The Demise of Traditional Hydro-Power

Traditional hydroelectric power, generated by the storage and release of water in reservoirs, has faced regulatory and environmental restraints on growth for decades. The current generation capacity of hydroelectric power, in the form of conventional and pumped storage, in the United States is around 101,000 megawatts. According to the Electric Power Supply Association, this is enough energy to power 75 to 100 million homes.

In 2013, hydroelectric power accounted for 7 percent of energy production, about 50 percent of total renewable energy produced that year. This represents a sharp decrease from ­­­­about 25 percent of electric generation in 1920.

While the federal government owns only 8 percent of the total number of hydroelectric facilities, it accounts for 52 percent of total hydro generation due to the large size of its facilities. The private sector, public utilities, and state or local governments own the other 92 percent of the facilities, 89 percent of which have a generation capacity of less than 30 megawatts. The non-federal market for hydroelectric power is therefore significant, operating over 1,600 hydropower facilities in states across the country.

While initial investment costs for hydropower projects is high, overall costs in dollars per kilowatt hour are comparatively low. According to the U.S. Department of Energy, hydro power plants cost $0.08/kW-hr, while coal plants and nuclear plants average costs around $0.10/kW-hr. Natural gas power plants are more competitive with costs between $0.07/kW-hr and $0.13/kW-hr. The increase in natural gas plants, which provided 27 percent of U.S. energy in 2014, stems from the cheap supply of gas from hydraulic fracking and the relatively quick construction process of plants. As traditional hydro investment slumps, natural gas is there to pick up the slack and provide cheap electricity for American homes.

Other key reasons for the lack of growth in hydroelectric development stem from considerations outside of average cost, including:

  • Intentional removal of existing dams to restore wildlife habitats.
  • Locations for new reservoirs are lacking as most were constructed on in the twentieth century.
  • Many key rivers in the United States are drying up as a result of changing weather patterns and outdated water sharing laws.
  • Regulations implemented in 1992 drastically increased the waiting time for project development, discouraging future investors who already faced large initial investment costs. Licensing, through Federal Energy Regulatory Commission, for traditional hydro projects can take anywhere from 16 months to 10 years, depending on the environmental concerns on the project.
  • Intentional removal of nearly 900 dams in the last 25 years to restore wildlife habitats.

While one of the easiest methods for boosting generation capacity is installing hydroelectric generators on existing dams, the destruction of current dams is hindering this prospect. Future increases in hydroelectric capacity will stem mostly from new technologies focused on closed-loop pumped storage systems, tidal, and hydrokinetic power (using river water flow). These technologies offer an alternative to outdated methods of controlling and releasing water gradually, which effectively decrease the environmental concerns about hydroelectric power and provide a strong alternative to traditional hydro projects. While the costs for these projects are still too high to be commercially viable, investments in research and development have been increasing throughout the world.

Lauren Aragon is a research associate at the National Center for Policy Analysis.

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