In this episode, I speak with Malcolm Woolf and Connor Nelson about hydropower's underappreciated role in America's clean energy landscape. While providing most of our energy storage and thus supporting solar and wind deployments, hydropower faces significant challenges, with a decade-long relicensing processes and inadequate market compensation. We discuss why preserving and expanding this reliable, clean firm energy source is crucial as we transition to renewables.
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David Roberts
Greetings, everyone. This is Volts for December 13, 2024, "Time to stop taking hydropower for granted?" I'm your host, David Roberts. Hydropower is a strange beast in America's clean energy menagerie. It's the oldest form of renewable energy and until fairly recently, the most abundant. But it doesn't get much attention in energy discourse or policy. It is generally taken for granted.
In a recent paper, the industry's trade group has issued a wake-up call, arguing that hydropower is at risk and needs attention. Its unique attributes are extremely valuable in a grid heavy with variable renewable energy — it was "clean firm" before clean firm was cool — but, the paper argues, it is not being fairly compensated for the value of the grid services it provides.
As a result, a rising number of hydropower owners are thinking twice about going through the onerous and up-to-a-decade-long relicensing process. And because there is a large wave of such relicensing decisions coming up, the situation is urgent. To discuss all this today, I'm chatting with Malcolm Woolf, the CEO of the National Hydropower Association, and Connor Nelson, the author of the paper in question. We're going to get into the rising value of hydropower on a clean grid, the licensing challenges facing many generators, and the potential for new generation capacity from existing dams.
All right, then. Okay. So, with no further ado, Malcolm Woolf and Connor Nelson, welcome to Volts. Thank you so much for coming.
Connor Nelson
Thanks for having us.
Malcolm Woolf
Happy to be here.
David Roberts
I wanted to do a pod on hydro forever. My attitude towards hydro, I think, is very reflective of people in the clean energy community generally, which is just, I just don't think about it a ton. It's kind of, I just take it for granted, I guess, assume it's always there, it's sort of puttering along at its level, reliably producing. I don't expect tons more of it, I don't expect tons less of it. I just kind of have factored it in as part of the background. But of course, that's never true of anything and there are things happening.
So, I want to just use this episode to just talk about the state of hydro, its challenges, and its potential. So, Malcolm, let's start with you. What is the scale of hydro in the US right now? So, what part does it currently play in our energy mix?
Malcolm Woolf
For starters, I think your perspective is exactly similar to so many in the clean energy space. They don't think about hydro. It's kind of out of sight, out of mind. And I think that's part of the problem. I sometimes think of us as the Rodney Dangerfield of the renewable energy space — for those of you who remember the old comic — you know, we don't get the respect we deserve. We're actually 80 gigawatts of existing emission-free generation on traditional hydropower. There's another 22 gigawatts of pump storage which provides long-duration energy storage. So, I think we're 96% of the nation's energy storage today.
Batteries get all the attention. I love them. I'm an EV enthusiast. However, for long-duration energy storage, most of it in this country is pump storage. So, together between the 80 gigawatts of traditional generation and the 22 gigawatts of pump storage, we're over 100 gigawatts of largely dispatchable, emission-free energy on the grid today.
David Roberts
And that is for the nerds among us, 6.2% of total US electricity generation, which is about, I guess, a third of nuclear and just a little bit behind wind, just a little bit behind solar. It's 29% of renewables.
Malcolm Woolf
So, we're not the largest energy source. We don't have any aspirations of being the largest energy source. But if that 6.2% went away, suddenly we've got an unreliable grid, and people can't stream Netflix and charge their iPhones. So, while it's small, you need it for reliability, which is the basis of the report.
David Roberts
I want to get to the report and Connor here because what's funny to me is the kind of the, one of the big things going on in the larger energy world right now is sort of the increasing prominence or prevalence of discussions about what's called clean firm generation, which is just — renewables, wind and sun are variable, they come and go with the weather. And so right now on the grid, mostly what's being used to balance out renewables is natural gas, which you can turn on whenever you want and run as long as you want i.e., it's firm, but it's not clean.
So, what we need is clean sources of energy, emissions-free sources of energy that we can turn on whenever we want and run as long as we want. And so, there's all this discussion of nuclear playing that role, there's all this discussion of geothermal coming on strong and playing that role. But hydro is that already. It's a little weird that we talk so much about clean firm and talk so little about the giant bucket of clean firm we've already got. So, all of which is preface to come to you, Connor. So, the first half of the paper, more than half actually, is kind of a brief on the merits of hydro, specifically for a clean energy grid, the role it can play in a clean energy grid.
So, Connor, maybe just tell us, just quickly go over what is advantageous about hydro in the context of a clean energy grid.
Connor Nelson
I think it's really the uniqueness of the technology and being able to straddle both this position as a baseload resource and this position as a dispatchable, flexible resource. Right. So, hydropower is obviously a large source of operating reserves. You're able to quickly ramp power up and down following load, as the needs of the grid require. But at the same time, you're able to be a source of firm baseload power. So long as the water is flowing, you can generate power to help support a 24/7 reliable grid. So, it's really that duality of the resource, something that really no other renewable resource can do, and sort of occupy both of those spaces simultaneously.
David Roberts
You know, I think that aspect is fairly well understood. You can run it as baseload, you can just run it flat out continuously, or you can just increase or decrease the amount you're running through your turbines to ramp up and down, to follow load. Talk a little bit though about grid services, what are called ancillary services. Hydro has some features in that space too.
Connor Nelson
Yeah, absolutely. So, it's one of the maybe less obvious values of hydropower that really is the crux of why it's so important here to grid reliability. So, very similar to fossil fuel plants. But again, renewable hydro really has this spinning mass generation. So, there are these large turbines being pushed by water and that creates an inertia because you're actually moving a generator. And that inertia really helps with sort of keeping the grid at a healthy frequency. It helps with voltage control and all these other important ancillary services that keep the grid stable and keep the grid functioning through both sort of mundane everyday challenges to reliability — that you never really see because the grid operators handle that —
and also, more dramatic swings in, maybe say, extreme weather due to climate change or other scenarios can create really dire situations. Maybe a generation goes out, maybe transmission is damaged, and then hydropower can then provide sort of that resilience, getting the grid back up to speed rapidly.
David Roberts
Yeah, talk about black start. I don't know that non-energy nerds are conversant with that, mostly because it doesn't happen very often. But talk about hydro in that capacity.
Connor Nelson
Yeah, black start is really unique. It's a really interesting component of hydropower. So, although hydro is only 6.2% of US electricity, as you pointed out, it's 40% of our nation's black start resources, and the rest of it is pretty much just fossil fuels and natural gas. Basically, what black start is, is it's just the ability to generate power without any sort of auxiliary support from the grid.
David Roberts
Right. Power without power. How do you get your power going without some power to get it going? Right, that's the dilemma when the power goes out.
Connor Nelson
Exactly. Yeah, it's counterintuitive, power without power. But most resources require something from the grid to get going. But again, because of the large portion of operating reserves, water as a source of fuel is incredible. It doesn't require any preparation, like oil. It's very easy to access, so you can just open those gates and have yourself booted back up pretty quickly, and it creates basically this island of energy that then you can distribute back through the transmission system to boot up other resources that need auxiliary power.
Malcolm Woolf
Right.
David Roberts
That gives you the power to start the other power.
Connor Nelson
Exactly.
Malcolm Woolf
That's exactly what happened. For those of you old enough to remember the huge East Coast blackout, I think it was 20 years ago at this point, it was hydropower that restarted the grid because it has that black start capability. So, I actually prefer the name "essential grid services" rather than "ancillary services".
David Roberts
Yeah, ancillary does kind of make them sound like extras. You really do need them.
Malcolm Woolf
And right now, we've got a lot of those ancillary services, a lot of inertia on the grid, which is wonderful, which is why we don't really value it or pay for it. But as we know, coal plants are retiring, as nuclear plants age and retire, we're going to have less spinning stuff. Particularly with the exciting penetration of wind and solar and offshore wind, we're going to have more and more variable load and less and less baseload, which is why it's critically important to preserve and enhance the nation's hydropower resources.
David Roberts
Right. So, its role right now in these ancillary services, or essential services, if you will, is not marginal, but it's not the majority. But that's mainly because most of those services are done by fossil fuels. So, as fossil fuels drop out of the grid, these services that hydro can provide are going to be more and more important. And it is worth saying, because I know right now there are some energy nerds out there gritting their teeth, it is worth saying that there's a lot of work being done basically simulating those services or trying to accomplish those same services with inverter-based resources, basically sort of simulating spinning reserve and that kind of thing.
But you know, that kind of stuff is somewhat cutting edge now, and it's not totally clear how far it'll go. And it certainly is not going to hurt to have a third of your clean energy capable of that stuff.
Malcolm Woolf
Yeah, and there was an interesting study done by, I believe, it was NREL a few years ago where they found that dispatchable hydropower can support, I think, it was 144 gigawatts of variable renewables. So, the existing dispatchable hydropower fleet. Now, 144 gigawatts is a huge amount but it's not enough to supply all of the US energy needs. So, we're going to need those other forms of clean firm, other forms of essential reliability services. But hydropower already exists, it already provides a huge resource for that and we need to value it and make sure it's around because in just a few years we're really going to need it.
David Roberts
Just to emphasize the point you're making, a little bit of stuff that can do this can enable a lot of variable energy. So, like, you know, any small increment more of hydro unlocks large increments of variable energy on the grid.
Malcolm Woolf
Exactly.
David Roberts
So, it's playing these crucial services, it's baseload, it's dispatchable, load following, it's doing all these grid services, stabilizing the grid voltage, etc. It's got black start capabilities. So, it's a key player on the team, let's just say. But Connor, the title and the sort of premise of the paper is that hydro is in trouble, that there are problems basically about licensing and relicensing. So, I was a little confused about this because in the paper you say there's a bunch of... We're sort of approaching a wave of hydropower dams reaching kind of the end of their natural life, their initial, you know, licensing period.
So, they're going to have to be relicensed, and this is a problem. But when I looked at the state of the hydro report that you sent the DOE, sort of state of hydro, it said that of all the dams coming up for relicensing, almost all of them are applying for relicensing. So, I'm trying to fit those two together in my head. Like, are we in danger of losing any substantial chunk of our existing hydro fleet? What is the problem exactly, the crisis?
Malcolm Woolf
Let me jump in on that one. Both things are right. Most hydropower facilities are starting the licensing process, yet we're still at risk of losing those very same facilities. The reason is that these facilities are not primarily energy facilities; they're really water infrastructure.
David Roberts
Right.
Malcolm Woolf
There are 90,000 dams in this country. There are 2,500 hydropower facilities. So, 3% of the nation's dams are hydropower. So, just to restate that, 97% of the nation's dams are not used for power generation. So, they're used for water storage, for flood control, for irrigation.
David Roberts
Do they have to be relicensed periodically? Just a dam being a dam.
Malcolm Woolf
They don't get relicensed. A dam is just a dam and it sits there. Now, if you add a hydropower facility to it, you generate emission-free resources and you get an income stream that can do the O&M. So, they give these facilities 50-year licenses. But unlike other facilities, that's not the useful life of the technology. There's actually a facility in Kansas that just celebrated its 150th anniversary. It's been producing power for that community for 150 years.
David Roberts
With the same turbine or do they switch out turbines?
Malcolm Woolf
They'll switch out turbines, but they switch them out like every few generations.
David Roberts
Right, right, right, right.
Malcolm Woolf
It is the first facility I saw. They actually had three turbines and they were doing a replacement and one was, they brought it up and I'm looking at this shiny new turbine that they're putting in and they said, "No, Malcolm, that's the 100-year-old one that Thomas Edison was here when we installed. The new one hasn't been delivered yet." So these are forever assets. If you maintain them, they can work forever. So from a regulatory perspective, a 50-year license is a reasonable time to reevaluate it. But that's not really the life of the unit.
David Roberts
Right.
Malcolm Woolf
So that's what the facilities are going through. They're starting the relicensing process. It typically takes about eight years, but in many cases, it can take a decade or longer. And when they start the process, they have no idea how long it's going to take, how much it's going to cost, or at the end of it, whether they're going to be required to spend hundreds of millions of dollars to do big upgrades. So just because you start the process doesn't mean that at the end of it you say, "You know what, it's not worth it, I'm just going to shut it down."
And of course, when you shut it down, it doesn't mean you remove the dam because you still need the dam for water storage, flood control, irrigation. You just turn off the powerhouse.
David Roberts
You just stop running the turbine?
Malcolm Woolf
You just stop running the turbine. Then, someone else has to pay for all the costs of maintaining a safe dam for water storage, for example. So, the farmers have to pay more, or the community has to float bonds in order to maintain the facility. That's the disconnect everyone assumes, I think, as you do, that hydropower is not going to go away, but it's also not going to grow. And I think both assumptions are wrong. Hydropower hasn't gone away in the last 50 years, but now we've got this wave of relicensing and now we've got wonderfully cost-competitive wind and solar.
And it's not at all clear that the facilities are going to be willing to make the investments needed, given our current structure, to maintain that existing fleet.
David Roberts
So, it's not the case that we've got a wave of hydro dams not relicensing, it's just that we're worried that there's a wave coming and we're worried about the result of that.
Malcolm Woolf
I think that's right. We've got a trickle already. I think we've seen about 65 facilities have chosen to voluntarily surrender their license in the last dozen years. In the last couple of years, it's gone up; there's another several dozen. So, we've got an increasing trend of voluntary license surrenders. These are largely the smaller facilities. What I'm worried about are the much larger facilities. Just between now and 2035, I think it's 16 or 17 gigawatts of facilities over 450 projects. So, it's that we've got a trickle, it's increasing, it's growing, and we're trying to get ahead of this problem because we saw what happened in the nuclear space where it took a few large facilities —
David Roberts
Yeah. Now, we're scrambling to restart them, which.
Malcolm Woolf
Now, we're looking at Three Mile Island again. We're trying to avoid that problem.
David Roberts
I think it's just fair to say, as an almost categorical matter, that in today's environment, needing the clean energy we need, it's just crazy to turn off any clean, dispatchable resource of any kind. It's just crazy to do that. But it seems like the big ones, the big dams, are also going to be more likely to have the wherewithal to fight their way through the relicensing process, though, don't you think that's true?
Malcolm Woolf
I don't make any assumptions. I think the big dams may have more resources because they're generating more power. They've got more of a cash flow coming in, but they're also a bigger target. They're a bigger resource out there. One of the phenomena we've experienced is that because these facilities are only licensed once every 50 years, when they go through the licensing, the states and localities often use it as an opportunity to achieve all sorts of other valuable public policy means that have nothing to do with the facility. So, these facilities, unlike nuclear, get one license from the Nuclear Regulatory Commission.
Hydropower facilities get licenses from dozens of entities. The Federal Energy Regulatory Commission at the federal level, but then also a bunch of other federal entities, Fish and Wildlife Service, Marine Mammal. Then you've got the state entities, then you've got the local entities, and facilities have been ordered to build Boy Scout amphitheaters or take care of Forest Service land that has nothing to do with the facility and are dozens of miles away. It becomes a blank check for other public policy means.
An "everything bagel" is, I believe, the term of art we use for these days.
Exactly. And frankly, the hydropower industry, as part of being good citizens, would say, "Okay, if that's the price of doing business, okay." We can't afford to do that now. The energy industry is too competitive. You've got wonderfully competitive wind and solar. The economics just don't support that any longer. And so that's what may be driving these facilities to surrender. They can't keep paying for costs that are unrelated to their business and try to provide affordable 24/7 reliable power.
David Roberts
Yeah. So, struggling kind of in the same way and for the same reasons, nuclear is struggling, plays a very similar role on the grid and similarly struggles in the wholesale market for the same reason I think nuclear is. And now, here we are frantically looking for extra market ways of preserving it, just like we are with nuclear.
Malcolm Woolf
I think that's exactly right, that it's very similar to the risk that we've faced with nuclear in losing gigawatts of carbon-free nuclear generation. I will note though, that nuclear can't complement wind and solar in the way of making them clean firm the way that hydropower can. So, hydropower is really good for the energy transition.
David Roberts
Well, the nuclear people will tell you that they can ramp, even though in practice, you don't see it very often.
Malcolm Woolf
All right, well, we'll leave that for a different podcast. What I will highlight though, is that in the Inflation Reduction Act, I think there was $30 billion set aside for preserving existing carbon-free nuclear, and yet preserving existing carbon-free hydropower did not get any money.
David Roberts
Interesting.
Malcolm Woolf
Again, we're kind of out of sight, out of mind in the policy conversations.
David Roberts
Well, before we move on from this licensing thing, I mean, this really fits well into a recurrent theme these days in clean energy, which is our bureaucracy and our regulations and our desire to make everything into an everything bagel is impeding the rapid spread of clean energy. So, what do we do about this licensing? I mean, in some sense, because these things are so big and because they are far more than power generation, right? They do affect the biology of rivers. They literally affect the landscape. I mean, they affect recreational opportunities. I mean, it's not mysterious why their licensing is a little bit more complicated since they are doing a lot more things.
But what are some practical ways that this licensing and relicensing issue could be solved? And are there vehicles to do so at the federal level these days?
Malcolm Woolf
The good news here is that a lot of people have given this a lot of thought, and I'm proud to have worked through Stanford University, created a process called the Uncommon Dialogue, where they brought the hydropower industry together with some leading environmental groups, American Rivers and Union of Concerned Scientists and others, along with tribal groups and dam safety groups. And we actually developed a joint hydropower reform licensing process.
David Roberts
Oh, interesting.
Malcolm Woolf
A bill that was introduced on a bipartisan basis in Congress. It did not move, but it's still out there. And —
David Roberts
Lame duck?
Malcolm Woolf
Lame duck. We're having conversations. Essentially, it was a compromise effort. There's something for everyone in the bill to hate because it doesn't give industry nearly as much streamlining as we wanted, but it's better than the existing process. And I think the other parties would say the same. But what it boiled down to is good government, from my perspective. What we really need is process discipline. You've got water as a shared resource. It flows through our facilities downstream to be used by others.
So, it makes sense that there's a lot of entities involved in licensing. What doesn't make sense is that if one state doesn't issue the water permit, a facility could be held up in getting its license for a decade. There's no capacity for any of the other entities to resolve disputes.
David Roberts
Sounds like transmission.
Malcolm Woolf
It sure does.
David Roberts
Lots of veto points.
Malcolm Woolf
Right. So it's the same, you know, we've got to "Build, baby, build." We've got to free ourselves up. And in most cases in the hydropower space, certainly for the 100 gigawatts, we're talking about existing facilities. So we're not talking about greenfield. We're not talking about building large dams in the lower 48. We're talking about preserving the existing infrastructure. There's also the opportunity for new. But the new stuff is in two categories. Either adding generation to existing dams that are already serving another purpose, so adding generation to non-power dams, or adding what's largely closed-loop pump storage.
David Roberts
I want to get back to the new stuff in a minute. I have lots of questions about the new stuff, but while we're still talking about the old stuff, there are several recommendations in the paper about how to help hydro. One is reforming this licensing relicensing process. And I was going to say — like just as a last word on that — it does seem like, I mean, licensing a new dam, I can see all the complications make sense to me. But like if a facility has been sitting there safely producing power for 50 years, it does kind of seem like the presumption should be on its side.
It doesn't seem like it should have to start from the ground up, justifying its existence all over again.
Malcolm Woolf
And it takes longer to relicense an existing hydropower facility than to relicense a nuclear plant.
David Roberts
Oh, that's crazy. Like eight years. Like, what do you, what do you...?
Malcolm Woolf
It's not even close.
David Roberts
You know, we hear these numbers and our eyes just glaze over. But like, literally, what could you do for eight years? I don't even understand. I feel like I could do it. If you gave me eight years, I could relicense the dam. How much work could there possibly be?
Malcolm Woolf
I mean, you want to do it right. You want to have reasoned decision making. So, to spend a couple seasons looking at fish breeding populations and its potential effect makes perfect sense. But what the agencies do is they do it in series. One agency does its study, its NEPA analysis of one species, and the other agency won't begin until that one's done.
David Roberts
That sounds like interconnection queues.
Malcolm Woolf
Get together at the beginning, figure out what you want to study, come together with an organized plan that's binding on all the different levels of government so that you don't have the delays.
David Roberts
Right, right. But moving on from licensing. So, one of the other critiques in the paper is that RTOs and ISOs, the administrators of regional wholesale energy markets, that basically, hydro is not compensated in those markets in a way that reflects its full value. What is the critique there?
Connor Nelson
The biggest concern is that a lot of the ancillary services that we discussed earlier, which are really vital to grid reliability and stability, are often compensated in what's called uplift payments, which are out-of-market payments. So, they get processed and compensated outside of the traditional competitive market structure, which allows for supply and demand to incentivize the entrance of new generations. So, a lot of what makes hydropower unique is not necessarily reflected in market compensation structures, which then means that there's a vacuum for incentivizing this kind of generation to continue. Essentially, the market signals are not being sent.
I mean, I think in ISO New England, for instance, almost 50% of their ancillary service compensation is uplift for hydropower. So, it's pretty pervasive.
David Roberts
Explain why it's a problem. Like, it's money for them, why is it?
Connor Nelson
Yeah, I think it's just that the value of those services is not reflected in the market. So, if you need more voltage control in a region, for instance, like the Western Interconnect, where there's really, really long transmission lines and you need appropriate amounts of reactive power to send energy across those transmission lines, that reactive power compensation is either not compensated at all or in some markets, it's compensated through uplift. And so, in moments where it's really necessary in either day ahead or on day of spot markets, that price, it's not reflected in the price.
David Roberts
I see. So, the value of the services changes depending on circumstances, but the payment doesn't.
Connor Nelson
Correct.
David Roberts
The payment doesn't reflect the value.
Malcolm Woolf
Just to share another example of that, I was touring one member's hydropower facility and I saw their black start operation and I asked them about it. They were doing one of their quarterly tests to show that it worked. They said that the quarterly tests cost them even more than they get from PJM for providing the service. So, they're providing the service because they know the grid needs it, but they're actually losing money by doing it.
David Roberts
Charity, basically.
Connor Nelson
And one more thing, I'll add that a lot of these services actually put wear and tear on hydropower facilities and equipment. The fast ramping, in particular, being able to ramp up your generation in as little as 10 minutes, does come at a cost. There's opportunity costs associated with it and there's also long-term wear and tear on the system. And those costs are not reflected in the market mechanisms either, in most RTOs and ISOs.
David Roberts
You know, anything having to do with RTO/ISO procedures is a rabbit hole. It's a pod of its own. But at a high level, how big of a deal would it be for RTOs to integrate these services into markets, to make them market reflective, to make them reflective of market circumstances? Like presumably some — it sounds like some RTOs do it, so it sounds like it's doable. How big of a reform is that?
Connor Nelson
In the sense that what the value would be, I mean, it's a huge deal, right? I mean, as we have variable renewables more and more coming online, these ancillary services are sort of the important piece of the puzzle now. Right. And so, we need to change our compensation structures to now reflect the changing grid and the increasing value of these ancillary services. You see that happening with ELCC (Effective Load Carrying Capability) in capacity markets and trying to measure whether or not a resource is actually going to perform when it says it's going to and how that affects the cost.
But, we just don't see that happening as rapidly as it should be, given the rapid changes to the grid and the increase in load, frankly, that we're seeing with data centers. It's becoming more and more important to compensate these reliability structures.
David Roberts
So, all these services are becoming more and more physically important to the operation of the grid as variable renewables come online, but they're not being compensated more and more to reflect that, I think is the basic critique here. The other critique in the paper has to do with compensation for hydro in the big bills Democrats passed in this past session, mainly IRA. But I remember reading, and I know that IRA did have billions and billions of dollars for hydro and it actually made hydro, it put hydro in a category with the other renewables and made it eligible for those same tax credits. So my impression was that that was, all things being equal, good for hydro.
But, the critique here is that the tax credits are not fairly compensating hydro. So, what's the critique there?
Malcolm Woolf
I think a lot of the senators and congressmen had the same misunderstanding that you had. It's wonderful that the Inflation Reduction Act now has an incentive for all forms of carbon-free generation. And hydropower is finally treated equally with wind and solar as a carbon-free source of generation. If you are building new hydropower, all of those incentives are only for new generation. And that's the distinction. There are new hydropower facilities being added to existing dams. There are a number of pump storage facilities being built. But the bulk of the fleet is the existing fleet.
David Roberts
Right. Does a new turbine added to an existing hydropower facility count as new or not?
Malcolm Woolf
Yeah, if you were to increase the capacity from 100 megawatts to 150, 50 megawatts would be new.
David Roberts
Got it.
Malcolm Woolf
But if you were to take out a 100-year-old turbine and put in a new turbine at the same capacity, there'd be no net increase and you wouldn't get any incentive.
David Roberts
Got it. So all the IRA incentives are for new hydro, but new hydro is a relatively small sliver. So, what's the idea here? Make incentives, tax incentives available for upgrades, operational upgrades in existing facilities?
Malcolm Woolf
Yes, there are kind of three components. One, there should be some incentive if you take an existing facility and you upgrade it. If you repower it. There are similar incentives for repowering wind or solar. You should be allowed to repower an existing hydropower facility.
David Roberts
What does that mean, repower an existing facility?
Malcolm Woolf
Take that 50-year-old turbine and replace it with a modern turbine, but with the same capacity, overall capacity. So, you're not increasing generation from the unit, but now you've got a more modern turbine in there. Some turbines are helpful in addressing some environmental pollution and other things. So, it creates an incentive to preserve the existing fleet by investing in the powerhouse. The other two areas where there's big infrastructure investments needed are either in dam safety or in environmental improvement. And it doesn't increase electricity generation, but those are huge expenses that could drive a facility to voluntarily surrender their license.
So, there is a bipartisan bill pending in Congress with 13 senators on board, including six Republicans, that would create an incentive for existing facilities who invest either in dam safety or environmental improvements. They could get a tax credit for those investments. That would go a long way to changing the economics and viability of these facilities for generations to come.
David Roberts
Yeah, it's kind of tricky because it's like, then you've got electricity — what is purportedly electricity policy — paying for basically non-electricity stuff. But it is, you know, two steps removed from electricity. It is closely related to electricity. I can see why that's vexing.
Malcolm Woolf
Welcome to my world. This wasn't done in the IRA because they said, "It's not energy, it doesn't increase megawatts." But now, they're not as interested in doing it because it deals with energy and we already did that a few years ago. So, we're neither fish nor fowl.
David Roberts
That's hilarious. But there is a bill. Lame duck. So, we want basically more tax credit compensation for upgrading existing facilities, even if you don't change the output. And you want more tax credits for the non-energy parts of dam maintenance and renewal, basically is the idea.
Malcolm Woolf
Yeah, and let me put this in a slightly larger context. We know that climate change is water change. So, particularly out west, we've got more rain in the fall, less snowmelt, and less snow in the winter, which is creating more floods in the spring and then summer droughts. So, how we adapt to climate is a lot of water management. And one way to pay for all of that water management, maybe it's flood control, maybe it's water storage, is using hydropower as a resource. You know, we've got all of the existing infrastructure which has not been addressed in the last four years, despite lots of efforts in lots of different areas of infrastructure.
The dam infrastructure was largely overlooked. So, we need to invest in that, and we need to deal with the realities of climate adaptation. What does that mean and how do we pay for it?
David Roberts
You know, one of the things you're seeing these days with extreme weather that comes from climate change, you frequently get these big droughts which then subsequently have a huge effect on hydro output. Like China, it had a big spike in emissions and in coal use in the past couple of years, mainly because of the big drought, which took out a bunch of its hydro. Can you make generalizations about sort of overall what climate change is going to do to hydro output? Or is it just all regionally sensitive, like, are we going to get on net less hydropower in the future or is it just going to be more in this season and less in this season? Or like, how do we. What's the right way to think about the effect of climate on hydro output?
Malcolm Woolf
A couple of thoughts on this one. First, I think we've all seen pictures of the Colorado River and it's tragic. I mean, it's horrible. But we live in a large country and a drought in one area is not a drought in another. And isolated examples are just that, they're isolated. The DOE National Lab, I think it was PNNL, did a study a few years ago of hydropower in the west during the mega-drought. And they found that even during the mega-drought, the region's hydropower sustained 80% of its average generating capacity. Yeah, the Colorado River is tragic, but the rivers will be low in California one year and then the next year there's atmospheric rivers and they restock or you import more electricity from the hydropower being produced in the Pacific Northwest.
There was a study recently done by the National Labs that tried to address the question you just asked: Given climate change, will there be more hydropower or less? And they found that in the next 50 years, you should expect more. In the United States, globally it may be a very different question. But more rain, more water, it's not in the Colorado, but it's in most of the rest of the country. And so, hydropower production would go up.
David Roberts
Is there such a thing as a particular hydro facility getting too much rain? Like more rain than it can handle, more rain than it can make power out of?
Malcolm Woolf
Yeah, no, that happens all the time, actually. They often release water from the hydropower facility to maintain the dam, to maintain the reservoir, not to have the water level get up to people's homes. Our guys always talk about it as we're just spilling fuel, we're wasting water that we'd otherwise use.
David Roberts
It's like curtailing solar, basically.
Malcolm Woolf
That's right. And when we talk about pump storage, we can get into that dynamic a little bit.
David Roberts
We've been mostly talking about the existing hydro installation, how to maintain it, how to make relicensing it easier, how to, you know, because it is struggling in wholesale markets and not necessarily being compensated for its full value, how to compensate it more for the values and services it provides. But if I have one, sort of like unexamined presumption about hydro in the US, is that we've probably tapped out most of it and there's not a ton left to do. But when I look into it, that's not necessarily true. So let's address two separate questions. One is, how many new dams are there to be built?
It seems low, but I guess if you get into smaller, you know, what they call run-of-river hydro, stuff like that, I guess there's more opportunities. But just, I'd like a global sense or an overall sense in the US of like just how much untapped hydro there is? And then the second question is, how much more could we get out of existing hydro facilities? Those are two separate questions. Let's do the first one first. Like, are there lots of undammed rivers around?
Malcolm Woolf
Yeah, the era of building dams in the US, particularly the lower 48, ended in the 50s and 60s. We haven't been doing that for 50 years.
David Roberts
Didn't find any more big rivers since then.
Malcolm Woolf
And it's also the, you know, the environmental ethos has changed, so we're not building new dams. What there is, is huge potential with the 97% of existing dams that don't have power generation. We've got lots of dams in this country. We can just add power to those existing facilities. And that's a win-win. The Department of Energy did do a study a few years ago and it found that using existing infrastructure, you could add about 13 gigawatts of generation.
David Roberts
Which, it's not a ton in the grand scheme of things.
Malcolm Woolf
That's right.
David Roberts
But every one of those gigawatts, just to recall an earlier part of our conversation, unlocks many more gigawatts of variable renewables. So, these are particularly valuable gigawatts.
Malcolm Woolf
Right. And it also creates an income stream to actually maintain those facilities, which we need for climate adaptation, all that water storage and flood control, et cetera.
David Roberts
So, I'm picturing 90,000 dams, 3% of them are generating electricity. One obvious question is just like, why so few already? Clearly, these opportunities are not particularly economic under current circumstances.
Malcolm Woolf
That would be a logical conclusion, and I think you'd be wrong. Oh, I think again, there's been a lot of study of these issues and the federal government released a report a dozen years ago identifying the top 100 facilities that existing dams that could be powered. And I think 88 of them were owned by the Corps of Engineers. So, it's not a question necessarily of the economics, because my members would love to develop and add generation to those non-power dams. The Corps of Engineers has a lot of missions. They've got a lot of things on their plate. They are the largest renewable generator in the nation, but they don't even realize it given all of the hydropower that they operate.
They are the largest single source of renewable generation, but it's like a tertiary responsibility for them. And they just haven't moved to develop their own resources, nor have they let the private industry come in and pay for the development of those resources.
David Roberts
Why not? Is that just a culture thing or environmental thing?
Malcolm Woolf
They are just pulled in so many different directions that this has just not been a priority. And I used to joke that in the all-of-the-government climate approach that President Biden imposed, that memo never got to the Corps of Engineers.
Connor Nelson
Yeah, and I'll add that the Corps of Engineers has an obligation to balance all of the various roles that those dams play as it relates to water supply, recreation, and other things. So again, the sort of multipurpose nature of hydropower can sometimes be difficult to navigate. But on the economics of non-powered dam development, I'll also point again back to the licensing. The uncertainty around the licensing process is a real wet blanket on private investment. NREL did research a couple of years ago, maybe actually this year, on the private investment landscape and when they spoke to venture capitalists, private equity investment banks, folks that are going to be bankrolling, that are bankrolling a lot of these renewable projects, they found that 91% of them were uninterested in early-stage investments in projects, mostly due to the uncertainty associated with licensing.
So, getting private money in the licensing process is a real obstacle to that.
David Roberts
Interesting. Speaking of the multifunction aspect of dams, does adding power to an existing dam substantially affect the ecology around the carrying capacity? All the other features of dams? Is adding power substantially messing with those other features or changing those other features? Or is it pretty much surgical? I have no sense of the physical job here.
Malcolm Woolf
"Surgical" is a great word for it. I'm thinking of one of the more recent non-powered dams that were built, and they simply diverted water just above the dam, ran it through a turbine, and then reintroduced that same water back to the river a few blocks below the dam. So, it didn't have any significant environmental impact, but it still took a decade to license.
David Roberts
A decade? Again, I just can't...
Malcolm Woolf
A dam that already existed.
David Roberts
Geez, like the solar people complain.
Malcolm Woolf
Yeah, and that's the dynamic we're facing. It's a lot easier to build wind and solar now, and you could get them licensed in a year or two and built in a year or two, and you're done. The problem is that facility may need to be decommissioned in 10 years or 15 years. And the hydropower facility, once it's built, can last 100 years. It's a forever asset once you've got it going. But heck, we may still be waiting for a permit by the time they're decommissioning that wind turbine.
David Roberts
I mean, this sounds complicated because there are all these different functions. So, there are lots of different stakeholders involved and interested in these things. Are there simple reforms that could make it easier, that would facilitate more redevelopment of existing dams, more additions?
Malcolm Woolf
There needs to be a streamlined process with much more certainty as to the timing. And I think if we focus the industry on the facilities which do not have a big environmental footprint, either adding generation to a non-powered dam or, as I mentioned earlier, closed-loop off-river pump storage, those are relatively non-controversial permitting processes. This is why in that bipartisan license reform bill that a number of environmental groups were comfortable with, it included a two or three-year licensing process for these kinds of new generation because they do have little or no environmental impact. So, you don't need to spend years doing those kinds of studies.
If it's not on a river, for example.
David Roberts
And who's in charge of the Army Corps of Engineers? Who would be the person to come in and redirect some of their attention in this way? I mean, it seems like Biden's whole-of-government thing would have been the thing to do that, but apparently, it didn't.
Malcolm Woolf
Yeah, I'm hoping that with the administration change, President Trump has been talking about energy dominance, and I think this is a great opportunity for them to have the federal government lead by example and elevate the importance of power generation as part of our own fleet.
David Roberts
It does seem to fit right into the permitting reform discussion that's going on right now. It's odd in some sense that this didn't make it into that permitting bill, the Manchin-Barrasso permitting bill.
Malcolm Woolf
I would agree. And we're talking to them as part of the lame duck, trying to see what we can get added and if not, we'll be back next Congress.
Connor Nelson
I'll add that there are provisions in the Water Resources Development Act of 2024 that try to streamline some of these processes within the Corps of Engineers' own structure. And there is language in there to hopefully improve that, including things like the establishment of a single office and an outreach coordinator specifically for projects that are trying to develop on Corps property.
Malcolm Woolf
And Dave, let me just highlight the area where there is a lot of market activity going on, which is in the pump storage.
David Roberts
Yeah, I was going to ask about that next. So, there's the question of getting more power generation capacity out of existing dams, and it sounds like there's quite a bit of potential there. But then, of course, there's the big looming need for power storage, which I think Volts' listeners are very familiar with. And I think they're mostly familiar with the fact that 96% of our existing energy storage is in pumped hydro. All other forms are playing catch up from a very distant second place. Tell me the capacity, like where could we build? What do we need to build new pumped hydro?
Because, of course, like the big ding on pumped hydro, the big criticism is just that it's very geography specific. You need a big hill basically and a bunch of water to make it work. So, how much capacity for new pumped hydro is there? Who's exploiting it and what's kind of standing in the way?
Malcolm Woolf
I think that's the area where there's a lot of exciting developments. In that Department of Energy study, they found there was the potential for another 36 gigawatts of new pump storage.
David Roberts
Relative to, what's the base now?
Malcolm Woolf
Base now is 22 gigawatts.
David Roberts
More than exists?
Malcolm Woolf
That's right. You could increase it by, what is that? 150%. But we're finding the market has found even more opportunities. So with the growth of variable load, I think increasingly folks are recognizing, "Hey, we need clean and firm." And so there are over 90 projects proposed at the FERC queue for new pump storage projects. Over 50 gigawatts in the queue.
David Roberts
Oh, wow.
Malcolm Woolf
I don't expect most of those to get built. Some of them may be in places where they shouldn't be built, but there's huge potential for, you know, eight-hour plus duration energy storage. And the one increasing innovation is that it doesn't have to be on a river. Folks have realized, you know what, once we fill the pump storage facility the first time, we're really just moving the water from either one reservoir to another or one tank to another. And then when there's excess solar, we can pump it back up and release it at the next sunset when the solar cycles off and we need the generation.
David Roberts
So this is what closed loop means, basically using a finite amount of water over and over again?
Malcolm Woolf
So, that really expands the opportunity.
David Roberts
Because then you just need a hill.
Malcolm Woolf
Exactly.
David Roberts
You can bring your own water.
Malcolm Woolf
Right.
Connor Nelson
I would also add that in addition to the closed-loop pump storage, in some cases, you don't even need a hill. There's a lot of work being done right now in developing pump storage in current and former mine lands. So, former coal mines underground, which totally changes the dynamic of the kind of land you can develop.
David Roberts
Pumping it up and down a mineshaft, basically.
Connor Nelson
Exactly.
Malcolm Woolf
There's an interesting project, actually, that the Department of Energy has helped fund some of the initial studies. I think it's Lewis Ridge in Kentucky where they're trying to do just that, use a former coal mine and convert it into a pump storage facility. Typically, you have transmission resources, and you've got the other infrastructure there. So, it really makes a nice resource.
David Roberts
Yeah, that's a good thing about all these abandoned mines and abandoned power plants too. In some sense, they have all that infrastructure laying around. Is there an extant pumped hydro facility that's using an old mine, or is all that sort of in the works?
Malcolm Woolf
I think Lewis Ridge is probably the furthest along. That's the Kentucky facility. The Department of Energy, as part of the Bipartisan Infrastructure Law, did give them, I think, over $100 million to start moving on that. So, things are moving. But these are billion-dollar facilities again. They last for a century or more.
David Roberts
So, all of them are big. There's not such a thing as like small distributed pumped hydro. Is this essentially a big thing?
Malcolm Woolf
Folks are looking at distributed pump storage. Folks are even doing it without water. Kind of take apartment buildings and just use weights and move things. There's something to be said for economies of scale, particularly once you add the transmission and the other costs involved. So, folks are actively looking at much smaller scale pump storage. In fact, the former Prime Minister of Australia, Malcolm Turnbull, is a big proponent of distributed pump storage. But the economics haven't yet penciled out.
Connor Nelson
The size and the scale really do matter for pump storage. When you get up to something like a 1000 megawatt pump storage plant, the actual cost in terms of dollars per kilowatt hours really is outperforming most chemical battery storage. But you need that scale to make it pencil out in most cases. And obviously, it's a long lead time investment.
David Roberts
Yeah. So, there's a lot of pumped hydro proposals out there. You say 90. When was the last time one actually got built and opened? Is there a long gap between the last new one and this new wave?
Malcolm Woolf
There is, indeed. The last one that opened in the United States was 20 years ago.
David Roberts
Oh my goodness.
Malcolm Woolf
So, we haven't built a new one in 20 years and the market's been pretty quiet. But in the last, I would say, 18 months, two years, suddenly folks are seeing the need for clean and firm and how do you provide data centers and everyone else with the 24/7 reliability they need? So, all of these proposals are coming up, but again, with a 10-year licensing process, we're not going to be able to achieve our goal.
David Roberts
So, all 90 of these pumped hydro storages are facing up to 10 years of licensing. That can't be allowed to happen, it can't be right.
Malcolm Woolf
100%. To be clear, three of the facilities have actually completed the licensing process. So, they're fully licensed. They still need to get through financing and interconnection and offtake agreements, and construction has not started.
David Roberts
Good grief.
Malcolm Woolf
So, it's a crazy process.
David Roberts
Yeah. So, none of these, I mean, practically speaking, none of these are going to be ready in time to meet the short-term boom in data center capacity. I mean, is that fair to say? There's not —
Malcolm Woolf
I think that is fair to say, but I think that's also true of the slate of new nuclear.
David Roberts
Yeah, it's true of almost everything people are talking about. The timescales are completely — We don't, because we're not capable of doing anything quickly. That's kind of what we're discovering.
Malcolm Woolf
And that is something that this kind of new administration has talked about.
David Roberts
Yeah, well, they talk about a lot of things.
Malcolm Woolf
That is true, but we'll see whether this is one of the areas they actually want to move on.
David Roberts
So are there licensing issues unique to pumped hydro storage that don't face just normal hydro, or is it mainly like the same stakeholders, the same long process, et cetera? Are there particular reforms for that process?
Malcolm Woolf
The problem is, it's treated just like facilities that are on a river, when actually it's a whole lot easier when you're just moving the water between two existing spots. So, that's why our proposal is, "Let's craft a different process. Let's not treat it like everything else."
David Roberts
Right. It does seem like when you're messing with a river, you're messing all of a sudden with ecosystems and biology and hydrology and everything else. But if you just find a hill and you bring your own water to pump up and down, up and down, it's just intuitively much less involved, much less interconnected with everything else.
Malcolm Woolf
Exactly. And the amount of water is substantial. So, how do you get that first fill? There are issues to be talked about, but we're hoping for a two or three-year process as opposed to what we've got now.
David Roberts
And so, if we could just kind of summarize where we've been, tell me if this is fair. So, hydro has been pumping along for 50 plus years, 100 years now, in some cases more or less at the same level for the last several decades. But two things are happening: one, it's becoming more valuable because of the characteristics of the clean energy grid. It's clean, firm, it's baseload, it's dispatchable, it can do storage. It really is a bit of a Swiss army knife for the clean energy grid. But the amount it's being compensated is not reflecting that increasing value.
And in fact, the opposite is happening. What's happening is a bunch of them are coming up for renewal, relicensing, and are facing this onerous 8 to 12-year process which some of them will decide not to go through at all. So, we're actually facing what could be a decline in hydro capacity at the very time we need, at the very least, to preserve what exists and to make more. Is that fair?
Malcolm Woolf
I think so.
Connor Nelson
Sounds like it.
David Roberts
And just to finish here with the politics, you sort of, Malcolm, kind of alluded to this a couple of times. But my sense, it's a little bit like when I talk to the geothermal people, they're like, "Our problem is not that we have enemies, it's just that we don't have enough sort of vigorous friends." And I get a little bit of the same vibe from hydro. It doesn't seem like — I know there are complaints about hydro's ecological impacts and methane emissions and stuff like that, but by and large, hydro just seems like it's taken for granted by everybody.
Everybody seems fine with it, nobody seems that excited about it. And basically, what it needs is more vigorous friends. It's got sort of bipartisan support, but not the intensity it needs. Do you see that changing at all in this new regime? I mean, I guess the positive story you could tell about this new political regime is that there'll still be a lot of momentum towards doing energy stuff. They're not going to want to do the same energy stuff as the dirty Democrats, which is mostly coded wind and solar. So, it does seem like that energy, plus the need to find new outlets for it, might be promising for hydro.
Am I straining the bounds of reality here, or do you see some glimmers of hope?
Malcolm Woolf
I think that's right. I think, by and large, historically, Democrats have liked hydropower. Because we're emission-free, we're dispatchable, so we could kind of firm up the variable wind and solar. Republicans have traditionally liked us because we're domestic, baseload, secure. We're hoping to translate some of that broad support into folks who will actually champion the resource. And we've been the middle stepchild or whatever the analogy you want to use. We've been overlooked or taken for granted for a very long time. And now, because of that time clock with the licenses, we're actually at risk of having gigawatt-scale retirements, which would really just set back not only our climate efforts but grid reliability.
David Roberts
Yeah, and you've got these existing bills floating about that do a lot of the things you want. I guess the hope here is just that maybe there's another kind of energy omnibus kind of thing and those just get tossed in. I mean, is that kind of the route we can anticipate?
Malcolm Woolf
The pathway at this point is really unclear to me. But I think maybe to pick up your earlier theme, we did not get a lot of attention over the last several years, and maybe that could be our saving grace going forward because we were not included, or at least the existing fleet was not included in the IRA. Hopefully, the Trump administration will not overlook us.
David Roberts
Yeah, you haven't been partisan coded yet. You're one of like a tiny handful of institutions remaining in the US that's escaped that. All right, guys. Well, this has been super, super fascinating. This is exactly what I've been wanting to do for ages. Just sort of check in with hydro, see where it is. Because it's like, it's this incredible resource. And I do feel like because it's just been there doing its thing for so long, we don't pay enough attention to how cool it is and how helpful it is specifically in what we're trying to do in clean energy.
So, thank you for coming on and walking us through all this.
Connor Nelson
Thanks, David.
Malcolm Woolf
Well, David, I've been a longtime fan of the Volts, so this has been real fun for me.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
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