Utah, USA — At 3.79 million square miles, the United States is the fourth largest country in the world by total area. Scattered throughout that vast landscape are some 80,000 non-powered dams that, if harnessed, could hold as much as 12.1GW (or 12,100MW) of renewable energy capacity. The U.S. Department of Energy recognizes this, and recently announced its intention to provide billions of dollars in loans to hydroelectric power technology developers to convert all that standing water into power.
In July, the DOE announced $4B in loan guarantees for five key areas of renewable energy technology. The loans are part of the President’s Climate Action Plan, which aims to cut carbon pollution and decrease greenhouse emissions through a variety of measures, including loan guarantees that support clean, innovative technologies. Among the five areas on which the DOE has decided to aim its considerable focus is the “enhancement of existing facilities including micro-hydro or hydro updates to existing non-powered dams.”
Peter W. Davidson, Executive Director of the Loan Programs Office (LPO) for the DOE, views the announcement as nothing less than a watershed moment for the U.S. hydropower industry. “This is the first time the loans program has specifically called out hydro and small-scale hydro as something we’re interested in developing further,” Davidson said. “If we can find a way to bring power to some of those 80,000 dams, we could relatively easily tap into a huge amount of power.”
(Above: As part of the PCL Construction design-build team, Black & Veatch designed a new 30-megawatt powerhouse and other hydropower components to increase the installed capacity of Puget Sound Energy’s Lower Baker development to 109 MW. The project was completed in 2013. Credit: Black & Veatch.)
Davidson, who added that there are “some very noninvasive ways to power up dams” with minimal environmental impact, pointed to a study that identified the potential to harness up to 8 GW of power capacity simply by converting 100 of the country’s top existing non-powered dams to power-generating dams.
“We’re very hopeful that developers will work on projects for these non-powered dams,” Davidson said, adding that doing so would present “a great opportunity to accelerate the deployment of hydropower in the United States.”
Carlos Araoz, Vice President and Director of Hydropower and Hydraulic Structures for Black & Veatch, pointed to additional areas of hydropower that may also benefit from loan program dollars. These include requests for loans to upgrade existing dam power plants with more modern — and therefore energy efficient — technology. “There are some very old power plants out there that could be replaced, either on a per-unit basis or by a single unit of a much larger size,” Araoz said.
Bonneville Power Administration completed the modernization of BPA’s Celilo converter station at Dalles, Oregon, which uses solid-state silicon chips that should allow the system to work cooler, safer and be ecologically improved. Credit: DOE.
Norman Bishop, Senior Vice President of Hydropower and Renewable Energy for Knight Piesold, sees the DOE initiative as a much needed boost for the U.S. hydropower industry. “For many years, other renewables have had the benefits of a wide variety of incentives,” Bishop said. “Certainly, the hydro sector of the country’s renewable portfolio needs a jump start. This program is the first of potentially many more that will attempt to capture energy that would otherwise be wasted.”
Bishop said DOE efforts to collect feedback from the renewable energy industry about the loan program was an encouraging and important first step. Prior to the official launch of the program, a series of meetings were held in six cities throughout the country. During this 30-day public comment period, renewable energy developers were encouraged to voice their concerns and suggestions.
“We had an extremely good response in those public meetings,” Davidson said. “We received a number of very helpful public comments and we incorporated as many as we could into the final solicitation.” Full details of the public comments, including DOE response, are available online.
The application process for the DOE’s Renewable Energy and Efficient Energy Projects Solicitation is being rolled out in two parts, each with a series of specified due dates ranging from October 1 of this year through December 2 of 2015. Part I will require applicants to pay a $50,000 application fee and provide a project summary that shows they meet certain requirements set forth by the DOE for loan consideration.
“There are several key requirements that must be met,” Davidson explained. “The project has to be located within the United States or its territories, it has to reduce greenhouse gas emissions, and it has to utilize a new technology or process to achieve that.”
Approved applicants will then move on to Part II of the process. Those companies requesting $150 million or less in loans will be required to pay a $100,000 fee. Those requesting greater than $150 million will be required to pay a $350,000 fee. These fees — which, all told, could cost individual developers anywhere between $150,000 and $400,000 — have come under criticism by some who believe it may discourage smaller developers from applying.
“We’ve worked very hard to make those fees as low as possible,” Davidson said, explaining that per 2005 Energy Policy Act specifications, the DOE is required to charge monies to cover the administrative costs associated with the intensive due diligence necessary when processing such high dollar loans.
Araoz believes the fee structures may deter smaller developers from participating. “If a developer has a big project and can get the initial funding put forward, it may be worth their while to go that route,” Araoz said. “But if the project is small and on the borderline of visibility, maybe not.” Araoz added that developers of substantially larger projects may find fees in excess of $400,000 a worthwhile investment.
“You’re always going to have some part of the sector that may not be addressed, or that may find the terms and conditions a bit prohibitive,” Bishop said. “But this is a first of its kind program that I think should be embraced and encouraged by our industry.”
In emphasizing the more “user friendly” nature of the loan program, Davidson noted the DOE’s ability to stretch repayment terms as long as 30 years. Repayment terms will be deal-specific, and will be commensurate to the offtake agreements developers have with the entities they will be providing power to – something Davidson says would be near impossible to achieve through a commercial bank, and which he says will play a crucial role in giving projects the necessary time to become self-sustaining.
“One of the reasons this is so important,” Davidson said, “is because many of these projects will need a longer period of time to pay themselves back. The economics aren’t as strong to be able to pay off the whole loan in a shorter amount of time.”
Looking ahead, Bishop said, “I see this as a program to be built on. I’m very hopeful that, when the applications start to pour in, it will be fully subscribed for many years.”
“We think the technology is ready to be demonstrated at commercial scale,” Davidson said. “Once that’s done, these industries will really be able to take off and they won’t necessarily need government funding anymore.”
Interested parties are encouraged to apply now by visiting the Loan Programs Office online application portal.