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Next Steps for Moving Energy Recovery Hydropower Forward
03/01/2018
Legislation passed in the U.S. in 2013 helped create a new industry:
energy recovery hydropower. However, due to recent electricity market
conditions, growth has been slow. This article presents new federal
efforts needed to help spur additional growth.
By Kurt Johnson
August 2013 marked the beginning of a new industry in the U.S.: energy
recovery hydropower.1 Before the Congress approved the Hydropower
Regulatory Efficiency Act (HREA), developers of even the smallest
conduit hydropower projects were required to submit a detailed
application to the Federal Energy Regulatory Commission (FERC), which
rendered many of these projects economically infeasible due to high
regulatory compliance costs. HREA made it possible for “qualifying
conduit” projects to receive FERC approval in 60 days.
Despite the promise of this reform, industry growth has been slow.
Between August 2013 and December 2017, only 94 projects received
approval from FERC as qualifying conduits, not all of which have
actually been built. This article explains why and suggests additional
federal efforts that may help spur the growth of energy recovery
hydropower in the U.S.
Market opportunity
There is substantial untapped opportunity for energy recovery hydropower
in the U.S. Billions of gallons of water are withdrawn each day from
existing natural water sources.2 Sectors responsible for significant
water consumption include thermoelectric power generation, agriculture
and public supply (see Figure 1).
Some of the energy embedded in this water, as it is delivered for its
intended purpose, can be harvested using energy recovery hydropower. For
example, the U.S. water transmission and distribution system includes
hundreds of thousands of pressure reduction valves (PRVs), which are
mechanical devices that keep water pressure at sufficiently low levels
to protect pipelines, plumbing and appliances. PRVs are frequently
located in underground concrete vaults. If there is both sufficient
space available and proximity to utility interconnection, PRVs can be
installed in parallel with small hydropower generators that perform
exactly the same function — reducing pressure — with the added benefit
of simultaneously generating energy.
Slow industry growth
Since the significant FERC process reforms of 2013, only 94 new
qualifying conduit projects totaling slightly over 30 MW have received
FERC approval — a rate considerably less rapid then FERC staff had
expected in 2013. The leading states for project development to date
have been California, Oregon and Colorado (see Figure 2) — all of which
have topography conducive to hydropower and state policies that actively
support energy recovery hydropower.3
Tough market conditions
The simplest explanation for slow industry growth is low electricity
prices. Average wholesale electricity prices are low by historical
standards, ranging from $25 to $35 per MWh in 2016. For comparison, in
2008, average prices nationwide ranged from $63 to $113 per MWh (see
Figure 3).4 In addition, federal production and investment tax credits
for hydropower expired at the end of 2016, further adversely impacting
the already challenging economics of new hydro project development.
Despite the complication of low wholesale electricity prices, locations
with an on-site electricity load that can be net metered may still be
economically attractive. For example, water treatment plants typically
have an on-site electricity load that can be offset with hydropower
generation through net metering — yielding a much higher value per kWh
as opposed to electricity sold into the wholesale market. The average
U.S. retail electricity price (combining residential, commercial and
industrial sectors) in 2016 was 10.28 cents/kWh.5 Currently, 41 states
and Washington, D.C., American Samoa, U.S. Virgin Islands, and Puerto
Rico have mandatory net metering policies in place.6
Options to accelerate growth
Below are federal actions that could further accelerate growth of energy
recovery hydro.
Additional federal regulatory reform
One logical reform would be addressing the inconsistency between
environmental impact and regulatory burden for energy recovery
hydropower. HREA represented a significant step forward relative to
typical hydropower permitting. However, unlike conventional hydro,
energy recovery hydropower in many cases is simply plumbing equipment
that generates electricity, located nowhere near an existing natural
waterway.
The delay associated with having to file a federal project approval
request and then wait 60 days for federal approval before ordering
equipment means that project completion cycles for even tiny energy
recovery hydropower projects are frequently at least one year and
typically longer (compared to several weeks for installation of a
typical PRV). Continuing to require a 60-day federal approval process
before it is legal to install energy recovery hydropower will likely
mean the industry will never grow to become a commonplace energy
efficiency upgrade for water operators.
At a May 2017 hydropower hearing of the House Energy and Commerce
Committee, the FERC witness recommended removing conduit hydropower
projects from FERC jurisdiction entirely, citing the lack of
environmental concerns associated with hydropower development using
existing conduits.7
By definition, energy recovery hydropower does not typically have
environmental impact. It uses water that has already been diverted from
a natural waterway into a pressurized pipeline for non-hydropower
purposes (e.g. municipal, agricultural or industrial). Consequently, any
environmental impact associated with diversion from an existing natural
waterway would already have occurred, and environmental impacts would
usually have been addressed prior to construction of the existing
conduit. If there are any incremental impacts (e.g. associated with
construction of a new powerhouse building), those would be addressed by
existing federal, state and local environmental law.
One possible legislative fix could allow developers of energy recovery
hydropower projects the legal right to assert that they be considered
qualifying conduits, meaning no need to file with FERC and wait for
approval. The owner of such a facility could be required to retain
documentation demonstrating that the project meets FERC qualifying
conduit criteria and be prepared to provide it to FERC if requested.
This would be consistent with other FERC policies allowing small
projects to be exempt from filing requirements.8 It would not change the
underlying FERC qualifying conduit eligibility criteria from 2013. It
would simply allow installation of energy recovery hydropower to become
as quick and easy as installation of distributed wind and solar
photovoltaic power (which do not have any federal approval requirements
prior to installation) while maintaining the legal right of any
stakeholders to protest project eligibility for qualifying conduit status.
One argument against further FERC streamlining for energy recovery
hydropower is that it could increase economic incentives to divert water
from existing natural waterways, which could potentially have adverse
effects if the impacted waterway is impaired. This is an understandable
concern. However, water diversions and rights are governed by state
water law, not by FERC. Changing the use of an existing water right to
add hydropower entails a state, not federal, legal process and disputes
over water rights are a state, not federal, legal issue.
Integration of hydropower into water infrastructure spending
Another logical action would be integrating energy recovery hydropower
into federal water infrastructure spending decisions. Water
infrastructure is typically funded by local, state and federal
government sources, including the multi-billion-dollar State Revolving
Funds administered by the Environmental Protection Agency. Water
agencies have a primary mission of delivering water and meeting
regulatory requirements to protect public health, so analyzing energy
data to optimize the energy efficiency of operations – including through
energy recovery hydropower — has not necessarily been a priority.
However, because the water sector is so energy-intensive,9 it makes
sense to routinely investigate whether energy recovery hydropower makes
technical and economic sense whenever money is being spent on new
water-supply pipelines. This could build on related efforts that have
already been developed in New York, California and other states to
promote energy efficiency in the water sector.10
Federal resource assessment of energy recovery hydropower
Perhaps the best federal action would be for the U.S. Department of
Energy to complete a comprehensive federal resource assessment of energy
recovery hydropower, building upon DOE’s successful hydropower resource
assessments on non-powered dams.11 Preliminary DOE conduit hydropower
estimates have indicated a national resource of 1,000 to 2,000 MW.12
However, there has never been a comprehensive, nationwide conduit
resource assessment.13 A comprehensive understanding of the magnitude of
the energy recovery hydropower resource could help to guide future
policy and program efforts as well as project development.
Conclusion
Energy recovery hydropower remains a largely untapped hydropower
development opportunity. Notwithstanding significant reforms of 2013,
the industry’s potential has yet to be realized. Additional federal
efforts may help grow the industry from the status of several dozen
projects approved by FERC each year to the point where installation of
energy recovery hydropower becomes as simple, routine and commonplace as
installation of a PRV.
Notes
1Johnson, Kurt, Aaron Levine and Taylor Curtis, Energy Recovery
Hydropower: Prospects for Off-Setting Electricity costs for
Agricultural, Municipal, and Industrial Water Providers and Users,
NREL/TP-6A20-70483, National Renewable Energy Laboratory, Golden, Colo.,
U.S., 2018, www.nrel.gov/docs/fy18osti/70483.pdf.
2Maupin, M.A., et al, Estimated Use of Water in the United States in
2010: U.S. Geological Survey Circular 1405, 2014,
dx.doi.org/10.3133/cir1405.
3Curtis, Taylor, Aaron Levine and Kurt Johnson, State Models to
Incentivize and Streamline Small Hydropower Development, National
Renewable Energy Laboratory, Golden, Colo., U.S., 2017,
www.nrel.gov/docs/fy18osti/70098.pdf.
4State of the Markets Report, Federal Energy Regulatory Commission,
Washington, D.C., April 2017. For additional information on wholesale
energy pricing, see
www.ferc.gov/market-oversight/reports-analyses/reports-analyses.asp.
5Short-Term Energy Outlook, Energy Information Administration,
Washington, D.C., 2017.
6www.nrel.gov/technical-assistance/basics-net-metering.html.
7See the question and answer session after the House Energy and Commerce
Committee hearing “Legislation Addressing Pipeline and Hydropower
Infrastructure Modernization” on May 3, 2017. The relevant exchange with
John Katz representing FERC is available at
https://youtu.be/a68eU-BESZQ?t=2h12s.
8There is precedent for a project to benefit from receiving a FERC
“status” without filing with FERC. Pursuant to FERC regulations
implemented under PURPA, projects less than 1 MW are not required to
file an application to assert qualifying facility (QF) status and
benefit from associated rights. The same policy argument applies to
energy recovery hydropower: the administrative burden, associated cost
and delay is not justified for small projects.
9Pabi, S., A. Amarnath, R. Goldstein and L. Reekie, Electricity Use and
Management in the Municipal Water Supply and Wastewater Industries,
2002001433, Electric Power Research Institute, Palo Alto, Calif., U.S.,
2013.
10Copeland, Claudia, and Nicole Carter, Energy-Water Nexus: The Water
Sector’s Energy Use, R43200, Congressional Research Service Washington,
D.C., 2017.
11Hadjerioua, Boualem, Yaxing Wei, and Shih-Chieh Kao, An Assessment of
Energy Potential at Non-Powered Dams in the United States, Oak Ridge
National Laboratory, Oak Ridge, Tenn., U.S., 2012.
12Hydropower Vision: A New Chapter for America’s 1st Renewable Energy
Source, U.S. Department of Energy, Washington, D.C., 2016.
13Sale, Michael, et al, Opportunities for Energy Development in Water
Conduits: A Report Prepared in Response to Section 7 of the Hydropower
Regulatory Efficiency Act of 2013, ORNL/TM-2014/272, Oak Ridge National
Laboratory, Oak Ridge, Tenn., U.S., 2014.
Kurt Johnson is chief executive officer of small hydro consulting firm
Telluride Energy and president of the Western Small Hydro Association
(WESHA). 2017 WESHA Energy Recovery Hydropower workshop proceedings are
available at www.smallhydro.co.
