The Case for Hydro Power

By WW

The Colbrun hydroelectric project in Chile illustrates the regulatory and political constraints on hydro power that operate in most OECD countries. It is perhaps ironic that one of the oldest, cleanest, cheapest and most reliable forms of renewable energy-water power-draws such environmental opposition and so little development interest. The problem, of course, stems principally from a history of large hydroelectric dams with sizable flooding for reservoirs and substantial disruption to local fisheries and others dependent on the water resource.*

In light of these concerns, it is not surprising that most of the largest hydroelectric facilities in the United States are 50 to 100 years old and that no large hydroelectric dam is currently under construction in this country. What is perhaps surprising is how little funding has gone into low impact hydro power development relative to the investments in solar and wind technologies over the last 30 years, particularly in light of the aging of our hydroelectric dam infrastructure and the relatively low levelized cost of electricity for hydro power.

Unlike solar and wind power, many hydroelectric projects provide continuous, base load power. In addition, hydro projects (including pumped storage) have the potential to mitigate the intermittent nature of wind and solar. Perhaps most importantly, a renewed focus on hydro power development could unlock substantial, untapped electricity resources. According to a recent study by the Department of Energy, nearly 50,000 dams used to regulate water supply and navigation in the United States currently lack power generation facilities. The 100 largest, many of which are operated by the Army Corps of Engineers, have a total technical generation capacity of 8 GW, which would represent over 10% of the nation’s current hydroelectric capacity. The costs to retrofit these dams would be a fraction of the cost of new construction. Another recent Department of Energy study found that the technical generation capacity of untapped streams in the U.S. (excluding those in federally protected lands) is over 65 GW or 347 TWh/year, which is more than the average net annual electricity generation of the nation’s existing hydroelectric facilities. These streams are well suited to low impact hydroelectric generation technologies, which mitigate harm to fish and other wildlife.

A number of new hydro-kinetic technologies are under development that could generate power from streams and rivers without the need for dams or water diversion. Some of these technologies could also unlock the potential of wave and tidal power. At least one has even been designed to power desalination facilities to address water shortages. Few have reached commercialization, however, which is striking given that these projects are less about science and more about engineering. Part of the reason appears to be the long permitting process for testing and implementing these technologies. That may be about to change as the Federal Energy Regulatory Commission and the Army Corps of Engineers, with prodding from the White House and Congress, are experimenting with more streamlined permitting processes. It may also derive from the substantial government ownership (~75%) of the country’s hydroelectric facilities, so entrepreneurs may have simply looked elsewhere. Fewer tax incentives, research grants and other government support apply to hydroelectric power, further discouraging investment relative to other renewable energy sources.

While the country has been chasing new technologies for solar and wind with capital, tax incentives and mandates, we have largely ignored the opportunity that lies in hydro power. It may be time for the supporters of hydro power to make a few waves.

*Full disclosure: I was involved in the financing of the Itaipu hydroelectric dam project, which remains one of the world’s largest, providing 25% of Brazil’s energy. At the time it was built, environmental concerns over destroying large portions of remote Amazonian rain forest were negligible. The principal mitigation was to move selected species to a game park for tourists.

Sources:

Hydropower Resource Assessment and Characterization http://energy.gov/eere/water/hydropower-resource-assessment-and-characterization

Subsidies and costs of EU energy: An interim report http://ec.europa.eu/energy/studies/doc/20141013_subsidies_costs_eu_energy.pdf

Levelized Cost and Levelized Avoided Cost of New Generation Resources in the Annual Energy Outlook 2014 http://www.eia.gov/forecasts/aeo/electricity_generation.cfm

Memorandum of Understanding for Hydropower among USACE, DOE and DOI http://energy.gov/sites/prod/files/2013/12/f5/hydropower_memorandum_of_understanding.pdf

A New Day for North American Hydropower?
http://www.powermag.com/a-new-day-for-north-american-hydropower

Hydrokinetic Electric Power Generation
http://www.c2es.org

Resolute Marine Energy, Inc.
http://www.resolutemarine.com/

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About macomberjohnd

HBS Finance faculty interested in sustainability in the built environment including devices, structures, townships, and cities.

One Response to “The Case for Hydro Power”

  1. I come from Ecuador, a country that is investing extensively in very dependable and clean energy which is hydro. In a few years down the road 70 percent of the total disposable energy is going to come from this source. In contrast, USA projections describe very limited interest in hydropower due mainly to environmental concerns and probably to the low tech aspect of it.
    Counting hydro out is a huge mistake and its difficult to understand why EPA proposed carbon emissions standards barely mention hydro. A recent study released by the Oak Ridge National Lab found that a potential of 84 GW exists and that excluding protected areas and wild and scenic rivers still more than 65 GW is there to develop.
    In the past we all have seen a concentration of hydro only in big projects and probably those are difficult to finance and build these days, however smaller projects can become key in areas where renewable capacity is being added. Pumped storage projects and retrofitted generation can be an attractive option.

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