Introduction and Background
Harnessing the energy contained in flowing water is not a new or difficult
technology. Mankind has long sought to convert hydropower to do work and provide
energy. By the 18th century, hydropower was used extensively for a variety of purposes
including milling grains, cutting lumber, and irrigating crops (History of Hydroelectric
Power, n.d.). Today, most Americans are familiar with large-scale hydropower projects
like Hoover Dam in Nevada, which includes 17 turbines and generates an average of 4
billion kilowatt-hours of electricity every year (Bureau of Reclamation, 2009). Less
commonly known, however, is the potential for small and micro-hydro projects to
collectively generate a significant supply of clean, renewable energy with few
environmental impacts. Across the country, cities and individuals are seeking to take
advantage of this potential to create clean electricity for their own use, or to sell to meet
growing energy demand.
Micro-hydro projects are undertaken within an environment of stringent
regulation, and must meet a variety of state and federal requirements. Regulatory
requirements are often complicated, and compliance can drain an organization’s
financial and manpower resources. For small cities or private organizations, the high
regulatory costs associated with micro-hydro can deter otherwise economically feasible
projects from ever getting off the ground. This study will explore the regulatory
environment surrounding micro-hydro generation, using narrative case studies to
illustrate how regulatory impediments are discouraging the development of valuable
micro-hydro potential across the U.S.
Micro-hydropower refers to small-scale hydroelectric power plants in which a
turbine, pump, or waterwheel is used to convert the energy contained in flowing water
into electricity (Department of Energy, 2012). The Department of Energy defines microhydropower as “usually” generating up to 100 Kilowatts (kw) of power (Department of
Energy, 2012). However, a variety of loose definitions exist from other agencies and
organizations. The Federal Energy Regulatory Commission (FERC), the agency
responsible for licensing hydroelectric projects, allows exemptions for hydropower
projects up to 5 MW in size and for in-conduit hydroelectric facilities with up to 15 MW
of generation (FERC, 2012). In general, the micro-hydro facilities discussed in this
report are less than 5MW in size. Compared with the power output from larger systems,
micro-hydro systems are indeed “micro,” generating only a fraction of power of large
dams like Hoover Dam. Although individually small, collective power generation from a
multitude of micro-hydro systems can be significant.
The electricity produced by micro-hydropower can either remain off the grid in a
stand-alone system, using storage capabilities such as batteries, or can be connected to a
larger distribution grid (Energy.gov, 2012). Figure 1 below shows a typical setup for a
micro-hydro project.
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Figure 1: Typical micro-hydro project
(Energy.gov 2012)
Micro-hydro facilities most commonly generate electricity by using “run-of-theriver” systems, which function when part of a river’s water is diverted to a channel or
pipeline. Water then flows through a turbine or waterwheel before being released
downstream. As the water turns the turbine or wheel, this provides power to the
generator that, in turn, produces electricity. A regulator or transformer is used to
control the generator and wiring is also necessary to deliver the electricity to where it
can be used. Figure 2 below shows the typical setup of a run-of-the-river micro-hydro
system.
Run-of-the-river systems are beneficial in that they require smaller water
volumes and do not require dams or reservoirs. For efficient operation, a water flow of
about 20 gallons per minute is required (Campbell, 2010, p. 12). Other water conduits,
such as canals and pipelines, can be used in the same way that the flow of a river is used
to capture energy. This means that waterways for irrigation and municipal uses can also
be used as a source of energy (Campbell, 2010, p. 5). Other micro-hydropower systems
allow for turbines to be placed directly into a stream, but all systems are alike in that
they require a turbine, pump, or waterwheel to convert the energy into electricity
(Energy.gov, 2012).
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Figure 2: Components of a Run of the River Hydropower System
(Dorado Vista 2009)
The United States has been generating energy from hydropower projects since
the 1800’s. In fact, most earlier hydropower projects were done on a very small scale,
much like today’s micro-hydro. During the early 1900’s, before post-war electricity
demands required more production from fossil fuels and other methods of generation,
hydropower accounted for nearly half the electricity production in the United States
(Campbell, 2010). Today, micro-hydropower is increasingly common in developing
countries and rural areas, due to its simplicity and low cost (Lwamba, 2008).
Energy Potential
Although individually small, micro-hydro projects have the potential to generate
significant amounts of energy when considered collectively. A system producing as little
as 10 kilowatts can power a large home, small resort, or hobby farm (Energy.gov, 2012).
On a nationwide and state-by-state basis, a significant amount of undeveloped
hydropower potential is available for development. A Department of Energy (DOE)
study conducted in 2004 estimated average annual hydropower potential in the U.S. at
300,000 MW. Excluding energy potential that cannot be developed and potential that
has already been developed, almost 170,000 MW of potential hydropower is left
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untapped (Department of Energy, 2004, p. vi). This means that approximately 60
percent of the nation’s potential hydropower potential remains undeveloped
(Department of Energy, 2012, p. 50). If taken advantage of, this energy potential could
power, on average, over 370,000 American homes on an annual basis.1 The highest
concentration of potential hydropower is located in Alaska, followed by the Western
states including Washington, California, Idaho, and Oregon (Department of Energy,
2004, p. 44). Nationwide, the average percentage of developed hydro energy potential is
only 12 percent, and 27 states have developed power percentages even lower than the
national average (Department of Energy, 2004, p. 50).
Specifically, the DOE study found the potential for micro-hydro technology to be
great, stating that micro-hydro sites are “abundant and exist everywhere in the country,”
except in the Midwest and Hawaii (Department of Energy, 2004, p. vi). The definition of
micro-hydro used in the DOE study includes any projects under 100 KW. Figure 1 below
breaks down the annual mean power in MW by high power (at least 1 MW) and low
power (under 1 MW), showing how much power could be generated by conventional,
unconventional, and micro-hydro systems (Department of Energy, 2004, p. 19). As the
table shows, about 6.5 percent of the total available energy potential is made of up
projects suitable for micro-hydro technologies. Available micro-hydro energy potential
constitutes over 50 percent of total low head (less than 30 feet)/low power potential in
the U.S.
Table 1
(Department of Energy, 2004, p. 23)
According to a feasibility assessment of small and low power hydroelectric plants,
generation of as much as 30,000 MW of energy is possible through small and low power
1 Based on average household consumption of 30 kWh/24 hours = 1.25 kW per day.
2 Based on average household consumption of 30 kWh/24 hours = 1.25 kW per day.
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hydro projects (30 MW or less) throughout the United States (Idaho National
Laboratory, 2006, p. 1). This is enough to power over 65,000 homes on an annual
basis.2 Development of small and low power projects could increase hydroelectric power
generation by at least 50% in the United States (Idaho National Laboratory, 2006, p.
35). Potential development could occur by installing electricity-generating technology
on existing dams or by installing run-of-river systems. It is estimated that fewer than 3%
of the dams in the U.S. have electrical generating capacity, and most of those dams
without power generating capacities are already located close to existing infrastructure,
greatly increasing the ease and convenience with which a power generation project
could be developed (Lacey, 2011). The following image shows new micro-hydropower
potential as a percentage of state electricity sales.
(Farrell, 2011)
Significant potential for job creation also exists, the benefits of which could be
realized by developing the energy potential described above. A study conducted in 2009
for the National Hydropower Association estimated that between 230,000 and 700,000
total jobs could be created based on the assumption that the U.S. will install between
23,000 and 60,000 MW of new hydro capacity by 2025 (Navigant Consulting, 2009).
These numbers include the predicted creation of 140,000 to 440,000 direct jobs and
95,000 to 265,000 indirect jobs, but do not include induced jobs in retail, restaurants,
etc. that would also be created by a spike in this industry (Navigant Consulting, 2009).
Increasing the ability to take advantage of hydropower potential could include a
range of actions from updating existing facilities to installing new ones. One study
2 Based on average household consumption of 30 kWh/24 hours = 1.25 kW per day.
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demonstrates that by simply modernizing existing hydropower facilities approximately
9,000 MW of additional capacity could be generated (National Hydropower Association,
2013). Converting non-powered dams represents another alternative action, as only 3
percent of the U.S.’s 80,000 dams are currently generating power (National
Hydropower Association, 2013). Since 89 percent of permitted non-federal projects are
small, with capacities of less than 30 MW, the National Hydropower Association also
suggests that more efficient permitting through FERC could increase the feasibility of a
significant portion of the nation’s energy hydro resources (National Hydropower
Association, 2013). This would increase the economic feasibility of smaller projects
including micro-hydro, and would allow communities without vast economic resources
to develop potential hydroelectric energy sites.
Regulatory costs aside, hydropower projects are generally economically feasible.
Hydropower dams have been referred to as “cash cows,” because the primary cost is
involved in initial construction and once a project is constructed, operation and
maintenance costs are usually low (Kosnik, 2010, p. 450). In addition, hydroelectricity
has a higher conversion rate of energy into electricity than any other form of power
generation. On average, conversion rates of all other types of energy are 50 percent or
less while hydropower enjoys an average conversion rate of 90 percent (Kosnik, 2010, p.
450). Rising energy prices have increased the cost-effectiveness of hydroelectric power
generation even further in recent years (Kosnik, 2010, p. 450). These economic factors
bode well for the feasibility and practicality of hydropower projects, especially smaller
projects like micro-hydro. If regulation is streamlined and costs minimized, the
potential for hydropower well into the future is enormous.
Constraints on Utilization
Micro-hydro power generation has the capacity to significantly alter the energy
regime of the U.S. However, constraints in the form of governmental regulation and
bureaucracy are proving to be a substantial barrier to implementing micro-hydro
projects. Because small projects like micro-hydro are regulated in a nearly identical
fashion to large projects (like Hoover Dam), costs and time delays effectively discourage
new project implementation and dissuade investment in technologies and projects.
Although regulatory impediments are encountered at every step during the regulatory
process, several of the most challenging regulations are discussed in greater detail in
this section.
FERC Regulation
Even once federal and state regulatory conditions are met – a daunting process in
and of itself – a potential site must move through the extensive Federal Energy
Regulatory Commission (FERC) application process. Several portions of this process
can, by themselves, derail a project immediately, occupy so much time as to make a
project unfeasible (or unpalatable), or impose inordinate economic costs that make the
project ultimately unprofitable.
Despite efforts to stream-line the licensing process through FERC and the
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relatively low impact nature of most small hydroelectric projects, the time consuming
process and costs of moving a project through FERC are daunting enough to make many
projects economically unfeasible. In this section we will examine the FERC licensing
process that highlights some of the impediments to small hydro projects (Small/LowImpact Hydropower in the Northeast Webinar (Webinar), 2012). We will also reference
several of the case studies in this document to illustrate specific points at which the
process becomes expensive and time consuming.
FERC’s jurisdiction over hydro projects extends to any project located on a
navigable waterway, in the “lands of the United States,” using surplus water from a
federal dam, or located on Commerce clause waterways, constructed post-1935, and
affecting interstate or foreign commerce (Webinar, 2012). In short, FERC’s jurisdiction
is over nearly every potential hydro project.
The agency grants “exemptions” for some small hydro projects, but this term is
somewhat misleading; the exemption granted is from re-licensing after 50 years, not for
circumventing any part of the regulatory process. Of particular interest are the
exemptions granted for projects with potential power generation of 5 mW or less, which
qualify as small or micro-hydro projects. For a project to qualify, it must be located at an
existing dam or natural water feature, and still requires Fish and Wildlife evaluation and
NEPA analysis (Webinar, 2012). As we discovered in communication with Lance Houser
in regard to the Logan City case study, this exemption didn’t meaningfully shorten the
permitting process (Houser, 2012). All cost considerations aside, the amount of time
required to obtain licensing for a project – even one as small as the micro-hydro projects
which this document focuses on – serves as a rather massive impediment to some
potential sites. The power generated by a micro-hydro project yields a rather small
payoff, and inordinately long licensing processes reduce the potential benefits further.
One of the more potentially daunting preliminary requirements in hydro projects
is that in order to begin the licensing process the applicant must possess all property
rights to the site in question, unless that site is located on federal land (Webinar, 2012).
This can be serious impediment as an applicant must engage in a substantial investment
without any assurance of receiving a license, which would allow them to capitalize on
that investment. Given the relatively low payoff for the small amount of power
generated, this makes the initial investment extremely risky for any entity attempting
development. While licenses can be granted for projects on federal lands, the difficulties
in obtaining permission for use of that land can be as daunting as the initial investment
in private land.
In applying for a license with FERC, even a minimal-impact hydroelectric
installation must comply with the full process to include preliminary notification and
pre-filing consultation with any “relevant Federal, State, and interstate resource
agencies” (eCFR — Code of Federal Regulations (eCFR), n.d.). In addition to the
agencies mentioned, contact and consultation with Indian tribes and members of the
public are also required (eCFR, n.d.). The time required to comply with contact and
consult with all of these entities could require a full-time employee for any given project,
regardless of size. In addition to applying to new projects, these requirements apply to
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expanding capacity of an existing project, nearly any construction around an existing
project, and addition of new water turbines to an existing structure. Among the
requirements which follow the preliminary steps, full maps (requiring the services of
surveyors and engineers) of the potential project and surrounding area must be
completed and submitted, annual flow rates estimated (requiring the services of a water
engineer), and a thorough examination of potential environmental impacts (requiring a
specialist in that area) must also be conducted (eCFR, n.d.).
Even after completion of these previous steps, and the costs implied in securing
services of the various specialists and conducting studies, the licensing process has only
begun. An applicant is required to hold a joint meeting, including opportunities for onsite visits, with all applicable agencies mentioned above and the public and provide
audio or written transcripts of said meeting to FERC (eCFR, n.d.). After the meeting, the
application enters the second stage of consultation, receiving comments from all parties
and resolving any disagreements with concerned parties as directed by FERC, and
conducting further studies as requested by agencies and directed by FERC. Now the
applicant must resubmit, as necessary, new results and revised plans and submit a new
request for comment to all concerned agencies and moves to a third round of
consultation (eCFR, n.d.). The process continues with more stages of consultation with
agencies, notifications to various parties, submitting and resubmitting documents to
FERC, and notifications of various events published in local newspapers.
While the above lengthy process makes sense for a large energy generation
facility with potentially enormous environmental and social effects, the process becomes
burdensome for small facilities which require little, or no, alteration of terrain and have
near zero emissions as is typical with small hydroelectric facilities. Despite the
demonstrable lack of impact inherent in an in-conduit small hydro project, or
modernization of an existing facility, they must go through all the same processes
required to construct a facility the size of Hoover Dam but without the same magnitude
of potential economic benefit. In the case of a micro-hydro installation (5 MW or less)
an installation will generate enough power for less than 3,810 homes3 (U.S. Energy
Information Administration, n.d.). In comparison, a large project such as the Hoover
Dam generates 2,080 MW, or enough power for 1,584,969 homes (Hoover Dam Power
FAQs, n.d.). While the regulatory procedures and requirements are similar for any sized
hydro-electric project, the potential economic gains for large projects are much greater
than that of micro-hydro. The burden of compliance for micro-hydro projects can, in
themselves, render a project economically untenable.
As mentioned above, the Federal Energy Regulatory Commission is the agency
responsible for issuing licenses and permits for the construction, operation, and
maintenance of hydropower plants, as mandated under the Federal Power Act. Going
through the licensing process can be a long and costly process. Despite the huge
potential for micro-hydropower development in the United States, the regulatory
environment is very unfriendly to these projects. Construction of facilities, no matter
3 U.S. Energy Information Administration reports, for a U.S. residential utility customer, an average annual use of 11,496 kWh in 2010. Liberty Source
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how limited in size and scope, requires that a developer go through the Federal Energy
Regulatory Commission, U.S. Fish and Wildlife Service, Army Corps of Engineers, State
Environmental Departments, and State Historic Preservation Departments, just to
name a few. All these steps in the regulatory process create additional expenses and
complicate the development of micro-hydro. On projects under 1 MW generation,
federal and state permitting alone can add up to $2,000 per kilowatt (Lacey, 2011). In
creating a new project, developers may need to obtain permits from as many as twentyfive different regulatory agencies (Campbell, 2010, p. 8). This lengthy and costly
regulation process reduces the desirability of micro-hydro as a potential energy source,
as the amounts of energy produced are often too small to compensate for the costs of
complying with regulations.
Environmental Regulation
Despite attempts by FERC to streamline permitting efforts for micro-hydro
projects, mandatory compliance with other regulations are often the primary cause of
increased delay and cost. Because federal authority from FERC is required in energy
generation activities, a federal nexus is created that triggers the requirement for the
National Environmental Policy Act (NEPA), and, by extension, other federal regulations
including the Clean Water Act, the Endangered Species Act, the National Historic
Preservation Act, among others. These environmental regulations, coupled with the
onerous nature of the FERC permitting process, account for the bulk of the delays and
the exorbitant costs associated with permitting even the smallest of energy projects.
This section identifies the environmental regulations with the greatest potential
to delay projects, discusses the reasons for the delays, and cites appropriate examples.
NEPA
The National Environmental Policy Act of 1969 is primarily a procedural law of
disclosure. Agencies must disclose what impacts can reasonably be anticipated to the
environment as a result of an agency action. Alternatives to the action must also be
analyzed and compared to a baseline of taking no action. Impacts to resources are
disclosed in an environmental document. Briefly, projects with the potential to have
significant impacts to environment or cause significant controversy are required to
prepare an Environmental Impact Statement (EIS). Projects that have consequences
that are uncertain, or thought to be insignificant, have the option of preparing an
Environmental Assessment (EA) rather than an EIS. If significant impacts are
discovered during the preparation of an EA, then an EIS must also be prepared. Finally,
some agency actions that may be routine and are known to not have significant
environmental impacts may be “categorically excluded” from in-depth analysis and a
brief Categorical Exclusion (CE) document is prepared to meet the requirements of
NEPA (42 U.S.C Section 4321).
With respect to micro-hydro power generation, authorization from FERC
constitutes a federal action that is subject to NEPA. The NEPA process inherently
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creates delays and costs that add to the delays and costs created or exacerbated through
other federal, state, and local regulation. The unique costs and delay attributable to
NEPA are discussed briefly below.
Redundancy – Many of the FERC permitting requirements are redundant with those of
NEPA. However many of the requirements must be separately prepared and submitted
as separate documents to FERC, causing duplication of effort, increased costs, increased
delays, and frustration for cooperating agencies as they spend inordinate amounts of
time dealing with the bureaucracies of other agencies. For example, as detailed in the
Logan City Case study in Section 4.1, project proponents were required to consult with
USFWS and the state wildlife agency separately under NEPA, Section 7 of the
Endangered Species Act, Clean Water Act Section 404, and Section 30(c) of the Federal
Power Act. This redundancy led to confusion and frustration on behalf of all the parties
involved.
Cost of Analysis - The procedural requirements of NEPA can be extremely costly,
particularly for the small entities that typically undertake micro-hydro projects. These
entities, such as small cities, individuals, or organizations generally lack expertise to
deal with the intricacies of federal legislation or perform the required analysis. As a
result, contractors and consultants must be hired to perform these tasks. Direct costs
associated with NEPA consultants can be upwards of $100 per hour for a single person
and can be much more for specialized expertise (in the Afton, WY case study,
environmental consultants were $250/hr). Over the time-frames discussed above, these
consultant costs, coupled with the direct costs of equipment and travel, can easily be in
the hundreds of thousands of dollars for an EIS, tens of thousands of dollars for an EA,
and thousands of dollars for a CE. These costs are in addition to those incurred by
personnel directly employed by the project proponent. For example, as discussed in the
Afton, Wyoming case study, it is estimated that nearly half of the $1.4 million price tag
for the project was used for environmental permitting purposes, including NEPA. But
the price tag did not even include salaries and costs for personnel from the city, the
power company, or resource agencies. For context, this project generates only
approximately 900kw of electricity at full output, operates under an existing FERC
license, and utilized existing infrastructure for water impoundment and turbine
controls. While contributing significantly to energy scenario of southwestern Wyoming,
the plant’s generally low power output and high initial costs would have made this
project a non-starter were it not for some substantial subsidies and cost-sharing
agreements. Other examples of high costs associated with NEPA abound. Logan City has
identified multiple other places where in-conduit micro-hydro could be added but will
not implement them due to the permitting costs, including NEPA. An entity in New
Mexico has identified 150 potential micro-hydro sites on a single waterway but have
shelved the idea after FERC communicated it’s intention to require a NEPA document
for each site (NWRA, 2013).
Timeframes – The procedural requirements of NEPA are costly in terms of time. While
a CE can generally be completed within a couple of months (depending on the
complexity), an EA generally takes from six months to two years. A full-blown EIS often
takes 3-5 years and complications can extend this timeframe to up to 10 years if
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significant controversy or substantial issues arise. These timeframes serve to discourage
investment from entrepreneurs in the energy industry, which significantly reduces the
rate of adoption for micro-hydro projects. Additionally, extended timeframes often
complicate projects as industry and agency personnel turnover or maintain various
levels of engagement in project affairs. As noted in the cost section above, extended
timeframes also increase costs as consultants and contractors must be paid to produce
the analyses and documents to satisfy the various agencies involved in the NEPA
process. Increasingly, agencies and organizations involved in NEPA processes utilize the
process to systematically increase delays in an effort to derail or obstruct projects. In
general, the delays result from increased requests from agencies and organizations for
the project proponent to provide additional documentation or provide greater detail.
Tactics such as these are termed “paralysis by analysis” and are common during EIS
projects where the requesting agency shoulders no cost or responsibility for the
increased costs and delay. In general, as timeframes increase, costs increase and
potential investment decreases. Thus, timeframes have direct effects on the viability of
micro-hydro projects from both a permitting perspective and an economic perspective.
Mitigation – As potential impacts are disclosed during NEPA analysis, compensation for
those impacts in the form of mitigation are sought by various organizations and agencies
that are concerned with the resources that may be impacted. For example, if a microhydro project occupies stream-bed where salmon potentially spawn, project proponents
may be required to enhance spawning habitat elsewhere to help offset and mitigate for
the impacts of the project. However, increasingly, projects with “deep pockets” or that
generate revenue, are held to a different standard than projects without revenue
streams. For example, although a Forest Service bridge reconstruction may impact the
same amount of salmon spawning habitat, the energy generation project may be asked
to mitigate to a greater degree simply because of the ability to do so and the desire of
project proponents to give-in to demands rather than delay the project further by
objecting to the request. Project personnel from the Afton, Wyoming case study noted
what they called “improper mitigation requests due to the deep pockets of energy
generation” (Allen 2013, Kinnington 2012).
Clean Water Act
Unlike NEPA, which is primarily procedural, the Clean Water Act is a more
substantive regulation with specific guidelines and must be met in order to fully comply
with the law. Among a variety of complexities and applications to hydro-electric
projects, the requirement that a specific alternative must be chosen for implementation
if it is the “least environmentally damaging practicable alternative” (LEDPA) is likely the
most onerous. Indeed, the LEDPA determination, as discussed in Section 404 of the
Clean Water Act, has been called “the steepest hurdle” in obtaining a clean water permit.
Because some aspect of a micro-hydro project generally involves affecting jurisdictional
waters of the United States, a 404 Clean Water Act permit is usually required. Jon Shutz
(2006) provides a good overview of how crucial and tenuous a Section 404 Permit can
be:
“To construct any project involving the discharge of dredged or fill material into
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U.S. waters, one must obtain a 404 permit from the United States Army Corps of
Engineers (Corps). An applicant for a 404 permit must demonstrate to the Corps
that, among other things, the proposed project is the least environmentally
damaging practicable alternative (LEDPA) to achieve the project's purpose. To
determine the LEDPA, an applicant conducts a 404(b)(1) Alternatives Analysis.
Though the LEDPA determination is only one of many determinations the Corps
will make for a project and that the applicant must pass, the LEDPA
determination is often the "steepest hurdle" in obtaining a 404 permit.
Practitioners should be aware that where a proposed project is not the LEDPA,
the Corps may not approve the project or grant the applicant a 404 permit. In
other words, the LEDPA determination can be fatal to the project.”
NEPA and Section 404 of the Clean Water Act have multiple redundancies in the
requirements to meet each law. However, while NEPA only requires disclosure of
impacts, Section 404 actually requires maximum protection of the resource and the
needed permit would not be issued unless the most environmentally friendly alternative
is selected. It is possible that the selected alternative under NEPA is not the same
alternative selected as the LEDPA under Section 404. This discrepancy can cause no
small amount of delay and cost as project proponents attempt to reconcile the
differences between the two regulations and the ensuing problems of amending the
permit, the NEPA document, or both.
Completion of the requirements of Section 404 alone is a substantial
undertaking; simultaneous compliance with both NEPA and 404 is truly daunting.
Coordination with the Corps is not an easy task. There are multiple timelines and
deadlines that must be met, certain procedures for public involvement in projects, and
additional redundant requirements to coordinate with the U.S. Fish and Wildlife Service
(USFWS) and state wildlife agencies. In addition, Section 404 requires separate
concurrence from NEPA with the State Historic Preservation Office regarding
compliance with the National Historic Preservation Act Section 106.
Although there is overlap in NEPA and Section 404, many of the requirements
still require separate concurrences and documentation, increasing costs and delays for
micro-hydro proponents. In addition, compliance with Section 404 introduces an
additional governmental bureaucracy creating demands and insisting on mitigation of
different degrees for potential impacts. Most significantly however, is the fact that
Section 404 requires protection of the very resource than must be exploited to make
micro-hydro function: water. Too often, the juxtaposition of developing micro-hydro
energy and protecting the Waters of the United States are too much to overcome and
energy potential is not realized.
National Historic Preservation Act
Section 106 of the NHPA requires that a federal agency take into account effects
to historic properties resulting from implementation of a project. For micro-hydro
projects, this is a requirement during both the NEPA process and the Section 404
permitting process, and must also be documented independently, adding both cost and
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delay (16 U.S.C. 470 as amended).
During the Section 106 compliance process properties, structures, and cultural
resources of all kinds are evaluated (usually by a specialized consultant) to determine if
historic properties are present within a project area. Historic properties are basically
any man made object that is 50 years old or more. However, in practice, historic
properties are evaluated that are 45 years old or more in order to accommodate the
project time frame and the possibility that it could take five years or more to work
through the various permitting processes. For micro-hydro projects, the historic
properties involved are often dam structures, canals, headgates, and other water works
structures. These structures are designed to have long lifetimes with little maintenance
and are often in good condition despite their “historical” nature.
After identifying historic structures, project proponents must pay for an analysis
and evaluation of the project’s potential impacts to the structures. This analysis is
forwarded to the State Historic Preservation Officer (SHPO) to concur with the findings.
If no properties are affected, then the process can be complete pending a concurrence
letter from the SHPO’s office. However, since preservation of historic properties are the
priority, timelines and delays are actually maximized for projects having no impacts as
Logan City discovered with their in-conduit micro-hydro project.
If historic properties are affected (and this is very likely when utilizing existing
infrastructure), then project proponents (and their consultants) must design specific
plans for minimizing harm to historic properties and mitigating for potential impacts.
The Section 106 process also requires public input and specialized advice and ideas from
industry leaders and professionals. This extensive coordination takes time and money,
further frittering away the resources of small or micro-hydro projects and potentially
making them unreasonable and unprofitable.
Endangered Species Act and General Wildlife Consultation
Conformity with the ESA and a general evaluation of potential impacts to wildlife
is required by all projects with a federal nexus (16 U.S.C. §1531 et seq). In addition,
micro-hydro projects often require separate consultation under several laws including
NEPA, CWA Section 404, and FPA 30(c). These redundant and separate requirements
increase costs and delay for small projects like micro-hydro that often have little or no
impacts to wildlife.
Increasingly, the federal and state agencies charged with consulting on projects
utilize the process to make requests for superfluous studies and evaluations at project
expense. These requests of projects have no costs to the agencies requesting them, yet
they add an extra data point that directly benefits the agency and may provide
information for pet projects. Many also serve to simply “cover” the agency in case of
scrutiny from other organizations or agencies. Protests against the requests can
sometimes be met with more requests, exaggeration of potential indirect and cumulative
impacts, and increased mitigation requests for the project, further increasing costs and
delays. If requests are not met during the NEPA process, agency personnel can also
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make similar requests during the Section 404 permitting or with FERC when meeting
FPA 30(c). Chances are that one federal decision-maker or another is likely to give in
and require the request over the course of a project.
Although ESA Consultation is required if a project could potentially impact
protected species or their designated critical habitat, wildlife agencies often request
expensive and long-term studies in areas that are nearby critical areas but are not
themselves designated as critical to the survival of a species. Costs and delays become
particularly acute when surveys are requested to take place during specific seasons (i.e.
bird migration or nesting) and project proponents must wait months for that time to
occur. The case studies for Logan and Afton provide examples of studies that were
completely superfluous and increased costs beyond reasonability with no costs to the
requesting agency. Logan’s micro-hydro project was completely in-conduit, with the
water never even seeing the light of day. Yet, as project proponents worked through the
regulatory process, they were required to consult with the USFWS two separate times
regarding habitat in the river where project water hasn’t flowed in over a hundred years.
Although Afton is nearby designated critical habitat for Canadian Lynx, micro-hydro
project proponents were required to conduct an evaluation of Lynx occurrence despite
the project only re-furbishing existing infrastructure and not developing any new areas.
It should be noted that ESA surveys are often more costly for project proponents
because they require specific protocols and specialized training.
In cases where threatened or endangered species could be present in the area,
Section 7 of the ESA also requires a separate Biological Assessment of the action on the
species. This assessment is generally prepared by specialized consultants at high costs to
project proponents. Further, the ESA requires “consultation” regarding the Biological
Assessment to ensure that USFWS and state wildlife agencies concur with its findings.
Consultation and negotiations can be both expensive and time consuming for even small
projects like micro-hydro.
Without incurring costs or accountability, wildlife agencies often request initial
detailed information, make unsubstantiated claims, speculate on impacts, and require
biological assessments and management plans of project proponents. These requests
can cause undue economic hardship and delays on micro-hydro project proponents and
cumulatively discourage viable green energy projects throughout the country. Clearly, in
the cases of Afton and Logan, the agencies were spurious, unreasonable, and seem to
intentionally have served as a barrier to projects with no meaningful impacts.
Case Studies
Several micro-hydro case studies from around the country were researched and are
discussed in this section. In general, case studies sought the experience and opinions of
the people directly involved in implementing micro-hydro projects.
Logan, Utah
In 2004 Lance Houser had an idea; one that would put existing resources to use
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supplying power for the city of Logan, Utah. It was during that same year that he started
work as the City’s Assistant Engineer, and was put in charge of managing the municipal
water system. Lance had worked on hydropower projects before and recognized the
untapped opportunity that could be taken advantage of by attaching a small
hydroelectric power generator to the Logan City water supply. This project, he
estimated, would create enough energy to power around 185 homes. Also, because the
project wouldn’t require any new construction, but rather would only place a turbine in
an already existing pipeline, he expected that the regulatory process would be a breeze.
What started as a simple plan to install a micro-hydro facility in Logan City’s
Dewitt pipeline, however, would soon prove too good to be true. As Lance Houser
learned firsthand, the permitting process required by the Federal Energy Regulatory
Commission (FERC), proved to be so lengthy and expensive that although the project
was eventually completed, the difficulties associated with the process far outweighed the
benefits and Logan City isn’t keen to start any new projects of a similar size or scope.
Lance Houser spent 15 years working in the private sector before landing the job
as Logan City’s Assistant Engineer. He left the private side because he was tired of the
travel it required (Lance Houser, personal communication, December 21, 2012). A Utah
native and Utah State graduate, Lance earned his Master’s of Science in Civil and
Environmental Engineering in 1998. Lance then worked on some larger scale projects
like Hoover Dam and the Bonito Pipeline in New Mexico. Upon moving back to Logan,
Lance recognized that, “the head, the flow rates, the variabilities,” in the Dewitt Pipeline,
where Logan gets its culinary water supply, constituted the perfect conditions for
installing an in-conduit micro-hydro power generator (Houser, 2012).
In Utah’s arid landscape water can be hard to come by. When the City of
Logan was founded in 1866, the location was selected for its abundant water resources
supplied by the Logan River. Logan, in the northeastern part of Utah, has a population
of around 50,000 people (Logan City, n.d.). About 70 percent of the city’s culinary water
supply comes from Dewitt Spring, a natural source of water whose mouth is about 11 km
up Logan Canyon along U.S. Hwy 89, designated a National Scenic Byway (White, 2011).
Water from DeWitt Spring is diverted through a pipeline to a Flow Control Vault used to
remove excess pressure. The spring water is then distributed among concrete storage
tanks used to store the water until it is released according to usage needs (White, 2011).
Logan’s micro-hydropower project was born out of a problem with the Dewitt
Pipeline’s steel structure. Built in 1934, the pipe eventually began to leak and large
sections were replaced with a new, larger diameter pipe that increased the supply of
water flowing to Logan’s population. Replacing the pipe took time, said Lance Houser,
mostly due to regulatory constraints. The permitting process started with the Forest
Service because the Dewitt Pipeline is located in the Wasatch-Cache National Forest
(Houser, 2012). Although reports were first conducted as early as 2006 on the project,
completion of the repairs didn’t come until two years later. “We had to do a full blown
EA [Environmental Assessment] on the water pipeline to replace it so we didn’t get it
built until 2008,” Lance told us (Houser, 2012). The EA, required by the National
Environmental Policy Act (NEPA), took time and money, and included reports on how
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the project would affect sensitive species, visual resources, water and soil quality,
recreation, cultural resources, and vegetative resources (CH2MHILL, 2007). After the
EA was filed, it took until 2008 for the Forest Supervisor to issue a 30-year-term Special
Use Permit to Logan City allowing the pipeline to be replaced (CH2MHILL, 2007). This
means that, 30 years down the road, the Forest Service permitting process will have to
be completed all over again.
Although the new, wider pipe provided increased water supply to the City, it
also resulted in increased pressure. Logan City had previously installed pressurereducing valves to deal with this excess energy, but these soon proved ill equipped to
handle the new load (White, 2011). Replacing the valves, however, would only have
provided a costly, short-term solution. Instead, Lance Houser decided to install a
Francis Turbine. Not only would this get rid of the extra water pressure, it would also
utilize it to generate up to 200 KW of power for use by Logan City residents (Houser,
2012). All it would take would be the installation of a turbine and a generator within the
DeWitt Pipeline. It almost seemed too good to be true.
The $787 billion economic stimulus package passed in 2009 provided further
encouragement for the project by providing financial incentives for development of
renewable energy sources including hydropower (Ingram, 2012). Lance Houser said that
after the stimulus package was passed, “we were approached by the Division of Drinking
Water from the ARRA [American Recovery and Reinvestment Act], and with that they
had to have green projects” (Houser, 2012). The only problem was, most water industry
projects didn’t meet the definition of “green” defined by the federal government. “So we
have this money that we can’t use unless we can identify green projects with the state of
Utah, but replacing water mains, rebuilding or improving a water treatment plant
efficiency, none of those met the definition of green” (Houser, 2012). Lance realized the
turbine idea would take advantage of the stimulus money available. Soon after, Lance
said the Division of Drinking Water, “actually encouraged us to go ahead and move
forward with the project,” and even provided some funding to help move the project
forward (Houser, 2012).
The next step proved to be by far the most frustrating; it was time for Logan City
to deal with FERC. While the environmental assessment on the pipeline was done with
the help of a consultant, as the assistant engineer Lance Houser did the FERC
permitting in-house for Logan City. When asked what it was like to work with FERC
Lance told us, “I’m not bald, but that’s because my hair grew back,” (Houser, 2012).
Although Houser tried to “fast track” the project to meet the ARRA stimulus deadlines,
“with all the red tape that was in it, it was an absolute joke,” (Houser, 2012). For
example, FERC required that all materials used in construction be American-made.
Lance told us that, “under that definition of American-made, that meant there was only
one turbine manufacturer in the entire world that met that definition,” (Houser, 2012).
Because the manufacturer enjoys a monopolistic situation, they were able to charge
artificially high prices, contributing further to the high cost of Logan City’s experiment
in micro-hydro (Houser, 2012).
Although Logan City’s project did qualify for FERC’s in-conduit exemption, this
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didn’t change the fact that the permitting process took over a year (Houser, 2012). FERC
provides exemptions from licensing requirements for, “constructing a hydropower
project on an existing conduit,” so long as the project has a capacity of 15 MW or less for
non-municipal and 40 MW or less for municipal projects (FERC, 2012). FERC
exemptions, however, only exempt projects from the requirement that they be relicensed after 50 years. Exempt projects still have to go through the entire regulatory
process up-front, and must pay the costs in time and money associated with that
process. Logan City applied under FERC’s in-conduit provision, and was eventually
granted the exemption. Lance Houser told us, however, “The irony of the whole thing is
that you get the exemption, but all it saves you is about three to four months” (Houser,
2012).
Micro-hydro projects, and hydropower generation in general, have long been
touted as “cash cows,” with unusually high returns to investment (Kosnik, 2010, pg.
450). Once a project is constructed, maintenance and operational costs are low and
hydropower generation enjoys higher conversion rates than any other type of power
generation (Kosnik, 2010, pg. 450). Regulatory costs aside, many hydropower projects
make economic sense. The water is there, it’s flowing, and simply installing a turbine
and generator is all it would take to capture potential energy. The time and money costs
of federal regulation, however, cannot be disregarded as they significantly increase the
costliness and decrease the feasibility of micro-hydro projects like the DeWitt Pipeline.
Although many small hydro projects might make economic sense before the regulatory
process is considered, federal requirements can bankrupt a project before it ever gets off
the ground. The situation has become a catch-22, as the federal government requires
such a detailed and painstaking permitting process that the only way economic
feasibility can be achieved is through federal subsidies like the stimulus package. Even
then, some projects end up not being worth it.
We asked Lance how the FERC process could have been streamlined. He gave
example after example of regulatory requirements he was required to fill that were
completely irrelevant to the DeWitt Pipeline project. For example, FERC species
clearance, “on a project that disturbed nothing outside of an existing building,” (Houser,
2012). As project manager, he was further required to show that no historical structures
were being impacted by the project, even though the project’s only construction would
occur within a structure built only three years prior that was not classified as historic.
According to Lance, “There was no common sense,” in FERC’s permitting requirements
(Houser, 2012).
Congress has enacted a whole host of federal regulations, and hydroelectric
projects, regardless of their size or the environmental effects they are expected to have,
must meet all of them in order to obtain a FERC permit. The “federal nexus” of
regulation begins with NEPA, the National Environmental Policy Act. NEPA requires
agencies to disclose information about the expected environmental impacts of a
potential action through the preparation of an Environmental Assessment (EA). If the
EA reveals significant expected environmental impacts, an Environmental Impact
Statement must also be prepared (42 U.S.C Section 4321). The Clean Water Act is meant
to protect water quality. The act requires that hydro projects obtain a Section 404
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permit demonstrating that, “the proposed project is the least environmentally damaging
practicable alternative (LEDPA) to achieve the project’s purpose” (Shutz, 2006). Section
106 of the National Historic Preservation Act (NHPA), further requires that agencies
take into account any potential effects on historic structures that may result from
completion of a project (16 U.S.C. 470 as amended). Finally, projects must also comply
with the Endangered Species Act, which requires an evaluation of potential impacts on
wildlife. If threatened or endangered species may be present, Section 7 requires an
additional Biological Assessment (16 U.S.C. §1531 et seq). These federal regulatory
requirements create excessive time and money costs that can deter small projects,
making them economically impractical.
Thanks to the DeWitt Pipeline micro-hydro project, Logan City has vowed never
to do any projects of a similar size or scope again. Because of “the cost of the permitting
headache and the nightmare and the frustration of the process, there is no economic
benefit to doing a project that required a biological review of the impacts of the project
on the Logan River even though the water to be used in the turbine comes from DeWitt
Spring, not from the river at all. “This project doesn’t change the diversion one iota,
doesn’t change it at all,” Lance said, but that fact did not matter as far as FERC was
concerned. Lance also had to complete an endangered size again; it’s just too small”
(Houser, 2012). Houser is confident that the difficulty and high cost of the permitting
process also deters smaller local cities like Hyrum, Millville, and Providence, from
developing micro-hydro potential. “Where are they gonna get the economic backbone in
their community to handle all the regulatory compliance requirements?” he asked
(Houser, 2012). According to Lance, if Logan City were to undertake micro-hydro
projects on a regular basis, the city would have to hire someone full-time to “shepherd”
projects through the FERC process (Houser, 2012). This would most likely require a
senior staff member, and because it, “tends to be pretty high level people dealing with
FERC, you’re talking $250,000 a year . . . You start doing the math on that and it
doesn’t take very long for FERC to bankrupt a project before it ever gets started”
(Houser, 2012).
The chart below shows the relative costs and benefits of the Dewitt Pipeline
project. The costs are taken from Logan City’s comprehensive annual financial reports
for years when construction of the new pipeline began, through 2012 when the microhydro project was completed. The costs include both construction of the pipeline and
the micro-hydro project itself, because both are necessary for the project’s completion.
The costs do not include time spent dealing with the regulatory processes involved as
Lance Houser did much of this work in house for Logan City. If his time were to be
included, however, Lance estimated that an additional $110,000 would need to be
added to the total cost. He also estimated that about 30 percent of the $1.5 million spent
on the micro-hydro project’s construction went toward dealing with regulations alone
(Houser, 2012). The numbers below for power generated by the project represent total
generation since the project’s installation. Chris Niemann, the Electric Meter Foreman
for Logan Light and Power, provided these numbers and according to his calculations, if
the DeWitt Pipeline project were to run 24 hours a day, 7 days a week, it would take 37
years for the project to pay off financially. He told us, however, in reality “it’s gonna take
more like 50 years,” since the project is usually run under capacity (Chris Niemann,
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personal communication, January 22, 2013). As the chart illustrates, the financial costs
of the project far outweigh the benefits, and the project is not likely to become
economically feasible for decades to come.
Fiscal Year
2008
2009
2010
2012
Table 2
Financial
Description of
Costs
Costs
$2.24 million Construction
of pipeline
$6.775 million Construction
of pipeline
$0.37 million Construction
of pipeline
$1.5 million
Construction
of microhydro project
Totals:
Power
Generated
0 kwh
Financial
Benefits
$0.00
0 kwh
$0.00
0 kwh
$0.00
1,121,401 kwh
$67,284.06
(avg. rate of
$0.06) per
kwh
$67,284.06
$10.885
million
(Logan City Finance Department, 2008 – 2012; Chris Nieman personal communication,
January 22, 2013)
The story of Logan City’s DeWitt Pipeline illustrates numerous flaws in the
federal permitting process required for micro-hydro projects. We asked Lance Houser
how the process could be improved, and where things could be streamlined. “FERC is
trapped by legislative mandate,” he told us (Houser, 2012). The redundant and
irrelevant requirements of the permitting process create excessive costs that often deter
the development of micro-hydro projects. Unless Congress changes the Federal Power
Act that gives FERC its power, however, the organization itself can’t do much to change
the permitting process. Lance told us the biggest problem is that “the legislature needs
to . . . stop micromanaging in the law,” and instead allow agencies to come up with their
own solutions (Houser, 2012). “Congress mandates, they go in with their grandiose
dreams of all this stuff they want to accomplish, and then they hamstring you so you
can’t accomplish them” he told us (Houser, 2012). A top-down approach in which those
making the rules “don’t understand the full impacts and ramifications of what they’re
mandating,” doesn’t seem to produce desirable outcomes when it comes to micro-hydro,
and Logan City’s story is illustrative of this finding (Houser, 2012). “If you’re asking do I
think the project had potential, absolutely. Do I think it went as flawless as it could
have? The FERC process was an absolute nightmare for what I would call an
inconsequential project,” (Houser, 2012).
Lance Houser has worked on hydropower projects all over the world. He told us
that, “in other countries a project like this would have been considered a gold mine”
because the regulatory environment is comparatively much less burdensome (Houser,
2012). The technology is proven and available, he says, and systems like the Dewitt
Pipeline micro-hydropower plant are low-maintenance. In the U.S. micro-hydro
technology is widely available and well developed, and demand for clean power is only
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increasing. Although Congress claims it wants to encourage increased production of
“green power,” Lance and others like him are frustrated by the complicated, expensive,
and time-intensive regulatory process that Congress has enacted, and that is deterring
many small and micro-hydro projects from ever getting off the ground. “They say they
want all this green power . . . and then we reach around and put all the regulatory
restraints on it that cut our own throats” (Houser, 2012).
Barre City, Vermont
Barre City, Vermont is a small city of just under 10,000 people that sits near the
state capital, Montpelier, and is considered its sister city. The city spends approximately
$700,000 in electric bills each year for a number of city owned facilities (Delcore,
2006). These high energy costs led them to investigate micro-hydro as way to reduce
energy expenditures.
In 2006, Barre City started the process of finding a micro-hydro site in the water
works of Barre to alleviate some of the burden of the city’s power bill. Nancy Wasserman
of Community Hydro estimated that the amount likely to be saved by a system like this
“is no small sum” (Delcore 2006). Hoping to move along quickly, the City Council
applied for a $30,000 planning grant from the Vermont Community Development
Program. After the initial study, a site for the project was selected. An aging pressure
reducing valve (PRV), as well as the housing surrounding the pipes, needed to be
replaced. They planned to replace the old equipment with a 15kW turbine to produce
green power. The power would be sold to the municipality’s power company, Green
Mountain Power Corporation (Delcore, 2012). The $625,000 project would pay for its
self in less than 10 years, according to preliminary estimates.
Compliance with state regulations would be handled by the Vermont Agency of
Natural Resources (ANR). The ANR’s job was to direct the City through the state process
of feasibility studies, environmental impact studies, archeology studies, and other
processes. Finally, on August 20, 2012, Barre City received a categorical exclusion
granted by the ANR (Thompson, 2012). This means that they did not need to do detailed
environmental studies. This is reasonable given the fact that the proposed hydro-electric
system is enclosed in the city’s piping.
Because the project is contained within existing pipes, the City had hopes of
moving along swiftly through the regulatory process. However, The Barre City project,
which started in 2006, has taken nearly 8 years and is not yet producing power. In
another two years, the project could have paid for itself, but instead has been slowed by
state and federal regulatory processes. To keep this in perspective, it should be
reiterated that this is only a $625, 000 project, is completely within pipes, generates
only 15kW, and was “expedited” through environmental permitting with the use of a
Categorical Exclusion. One can imagine the likely delays if the project actually had
environmental impacts or generated a significant amount of power.
Barre City is trying to tap into a resource that is widely available in Vermont:
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hydro power without the need for a dam. In fact, the Idaho National Laboratory had
identified 400 MW of potential hydropower in Vermont that can be developed without
building any new dams (Barg, 2012). However, given the stringent state and federal
regulations, it is currently unlikely that this potential will be reached.
Lori Barg, a consulting geologist with expertise in hydrology, wrote in an article for the
Burlington Free Press that:
“There have been legislative attempts to move hydro forward, but the pace
remains glacial. In this time of belt-tightening, it will be easier for the regulators
and the regulated to have clear guidance. Vermont should promote a simplified
state and federal permitting process for local, small-scale hydroelectric projects”
(Barg, 2012).
After nearly 8 years, the Barre City micro-hydro is scheduled to come online in 2013.
However, given the time and money the project has required so far, it remains to be seen
if anyone can economically capitalize on the additional 400MW of untapped power
flowing from the hills of Vermont.
Telluride, Colorado
A little over a century ago, Nikola Tesla, a Serbian-American inventor gave us the
right idea about energy. He pointed out that it is completely logical to capture existing
mechanical energy wherever possible and utilize it to generate and distribute energy
that is both economically and environmentally friendly (Johnson, 2012). Colorado has
been the leader in utilizing hydropower since 1891 when the Ames Hydroelectric Power
Plant, near Telluride, adopted Tesla’s innovative ideas and became the world’s first
power plant to use a small hydropower project for commercial gain (Johnson, 2012).
Colorado continues to lead the fight for small hydropower projects today. The United
States Federal Government, specifically the Federal Energy Regulatory Committee, has
made the process for obtaining a license to build a hydropower plant extremely
strenuous, lengthy, and expensive. Colorado lawmakers, proponents of small
hydropower projects, and citizens who look forward to the economic benefits
hydropower projects bring have been fighting for change in the licensing process.
Telluride, the county seat of San Miguel County in Colorado, is more than just the
subject of popular country songs, the site of summer festivals, and a premier destination
for skiing. It is a town rich in Western history and culture. It is also the site of one of the
oldest hydropower plants in the world. The area where Telluride is located is nestled at
the bottom of a box canyon near the San Miguel River and boasts two impressive
waterfalls, Bridal Veil Falls and Ingram Falls. It was home to Ute Indian tribes for
hundreds of years before Spanish explorers ventured into the area searching for gold in
the 1700’s (Telluride, n.d.). In the mid 1800’s, the San Miguel Mountains were a part of
the Gold Rush. The rowdy, rugged mining camp became the town of Telluride, Colorado
in 1878 (Telluride, n.d).
With the onset of the progressive movement at the turn of the century, miners
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began to form unions because they were working extremely long hours, receiving very
little pay, and being mistreated by mine owners. The conflict turned bloody quickly. The
union was named the Western Federation of Miners and they were violent extremists –
habeas corpus even had to be suspended in Colorado because the group was so radical
(Jacobson, 2009). The mine manager, Bulkeley Wells, came down very harsh on the
rebellious miners and in turn the miners tried to kill him. Fearing for his life, Wells
decided to move. He asked the mining company to pay for the construction of his new
house. When they refused, Wells asked them to sponsor building a hydropower station
at the top of Bridal Veil Falls. The mine owners agreed to help Wells build the power
station because their mine needed power and the new hydropower station would be able
to provide the needed power. Wells had the power station constructed on top of the
waterfalls, slyly building a new house directly on top of the power station for him to live
in (Jacobson, 2009). The power station at Bridal Veil Falls became Telluride’s second
hydropower facility, joining the Ames Hydroelectric Power Plant.
Bridal Veil Falls’ power plant was shut down in the 1950’s. In 1981 Eric Jacobsen
began his attempt of acquiring the property and restoring its energy producing
capability. It took him six years to jump through all the federal government restrictions
and regulations. Finally, a decade after he first sought to buy Bridal Veil, the generator
was up and running in 1991 (Jacobson, 2009). The reason the licensing process took so
long is largely due to several environmental regulations that have been passed over the
years such as the Federal Power Act, the Clean Water Act, the Endangered Species Act,
and many others. To have a hydropower facility, no matter the size, one must either
obtain a license or obtain an exemption from FERC. Both the processes of obtaining a
permit and of qualifying for exemption are extremely costly and could take in excess of
five years to complete (Colorado Energy Office, 2013).
The term exemption is misleading because it provides an escape only from having
to get relicensed every 30-50 years. It does not avoid having to go through the initial
licensing process (Regarding the Hydropower, 2012). The initial licensing process alone
requires all the information including charts, diagrams, statistics, letters, and
explanatory text to be compiled and submitted to FERC. Gathering the information
requires the hire of expert consultants, attorneys, engineers, and professionally licensed
surveyors - all of whom must be compensated for their time (Regarding the
Hydropower, 2012).
In theory, the purpose of the current process is so FERC can assess the impact
the project would have on the environment and economy. Ideally, the process would be
simplified to take less time and money while still providing FERC the opportunity to
protect the environment. This would be more possible if there was more of a distinction
made between small hydropower projects and large scale hydropower projects and the
permitting requirements were adjusted appropriately.
The power stations at Bridal Veil Falls and the Ames Hydroelectric Power Plant
are considered small hydropower projects, meaning they utilize resources that are
naturally available. This distinguishes it from large hydropower projects because large
scale projects often require the construction of new dams and buildings. Small
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hydropower projects can often have minimal impacts on the environment, while bigger
projects may have bigger impacts (Colorado Energy Office, 2013). For example, in the
case of Bridal Veil, the water supply lake has no fish in it, meaning “there are zero
deaths per kilowatt hour…it’s hard to be any greener than Bridal Veil” the plant
proprietor, Eric Jacobson, said (2009).
Despite the seemingly ideal locations for hydropower development in Telluride
and in other places across the United States, the federal government’s licensing process
still makes it extremely difficult for people, businesses, and smaller governing bodies
alike to actually build a hydropower plant. In Colorado alone there are hundreds of
undeveloped megawatts of electric energy available at “existing impoundments and
diversions as well (as) existing municipal water systems” (Colorado Small Hydro
Association). This means that very little infrastructure, if any at all, would have to be
built to utilize this energy.
The Colorado Energy Office has received national attention for its efforts to make
it easier for small hydropower projects that will utilize existing infrastructure and have
minimal impacts on the environment to obtain a federal license. The office hopes to
reduce the risk developers take when investing in hydropower projects. The permitting
process often costs so much time and money that the return on investment is very low or
even nonexistent (Colorado Small Hydro Association). One of Colorado’s
Congresswomen, Diana DeGette, has been at the forefront for change in the process. In
2012 she cosponsored The Hydropower Regulatory Efficiency Act of 2012 with a
member of the opposing party, Cathy McMorris Rodgers (R-WA).
The purpose of the bill is to make it easier for small, non-controversial hydro
projects to qualify for an exemption in the FERC licensing process, increasing the
profitability of utilizing hydropower and making green energy more available for use
(Wright, 2012). Kurt Johnson, president of the Colorado Small Hydro Association flew
back to Washington D.C. to testify on the bill’s behalf. “The problem is, the FERC
process is particularly burdensome for very small projects, where the cost of FERC
compliance can potentially exceed the cost of hydro equipment,” he testified. “Many
projects do not get built once people understand the law”(Wright, 2012) The
Hydropower Regulatory Efficiency Act, also known as H.B. 3680, passed in the House
but awaits a vote in the Senate.
Throughout the United States there are 54,000 non-powered dams already
constructed, these dams alone contain over 12,000 megawatts of untapped energy
(Wright, 2012). They are undeveloped because of the arduous FERC requirements. Few
know the strenuous process better than Bridal Veil Falls proprietor Eric Jacobson.
Because of his experience dealing with the FERC licensing jungle, Jacobson is also one
of the big supporters of H.B.3680. Jacobson said:
FERC has made compliance costs so high it absolutely shuts down small projects.
There’s a direct correlation between size of project and size of its impact. Big ones
submerge tens of thousands of acres. Little ones submerge nothing, and take
nothing away in habitat. Yet some say that every project ought to have the same
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environmental review. [This] legislation simply recognizes that adding hydro to
existing features such as dams, rivers and ditch drops poses very little impact, if
any, and shouldn’t have to go through the same level of review. (Wright, 2012)
Not only would municipalities and organizations save money on electricity costs by
installing more hydropower systems, hundreds of hydropower related jobs would be
created in Colorado alone. The construction of hydropower systems creates jobs for
plumbers, electricians, and craftsmen. After a project is up and running it continues to
produce revenue for farmers, ranchers, municipalities, and water districts (Johnson
2012).
Evidence of minimal environmental impacts and maximum economic benefits
from small hydro power projects shows that the U.S. would benefit immensely if
changes were made to current FERC licensing requirements. Small hydropower projects
should be distinguished from large hydropower projects because they do not have the
same impact on the environment, utilize existing infrastructure, and generate clean,
renewable energy. Cities and organizations would save money and jobs would be created
by building more hydropower facilities. Therefore, small hydropower projects should
not have to undergo the same licensing process as large scale power projects and
changes should be made to current legislation to make development of small hydro
more accessible, affordable, and timely. We should follow the logical thinking of Nikola
Tesla and capture existing mechanical energy, utilize it to generate and distribute power,
and enjoy the economic and environmental benefits it will bring.
Afton, Wyoming
Situated in the mountains of southwest Wyoming, Afton is a small town on the
south end of Star Valley. Just south of Yellowstone and Grand Teton National Parks,
Star Valley is often used as a bedroom community for the high-priced recreational town
of Jackson, Wyoming.
A variety of small creeks and streams flow from the mountains on both the west
and east sides of Afton. Most creeks are seasonally higher in the spring and summer
months, but most have continuous and predictable flows throughout the year making
them perfect for micro-hydro application. In fact, small hydro projects have been
fixtures in the community of Afton since the early part of the 20th century. In particular,
Swift Creek flows from the mountains to the east and directly into town.
The early part of the 1900’s saw hydropower developed in several areas near
Afton, including Swift Creek. A small dam, penstock, and powerhouse were developed as
part of the energy production infrastructure. However, in the late 1960’s, an avalanche
destroyed a good portion of the infrastructure and the project was abandoned (Sunrise
Engineering 2013).
Several attempts to rehabilitate the project were started in the 1980’s and 1990’s
but the project proved a daunting task due to excessive regulation and costs. Finally, in
2008 cooperation between the town of Afton and the local power company, Lower
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Valley Energy, resulted in renewed efforts to bring the power from Swift Creek back
online (Spalding 2012).
Despite having an existing license from FERC for the project, the permitting and
regulatory hoops proved a substantial challenge. Frustrated with the delays inherent in
the project, the project manager for engineering commented that the “process is more
complex and burdensome than it needs to be” and that “the federal red tape makes
things take longer than it should” (Kinnington, 2012). Another project manager noted
that “for many micro-hydro projects it is often 5 years until you’re breaking ground”
because of the stringent federal permitting requirements (Allen, 2013). Although project
personnel recognize the need to follow procedures and have environmental oversight,
the consensus was that current regulations “have gone too far in the wrong direction”
(Allen 2013, Spalding 2012, Kinnington 2012).
Reflecting on the costs involved with micro-hydro projects, Tony Allen estimated
that “three-quarters of the costs is regulatory”. This is a substantial sum when the
project doesn’t even produce one megawatt of power. Environmental and engineering
personnel from consultants can be particularly expensive for small projects. Costs to the
project for the prime consultant on the project were $250 per person per hour. Project
costs totaled approximately $7.5 million (Spalding 2012). Using Tony Allen’s estimate,
this indicates approximately $5.6 million was required just to jump through regulatory
hoops and satisfy government bureaucrats. Another way to view this process is that you
get one project for the price of four. A natural result is that hydropower capacity is going
unmet all over the country as regulation and bureaucracy stifle and discourage the green
energy potential of micro-hydro.
Despite the regulatory hurdles, the project was able to be permitted and constructed
within two and a half years, a somewhat accelerated pace compared with many other
micro-hydro projects. According to project management, this was primarily because the
“stars were in alignment” for things to go well (Spalding 2012, Allen, 2013). As it turns
out, many of the most costly and time-consuming aspects of micro-hydro development
had already taken place. These aspects include the following:
•
•
•
•
•
•
•
A current FERC license was already in place
Existing infrastructure (Dam, powerhouse, transmission lines, etc) were already
in place (but needed refurbishing)
Past failed attempts at the project produced some submissions and permits that
were able to be “piggybacked” by this project
The project was on Forest Service land and they were requiring that the project
wither be re-instated or cleaned up, so money had to be spent either way
There was little interference from non-governmental organizations usually
opposed to power projects
The project was “Greentagged” and qualified for state and federal governmental
subsidies
An unusually positive and cooperative relationship with the Forest Service
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•
The power was to be sold to users in Jackson, Wyoming who generally place a
premium on “green” power from local sources and are willing and able to pay
higher prices
The fact that these items were already in place and it still took two and a half years is
a testament to the incredible hurdles faced by potential micro-hydro power producers.
One such hurdle is dealing with requests for more studies and more mitigation from
resource agencies. For example, an expensive Lynx survey was required despite the
project not occurring in Critical Habitat for Lynx. It was also noted that the project
would go smoother if the project provided a parking lot desired by the Forest Service.
Tony Allen noted, “agencies have “wish lists” that are part of “buying” your permitting,
like parking lots or other pet projects” that allow projects to go through (Allen 2013).
Interestingly, the regulatory and bureaucratic nightmares do not magically stop once
a micro-hydro project is built. In fact, the costs keep coming from the federal side with
regularity. Review of the FERC website for the Swift Creek hydro project indicates that
following the construction of a project, federal requirements continue to place financial
and temporal burdens upon micro-hydro power producers. Examples include multiple
requests from federal agencies to update information, conduct surveys, provide
certifications, disclose operational details, and more (FERC 2013). Cumulatively, these
requests result in substantial costs that are difficult to bear for micro-hydro producers
like the City of Afton, even after the initial permitting and construction costs are
realized.
Although the Swift Creek micro-hydro project was constructed and is operational, it
was not without substantial costs and delays resulting from regulatory processes.
Ironically for Afton, government regulation is the reason for the increased costs and
government subsidies are the mechanism to overcome the increased costs.
Conclusion
C
onvoluted regulatory requirements are discouraging the development of
otherwise economically feasible micro-hydro projects across the U.S. Although the
American Reinvestment and Recovery Act of 2009 sought to increase funding for green
energy projects like micro-hydro, federal stimulus money is not being used effectively in
meeting this goal, and much of it is lost in the federal government’s own nexus of
regulatory requirements surrounding development of micro-hydro projects. The case
studies explored above illustrate that in many cases, top-down regulation of the
hydropower industry has stymied the development of potential green energy. Meeting
federal and state permitting requirements can take years and costs millions of dollars.
Many organizations simply do not have the economic backbone necessary to sustain
such costs. In many cases, it does not take long for the regulatory costs associated with
micro-hydro to outweigh the benefits. Micro-hydro presents significant potential for
green power development; however, a drastic policy change is needed to streamline the
FERC permitting process if these projects are to become economically feasible.
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