Mountain communities where hydro once was the
only local source of electricity are taking another
look at it. To offset its electric load, the city of
Ouray, Colo., installed a 20-kilowatt Pelton turbine that uses water from an abandoned water
States offer various financing incentives for small hydro. In Colorado, Tri-County Water Conservancy District has been approved to receive 2 percent loan financing from state agencies to support construction
of a 7-megawatt hydro project at Ridgway Dam.
Copyright © 2012 by the American Solar Energy Society Inc. All rights reserved.
Making the Economics Work
Another barrier to small hydro development
has been securing an attractive power purchase
agreement with the local utility.
In many states, utilities are required by law
to offer net metering, allowing project owners
to receive the full retail value of the energy they
generate in order to offset their on-site electricity consumption. Many hydro sites, however,
are located in remote areas without an adjacent
electricity load to offset.
Even in states that have a renewable portfolio
standard (RPS), if utilities can meet their RPS
requirements entirely with utility-scale renewable generation, there may be little incentive for
utilities to simplify interconnection for small
This barrier is readily overcome where there
is a feed-in tariff. In California, for example,
small (less than 1.5 MW) renewable genera-
tors, including hydro in Pacific Gas & Electric
service territory, are eligible for feed-in tariff
payments. The amount of the payment depends
on the “market price referent” as determined by
the California Public Utilities Commission. For
example, the 2012 baseload rate for a 10-year
contract is 9. 2 cents per kilowatt-hour. The base
payment amount is also adjusted by a time-of-
day factor to reflect the fact that electricity
produced during peak times is more valuable.
The feed-in tariff is offered on a first come, first
served basis that expires when the allocated
tember, prompting praise from both FERC and
the hydropower industry.
amount of available generation capacity has
Project financing is another obstacle to development. Hydro, like other renewable energy
sources, benefits from federal tax incentives,
though these are subject to congressional reauthorization or expiration. States also offer various
financing incentives. Colorado, for example, has
low-interest ( 2 percent) loan funding available
to support hydro project construction.
Small hydro has the potential to create jobs.
In a study done for the National Hydropower
Association, Navigant Consulting estimated that
for every megawatt of new small hydro installed at
existing dams without hydro, 5. 3 jobs are created
(including direct, indirect and induced jobs).
Jobs in hydro development typically include
not only product manufacturing but also jobs for
project managers, engineers, lawyers and environmental analysts, as well as construction jobs
for welders, plumbers, electricians and carpenters and operations and maintenance jobs.
With continuing support from federal and
state policymakers, small hydro is poised for
growth, creating jobs and accelerating rural economic development. ST