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.

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 percent 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 CEO 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 percent hydroelectric? In what other renewable initiatives is the utility involved?

Vandal: Yes, a full 98 percent 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 percent of GHG emissions in the province in 2007. By exporting this clean energy, Hydro-Quebec helps limit GHG emissions across northeastern North America.