa Brought the Right Tools
While the federal contribution could be misread as just throwing money at the provinces, Ottawa’s achievement here was helping resolve a 55-year dispute using a financing tool that made the deal work economically for both sides.
A federal guarantee on Gull Island financing means Ottawa stands behind the debt. Lenders price risk into interest rates, so removing risk lowers the rate and lets the project carry more debt against less equity. On a hydro asset, where the capital cost is most of the lifetime cost of the power, that difference ultimately translates into savings for customers. Ottawa is lending its balance sheet rather than spending from it, and unless something goes wrong it never writes a cheque. This is one of the most effective tools the federal government has for making provincial infrastructure more viable.
Setting up a Clean Iron Boom
The Labrador Trough runs about 1,100 km and has produced more than two billion tonnes of iron ore. The federal government calls it a strategic asset for low-carbon steel supply chains, and it can be, provided we do the processing here.
There is a high-value market in decarbonized steel for cleaner, more refined iron than Canada currently ships. That market is still small globally, but it is growing, it pays a premium, and the Trough is one of very few places with a resource base capable of supplying it at scale. Building on that advantage means investing in the plants that upgrade the ore, not just the mines that dig it.
By putting power, mining, processing and shipping together, this announcement is setting up a clean iron ore boom in the Labrador Trough. The mines there are running at the ceiling of their power supply, the port at Sept-Îles is near capacity, and new projects have nowhere to connect. This announcement aims power, transmission, and port money at those three constraints, and the result will be iron ore produced with some of the cleanest electricity on the continent, in a market that is starting to pay for exactly that.
A Template to Get to Scale
Canada’s installed electricity capacity is currently about 150 GW. The electricity strategy calls for adding roughly that much again by 2050. This deal delivers about 8.5 GW, making it one of 15 to 20 packages of similar size needed over the next 25 years.
To keep that pace, we need to learn from what works rather than starting over each time. Every project will have its own geography, its own politics and its own set of parties. But the federal guarantee, the referral of the Trough corridor to the MPO, and the bilateral structure that lets two provinces settle and then build are all portable. The more elements that we can standardize, financing instruments, structures for Indigenous ownership, procurement that aggregates demand across projects, the more efficient and effective these processes become.
The Right Conditions for Success
The pursuit of growth through electricity is now valuable enough to allow two provinces to write off 55 years of grievance. That is a remarkable shift. The impasse at Churchill Falls survived every previous attempt at resolution because neither side had enough to gain from settling, until the economic benefits of abundant, clean electricity became clear.
Setting the megawatts and economics aside for a moment, another lesson emerges. Two provinces entrenched in a famously long-held disagreement sat down and made a deal. The federal government helped by reaching for the right tool rather than by imposing a design or a framework of its own. It took Québec’s and Newfoundland and Labrador’s priorities as the starting point and made them easier to act on.
Canada has seen plenty of projects where the substance was good and the deal still did not get done. What broke the logjam here was two governments willing to move forward and a federal partner who showed up with the right tool instead of dictating what to do.
The politics around a final contract still have a Québec election to get past. Supply chain constraints will be a real barrier and need to be managed. Upcoming negotiations with the Innu will need to set a strong example for how Indigenous communities are to benefit from these major projects. But the conditions for success are here, and Churchill Falls should be the first of many projects at this scale where clean electricity powers up Canada’s economic development.
