Executive Interview: From the Board Room: Thierry Vandal, President and CEO of Hydro-Quebec

Thierry Vandal, president and chief executive officer of Hydro-Quebec, discusses methods his company uses to provide energy to customers, the differences between operating in Canada vs the U.S. and the future of hydro and its integration into other energy strategies.

By Kristen Wright

President and CEO Thierry Vandal.
President and CEO Thierry Vandal.

Hydro-Quebec – Canada’s biggest electricity producer and the world’s largest hydropower producer – has been noted by Electric Light & Power for its contribution to a cleaner environment and making record profits while keeping rates low for customers, earning it past recognition as the magazine’s Utility of the Year.

The Canadian state-owned utility has about 23,000 employees and generates 98% of its electricity from hydropower. Its generating fleet includes 60 hydro, one nuclear and 27 thermal stations for an installed capacity of 36,810 MW. Hydro- Quebec TransEnergie operates the most extensive transmission system in North America, with more than 20,656 miles of lines and 515 substations.

In its 2010 annual report, the company had a net income of more than C$2.5 billion (US$2.5 billion) resulting from strict, controlled operating expenses and management of market risks in what had been a challenging year for the industry.

Hydro-Quebec also seems well-liked by its customers. A recent issue of Electric Light & Power featured an article called “North American Utility Industry Needs Reputation Makeover.” In it, author John Patterson explains the Reputation Institute’s Global Reputation Pulse consumer survey about companies in 34 countries. Consumer rankings were based on seven factors: products and services, innovation, workplace, governance, citizenship, leadership and performance. In the survey, Hydro-Quebec ranked sixth among North American utilities and third among Canadian utilities, while its numbers rated “strong/robust” in products and services, workplace and financial performance.

What’s the secret up north? In this interview, conducted in the fall of 2010, Hydro-Quebec President and Chief Executive Officer Thierry Vandal highlights the work behind the utility’s success.

Q: What is Hydro-Quebec doing to keep its customers happy?

Vandal: There are a lot of initiatives under way in various areas of our business. We’re offering major energy efficiency programs in all market segments. Close to C$1.8 billion (US$1.8 billion) has been invested so far in energy efficiency measures throughout Quebec.

Hydro-Quebec is investing in both the transmission and distribution grids to ensure long-term reliability and drive efficiencies through selected smart grid/AMI (advanced metering infrastructures) applications.

We’re continuing to develop our generation capacity, solely in renewable energy. Our capital expenditure amounts to C$2 billion per year in hydropower generation.

And our customers obviously like that our rates aren’t increasing right now. In fact, the rate applicable to Hydro-Quebec’s residential customers is among the most advantageous in North America. For residential customers, Montreal has the lowest rates on the continent.

Q: Hydro-Quebec’s generating fleet is 98% hydroelectric? In what other renewable initiatives is the utility involved?

Vandal: Yes, a full 98% of Hydro-Quebec’s output comes from hydropower. And we’re continuing to grow our generation fleet. Right now, about 2,500 MW of new hydropower is under construction. Hydro-Quebec is also adding a lot of wind power to the grid. We should have about 4,000 MW in Quebec by 2015. Our focus has been on making sure that this wind could attach to the grid without compromising transmission reliability. We’ve also developed sophisticated, regional, short-term wind forecasting models to get the maximum capacity contribution from the operating wind farms.

We’re also pushing the development of hydrokinetic power in the form of in-stream turbines.

The key here has been the development of an industrial-level turbine for long-term reliability. Our R&D arm and technology affiliates have partnered with private developers in this area. A full-scale pilot is currently in operation in the St. Lawrence River in the Montreal area. It’s an impressive, yet very simple piece of equipment.

Q: Hydro-Quebec has sold energy to Vermont utilities since the 1980s. In August 2010, subsidiary H.Q. Energy Services signed a 26-year contract to sell up to 225 MW of predominately hydro energy to Vermont’s two largest utilities, Green Mountain Power and Central Vermont Public Service, beginning November 2012. Other Vermont utilities have pledged to buy power, as well. How does U.S. energy policy, or the lack thereof, affect Hydro-Quebec?

Vandal: Hydro-Quebec has been providing reliable, cost-effective power to a number of U.S. markets, primarily in New England and New York, for many decades. This will continue and expand in coming years. The Vermont contract attests to the quality of the relationship we’ve established with our U.S. partners over the years.

Energy policy in North America and across the world is clearly moving toward an increase in renewable power. In the U.S. markets we serve, this is going to be mainly wind and distributed solar. This is all intermittent power that needs a source of baseload energy to balance the market. Our reservoir-based hydropower generation in Quebec can be used in this way with more flexibility than other baseload sources. We can store a lot of power, in fact more power than the state of New York consumes in an entire year, and we have 40,000 MW of capacity to produce energy on demand for our customers. So we’re natural partners for the long term. People are going to expect more of their power to be renewable in the future.

One of the keys is obviously going to be expanding the transmission grid. We can’t increase renewable electric supply over the long term without significant grid investment. This is a major challenge for all of us.

Q: What is hydropower’s contribution to the fight against climate change?

Vandal: Quebec hydropower facilities with reservoirs emit 40 times less greenhouse gas than natural gas power stations and 100 times less GHG than coal-fired stations. Hydropower does well when compared with other renewable energies, as well. On a life cycle basis, GHG emissions from our generating stations with reservoirs in northern regions are pretty much equivalent to those from wind generation and less than a quarter of those from photovoltaic solar generation for equivalent energy output. Thanks to our water resources, electricity generation accounted for only 2.7% of GHG emissions in the province in 2007. By exporting this clean energy, Hydro-Quebec helps limit GHG emissions across northeastern North America.

Since 2001, more than 39 million metric tons of GHG emissions have been avoided as a result of energy exports from Quebec. That about equals the yearly emissions of 10 million cars.

Hydro-Quebec developed the Line-Scout robot, shown here, to carry out line inspections that otherwise would have to be done by helicopter.
Hydro-Quebec developed the Line-Scout robot, shown here, to carry out line inspections that otherwise would have to be done by helicopter.

Q: How is operating in Canada different from operating a utility in the U.S.? What are the advantages and disadvantages?

Vandal: I’ve spent a lot of time over my career dealing with U.S.-based utilities – gas and electric and meeting regulators in the U.S. – and I don’t see any major differences, other than Hydro-Quebec has a single shareholder: the Quebec government. We’re an integrated utility with close to C0 billion of assets, about half in the transmission and distribution side and the other half in generation. Our regulatory models and drivers are very similar to what you would see in the U.S., as are our customers’ expectations on questions like rates, reliability, etc.

We share many of the same industry-based organizations, such as the North American Electric Reliability Corp. Also, Federal Energy Regulatory Commission-based nondiscriminatory open access transmission tariffs are the norm in Canada. We adopted this in Quebec back in 1997.

One distinction that you can make, if you compare Hydro-Quebec with other large utilities, is that the engineering and construction side of our business is perhaps more significant. We now have a number of large hydro projects under construction, and we do the project management and engineering-construction management in-house. So we have a very large engineering-construction group. In fact, the largest engineering-construction group in Canada is Hydro-Quebec. We’ve developed solid expertise in project management both in our hydro development and through our large transmission investments.

The other thing that’s perhaps distinctive from what you see in U.S. investor-owned utilities is that we’re a heavy player in research. We have a research center. We spend about CA$100 million a year in pure research and development, providing technical support to Hydro-Quebec’s divisions.

Q: Ontario is involved in a large smart meter rollout. Does Quebec have similar plans?

Vandal: We have a large-scale advanced metering infrastructure rollout under way. We’ll have AMIs installed for the vast majority of our 4 million customers by the end of 2017. We’re still in the initial stages of the project.

We’re trying to keep things fairly simple. We have a good idea of what is going to work beyond the basic meter data transfers. We’re focusing on connect-disconnect, faster and more precise outage info, and theft detection, for example. The more sophisticated commercial applications will come later; we don’t necessarily expect to be an early mover in this area. We’ll move to implement each new application when we can see a clear added value for our customers.

Q: How is Hydro-Quebec preparing for electric vehicles?

Vandal: This is an exciting new area for our industry in the long term, and Hydro-Quebec has been very active recently. The key at this stage is technology. There are some exciting electric vehicles and plug-in hybrid electric vehicles coming out now, but the technology still has a ways to come. That’s where we’re putting a lot of our efforts right now. We already hold international patents related to promising battery materials: lithium-iron-phosphate, coatings and molten salts, for example.

The Daniel-Johnson Dam, operated by Hydro-Quebec, is part of the Manic-Outardes complex and has a total installed capacity of more than 7300 MW.
The Daniel-Johnson Dam, operated by Hydro-Quebec, is part of the Manic-Outardes complex and has a total installed capacity of more than 7300 MW.

We’re working both at the research level with international research partners and at the industrial level with many of the industrial leaders in the field. Our R&D teams are quite active. Under Hydro-Quebec’s stewardship, the international scientific conference for lithium-ion batteries was held in Montreal in 2010. We’re also active in the field of electric motors for electric vehicles through our TM-4 affiliate. We’re also involved in a number of pilot projects to test electric vehicles, with Mitsubishi, Nissan, Ford and Toyota in Quebec.

And we’re looking at the necessary recharge infrastructure. We’ve been plugging in our cars in Quebec for a long time in the winter so that the engine starts when it’s really cold outside. Our distribution grid is also quite robust because the majority of homes use electricity for heating in Quebec. We do not see this as being a big issue for capacity.

These initiatives could have substantial environmental benefits. If Quebec replaced 25% of its current fleet – or about 1 million vehicles – with electric vehicles, it would reduce GHG emissions by 3.4 million metric tons (3.7 million tons) annually. I’m personally convinced that electric vehicles and plug-in hybrid electric vehicles will be a significant segment of the car industry sooner than many people think.

Q: Your territory is much colder than most of the U.S. What does Hydro-Quebec do to prevent weather-related outages?

Vandal: Cold weather as such is not really a problem; we’re pretty used to the cold here in Quebec. It’s the transition periods in the spring and fall, when we have a combination of freezing rain and wind that can be a potential risk for the distribution grid.

We had a major ice storm back in 1998, as many in the industry will remember. Since then, we’ve invested a lot of money to reinforce the transmission grid. Today it can withstand much higher freezing rain radial loads and combined wind conditions. We’ve also developed a number of technologies designed to de-ice transmission lines before accumulations cause any problems.

Q: The Edison Electric Institute named Hydro-Quebec a joint winner of the 2010 Edison Award with British Columbia Transmission Corp (BCTC) for your LineScout Technology. Tell me more about the LineScout. Is it something other utilities could use?

Vandal: The LineScout robot is used to inspect live transmission lines to detect problems like broken insulators or damaged strands. It can clear obstacles – insulator strings, vibration dampers, aircraft warning markers, and corona rings – and can run along the ground wire, individual conductors or bundled conductors to examine hard-to-reach line sections. Through its cameras, line crews can conduct detailed and highly precise inspections of live lines, carry out diagnostics and make temporary repairs, if needed, safely and without interfering with grid operations.

The technology was developed by Hydro-Quebec’s research institute, and Hydro-Quebec worked actively with the British Columbia Transmission Corp., which is now part of BC Hydro, to test the LineScout technology on a transmission line that crosses an ocean inlet in the Vancouver area. The 2-mile-long line was inspected before the 2010 Olympics to ensure the reliability and security of the area’s power supply.

I’m certain that this technology could be put to very good use by other electric utilities. To the best of our knowledge, no other robot can inspect live transmission lines with the same degree of precision and same tools as the LineScout technology offers. It allows line workers to perform a number of jobs from the ground, rather than working on live conductors.

Some companies use helicopters for this type of inspection, but this is expensive and often doesn’t allow workers to get close enough to lines to obtain precise information.

The La Grande-1 facility, a run-of-river generating station operated by Hydro-Quebec, has an installed capacity of 1,436 MW. Hydro-Quebec is the among the world’s largest producers of hydropower.

Q: What are you most proud of at Hydro-Quebec?

Vandal: I’m so proud of the people we have throughout the company, as well as the young generation of Quebecers now coming into the industry. There’s a lot of talent here to help the organization grow in the future.

These are the people who manage C0 billion worth of assets, including one of the most sophisticated transmission grids in the world. These are the people who run our construction division and the project management for more than CA$20 billion worth of projects of all sizes, including the C$6.5 billion Romaine hydro project under construction at this time. These are the people who do the R&D to keep us at the technological forefront of our industry.

There’s so much you can do in our industry with the right talent.

Kristen Wright is senior editor for Electric Light & Power magazine. This article previously ran in Electric Light & Power, which is also published by Pennwell, in December 2010.

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