RELIABILITY OF RENEWABLE ENERGY: HYDRO
Jordan Lofthouse, BS, Strata Policy
Randy T Simmons, PhD, Utah State University
Ryan M. Yonk, PhD, Utah State University
The Institute of Political Economy (IPE) at Utah State University seeks to promote a better understanding of the foundations of a free society by conducting research and disseminating findings through publications, classes, seminars, conferences, and lectures. By mentoring students and engaging them in research and writing projects, IPE creates diverse opportunities for students in graduate programs, internships, policy groups, and business.
PRIMARY INVESTIGATORS:
Jordan Lofthouse, BS Strata Policy Randy T Simmons, PhD Utah State University Ryan M. Yonk, PhD Utah State University
STUDENT RESEARCH ASSOCIATES:
Dan Butler Devin Stein Michael Cox
TABLE OF CONTENTS Executive Summary ...... 1 Introduction ...... 2 How Does Hydropower Function? ...... 3 Large-scale Hydropower ...... 3 Small Hydropower ...... 4 Retrofitting Non-Powered Dams ...... 4 Conduit-based Hydropower ...... 4 Large Potential to Retrofit and Uprate Existing Dams ...... 5 Physical Reliability ...... 5 Meeting Consumer Demand ...... 6 Consistency ...... 6 Physical Potential to Retrofit Non-Powered Dams ...... 7 Geographic Versatility ...... 8 Effects of Climate Change on Hydropower ...... 8 Verdict on Physical Reliability ...... 9 Environmental Reliability ...... 9 Environmental Reliability of Retrofitting Non-powered Dams ...... 9 Effects of New Dam Construction on Wildlife & Riparian Habitat ...... 10 Retrofitting Small Dams Can Increase Fish Mortality ...... 11 Verdict on Environmental Reliability ...... 11 Economic Reliability of Hydropower ...... 12 Financing Hydropower ...... 12 Regulatory Burden on Hydropower ...... 15 State Policies ...... 17 Renewable Portfolio Standards ...... 17 Other State Level Policies ...... 18 Federal Policies ...... 18 Current Licensing Process ...... 19 Hydropower Regulatory Efficiency Act ...... 21 Effects of the HREA ...... 21 Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act ...... 22 Case Study: Hydropower in Logan, Utah ...... 23 Verdict on the Economic Reliability ...... 24 Conclusion ...... 24
EXECUTIVE SUMMARY
In this report, Utah State University’s Institute of Political Economy (IPE) examines the environmental, economic, and physical implications of hydropower to assess its overall reliability as an energy source. Assessing hydropower's reliability will help determine whether increasing the use of hydropower is a worthwhile investment. IPE found that hydropower is a reliable, but underutilized, source of electricity because unnecessarily burdensome government regulations limit access to this clean and reliable energy source.
Hydropower is more efficient than most other electricity sources and can run consistently with little maintenance, making it an ideal source of baseload power. Hydropower can meet electricity demand consistently because hydropower is nearly always operational. A hydropower plant can also increase or decrease the level of water flowing through its turbines to flexibly meet changes in electricity demand.
Because many of the most ideal large-scale dam sites have already been developed, the construction of new large- scale hydroelectric facilities is unlikely. Existing large-scale hydropower continues to provide clean, renewable energy at a low cost to American consumers. With new efficiency improvements, called "uprating," overall energy production from large-scale hydropower can increase by up to 50 percent.
The United States has more than 80,000 non-powered dams, many of which can be retrofitted with small hydroelectric facilities. Converting non-powered dams to hydroelectric plants has the potential to generate up to 12 gigawatts of energy capacity without the environmental consequences of building new dams. The minimal environmental impacts of retrofitting existing dams can be further reduced by selecting turbines that minimize fish mortality. Small-scale hydropower’s efficiency, reliability, and geographic ubiquity make it a logical investment across the country.
Hydropower’s levelized cost of electricity (LCOE) of 2 cents per kilowatt-hour is among the lowest of all energy sources. The LCOE compares the full cost of an electricity source, considering capital, maintenance, operations, and fuel costs. Most of hydropower’s cost is derived from physical construction of the hydropower dam, so retrofitting non-powered dams and conduits reduces the cost substantially. In general, efficiency improvements and additional development at already-powered dams have lower development barriers than development at non-powered dams because of the difficulty of connecting to an electric grid.
Financing a hydropower project can be problematic because most hydropower developments are capital intensive with long payback periods. In many cases, high capital costs coupled with the process of selling to bulk power markets makes hydropower development too risky to attract investment. A 2015 report for the Maine Governor’s Energy Office found that project permitting and licensing, project financing, and grid interconnection are the three primary barriers to hydropower’s economic viability.
The largest deterrent to hydropower investments is the regulatory burden put on developers. The complex process of licensing and approving a project, most of which is instituted by the Federal Energy Regulatory Commission (FERC) stifles hydroelectric development. A convoluted regulatory process makes the cost of retrofitting existing dams and conduits prohibitively high for most developers, despite recent legislation intended to encourage hydroelectric development.
Hydropower is a reliable, cost effective, and environmentally friendly way to increase renewable energy production in the United States. Despite hydropower’s ability to augment U.S. energy production, federal regulations stifle its growth. Hydropower will not develop fully while unnecessary federal regulatory barriers stand in the way of small hydropower development in the United States.
Reliability of Renewable Energy: Hydro 1
INTRODUCTION
As Americans are becoming more concerned about climate change and environmental quality, many want to see an increase in renewable energy production. Federal and state policymakers have responded to their constituents by creating subsidies and mandates that encourage the use of renewable energy sources like hydropower. Although hydropower is subsidized as a renewable energy source, a 2015 report from the Department of Energy acknowledges that hydropower receives only half the credit that is provided to other renewables.1
Hydropower has historically been the most used renewable energy resource in the United States because all states have available hydropower resources.2 The United States has relied on hydroelectric energy production for over a century.3 By the 1940s, hydropower accounted for one-third of the electricity generated in the United States.4 The growth in newly installed capacity began to slow in the United States in the 1970s, when Congress enacted a series of environmental protection policies that severely limited dam construction.5 In 2014, hydroelectric facilities provided approximately 6 percent of the United States’ electricity generation, a higher proportion than any other renewable energy source.6 7
IPE has designed this report to examine the reliability of hydropower. Assessing hydropower's reliability is a major component in determining whether hydropower is a worthwhile investment as an energy source. “Reliability” can be an ambiguous term, however, and this report’s definition goes beyond hydroelectric power’s ability to consistently meet energy demand. IPE explored the environmental, economic, and physical implications of hydroelectric power to assess its overall reliability as an energy source. For the purposes of this report, IPE defines "reliability" in three ways:
• Physical reliability is the ability of an alternative electricity source to consistently meet electricity demands without disruptions in energy supply. • Environmental reliability is the ability of an alternative electricity source to have fewer negative environmental impacts than traditional fossil fuels. • Economic reliability is the ability of an alternative electricity source to be cost -competitive and sustainable in a market without government mandates and subsidies.
This report begins with an overview of how hydropower works, followed by a comparison of large- and small-scale hydropower. Efficiency improvements of large-scale hydropower offers new energy capacity, but the primary focus of this report is on small and micro-scale hydropower. The main body of this report consists of an assessment of the physical, environmental, and economic reliability of hydropower, with particular emphasis on small and micro-scale hydropower. This report concludes by determining the overall reliability of hydropower and whether current hydropower policies are beneficial.
1 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 23. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 2 National Hydropower Association. (n.d.). US Hydropower Industry Snapshot. Retrieved from: http://www.hydro.org/why- hydro/available/industrysnapshot/ 3 U.S. Department of Energy. (n.d.) History of Hydropower. Retrieved from: http://energy.gov/eere/water/history-hydropower 4 Pew Center on Global Climate Change. (2009, October). Hydropower. p. 4. Retrieved from: http://www.circleofblue.org/waternews/wp- content/uploads/2010/10/Hydropower10-09_FINAL_cleanPDF.pdf 5 Uría-Martínez, R., O’Connor, P., Johnson, M. (2015, April). 2014 Hydropower Market Report. Oak Ridge National Laboratory. p. 8. Retrieved from: http://www.energy.gov/sites/prod/files/2015/04/f22/2014%20Hydropower%20Market%20Report_20150424.pdf 6 U.S. Energy Information Administration. (2015, March 31). What is U.S. electricity generation by energy source? Retrieved from: http://www.eia.gov/tools/faqs/faq.cfm?id=427&t=3 7 If nuclear is classified as a renewable energy source, hydropower generates the second highest proportion of renewable energy behind nuclear.
Reliability of Renewable Energy: Hydro 2
HOW DOES HYDROPOWER FUNCTION?
In a hydroelectric installation, water from a river or stream is diverted through a channel or penstock to a turbine housing, where the kinetic energy of flowing water spins a turbine and rotates a shaft connected to the turbine. The shaft is connected to a generator that converts rotational energy into electrical energy. Once generated, the electricity is generally transmitted to an electrical grid.8 The three primary forms of hydropower are:9
• Impoundment hydropower plants are the most common type of hydropower plant. These plants use a dam to store water in a reservoir. Water is then released from the reservoir to turn a generator before being returned to the river below the dam. • Diversion hydropower plants, sometimes called run-of-river or conduit hydropower, channel a part of a river through a canal or penstock to reach a generator before being returned to the river. • Pumped storage hydropower plants are essentially the battery of hydropower plants. When electricity demand is low, these facilities use excess electricity to pump water uphill to a reservoir. When demand for electricity increases, pumped storage facilities release the water through a turbine to help meet demand. Once the water is pumped into the reservoir, these hydropower plants act like impoundment dams. Because pumped storage functions the same as impoundment dams in the electricity-generating process, this report refers to them in the same context. LARGE-SCALE HYDROPOWER
Many environmental advocates pressure policymakers to discourage the growth of large hydropower because they are concerned about negative environmental impacts. In addition, many of the most attractive large-scale dam sites have already been built, as evidenced by the average age of large dams being 35 years old.10 Political pressures and a limited number of available dam sites make future growth in large-scale hydropower unlikely.11
Discouraging hydropower is costly to energy consumers because hydropower can be one of the most cost-effective sources of electricity. A study from the International Renewable Energy Agency found that existing large-scale hydropower facilities provide energy at lifecycle costs between $0.02 and $0.19 per kilowatt-hour, with many hydropower projects being the most cost competitive sources of electricity generation.12 Further, studies conducted on efficiency improvements at existing dams, known as “uprating,” indicate that the United States has potential to increase hydropower production by anywhere from 8 to 50 percent of current output.13 Estimates of uprating generally consist of replacing outdated and inefficient turbines, but can also be as simple as installing more accurate computer controls for gates, switches, and monitoring equipment. 14 A 1998 report by the Department of Energy (DOE) conservatively estimated that uprating can add 30,000 megawatts of undeveloped hydroelectric capacity after
8 U.S. Department of Energy. (2012, July 2). Microhydropower Systems. Retrieved from: http://energy.gov/energysaver/articles/microhydropower-systems 9 U.S. Department of Energy. (n.d.) Types of Hydropower Plants. Retrieved from: http://energy.gov/eere/water/types-hydropower-plants 10 Arthur, M., Saffer, D., Belmont, P. (n.d.) The Future of Dams: Developing Nations. InTeGrate. Retrieved from: https://www.e- education.psu.edu/earth111/node/895 11 Pew Center on Global Climate Change. (2009, October). Hydropower. p. 4. Retrieved from: http://www.circleofblue.org/waternews/wp- content/uploads/2010/10/Hydropower10-09_FINAL_cleanPDF.pdf 12 International Renewable Energy Agency. (2012, June). Hydropower. p. i. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf 13 Kosnik, L. (2008, June 24). The potential of water power in the fight against global warming in the US. Energy Policy 36. p. 6. Retrieved from: http://www.umsl.edu/~kosnikl/Saved%20Emissions.pdf 14 Kosnik, L. (2008, June 24). The potential of water power in the fight against global warming in the US. Energy Policy 36. p. 12. Retrieved from: http://www.umsl.edu/~kosnikl/Saved%20Emissions.pdf
Reliability of Renewable Energy: Hydro 3
considering the environmental, legal, and institutional constraints.15 More recent reports by the DOE have focused on constructing new dams and uprating federally-owned facilities specifically. The 1998 DOE report is the most recent assessment of full U.S. potential to uprate existing dams. Technology improvements in the past decade will likely increase capacity more than the 30,000 megawatt estimate from 1998. Large-scale hydropower will continue to provide renewable energy for the United States, and uprating will increase energy output. SMALL HYDROPOWER RETROFITTING NON-POWERED DAMS
Thousands of existing non-powered dams (NPDs) in the United States can be converted into small hydropower facilities without significantly impacting river health and surrounding wildlife. Non-powered dams are found in all 50 states, and the environmental consequences of damming have already impacted their associated waterways. For many of these dams, substantial hydroelectric potential exists, but remains unutilized.
A study conducted by Oak Ridge National Laboratory assessed 54,000 NPDs in the continental United States and found the physical potential to add up to 12.1 gigawatts of new energy capacity by retrofitting existing dams with hydroelectric facilities.16 While this study did not consider economic limitations, it still highlights how many potential hydroelectric resources are undeveloped today.
A large deterrent to this untapped energy potential is the regulatory burden that plagues the licensing process for retrofitting NPDs. The licensing process for hydroelectric plants is a complex and time-intensive burden on developers, as will be discussed later in this report. NPD conversion projects do not have as many environmental impacts as constructing new dams, but they require a similarly long licensing process.
CONDUIT-BASED HYDROPOWER
Conduit-based hydropower consists of building turbines in man-made waterways, such as aqueducts, tunnels, and pipes. Pressurized pipelines and canals that deliver water to consumers are often viable options for conduit-based hydropower projects. Conduit-based hydropower repurposes existing water infrastructure to produce hydropower without any dams or diversions.17
Conduit-based hydropower uses gravity and water pressure to generate electricity. The overall output is influenced by the efficiency of the turbine, as well as the distance the water drops (known as net head) and total water discharge at a specific location. The water flow in conduits is generally not continuous, however, so conduit-based projects usually produce less electricity and at lower efficiencies than other forms of hydropower. 18 Despite lower output and efficiency, conduit-based hydropower still offers substantial potential to increase renewable energy capacity. Federal agencies have not recently assessed national conduit-based hydropower potential, but many states have investigated their in-state potential. For example, Colorado found a power production potential of 738 gigawatt-hours per year in undeveloped hydro resources. 19 California has the potential to produce 1,122 more gigawatt-hours of conduit-
15 Conner, A., Francfort, J., Rinehart, B. (2008, December). U.S. Hydropower Resource Assessment Final Report. Idaho National Engineering and Environmental Laboratory. p. iii. Retrieved from: http://www1.eere.energy.gov/wind/pdfs/doewater-10430.pdf 16 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. p. 22. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf 17 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. iii. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 18 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 15. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 19 The Colorado Energy Office. (n.d.). Small Hydropower Handbook. p. 8. Retrieved from: http://www.ext.colostate.edu/energy/hydro-
Reliability of Renewable Energy: Hydro 4
hydropower per year.20 Oregon could produce an additional 9,040 gigawatt-hours per year, and Massachusetts an additional 39.5 gigawatt-hours per year.21
Risk aversion to new technologies is a large deterrent to conduit-based hydropower. Because few conduit hydropower plants exist, most developers have little to no understanding or experience with the currently available conduit-based hydroelectric technologies. Many new cost-competitive technologies appear risky to investors because they do not have long operational track records.22 Finding data on cost alone is problematic because many conduit-based projects are so small that the Federal Energy Regulatory Commission does not require cost information on their applications or application exemptions.23 No comprehensive national assessments of the undeveloped energy potential from water conduits exist, making it even harder for developers to find available opportunities.24
Risk aversion to conduit hydropower is also the result of many water pipelines being owned by publicly-owned utilities. Publicly-owned water suppliers are often governed by elected boards that fear public response to projects that will not be paid off during their terms in office and require rate hikes. Furthermore, water and wastewater utilities are risk averse to spending their limited budgets on projects that do not fulfill their responsibilities to collect and distribute water.25 LARGE POTENTIAL TO RETROFIT AND UPRATE EXISTING DAMS
The United States has enormous potential to expand hydropower by retrofitting existing dams, developing conduit- based hydroelectric facilities, and uprating existing hydroelectric plants. The conversion of existing non-powered dams (NPDs) and conduits into small and micro-scale hydroelectric facilities would allow energy developers to take advantage of an energy source that is being unused. 26 This report emphasizes the economic, physical, and environmental implications of small- and micro-scale hydroelectric projects that do not necessitate new dam construction, but still offer substantial potential for new renewable energy capacity. PHYSICAL RELIABILITY
Hydropower is a physically reliable source of electricity because it efficiently and consistently converts water's kinetic energy into electricity. Hydropower can generate a baseload supply of electricity, and can adjust output to meet electricity demand. As long as flowing water is available, hydropower plants of any size can reliably generate electricity.
handbook.pdf 20 Navigant Consulting. (2006, June). Statewide Small Hydropower Resource Assessment. p. 13-14. Retrieved from: http://www.energy.ca.gov/2006publications/CEC-500-2006-065/CEC-500-2006-065.PDF 21 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 18. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 22 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 22. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 23 Zhang, Q., Smith, B., Zhang, W. (2012, October). Small Hydropower Cost Reference Model. Oak Ridge National Laboratory. p. 9. Retrieved from: http://info.ornl.gov/sites/publications/files/pub39663.pdf 24 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 22. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 25 Christian-Smith, J., Wisland, L. (2015, April). Clean Energy Opportunities in California’s Water Sector. Union of Concerned Scientists. p. 13- 14. Retrieved from: http://www.ucsusa.org/sites/default/files/attach/2015/04/clean-energy-opportunities-in-california-water-sector.pdf 26 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. p. vii. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf
Reliability of Renewable Energy: Hydro 5
MEETING CONSUMER DEMAND
Hydropower can serve as both a baseload and peak power source. A baseload power source is an energy source that can meet the minimum level of energy demand for a given area. Baseload power sources are able to supply the electric grid with an almost constant flow of energy that can meet electricity demand throughout the day. Hydropower can consistently meet demand because hydroelectric plants are always operational, except when maintenance must be performed. Peak power plants augment baseload power sources when electrical demand reaches its peak levels during the day. Although hydropower is often used as a baseload power source it can also function as a peak power source. Most hydropower plants can increase the level of water flow their turbines receive, thus augmenting power output to meet peak demand.27 CONSISTENCY
Hydropower is physically reliable because it is more efficient than many other energy sources and can run consistently with little maintenance, making it an ideal source of baseload power. For decades, hydropower has proven to be a source of renewable energy that millions of Americans rely on to meet their daily electricity needs.
One of small-scale hydropower’s most obvious advantages is its ability to efficiently and consistently meet electricity demand. One measure of hydropower’s efficiency is its capacity factor. Capacity factor is a ratio calculated by dividing a power plant’s output by the plant’s potential maximum output over a set time period. In other words, a capacity factor is the amount of power a facility actually produces compared to the amount it can potentially produce. According to the Energy Information Administration (EIA), hydroelectric power plants in the United States have an average capacity factor of 39.8 percent, although this number is skewed by the fact that hydroelectric plants are both baseload and peak power sources.28 Baseload power sources will generally have high capacity factors because they run at nearly full capacity consistently, while peak power plants generally have much lower capacity factors because their energy output varies substantially. The capacity factor for small and micro hydroelectric plants is estimated around 50 percent, well above some estimates for wind power’s 30-35 percent and solar power’s 20 percent capacity factor.29 Hydropower’s capacity factor is slightly lower than that of coal and natural gas, which are 60 and 47 percent, respectively.30 Capacity factors can be misleading because peak power sources like natural gas adjust output to meet demand, thus giving them low capacity factors. In other words, any energy source that does not consistently generate its full potential of electricity will have a lower capacity factor. Capacity factors can also be misleading because dams often have secondary purposes like flood control that limit the amount of water that can be released for electricity generation, while other forms of power generation have no other purpose than generating electricity. In addition, because calculation methods vary, capacity factor estimates also vary.
A different measure of hydropower’s efficiency is its conversion efficiency. Conversion efficiency is a ratio of electrical output to energy input. For hydropower, conversion efficiency is a measure of electricity generated relative to the amount of water that passes through a hydroelectric turbine. Hydropower has one of the highest, if not the highest, conversion efficiencies of any major energy source, ranging from 60 to 90 percent. This efficiency generally decreases slightly as the size of the turbine decreases. The conversion efficiency for micro-scale hydropower plants is around 60-
27 KCET. (n.d.) Explainer: Base Load and Peaking Power. Retrieved from: http://www.kcet.org/news/redefine/rewire/explainers/explainer-base- load-and-peaking-power.html 28 U.S. Energy Information Administration. (2011, April). Electric Power Annual 2009. p. 48. Retrieved from: http://www.eia.gov/electricity/annual/archive/03482009.pdf 29 Open Energy Information. (n.d.) Transparent cost database - Capacity factor. Retrieved from http://en.openei.org/apps/TCDB/ 30 U.S. Energy Information Administration. (2015, August 26). Electric Power Monthly. Retrieved from: http://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_6_07_a
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80 percent.31 The conversion efficiency for photovoltaics is around 15 percent, wind is around 35 percent, and steam coal is around 39 to 47 percent.32 PHYSICAL POTENTIAL TO RETROFIT NON-POWERED DAMS
Although retrofitting non-powered dams (NPDs) with turbines can enlarge our nation’s renewable energy output, physical and economic limitations affect the feasibility of making these conversions. The United States' abundance of NPDs does not address the ease of actually developing small hydropower. Economic feasibility is best determined on a case-by-case basis, but the United States has physical potential to convert thousands of NPDs to hydroelectric generators. Figure 1 shows the locations of non-powered dams throughout the contiguous United States with a potential capacity greater than one megawatt.
FIGURE 1. NON-POWERED DAM CONVERSION POTENTIAL.33
Oak Ridge National Laboratory found that U.S. NPDs alone have the potential to add up to 45 terawatt-hours of new renewable energy production per year, representing a 15 percent increase in the output of existing conventional hydropower. Most of this potential comes from just 100 NPDs, with the top 10 facilities alone capable of adding up to 3 gigawatts of new hydropower capacity. Most of these top 100 NPDs are U.S. Army Corps of Engineers facilities, and 260 megawatts of potential capacity is held by the U.S. Bureau of Reclamation.34
Hydroelectric power plants are found in all 50 states, but Oak Ridge’s study only looked at the continental United States. The report concluded that all 48 states in the continental U.S. have the potential to convert existing NPDs into hydroelectric plants. States with the most potential include Arkansas, Illinois, and Kentucky. States with the least potential include Delaware, Nebraska, and South Dakota.35
31 Uhunmwangho, R., Okedu, E. (2009, November). Small Hydropower for Sustainable Development. The Pacific Journal of Science and Technology (Volume 10, Number 2). p. 537. Retrieved from: http://www.akamaiuniversity.us/PJST10_2_535.pdf 32 Eurelectric. (2003, July). Efficiency in Electricity Generation. p. 11-12. Retrieved from: http://www.eurelectric.org/Download/Download.aspx?DocumentID=13549 33 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. U.S. Department of Energy. p. viii. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf 34 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. p. vii-viii. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf 35 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. p. 25. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf
Reliability of Renewable Energy: Hydro 7
Small-scale and micro-scale hydropower plants require some basic geographic features to operate. Like large-scale hydroelectric plants, small-scale projects require a consistent flow of water caused by a change in elevation. The change in elevation from the highest point of the water flow to the location of the turbine is known as the net head. When conducting their study on the hydroelectric generation potential of NPDs in the United States, Oak Ridge researchers did not include NPDs less than five feet tall. This exclusion ensured that all of the dams identified as potential hydropower plants had net heads large enough to power a hydroelectric turbine.36
GEOGRAPHIC VERSATILITY
Small-scale hydropower’s geographic versatility gives it an advantage over other renewable energy sources. Because small hydropower can be implemented along countless water sources, power production occurs much closer to the electricity’s final destination. Large-scale hydropower, in contrast, cannot always be built close to population centers and often requires large transmission infrastructure. The vast number of NPDs and conduits that can be converted into hydropower plants make it more likely that future hydropower plants will be closer to communities using the power. Geographic proximity reduces the transmission loss of electricity, allowing a larger percentage of generated electricity to reach the consumer.
To ensure that small-scale and micro plants always have enough waterflow to function, engineers consider the annual minimum flow rate, or the lowest level of water flow during the year into the design of small hydropower plant. The annual minimum flow rate informs developers on how to construct hydropower plants to capture the power of moving water consistently throughout the year, even during times of low flow. Without considering the annual minimum flow rate, seasonal fluctuations would make hydropower much less reliable. If constructed appropriately based on minimum flow rate, even when water flow decreases because of low precipitation, the hydroelectric plant will still be able to function. EFFECTS OF CLIMATE CHANGE ON HYDROPOWER
Global climate change may impair the regional viability of hydroelectric power generation because hydropower is largely dependent on precipitation. The volume of precipitation in many locations may change as climate change progresses.37 Researchers at the Norwegian University of Science and Technology used future precipitation models to forecast how runoff changes will impact global hydropower development. Within the United States, the models show an overall runoff decrease in several plains states, as well as Texas and California of between 2.5 and 10 percent by 2050. In contrast, the Pacific Northwest and some Northeastern states are predicted to have an increase in runoff, ranging from 2.5 to 10 percent.38 The modeling employs the most recent climate data and indicates that some regions of the United States will undergo a change in runoff levels over the next 35 years.
Future studies conducted on a regional or state-by-state basis on how the volume of runoff will change will help hydropower developers determine which sites are most viable. Hydroelectric power developers recognize that global climate fluctuations might have a tangible impact on water supply, which will affect the viability and performance of future hydroelectric power plants. The predicted runoff change in one state, positive or negative, should incentivize
36 Hadjerioua, B., Wei, Y., Kao, S. (2012, April). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. p. vii. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf 37 Hamududu, B., Killingtveit, A. (2012, February 14). Assessing Climate Change Impacts on Global Hydropower. p. 305. Retrieved from: http://www.mdpi.com/1996-1073/5/2/305 38 Hamududu, B., Killingtveit, A. (2012, February 14). Assessing Climate Change Impacts on Global Hydropower. p. 322. Retrieved from: http://www.mdpi.com/1996-1073/5/2/305
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locales to design small-scale hydroelectric plants that can function with efficiency and a high capacity factor not only at present, but also in the future when the volume and flow rate of a water source has changed.
VERDICT ON PHYSICAL RELIABILITY
Hydropower serves as a source of baseload power, but it is also flexible enough to be used for peak power to meet changes in consumer demand. The conversion of the tens of thousands of NPDs and conduits would provide an immediate boost to our nation’s renewable energy output. Small hydropower plants can also be engineered to continue functioning based on predicted levels of runoff in coming decades, making them reliable sources of power despite fluctuations in global climate patterns. ENVIRONMENTAL RELIABILITY
For this report, “environmental reliability” is the ability of an alternative electricity source to have fewer environmental impacts than traditional fossil fuels. In existing literature, environmental reliability is most commonly referred to simply as an environmental impact.
Energy markets are a complex system of capital and production costs, subsidies, mandates, taxes and regulations, and environmental costs. We have not attempted a general equilibrium analysis of that complex system, so we do not identify the multiple policy distortions across energy markets. We simply identify the political and regulatory impediments to increased use of hydropower. Of course, increasing the amount of electricity supplied by hydropower will have ripple effects across all energy markets, just as will increases in production from any production sector. Increasing hydropower production will have few effects on environmental conditions.
Hydropower plants offer several environmental benefits. Hydropower does not consume any fuel in the electricity- generation process, and it does not produce any emissions once constructed. Constructing new dams for hydropower, however, does have local negative environmental impacts. Hydropower dams can accumulate sediment, change water flow patterns, simplify river channels, and increase methane emissions.39 40 Constructing a new dam creates a reservoir, increasing carbon dioxide and methane emissions because of decomposing flooded vegetation and soil organic matter. Emissions from reservoirs tend to decline during the aging process.41 Damming can also harm local fish and wildlife communities by obstructing migratory patterns and killing fish in turbines.
ENVIRONMENTAL RELIABILITY OF RETROFITTING NON-POWERED DAMS
The United States does not need to build new dams to expand hydropower production, and retrofitting is much more environmentally sound. Constructing new dams has huge environmental consequences, but the United States has an abundance of existing dams. In most cases, the environmental impacts of existing dams and waterways have already been realized, meaning any impact on the surrounding ecosystem has already been made.
39 In addition, large hydropower dams have been shown to reduce geomorphologic activity in the river bed, reduce flooding, reduce groundwater discharge, increase salinization of floodplain soil, destroy habitats, and alter riparian communities. See Nilsson (2000) for a detailed analysis of the environmental impacts of hydropower dams. 40 Nilsson, C., Berggren, K. (2000, September). Alterations of Riparian Ecosystems Caused by River Regulation. BioScience Vol. 50 No. 9. p. 783- 784. Retrieved from: http://bioscience.oxfordjournals.org/content/50/9/783.full.pdf+html 41 Barros, N. et. al. (2011, July 31). Carbon emission from hydroelectric reservoirs linked to reservoir age and latitude. Nature Geoscience. Retrieved from: http://www.researchgate.net/publication/235612531_Barros_N_Cole_JJ_Tranvik_LJ_et_al._Carbon_emission_from_hydroelectric_reservoirs _linked_to_reservoir_age_and_latitude._Nat_Geosci
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As with any manufacturing or construction process, building small-scale hydroelectric plants will produce some emissions. Manufacturing hydroelectric equipment and exhaust emissions from construction vehicles are two examples. 42 But, once small-scale hydroelectric plants are producing electricity, they emit nothing into the atmosphere.43 EFFECTS OF NEW DAM CONSTRUCTION ON WILDLIFE & RIPARIAN HABITAT
Some state policies specifically encourage new dam construction over retrofitting existing dams, as discussed in the “State Policies” section of this report. Although this report focuses on retrofitting existing dams and conduits, building new dams for hydropower has more far-reaching consequences than retrofitting. Martin Doyle, Director of Duke University’s Water Policy Program, claims that new small-scale dam construction can negatively affect the surrounding ecosystem. These effects can be difficult to measure because one small dam might have little impact. As more dams are added to the same watershed, however, the minimal environmental impacts of each facility add up to make more substantial damages. Doyle refers to these cumulative damages as “death by a thousand cuts.”44
Researchers working under the guidance of UNESCO investigated the environmental impact of small-scale hydropower on the Nu River in Central China. The study surveyed thirty-one small and four large hydroelectric dams on the Nu River and broke down their impacts into different categories, including water quality changes and diversity of habitats affected.45 The results from the study indicate that small dams returned a greater impact per megawatt-hour in terms of length of river channel affected, flooding of lands, designated conservation priorities, diversity of habitats, and water quality. Large dams had a greater impact on the potential for sediment transport disruption, as well as potential reservoir-induced seismicity and total land inundation.46
This study defined large hydroelectric dams as having an installed production capacity of 50 megawatts, while small dams produced less than 50 megawatts. This definition of small-scale hydroelectric plants differs from the one used in the United States, where small hydro plants are defined as having 25 megawatts of capacity or less.47 The study is still relevant because the mean output for small dams in the study was 19 megawatts, markedly less than 50 megawatts.48 The UNESCO study suggests that small hydropower is more harmful than large hydropower in some respects relative to the amount of electricity produced, although the study has an international focus and regulations for mitigating environmental impacts vary greatly between countries. All of the environmental impacts in this study are associated with damming a waterway, however, so converting existing dams and conduits allows for electricity generation without making these impacts.
42 International Renewable Energy Agency. (2012, June). Hydropower. p. 5. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf 43 Lorenzoni, A. et al. (n.d.) Strategic study for the development of Small Hydro Power in the European Union. European Small Hydropower Association. p. 22. Retrieved from: http://www.esha.be/fileadmin/esha_files/documents/publications/publications/BlueAGE.pdf 44 Levitan, D. (2014, August 4). As Small Hydropower Expands, So Does Caution on Its Impacts. Retrieved from: http://e360.yale.edu/feature/as_small_hydropower_expands_so_does_caution_on_its_impacts/2790/ 45 Kibler, K., Tullos, D. (2013, June 3). Cumulative biophysical impact of small and large hydropower development in Nu River, China. p. 10. Retrieved from: http://onlinelibrary.wiley.com/doi/10.1002/wrcr.20243/full 46 Kibler, K., Tullos, D. (2013, June 3). Cumulative biophysical impact of small and large hydropower development in Nu River, China. p. 56. Retrieved from: http://onlinelibrary.wiley.com/doi/10.1002/wrcr.20243/full 47 Kibler, K., Tullos, D. (2013, June 3). Cumulative biophysical impact of small and large hydropower development in Nu River, China. p. 9. Retrieved from: http://onlinelibrary.wiley.com/doi/10.1002/wrcr.20243/full 48 Kibler, K., Tullos, D. (2013, June 3). Cumulative biophysical impact of small and large hydropower development in Nu River, China. p. 51. Retrieved from: http://onlinelibrary.wiley.com/doi/10.1002/wrcr.20243/full
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RETROFITTING SMALL DAMS CAN INCREASE FISH MORTALITY
Turbines in hydropower plants can still pose lethal dangers to fish.49 Fish passing through turbines can be killed by swimming into spinning blades.50 Contact with migration devices, deflectors, or spillways can potentially be fatal too, but retrofitting existing dams does not necessitate constructing these technologies. In addition to direct contact with the turbine blades, a sudden change in the speed of the turbine can create enough turbulence in the water to tear fish apart.
Turbines can also cause water pressure changes that not all fish are capable of adapting to. These pressure changes can kill fish by rupturing their swim bladder, a gas-filled organ that fish use to change their buoyancy.51 A leading cause of fish death around a hydropower dam is cavitation. Cavitation is the formation of gas bubbles under low pressure behind a turbine that move to higher pressure water and implode. This implosion generates pressure waves that can damage turbines and kill fish.52
An oversaturation of nitrogen in the water can also be fatal. As air mixes with water passing through the dam, the air is forced to the bottom of the river, where higher pressure causes nitrogen in the air to dissolve into the water. Nitrogen enters the bloodstream of fish and forms nitrogen bubbles. These bubbles can block blood circulation, killing the fish.53 Fish may also become disoriented from their passage through a hydroelectric plant, which makes them an easier target for nearby predators. Studies indicate that predation is higher at sites where a hydropower plant releases water at a lower velocity than the velocity before reaching the dam.54
Fish mortality can be reduced with certain types of turbines in a hydropower plant. Francis and Kaplan turbines are two common types of turbine designs used in hydropower production. Different species of river fish have higher survival rates when traveling through Kaplan turbines, while others fare better swimming through Francis turbines.55 Concerned developers can select a turbine based on the types of fish species and other aquatic wildlife in a river or stream before constructing a plant or converting an existing dam. VERDICT ON ENVIRONMENTAL RELIABILITY
In the United States, tens of thousands of dams were constructed decades ago, and the environmental impacts have already been realized. With 54,000 NPDs capable of being converted to produce electricity, small-scale hydropower installations could take advantage of an untapped resource without substantial impact on the surrounding environment.56 The retrofitting process itself has a minimal effect on the environment, and does not disrupt wildlife
49 Therrien, J., Bourgeois, G. (2000, March). Fish Passage at Small Hydro Sites. The International Energy Agency. p. 13. Retrieved from: http://www.ieahydro.org/uploads/files/annexii_fish_passage_smallhydrosites.pdf 50 Therrien, J., Bourgeois, G. (2000, March). Fish Passage at Small Hydro Sites. The International Energy Agency. p. 13. Retrieved from: http://www.ieahydro.org/uploads/files/annexii_fish_passage_smallhydrosites.pdf 51 Therrien, J., Bourgeois, G. (2000, March). Fish Passage at Small Hydro Sites. The International Energy Agency. p. 14. Retrieved from: http://www.ieahydro.org/uploads/files/annexii_fish_passage_smallhydrosites.pdf 52 Princeton University. (n.d.) Fish Passage and Entrainment Protection. p. 32. Retrieved from: https://www.princeton.edu/~ota/disk1/1995/9519/951904.PDF 53 Collins, G. (1976, November). Effects of Dams on Pacific Salmon and Steelhead Trout. p. 45. Retrieved from: http://spo.nmfs.noaa.gov/mfr3811/mfr38116.pdf 54 Therrien, J., Bourgeois, G. (2000, March). Fish Passage at Small Hydro Sites. The International Energy Agency. p. 17. Retrieved from: http://www.ieahydro.org/uploads/files/annexii_fish_passage_smallhydrosites.pdf 55 Therrien, J., Bourgeois, G. (2000, March). Fish Passage at Small Hydro Sites. The International Energy Agency. p. 22. Retrieved from: http://www.ieahydro.org/uploads/files/annexii_fish_passage_smallhydrosites.pdf 56 Hadjerioua, B., Wei, Y., Kao, S. (April 2012). An Assessment of Energy Potential at Non-Powered Dams in the United States. Oak Ridge National Laboratory. Retrieved from: http://nhaap.ornl.gov/sites/default/files/NHAAP_NPD_FY11_Final_Report.pdf
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habitats or displace sediment that can exacerbate flooding. Small-scale hydropower does increase fish mortality. Developers can mitigate this increased fish mortality at hydroelectric dams by using environmentally conscious engineering designs. ECONOMIC RELIABILITY OF HYDROPOWER
For this report, “economic reliability” is the ability of an electricity source to sustain itself in a market without government mandates and subsidies. Economic reliability also includes the ability of an energy source to sustain itself in the market without undue burdens from government policies or regulations. Economic reliability refers to what existing literature generally refers to as economic viability and compatibility.
Many politicians and environmentalists are interested in developing renewable energy sources, and while wind and solar receive billions in subsidies from the federal government, hydropower is an ignored renewable source of energy. Wind and solar subsidies distort the renewable energy market, making it harder for hydropower to compete. Hydropower receives different tax treatment than other renewable energy sources and, until recently, has not received a production tax credit. According to the Department of Energy, hydropower has received half of the credit that is provided to other renewable energy sources.57
More importantly, the biggest problem hydropower faces is the regulatory burden that discourages investors. A complex licensing process and multiple-agency overlap increase the price of retrofitting and uprating existing dams. A congressional study found that the cost to get a FERC exemption for a residential-sized hydropower project would cost between $10,000 and $30,000, which is often more than the cost of hydroelectric equipment.58 While this burdensome regulation exists, energy developers will find it too costly to develop small- and micro-hydropower on a large scale, even though hydropower has one of the lowest levelized costs of electricity of any energy source at 2 cents per kilowatt- hour over the life of a project.59
Wind, solar, and other renewable energy sources are often too costly and, therefore, dependent on government subsidies. Furthermore, renewable energy sources like wind and solar are not actually as environmentally beneficial as generally believed.60 Hydropower, especially through conversion of NPDs to small- and micro-scale hydro, can be both a physically reliable and environmentally friendly way of meeting a state’s renewable energy mandates. FINANCING HYDROPOWER
Most hydropower developments are capital-intensive with long payback periods. In many cases, high capital costs coupled with the process of selling to bulk power markets make development too risky to attract investment.61 A 2015 report for the Maine Governor’s Energy Office found that project permitting and licensing, project financing, and grid interconnection are the three primary barriers to hydropower’s economic viability.62
57 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 23. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 58 113th Congress. (2013, February 4). Hydropower Regulatory Efficiency Act of 2013. Retrieved from: http://www.gpo.gov/fdsys/pkg/CRPT- 113hrpt6/html/CRPT-113hrpt6.htm 59 Frantzis, L. (2010, June 29). Renewable Energy Global and Domestic Market Drivers. Navigant Consulting. p. 6. Retrieved from: http://www.navigant.com/~/media/WWW/Site/Insights/Energy/Renewable%20Energy%20Global%20and%20Do_Energy.ashx 60 Please refer to the Institute of Political Economy’s recent True Cost of Energy report series and other Reliability of Renewable Energy reports. 61 Navigant Consulting. (2006, June). Statewide Small Hydropower Resource Assessment. Prepared for California Energy Commission. p. i. Retrieved from: http://www.energy.ca.gov/2006publications/CEC-500-2006-065/CEC-500-2006-065.PDF 62 Kleinschmidt. (2015, February). Maine Hydropower Study. Prepared for Maine Governor’s Energy Office. p. ii. Retrieved from: http://www.maine.gov/energy/publications_information/001%20ME%20GEO%20Rpt%2002-04-15.pdf
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FIGURE 2. TYPICAL INSTALLED COSTS AND LCOE OF HYDROPOWER PROJECTS.63
Figure 2 breaks down average costs for large and small hydropower, as well as for project upgrades and refurbishments. The total installed cost for a large-scale hydropower project typically ranges from $1,000 to $3,500 per kilowatt, but retrofitting existing dams may have costs as low as $500 per kilowatt. The price of a hydropower project is largely a function of its location, with projects at remote sites located far from existing transmission networks sometimes costing significantly more than $3,500 per kilowatt.64 A cost analysis of over two-thousand hydropower projects in the United States suggests that at least half of the potential 43 gigawatts of energy capacity can be developed for $1,600 per kilowatt or less.65 Hydropower’s capital cost of $1,600 per kilowatt is cost competitive with other energy sources, especially considering that hydropower does not require added fuel costs. The Energy Information Administration estimated capital costs of approximately $3,000 to $6,500 for coal plants, $5,500 for nuclear power, and $4,000 to $5,000 for solar.66
63 International Renewable Energy Agency. (2012, June). Hydropower. p. i. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf 64 International Renewable Energy Agency. (2012, June). Hydropower. p. 18. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf 65 Hall, D., Hunt, R., Reeves, K., Carroll, G. (2003, June). Estimation of Economic Parameters of U.S. Hydropower Resources. Idaho National Engineering and Environmental Laboratory. p. vii. Retrieved from: http://www1.eere.energy.gov/wind/pdfs/doewater-00662.pdf 66 U.S. Energy Information Administration. (2013, April). Updated Capital Cost Estimates for Utility Scale Electricity Generating Plants. p. 6. Retrieved from: http://www.eia.gov/forecasts/capitalcost/pdf/updated_capcost.pdf
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FIGURE 3. LEVELIZED COST OF ELECTRICITY OF VARIOUS ENERGY SOURCES.67
Figure 3 shows that hydropower’s estimated levelized cost of electricity (LCOE) is among the lowest of all energy sources. The LCOE compares the estimated lifecycle cost of an electricity source, considering capital, maintenance, operations, and fuel costs. The LCOE does not take every factor into account, however, including subsidies and regulatory environment. Because of this, the LCOE is a somewhat misleading comparison of the cost of different energy sources. Hydropower’s estimated LCOE of 2 cents per kilowatt-hour is substantially lower than natural gas and wind’s 6 cents, and solar photovoltaic’s 16.5 cents per kilowatt-hour.68 Most of hydropower’s cost is derived from physical construction of the hydropower dam, so retrofitting non-powered dams and conduits reduces cost substantially. For small- and micro-scale hydropower, however, electro-mechanical equipment may be the dominant cost. In more remote areas, access to an electric grid is likely to be a large barrier to development. In general, efficiency improvements and additional development at already powered dams have lower development barriers than development at NPDs because of the difficulty of connecting to an electric grid.
After paying the initial capital costs of a hydropower project, hydropower developers have low annual operations and maintenance (O&M) costs. The International Renewable Energy Agency estimates that hydropower’s O&M costs typically range from 1 to 4 percent of the investment cost per kilowatt. Large hydropower’s O&M costs are generally lowest, averaging around 2.2 percent, while estimates of small hydropower’s O&M costs range from 2.2 to 4 percent. Large hydropower developers pay roughly $45 per kilowatt each year, while small hydropower developers generally pay around $52 per kilowatt each year.69 Low O&M costs make hydropower an inexpensive source of electricity once initial capital costs are paid for.
A study prepared for the Maine Governor’s Energy Office found that in many cases one of the largest hurdles to a hydropower development is uncertainty in the permitting process that makes financing difficult to find. Hydropower has a long development timeline filled with uncertainties about requirements of the permitting process and expected outcomes. Hydropower does not attract the same investment other energy sources do because investors expect certainty in the development schedule, availability of a power purchase agreement (PPA), and permitting approval. Developers have little control over the development schedule and permit approval, and establishing a PPA with a grid operator without a guaranteed project timeline is difficult. A PPA is a contract to purchase the electricity generated
67 Frantzis, L. (2010, June 29). Renewable Energy Global and Domestic Market Drivers. Navigant Consulting. p. 6. Retrieved from: http://www.navigant.com/~/media/WWW/Site/Insights/Energy/Renewable%20Energy%20Global%20and%20Do_Energy.ashx 68 Frantzis, L. (2010, June 29). Renewable Energy Global and Domestic Market Drivers. Navigant Consulting. p. 6. Retrieved from: http://www.navigant.com/~/media/WWW/Site/Insights/Energy/Renewable%20Energy%20Global%20and%20Do_Energy.ashx 69 International Renewable Energy Agency. (2012, June). Hydropower. p. 24. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf
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from an energy source, and provides long-term economic stability to a project. Lenders are reluctant to finance a project without a PPA, and developers are unlikely to make long-term capital investments without the pricing assurance of a PPA. Respondents to a survey of hydropower developers in Maine claimed that without a PPA, financing a hydropower project is impossible.70
Hydropower is a long-term investment, with many projects having an expected life of longer than 50 years. Because of their long expected life, hydropower projects often have long payback periods. Many developers of conventional hydropower have planning horizons of between 20 and 50 years. A typical payback period for an upgrade to an already existing hydroelectric project is generally between 1.5 and 3 years, while major projects might have payback periods in the range of 7 to 11 years. In general, hydropower developers expect minimum payments of between 8.3 and 10 cents per kilowatt-hour of electricity generated.71
Economic considerations that affect hydropower development include site conditions, equipment needed, payback periods, and regulation, among others. The variation in cost per kilowatt for a hydropower project is determined by local site considerations, including the availability of an already existing dam. The biggest costs for a hydroelectric project, excluding regulation, are for electro-mechanical equipment, transmission networks, and construction of the physical dam. Over the course of hydropower’s long expected lifetime, the cost to produce electricity is relatively low. Hydropower developers face financing hurdles because lenders are less willing to invest in hydropower projects when the risk is substantially increased by regulation without a commensurate increase in potential payoff. The development timeline, requirements for the permitting process, and expected outcome are other uncertainties that may affect the economic viability of a project. While all of these economic considerations affect hydropower development, the slowed growth of hydropower following environmental legislation of the 1970s suggests regulatory burden is a substantial deterrent to the development of hydropower. REGULATORY BURDEN ON HYDROPOWER
Developers are discouraged from tapping into the vast small-hydroelectric potential in the United States by a slew of complex and burdensome federal regulations. Small hydropower is an efficient and inexpensive baseload source of electricity with virtually no additional environmental impact when retrofitting existing dams. Legislation limiting some of the regulations affecting small hydropower development has been passed as recently as 2013, but hydropower has yet to attract many new investors.
70 Kleinschmidt. (2015, February). Maine Hydropower Study. Prepared for Maine Governor’s Energy Office. p. 3-16. Retrieved from: http://www.maine.gov/energy/publications_information/001%20ME%20GEO%20Rpt%2002-04-15.pdf 71 Kleinschmidt. (2015, February). Maine Hydropower Study. Prepared for Maine Governor’s Energy Office. p. 3-16-3-17. Retrieved from: http://www.maine.gov/energy/publications_information/001%20ME%20GEO%20Rpt%2002-04-15.pdf
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FIGURE 4. HYDROPOWER INSTALLATION TIMELINE.72
The growth in hydroelectric power generation has been slowing since the 1970s, as seen in Figure 4, following enactment of environmental legislation including NEPA, the Endangered Species Act, and the Clean Water Act.73 Environmental legislation adds costly regulatory complexity to hydropower development.
Hydropower developers can find it difficult to find funding for the initial regulatory costs that have increased from 5 percent to as much as 25 to 30 percent of total project costs over the past 30 years. 74 Regulatory costs for conduit-hydropower are similar to those for conventional hydropower, consisting of permitting, licensing, post-licensing, relicensing, and environmental mandates, but conduit-based hydropower also requires an engineering assessment to determine how much electricity can be generated without jeopardizing existing water delivery functions. Further, the electrical grid interconnection process is uncertain, with increasingly complex grid interconnection requirements.75 76 Many conduit-hydropower developers must work with independent system operators to connect to an electric grid, and this process is both expensive and time consuming.77
72 Uría-Martínez, R., O’Connor, P., Johnson, M. (2015, April). 2014 Hydropower Market Report. Oak Ridge National Laboratory. p. 9. Retrieved from: http://www.energy.gov/sites/prod/files/2015/04/f22/2014%20Hydropower%20Market%20Report_20150424.pdf 73 Natural Resources Defense Council. (n.d.) Hydropower. Retrieved from: http://www.nrdc.org/energy/renewables/hydropower.asp 74 Oak Ridge National Laboratory, National Hydropower Association, Hydropower Research Foundation. (2010, April 7-8). Small Hydropower Technology: Summary Report on a Summit Meeting. p. 6. Retrieved from: http://www.esd.ornl.gov/WindWaterPower/SmallHydroSummit.pdf 75 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 22. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf 76 Oak Ridge National Laboratory, National Hydropower Association, Hydropower Research Foundation. (2010, April 7-8). Small Hydropower Technology: Summary Report on a Summit Meeting. p. 6. Retrieved from: http://www.esd.ornl.gov/WindWaterPower/SmallHydroSummit.pdf 77 U.S. Department of Energy. (2015, February). Pumped Storage and Potential Hydropower from Conduits. p. 23. Retrieved from: http://energy.gov/sites/prod/files/2015/06/f22/pumped-storage-potential-hydropower-from-conduits-final.pdf
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FIGURE 5. COST RELATIONSHIP OF HYDROELECTRIC CAPACITY.78
As Figure 5 suggests, costs for hydropower projects in general, but conduit projects in particular, rise rapidly at lower head heights and energy production capacities, making these projects less economically feasible. Even a small cost reduction in the initial capital costs of small hydropower can open many more sites for commercial development, unlike many other emerging energy technologies.79 One way to decrease these initial capital costs is to reduce the regulatory burden of initial project licensing.
In addition to these regulatory burdens, other forms of energy are heavily subsidized. For example, in 2013 wind energy received a total of $5,936 million in subsidies, solar received $5,328 million, and hydropower received only $395 million in subsidies.80 Not only is hydropower subject to a huge regulatory burden, but many developers are more interested in chasing the subsidies that come with less reliable and more expensive sources of energy production which guarantee profitability. STATE POLICIES RENEWABLE PORTFOLIO STANDARDS
State legislatures have established state-level mandates to encourage developing renewable energy sources. Renewable Portfolio Standards (RPS) are the most common renewable energy mandate, requiring a certain amount of a state’s energy portfolio to come from renewable resources by a set date. More than half of all states have enacted RPS with varying stringency. In Texas, for example, 10,000 megawatts of renewable energy must be developed by 2025, while Indiana has a voluntary RPS program asking for 7 percent of electricity to be generated by renewable resources between 2019 and 2024. States have varying definitions of what renewables are accepted in this standard and some state RPS passively discourage hydropower by not defining it as a renewable energy source.81 Many states with RPS require a certain amount of their renewable energy mix to come from specific sources like wind, solar, and biomass.82
States that only include new hydroelectric developments in their RPS are encouraging the environmental impacts associated with dam construction. North Dakota, for example, accepts all hydropower in its RPS while New Mexico only accepts hydroelectric facilities built after July 2007. New Mexico's policy encourages the development of new renewable energy, but fails to take into consideration the environmental costs of encouraging new dams with this
78 Zhang, Q., Smith, B., Zhang, W. (2012, October). Small Hydropower Cost Reference Model. Oak Ridge National Laboratory. p. 25. Retrieved from: http://info.ornl.gov/sites/publications/files/pub39663.pdf 79 Zhang, Q., Smith, B., Zhang, W. (2012, October). Small Hydropower Cost Reference Model. Oak Ridge National Laboratory. p. 25. Retrieved from: http://info.ornl.gov/sites/publications/files/pub39663.pdf 80 U.S. Energy Information Administration. (2015, March 23). Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013. Retrieved from: http://www.eia.gov/analysis/requests/subsidy/ 81 Hydropower Reform Coalition. (n.d.) Renewable Portfolio Standard (RPS). Retrieved from: http://www.hydroreform.org/policy/rps 82 PJM EIS. (2015, February 5). Comparison of Renewable Portfolio Standards (RPS) in PJM States. p. 2-3. Retrieved from: http://www.pjm- eis.com/~/media/pjm-eis/documents/rps-comparison.ashx
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policy. Illinois, Michigan, and Missouri consider the environmental consequences of dam building by only including hydroelectricity that does not require constructing new dams or significantly expanding existing ones.83
OTHER STATE LEVEL POLICIES
Renewable Portfolio Standards are the predominant state level policy affecting hydropower, but several other mandates and incentives affect hydroelectric development. Some states regulate the licensing, construction, environmental requirements, and other aspects of hydroelectric dam construction beyond the regulations established by FERC. In Colorado, many potential hydropower developers must work with the Colorado State Engineer’s Office to purchase water rights for a hydroelectric project. Even if a hydropower project is a non-consumptive use of water, meaning it does not take any water out of the waterway, developers must consider whether their project will impair minimum flow requirements.84 Flow can be impaired because the dam may change the flow of water as power demand changes, thus changing the flow of the river throughout the year from its natural state.
Most state level policies affecting hydropower are shared with other renewable energy sources. Net metering, tax incentives, and cost recovery programs are all common incentives that make it easier for a potential developer to invest in hydropower by guaranteeing a way to sell electricity and recover the costs of constructing an expensive renewable energy project.
New York State is encouraging hydropower development. New York is the largest producer of hydroelectric power east of the Rocky Mountains, meeting approximately 17 percent of the state’s total electricity demand with hydropower.85 In 2014, Governor Andrew Cuomo (D-NY) announced an initiative to help fund two hydropower projects. One plant will be built at an existing NPD, while the other will be added onto an existing hydroelectric plant. The Cuomo administration has focused on developing inexpensive hydropower as a clean renewable energy source that can lower electricity rates and, they claim, create jobs.86 FEDERAL POLICIES
Several federal policies shape the hydroelectric power industry today. With only a few exceptions, most of these policies have raised the barriers to developing hydroelectric power by requiring developers to comply with stringent regulations. These policies require developers to consider the environmental implications of their projects, but inadvertently discourage even environmentally-negligible hydropower projects by making it more difficult to obtain a license to generate hydropower. These policies include the Federal Water Power Act, the National Historic Preservation Act, the National Environmental Policy Act, the Clean Water Act, and the Energy Policy Act. While these regulations were designed to prevent environmental damage from large-hydropower projects, they raise the cost of all hydropower projects, including small- and micro-scale dam and conduit conversion.
The first major piece of legislation affecting the hydroelectric industry is the Federal Power Act of 1920, also known as the Federal Water Power Act. The act created the Federal Power Commission (FPC), precursor to the Federal Energy Regulatory Commission (FERC). The Federal Power Act encouraged hydroelectric projects by tasking the FPC with issuing licenses to non-federal hydropower projects that affected navigable waters, occupied federal lands, affected
83 Haugen, D. (2012, January 13). Renewable or not? How states count hydropower. Midwest Energy News. Retrieved from: http://midwestenergynews.com/2012/01/13/renewable-or-not-how-states-count-hydropowe/ 84 Colorado Energy Office. (n.d.). p. 10. Small Hydropower Handbook. Retrieved from: http://extension.colostate.edu/docs/energy/hydro- handbook.pdf 85 New York State Department of Environmental Conservation. (n.d.) Hydropower in New York: A Workhorse Renewable Energy Technology. Retrieved from: http://www.dec.ny.gov/energy/43242.html 86 Harris, M. (2014, November 13). New York allocations to create new hydroelectric power. HydroWorld. Retrieved from: http://www.hydroworld.com/articles/2014/11/new-york-allocations-to-create-new-hydroelectric-power.html
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interstate commerce, or used water from government-operated dams.87 The Federal Power Act requires potential developers to obtain a hydroelectric license through FERC, even for retrofitting existing dams and conduits.
Section 106 of the National Historic Preservation Act of 1966 requires FERC to take into account the effect of a proposed project on any historic property.88 This policy is intended to protect the nation’s historic heritage, but can be a major impediment to developing new hydroelectric projects. Even small- and micro-hydropower projects are required to catalog the impacts of a hydropower project on nearby historical structures.
In 1970, Congress enacted the National Environmental Policy Act (NEPA), requiring all federal agencies to assess their environmental impacts. FERC is required to develop an Environmental Assessment (EA) or Environmental Impact Statement (EIS) for hydroelectric projects, as well as suggest alternatives that will be less environmentally harmful. NEPA ensures that environmental considerations are made for hydroelectric projects, but the lengthy process of developing EAs and EISs can discourage developers.89 Although retrofitting existing dams and conduits has virtually no environmental impact, FERC still requires potential developers to prepare an EA or EIS.
The Clean Water Act of 1972 (CWA) sets water quality standards for hydroelectric projects. FERC generally sets these water quality standards as a condition of project certification, requiring developers to find ways to meet minimum water quality standards. Congress passed the Endangered Species Act (ESA) the following year, requiring FERC to consult with both the U.S. Fish and Wildlife Service (FWS) and National Marine Fisheries Service (NMFS) before issuing a hydroelectric power license. The agencies must determine that a proposed project will not negatively impact any listed species or their habitat before allowing a developer to build a hydroelectric project.90 Even retrofitting existing dams and conduits requires compliance with designated water quality standards, and FERC is still required to investigate the potential impact of a small or micro-hydropower project on threatened and endangered species.
Section 242 of the Energy Policy Act of 2005 creates a production incentive for expanding hydropower energy development at existing dams and impoundments. The Department of Energy (DOE) received no funding for this incentive until the Fiscal Year 2014 Omnibus Appropriations bill, which appropriated $3.6 million to the program.91 The FY 2015 Appropriations bill appropriated another $3.96 million for Section 242. These appropriations allow qualified hydroelectric facilities to receive a guaranteed payment of approximately 2.3 cents per kilowatt hour produced for up to 10,000 kilowatt-hours a year, as long as Congress appropriates funding for the program.92 93
CURRENT LICENSING PROCESS
Given all the legislation that affects hydropower licensing, the current permitting process is a long, inconsistent, and inefficient regulatory burden on hydropower developers. Although FERC is the agency with jurisdiction over energy production from hydropower, developers must also work through many other agencies, organizations, and entities. In Iowa, the initial consultation list for hydropower developers includes 55 federal and state agencies, Native American tribes, and non-governmental organizations.94 Further, developers nationwide must work with the U.S. Army Corps of
87 Kubiszekski, I. (2008, September 4). Federal Power Act of 1920, United States. Retrieved from: http://www.eoearth.org/view/article/152749/ 88 National Historic Preservation Act of 1966, As amended through 2006. p. 19. Retrieved from: http://www.ncshpo.org/nhpa2008-final.pdf 89 Hydropower Reform Coalition. (n.d.). Laws Governing Hydropower Licensing. Retrieved from: http://www.hydroreform.org/resources/laws 90 Hydropower Reform Coalition. (n.d.). Laws Governing Hydropower Licensing. Retrieved from: http://www.hydroreform.org/resources/laws 91 No author. (n.d.). Guidance for EPAct 2005 Section 242 Program. U.S. Department of Energy. p. 1. Retrieved from: http://energy.gov/sites/prod/files/2015/01/f19/Final%20Guidance%20for%20EPAct%202005%20Section%20242%20Hydroelectric%20Incenti ve%20Program.pdf 92 U.S. Department of Energy. (n.d.). Final Guidance for EPAct 2005 Section 242 Hydroelectric Incentive Program. Retrieved from: http://energy.gov/eere/water/downloads/final-guidance-epact-2005-section-242-hydroelectric-incentive-program 93 No author. (2005, August 8). Energy Policy Act of 2005. p. 86. Retrieved from: http://energy.gov/sites/prod/files/2013/10/f3/epact_2005.pdf 94 Thornton, D. (2012, December). Water, Water Everywhere but Not a Drop for Power. Public Interest Institute. p. 12. Retrieved from:
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Engineers (USACE) if there are any alterations to the physical structure of the dam or river. These federal agencies have substantial overlap in responsibilities with limited coordination, further extending the wait time for a developer’s license.95
FERC oversees licensing, ensuring compliance, and comprehensive planning for all non-federal dams. FERC regulates more than 1,600 hydropower projects at over 2,500 dams in the United States.96 With the exception of federal dams constructed before 1920, all dams must obtain a FERC license.97 The licensing process is difficult to navigate and begins with determining which permitting process must be used. The integrated licensing process is the default, with the traditional and alternative licensing processes requiring FERC’s approval.98
The integrated licensing process encourages stakeholders to find solutions to licensing issues. As soon as a developer submits a proposal and information document, FERC begins to seek public input, as well as input from nongovernmental organizations, Indian tribes, local, state, and federal resource agencies. Once concerns are identified, the developer and FERC create a scientifically supported study plan. According to FERC, studies typically take one to two years to complete.99
Once these studies are completed, the developer prepares an application, consisting of a proposal with detailed descriptions of project facilities and operations, the expected effects, and proposed mitigation measures. FERC then reviews this application and seeks public comment on the license. FERC prepares a set of environmental rules and issues environmental reports before soliciting more public comment. Before making the final decision to license, modify, or decline a permit, FERC must consider a state’s comprehensive plan for waterways and determine whether the project will impair its use.100 FERC’s consideration of a state’s comprehensive plan for waterways requires FERC to represent the interests of the federal government and the states’ government.
If a dam is being constructed or modified or if installing turbine to a NPD requires dredging of soil or sediment, a whole new set of licensing processes is required by the Army Corps of Engineers (USACE). In some phases of the licensing process, only one agency’s regulation is necessary, but the overlap in permitting adds unnecessary inefficiency. Further, the lack of coordination between these two agencies means FERC and USACE impose their regulatory procedures on different timeframes, which often adds redundancy by having identical requirements.101
This regulatory burden can be a huge deterrent to hydroelectric development. Obtaining a hydropower license often takes more than the intended maximum of five years, but the process is inconsistent and unpredictable. FERC has issued a license in as short as two months, but the wait time often exceeds five years.102
http://limitedgovernment.org/publications/pubs/studies/ps-12-12.pdf 95 Morrissey, S. (2015). FERC and USACE: The Necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. p. 16- 18. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf 96 Miles, A. (2015, May 13). Hearing on Discussion Drafts Addressing Hydropower Regulatory Modernization and FERC Process Coordination under the Natural Gas Act. Federal Energy Regulatory Commission. p. 2-3. Retrieved from: http://www.ferc.gov/CalendarFiles/20150513110741-Miles-testimony-05-13-2015.pdf 97 Morrissey, S. (2015). FERC and USACE: The Necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. p. 15. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf 98 Federal Energy Regulatory Commission. (n.d.). Hydropower Licensing--Get Involved: A Guide for the Public. p. 6. Retrieved from: http://www.ferc.gov/resources/guides/hydro-guide.pdf 99 Federal Energy Regulatory Commission. (n.d.). Hydropower Licensing--Get Involved: A Guide for the Public. p. 6-7. Retrieved from: http://www.ferc.gov/resources/guides/hydro-guide.pdf 100 Federal Energy Regulatory Commission. (n.d.). Hydropower Licensing--Get Involved: A Guide for the Public. p. 7. Retrieved from: http://www.ferc.gov/resources/guides/hydro-guide.pdf 101 Morrissey, S. (2015). FERC and USACE: The Necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. p. 18. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf 102 Morrissey, S. (2015). FERC and USACE: The Necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. p. 18-
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The Department of Energy and members of Congress have recognized the economic and environmental benefits of small-scale hydropower, but over 50,000 non-powered dams remain untouched because prospective developers must wade through expensive regulatory barriers before they can build or retrofit. Congress attempted to tackle this excess red tape with the Hydropower Regulatory Efficiency Act of 2013 and Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act, each of which were designed to simplify the regulatory framework of hydropower development. Nonetheless, these environmental and historical preservation rules add regulatory complexity that discourage developers from undertaking hydropower projects.
HYDROPOWER REGULATORY EFFICIENCY ACT
In 2013, Representative Cathy McMorris Rodgers (R-WA) introduced the Hydropower Regulatory Efficiency Act (HREA) in the House of Representatives to facilitate development of the extensive hydropower potential of her home state.103 Washington relies on hydropower to produce 58.4 percent of its electricity, and is also home to the Grand Coulee Dam, which has the largest generating capacity of any hydroelectric power plant in the United States.104 The HREA eventually passed through both the House and Senate with little opposition, and became law after President Obama signed it in August 2013.
The HREA was intended to help small-scale hydroelectric projects get underway more quickly. First, the law was intended to make it easier for state and municipal governments to construct conduit-based, small-scale hydroelectric power generators. Under the new regulations, hydropower plants that produce 5 megawatts or less are exempt from licensing requirements, provided that the conduit-based system is not located on federally owned lands.105 Individuals or companies wishing to develop conduit-based hydroelectric power with an output less than 5 megawatts would only have to file intent to do so with the Federal Energy Regulatory Commission (FERC). If FERC concludes that a plant qualifies for the license waiver, then the project can move forward, as long as there is no stated formal opposition to the project within 45 days of the waiver being granted. In short, Congress intended for the act to exempt many small- scale projects from the FERC permitting process.
Second, HREA grants FERC the authority to issue exemptions to non-conduit small-scale hydropower with outputs of 10 megawatts or less. Although the HREA does not exempt developers from licensing requirements, the licensing process is shorter and less rigorous, and exemptions do not expire.
Finally, the act gives FERC the authority to issue permit extensions for potential license applicants. A permit allows a developer to survey a site and determine the cost of a prospective project before undertaking it. Before the HREA, permits only lasted three years. Now FERC can extend the length of the permit by two additional years, giving the developer more time to analyze the site conditions before seeking a license.
EFFECTS OF THE HREA
Two years have passed since HREA was passed, but the legislation has done little to promote hydropower’s growth. As of June 2015, 58 small hydropower conduit-based projects have applied for the FERC licensing exemption under the HREA. Of these 58 applications, 43 were approved, 8 were rejected and 7 are still pending. FERC reports having received
19. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf 103 No author. (2013, August 9). Hydropower Regulatory Efficiency Act of 2013. p. 2. Retrieved from: https://www.congress.gov/bill/113th- congress/house-bill/267 104 U.S. Energy Information Administration. (n.d.). Washington. Retrieved from: http://www.eia.gov/state/?sid=WA 105 Spiegel & McDiarmid LLP. (2013, September 11). New Hydropower Legislation. Retrieved from: http://www.spiegelmcd.com/files/Client%20Alert%20on%20New%20Hydropower%20Legislation_2013_09_11_03_40_20.pdf
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30 applications for the 2-year extension of preliminary permits since the HREA became a law. They have granted 15 permit extensions, and denied 14 for “lack of diligence,” with one still pending.106
With thousands of potential sites for hydropower plants across the United States, the 58 conduit-exemption applications FERC received suggests the HREA has been largely ineffective. Robert Bell, in charge of conduit exemptions with FERC, claims that before the HREA there were about 10 requests for conduit exemptions a year on average.107 The 58 exemptions over a two-year period are more than double the average 10 exemption applications a year, but the thousands of opportunities for small-hydropower suggests that there is a huge potential being missed. Moreover, it would be expected to see the largest increase in exemption applications immediately after passage of the HREA, so the slight uptick is unlikely to suggest more exemptions in the future. The HREA has done little to create incentives for developing hydropower resources because it only addresses part of the licensing process and not the other regulations, such as water quality and other environmental regulations that impede hydropower development.
BUREAU OF RECLAMATION SMALL CONDUIT HYDROPOWER DEVELOPMENT AND RURAL JOBS ACT
President Obama signed the HREA into law the same day he signed the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. The legislation was sponsored by Representative Scott Tipton (R-CO) in the House, and cosponsored in the Senate by John Barrasso (R-WY) and Jim Risch (R-ID).108 This law authorizes power production from canals owned by the United States Bureau of Reclamation. 109 It also permits conduit-based hydropower developers to bypass National Environmental Policy Act’s (NEPA) Environmental Assessment (EA) framework if the developer’s hydro plant has a maximum output capacity of 5 megawatts or less.110 The act does away with NEPA’s environmental assessment (EA) without substantial risk of environmental damage because the conduits already exist and because of the small size of exempt projects. Bypassing this complex regulatory process was meant to save developers time and money by avoiding the redundancy of an additional NEPA review.
As of March 2012, the United States Bureau of Reclamation had identified 373 canals as suitable for hydroelectric power development.111 As might be expected, Representative Tipton’s and Senator Barrasso’s home states of Colorado and Wyoming have the highest potential to generate electricity from conduit hydropower on Bureau of Reclamation canals. Wyoming has 121 potential sites for hydroelectric generation, by far the most of any state where Bureau of Reclamation canals are located. Senator Barrasso stressed that the bill would not only provide Americans with a cheap and clean source of energy, but would also help create jobs in rural western areas.112 The fiscal and environmental benefits that came with the passage of The Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act may demonstrate the potential of both small and large hydroelectric power generation. With only seven
106 Federal Energy Regulatory Commission. (2015, June 18). H-1 and Update on the Hydropower Regulatory Efficiency Act of 2013. p. 4. Retrieved from: https://www.ferc.gov/industries/hydropower/indus-act/efficiency-act/H-1-presentation.pdf 107 R. Bell (Conduit Exemptions at Federal Energy Regulatory Commission), personal communication, October 19, 2015. 108 No author. (2013, August 10). Barrasso-Risch Hydropower, Rural Jobs Bill Signed Into Law. Retrieved from: http://www.barrasso.senate.gov/public/index.cfm/news-releases?ID=68fce894-ae48-c8e4-9da6-e4fd546e309a 109 Committee on Natural Resources. (2013, March 25). Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. House of Representatives. p. 5. Retrieved from: http://www.gpo.gov/fdsys/pkg/CRPT-113hrpt24/pdf/CRPT-113hrpt24.pdf 110 Committee on Natural Resources. (2013, March 25). Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. House of Representatives. p. 3. Retrieved from: http://www.gpo.gov/fdsys/pkg/CRPT-113hrpt24/pdf/CRPT-113hrpt24.pdf 111 Committee on Natural Resources. (2013, March 25). Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. House of Representatives. p. 2. Retrieved from: http://www.gpo.gov/fdsys/pkg/CRPT-113hrpt24/pdf/CRPT-113hrpt24.pdf 112 No author. (2013, August 2). Barrasso-Risch Hydropower, Rural Jobs Bill Passes Senate. Retrieved from: http://www.barrasso.senate.gov/public/index.cfm/news-releases?ID=3f740b3b-ce2e-f940-5880-4c94596489af
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opposed in the House, and passing in the Senate by unanimous consent, the vast majority of Congress recognized that this legislation promotes cheaper energy and thousands of jobs with minimal environmental impact.113 CASE STUDY: HYDROPOWER IN LOGAN, UTAH
Logan is a city located in Utah’s Wasatch Mountains and is home to approximately 50,000 people. The majority of the city’s water is provided by the Dewitt Natural Spring, travelling through a pipe grid before being stored in tanks for later use. City officials and engineers replaced the original piping with wider piping in 2008 to allow more water to reach residents.114 Wider pipes and greater flow caused increased water pressure, and city officials realized that installing pressure regulating valves would not be a permanent solution to the problem. In response, Logan’s Assistant Engineer, Lance Houser, formulated a plan to install an electrical turbine in the network of pipes. The turbine would reduce the water pressure to acceptable levels while providing electricity for up to 185 homes when connected to a standard generator. The installed 200 kilowatt turbine is small, but nonetheless lowers energy costs for Logan residents.115 Unfortunately, Mr. Houser and the city of Logan learned just how debilitating federal hydropower regulations can be to a cost effective small hydro project.
The installation process for the conduit turbine in Logan took place before the HREA and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act became law. But, if Logan tried to install a turbine after the passage of these bills, their experience with FERC would have been no less costly. The HREA endows FERC with the authority to waive granting licenses all together if the developers of a 5-megawatt conduit-based project file a statement of intent that FERC approves.116 This component of the HREA, while intended to benefit some small hydropower developers, would not have expedited the licensing process for Logan because their conduit had already been granted an exemption.117 This exemption did virtually nothing to expedite the permit process, which according to Mr. Houser took almost a year.118 Nothing in the HREA or Bureau of Reclamation Act expedites the permit process. The HREA addresses the lengthy permitting process, but only by giving FERC the power to grant an additional two years on a given developer’s permit.119
Houser and the City of Logan faced additional regulatory barriers during the yearlong permit phase. Once FERC grants a license or license exemption, the developer must undergo the rigorous task of preparing an environmental assessment pursuant to NEPA. NEPA requires that an environmental assessment include a comprehensive overview of the detrimental effects a potential project will have on the surrounding flora and fauna. Developers also must not violate the Clean Water Act, which requires many projects to be the least environmentally damaging and practicable alternative.120 Logan City officials also had to catalog potential negative effects their proposed hydropower plant
113 The Library of Congress. Bill Summary & Status H.R. 678. 113th Congress (2013-2014). Retrieved from: http://thomas.loc.gov/cgi- bin/bdquery/z?d113:HR678:@@@X 114 Institute of Political Economy. (2013, January). Micro-Hydro: How the Government Discourages the Use of Renewable Energy. p. 15. Retrieved from: http://www.strata.org/wp-content/uploads/ipePublications/Micro-hyrdo.pdf 115 Institute of Political Economy. (2013, January). Micro-Hydro: How the Government Discourages the Use of Renewable Energy. p. 15-16. Retrieved from: http://www.strata.org/wp-content/uploads/ipePublications/Micro-hyrdo.pdf 116 Spiegel & McDiarmid LLP. (2013, September 11). New Hydropower Legislation. p. 2. Retrieved from: http://www.spiegelmcd.com/files/Client%20Alert%20on%20New%20Hydropower%20Legislation_2013_09_11_03_40_20.pdf 117 Institute of Political Economy. (2013, January). Micro-Hydro: How the Government Discourages the Use of Renewable Energy. p. 17. Retrieved from: http://www.strata.org/wp-content/uploads/ipePublications/Micro-hyrdo.pdf 118 Institute of Political Economy. (2013, January). Micro-Hydro: How the Government Discourages the Use of Renewable Energy. p. 17. Retrieved from: http://www.strata.org/wp-content/uploads/ipePublications/Micro-hyrdo.pdf 119 Spiegel & McDiarmid LLP. (2013, September 11). New Hydropower Legislation. p. 3. Retrieved from: http://www.spiegelmcd.com/files/Client%20Alert%20on%20New%20Hydropower%20Legislation_2013_09_11_03_40_20.pdf 120 Shutz, J. (2006). The Steepest Hurdle in Obtaining A Clean Water Act Section 404 Permit. p. 235. Retrieved from: http://escholarship.org/uc/item/2976c9tq
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would have on nearby historical structures, pursuant to National Historical Preservation Act.121 The process of cataloging the potential impact that the small hydropower project might have on wildlife, water quality, and historical structures cost Logan city officials not only man hours, but approximately $400,000. In total the project took four years and cost nearly $3 million, substantially more than the estimated cost of $225,000 to $375,000 for a similar project in Canada.122
The deregulatory elements of the HREA or Bureau of Reclamation Act would not have simplified or decreased the cost of meeting regulations for Logan City. Attempting the same project now would result in the same wasted time and hundreds of thousands of taxpayer dollars used to navigate the tangled web of federal regulations. Houser stated that because of “the cost of the permitting headache and the nightmare and the frustration of the process, there is no economic benefit to doing a project that size again.”123 The overly complicated and unnecessary system of federal regulations killed the economic viability of future small hydropower projects in Logan. If politicians want to see small- scale hydropower thrive as a source of clean energy, the regulatory process for its development requires an overhaul. Developers of hydropower currently have to deal with an overbearing regulatory environment that hinders progress by forcing them to comply with regulations that do not pertain to their specific projects. Congress’ attempts to facilitate hydropower production have failed because for most developers the regulatory environment is still too burdensome and costly. VERDICT ON THE ECONOMIC RELIABILITY
The HREA and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act were created with noble intentions, but ultimately the laws do little to encourage the development of small hydropower in the United States. Congress recognizes the tangible economic benefits that come from the conversion of NPDs and construction of conduit based hydropower, but also remains concerned about the environment. Small-scale hydropower does not necessarily need to come at the expense of the environment. Conversion of existing NPDs will not impact the environment because the dams have already made their impact on streams, and the small size of conduit based hydropower has a relatively non-existent environmental impact compared to other energy sources. The HREA and the Bureau of Reclamation Small Hydropower Development Act represent a legislative maneuver in favor of small hydropower development, but the acts are not enough to sufficiently streamline the regulatory process. Hydropower licensing is still a process of complexity and costliness that discourages towns and cities from taking advantage of a clean, cheap, and reliable energy resource. Greater reform of hydropower regulatory law at the federal level will be needed to incentivize the development of the numerous small hydropower resources the United States has to offer. CONCLUSION
The massive potential for small hydropower development gives the United States a reliable, cost effective, and environmentally friendly means to markedly increase its energy production. Small hydropower outperforms many of its renewable energy competitors in both reliability and efficiency, and does not require billions of dollars in federal energy subsidies to survive in the market. The environmental impact of non-powered dams in the United States has already been realized, and the conversion of thousands of NPDs into hydropower plants only marginally impact surrounding
121 Hansen, M., Simmons, R., Yonk, R., Sim, K. (2013, December). Logan City’s Adventures in Micro-Hydropower. Mercatus Center. p. 9. Retrieved from: http://mercatus.org/sites/default/files/Hansen_LoganCity_v2.pdf 122 Hansen, M., Simmons, R., Yonk, R., Sim, K. (2013, December). Logan City’s Adventures in Micro-Hydropower. Mercatus Center. p. 5. Retrieved from: http://mercatus.org/sites/default/files/Hansen_LoganCity_v2.pdf 123 Hansen, M., Simmons, R., Yonk, R., Sim, K. (2013, December). Logan City’s Adventures in Micro-Hydropower. Mercatus Center. p. 10. Retrieved from: http://mercatus.org/sites/default/files/Hansen_LoganCity_v2.pdf
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wildlife and ecosystems. Conduit-based hydropower takes advantage of untapped electricity generation potential in existing man-made waterways, and has no affect on surrounding ecosystems.
Despite small hydropower’s potential to augment U.S. energy production, federal regulations continue to stifle its growth. Congress’s passage of the HREA and Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act in 2013 helped to streamline the licensing process for developers of small hydropower, but they have not sufficiently incentivized states and cities to exploit small hydropower resources that remain unused resources. Navigating the complex and costly regulatory process that involves compliance with redundant and unnecessary laws has dissuaded developers and municipalities from attempting to develop small hydropower. Further, congressional reform of the environmental and historical protection laws that apply to the hydropower licensing process would lower the costs of small hydropower development for local and state governments. Hydropower will not reach its full potential while these regulatory barriers burden small hydropower development in the United States.
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