Hand over of power

US hydro, along with the rest of the country’s power industry, is witnessing a sea change. ‘After decades of being in the hydro power business in the US, some of us are finding ourselves in very strange territories,’ Linda Church Ciocci, executive director of the national-hydropower-association (NHA) commented. Her opening remarks, at NHA’s annual conference in the US, embraced the theme of the meeting — harnessing change.

‘Change is the norm in life,’ Church Ciocci went on to explain, ‘and we have begun to recognise that change is happening faster than any of us imagined. We are going from the familiar to the unfamiliar, but we must use this to propel our industry to a position of strength.’

Much has been said about the profound changes which are sweeping across the US hydro industry. Furthermore, NHA has been trying to ensure that these changes will benefit the industry. Julie Keil, last year’s president of NHA, gave her comments about an area she has been fighting hard to change — the licensing and relicensing of hydro power plants.

‘The complexity of the regulatory system we have right now is making it very difficult for hydro power to compete against other energy resources,’ she explained. ‘They do not have to face the licensing and relicensing hurdles we do.’

The traditional licensing/relicensing process for hydro plants in the US requires licensees to go through a three-stage consultation. This has become more complex, time consuming and costly over recent years due to increased environ-mental and social stipulations. To make matters worse, the process is completed by the hydro licensee with no help or involvement from the licensing body, the Federal Energy Regulatory Commission (FERC).

‘So really you’re out there on your own,’ Keil said. ‘You’re trying to work out what your ultimate decision-maker will want. Then when your licence application arrives at FERC for review the whole cycle starts again. You run the risk of FERC saying “I didn’t like that study you did”, or “I thought you addressed this issue inadequately in your application”.’

Alternative approach

Keil went on to explain how NHA has been trying to change this traditional approach to relicensing. A new scheme, termed as alternative licensing or the collaborative approach, is now being encouraged by FERC. A similar strategy to the one NHA started promoting several years ago, the alternative method consolidates more pieces of the licensing process. It necessitates communication, and hopefully an agreement, between all of a project’s stakeholders (recreational groups, fishing enhancement groups etc) before the application gets to FERC. This reduces the length of the licensing process.

‘It now makes sense for us [the hydro industry], and also FERC, to get them involved at a much earlier stage. You start to do more comprehensive issue analysis earlier in the licensing process so that people don’t get surprises later on. You can also get through it more efficiently,’ Keil explained.

The real key to making effective changes to the licensing process is the possibility of having FERC involved at an early stage. ‘Ultimately the decision about the licence application will be theirs,’ Keil added. ‘So, you want to make sure that you’re building a record they can rely on, and is adequate for their purposes.’

Will this changing approach to the licensing and relicensing processes make things much easier for US hydro plant owners? ‘We would have preferred it if what is now termed as the alternative, would have become the standard,’ Keil said. ‘One of the difficulties with what FERC has proposed is that in order to undertake an alternative licensing process you have to find a consensus among all the stakeholders. So in some sense what FERC has done is created another negotiating forum. You have another set of hoops to jump through.’

However, credit must be given where credit is due, the newly elected president of NHA, John Devine, commented. ‘You’ve got to give the Commission some credit,’ he said. ‘They’ve come up to a wall and are trying to scale it — not move around it. They’re finding solutions.’

Keil agreed: ‘The alternative licensing process for many licensees has been a great step forward. It is one that NHA takes particular pride in as it looks an awful lot like what we petitioned for a number of years ago.’

In the near future, deregulation of the electricity industry in the US is another change which will affect hydro. ‘In the short term, in this transition period, it will be very difficult for hydro projects,’ Keil believes. ‘We’re caught in a conundrum. So many hydro plant owners are licensing and relicensing their projects, that hydro costs are bound to go up. At the same time, in the face of deregulation, there is a real drive for retail prices to go down.

‘If we can survive this transition, my sense is that the benefits of hydro power will become overwhelmingly obvious to people who sell electricity. The value of these projects which are reliable, flexible and can come on whenever you need them are going to be of increasing value as we move forward.’

Devine agrees — the immediate prospects for hydro are not too sunny, but things will improve. ‘Our challenge in this industry is that we need to keep the importance of hydro alive.’

Industry outcry

When considering the value of hydro power, Keil was keen to respond to comments about the Department of Energy’s (DOE’s) recent refusal to acknowledge hydro as a renewable energy source in the US. Earlier this year, DOE excluded hydro power from the Com-prehensive National Energy Strategy, which was being compiled to offer con-sumers a greater choice of greener energy sources. Responding to the industry’s outcry, DOE relented and included hydro in the final version of its report.

‘I think the problem with DOE comes from a couple of areas,’ Keil said. ‘One of them is that its policy goals encourage ‘new renewables’ (such as wind, solar and biomass), which need something other than market support to mark their place in the industry.

‘Looking at things with DOE’s narrow policy analysis, it sees hydro as a mature industry in the US, which is already an inexpensive energy source, and does not need the support of a national energy strategy. This is dangerously short-sighted,’ Keil claims, ‘They’re ignoring the existing base of hydro and do not understand that we need hydro to make the next generation of renewables viable in an energy mix. You can’t build an electricity system on wind or solar power. You need a backbone to that system to keep it going.’

But can hydro survive in the US, in the light of increasing environmental regulations and the most recent cause for concern — decommissioning and dam removal? The much publicised case where FERC ordered the removal of Edwards dam in Maine has highlighted this issue.

‘There is a range of opinions on decommissioning and dam removal,’ John Devine explained. ‘But we, NHA, do not believe in decommissioning dams. However, it is a legitimate issue and can be brought into relicensing discussions. NHA believes that to order the removal of a dam, there must be overwhelming scientific evidence to support the case. That’s how the public interest would be best served by dam removal.

‘At the same time,’ Devine added, ‘the licensee should not carry the financial burden. If it is a societal decision the licensee should be compensated for the costs associated with the structure’s removal and lost revenue.’

Keil believes that when considering dam removal, all parties involved should look at all of the facts. ‘We need to be careful when thinking about decommissioning and removal issues,’ she said. ‘It needs to be structured in such a way that the impacts, other than the immediate impacts of the dam site, are considered. We need to consider the support hydro provides to the electricity generating system in the US, as well as its contributions to the Administration’s environmental goals on climate change and reducing CO2 emissions. We also need to keep the electricity system in the US stable through what is a pretty turbulent restructuring process.’

When thinking about decommissioning and dam removal, one of the questions that should be asked, Keil says, is how else are you going to generate electricity? — an issue which has not been addressed by the recent Edwards dam case. ‘Size-wise,’ Keil explained, ‘Edwards is a small project that gets lost in the rounding. Although this energy argument has not been strongly presented as yet, I still think it is a very important issue.’

Class of 2000

Contemplating what FERC terms the class of 2000 (where over 200 hydro projects, 37% of FERC’s licensed capacity, will require relicensing during 2000-10), Devine says that dam removal and the contribution hydro plants play in the power system may come up within the context of certain relicensings.

‘Many of the projects in this next class are larger than those of the class of ‘93 (the last batch of mass relicensing FERC carried out). The energy values of these larger projects are much more prominent and really should be considered. It will be there as a potential issue,’ Devine said.

Although she does not want to underplay the importance of the dam removal issue, Keil does not believe it will become a major concern in the next class of relicensings. ‘I don’t want to diminish the issue for someone who is facing it,’ she said, ‘but from an industry perspective we can say that overall dam removal is unlikely to become a tidal wave engulfing project owners. However, it is still a very serious issue.’

Although the US hydro industry has a lot of issues to focus on at home, NHA is actively encouraging companies to cross international frontiers. The recent establishment of the US Hydropower Council for International Development, has re-iterated NHA’s desire to look to foreign waters. ‘The international market is the place to be,’ Keil enthused. ‘But it is also a reflection on the fact that there is little new hydro being developed in the US.’

‘We’ve been so focused domestically,’ John Devine added, explaining why NHA set-up this affiliated council. ‘The opportunity is out there for US hydro companies. They have excellent technology and experience, and it is about time we got focused on using these in international markets.’

Devine spoke about the international experiences of other countries. ‘Other international firms are way ahead of us. The Norwegians, for example, have been in international markets for 30-40 years — that’s what they had to do to survive due to the limited hydro market in Norway. They’re decades ahead of most US companies when looking at inter-national opportunities. US hydro’s recognition of markets on an inter-national perspective has to be jump-started, and this is where the US Hydro Council will play a fundamental role.’

Achievements

Looking back over the past year, what role does Julie Keil think NHA has succeeded in playing in the US hydro industry? ‘Our greatest achievement over the past year,’ she said after a little thought, ‘has been in moving the legislative agenda forward. We have really made a great leap in the learning curve — educating Congress about the benefits of, and problems associated with, hydro power generation in the US. And, most importantly, we have explained why they should support our industry.’

The newly elected president of NHA, John Devine, spoke about his hopes for the forthcoming year. ‘NHA has really positioned itself on the legislative front over the past year,’ he said, ‘and we are really going to move on this. The US hydro industry is still very sensitive to its environmental responsibility, but we are trying to get some fundamental legislative changes instigated to help hydro plant owners in the licensing process.’

Devine acknowledged that changes in the hydro licensing procedures have been helped by improved communication between all players within the US hydro industry, particularly with FERC.

In the past, concern has been voiced about a lack of communication with the federal body, but the recent appointments of James Hoecker as chairman of FERC and Carol Sampson as the director of the office of hydro power licensing, seems to have paved the way for more open communication between the US hydro industry and its licensing body.

Devine seems hopeful that this can only improve in the future. ‘We are confident that we have more dialogue with FERC now,’ he said. ‘They are really taking a fresh look at hydro and how they treat it. Before, many doors were shut to us but now they are opening again. Things are changing, and we’ll be right in there.’