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.