Why aren’t there more hydro projects?

by Paul Lefebvre

copyright the Chronicle, May 30, 2012

This is part one of a series of articles about hydropower.

MONTPELIER — The Legislature gave a nudge this session to a renewable source of energy that roughly 70 years ago dominated Vermont’s rivers and ponds. As recently as 1940, hydropower supplied the state with 90 percent of its power needs.

But today hydropower is seldom mentioned in the push to acquire 20 percent of Vermont’s energy needs from renewable sources like solar and wind by 2017.

“Hydropower is the forgotten stepchild of the renewable energy movement,” says Lori Barg, who owns a business in Plainfield that designs and installs small hydro systems for towns and farms, and who gave testimony for the hydro bill that was signed into law recently by Governor Peter Shumlin.

One of the co-sponsors of the bill was Northeast Kingdom Senator Vince Illuzzi of Derby. Nearly ten years ago Senator Illuzzi spearheaded a failed attempt to get the state to buy hydroelectric dams on the Connecticut River.

He has been pushing hydro ever since and, except for this year, striking out.

“It’s been a constant fight with ANR and water quality people,” he says. And in the Legislature there has been no middle ground with hydro projects, he adds: “Either you authorize them or you don’t.”

The bill that made it into law this year, S.148, intends to expedite the permit process for small and micro hydro developers. A small hydro is defined as a project that generates up to five megawatts (MW) of power, while a micro is one that is 100 kilowatts (KW) or less. There are 1,000 KW in a MW.

Estimates of Vermont potential for hydro projects are all over the map. According to the bill’s findings, they range from 25 MW to 434 MW. In a 2008 study, the Agency of Natural Resources (ANR) estimated there were 25 MW at 44 sites; whereas a year earlier the Department of Public Service (DPS) estimated there were 90 MW developable at 300 of the 1,200 existing dams, according to the bill’s findings.

In testimony on the bill before the House Fish, Wildlife and Water Resources Committee, Ms. Barg testified that Vermont has 400 MW of potential hydropower without building a single new dam.

So, the elephant in the room or the whale in the river is the question: Why isn’t hydro playing a larger, more important role in the renewable energy mix?

The reason, say a variety of sources, is the cost of permitting — a process that involves both state and federal agencies.

“Most hydroelectric projects require approval from the Federal Energy Regulatory Commission (FERC). The length and cost of the process of obtaining a FERC approval do not vary significantly with the capacity of the hydroelectric project,” says the bill’s findings. “However, the ability of a hydroelectric project to absorb this cost decreases as the capacity of the project grows smaller.”

To ease the permitting cost, S.148 authorizes the DPS commissioner to enter into an agreement, or what is known as a “memorandum of understanding” (MOU) with FERC that would enable Vermont agencies to prescreen proposed hydroelectric projects in the state.

The MOU would be comparable to one recently signed between Colorado and FERC “to streamline and simplify the authorization of small-scale hydropower projects.” But whereas the Colorado MOU focused mainly on agricultural irrigation canals, Vermont’s will deal with small dams and conduits.

The state must initiate negotiations with FERC by July 15, and recently the DPS assigned a staff person to the project, according to Andy Perchlik, who is the department’s director of Clean Energy Development Fund.

It may be too early to estimate how much money the new law will save those who develop small hydro projects, says Mr. Perchlik. The bill says the state will review the MOU once five projects have been permitted and are up and running.

For its part, says Mr. Perchlik, the state is expected to do “more hand holding” with developers and coordinate permit work among agencies. The department and ANR will put together a list of criteria that a project will have to meet and, once all the agencies have signed off, he adds, FERC will be able to move ahead.

Though some may see the legislation as a step forward, no one is saying it will stimulate hydro development or increase applications for small or micro hydro projects.

Since S.148 went into effect the phone hasn’t been ringing off the hook at the Department of Environmental Conservation, says Brian Fitzgerald, the department’s Streamflow Protection Coordinator.

“Realistically, there aren’t that many good projects out there,” he says.

If the MOU succeeds, Mr. Fitzgerald says the state will be able to offer “a new service” to small hydro projects. He says that by pre-screening environment issues, the state will be able to speed up the FERC review.

Still, he adds, when licensing a hydro project, the state is “allocating a public resource.” And that requires a permitting process “to be thorough and thoughtful.”

Mr. Fitzgerald says operating costs and the need to maintain minimum stream flows are the biggest obstacle for hydro developers. And while legislation to allow hydro owners to sell or net meter power back to utilities has improved the economic picture, he expects the new law will only help a few small hydro developers.

A 5 MW hydro is “a big project for Vermont,” he says.

Hydro projects are licensed for 30 years and, according to Mr. Fitzgerald, between three and five have been certified in the state during the last couple of years. But some say that the permitting process in Vermont takes so long that would-be developers get discouraged.

There are no tax credits but the state does offer grants for micro projects. Mr. Perchlik says the grants only kick in when the permits are nearly in hand.

“You need to prove you’ve got the permit,” he says.

When it comes to hydros, he adds, applications for financial aid are rare.

As the woman who founded the Plainfield business, Community Hydro, Ms. Barg believes projects should be rated initially by the impact they will have on the environment. That would enable those projects with low impact to clear the permit hurdle quicker.

She also believes there should be something like the IRS 1040 EZ form for hydro projects, which she says would make life easier for both the regulated and regulators. In her ideal list, developers would be required to go through a standard form and check off the statements that characterize their projects.

For example:

• “Utilizes for electric power generation only the water power potential of an existing dam”; or

• “Utilizes only a dam at which there is no significant existing upstream or downstream passage of fish.”

In testimony before the House Committee on Fish, Wildlife and Water Resources, she characterized the federal licensing process as onerous and expensive, regardless of size.

Still, she notes, that the MOU signed between Colorado and FERC has expedited the permit process in the Rocky Mountain state by licensing ten projects in a year and a half.

Big hydro projects like the one at James Bay in Quebec may have given hydro an indelible black eye. Senator Illuzzi says it alienated the public opinion by displacing native people and flooding thousands of acres of land. But local hydros, he argues, are viewed more benignly.

Still, when it comes to permitting, he says developers are caught between a “chicken-egg type of thing” as to who comes first, the state or FERC?

“It’s a colossal circuit that advances nothing,” he says.

contact Paul Lefebvre at paul@bartonchronicle.com

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