Can FERC Pilot Licensing Program Speed Installation of Hydro Generators at Non-Power Dams?

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Only about 3% of all dams in the U.S. generate electricity, and unless the federal government's licensing process is streamlined, most of those dams will not become hydroelectric generators, thus robbing the U.S. of a source of clean, low-cost, non-emitting electricity, speakers at multiple sessions told the HydroVision International conference June 27-30.

The conference, held in Denver, Colorado, and sponsored by PennWell (Tulsa, Oklahoma), billed itself as the largest hydropower event in the world. It drew more than 3,000 registrants and 500 exhibitors.

For more reports from the HydroVision International event, see July 3, 2017, article - HydroVision Conference Speakers Showcase Hydro's Potential, July 5, 2017, article - Exhibitors at HydroVision International Chase Refurbishing, Greenfield Projects and July 6, 2017, article - Hydro Industry Expects Better Days in Trump Administration.

How to expedite federal licensing and re-licensing of all hydro projects, including pumped storage projects and the addition of hydro generators to non-power dams, was a topic of particular interest to attendees and exhibitors.

Adding generators to non-power dams is a "no-brainer" and represents the often-illusive "low-hanging fruit," said Ramya Swaminathan, chief executive at Rye Development (Boston, Massachusetts), a developer of non-power dams. But it's not happening as frequently as it should because of the timeline to license a hydro facility, she added.

"It's all about access to capital," Swaminathan told conference attendees. Capital will go where it can generate the fastest returns, she said, and hydro's long development and licensing process makes it far less attractive than solar, wind or a gas-fired power plant.

"It takes about eight years to clear the licensing period for hydro, and two years to add a small generator to a non-power dam," Swaminathan estimated. By contrast, she said it takes about one year to license and build a solar farm, two to three years for a windfarm and four years for a gas-powered power plant.

"No one will invest in your hydro project if they don't see a return of their money for 10 years," the Rye Development chief executive said. The company she leads is the manager of FFP New Hydro, which owns 23 small, low-impact, late-development stage hydropower projects in seven states. The 23 projects have aggregate generating capacity of over 265 megawatts, and most of them are expected to begin generating electricity in 2018. The company also is in the early stage of developing over 20 more low-impact hydro projects on non-hydro dams.

If investors have to wait at least eight years for a return on capital, developers would be forced to pay returns of between 64% and 128%, Swaminathan told HydroVision. Plus, negotiating offtake agreements can be complex, particularly given current low electricity prices.

"Investors want predictability and a short licensing process," said Erik Steimle, a vice president at Rye Development. "Hydro, by contrast, is unpredictable and long."

The Hydroelectric Regulatory Efficiency Act of 2013 (HREA) contains a provision for a pilot program to award hydro licenses to non-power dams in two years, several speakers noted. That program "is good and needs to be more widely used," Steimle said. "The meaningful shortening of the licensing process is an achievement for hydro generation on federal and non-federal dams." He called for a broader use of the pilot program, adding, "without a meaningful shortening of the licensing process, private investment will be strangled by the pace of federal regulation."

Timothy Konnert, an official from the Federal Energy Regulatory Commission (FERC) (Washington, D.C.), which licenses hydro projects, said that his agency updated its memorandum of understanding (MOU) with the U.S. Army Corps of Engineers (USACE) last July to offer developers an opportunity to decrease permitting times, reduce risks, increase certainty and improve the efficiency of the licensing process. One element of that updated MOU is the preparation of a single National Environmental Policy Act (NEPA) assessment of a proposed hydro project.

"This will cost the developer a little more in upfront costs, but it will increase certainty on the back end," Konnert told the conference. In a recent report to Congress, FERC said no changes to the Federal Power Act are needed because FERC is able to license new projects on a more expedited basis, he said, adding, "Early outreach to FERC by developers can expedite the licensing process."

Swaminathan, the Rye Development CEO, said the basic need was for the USACE to provide "unified, actionable input" that is "appropriate to the project's stage of design." She said the FERC-USACE MOU was "a good first step."

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