Posts

Small Hydro Emerging as Viable Sector for Renewable Energy Development

by David Niebauer

With many states adopting renewables portfolio standards (RPS) and the prospect of a federal RPS somewhere on the horizon, more attention is being given to hydroelectric power generation.  Renewable resources such as sun, wind and water, are those that can be harvested in a sustainable manner to provide the electric power that our society depends on. Water (or gravity moving water) has received less attention from project developers than wind and solar.  But that may be changing.

Approximately 18% of the total world energy supply is hydroelectric. But of course, all hydro is not created equal.  The bulk is large hydro, which employs dams and weirs that disrupt the environment in unalterable ways.  Most hydroelectric facilities are not considered “renewable” – at least not by environmentalists.  Large man-made reservoirs change habitats forever and are often blights on the natural settings in which they are built.

Small hydro – facilities that generate up to 30 MW – can be developed without harming the environment.  So called run-of-river facilities are designed to take advantage of flowing water in rivers and streams in such a way as to have minimal impact on fish habitats and natural settings.  Also, many of the dams in the US are not powered. These facilities, where the environmental impact of the dams cannot be undone, are ripe for small hydro development.  In September 2009, U.S. Energy Secretary Steven Chu said the hydro industry could add 70,000 MW of capacity by installing more efficient turbines at existing dams, increasing the use of pumped-storage projects and encouraging the use of run-of-river turbines. That capacity is equivalent to 70 nuclear plants or 100 coal-fired plants.

Until recently, the major impediment to the development of small hydro has been regulatory.  There are two major federal agencies responsible for hydroelectric power development – Federal Energy Regulatory Commission (FERC) and the US Army Corp of Engineers – neither of which are known for their nimble, user-friendly ways.  While wind and solar projects can often avoid federal regulation, relying instead on individual state authority, FERC is responsible for licensing all non-federal government hydroelectric projects that touch navigable waterways or affect interstate commerce (i.e., if the system is to be connected to a regional electric transmission grid).  Horror stories abound of FERC applying the same licensing and fee structure to a 500kW run-of-river system as it would to a 500MW hydroelectric dam project.  This appears to be changing.

FERC has been investigating ways to simplify the process of obtaining small hydropower licenses and exemptions and, on August 31, 2010, unveiled its Small/Low Impact Hydropower Program Internet site, explaining how developers can quickly and efficiently win FERC approval to build and operate small hydro projects.  The website is part of a FERC plan to expedite small hydro projects.  Another important component is an initiative to enter into memoranda of understanding with state governments to advance FERC exemptions for small hydro projects in those states.  In August 2010, FERC announced a pilot program with the State of Colorado, and has entered into similar MOUs with the states of Washington, Oregon, California and Maine.

Developers appear to be rising to the challenge.  FERC issued 50 preliminary permits to study small sites in 2009, compared to 15 in 2007.  There is money available at both the state and federal level, mostly untapped, in the form of low interest loans, and investors appear to be warming to the sector. An Internet search uncovered at least one developer engaged in a strategy of rolling-up small hydro assets, and undoubtedly more will follow.  A logical approach for a developer would be to acquire a portfolio of revenue-generating assets as a way to demonstrate satisfactory investor returns.  From this base, a developer should be able to build profitable projects at existing unpowered dam sites, and to pursue run-of-river and pumped storage opportunities.

Much attention has been paid to wind turbines and solar PV as ways to harness nature’s abundant energy resources.  Hydroelectric power has often been overlooked due primarily to its scale and the high regulatory hurdles facing developers.  That may be changing in regard to small hydro.  The country has countless unpowered dams that are ripe for development.  This, combined with the prospect of streamlined permitting and exemption processes at FERC for run-of-river and pumped storage facilities, has developers exploring ways to advance small hydro in the service of the nation’s renewable energy goals.

David Niebauer is a corporate and transaction attorney, located in San Francisco, whose practice is focused on financing transactions, M&A and cleantech.  www.davidniebauer.com

 

 

Edison International Says Solar is the Great Untapped Resource

Cleantech Blog had a conversation last year with Stuart Hemphill, now the newly appointed Vice President for Renewables and Alternative Energy at Southern California Edison, a subsidiary of Edison International (NYSE:EIX), one of the largest purchasers of renewable power in the US. We caught up with him again today in a lively discussion around his predictions for the renewable sector.

Today they are announcing their sixth competitive solicitation for renewable energy. On peak delivery from the Tehachapi region is preferred, as they are currently building a massive transmission line to tap into the 4,500 MW of wind potential. But wind produces only 35% of the time. This major pipeline needs to be balanced. So they are looking for creative proposals from developers to fill up the rest of that transmission line with on peak power deliveries.

Renewable and alternative energy are still top goals for Edison. Stuart says his promotion is part a reflection of the business’ expanding interest in leadership in renewables in the US.

Prediction Number 1 – The next 10 years are going to be a wild, wild west in the solar industry. Companies around the globe are exploring new solar technologies of every variety. Stuart thinks it’s way too early to tell which ones are going to be successful. But he considers solar to be the great untapped resource in California and elsewhere.

So I asked him if by that he meant solar thermal or photovoltaics. The answer is “Yes”. Stuart responded that in the past couple of years we have seen incredible amounts of venture capital investment going into solar firms, and PV is only part of that equation.

When I pushed Stuart to predict a winner between conventional solar parabolic trough and other types of solar thermal technologies, Stuart refused, suggesting that it is still too early to tell which technologies will be the winners. That’s what makes it exciting to watch, in his opinion. As an example, he stated that we are now seeing renewed interest power tower technologies with pretty high efficiencies. The challenge is to see which ones get done.

When it comes to what’s important to SoCal Edison itself, it is really important that they sign PPA contracts with viable companies and viable technologies. He sees a wide spectrum of proposals in terms of viability, and is always looking for at least some sort of demonstration plant to prove it up and a significant level of backing for the companies before they can get involved.

Prediction Number 2 – I did ask him what his take on run of river hydro is. He responded that he hopes to be wrong, as he likes run of river hydro, but doesn’t see any major increases in the resource coming in California. Hydro in California in general has a very a limited resource potential left to be developed and lots of stakeholder concerns to be addressed in each case, so while he is hopeful, he is not predicting any great increases.

Prediction Number 3 – US Offshore Wind – We will not see much from offshore wind in California, as the limitations both from physical layout of shoreline as well as policy and consumer concerns.

We then switched to what the industry challenges are. Stuart nailed two big ones, transmission and interconnection.

He believes that transmission is getting even more challenging than last time we spoke. What’s interesting to Stuart is that most people agree and are in support of renewables in California, but very few people support the way that the goals need to be attained, ie, significantly increase transmission infrastructure. There tends to be lots of local opposition, or federal agencies that aren’t always in support of particular local goals. This makes sense, as transmission by its nature always touches a lot of different land and communities in its path, meaning lots of different stakeholders need to be involved.

Interconnection queue bottlenecks are the real next challenge in California and in the Midwest according to Stuart. This is a challenge that is addressable and there are proposals into FERC to do so. But currently it is a first come first serve system, and easy to get into the queue. Getting in the queue starts a study process based on FERC rules, including a feasibility study, then a system impact study and a facility study. The bottleneck arises because according to the current rules, if your facility is further back in the queue, your studies assume that the facilities ahead of you are up and running, but if at any point in time someone ahead of you drops out, your studies need to be effectively redone. Because it is relatively easy to get into the queue, nonviable projects that do not end up coming online as planned have been upsetting the applecart, causing all the projects behind them to go back to the drawing board as far as the study process is concerned. Since 2002, we’ve seen a steep ramp up to a level that is just unmanageable given that dynamic. CAL ISO has a proposal in with FERC to change this, so Stuart believes a solution is coming, just not here yet.

As usual, SoCal Edison is pushing forward aggressively on renewables, and we were excited to see the new solicitation and changes they are making. As we have said before, let’s just get it done.

Neal Dikeman is a founding partner at Jane Capital Partners LLC, a boutique merchant bank advising strategic investors and startups in cleantech. He is founding contributor of Cleantech Blog, a Contributing Editor to Alt Energy Stocks, Chairman of Cleantech.org, and a blogger for CNET’s Cleantech blog.

Blogroll Review: Dam, Leadership, and Lime

by Frank Ling

Red Sea Power

A recent study shows that damming the Red Sea could provide 50 GW of emissions free hydroelectric power. This would be the largest power plant in the world. However, tens of thousands of people would have to be displaced, not to mention untold ecological damage.

Hank Green at EcoGeek writes about how this would politically impact the Middle East:

“The project would provide enough power to switch off oil-burning power plants throughout the Middle East. Political scientists are already estimating the stability such a project would bring to the region.”

Sustainable Leadership

Sustainability is now becoming a buzzword just like eco and environmental. But what does it take at the corporate level to promote sustainable practices?

A recent report from Avastone Consulting examined what types of leadership and organization structure was needed to carry out such changes.

Joel Makower says:

“Their study found that it isn’t a lack of systems and activities that limit a company’s success, but rather the scarcity of what it calls “higher capacity leaders” and the direct relationship between leader mindset development and the realization of complex sustainability outcomes.”

Baking Soda Solution

Jim Fraser at the Energy Blog writes about this simple but promising process:

“Sodium hydroxide, which is produced on site as a part of the SkyMine™ process is used to react with the CO2 to produce the sodium carbonate. The heat to drive the process is captured from the heat in the flue gas.”

For a 500 MW power plant, that amounts to 642,000 tons of emissions reduced each year.

Frank Ling is a postdoctoral fellow at the Renewable and Appropriate Energy Laboratory (RAEL) at UC Berkeley. He is also a producer of the Berkeley Groks Science Show.