• Home
  • Blog
  • Nearly Nine Years Later, Congress Finally Funds Incentives for Power Production on...

Nearly Nine Years Later, Congress Finally Funds Incentives for Power Production on Existing Dams

July 21, 2014 posted by Eric Christensen

When Congress passed the Energy Policy Act of 2005 nearly nine years ago, it included a provision, Section 242, authorizing incentives to retrofit non-powered dams, canals, and conduits with new hydroelectric generation. Until this year, however, Section 242 gathered dust, with Congress failing to authorize any funding. For the first time, when it finally passed its funding bill for Fiscal Year 2014 (October 1, 2013-September 2014) in January, Congress authorized $3.6 million to fund the Section 242 incentives program, dubbed the Hydropower Production Incentive Program ("HPIP"). The U.S. Department of Energy is now finalizing guidance on operation of the HPIP, and anticipates it will begin taking applications for HPIP funding later this summer. There are over 80,000 non-powered dams in the United States, and a 2012 Oak Ridge National Laboratory study concluded that these dams have the potential to produce about 12,000 MW of new, renewable generation capacity, including about 225 MW here in the Pacific Northwest. In addition to HPIP funding, last summer Congress enacted two bills that greatly reduce the regulatory barriers to constructing new hydroelectric generation on existing dams, canals, and similar facilities. In combination with this legislation, the HPIP represent a major opportunity to extract value from existing dams, especially in the West, where many irrigation dams and canals were constructed without hydroelectric capacity. While the $3.6 million appropriation is relatively modest, it is expected that qualifying facilities may be able to collect up to 2.3 cents per kilowatt-hour of power actually produced. Because of the odd timing of the authorization, new hydroelectric generators are eligible for HPIP if they began or will begin producing electricity in the period between October 1, 2005, and September 30, 2015. They must be constructed on dams or conduits that were built before August 8, 2005. New facilities may be constructed on existing federal dams -- an important consideration given that much of the potential identified in the Oak Ridge study is at dams owned by the U.S. Army Corps of Engineers or the U.S. Bureau of Reclamation -- but non-federal entities must own and operate the hydroelectric facilities. The HPIP is modeled on the Renewable Energy Production Incentives program, which operated from 1995 through 2008, and eventually paid out about $54 million to owners new renewable energy facilities. If you have any questions about the Hydroelectric Production Incentive Program, hydroelectric power, energy project construction or finance, or other matters involving the energy or environmental law, please contact a member of GTH's Energy, Telecommunications, and Utilities or Environment & Natural Resources practice groups. We're proud that our partner Jim Waldo was recently named 2013 Lawyer of the Year for Energy and Natural Resources Law, and six practice members were recently recognized as Washington Super Lawyers.