Twenty-first century powerhouse18 June 2008
Linda Church Ciocci, Executive Director of the National Hydropower Association, explains why US hydro should no longer be viewed as a relic of the past
Hydro power is the largest renewable energy resource in the US, accounting for more than three-quarters of the country’s existing renewable energy capacity. The country’s 2300 hydro power projects generate about 8% of all US electricity. Right now, hydro power is growing fast – the Federal Energy Regulatory Commission (FERC) reports having some 11,000MW of new hydro power projects under licensing review, which could spark more than a 10% increase in the industry’s overall capacity.
The electric-power-research-institute projects that the industry could grow by 20% in 20 years, creating 23,000MW of new capacity by 2025, with more than half of the new capacity coming from new technologies. In addition, applications that improve efficiencies at existing facilities could add up to 2300MW over the same period.
Only about 3% of the country’s 80,000 dams harness water for producing electricity, so installing hydro power at these sites offers a way to create new energy resources with minimal environmental impacts. The nha and other US organisations estimate that the industry could develop anywhere from 5000 to 10,000MW of capacity at these sites in the next 20 years.
One indicator of just how favourably experts view hydro’s growth potential came from FERC Commissioner Jon Wellinghoff, who spoke at the NHA’s annual conference in March 2008. Wellinghoff challenged the industry to set 90,000MW of new capacity by 2030 as its goal. Rather than being the industry’s end point, he believes hydro power developers should set this as a current target.
Energy policy and federal support
The federal government has a major role to play in hydro power’s future service to consumers by creating public policies that sustain development – through tax incentives, research and development investment, and reasonable regulatory approaches.
Tax incentives that ensure a stable investment environment for developers are a high priority. When Congress passed the Energy Policy Act (EPACT) in 2005, NHA lobbied hard and secured inclusion for incremental hydro power and some development at existing non-powered dams within the production tax credits (PTC) and clean renewable energy bond (CREBs) programmes. The legislation providing these tax and financing incentives for hydro initially set the measures to expire at the end of 2007, although the industry was able to secure an extension through 2008. NHA is working on additional extensions to keep the incentives in place through 2009 and beyond, expanding its coverage to new technologies and additional non-powered dams.
Developers, eager to take advantage of the production tax credits created under EPACT, have already installed efficiency improvements at some existing conventional hydro power dams, creating an additional 230,908MWh of capacity in the last two years. These technologies have improved output at the plants by an average of 7.2%, with one facility, the Vergennes plant in Vermont, improving its output by 23%.
The fate of the PTC and CREBs over the long term could change the nature of hydro power development in the US considerably. In January 2008, NHA asked several of its members to estimate the impact that the PTC has on their own development work, and learned that operating in an environment where this incentive could expire in less than a year has a chilling effect. NHA members reported that, faced with PTC expiration at the end of 2008, their work has slowed anywhere from 10-20%. The same companies said that passage of the PTC in 2005 – and the prospect of extending it even longer – had previously spurred their activities by anywhere from about 20-50%.
NHA is also working with the federal government to reinstate funding for waterpower research. Congress signaled its willingness to support hydro power this year by allocating US$10M to hydro research, although the White House did not include water power in the federal budget.
Securing this funding is critical to the industry’s continued growth and its ability to provide clean, reliable energy. Based on epri’s projections, just US$54M in federal investment annually between now and 2025 could lead to 23,000 new megawatts of capacity by 2030 – the equivalent of more than a dozen new coal or nuclear plants.
With the industry growing at a rapid pace – new projects that would expand the industry by more than 10 % are already under review – regulators are taking a new look at how they license hydro power projects.
In the 1990s, as the 30-year and 50-year licences for some of the country’s largest conventional hydro power facilities started coming up for renewal, the industry worked closely with FERC, other federal agencies, the states, environmental groups, and other stakeholders to create a framework for assessing and addressing existing facilities, particularly in terms of environmental impact.
Responding to these and other stakeholder issues, the US industry has invested millions of dollars per project in improvements. Efforts include new and even more effective approaches that support fish migration through specially designed fish ladders, improved land management around reservoirs, and otherwise minimising the environmental impact of hydro power operations. Hydro power facilities also continue to provide valued recreational and sporting opportunities to local communities, and drive local economies by attracting businesses with affordable energy prices.
NHA worked closely with FERC on the development of the Integrated Licensing Process (ILP) and other new regulatory approaches that create more predictability in the licensing or relicensing of hydro projects. The industry is also working with FERC to streamline the licensing process for new technologies and small projects to lower costs and offer more certainty in the approach.
Whether the industry takes up Wellinghoff’s challenge of creating 96,000MW in 22 years, meets EPRI’s projections of 23,000MW by 2025, or finds a way to expand even faster, finding the path to sustainable growth is the top priority.
Through the NHA, the industry is also working to inform policymakers, regulators, and the public about hydro power’s potential. With a history that goes back 125 years to the very start of electric generation in the US, some people still believe hydro power is a relic of the past associated with environmental compromise. In fact, the opposite is true – hydro power is a resource with cutting-edge technologies, strong environmental benefits, and attributes that make it a 21st century powerhouse.
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