Squeezing Hydropower

It may be small, but it will have a big impact. General Electric is investing about $103 million (U.S.) in a 196-megawatt hydroelectric project to be constructed in Canada, about 120 miles away from Vancouver, British Columbia. The agreement, expected to close later in June, also involves about $370 million in debt financing and gives GE a 49-percent equity interest in the deal.

While the hydroelectric industry may be mature, activity there abounds. The sector’s next phase, however, will focus on smaller hydro units that are less disruptive environmentally but still useful in supplying electricity to remote areas. Government researchers say that almost 60 percent of the nation’s water energy resources are potentially available for development using technologies that are environmentally adept.

Indeed, more than 100 hydro facilities generating 2,400 megawatts have been proposed, with many being granted preliminary approval by the Federal Energy Regulatory Commission (FERC). Most of those would generate power by re-directing the river’s flow using distributed hydropower units that include underwater watermills. While such technology is dependent on stream flow and access to power lines, it does not require the construction of dams that block water and kill off aquatic life.

“The hydropower industry is primed for responsible growth at a time when policymakers are seeking sound solutions to the climate change problem,” says Linda Church Ciocci, executive director of the National Hydropower Association. “In fact, a recently released report by the Electric Power Research Institute estimates that hydropower can add at least another 23,000 megawatts by the year 2025, with a total growth potential of nearly 90,000 megawatts.”

About 7 percent, or 80,000 megawatts, of this country’s overall energy mix comes from hydro sources, says the U.S. Department of Energy. Most of that power is highly efficient, meaning that utilities are able to convert lots of energy from it. More than half of the nation’s hydro potential is in Alaska and the Pacific Northwest.

The conventional way to produce hydroelectricity is through dams. But the amount of power is contingent upon the speed of the water that turns the turbines. Dams can increase the velocity by raising the water level. But they leave big footprints and can cause local populations to disperse. Investors, meantime, are skeptical because the permitting process is slow and costly.

In the case of GE, construction will begin this summer and the facility will be a so-called run-of-the-river hydro project. Such plants divert the river to a generating station and do not impede water flow. “Run-of-river hydroelectric power is one of the most environmentally safe and commercially viable sources of electricity generation,” says Mark Tonner, managing director at GE Energy Financial Services in Canada.

Relicensing Procedure

Like most power plants, hydro facilities are also a divisive topic. To build dams that can generate lots of electricity, local populations oftentimes have to be dispersed and damages occur to the ecosystem. Such projects can create huge lakes that harm sensitive streams and rivers while the dams can reduce oxygen levels in associated waterways. That limits the ability of migratory fish to spawn.

About 80 percent of the hydro facilities in South America, for example, are located in rain forest. China, furthermore, currently uses about a quarter of its potential hydropower. By 2020, it expects to have tapped roughly 60 percent of that potential. Toward that end, its Three Gorges Project plans to construct 26 generators that produce 700 megawatts each along the Yangtze River by 2009—a move estimated to dislocate 1.4 million people.

“The damage to aquatic habitat from dams may be significant, but acid rain, nitrogen deposition, and thermal pollution from coal plants also lead to aquatic damage, as well as to air pollution and global warming emissions,” says the Union of Concerned Scientists. “Still, if it’s done right, small run-of-the-river hydropower can be a sustainable and nonpolluting power source.”

A movement is afoot to destroy existing dams. Nearly 200 dams have been demolished here since 1999, all tying into concerns over declining pools of salmon. And more dams are slated to go, including seven in Washington and Oregon in the next five years. And while hydropower’s growth is limited, the same is not true of wind and solar energy. That sentiment is underscored by the Bush administration’s refusal to fund additional research into hydropower, saying the focus should be on supporting novel technologies.

That’s not to say that the federal government is complacent. In fact, the 2005 Energy Act allows utilities to challenge early on environmental demands that they say add a decade to the licensing process and cost hundreds of millions. More than 200 dams in 36 states are set to apply for new permits by 2020, all of which would extend operational rights 30-50 years into the future. By streamlining regulatory procedures and extending operating licenses, projects can attract the capital they need to modernize.

Among the first facilities up for review: PPL Montana’s Mystic Lake Dam, which began the relicensing process in 2004 and whose permit expires in 2009. FERC, which could approve the application by year end, says that all parties must meet and resolve their differences early on. FERC is also busy approving new permits, including the 2,755-megawatt Niagara Hydroelectric Project on the Niagara River in New York.

Certainly, hydro plants are widely criticized for their high costs both economically and environmentally. But the focus now is on upgrading and retrofitting existing facilities. The goal is to assure both a stable flow of power and the protection of pristine surroundings – one that seems realistic. Contemporary technologies, along with the demand to clean the air and reduce global warming, will spawn new hydro projects.

Ken Silverstein is an award-winning journalist who is the editor-in-chief of Energy Central’s publication, EnergyBiz Insider. With a background in economics and public policy, he has spent several years writing about the issues that touch the energy and financial sectors, and his work has been published in more than 100 periodicals.

Republished with permission from CyberTech, Inc. EnergyBiz Insider is published three days a week by Energy Central. For more information about Energy Central, or to subscribe to EnergyBiz Insider, other e-newsletters and EnergyBiz magazine, please go to http://www.energycentral.com/.


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