On Monday, July 09, 2012, the House is scheduled to consider H.R. 5892, the Hydropower Regulatory Efficiency Act of 2012, under a suspension of the rules requiring a two-thirds majority vote for approval.  The bill was introduced on June 5, 2012, by Rep. Cathy McMorris Rodgers (R-WA) and referred to the Committee on Energy and Commerce.  

H.R. 5892 would facilitate the development of new hydropower resources in the United States by streamlining the federal licensing requirements for small hydropower projects and qualifying conduit hydropower facilities. The legislation would also require the Federal Energy Regulatory Commission (FERC) to study ways to improve federal hydropower licensing for non-powered dams and closed-loop pumped storage facilities.

According to House Report 112-563, “Hydropower is the nation's largest renewable energy generation resource, providing nearly eight percent of the electricity generated in the United States.  Including pumped storage facilities, there are approximately 100,000 megawatts (MW) of current installed hydropower capacity in the United States.  The hydropower sector employs approximately 200,000-300,000 workers across the United States and nearly 2,500 U.S. companies participate in the development, licensing, construction, and operation of hydropower projects.”

“Ninety-three percent of U.S. hydroelectric facilities are operated by the private sector, public utilities, and state or local governments.  According to the Federal Energy Regulatory Commission (FERC), which regulates non-federal projects, these entities operate 1,645 hydropower facilities in every region of the U.S.  Many of these facilities are much smaller than the large federal dams typically associated with hydropower.  FERC records show that approximately 71% of non-federal hydropower facilities have a capacity of less than five MW, demonstrating the importance of small hydropower projects to the nation's energy portfolio.

“Despite abundant resources, the production of electricity from water resources is not fully utilized.  With the right federal policies in place, it may be possible to double hydropower capacity and create thousands of new domestic jobs.  For instance, a study completed on behalf of the National Hydropower Association (NHA) concluded that by utilizing currently untapped resources, the United States could add approximately 60,000 MW of new hydropower capacity by 2025, potentially creating as many as 700,000 jobs in the process.

“A significant amount of new hydroelectric generation could come from maximizing existing infrastructure, particularly non-powered dams.  For example, only about three percent of the nation's approximately 80,000 dams currently generate hydropower.

“There also is significant growth potential in the small hydropower and conduit power sectors of the industry, as numerous project developers and local governments across the country consider retrofitting local dam infrastructure or investing in irrigation power projects and other conduit applications.  For instance, the U.S. Bureau of Reclamation released a study identifying 373 existing canals and conduits that have the combined potential of generating over 365,000 MW-hours of additional hydropower annually.

“Hydropower is a clean, renewable, and zero-emission electricity source; its utilization currently avoids 225 million metric tons of carbon dioxide in the U.S. each year--equal to the output of approximately 42 million passenger cars, according to NHA.  Hydropower facilities also can provide grid reliability and stability services, such as the ability to quickly meet changing demand in electric load, firming for intermittent variable resources, such as wind and solar, and black start capability in times of an outage.

“Hydropower developments face a comprehensive regulatory approval process that involves many participants, including FERC, federal and state resource agencies, local governments, tribes, non-governmental organizations and the public.  The regulatory process to license and construct a hydropower facility can be considerably longer than the process for other renewable energy resources.  For example, FERC's Integrated Licensing Process established specifically for hydropower projects is structured to be completed in five years, while the development timeline for wind and solar projects can be as short as 18-24 months.

“Developers of small hydropower projects told the Committee that, due to the lack of economies of scale with smaller projects, the costs associated with the licensing process serve as a financial disincentive to pursue these facilities.  In recent years, FERC has taken steps to improve the licensing process of small hydropower projects. However, FERC exemption applications can be lengthy and time consuming to prepare.  For very small projects, the cost of FERC compliance can potentially exceed the cost of hydro equipment.

“According to the Colorado Small Hydro Association, a typical exemption application for a small hydropower system may be on the order of 100 pages, including all the necessary explanatory text, diagrams, maps, letters and appendices.  Compiling all the necessary information can take months, requiring expensive consulting assistance from engineers, attorneys, professionally-licensed surveyors and environmental consultants.  Hiring consultants to complete FERC small hydro exemptions for small projects may typically cost somewhere between $10,000 and $30,000--a price tag that often outweighs the total hydro equipment installation cost for a typical small (1-2 kilowatt) residential micro-hydro system.

“FERC currently reports 578 proposed projects with pending license and license exemption applications, as well as issued and pending preliminary permits.  This represents over 76,000 MW in new hydropower capacity pending at FERC.  By improving the hydropower licensing process, H.R. 5892 could facilitate the development of many of these and future hydropower projects.”

Based on information from FERC and the Department of Energy (DOE), the Congressional Budget Office (CBO) estimates
that implementing H.R. 5892 would have no significant impact on the federal budget.  CBO anticipates that the proposed changes to FERC’s permitting and licensing requirements would reduce the commission’s workload.  They also estimate that FERC would spend about $1 million on pilot projects authorized under the bill, assuming appropriation of necessary amounts. However, because FERC recovers 100 percent of its costs through user fees, any change in the agency’s costs (which are controlled through annual appropriation acts) would be offset by an equal change in fees that the commission charges, resulting in no net change in federal spending.

Finally, CBO estimates that any increased costs to DOE to prepare the study required under H.R. 5892 would be negligible. Enacting H.R. 5892 would not affect direct spending or revenues; therefore, pay-as-you-go procedures do not apply.