Hydroelectric

Hydropower investment opportunities in U.S. remain untapped, per NREL report

The new report provides a comprehensive analysis of the risks and opportunities for investing in small- to medium-sized hydropower and pumped storage projects.
Hydropower investment opportunities in U.S. remain untapped, per NREL report
(photo courtesy NREL)

Hydropower’s reputation as a reliable source of energy and storage may ironically be one of the reasons people often assume it is “tapped out” of investment opportunities. But hydropower, including pumped storage, still has enormous potential for growth, particularly for small- and medium-sized projects (or those with up to 30 MW of capacity).

This is the key message of a new report, Hydropower Investment Landscape, developed by the National Renewable Energy Laboratory with support from Deloitte.

Globally, hydropower is the third largest source of electricity after coal and natural gas. As the world continues to transition away from fossil fuels, low-carbon sources of firm power will be increasingly critical to maintain the electric grid’s reliability. Hydropower already serves as a force multiplier for other renewable energy sources, and the value of this reliability and flexibility will continue to increase.

With the Bipartisan Infrastructure Law and Inflation Reduction Act offering financial support for clean energy projects, new hydropower and pumped storage projects could offer increasingly attractive investment opportunities.

The new report provides a comprehensive analysis of the risks and opportunities for investing in small- to medium-sized hydropower and pumped storage projects. Key findings from the study, which was funded by the U.S. Department of Energy’s (DOE’s) Water Power Technologies Office (WPTO), include:

Medium-sized projects offer significant opportunities for low-impact hydropower development. The medium-sized project pipeline includes projects that would constitute a total capacity of more than 1 GW and involves capacity additions, non-powered dam retrofits, hydropower generation in conduits, pumped storage, new stream-reach development and hybrid projects that combine multiple renewable technologies.

New technology innovations and the variety of sites at which hydropower could be developed present potential opportunities for future investment. Top areas of interest include modular conduit hydropower, non-powered dam resources, hybrid plant confirmation and closed-loop pumped storage innovation.

In the past decade, developers have begun designing and deploying small modular conduit systems, which can be manufactured offsite and assembled onsite. This approach can decrease construction costs, reduce project timelines and increase flexibility to expand the size of a hydropower system in the future. One example highlighted in the report of a company pursuing modular conduit hydropower is Emrgy, which raised several million dollars in private investment.

Because about 97% of U.S. dams do not have power-generating infrastructure, non-powered dams represent an attractive development opportunity with a potential capacity of 2 GW or more within the medium-sized range.

Using hydropower in a hybrid configuration with other renewables and battery storage can unlock new revenue streams by providing power during peak demand or ancillary services, such as the ability to adjust quickly to ensure grid reliability.

Closed-loop pumped storage systems feature two reservoirs that are not connected to a naturally flowing water feature like a river. These projects, which can offer siting flexibility, account for the majority of pumped storage projects in the pipeline. These projects would be the first closed-loop facilities in the U.S.

Investors surveyed for this study generally expressed the greatest level of interest in supporting capacity additions at existing facilities. With a connection to the grid already established, these facilities offer critical opportunities to increase clean energy production.

Overall, innovations in hydropower are driving the industry toward smaller, more modular and flexible solutions that can be more easily scaled and replicated.

Of course, there are challenges associated with hydropower projects, which are generally well known in the industry. Risks like financing for early-stage development, long permitting and licensing timelines, supply chain constraints, and more are important considerations but can also be addressed. The report includes several suggestions for addressing challenges in the industry to help increase investment. They are:

  • Provide financing, funding and support for early-stage development
  • Support improved market-based incentive signals for hydropower and pumped storage
  • Support transparent and efficient permitting and licensing processes
  • Support new, innovative research on reducing deployment time and costs
  • Clarify new legislation and regulations and conduct outreach with developers and industry
  • Increase awareness of new opportunities in hydropower and pumped storage

Published on Hydro Review.