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UNTAPPED: HOW REGULATIONSTIFLES SMALL HYDROPOWER DEVELOPMENT

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Primary Investigators:Randy T Simmons, PhD, Strata Policy

Devin Stein, M.S., Strata Policy

Megan Hansen, M.S., Strata Policy

Student Research Associates:Saige Bowen

Ryan Lee

Richard Poll

Madi Smith

April 2017

Table of Contents

Report Overview...................................................................................................................1

What is Small Hydro? ..........................................................................................................2

Small Hydro Could Help Power America ........................................................................2Physical Potential ...................................................................................................................................... 3

Capacity Factor and Efficiency ..........................................................................................4Lifetime Cost ............................................................................................................................................... 5Environmental Impacts ............................................................................................................................. 6

Small Hydro Faces Big Regulations ..................................................................................7The Public Utility Regulatory Policy Act (PURPA) ...................................................................................... 9Financial Incentives .................................................................................................................................. 10Renewable Energy Incentives .................................................................................................................. 12

FERC Licensing Process ......................................................................................................................... 12Federal Power Act ................................................................................................................................. 12

Exemptions ............................................................................................................................................... 14Conduit exemption ................................................................................................................................. 1410 MW exemption.................................................................................................................................. 14

Licensing ................................................................................................................................................... 15The Integrated Licensing Process .......................................................................................................... 16The Traditional Licensing Process .......................................................................................................... 17The Alternative Licensing Process ......................................................................................................... 17

Recent Attempts to Reform Hydropower .......................................................................18The Hydropower Regulatory Efficiency Act ........................................................................................ 19The Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act ..... 20Water Resources Reform and Development Act of 2014 ................................................................. 20

Proposed Legislation .........................................................................................................20North American Energy Security and Infrastructure Act ................................................................ 21The Hydropower Improvement Act ...................................................................................................... 21

Outcomes of Recent Reforms ..........................................................................................21

Recommended Policy Changes .......................................................................................22

Conclusions ........................................................................................................................23

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Report OverviewThis report examines the energy potential of small hydropower (small hydro), regulatory obstacles, and potential policy changes to increase its use. In today’s energy debate, there is pressure from both the public and lawmakers to produce less electricity from fossil fuels in favor of renewables. Despite this increased attention on renewables, public attention and funding is usually directed towards solar and wind rather than other renewable sources of energy. Small hydro is environmentally friendly, reliable, and has significant potential for electricity production in the United States. Despite these benefits, small hydro faces a stringent regulatory process that discourages its development.

Hydropower has been the largest component of the United States’ renewable energy portfolio for over a century.1 According to the United States Energy Information Administration, in 2015, hydropower accounted for six percent of total electricity generation in the U.S., and 46 percent of all renewable energy generation.2 Hydropower is a clean and reliable energy source, yet despite recent pushes for increased renewable energy in the U.S., hydropower electricity generation has leveled off while other renewables are continuing to produce more electricity. Figure 1 shows generation from hydropower and other renewables from 1995 to 2015.

Figure 1: Hydropower and other renewable electricity generation, 1995-20153

1 In this report, “hydropower” is used to refer to conventional hydropower of all sizes. “Small hydro” will be used to refer to hydropower facilities that generate up to 30 MW of electricity.

2 Energy Information Administration. (August, 2016). Hydropower Explained. Retrieved from: http://www.eia.gov/Energyexplained/index.cfm?page=hydropower_home

3 Ibid.

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Small hydro has the potential to provide significant amounts of renewable energy without substantial environmental impacts. One major factor that has limited investment in new small hydro capacity is excessive regulation geared towards larger hydropower projects. Hydropower is the only renewable energy source that is licensed at the federal level, and excessive federal regulations discourage investment across all states.4

This report begins by examining small hydro’s potential to provide reliable and environmentally friendly electricity. It then reviews government policies that affect small hydro development and details the requirements for obtaining regulatory approval for a project. Finally, the report examines how effective recent legislation has been at encouraging the expansion of small hydro and suggests opportunities to reduce the regulatory burden facing small hydro.

What is Small Hydro?Conventional hydropower uses dams to collect water in a reservoir which stores the potential energy of the water. Gravity feeds the water through a pipe that regulates the flow of water into a turbine.5 The moving water provides kinetic energy which turns the blades of the turbine and powers a generator to create electricity.6

Small hydro, which is typically defined as a hydropower facility that generates under 30 megawatts (MW) of electricity, can often take advantage of other non-dam water sources.7 For example, run-of-river hydropower uses a turbine in a river or its offshoot, whereas conduit hydropower uses existing pipelines like municipal water supply pipes.8

Lastly, both small and large hydro can use pumped-storage technologies. Pumped storage hydro is essentially a hydro battery, using two reservoirs at different elevations and a pump. At times of low electricity demand, excess energy is used to pump water to the upper reservoir. At times of high electricity demand, the stored water is released through a hydroelectric turbine to generate electricity.

Small Hydro Could Help Power America Small hydro has the physical potential to generate large amounts of clean, renewable electricity. Most forms of hydropower can easily create enough electricity to help meet baseload energy demands by providing a constant supply of electricity as long as water flow is steady. Baseload power sources like hydropower are those that are able to supply the electric grid with a constant flow of cheap and reliable electricity.9 Many forms of small hydro can also easily increase or decrease electricity generation by adjusting the flow through dams in order to meet changes in electricity demand. Small hydro turbines could potentially be added to thousands of existing dams and water supplies throughout the country to generate more renewable electricity consistently and reliably without creating additional environmental impacts.

4 International Hydropower Association. (2016). Hydropower Status Report 2016, pp. 36. Retrieved from: http://www.hydropower.org/sites/default/files/publications-docs/2016%20Hydropower%20Status%20Report_1.pdf

5 National Hydropower Association. (n.d.). Conventional Hydropower. Retrieved from: http://www.hydro.org/policy/technology/conventional/;This pipe is called a penstock, which is a floodgate used for regulating the flow of water.

6 U.S. Department of Energy. (n.d.). How Hydropower Works. Retrieved from: http://www.energy.gov/eere/water/how-hydropower-works

7 One MW is capable of powering between 750 to 1,000 homes, on average.;Kosnik, Lea. (2010, June 1). The potential for small scale hydropower development in the US. Energy Policy, Vol. 38, pp. 5512-5519. Retrieved from: https://www.umsl.edu/~kosnikl/Costs%20SSH.pdf ;Electric Power Supply Association. (n.d.). What Is a Wholesale Electricity Market? Retrieved from: https://www.epsa.org/industry/primer/?fa=wholesaleMarket

8 Oak Ridge National Laboratory. (April, 2015). 2014 Hydropower Market Report. Retrieved from: http://nhaap.ornl.gov/sites/default/files/ORNL_2014_Hydropower_Market_Report.pdf

9 Institute for Energy Research. (2014, September 2). Electricity Generation. Retrieved from: http://instituteforenergyresearch.org/electricity-generation

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Physical PotentialIn the United States, six percent of total U.S. electricity generation came from hydropower in 2015, most of which was from large dams throughout the country.10 These large dams, however, are only one component of hydropower. There is also significant potential for additional electricity production through small and micro hydro. In this report, the term small hydro will be used to refer to both small and micro hydro.

In 2012, Oak Ridge National Laboratory published a report which found that 2,500 powered dams (out of some 80,000 powered and non-powered dams across the U.S.) provide a total of 78 gigawatts (GW) of electricity.11 These dams produce enough electricity to power over 58 million homes.12 But significant hydropower potential also exists in the form of non-powered dams that could be retrofitted with hydroelectric turbines. Adding turbines to existing dams would generate additional electricity with few additional environmental impacts, as no new dams would need to be constructed.13 Oak Ridge National Laboratory also found that adding hydropower to 54,391 qualifying non-powered dams has the potential to increase hydroelectric generation by 15 percent overall. This increase represents approximately 12 GW of untapped renewable energy potential.14

Even if only a small fraction of these non-powered dams were retrofitted, significant electricity could be generated. Of the 12 GW of potential power available from non-powered dams, 8 GW could be generated by the 100 dams with the most generation capacity potential. The top 10 dams alone could generate 3 GW, enough to power about 2.2 million homes.15 Figure 2 shows which states have the most small hydro potential at non-powered dams.

Figure 2: Potential Small Hydro Capacity Per State From Retrofitting Non-Powered Dams16

10 Energy Information Administration. (August, 2016). Hydropower Explained. Retrieved from: U.S. Department of Energy website: http://www.eia.gov/Energyexplained/index.cfm?page=hydropower_home

11 Oak Ridge National Laboratory. (April, 2012) An Assessment of Energy Potential at Non-Powered Dams in the United States. pp. vii. Retreived from: http://www1.eere.energy.gov/water/pdfs/npd_report.pdf

12 Value generated based off estimates of the value of one GW from the National Hydropower Association multiplied by production estimates from Oak Ridge National Laboratory. Retrieved from: http://www.hydro.org/tech-and-policy/faq/#494 ; Oak Ridge National Laboratory. (April, 2012). An Assessment of Energy Potential at Non-Powered Dams in the United States. pp. vii. Retreived from: http://www1.eere.energy.gov/water/pdfs/npd_report.pdf

13 Oak Ridge National Laboratory. (April, 2012) An Assessment of Energy Potential at Non-Powered Dams in the United States. pp. vii. Retreived from: http://www1.eere.energy.gov/water/pdfs/npd_report.pdf ;Using the same estimate as above suggesting 1 MW powers 750-1,000 homes, we can calculate that 8 GW (8,000 MW) x 750 homes = 2,250,000 million homes.

14 Ibid.

15 Ibid.

16 Johnson, K., Hadjerioua, B. (September, 2015). Small Hydropower in the United States. Oak Ridge National Laboratory. pp. 8. Retrieved from: http://info.ornl.gov/sites/publications/files/Pub56556.pdf

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Pumped-storage hydropower is another potential source of additional small hydro energy production. These facilities pump water uphill to reservoirs at higher elevations when electricity demand is low, and release water when needed to generate electricity to meet demand.17 Today, pumped-storage hydropower generates 22 GW of electricity.18 A 2014 Idaho National Laboratory report found that at least 653 non-powered dams in the United States are capable of producing at least 1 MW of electricity each through the development of pumped-storage capacity. Many of these dams are likely the same ones estimated above by Oak Ridge National Laboratory for their conversion potential, however, so these two estimates cannot simply be combined.19

Capacity Factor and EfficiencyOne of the most commonly used methods to quantify the efficiency of an energy source is capacity factor. Capacity factor is a measure of the amount of power a facility actually produces in comparison to its potential output. Capacity factor is calculated by dividing a generator’s actual output by the maximum potential output over a set time period.20 Generally, a higher capacity factor means that a power plant’s actual output is close to its potential output, suggesting that the plant’s capacity is more fully utilized.21

Hydropower has a relatively high capacity factor. Open Energy Information estimated the average capacity factor for conventional hydropower at 43.1 percent and the capacity factor for small hydro at 38.6 percent.22 As seen in Figure 3, these capacity factors, while lower than those of fossil fuels, are generally higher than those for other renewables such as wind and solar.23

17 Energy Storage Association. (n.d.). Pumped Hydroelectric Storage. Retrieved from: http://energystorage.org/energy-storage/technologies/pumped-hydroelectric-storage

18 Oak Ridge National Laboratory (April, 2012). An Assessment of Energy Potential at Non-Powered Dams in the United States. Retreived from: http://www1.eere.energy.gov/water/pdfs/npd_report.pdf

19 Hall, D.G., Lee, R.D. (March, 2014). Assessment of Opportunities for New United States Pumped Storage Hydroelectric Plants Using Existing Water Features as Auxiliary Reservoirs. Idaho National Laboratory. pp. 9. Retrieved from: http://hydropower.inel.gov/resourceassessment/d/pumped-storage-hydro-assessment-report-published-version-20mar14.pdf

20 Lofthouse, J., Simmons, R.T., Yonk, R.M. (2015). Reliability of Renewable Energy: Hydro. Institute of Political Economy. pp. 6 Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf

21 Enerdynamics (2012, February 8). Capacity Factor – A Key Determinant of the Value of a Power Plant. Retrieved from: https://blog.enerdynamics.com/2012/02/08/capacity-factor-a-key-determinant-of-the-value-of-a-power-plant/

22 Average Capacity Factor Values were determined averaging data collected from the OpenEI Transparent Cost Database. Retrieved from: http://en.openei.org/apps/TCDB/#blank

23 Energy Information Administration. (April, 2011) Electric Power Annual 2009. pp. 48. Retrieved from: http://www.eia.gov/electricity/annual/archive/03482009.pdf; Open Energy Information. (n.d.). Transparent cost database - Capacity factor. Retrieved from http://en.openei.org/apps/TCDB/

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Figure 3: Average capacity factors from 2009 to 2015 by source24

The average capacity factor for small hydro is misleadingly low, as many small hydro projects can be much more efficient. Most dams and reservoirs have secondary purposes like flood control and water storage that limit the amount of water that can be released, thus limiting the amount of electricity a turbine can generate.25 If small hydro is added to dams and conduits without these secondary purposes, the turbine can generate more electricity with a higher capacity factor.26

Lifetime CostThe Levelized Cost of Electricity (LCOE) is a common measurement used to compare the cost of different electricity sources. The LCOE is calculated by estimating the average cost of producing electricity over a plant’s lifetime. Specifically, LCOE measures the cost per unit of electricity generated, normalized over the expected life of an energy source. It takes into account construction, operation, financing, and return on investment over the financial life of the source.27

24 Average Capacity Factor Values were determined averaging data collected from the OpenEI Transparent Cost Database. Retrieved from: http://en.openei.org/apps/TCDB/#blank

25 Lofthouse, J., Simmons, R.T., Yonk, R.M. (2015). Reliability of Renewable Energy: Hydro. Institute of Political Economy. pp. 6. Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf

26 Ibid.

27 Namovicz, Chris. (2013, June 17). Assessing the Economic Value of New Utility-Scale Renewable Generation Projects. Energy Information Administration. pp. 6. Retrieved from: https://www.eia.gov/conference/2013/pdf/presentations/namovicz.pdf

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Open Energy Information estimated the median LCOE of large-scale hydropower projects at $70 per megawatt-hour (MWh) and small hydro at $100 per MWh.28 These estimated costs, shown in Figure 4, suggest that hydropower is a cost competitive source of renewable electricity.29

Figure 4: Median LCOE from 2009 to 2015 by source.30 (USD/MWh)

The largest portion of large hydropower’s cost is the capital cost of constructing a dam and purchasing and installing electricity-generating equipment. For small hydro projects, capital costs are generally low because retrofitting existing dams or placing turbines within existing pipelines is much cheaper than building new facilities. Small hydro’s largest infrastructure cost is the electricity generation equipment, including turbines and generators. In more remote areas, transmission and distribution infrastructure to provide access to the electric grid is costly and can also act as a barrier to development.31

Environmental ImpactsElectricity generated from hydropower is both clean and renewable. Hydropower does not consume any fuel in the electricity generation process, and hydropower production facilities do not produce any emissions. The House Committee on Natural Resources estimates that hydropower helps the nation avoid 200 million tons of carbon dioxide annually.32

28 Open EI. (n.d.). Transparent Cost Database. Retrieved from: http://en.openei.org/apps/TCDB/#blank

29 International Renewable Energy Agency. ( June, 2012). Renewable Energy Technologies: Cost Analysis Series - Hydropower. pp. 1. Retrieved from: https://www.irena.org/DocumentDownloads/Publications/RE_Technologies_Cost_Analysis-HYDROPOWER.pdf;The LCOE is the best available cost estimate and is the most commonly used to compare the costs of different energy sources, but does not account for subsidies or the regulatory environment facing different energy sources. Instead of decreasing production costs, subsidies simply transfer costs away from producers and onto taxpayers. Not only does the LCOE misrepresent the full cost of an energy source, but because subsidies vary by energy source, the levelized cost can be a misleading comparison. See: Hansen, M.E., Simmons, R.T., Yonk, R.M. (April, 2016). The Unseen Costs of Natural Gas. pp. 6. Retrieved from: http://www.strata.org/pdf/unseencosts/unseen_ng_full.pdf

30 Median LCOE Values are based on DOE Estimates collected from the OpenEI Transparent Cost Database. Retrieved from: http://en.openei.org/apps/TCDB/#blank

31 Lofthouse, J., Simmons, R.T., Yonk, R.M. (2015). Reliability of Renewable Energy: Hydro. Institute of Political Economy. pp. 14. Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf

32 House Committee on Natural Resources. (n.d.). Hydropower as a Renewable Energy Source. Retrieved from: http://naturalresources.house.gov/issues/issue/?IssueID=8267; Ciocci, L., Flores, T. (2015, July 12). Additional hydropower could cut carbon emissions. Retrieved from: http://www.oregonlive.com/opinion/index.ssf/2015/07/additional_hydropower_could_cu.html

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The construction of dams does, however, have significant environmental impacts. Dams accumulate sediment which can deprive downstream habitats of important nutrients. Dams also change water flow patterns and straighten river paths which can impact the riparian habitat, ecology and the geography of the surrounding area.33 Perhaps the most overlooked environmental impact of dams is the increase in methane and carbon dioxide emissions caused by an increase in decaying organic matter and microbacterial matter that grows in the reservoir behind the dam.34 A commonly cited issue with dam construction is the disruption of fish migration patterns and increased fish mortality rates. These problems, however, can be mitigated by installing turbines that allow fish to swim through, as well as installing fish ladders which allow fish to swim around or over a dam.35

New dams generally have significant environmental impacts, but the environmental impacts of small hydro projects are often negligible. Existing dams have already disrupted streamflow and fish migration, and already created large reservoirs of stagnant water that may emit greenhouse gases. But many of the non-powered dams around the country have the ability to be retrofitted with electricity generation facilities.36 Adding power generation facilities to these non-powered dams has little to no additional environmental impact. Further, conduit projects do not require large bodies of water at all because they rely on existing artificial waterways. Conduit projects thus do not disrupt natural streamflow patterns and are also less susceptible to climate and environmental disruptions.

Many environmentalists are currently pushing for the removal of existing dams. This push for dam removal presents an ideal opportunity for dam trading. Dam trading allows for environmental improvements to be exchanged for reduced regulatory constraints on hydropower projects.37 One example is the Penobscot River restoration project in Maine. In this case, environmentalists agreed not to fight hydropower licenses at six dams in exchange for the removal of two other dams, and decommissioning and installation of a fish bypass facility at a third.38 If more hydropower developers can find ways to negotiate with environmental groups, developers can actually create environmental benefits while maintaining or increasing the amount of electricity generated.

Small Hydro Faces Big RegulationsSmall hydro is reliable, efficient, and has few environmental impacts. Despite these benefits, there have been very few new small hydro developments in recent decades, as shown in Figure 5. One reason for this may be that small hydro faces burdensome regulations created primarily for large hydropower projects. These regulations create a one-size-fits-all regulatory umbrella. These regulations may discourage the development of small hydro by increasing compliance costs to the point that small projects are no longer cost-effective.39

33 International Rivers. (n.d.). Environmental Impact of Dams. Retrieved from: https://www.internationalrivers.org/environmental-impacts-of-dams

34 Magill, Bobby. (2014, October 29) Methane Emissions May Swell from behind Dams. Scientific American. Retrieved from: http://www.scientificamerican.com/article/methane-emissions-may-swell-from-behind-dams/; International Rivers. (2007, May 1). Greenhouse Gas Emissions From Dams FAQ. Retrieved from: https://www.internationalrivers.org/resources/greenhouse-gas-emissions-from-dams-faq-4064

35 Lofthouse, J. , Simmons, R. T., Yonk, R. M. (2015). Reliability of Renewable Energy: Hydro. Institute of Political Economy. Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf; Department of Energy. (2011, October 21) Fish-Friendly Turbines Making a Splash in Water Power. Retrieved from: http://energy.gov/articles/fish-friendly-turbine-making-splash-water-power; National Oceanic and Atomospheric Administration. (n.d.). What is a Fish Ladder? Retrieved from: http://oceanservice.noaa.gov/facts/fish-ladder.html

36 Hall, D.G., Lee, R.D. (March, 2014). Assessment of Opportunities for New United States Pumped Storage Hydroelectric Plants Using Existing Water Features as Auxiliary Reservoirs. Idaho National Laboratory. pp. 9. Retrieved from: http://hydropower.inel.gov/resourceassessment/d/pumped-storage-hydro-assessment-report-published-version-20mar14.pdf

37 Owen, D., Apse, C. (2015, March 10). Trading Dams. UC Davis Law Review, Volume 48 (1043), pp. 1043-1109. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2434260

38 Ibid.

39 Kosnik, L. (December, 2009). The Potential for Small Scale Hydropower Development in the United States. pp. 16. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1516731

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Figure 5: Hydropower Installation Timeline by Plant Size.40

As hydropower regulations have increased, the costs associated with developing hydropower have grown as well. Oak Ridge National Laboratory found that regulatory costs have increased over the past 30 years – from just five percent of total project costs to 25 percent in 2010.41 Over these same few decades, the total amount of U.S. electricity generated by hydropower has generally remained stagnant.42 This stagnation is likely because many of the best large dam sites have already been constructed, but may also be a result of increasing regulatory compliance costs as well as increasing construction and environmental costs.43

Even though small hydro has fewer environmental impacts, it is often subject to the same regulations as large hydropower projects. Small hydro projects produce less power than their larger counterparts. Thus, when they are subject to the same regulatory requirements, regulatory costs make up a larger portion of the total project cost. These high regulatory costs may discourage a potential small hydro developer from making the investment. Large hydropower projects requiring new dam construction often have the backing of a government agency or a large firm that has more resources to fulfill licensing requirements. Small hydro developers are less likely to have those resources. As a result, regulation ends up harming the small hydro developer more than the large developer the legislation was originally intended for.

40 Figure 5 uses data compiled from Oak Ridge National Laboratory, which looks at new installed capacity by decade. There have been several attempts to reform the licensing process to encourage more hydropower development this decade. These effects may not yet be visible on this graph because of the aggregation. When combined with Figures 1 and 9, however, we can reasonably suggest that the amount of power generated from all forms of hydropower is still declining. Graph made from data compiled from Oakridge National Laboratory. (April, 2015). The 2014 Hydropower Market Report. Retrieved from: http://nhaap.ornl.gov/HMR/2014

41 Zhang, Q., Smith, B., Zhang, W. (October, 2012). Small Hydropower Cost Reference Model. Oak Ridge National Laboratory. Retrieved from: http://info.ornl.gov/sites/publications/files/pub39663.pdf

42 Energy Information Administration. (2012, September 27). Total Energy. Retrieved from: http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0802a ; Energy Information Administration. ( July, 2016). Electric Power Monthly. Net Generation by Energy Source. Retrieved from: https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_1_01;See Figure 9.

43 Tarlock, D. (2011). The Legal-Political Barriers to Ramping Up Hydro. Chicago-Kent Law Review, Vol. 86 (1), pp. 259-276. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2187550

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Environmental regulations may make sense in the context of new dam construction, but these same regulations are often unnecessarily applied to environmentally-benign small hydro projects. For example, the city of Logan in northern Utah had to evaluate the environmental impacts of a small conduit turbine being installed in an existing water pipeline, which had virtually no environmental impacts. Unnecessary evaluations ended up costing the city three million dollars and four years of effort for a relatively small project.44 As a result of high regulatory costs, the city engineer estimates the project will not break even for 50 years.45

Many of the regulations that plague the hydropower licensing process were not created with small hydro in mind. Congress typically gives regulatory agencies the power to create regulations in response to new technologies and perceived crises, but it is not easy to remove old, unnecessary, or ineffective regulations.46 Federal regulations therefore keep growing, constraining hydropower development with a tangled mess of requirements.47

Examples of these regulations include the Public Utility Regulatory Policy Act, Renewable Portfolio Standards, and the National Environmental Policy Act. Although these regulations are well-intentioned, they also have negative consequences for the development of small hydro. This section examines the origin of these policies and their intended purposes, as well as their unintended consequences for small hydro development.

The Public Utility Regulatory Policy Act (PURPA) The Public Utility Regulatory Policy Act (PURPA) of 1978 created an incentive for small-scale renewable energy development.48 PURPA was enacted as part of the National Energy Act to promote the use of renewable energy. The Act did this by requiring electric utilities to buy power from renewable energy producers.49 Under PURPA, an energy developer can obtain a power purchase agreement (PPA) that allows the developer to sell electricity to a utility. These agreements play a key role in financing independently owned projects because they define revenue terms that allow developers to obtain financing.50

The spike in small hydro plants in the 1980s can be at least partially attributed to PURPA. The Act created a market for renewables by requiring utilities to pay the “avoided cost,” the cost the utility would otherwise pay for generating power for electricity generated by small renewable power-production facilities.51 PURPA helped create an incentive for independent companies to develop renewable energy technologies.

Unfortunately, for small hydro projects PPA’s can be difficult to obtain because of the uncertainty in the development and licensing process. If a utility company is going to buy power from a renewable energy source, they need to know that a project will be active within a specific timeframe. These utilities need certainty to coordinate changes in electricity supply to meet expected demand, and to determine the timeline for financial return on investment. There are many federal agencies involved in project licensing, and this slows down and adds uncertainty to the licensing process,

44 Hansen, M., Simmons, R., Yonk, R. M. (2016, June 23). The Regulatory Noose: Logan City’s Adventures in Micro-Hydropower. Energies. MDPI Basel.

45 Ibid.

46 McNutt, P. (May, 2002). Bureaucracy and Government Output. In 2nd ed. Of The Economics of Public Choice, pp. 124-164. Edward Elgar Publishing.; Lofthouse, J.K. (2016). How Good Intentions Backfire: Failures and Negative Consequences of Federal Environmental Policies. Utah State University. Retrieved from: http://digitalcommons.usu.edu/cgi/viewcontent.cgi?article=5776&context=etd

47 McLaughlin, P. A. (2013). On the Human Costs of the US Regulatory System: Should Congress Pressure Agencies to Make Rules Faster? Testimony before the Senate Judiciary Committee Subcommittee on Oversight, Federal Rights, and Agency Action. The Mercatus Center at George Mason University. Retrieved from: http://mercatus.org/sites/default/files/McLaughlin_human-costs_testimony_073013.pdf

48 Electric Power Supply Association. (2016). What is PURPA? Retrieved from: https://www.epsa.org/industry/faqs/?fa=purpa

49 Ibid.

50 Glass, T., Goodrich, W.S., and Rosati. ( June, 2016). Implementing the Public Utilities Regulatory Policies Act: FERC Must Preserve the Foundation of Competitive Markets. Solar Energy Industries Association. Retrieved from: https://www.ferc.gov/CalendarFiles/20160616092501-Glass,%20SEIA.pdf ;Kleinschmidt. (February, 2015). Maine Hydropower Study. Prepared for Maine Governor’s Energy Office. pp. 3-16. Retrieved from: http://www.maine.gov/energy/publications_information/001%20ME%20GEO%20Rpt%2002-04-15.pdf

51 Johnson, K., Hadjerioua, B. (September, 2015). Small Hydropower in the United States. Oak Ridge National Laboratory. pp. 5. Retrieved from: http://info.ornl.gov/sites/publications/files/Pub56556.pdf

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making it unclear and difficult to obtain a PPA. Without a guaranteed project timeline and a PPA, lenders may be reluctant to finance small hydro projects and developers may be reluctant to make long-term capital investments.52

Financial IncentivesToday, hydropower receives fewer subsidies than traditional fossil fuel energy sources or other renewable energy sources. As can be seen in Figure 6, hydropower receives only 1.4 percent of total federal energy subsidies, which is significantly less than the 18.2 percent and 20.3 percent given to solar and wind, respectively.53

Figure 6: Percentage of total energy subsidies awarded by technology.54

In addition to the loan guarantees and renewable energy bonds offered to all renewables, hydropower has qualified for a production tax credit (PTC) since 2005. A PTC is a tax credit offered to many renewable energy producers for each kilowatt-hour (kWh) of electricity produced. Although the Energy Policy Act of 1992 created a PTC for hydropower, producers did not get this tax credit until 2014 when Congress first appropriated funds for this program.55 Under section 242 of the Energy Policy Act, hydropower producers are eligible to receive 1.2 cents per kWh of electricity produced. In comparison, wind, geothermal, and closed-loop biomass are all eligible to receive 2.3 cents per kWh of electricity generated.56

52 Lofthouse, J., Simmons, R.T., Yonk, R.M. (2015). Reliability of Renewable Energy: Hydro. Institute of Political Economy. Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf

53 Percentage value generated via comparison of rewards towards hydropower versus wind. Energy Information Administration. (March, 2015). Direct Federal Financial Interventions and Subsidies in Energy in Fiscal Year 2013. Table ES2. pp. xvi. Retrieved from: https://www.eia.gov/analysis/requests/subsidy/pdf/subsidy.pdf

54 Ibid.

55 Lofthouse, J., Simmons, R.T., Yonk, R.M. (n.d.). Reliability of Renewable Energy: Hydro. Institute of Political Economy. Retrieved from: http://www.usu.edu/ipe/wp-content/uploads/2015/11/Reliability-Hydro-Full-Report.pdf ;Sherlock, M.F. (2015, July 14). The Renewable Electricity Production Tax Credit: In Brief. Congressional Research Service. pp. 3. Retrieved from: http://www.lankford.senate.gov/imo/media/doc/The%20Renewable%20Electricity%20Production%20Tax%20Credit%20In%20Brief.pdf

56 U.S. Department of Energy. (n.d.). Renewable Electricity Production Tax Credit. Retrieved from: http://energy.gov/savings/renewable-electricity-production-tax-credit-ptc

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Hydropower developers are also eligible for a federal Business Energy Investment Tax Credit (ITC), as with most renewables. The ITC is a one-time tax credit worth 30 percent of the value of a renewable facility. A hydropower developer can choose between receiving tax credits through the PTC for 10 years, or receiving a one-time ITC.57

The Department of Energy also offers research and development funding to innovative hydroelectric and other water power technologies.58 The current Water Power Program was developed in 2008 to improve performance and lower the cost of water projects to help encourage private-sector innovation and development.59 Research and development helps to improve water power technologies, but does little to encourage investment in already existing hydroelectric technologies. The Water Power Program’s budget has increased from $10 million in 2008 to $70 million in 2016, as shown by Figure 7, but there has not been a corresponding increase in electricity generated through hydropower.60

Figure 7. Water Power Program Budget History61

Despite all these incentives, the amount of electricity generated by hydropower is not increasing significantly. The costs of complying with regulatory requirements now make up approximately a quarter of total project costs, which may be discouraging investment in hydropower.62 The long and arduous licensing process is the source of most of these requirements.

57 U.S. Department of Energy. (2014). Federal Incentives for Water Power. Energy Efficiency & Renewable Energy Water Power Program. Retrieved from: http://energy.gov/sites/prod/files/2014/06/f16/Federal%20Incentives%20for%20Water%20Power.pdf

58 Ibid.

59 U.S. Department of Energy. (n.d.).Water Power Program Budget. Retrieved from: http://energy.gov/eere/water/water-power-program-budget;U.S. Department of Energy. (n.d.). About the Water Power Program. Retrieved from: http://energy.gov/eere/water/about-water-power-program

60 U.S. Department of Energy. (n.d.).Water Power Program Budget. Retrieved from: http://energy.gov/eere/water/water-power-program-budget;Energy Information Administration. (2016, April 10). Hydropower Explained. Retrieved from: http://www.eia.gov/energyexplained/?page=hydropower_home

61 U.S. Department of Energy. (n.d.).Water Power Program Budget. Retrieved from: http://energy.gov/eere/water/water-power-program-budget

62 Zhang, Q.F., Smith, B., Zhang, W. (October, 2012). Small Hydropower Cost Reference Model. Oak Ridge National Laboratory. Retrieved from: http://info.ornl.gov/sites/publications/files/pub39663.pdf

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Renewable Energy IncentivesHydropower is also encouraged by Renewable Portfolio Standards (RPS) and the Department of Energy’s Hydropower Program. Renewable Portfolio Standards are state-level policies that require or encourage a certain amount of a state’s electricity to be generated by renewable resources by a certain year.63 As of 2016, 29 states have enacted RPS, but requirements vary.64 For example, Vermont requires utilities to sell 75 percent of their electricity from renewable sources by 2032. Other states have much less aggressive targets; South Carolina’s requirement for utilities is to sell two percent of their energy from renewable sources by 2021.65

RPS encourage renewable energy development and most states allow some form of hydropower to qualify as a renewable energy under an RPS mandate. In 25 states, small hydro qualifies under the RPS. Most state RPS requirements define small hydro as generating between 3 and 60 MW of electricity. Some states, however, require new dam construction for hydropower to count toward a state’s RPS. By encouraging the construction of more dams, such requirements lessen hydropower’s environmental benefits. Many RPS also limit the projects that qualify according to capacity, age, or type of technology. These standards generally favor new or more recent projects, excluding most hydroelectric facilities that were installed decades ago.66

Some states have placed even more restrictions for small hydro facilities to qualify under RPS. In Connecticut, a project must be less than 5 MW, be run-of-river (using moving water without creating a dam), and have been built after 2003 to count toward RPS requirements. In Maryland, small hydro under the state RPS is restricted to facilities that were in operation before 2004, and no new construction is accepted.67 But these restrictions on accepted forms of hydropower under an RPS mandate may not be significantly affecting new hydro developments. Although RPS have created more incentives for renewables in general, developers may find it easier to invest in renewables with an easier licensing process and more financial incentives like wind and solar.

FERC Licensing ProcessHydropower projects of any size face an arduous licensing process overseen by the Federal Energy Regulatory Commission (FERC). In some cases, small hydro projects can be approved for an exemption, rather than a license, which allows a developer to circumvent some of the tougher requirements. FERC is the primary regulatory agency for hydropower, but a developer is also required to work with other federal and state agencies throughout the licensing and exemption process.68 In this section, we look at the exemption process, the three different licensing processes, as well as other regulations and requirements that a developer will encounter while trying to obtain a license or exemption.

Federal Power Act The first piece of legislation to affect hydropower in the U.S. is the Federal Power Act, enacted in 1920.69 The act was created to coordinate and encourage hydropower projects in the United States by creating the Federal Power Commission, the precursor to the Federal Energy Regulatory Commission (FERC).70 The agency was tasked

63 Although these policies do encourage renewable energy development, they also have an unintended consequence of being very expensive for taxpayers and energy consumers in states with RPS. A recent study found that Pennsylvania’s average household income was an estimated $4,000 less than it would have been without RPS in 2009. See: Simmons, R., Yonk, R., Brough, T., Fishbeck, J. (April 2015). Renewable Portfolio Standards: Pennsylvania. Institute of Political Economy at Utah State University. Retrieved from: http://www.strata.org/wp-content/uploads/2015/03/IPE-RPSPenn-Full-Report.compress.pdf

64 Durkay, J. (2016, July 2016). State Renewable Portfolio Standards and Goals. National Conference of State Legislatures. Retrieved from: http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx

65 Ibid.

66 Stori, V. (April, 2013). Environmental Rules for Hydropower in State Renewable Portfolio Standards. Clean Energy States Alliance. Retrieved from: http://www.cesa.org/assets/2013-Files/RPS/Environmental-Rules-for-Hydropower-in-State-RPS-April-2013-final-v2.pdf

67 Ibid.

68 Federal Energy Regulatory Commission. (2016, May 24). What FERC Does. Retrieved from: https://www.ferc.gov/about/ferc-does.asp

69 Federal Energy Regulatory Commission. (n.d.). History of FERC. Retrieved 2016, from Students Corner: http://www.ferc.gov/students/ferc/history.asp

70 Morrissey, S. (2015). Note FERC and USACE: The necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. Law Review U.C. David, Volume 48(1581), pp. 1581-1616. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf

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with issuing licenses to non-federal hydropower projects as well as being the main authority for all licensing and exemptions. The Federal Power Act requires hydro developers to obtain a FERC license, even for small projects. In some cases, smaller projects may be eligible for an exemption.71

Before a project can receive a license or license exemption, the Federal Power Act requires developers to complete a strict and lengthy approval process. Licenses and exemptions are issued to non-federal hydropower projects that affect navigable waters, occupy federal lands, affect interstate commerce, and use water from government operated dams.72 The processes for obtaining a license or exemption are shown in Figure 8.

71 Federal Energy Regulatory Commission. (2016, February 16). Small/Low Impact Hydropower Program. Retrieved from: http://www.ferc.gov/industries/hydropower/gen-info/licensing/small-low-impact.asp

72 Federal Energy Regulatory Commission. (2015, August 20). Small/Low-Impact Hydropower Projects. Retrieved from: http://www.ferc.gov/industries/hydropower/gen-info/licensing/small-low-impact/get-started/exemp-licens.asp

Notice of Intent& Pre-application

Start 401Water Quality Certifications

ESAConsultation

NHP consultation

Begin NEPA scoping

Preliminary licenseconditions & recommendationsfor FS, FWS, and NOAA

Scoping doc

Demonstrate401 Compliance

ReviewApplication

Approve?

Letter of approval

TraditionalLicensingProcess

Commentperiod

Commentperiod

no

yes (TLP)

yes (ALP)

no

yes

no yes

Schedule &hold consultationmeeting

ConductSite visit

Comment period

Is license approved?

Demonstrate401 Compliance If there are requests

for more studiesthe developer must comply

Developer draftsan application &comment period

Accepted?

Letter of denial

Start over

AlternativeLicensingProcess

Form stakeholderwork group& communicationprotocol

Createinformationpackage

Schedule and hold informationmeeting

Develop studyplans & conduct

Draft application& preliminaryEA or EIS

Conductconsults

FinalLicensingOrder

Fish HabitatAssessment

Resolve disputesif necessary

Implement study plans

Create initial study report,hold meeting

Issue meetingsummary

Fulfill requestfor more information

Conductconsultations

Notify of scopingdoc, meeting, andsite visit- hold

IntegratedLicensingProcess

Comment period

Documents

Comment period

Commentperiod

Comment andissue finalapplication

Application

Draft licenseapplication

Did the developerobtain a waiver from the preliminary requirements?

Does FERCrequest moreinformation?If so, fulfill

Notice for readiness for environmental analysis &comment period

Commentperiod

Create study plans & submit- if there are any disputes they are resolved and the plans are implemented

Figure 8. Hydropower Licensing and Exemption Processes

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Obtaining a license or a license exemption through FERC is generally a complicated process and the level of difficulty varies depending on whether a developer qualifies for an exemption or a license. Small hydropower facilities may qualify for either a conduit exemption or a 10 MW exemption, but if they are not granted an exemption, then the developer must obtain a license.77 The processes for obtaining exemptions and licenses are briefly outlined below.

ExemptionsThe purpose of an exemption is to expedite project licensing by allowing a developer to circumvent the extensive requirements of the licensing process. These exemptions can save time for the developer, but can also be difficult to apply for.

Conduit exemptionA developer constructing a conduit facility that will produce 40 MW of energy or less may apply for a conduit exemption. To do so, the developer must first notify FERC and the public of their intent to construct a facility and obtain the exemption.78 If FERC determines that the project qualifies for an exemption, they will notify the public and open a 45-day comment period. During this period, anyone may object to the project being qualified for an exemption.79 If there are no objections, FERC approves the project and the developer may begin construction. If there is public opposition, the developer may try to obtain the exemption again by creating a revised plan or they may try to obtain a license instead.80

10 MW exemptionA developer constructing a facility that will produce less than 10 MW of energy may apply for a 10 MW exemption. The developer starts this process by filing a notice of intent to file for an exemption.81

If the state that the project is located in requires a 401 Water Quality Certification*, the developer will begin the certification approval process immediately. The water quality certification shows that the project will meet the state’s water quality standards.82 Not all states require this certification. In those that do, the difficulty of obtaining a certification varies. For example, New York has an extensive process to obtain the certification, which requires obtaining an additional permit from the United States Army Corps of Engineers.83 In contrast, California does not require this permit and the process is simpler overall.84

77 Ibid.

78 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Exemption Process (7-FD-g). Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-g

79 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Qualifying Conduit Hydropower Facility Authorization. Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-f ; Warren, G. (2014). Hydropower: Time for a Small Makeover. Indiana International & Comparative Law Review 24(1), pp. 249-268

80 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Qualifying Conduit Hydropower Facility Authorization. Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-f

81 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Exemption Process (7-FD-g). Retrieved from Open Energy Information: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-g

82 Ibid.

83 Regulatory and Permitting Information Desktop Toolkit. (n.d.). New York 401 Water Quality Certification. Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/14-NY-d

84 Regulatory and Permitting Information Desktop Toolkit. (n.d.). California 401 Water Quality Certification. Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/14-CA-d

* The Clean Water Act

The Clean Water Act (CWA) was established to “restore and maintain the chemical, physical, and biological integrity of the Nation’s waters.”73 The CWA sets water quality standards for hydroelectric projects, and FERC requires developers to meet minimum water quality standards as a condition of project certification. In addition, section 404 of the CWA requires any project that involves the discharge of material in U.S. waters to obtain a permit from the United States Army Corps of Engineers (USACE). The applicant must demonstrate that the proposed project is the least environmentally damaging practicable alternative to achieve the proposed purpose. Jonathan Schutz, an environmental law attorney, claims that proving a project is the least environmentally damaging alternative is the “steepest hurdle” in obtaining a permit.74

In order to expedite the permitting process, the USACE will consider a small hydro project for a Nationwide Permit. Nationwide Permits authorize projects that have minimal effects on the aquatic environment.75 To be eligible for these permits, projects must not affect any endangered species or their habitats, and cannot be placed on any federally-designated wild and scenic rivers. If the expected effects are minimal, the permit is issued and NEPA’s requirements are fulfilled. Even though a Nationwide Permit can speed up the permitting process, a project may still need to prepare documentation and assessments for other agencies.76

Because the CWA requires projects obtain a USACE permit as well as a FERC license or exemption, each agency may have overlapping requirements, meaning that each agency is required to prepare the same documents for their records. This redundancy adds time and monetary costs to the project.

Section 401 of the Clean Water Act says that FERC may license a hydropower project only if the state where the project is located certifies that the project will comply with their applicable water quality standards. This section of the CWA was put in place to give the states some authority over hydropower development by allowing a state to reject a project. Even if a permit has been federally approved, the state still has the power to deny a permit or license, and they retain the right to impose additional limitations on certifications beyond the federal requirements.

73 Federal Water Pollution Control Act, 33 U.S.C. § 1251 (2002). Retrieved from: http://www.epw.senate.gov/water.pdf

74 Shutz, J. (2005). The Steepest Hurdle in Obtaining a Clean Water Act Section 404 Permit. UCLA Journal of Environmental Law and Policy, Volume 24(235), pp. 235-258. Retrieved from: http://escholarship.org/uc/item/2976c9tq

75 United States Army Corps of Engineers. (n.d.). Decision Document Nationwide Permit 17. Retrieved from: http://www.usace.army.mil/Portals/2/docs/civilworks/nwp/2012/NWP_17_2012.pdf ; United States Army Corps of Engineers. (n.d.). Regulatory Permit Programs. Retrieved from: http://www.saw.usace.army.mil/Missions/Regulatory-Permit-Program/Permits/

76 United States Army Corps of Engineers . (n.d.). Decision Document Nationwide Permit 17. Retrieved from: http://www.usace.army.mil/Portals/2/docs/civilworks/nwp/2012/NWP_17_2012.pdf

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Once the water quality certification process is initiated, FERC will begin the NEPA† scoping process and will develop either an Environmental Assessment or an Environmental Impact Statement to outline the environmental impacts of the project.85 During that time, the developer must contact all involved parties that will be affected by the project and hold a meeting to discuss any concerns.86 After the meeting, there is a 60 day comment period where any of the involved parties can request more information and raise any concerns they may have. To resolve these concerns, FERC will review the project to suggest potential resolutions that will please the public to be implemented into the developer’s plan.87

After the first public comment period, the developer must draft a study plan for the facility. This plan will outline the entire project and its expected effects. All agencies involved are then given a draft of the study plan and another public comment period begins. If there are any substantive disputes to the project, the developer must hold a joint meeting between the disputing party and FERC to reach an agreement.88

Once the project plan and application have been reviewed and accepted by FERC, the public is given another chance to comment on the project. During this time, the Fish and Wildlife Service, the National Marine Fisheries Service, and any relevant state agencies will assess the project to make sure the project will not adversely affect any fish or wildlife species.89 These agencies will also make sure that the project has proper fish passage equipment.90 Once those agencies have completed their assessments and the project receives 401 Water Quality Certification (if necessary), FERC will grant the exemption, and the developer may continue with the project.91 The exemption process is still long, but it is less complicated and shorter than obtaining a license.

LicensingIf a project does not qualify for either the conduit or the 10 MW exemption, the developer is required to obtain a license. There are three different licensing processes that a developer can use: the alternative process, the traditional process, and the integrated process. By default, the integrated process is used, unless a developer is granted the right to use one of the other two.

85 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Exemption Process (7-FD-g). Retrieved: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-g

86 Ibid.

87 Ibid.

88 Ibid.

89 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal U.S. Fish and Wildlife Service License Conditions and Recommendations. Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-o ; Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal NOAA Fisheries Licensing Conditions and Recommendations (7-FD-p). Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-p

90 Ibid.

91 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal FERC Exemption Process (7-FD-g). Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-g

† The National Environmental Policy Act (NEPA)

In 1969, Congress established the National Environmental Policy Act (NEPA). The act requires federal agencies to produce reports that summarize the environmental effects of their proposed actions.92 These reports are known as Environmental Assessments (EA) and Environmental Impact Statements (EIS).93 Both of these statements summarize the scope of the environmental effects that may result from a project as well as possible alternatives to the project.

For hydropower projects, the process of developing an EA or EIS is tedious, redundant, and costly. Both FERC and the Army Corps of Engineers are required to produce an EA or an EIS.94 Although there are no exact numbers for how long it takes to prepare these statements, one study conducted by United States Government Accountability Office found that on average it takes 4.6 years to complete an Environmental Impact Statement and 13 months to complete an Environmental Assessment.95 This time to complete an EA or EIS adds uncertainty to the overall development timeline and raises the total cost of project completion.96

In an attempt to help streamline the NEPA process, the Energy Policy Act of 2005 removed the requirements for NEPA review on small hydroelectric projects on United States Bureau of Reclamation land.97 This provision is good for the dams owned by the Bureau of Reclamation, but does not encourage development on any other dams or conduits.

92 US Environmental Protection Agency. (2016, August 2). Summary of the National Environmental Policy Act. Retrieved from: https://www.epa.gov/laws-regulations/summary-national-environmental-policy-act

93 US Environmental Protection Agency. (2016, July 5). Environmental Policy Act Review Process. Retrieved from: https://www.epa.gov/nepa/national-environmental-policy-act-review-process

94 Morrissey, S. (2015). Note FERC and USACE: The necessity of Coordination in Implementation of the Hydropower Regulatory Efficiency Act. Law Review U.C. David, Volume 48(1581) pp. 1614. Retrieved from: http://lawreview.law.ucdavis.edu/issues/48/4/Note/48-4_Morrissey.pdf

95 U.S. Government Accountability Office (April, 2014). National Environmental Policy Act: Little Information Exists on NEPA Analysis. U.S. Government Accountability Office. Retrieved from: http://www.gao.gov/assets/670/662543.pdf

96 Fargo, James, FERC. (2016, October 18). Personal Communication.;Lofthouse, J. (October, 2016). How Good Intentions Backfire: Negative Effects of Federal Environmental Policies. Institute of Political Economy, Utah State University. pp. 17-24. Retrieved from: http://www.strata.org/pdf/good_intentions/good_intentions_full.pdf

97 Ibid.

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The Clean Water Act states that a developer will need to obtain both FERC and a USACE permit. In the case of small hydro, however, the FERC license will generally satisfy both requirements.102 Other licensing requirements may be necessary for projects that include Bureau of Reclamation land or projects involving “dredged” material, which is the sediment removed from the bottom of a water source.103

The Integrated Licensing ProcessThe Integrated Licensing Process was created in 2003 to provide an efficient and timely licensing process by integrating the FERC application with other environmental reviews. The integrated process is usually more expensive than the traditional or alternative processes, and takes more time to complete as it requires more periods for open public comment.104

To obtain an integrated license, a developer must notify the public and FERC of their intent to construct a project, and begin preparing the pre-application documents. One of these documents requires the developer to initiate the 401 Water Quality Certification process if the state in which the project is located requires it. The developer then conducts consultations with any involved agencies. These agencies check that the developer’s project complies with federal regulations. Next, the developer must prove that they comply with the National Historic Preservation Act‡, the Endangered Species Act§, and the project will need to undergo a Fish Habitat Assessment to show that it will not adversely affect any fish species.105

After these consultations are complete, the developer creates a scoping document outlining all the plans for the project. The developer must hold a meeting about the scoping document to resolve any disputes that arise, and holds another comment period. The plans go through several stages of revision to resolve comments until the agencies and the public are satisfied. After the scoping document is completed, an initial study report will be issued and a meeting is held for discussion. Throughout this process the developer will need to fulfill any requests for more information from involved agencies or the public.106

To finish the integrated process, a developer will need to fulfill the preliminary license requirements or obtain a waiver stating the requirements are unnecessary. Once the preliminary license requirements are complete, including making sure the project complies with requirements made by the Forest Service, the Fish and Wildlife Service, and the National Oceanic and Atmospheric Administration (NOAA), a draft license application is made public and commented upon. FERC will then review the application for completeness and open another comment

102 McLaughlin, K. (n.d.). United States Army Corps of Engineers Regulatory Program Small Hydropower Development in the United States. Federal Energy Regulatory Commission. Retrieved from: https://www.ferc.gov/eventcalendar/Files/20091207133422-McLaughlin,%20Army%20Corps%20of%20Engineers.pdf

103 U.S. Bureau of Reclamation. (2016, November 15). Hydropower Program. Retrieved from: https://www.usbr.gov/power/LOPP/

104 Open Energy Information. (n.d.). Federal FERC Integrated Licensing Process (7-FD-k). Retrieved 2016, from OpenEI: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-k

105 Ibid. 106 Ibid.

‡ The National Historic Preservation ActThe National Historic Preservation Act was established in 1966 to protect historic and cultural heritage. Under Section 106 of the Act, FERC is required to “take into account the effect of the undertaking on any district, site, building, structure, or object that is included in or eligible for inclusion in the National Register.”98 Any hydropower project that must comply with the National Historic Preservation Act as part of the licensing process must prove that the development will not affect the historic and cultural heritage of the site. FERC must also give the Advisory Council on Historic Preservation and federally recognized Indian tribes a reasonable opportunity to comment on a proposed action.99

§ The Endangered Species ActThe Endangered Species Act was enacted in 1973 to restore and protect threatened or endangered species and their habitats. The act requires FERC to consult with the U.S. Fish and Wildlife Service and the National Marine Fisheries Service before a license can be issued.100 The two agencies must approve a proposed project by determining that it will not negatively impact any threatened or endangered species or their habitats. Even small hydro projects that require no dam construction require FERC to investigate the potential impact of a small project on threatened and endangered species.101

98 Steinauer, K.A. (December, 2012). Nebraska’s Traditional Cultural Properties in theSection 106 Process. University of Nebraska - Lincoln, Department of Anthropology. Retrieved from: http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1019&context=anthrotheses

99 Regulatory and Permitting Information Desktop Toolkit. (n.d.). Federal National Historic Preservation Act Section 106 - Resource Survey (11-FD-a). Retrieved from: http://en.openei.org/wiki/RAPID/Roadmap/11-FD-a

100 Hydropower Reform Coalition. (2016). Laws Governing Hydropower Licensing. Retrieved from: http://www.hydroreform.org/resources/laws

101 Yonk, R.M., Hansen, M.E. (2013, December 9). Green innovation vs. green regulation: Column. U.S.A. Today. Retrieved from: http://www.usatoday.com/story/opinion/2013/12/19/green-energy-efficient-innovation-regulation-environmental-column/4012743/

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period. The developer must then demonstrate 401 compliance and begin the NEPA scoping process by drafting an Environmental Assessment or an Environmental Impact Statement.107

Once the NEPA documents are complete, there is a final comment period on the Environmental Assessment or Environmental Impact Statement. FERC will review the project one last time to determine if it has met all the application requirements. If all requirements are met, FERC will issue a final licensing order. If the project does not meet all the requirements, FERC may deny the license. If this happens, the developer can contest the decision, request a rehearing, and submit the documents again to try again.108

If a developer does not want to use the integrated process, they must receive FERC approval to use either the traditional or alternative processes. In general, the traditional process works better for less contentious projects, whereas the alternative process is better for projects that might demand more public input.109

The Traditional Licensing ProcessA developer may use the Traditional Licensing Process to avoid the strict schedule of the integrated process and to complete the pre-filing stage quicker. With the traditional process, FERC’s involvement is limited until after the pre-filing stage. In the pre-filing stage, the developer is in charge of directing and consulting with all relevant agencies. Once the application has been accepted for filing after the pre-filing stage, FERC begins the scoping process.110 Overall, the Traditional Licensing Process is more flexible than the Integrated Licensing Process, which makes it a better option for many small hydro projects.111

Similar to the integrated process, the traditional process requires the developer to notify the public and all involved agencies, obtain water quality certification, hold an initial consultation meeting, and comply with the Endangered Species Act and the National Historic Preservation Act.112

After relevant agencies have been consulted, the developer drafts plans for the project to be submitted to FERC. FERC begins the NEPA scoping process while the developer finds ways to comply with Forest Service, Fish and Wildlife Service, and NOAA preliminary license conditions. The developer then submits the application and their documents to FERC to be reviewed for completeness. If the developer does not receive a letter of acceptance, they may request a judicial review of their application with a federal appeals court.113

After the letter of acceptance is issued, the developer must create the final scoping document and notify FERC that the project is ready for another environmental analysis. Once FERC has completed the final environmental analysis, they issue the final licensing order for the developer to continue the project.114

The Alternative Licensing ProcessFor more complicated or controversial projects, a developer may need more collaboration with stakeholders throughout the licensing process. The Alternative Licensing Process is often the best option for these types

107 Ibid.

108 Ibid. 109 Committee on Energy and Commerce Subcommittee on Energy and Power United States House of Representatives. (2015, May 13). Testimony of Ann F. Miles Director, Office of Energy Projects. Retrieved from Environment and Energy Publishing: http://www.eenews.net/assets/2016/06/03/document_gw_05.pdf

110 U.S. Department of Energy. (2016). Hydropower Vision: A New Chapter For America’s 1st Reliable Energy Source. pp. 192. Retrieved from: http://energy.gov/sites/prod/files/2016/07/f33/Hydropower%20Vision_Ch-2_07-25-2016.pdf

111 Open Energy Information. (n.d.). Federal FERC Traditional Licensing Process (7-FD-i). Retrieved 2016, from OpenEI: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-i

112 Ibid.

113 Ibid; United States General Accounting Office. (2001). LICENSING HYDROPOWER PROJECTS: Better Time and Cost Data Needed to Reach Informed Decisions About Process Reforms. Washington DC.

114 Ibid.

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of projects because it helps the developer communicate with stakeholders to resolve potential issues.115 The alternative process is both flexible and collaborative, but does not have the same consistency and structure of the integrated or traditional processes.116

First, the developer must form a stakeholder workgroup and create a communication protocol. This protocol outlines a strategy for how to contact an agency if there is a public dispute, and how the public will be contacted if an agency has a dispute. The communication protocol’s purpose is to ensure that the public, agencies, and any other involved parties are kept informed of the project and its expected effects. The key difference between the alternative and the integrated process is that FERC will draft an Environmental Assessment or an Environmental Impact Statement at the same time as other consultations rather than afterwards. This allows more time for public comment and to resolve disputes.117

Overall, the alternative process is very similar to the integrated process. The developer first notifies the public and any involved agencies of the project. The developer then starts obtaining the 401 Water Quality Certification, demonstrating compliance with the Endangered Species Act and the National Historic Preservation Act, and FERC begins the NEPA process.118

After all involved agencies have been consulted, the developer submits an information package and a scoping document to FERC about the potential impacts the facility could have. Once those are submitted, another meeting is held to ensure that all parties still approve of the project. The developer then works with the Forest Service, the Fish and Wildlife Service and NOAA to make sure the project meets their preliminary license requirements. Once these requirements are met and FERC has drafted an Environmental Analysis or Environmental Impact Statement, the developer proves they have obtained a water quality certification and the public is given time to comment. If no disputes are made, FERC issues a decision on the project. If FERC approves, the developer obtains the license and may begin project construction. If FERC rejects the project, the developer may request a rehearing to try again.119

The cost of obtaining a permit varies with each type of license depending on how many federal agencies are involved and how many studies they request. According to an estimate by James Fargo, a FERC engineer, in 2016 the average costs of the FERC permitting process range from $500,000 to $600,000 plus an additional $2,000 to $3,000 for the preliminary permit.120 This does not include construction costs that will be accrued later.

Recent Attempts to Reform HydropowerIn recent years, policymakers have recognized the potential for hydropower to produce clean, reliable, renewable energy. As a result, there have been several attempts to incentivize hydropower development through federal and state initiatives. Many of these initiatives work in direct opposition to regulations that discourage small hydro and would likely be unnecessary if regulators reformed the licensing process.

Policymakers have attempted to create several reforms to encourage or allow the development of more small hydro. In 2013, Congress passed two important pieces of legislation for small hydro: the Hydropower Regulatory Efficiency Act of 2013 and the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act.121 In 2014, Congress also passed the Water Resources Reform and Development Act. These acts were intended to reduce

115 Federal Energy Regulatory Commission. (n.d.). Hydropower Licensing--Get Involved: A Guide for the Public. Department of Energy. Retrieved from: https://www.ferc.gov/resources/guides/hydropower/hydro-guide.pdf; Toolkit, R. a. (n.d.). Federal FERC Alternative Licensing Process (7-FD-j). Retrieved from Open Energy Information: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-j

116 Toolkit, R. a. (n.d.). Federal FERC Alternative Licensing Process (7-FD-j). Retrieved from Open Energy Information: http://en.openei.org/wiki/RAPID/Roadmap/7-FD-j

117 Ibid. 118 Ibid. 119 Ibid.

120 Fargo, James. FERC (2016, September 1). Personal Communication.

121 Hydropower Regulatory Efficiency Act of 2013, H.R. 267 (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf ; S. Rept. 113-39 (2013). Retrieved from: https://www.congress.gov/congressional-report/113th-congress/senate-report/39/1

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the regulatory burden facing small hydro developers, but in reality they may have only added minor exemptions that make existing regulation even more confusing.122

The Hydropower Regulatory Efficiency ActThe Hydropower Regulatory Efficiency Act of 2013 was passed to encourage small hydro development by streamlining the regulatory process and providing exemptions for these projects.123 Unfortunately, three years may be too soon to determine if this act has been a success.

The Hydropower Regulatory Efficiency Act lengthens the time for which preliminary permits are valid. A preliminary permit does not guarantee the project will be constructed, but reserves the site for the permit holder until they are ready to apply for a license.124 This amendment allows FERC to extend the preliminary permit length from the original three years to five.125 This extension is meant to encourage development by giving project managers more time to prepare for the licensing process. The extension is unnecessary, however, because the permit itself is only needed to reserve the site for further study. A license is not guaranteed by holding a permit, but a permit does ensure that no one else can build on the site before the project developer.

The Hydropower Regulatory Efficiency Act also amended Section 30 of the Federal Power Act by revising qualifications for license exemptions for conduits. Conduits with a capacity of 40 MW or less may be granted a license renewal exemption. Exempt projects do not have to renew their license, which would otherwise expire every 30-50 years. This exemption does not mitigate initial construction or permitting costs, and it is questionable whether removing renewal requirements is actually beneficial.126

Smaller conduits of 5 MW or less qualify for an exemption under the Efficiency Act and do not require a license.127 Both exemptions appear to be an improvement, but Associate Professor Gina S. Warren of the University of Houston found that “the label ‘exemption’ is misleading, as small hydro and conduit projects must still go through a lengthy and extensive application process-both pre- and post-application to qualify for the exemption, including three stages of consultation.”128 Conduits producing 5 MW or less do not require a license so they do not have to go through the licensing process, but project managers still must fill out the required paperwork and apply for an exemption.129

The Efficiency Act gives non-powered dam developers the opportunity to obtain a license in two years in the hopes of encouraging more projects. The average time period from filing an application to obtaining a license is 3.6 years and the process has taken up to eight years.130 There are several qualifications that could reduce the Efficiency Act’s permitting power. Only non-powered dams and closed loop pumped storage projects qualify for this two year licensing.131 A potential hydroelectric developer must also obtain a letter of feasibility from the dam owner and letter of approval from the project manager.132

122 Ibid

123 Hydropower Regulatory Efficiency Act of 2013, H.R. 267 (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf

124 U.S. Department of Energy. (2016). Hydropower Vision: A New Chapter For America’s 1st Reliable Energy Source. pp. 192. Retrieved from: http://energy.gov/sites/prod/files/2016/07/f33/Hydropower%20Vision_Ch-2_07-25-2016.pdf

125 Hydropower Regulatory Efficiency Act of 2013, H.R. 267 (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf

126 Ibid. ; Warren, G. S. (2013). Hydropower: It’s a Small World After All. Nebraska Law Review, Volume 91(925) . pp. 960-961. Retrieved from: http://scholarship.law.tamu.edu/cgi/viewcontent.cgi?article=1175&context=facscholar

127 Hydropower Regulatory Efficiency Act of 2013, H.R. 267. (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf

128 Warren, G. S. (2013). Hydropower: It’s a Small World After All. Nebraska Law Review, 91(925), Retrieved from: http://scholarship.law.tamu.edu/cgi/viewcontent.cgi?article=1175&context=facscholar

129 Hydropower Regulatory Efficiency Act of 2013, H.R. 267. (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf

130 Robinson, J. M. (2013, January 4). Promoting Growth: Six Steps to Advancing Hydropower Development. Hydro World. Retrieved from:http://www.hydroworld.com/articles/hr/print/volume-32/issue-3/cover-story/promoting-growth--six-steps-to-advancing-hydropower-development.html

131 Hydropower Regulatory Efficiency Act of 2013, H.R. 267. (2013). Retrieved from: http://www.ferc.gov/legal/fed-sta/bills-113hr267enr.pdf

132 Harris, M. (March/April 2015). The Power of Water: America’s hydropower industry gets a boost from U.S. legislation. Right of Way. Retrieved from: http://www.irwaonline.org/eweb/upload/web_marapr_15_PowerWater.pdf

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To measure the effectiveness of the Efficiency Act, FERC proposed a pilot program to determine how feasible a two-year licensing process is. Kentucky Lock and Dam 11 qualified for the Act’s pilot project, and was the first project to be issued a license under the two-year program.133 The Kentucky River Authority was awarded a license on May 5, 2016. Construction is expected to begin in 2017 and be completed in 2018.134

The Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act The Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act was enacted to encourage the development of hydropower facilities owned by the Bureau of Reclamation.135 This law was proposed because the Bureau owns most of the dams with substantial potential for increasing hydroelectricity generation.136 The law encourages retrofitting these dams by giving the Bureau, not FERC, authority over their hydro projects.137

Like the Hydropower Regulatory Efficiency Act, this act also creates an exemption to encourage small hydro development. This act exempts small conduit facilities owned by the Bureau of Reclamation that produce 5 MW from a NEPA assessment.138 This exemption is meant to expedite the licensing process for small projects because they do not require new infrastructure and therefore will not usually have significant impacts on the environment.

Water Resources Reform and Development Act of 2014 The Water Resources Reform and Development Act was passed in 2014 in part to streamline hydropower regulations.139 One purpose of the Water Resources Act is to encourage hydropower development by changing the requirements of feasibility studies, the first step in the permitting process.140 Under this act, feasibility studies must be completed within three years and cost less than $3 million.141 The act puts the Secretary of the Army in charge of feasibility studies because the Army Corps of Engineers is one of the largest owners of hydropower.142 The Corps is placed in charge of the environmental review process, instituting the guidelines for NEPA.143 This could potentially impact development because the Corps owns the majority of the non-powered dams.

Proposed LegislationPolicymakers continue to search for ways to increase renewable energy generation through small hydro. Congress introduced the North American Energy Security and Infrastructure Act of 2016 and the Hydropower Improvement Act of 2015 to further encourage small hydro development.144 These bills only offer amendments that may further

133 Wood, et al. (2016, March 31). Hydro Newsletter - Volume 3, Issue 6. Retrieved from: http://www.vnf.com/hydro-newsletter-volume-3-issue-6

134 PR Newswire. (2016, May 11). Rye Development Receives FERC License for Kentucky Lock and Dam 11 Hydropower Project. Retrieved from: http://www.prnewswire.com/news-releases/rye-development-receives-ferc-license-for-kentucky-lock-and-dam-11-hydropower-project-300266826.html

135 Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act. H.R. 678. (2013). Retrieved from: https://www.congress.gov/congressional-report/113th-congress/senate-report/39/1

136 Ibid.

137 Ibid.

138 Ibid.

139 Water Resources Reform and Development Act of 2014, H.R. 3080. (2014). Retrieved from: https://www.govtrack.us/congress/bills/113/hr3080/summary

140 U.S. Department of Energy. (2016). Hydropower Vision: A New Chapter For America’s 1st Reliable Energy Source. pp. 132. Retrieved from: http://energy.gov/sites/prod/files/2016/07/f33/Hydropower%20Vision_Ch-2_07-25-2016.pdf ; Water Resources Reform and Development Act of 2014, H.R. 3080 (2014). Retrieved from: https://www.congress.gov/bill/113th-congress/house-bill/3080

141 Summary: Water Resources Reform and Development Act of 2014, H.R. 3080. (2014). Retrieved from: https://www.congress.gov/bill/113th-congress/house-bill/3080; Johnson, K. Hadjerioua, B. (September 2015). Small Hydropower in the United States. Retrieved from: http://info.ornl.gov/sites/publications/files/Pub56556.pdf

142 Johnson, K. Hadjerioua, B. (September, 2015). Small Hydropower in the United States. Retrieved from: http://info.ornl.gov/sites/publications/files/Pub56556.pdf

143 Water Resources Reform and Development Act of 2014, H.R. 3080. (2014). Retrieved from: https://www.govtrack.us/congress/bills/113/hr3080/summary

144 North American Energy Security and Infrastructure Act of 2016, S. 2012. (2016). Retrieved from: https://www.govtrack.us/congress/bills/114/s2012/text ; Hydropower Improvement Act of 2015, S. 1236. (2015). Retrieved from: https://www.congress.gov/bill/114th-congress/senate-bill/1236/all-info

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complicate the exemptions existing in current acts. These bills show that Congress is trying to increase hydropower development, but it is still unclear if these proposals will help.

North American Energy Security and Infrastructure Act As of April 2017, the North American Energy Security and Infrastructure Act of 2016 has not been passed by the Senate or signed by the President.145 If passed, this act does not seem likely to significantly affect small hydro. The Infrastructure Act extends the time period a project has to begin construction to six years.146 This bill, like many of other new pieces of legislation, would amend small parts of the licensing process for small hydro. Because this bill only proposes to make small amendments to the licensing process, it might not encourage new hydropower developments substantially.147

The Hydropower Improvement ActThe Hydropower Improvement Act of 2015 was introduced in May 2015 and does not seem likely to move forward as of April 2017.148 The act lengthens the preliminary permit extension to an additional four years instead of the current two and gives FERC the ability to grant a second permit if needed.149 Like the permit extension granted in the Hydropower Regulatory Efficiency Act, this act offers a small reprieve to an extensive process.

Under the Improvement Act, projects are required by FERC to include a fishway if FERC, instead of the U.S. Department of the Interior, determines it necessary to reduce environmental impacts.150 A fishway, or fish ladder, is a series of small pools that acts as a detour around a dam for migrating fish.151 Although these fishways help fish to swim over or around a dam, they do not fully mitigate the impact of a dam on fish and wildlife. Dams still raise water temperatures downstream and trap gravel behind an impoundment, which can be harmful to local fish populations.152 The Improvement Act also seeks to extend the preliminary permit from three to four years and offer an additional four years if needed.153 It is unclear what the effects of this bill would be, but the small changes proposed may not be enough to adequately encourage more small hydro development.

Outcomes of Recent ReformsIf these recent attempts to improve the licensing process and promote new small hydro development were successful, one could expect to see an increase in the amount of electricity generated by hydropower. But the amount of electricity generated by hydropower of all sizes has stagnated or slightly decreased, as shown by Figure 9. Despite a massive increase in the amount of electricity generated by renewables, the amount of electricity generated from hydropower has been declining for decades. As Figure 9 shows, hydroelectric power generation does not appear to be increasing following the passage of recent attempts to reform the licensing process. It could also be the case, however, that these acts could be too new to have impacted development.

145 Ibid.

146 Ibid.

147 Davenport, C. (2016, January 27). Senate Begins Debate on Comprehensive Bipartisan Energy Bill. The New York Times. Retrieved from: http://www.nytimes.com/2016/01/28/us/politics/senate-bipartisan-energy-legislation.html

148 Hydropower Improvement Act of 2015, S. 1236. (2015). Retrieved from: https://www.govtrack.us/congress/bills/114/s1236

149 Ibid.

150 Ibid. ; U.S. Fish and Wildlife Service. (2013, April 16). Klamath Hydroelectric Project Frequently Asked Questions. Retrieved from: https://www.fws.gov/yreka/hydrofaqs.html

151 National Ocean Service. (2014, November 14). What is a fish ladder? Retrieved from: http://oceanservice.noaa.gov/facts/fish-ladder.html

152 Kibel, P. S. (2016). Passage and Flow Considered Anew: Wild Salmon Restoration Via Hydro Relicensing. Public Land and Resources Law Review, Volume 37(4), pp. 70. Retrieved from: http://scholarship.law.umt.edu/cgi/viewcontent.cgi?article=1482&context=plrlr

153 Summary: Hydropower Improvement Act of 2015, S. 1236. (2015). Retrieved from: https://www.congress.gov/bill/114th-congress/senate-bill/1236/all-info

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Figure 9: Hydroelectric power generation from 1949 to 2015, and hydropower as a percentage of all US electricity generated.154

Recommended Policy ChangesMost of the recent attempts to reform hydropower’s regulatory environment have focused on offering exemptions, alternative processes, and incentives to the licensing process. Many of these attempts for reform may be unnecessary if the licensing process for small hydro as a whole were made less restrictive. Some suggested policy changes that may help increase the amount of electricity from hydropower include, from most plausible to most difficult:

1) Reduce the amount of time allocated for public review to shorten the development timeline, or remove public review for small projects altogether. Public review may be unnecessary for many small hydro projects with no social or environmental impacts. Removing or reducing the amount of public review would help streamline the licensing process and encourage more development.

2) Remove the need for identical studies to be completed by multiple agencies, especially the environmental reviews required by FERC and the Army Corps of Engineers. Removing identical and overlapping studies would save time and money for developers and utility customers, and would make hydropower a better investment.

3) Simplify the licensing process for retrofitting existing dams and conduits with small hydro when the environmental impacts are negligible. Many small hydro projects use man-made water infrastructure with no environmental impact or existing dams that have already made an impact. Adding a small hydro project to these existing waterways would not create significant environmental impacts.155

4) Give states more control over the licensing process for small projects. Handing licensing back to the states would allow for a more efficient process with the states overseeing everything before sending applications to FERC.156

154 Energy Information Administration. (2012, September 27). Total Energy. Retrieved from: http://www.eia.gov/totalenergy/data/annual/showtext.cfm?t=ptb0802a ; Energy Information Administration. (2016, July). Electric Power Monthly. Net Generation by Energy Source. Retrieved from: https://www.eia.gov/electricity/monthly/epm_table_grapher.cfm?t=epmt_1_01

155 Warren, G. (2014). Hydropower: Time for a Small Makeover. Indiana & International Comparative Law Review 24(1). pp. 249-268

156 Warren, G. (2013). Hydropower: It’s a Small World after All. Nebraska Law Review 91(925), pp. 969-970

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5) Comprehensively reform the current licensing process to create a new, more streamlined licensing process that is less intensive, especially for small hydro projects. A complete overhaul of the licensing process would help promote more renewable energy production by simplifying the requirements to construct a small hydro project. If the licensing process is adequately simplified, there may be a substantial increase in the number of new small hydro projects.

These recommendations are all feasible, but some will require much more time and effort than others. Many requirements, including environmental reviews and opportunities for public comment, are required by Congress, which would require another act of Congress to remove.157 The overall process, including several rounds of public review, was designed by federal agencies like FERC to meet the requirements of Congress, and can be streamlined internally. Reducing overlap in the licensing process and giving more power to the states can potentially be done with memorandums of understanding. The most effective changes, however, will likely need acts of Congress.158

Conclusions With today’s focus on expanding the use of renewable energy sources, small hydro has substantial potential to increase renewable electricity output without significant environmental impacts. Small hydro is a cost-effective renewable that has the potential to generate 49 more GW of power–enough to power 50 million homes–but not under the current regulatory conditions.159

If recent attempts to reform the hydropower licensing process were effective, then the amount of electricity generated by hydropower would likely increase. Despite the many recent changes to the regulatory process, the amount of electricity generated by hydropower is still declining.160 Policymakers recognize the need for reform, yet current solutions are creating exemptions for a system that needs to be reformed altogether.

157 CFR Title 18, Chapter 1, Subchapter B, Part 4, Subpart D. Application for Preliminary Permit, License or Exemption: General Provisions. Retrieved from: http://www.ecfr.gov/cgi-bin/text-idx?SID=b02adedaa51b4111cc693c24a446ab0e&mc=true&node=sp18.1.4.d&rgn=div6#se18.1.4_138

158 For more about the potential for regulatory reforms, see: Warren, G. (2013). Hydropower: It’s a Small World After All. Nebraska Law Review, Volume 91(925). Retrieved from: http://digitalcommons.unl.edu/cgi/viewcontent.cgi?article=1192&context=nlr

159 U.S. Department of Energy. (2016). Hydropower Vision: A New Chapter For America’s 1st Reliable Energy Source. pp. 5. Retrieved from: http://energy.gov/sites/prod/files/2016/07/f33/Hydropower-Vision-Executive-Summary.pdf; Energy and Commerce Commity. (2015, October 23). Grid operator: Reliable electricity at risk under EPA’s plan. Retrieved from: https://energycommerce.house.gov/news-center/news/grid-operator-reliable-electricity-risk-under-epa-s-plan

160 See Figures 1 & 9. ; Energy Information Administration. (2016, April 10). Hydropower Explained. U.S. Department of Energy. Retrieved from: http://www.eia.gov/energyexplained/?page=hydropower_home

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