WSHPDR_2013_Final_Report-updated_version

for a term of up to 50 years. The licensee is given the
authority of eminent domain to obtain lands or other
rights needed to construct, operate, and maintain the
hydropower project. 7 13 Licenses must be renewed.
There are very few hydropower projects that are not
subject to FERC licensing requirements. These include
projects on navigable waterways; projects on federal
land; projects using surplus water or water power
from a federal dam; and projects that will affect
interstate commerce (being connected to a regional
transmission grid). 7
Two types of license exemptions exist for small
hydropower projects and water transportation
conduits. First, the 5 MW Exemption is issued with an
indefinite validity. The project must be located at the
site of an existing dam or use a natural water feature.
It must propose increased capacity. The exemptee
must own all land and facilities other than federal land
to be eligible. 13 Second, conduit exemption is also
issued with an indefinite validity; it must use the
potential of a conduit (e.g. irrigation canal, aqueduct,
water supply or effluent stream) constructed primarily
for non-hydropower purpose. The exemptee must
own the proposed powerhouse and the land upon
which the powerhouse will be located. A conduit
exemption may not use federal land. 13
The Public Utility Regulatory Policies Act (PURPA) of
1978 requires States to implement utility conservation
programmes and create incentive rates for eligible
small power producers and cogeneration facilities. A
small power production facility is defined as a power
generating plant of 80 MW or less, whose primary
energy source is renewable (hydro, wind or solar),
biomass, waste, or geothermal resources. A small
power production facility which meets PURPA’s
ownership, operating and efficiency standards is called
a ‘qualifying facility’ (QF). States set the prices and
mandatory purchase requirements under which
utilities (under their jurisdiction) must buy from such
facilities. Small hydropower facilities qualifying for QF
status are eligible for such incentive rates. 14
Barriers to small hydropower development
In 2009, the Small Hydro Council was established with
the purpose of addressing barriers to the development
of small projects with a particular focus on traditional
hydro resources such as conventional hydro,
development at non-powered dams, irrigation power,
and conduit power. The Council coordinates activities
on proposed initiatives for small hydro with the
committees of the National Hydropower Association
(NHA) and with the Ocean, Tidal and New
Technologies Council.
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According to the Small Hydro Council Initial Report
(2010), the investment of time and money necessary
to obtain a license for a small hydropower facility has
become a significant burden, which has had an impact
on the speed at which potential small hydropower is
being developed. 15 Coordination between regulating
agencies needs to become smoother and less
duplicative, and other barriers to development need
to be addressed, without compromising appropriate
environmental protection.
Potential barriers to small hydropower development
identified by NHA included the following: 5
1. Complex regulatory processes. Project
permitting/licensing/exemptions by the FERC are
costly and time-consuming. Regulatory costs can
exceed equipment costs.
2. Lack of integration and communication among
agencies leads to redundancies. The consultation
process takes too long – the studies needed to build
new projects may take years.
3. Lack of standards. There are many standards and
guidelines either available or in development for other
renewables, especially wind and solar technologies.
However, small hydropower has largely been ignored
or the existing regulations and guidelines are not
applicable. For standards development, it was
recommended that the International Electrotechnical
Commission (IEC) and European organizations be
examined and possibly used as a model.
4. Some regulations hinder or block development.
FERC did an analysis of the costs and resources
associated with licensing, and found that Section 401
Water Quality Certification (under the Clean Water Act)
was a major cost driver for projects. The Integrated
Licensing Process (ILP) may not be useful for
developing new projects.
5. Grid connection difficulties exist.
6. Limited incentives for development. The DOE
application process is too complex for small
hydropower projects, and the short window to submit
paperwork can present difficulties. Financial
companies do not fully understand hydropower
attributes and lifetimes. Installed costs are only a part
of the levelized cost of energy; financing, operations
and maintenance, and other factors need to be
considered. For example, the soft costs of small hydro
project engineering, environmental analysis and
permitting are much the same as for larger projects,
driving the cost per kW/capacity for small projects
significantly above the cost per kW/capacity of larger
projects. In addition, financial institutions charge soft
costs of project analysis and approval that are about
the same regardless of the size of a project. These
additional costs make the financing hurdle for small
hydropower more difficult to overcome. 13
Furthermore, financial incentives are neither available
for adding power to existing non-powered dams