Policies and Regulations: Taking a hard look at hydropower reform

Opportunities to increase hydropower production in the U.S. and Canada are aplenty. A recent study by Navigant Consulting Inc. indicates the U.S. has the technical potential to quadruple hydropower capacity.

Exactly how much of that potential can be realized, though, will depend largely on efforts to reform the regulatory process and establish new government policies designed to encourage hydropower developers. It’s a high priority for the industry, which has set a goal of doubling U.S. hydropower capacity by 2025.

At HydroVision International 2010, the Policies and Regulations track will explore many of the regulatory and policy obstacles confronting the industry and the potential solutions. Altogether, seven sessions will be held on a wide range of subjects, from the difficulty in adding hydropower to water supply projects to the challenges of shoreline management. Panels of experts will discuss these and other issues at HydroVision, scheduled July 27-30 in Charlotte, N.C.

During the four-day event, the Policies & Regulations track will examine a range of topics, described in the following seven sections.

Shoreline Management Plans – What Next?

Shoreline Management Plans, a tool for guiding development near and around reservoirs, can be volatile and highly contentious as they relate to land use and jurisdiction.

Issues often center on the use of private land within an area regulated by the Federal Energy Regulatory Commission and the utility that manages the reservoir to produce power. Balancing public use versus private use is the utility’s challenge. What’s more, the utility is often faced with conflicting federal, state and local laws.

For example, an adjacent property owner wants to place rip-rap or protective measures to protect their property or remove shoreline vegetation to improve their view or do some landscaping. Any of these actions, however, may directly affect how others are able to use or access the shoreline, or may directly conflict with management plans for a reservoir shoreline. How does FERC’s requirement to provide public access to a licensee’s reservoir affect the right of a private landowner to place, manage or use facilities on the shoreline? How does a licensee balance the private property owner’s unencumbered use of his property with FERC’s directive to manage for public access and use of the shoreline? Should disputes about restrictive uses of private property at a licensed project fall under state jurisdiction or be held as jurisdictional under the federal systems?

Who has ultimate control of the reservoir? What changes are needed to develop better shoreline management plans into more effective tools? What are the strengths and weaknesses of shoreline management plans in managing FERC projects?

Panelists will address these and other questions during what is expected to be a well attended session.

How Does Hydro Fit into Water Supply Projects?

Whether developing a major water supply project in an arid area or retrofitting existing water supply projects, adding hydro may provide increased value for a project. But adding hydro to an irrigation canal or a municipal water pipeline isn’t as simple as it sounds.

It requires a lot more than an engineering design and some concrete. Developers have to foot the bill for costly environmental studies to get a license to add hydropower to a water supply system.

In the U.S., developers interested in adding hydropower to water delivery infrastructure must meet the same federal rules required for building hydro anywhere, as well as meet the requirements for the facility’s primary purpose. Some argue that licensing these facilities is a costly and unnecessary step that discourages use of a readily available energy source as evidenced by the inclusion of hydro in water supply projects around the world.

In addition to supplying clean power, revenues from the hydropower component could be used to offset the cost of supplying water to farms and residents.

In this session, a panel of experts will discuss cases where hydro has become an important part of water supply systems and will explore if there is a need for enhanced regulatory policies and processes that consider the needs of supplying water and energy concurrently. Also, what role should energy production play in planning water supply projects?

Panelists will address these questions in a session led by Edward Carter, senior vice president of MWH Business Solutions.

Global Regulatory Policy – Exploring Hot Hydro Policy and Regulatory Issues

How is hydropower regulated and managed in other parts of the world? What’s working in other countries? And can those policies be applied in North America to promote the development of more hydropower?

In this session, panelists will explore international policy issues that affect waterpower development throughout the world.

The energy markets of the U.S. and Canada are highly integrated. Thus the policies and regulations used to govern those markets are very similar. The tariff and tax structure in Europe appears to be more supportive of hydropower and other forms of renewable energy. Can a similar model succeed in North America?

Building Hydro at Non-Hydro Dams

In this session, coordination between the various state and federal agencies that regulate and oversee hydropower production will be the focus of discussion.

Of the 82,000 dams in the U.S., only 3 percent are used to generate electricity.

What are the issues related to developing hydropower generation at facilities not originally intended for the purpose? What regulatory and policy changes do agencies such as the U.S. Corps of Engineers and the U.S. Bureau of Reclamation need to implement to facilitate development? What is the role of state agencies in encouraging development?

Led by Kamau Sadiki, national hydropower line manager for the Corps of Engineers, the panel will explore technical and regulatory concerns related to expanding the use of existing assets and encouraging energy production.

Transmission Policy and Hydro Development

If the industry succeeds in developing a significant amount of new hydropower capacity, it will have to find a way to transport that power to customers. Pumped storage hydro requires large transmission capacity and smaller hydroelectric plants are often in remote locations far from the nearest transmission system.

Major power line projects will have to be built to support the construction of those facilities.

But who should pay for the cost of those power line projects? Does hydro need new or different transmission policies? Are there successful international models for siting transmission? How do U.S. policies on eminent domain affect hydro development? How does transmission developed for other renewable generation and system support provided by hydro change the equation?

A panel led by Mark Robinson, of JMR Energy Infra LLC, will explore these and other questions.

Hydropower and Energy Storage

There are more than 127,000 MW of pumped-storage hydro capacity worldwide, and the market is expected to grow 60 percent over the next four years.

Pumped-storage hydro is attractive because it is the only source of renewable energy that can be used to balance intermittent resources such as wind and solar. Power from pumped-storage facilities is always available, even during dry periods when production from conventional hydropower plants is limited.

The U.S. has a little more than 20,000 MW of pumped-storage capacity. Only 40 MW of new pumped-storage capacity is now under construction in the U.S. but numerous sites with thousands of MW of potential are under early stages of development.

In this session, panelists will speak about the benefits and real value of pumped storage for the grid, how it can facilitate the integration of wind power and other renewables, and why pumped-storage development will be an important business activity in the future.

Colin Clark, executive vice president and chief technical officer of Brookfield Renewable Power in Canada, will lead the discussion.

Hydro Incentives: What’s Working and Why

What policies work best to encourage the development of new hydropower capacity?

For example, Ontario, Canada, enacted in 2009 the Green Energy Act, which provides renewable energy producers a fixed price above market rates for the electricity they produce. So far, Ontario has awarded 694 contracts representing more than 2,600 MW of new capacity under the feed-in tariff program. Of the 694 contracts, 50 are waterpower projects. Other countries have offered direct subsidies for the construction of renewable energy projects including hydropower. In the United States programs such as Production Tax and Investment Tax Credits, as well as direct grants for certain projects have also spurred hydro development.

In this session, led by Julie Smith-Galvin, director of communications and community relations for Brookfield Renewable Power, panelists will examine policies that encourage or discourage the development of hydropower resources.

Certain incentives have fostered the development of other forms of renewable energy throughout the world. This session compares incentives used in different parts of the world and their results.

This article was written by Jeremiah L. Maher, a senior manager and regulatory advisor for Kleinschmidt Associates. Maher is the track chair for the Policies & Regulations track at HydroVision International 2010, to be held July 27-30 in Charlotte, N.C.

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Policies and Regulations: Regulating Small Hydro

New incentives have led to a number of proposals to build small hydropower projects in the U.S. The Federal Energy Regulatory Commission is considering reforms aimed at streamlining the licensing process for the developers of those projects.

Developers of small hydropower projects are seeking big changes in the way their projects are permitted and licensed by the Federal Energy Regulatory Commission (FERC).

Requests to build small hydro projects, facilities with a capacity of 5 MW or less, have been pouring into FERC, thanks to new tax credits, grants, and initiatives to reduce greenhouse gas emissions.

“There’s a definite increase in interest in the industry and FERC is feeling it in the number of preliminary permit applications and development proposals,” said Nancy Skancke, an attorney with GKRSE and chair of the National Hydropower Association’s (NHA) Small Hydro Council.

Without a simpler, quicker, and more efficient licensing process for small hydro projects, though, the development of new hydropower capacity in the U.S. may be stymied, according to NHA. FERC is reevaluating its licensing process for small hydro projects because of the increased activity.

Issues facing the developers of small hydro projects were placed front and center during a technical conference hosted by FERC in December 2009. Written comments were filed in February 2010. The underlying question: Why should a 500-kW project with no significant environmental issues comply with the same regulatory process used for a 500-MW project?

“Projects supplying the smallest amount of generation are paying the most in process costs because the relative scale of those costs is the same regardless of project size,” according to written comments filed by NHA. “This situation detracts investor interest in smaller hydro projects and makes finding financing very difficult.”

Applications for new hydro projects surge 30 percent

The number of proposals to build new hydropower capacity is up about 30 percent from two years ago, said Ed Abrams, deputy director of the Office of Hydropower Licensing at FERC.

“A lot of these are at existing federal dams,” Abrams said. “We have had quite a few 5-MW exemptions for small projects.”

But the regulatory process can be difficult to navigate, especially for the developers of small projects, Abrams said.

“They tend to be less sophisticated than the typical relicense applicants, who have professionals at their disposal to prepare the application and do the consultation work,” he said. “We’re having to kind of hold the hands of a lot of these smaller developers.”

Faster, smarter licensing process sought

Right now, it takes about five years to obtain a license to install hydro capacity at existing non-powered dams. NHA has asked the commission to cut the licensing process down to two years by establishing a more efficient system.

“Only 3 percent of the nation’s 80,000 dams currently generate electricity – so the potential for adding electric generation to non-powered dams is enormous,” NHA wrote. In addition, the environmental impacts associated with the development of hydropower at existing non-powered dams are typically minimal because the most significant environmental impact – the construction and operation of a dam – has already occurred.


The Federal Energy Regulatory Commission may overhaul the approval process for small hydro projects such as the 8-MW Milford Hydroelectric Project on Maine’s Penobscot River.

“These are dams that have been there a long time,” Skancke said. “If you’ve got minimal environmental issues, it shouldn’t even be that long.”

Other recommendations by NHA include:

– Increasing the threshold for “non-capacity” amendments to under 10 MW;

– Approving unopposed exemption applications within 45 days after the notice period expires, unless the commission issues an order to the contrary;

– Modifying the definition for conduit exemptions;

– Providing outreach programs to help those with limited experience with FERC’s regulatory process;

– Establishing an online application process for permits, licenses, and exemptions.

Meanwhile, FERC is reviewing the public comments that were filed in February 2010. No one knows for sure what FERC will do next.

“We’re hoping that they start an expedited rulemaking proceeding to try and fix some of the regulations that would help remove some of these barriers,” Skancke said.

More exemptions could be issued

FERC should be issuing more exemptions to small hydro projects, especially in cases where there is no opposition, Skancke said. But FERC has curtailed its use of such exemptions, fearing lawsuits from environmental groups and the threat of court-ordered decision making.

“FERC has the statutory authority to exempt certain types of projects,” Skancke said. “It’s just not using the authority to its fullest extent.

“It shouldn’t take the ‘average Joe’s’ company nine months to a year to get an exemption where there was no opposition.”

Jeanne Hilsinger, of MAVEL Americas Inc., a turbine manufacturer, said Europe has developed 17 percent of its economically feasible small hydro potential, while the U.S. has developed 14 percent. In 1940, hydropower accounted for 40 percent of the electricity produced in the U.S. That figure has plunged to 7 percent today.

“Policy really matters,” Hilsinger said. “Europe has 17,571 small hydro plants. That’s more than seven times the number in the U.S. (2,346).”

Navigant Consulting: U.S. has potential to quadruple capacity

The U.S. has about 100,000 MW of hydropower capacity. However, a study by Navigant Consulting Inc. shows that the technical potential is around 400,000 MW.

“It’s a tremendous opportunity, and I think it is sort of an unknown secret,” said Navigant Consulting Managing Director Lisa Frantzis.

The study estimates the industry could add 60,000 MW of new capacity by 2025. But NHA, which commissioned the study, said an increase of that size “will not occur without a series of changes to the status quo, including improvements in certain aspects of the regulatory process for hydropower development.”

Up to 700,000 jobs could be created by 2025 if the potential for new capacity is met, the study shows.

“There is a tremendous opportunity in the hydropower sector, not only with jobs, but in terms of megawatts of installations,” Frantzis said. “And I think the other exciting thing is that the opportunity would create jobs across the U.S., which is also a real benefit.”

Interest in the development of small hydropower capacity has surged in the wake of Congress’ enactment of the Energy Policy Act of 2005 and the American Recovery and Reinvestment Act of 2009. The 2009 legislation included a 30-percent investment tax credit and grants for building new hydropower capacity at existing plants and non-powered dams.

“We have a great opportunity in North America because we have a lot of infrastructure already in place,” said Jay Maher, a senior manager for Kleinschmidt Associates, a consulting company that specializes in energy and water resources. “It’s very unlikely that you’ll see a great big dam going up, but we have thousands of existing dams that have the potential.”

Some of the policy changes recommended by the NHA could be implemented quickly, without a rulemaking proceeding. Such swift action “will enable small hydro developers to take advantage of current incentives for small hydro development,” NHA said.

State reform also needed

Industry observers say regulatory reforms are needed at the state level as well.

“It is estimated that Vermont has up to 400 MW of undeveloped hydroelectric potential,” said Sen. Vincent Illuzzi, chairman of Vermont’s Senate Committee on Economic Development, Housing, and General Affairs. “But no new hydro site has been developed or redeveloped in Vermont for 25 years because of the permitting obstacles.”

In written comments filed with FERC, Illuzzi said Vermont’s Agency of Natural Resources has been reluctant to streamline its procedure for obtaining a 401 water quality certificate for hydroelectric projects, despite a new state law directing the agency to devise a more timely, predictable and affordable procedure.

“This has turned into a multi-year process,” Illuzzi wrote. “Perhaps Vermont’s largest utilities don’t want to deal with small power producers.”

Among other things, Illuzzi recommended that FERC devise a process that grants automatic approval to hydro projects within 60 days after filing its application, unless FERC steps in to delay the approval.

“We have similar processes like this in Vermont,” Illuzzi said. “For example, the Vermont Public Service Board issues a Certificate of Public Good for net-metered projects if there are no intervenors within 30 days.”

Requests to build small hydro projects such as the 400-kW Harris Bridge Hydroelectric Project on Virginia’s Rockfish River are up 30 percent over the past two years, according to the Federal Energy Regulatory Commission.

According to the study by Navigant Consulting, there are 5,140 MW of undeveloped hydropower potential in the Northeast. If that potential was met by 2025, it would create more than 159,000 jobs in the region, the study shows.

“We need simplified state and federal permitting processes for small-scale hydroelectric projects,” Illuzzi said. “Vermont, like other states, has the opportunity to generate renewable power in our towns, along our rivers, and at the same time address climate change, generate skilled jobs in construction, and protect the environment. These jobs can’t be outsourced.”

New players, from private utilities to local communities, are looking to develop small hydro projects, and their experience with the FERC’s regulatory process is limited, NHA said. An updated Small Hydro Handbook would be a valuable tool for the industry, the association said.

Russell Ray is associate editor of Hydro Review.


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