Washington Looks to Hydro
The sharp reversal in US policy on carbon emissions is likely to have a profound impact on the country's power sector, writes Neil Ford. New regulations and emissions targets are likely to deter the construction of coal fired power plants and may encourage more investment in renewables and large hydro
THE UNITED STATES' hydro industry is set to benefit from much stronger federal support, as a result of Washington's apparent determination to finally tackle global warming. During his first 100 days in office, President Barack Obama repeatedly pledged to reduce the nation's carbon emissions and the impact on power sector policy is already becoming apparent. Support for low carbon power generation including hydro is growing, while the coal industry is facing tighter restrictions, in a strategy that could boost investment in dam projects over the next decade.
Speaking at a meeting of the world's biggest greenhouse gas polluting countries in Washington on 27 April, Obama said that the US must "make up for lost time" in tackling climate change. He has instructed US officials to work with other governments to lay the basis of a successor agreement to the Kyoto Protocol, which expires in 2012. US secretary of state Hillary Clinton told delegates: "The United States is fully engaged and ready to lead and determined to make up for lost time both at home and abroad. Climate change is a clear and present danger to our world that demands immediate attention."
Securing Kyoto II is likely to take several years of hard international negotiation but there is little doubt that Obama has shifted the US position. Although less ambitious than European Union targets, he has set a goal of cutting US carbon emissions by 15% by 2020. He has also set a goal of a 80% reduction by 2050 and although such very long term targets are merely aspirational and do not require immediate action, the target is currently being debated by the House of Representatives' energy and commerce committee as part of the presidency's efforts to introduce a carbon trading scheme.
Environmental agencies have already begun to back Washington's new policy position. In April, the Environmental Protection Agency (EPA) concluded that greenhouse gases "endanger public health", as defined by the Clean Air Act. Among the dangers to human health listed by the EPA are increased drought; more heavy downpours and flooding; more frequent and intense heat waves and wildfires; greater sea level rise; more intense storms; and harm to water resources, agriculture, wildlife and ecosystems. The EPA undertook a thorough scientific study of the subject following an order by the US Supreme Court in 2007.
EPA administrator Lisa Jackson commented: "This finding confirms that greenhouse gas pollution is a serious problem now and for future generations. Fortunately, it follows President Obama's call for a low carbon economy and strong leadership in Congress on clean energy and climate legislation. This pollution problem has a solution - one that will create millions of green jobs and end our country's dependence on foreign oil." The findings of the country's premier environmental agency are likely to have major ramifications for the power sector.
The sharp reversal in US policy on carbon emissions is likely to have a profound impact on the country's power sector. New regulations and emissions targets are likely to deter the construction of coal fired power plants and encourage more investment in renewables and large hydro. Obama has already suggested as much by discussing the need "to break the bonds of fossil fuels" and arguing: "The choice we face is not between saving our environment and saving our economy. The choice we face is between prosperity and decline. We can remain the world's leading importer of oil, or we can become the world's leading exporter of clean energy."
He added: "We're not going to transform our economy overnight. We still need more oil, we still need more gas. But the bulk of our efforts must focus on unleashing a new, clean energy economy that will begin to reduce our dependence on foreign oil." It is perhaps too soon to say that US environmental and energy regulatory authorities are definitely taking a strong stand against high polluting power projects but there have already been some indications that this could be the case.
Interior secretary Ken Salazar has revealed that the Obama administration will seek to reverse looser regulations on the disposal of coal industry waste that were introduced by the Bush administration. In addition, at the end of April, the EPA withdrew an emissions permit, which the organisation had itself issued to Sithe Global Power's planned 1.5GW Desert Rock power plant in July last year. The plant was due to be developed on Navajo Nation land in New Mexico but the EPA argued that the permit had been issued before a full emissions assessment had been completed.
Support for hydro
On the other side of the coin, Washington has set a target of generating up to 20% of all electricity from wind energy by 2030, up from just 2% in 2008. However, the National Hydropower Association (NHA) argues that national hydroelectric output could double by 2025 through the introduction of new technology and the selective development of new dams. The Emissions of Greenhouse Gases in the United States 2007 report, which was produced by the US Energy Information Administration, partly attributed the 2.9% increase in carbon emissions in 2007 to a 14% decrease in hydroelectric production over the same period. Lower rainfall and hydroelectric output meant that more coal and gas fired generating capacity needed to be brought on stream.
The US hydro industry has certainly welcomed the new policy on low carbon power production. The executive director of the NHA, Linda Church Ciocci, commented: "We believe that both the President and Congress understand the important role that hydropower and other renewables can and must play if we are to put the nation on a path toward energy independence, prosperity, and a clean, sustainable environment. President Obama has stated his support for hydropower many times." Indeed, during a visit last September to a Voith Hydro factory that produces components for the hydro industry, Obama commented: "We can't drill our way out of this problem. That's where this facility comes in."
However, there appears to be some doubt over whether the large hydro industry will be included in Washington's goal of boosting national renewables generating capacity over the next five years. The NHA is currently campaigning for inclusion and argues that: "Hydropower is America's largest renewable energy resource, and its use and development offer solutions for many of the country's most pressing needs." Washington's economic stimulus programmes could also benefit the hydro sector. In a statement, the NHA appealed: "As the President looks at energy strategies, economic plans and public works initiatives that will prepare us for the future, we urge him to consider hydropower projects, just as his predecessors turned to hydropower development during tough economic times 75 years ago." This refers to the vast sums that were invested in dam construction during the Great Depression as a means of creating employment, although far fewer workers are required today during construction.
The centrepiece of the economic stimulus plan, the American Recovery and Reinvestment Act, which was signed into law in February, includes the hydro industry among the sectors that could benefit. Specific mention was made in the Act of "incremental hydropower and hydro at non-powered dams", as well as ocean, tidal, and "in stream hydrokinetic technologies", among the areas that could benefit from tax reductions. Funding will also be made available for federal hydro research projects, public private partnerships and improvements to hydro schemes operated by the US Army Corps of Engineers.
The NHA responded to the provisions: "The Act provides the stability investors and developers need to move forward on projects that increase our water power generation. Earlier measures, such as production tax credits, prompted an almost immediate industry wide expansion in development of between 25% and 50%, so we're very optimistic that these measures will have a similar effect on our industry now…We will be able to create jobs and economic activity within the hydro industry today, while laying a course that will lead us to new technologies, new investment, and more growth in the future."
It remains to be seen whether this new enthusiasm for hydro will result in any licensing changes but the US Federal Energy Regulatory Commission (FERC) is certainly backing dam licensing renewals at present. The first project to receive a licence renewal since Obama gained power was awarded to the 865MW Rocky Reach Hydroelectric Project on the mid-Columbia River in Washington State, which is operated by Chelan County Public Utility District (PUD). In its relicensing order, FERC stated: "We conclude that the project's power, low cost, displacement of non-renewable fossil fuelled generation, and contributions to the region's diversified generation mix will help meet a need for power in the region."
Announcing the award, FERC commissioner Philip Moeller commented: "This decision is made all the more gratifying by Chelan PUD's implementation of the Habitat Conservation Plan - a plan negotiated with federal, state, tribal and environmental representatives. I applaud everyone for their innovative and collaborative approach to managing our hydropower resources while protecting the salmon and steelhead that migrate through the project." The scheme, which supplies more than 6M MWh to the Pacific Northwest region, has been awarded a new 43-year licence.
FERC has also recommended relicensing the four Big Creek hydro projects. Operator Southern California Edison has applied through the alternative licensing process for the four dams, which provide combined generating capacity of 865MW. As with other federal environmental and energy authorities, FERC highlighted the benefits of the projects in terms of displacing hydrocarbon consumption and reducing carbon emissions, when it published its conclusions in March.
One issues centres on whether many new large hydro projects will be developed. As Table 1 indicates, hydroelectric production is concentrated in just a few states, so although the sector accounts for about 8% of the US generation mix, just eight states rely on the technology to this extent. Idaho is the most hydroelectric dependent state in the country, sourcing 84% of its electricity from dam projects, followed by two other states on the Columbia River system: Washington (76%) and Oregon (71%). The only other states to take more than 8% of their electricity from dam projects are: South Dakota (48%), Maine (25%), California (22%), Vermont (21%) and New York (19%). These same areas contain most of the country's untapped hydro resources but Washington seems set to leave local policy up to the state governments in question.
Perhaps even more pressing is the need for dam upgrades. According to the US Association of State Dam Safety Officials (ASDSO), the total bill for outstanding non-federal dam repairs is $50B, of which $16B is considered urgent. Basing its research on data from the US Army Corps of Engineers, ASDSO concluded that the backlog in repair work is growing every year. Unveiling plans for $1B federal investment in US water infrastructure in mid-April, secretary Salazar commented: "From aging dams to outdated water systems, America's water infrastructure needs immediate attention and investment." Given Washington's pledges on climate change and support for the hydro industry, this backlog may finally be tackled, while the NHA is confident that it will be able to position the industry as a key element of the country's new low carbon generation mix.
High level support for pumped storage
In a speech in February, energy secretary Steven Chu highlighted the importance of pumped storage projects in balancing out the less reliable power production of wind farms. He said: "The good news is that there is a potential for pumped storage; namely, when you can install capacity, you can use that energy to pump water up to the hydroelectric dams. And when you need it and the wind isn't blowing, you can lay it back down into a holding volume, a holding pond or something down below."
However, he added: "When you do this, you want to make sure you don't destroy the river, fisheries and habitats. I think it is possible Europe is using pumped storage much more effectively than the United States. And so one of the things we need to look into is how to overcome the environmental sensitivities, and be responsive to those concerns and yet use pumped storage. If you do, this is a perfect system for a much higher renewable system."
There is already 20,355MW of pumped storage generating capacity in the country but hydro industry investors believe that there will be plenty of opportunity to expand this in support of renewables. Ciocci of the NHA says: "With thousands of megawatts of new wind and solar technologies planned for the near future, expanding this storage capacity will be a high priority. Through our new pumped storage council, NHA is working on strategies that will help speed development of this critical capability." The NHA is campaigning for financial incentives for pumped storage projects, possibly through the award of carbon credits or investment tax credits.
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