TODAY’S STUDY: The Big Potential In Hydropower

Hydropower Vision; A New Chapter for America’s First Renewable Electricity Source

July 2016 (U.S. Department of Energy)

Executive Summary – Overview

The U.S. Department of Energy’s (DOE’s) Wind and Water Power Technologies Office has led a first-ofits-kind comprehens ive analysis to evaluate future pathways for low-carbon, renewable hydropower (hydropower generation and pumped storage) in the United States, focused on continued technical evolution, increased energy market value, and environmental sustainability. Undertaken through a broad-based collaborative effort, the Hydropower Vision initiative had four principal objectives:

• Characterize the current state of hydropower in the United States, including trends, opportunities, and challenges;

• Identify ways for hydropower to maintain and expand its contributions to the electricity and water management needs of the nation from the present through 2030 and 2050;

• Examine critical environmental and social factors to assess how existing hydropower operations and potential new projects can minimize adverse effects, reduce carbon emissions from electricity generation, and contribute to stewardship of waterways and watersheds; and

• Develop a roadmap identifying stakeholder actions that could support responsible ongoing operations and potential expansion of hydropower facilities. The Hydropower Vision analysis finds that U.S. hydropower could grow from 101 gigawatts (GW) of capacity to nearly 150 GW by 2050. Growth under this modeled scenario would result from a combination of 13 GW of new hydropower generation capacity (upgrades to existing plants, adding power at existing dams and canals, and limited development of new stream-reaches), and 36 GW of new pumped storage capacity. If this level of growth is achieved, benefits such as a savings of $209 billion from avoided greenhouse gas (GHG) emissions could be realized, of which $185 billion would be attributable to operation of the existing hydropower fleet. Transformative technical innovations able to meet the co-objectives of environmental sustainability and low-carbon energy will be critical to enabling additional hydropower growth beyond these levels.

The Hydropower Vision report specifically does not evaluate or recommend new policy actions but instead analyzes the feasibility and certain benefits and costs of various credible scenarios, all of which could inform policy decisions at the federal, state, tribal, and local levels.

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The Hydropower Vision Framework

The Hydropower Vision report is based on three equally important foundational principles, or “pillars,” arrived at through extensive stakeholder input. These pillars are critical to ensuring the integrity of the research, modeling, and analysis in the Hydropower Vision: Optimization: Optimize the value and power generation contribution of the existing hydropower fleet within the nation’s energy mix to benefit national and regional economies, maintain critical national infrastructure, and improve energy security. Growth: Explore the feasibility of credible long-term deployment scenarios for responsible growth of hydropower capacity and energy production. Sustainability: Ensure that hydropower’s contributions toward meeting the nation’s energy needs are consistent with the objectives of environmental stewardship and water use management.

Hydropower Vision: Responsibly operate, optimize, and develop hydropower in a manner that maximizes opportunities for low-cost, low-carbon renewable energy production, economic stimulation, and environmental stewardship to provide long-term benefits for the nation.

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Hydropower Vision Insights

Applying these foundational principles to both the quantitative and qualitative analyses in the Hydropower Vision led to several key insights regarding the role of existing and future hydropower in the U.S. power sector:

• Existing hydropower facilities have high value within the U.S. energy sector, providing low-cost, low-carbon, renewable energy as well as flexible grid support services;

• Hydropower has significant near-term potential to increase its contribution to the nation’s clean generation portfolio via economically and environmentally sustainable growth through optimized use of existing infrastructure;

• Meeting the long-term potential for growth at potential sites that are not developed for hydropower is contingent upon continued commitment to innovative technologies and strategies to increase economic competitiveness while meeting the need for environmental sustainability;

• Significant potential exists for new pumped storage hydropower to meet grid flexibility needs and support increased integration of variable generation resources, such as wind and solar;

• The economic and societal benefits of both existing and potential new hydropower, as quantified in this report, are substantial and include job creation, cost savings in avoided mortality and economic damages from air pollutants, and avoided GHG emissions. Hydropower has provided a cumulative 10% of U.S. electricity generation over the past 65 years (1950–2015), and 85% of cumulative U.S. renewable power generation over the same time period.

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Study Summary

DOE’s approach to characterizing key aspects of hydropower and assessing future potential had two major components: data gathering and computational analysis. More than 300 experts from over 150 organizations and agencies participated as task force members and reviewers in documenting the opportunities, challenges, and technical and market aspects of the industry. These experts also contributed cost data and input on methods and assumptions used in the computational analysis.

DOE’s national laboratories used national-scale electric sector capacity expansion modeling to simulate the cost of construction and operation of generation and transmission capacity to meet electricity demand and other power system requirements on a competitive basis with other generation sources over discrete study periods—2017, through 2030, and through 2050. These modeling methods were used to evaluate a range of possible future outcomes for hydropower deployment based on resource availability, technical innovation, economic factors, market forces, and potential environmental effects. The modeling analysis assumed policy as legislated as of December 31, 2015, including the U.S. Environmental Protection Agency’s Carbon Pollution Standards for Existing Power Plants (Clean Power Plan).O1

In addition to modeling future outcomes of new deployment, the future contributions of the existing hydropower fleet were evaluated. As of the end of 2015, the U.S. hydropower generation fleet included 2,198 active power plants with a total capacity of 79.6 GW and 42 pumped storage hydropower (PSH) plants totaling 21.6 GW, for a total installed capacity of 101 GW. PSH comprised the majority (97%) of the utility-scale electricity storage in the United States at the end of 2015.

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Analysis Overview

For the report, four categories of hydropower projects were evaluated:

1. Existing hydropower plants that can be upgraded and optimized for increased generation and environmental performance;

2. New power plants at existing non-powered dams (NPDs) and other water conveyance infrastructures such as irrigation canals;

3. New and existing PSH facilities and upgrades; and

4. New stream-reach development (NSD).

Due to the limits of the quantitative economic modeling framework used, potential capacity additions from canals; from upgrades to existing pumped storage facilities; and in Alaska and Hawaii are only discussed qualitatively throughout the report. More than 50 hydropower deployment scenarios were modeled to assess the relative influence of specific variables on hydropower growth in the competitive energy marketplace. The factors that exerted the greatest influence on the modeling results were: (1) technology innovation to reduce cost; (2) improvement of market lending conditions by valuing the long asset life of hydropower facilities; and (3) the concurrent influence of several environmental considerations. These factors and others were combined in a final set of four scenarios. This set of scenarios was used to quantify potential long-term hydropower growth and a range of potential benefits from specific metrics, such as GHG reduction, when compared to a baseline scenario representing no new unannounced hydropower development. Growth in hydropower generation capacity in the various scenarios was added to current installed capacity to establish a range of potential total capacity.

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Results: Overall Positive Benefit for the Nation

The Hydropower Vision analysis found that—under a credible modeled scenario in which technology advancement lowers capital and operating costs, innovative market mechanisms increase revenue and lower financing costs, and a combination of environmental considerations are taken into account—U.S. hydropower including PSH could grow from 101 GW of capacity in 2015 to 150 GW by 2050. Growth potential is tied to a complex set of variables, and changes in these variables over long periods of time are difficult to predict. Modeling results therefore serve primarily as a basis for identifying the key factors and drivers likely to influence future trends and outcomes, and should not be interpreted as DOE projections or targets.

Near-term growth of hydropower generation (through 2030), estimated as 9.4 GW under this scenario, is driven primarily from upgrades of existing hydropower facilities (5.6 GW) and powering non-powered dams (3.6 GW). Long-term growth of 3.4 GW between 2030 and 2050 includes 1.7 GW of NSD, for a total of 12.8 GW of new growth by 2050. The analysis also concluded that potential exists to increase NSD beyond this level; however, this development is unlikely to occur without significant, transformational innovation in technology and development approaches that can lower costs and meet environmental sustainability requirements.

Under a range of scenarios, PSH can increase in both the near term (to 2030), where 16.2 GW are added, and in the longer term (to 2050), where an additional 19.3 GW are deployed, for a total of 35.5 GW by 2050. This growth is driven primarily by modeled growth in other variable renewable generation sources, such as wind and solar, and by the inherent flexibility of pumped storage and its ability to provide needed operating reserves and other essential grid reliability services. With increased PSH deployment under Advanced Technology and Low Cost Finance modeling assumptions, PSH provides more operating reserves (52%) than any other technology by 2050.

The Hydropower Vision modeled capacity of 150 GW by 2050 yields a scenario under which a combined $209 billion savings from avoided global damages from GHG emissions is possible, including $185 billion in savings from the existing hydropower fleet being operated through 2050. The figure below provides an itemized quantification of selected benefits realized by both the existing fleet and new growth between 2017 and 2050.

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Roadmap for Key Stakeholder Actions

The Hydropower Vision roadmap outlines potential actions, in a non-prescriptive manner, for consideration by all stakeholder sectors. Within the five topical action areas listed below, 21 sub-categories include 64 actions developed in conjunction with task forces representing a wide range of stakeholder perspectives. The defined roadmap action areas are:

1. Technology Advancement to advance development of innovative technologies and system design concepts needed to reduce costs and improve both power production efficiencies and environmental performance;

2. Sustainable Development and Operation to further integrated approaches that incorporate the principles, metrics, and methodologies required to balance environmental, social, and economic factors;

3. Enhanced Revenue and Market Structures that appropriately compensate and incentivize new and existing hydropower, given the numerous energy production and grid support services it provides;

4. Regulatory Process Optimization by increasing access to shared data, making information on relevant scientific advances available, and furthering other means of enhancing process efficiency and reducing risks and costs; and

5. Enhanced Collaboration, Education, and Outreach including dissemination of best practices for maintaining, operating, and constructing facilities; and developing curricula for vocational and university programs to train new hydropower professionals.

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Risks of Inaction

While the hydropower industry is mature in terms of established facilities and technologies, many actions and efforts remain critical to further advancement of U.S. domestic hydropower as a key future energy source. Continued technology development is needed to increase efficiency, improve sustainability, and reduce costs. Improvement in the way markets value grid reliability services, air quality and reduced GHG emissions, and long asset lifetimes can increase revenues.

The lack of well-informed, coordinated actions such as those identified in the roadmap reduces the likelihood that potential benefits to the nation will be realized. Failure to address business risks associated with hydropower development costs and development timelines could mean that opportunities for new deployment will not be realized. As detailed in the roadmap, engagement with the public, regulators, and other stakeholders is needed to address environmental considerations effectively. Continued research and analysis on energy policy and hydropower costs, benefits, and impacts are important to provide accurate information to policymakers and for public discourse.

Finally, regularly revisiting the Hydropower Vision roadmap and updating priorities across stakeholder groups and disciplines are essential to ensuring coordinated pathways toward a robust and sustainable hydropower future.

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Conclusions

One of the greatest challenges for the United States in the 21st century is ensuring the availability of low-carbon, affordable, and secure energy. Hydropower has been and can continue to be a substantial contributor toward meeting that challenge. Although the hydropower industry exhibited significant growth over the past century, the factors that led to its historical growth rates are different than the contemporary opportunities and challenges the industry is facing.

The hydropower industry has increasingly responded to the needs for technical advancement and environmental protection. Continued efforts to lower costs, increase efficiencies, and incorporate the principles of environmental sustainability through technical innovation are likely to determine the scale at which hydropower contributes to the energy mix of the future.

Increasing hydropower can simultaneously deliver an array of benefits to the nation that address issues of national concern, including air quality, GHG emissions, public health, economic development, energy diversity, grid reliability, and energy and water security. Based on the benefit and cost quantifications of the Hydropower Vision, the overall value of these types of long-term social benefits can be significant.

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