Electric Light & Power 2010 Utility of the Year Hydro-Quebec

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by Kristen Wright, associate editor

President and CEO Thierry Vandal
This year Electric Light & Power editors named Canada's largest electricity producer and the world's largest hydroelectric power producer as the magazine's Utility of the Year. The winner is Hydro-Québec, a utility that's contributing to a cleaner environment and making record profits while keeping rates low for customers.

The Canadian state-owned utility with some 23,000 employees generates 98 percent of its electricity from hydropower. Its generating fleet includes 60 hydroelectric, one nuclear and 27 thermal generating stations, plus a wind farm for an installed capacity of 36,810 MW. Hydro-Québec TransÉnergie operates the most extensive transmission system in North America, with more than 20,656 miles of lines at different voltages and 515 substations.

In 2009, Hydro-Québec posted a record income from continuing operations of more than CA$3 billion ($2.9 billion) resulting from strict, controlled operating expenses and management of market risks. As for 2009 capital investments, the utility made CA$4.3 billion, most of which went to development and growth projects for Hydro-Québec Production, Hydro-Québec TransÉnergie, Hydro-Québec Distribution and the Energy Efficiency Plan.

Daniel-Johnson dam

In June, the Edison Electric Institute named Hydro-Québec a joint winner of the 2010 Edison Award alongside British Columbia Transmission Corp., which is now part of BC Hydro, for their partnership in using LineScout Technology. Hydro-Québec's Research Institute (IREQ) developed the remote-controlled robot equipped with cameras to inspect high-voltage transmission lines across long passages. LineScout can service energized lines, saving time and money and reducing risks for workers. Recently it has been used on large, water-crossing transmission lines in British Columbia.

Hydro-Québec also seems well-liked by its customers. The September-October issue of Electric Light & Power magazine 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-Québec 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.

Above all, electricity rates paid by Hydro-Québec's residential customers are among the most advantageous in North America.

What's the secret up north? We interviewed Hydro-Québec President and CEO Thierry Vandal about the utility's success.

ELP: What is Hydro-Québec doing to keep customers happy?
Vandal: There are a lot of initiatives underway in various areas of our business. We're offering major energy efficiency programs in all market segments. Close to CA$1.8 billion has been invested so far in energy efficiency measures throughout Québec.

Hydro-Québec is investing in both the transmission and distribution grids to ensure long-term reliability and drive efficiencies through selected smart grid/AMI applications.

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

And our customers obviously like that our rates aren't increasing right now. They went up by only 0.2 percent in 2010, and we haven't asked for an increase at all for 2011. In fact, the rate applicable to Hydro-Québec's residential customers is among the most advantageous in North America. For residential customers, Montréal has the lowest rates on the continent.

ELP: Hydro-Québec's generating fleet is 98 percent hydroelectric? In what other renewable initiatives is the utility involved? 
Vandal: Yes, a full 98 percent of Hydro-Québec'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-Québec is also adding a lot of wind power to the grid. We should have about 4,000 MW in Québec 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.

Other renewables such as geothermal and solar are in a more high-end niche in Québec at this time.

ELP: Hydro-Québec has sold energy to Vermont utilities since the 1980s. Last August, H.Q. Energy Services, a Hydro Québec subsidiary, signed a 26-year contract to sell up to 225 MW of predominately hydroelectric 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, namely Vermont Public Power Supply Authority, Vermont Electric Cooperative Inc., Vermont Marble Power Division of Omya Industries Inc., the Town of Stowe Electric Department and the Burlington Electric Department. How does U.S. energy policy, or the lack thereof, affect Hydro-Québec?
Vandal: Hydro-Québec has been providing reliable, cost-effective power to a number of U.S. markets, primarily in New England and New York, for many decades now. This will continue and expand in coming years. The new Vermont contract attests to the quality of the relationship we've established with our U.S. partners over the years.

LineScout robot inspecting a line above St. Lawrence River

Energy policy in North America and across the world is clearly moving towards 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 Québec 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. We have a number of large projects underway in this regard. One of the most exciting projects we're involved with at this time is the Northern Pass Transmission Project in New England, a major new direct current line running from Québec into southern New Hampshire. This is a CA$1.1 billion investment by our U.S. partners, Northeast Utilities and NSTAR, supported by a transmission service agreement contracted by Hydro Renewable Energy, a U.S. subsidiary of Hydro-Québec. We're also looking at other potential transmission projects, in New York, for example.

La Grande-1 dam in the Baie-James region

ELP: What is hydropower's contribution to the fight against climate change?
Vandal: Québec hydropower with reservoirs emits 40 times less greenhouse gas than natural gas power stations and 100 times less than coal-fired generating stations. Hydropower does well when compared with other renewable energies, as well. On a life cycle basis, greenhouse gas emissions from our reservoir generating stations 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 percent of greenhouse gas emissions in Québec in 2007. By exporting this clean, renewable energy, Hydro-Québec helps to limit greenhouse gas emissions across northeastern North America.

Since 2001, more than 39 million metric tons (43 million tons) of greenhouse gas emissions have been avoided in the northeast as a result of energy exports from Québec. That is pretty much equal to the yearly emissions of 10 million cars.

ELP: How is operating in Canada different from operating a utility in the United States? 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-Québec has a single shareholder: the Québec government. We're an integrated utility with close to CA$70 billion worth of assets, about half in the transmission and distribution side of the business 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, FERC-based nondiscriminatory open access transmission tariffs are the norm in Canada. We adopted this in Québec back in 1997.

One distinction that you can make, if you compare Hydro-Québec with other large utilities, is that the 

New interconnection with Ontrrio (salle des valves a thrytors)
engineering and construction side of our business is perhaps more significant. Right now we have a number of large hydro projects under construction, and we do the project management, 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-Québec. 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-Québec's divisions.

ELP: Ontario is involved in a large smart meter rollout. Does Québec have similar plans? Are Canadian customers giving smart meters a warm reception? Do they understand what smart grid means?
Vandal: We have a large-scale advanced metering infrastructure rollout underway. 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 so it's too early to get a sense of overall acceptance.

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.

ELP: How is Hydro-Québec preparing for electric vehicles?
Vandal: This is an exciting new area for our industry in the long term, and Hydro-Québec 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.

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-Québec's stewardship, the international scientific conference for lithium-ion batteries was held here in Montreal earlier this year. We're also active in the field of electric motors for electric vehicles through our TM-4 affiliate. TM-4 is supplying the motors and power electronics going into Tata's Indica model in Europe. The Tata Group from India, the owners of Jaguar/Land Rover, are actively developing an electric vehicle segment.

We're also involved in a number of pilot projects to test electric vehicles, with Mitsubishi, Nissan, Ford and Toyota in Québec. And we're looking at the necessary recharge infrastructure. We've been plugging in our cars in Québec for a long time in the winter so that the engine starts when it's really cold. Our distribution grid is also quite robust because the majority of homes use electricity for home heating in Québec. We don't see this as being a big issue for capacity.

Sarcelle construction site, Eastmain 1-A-Arcelle-Rupert, in August

These initiatives could have substantial environmental benefits. If Québec replaced 25 percent 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.

ELP: Your territory is much colder than most of the United States. What does Hydro-Québec 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 Québec. 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 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.

ELP: Recently the Edison Electric Institute named Hydro-Québec 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, 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-Québec's research institute, and Hydro-Québec worked actively with the British Columbia Transmission Corp. (BCTC), which is now part of BC Hydro, to test the LineScout on a transmission line that crosses an ocean inlet in the Vancouver area. The 2-mile 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 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 LineScout. It allows line workers to do 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. LineScout could be a great solution to many companies in this way.

ELP: What are you most proud of at HQ?
Vandal: I'm so proud of the people we have throughout the company and the young generation of Québecers 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 CA$70 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 over CA$20 billion worth of projects of all sizes, including the CA$6.5 billion Romaine hydroelectric 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.

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