Backgrounders
Energy Policy Act of 2005
After years of consideration, comprehensive energy legislation was enacted on Aug. 8, 2005 (P.L. 109-58). Congress and the Administration clearly recognized hydropower’s importance to the country as a domestic source of renewable, climate-friendly, and affordable energy when they addressed the two largest issues confronting the resource in the Energy Policy Act of 2005 (EPAct 2005): the challenging licensing process and the lack of significant growth during the last decade.
Hydropower Licensing Reform
While the law brings important new reforms to the Federal Energy Regulatory Commission’s (FERC) hydropower licensing process, it also ensures environmental standards for rivers in the country are maintained.
Trial-type hearings
Any party in the licensing process can call for a 90-day expedited trial-type hearing on the facts federal agencies use to base their mandatory conditions. For example, a hearing could take place on the behavior patterns of a fish species. The goal is to help federal agencies take full consideration of all the facts relevant to the mandatory conditions.
Alternative Conditions
Any party in a licensing proceeding can offer a cost or power-saving alternative to a mandatory condition (Section 4(e) or Section 18) proposed by a federal resource agency. If the agency determines the proposed alternative meets statutory requirements for environmental and resource protection, and the agency finds that the alternative will – compared to the original condition or prescription – provide significant cost or power savings, the agency must accept the alternative.
For Section 18 alternative prescriptions, the alternative must be “no less protective than the fishway initially prescribed,” and for 4(e) alternatives, the alternative must “provide for the adequate protection and utilization of the reservation.”
Equal Consideration
Federal agencies must document that they gave equal consideration to the effects of a mandatory condition on the many benefits of hydropower, such as energy supply, distribution, cost, flood control, navigation, water supply, and air quality. Equal consideration is also required when an agency rejects an alternative condition. The goal of this provision is to ensure that during the licensing process, a hydropower project’s many positive attributes are preserved as fully as possible, while at the same time, provide for the appropriate and necessary levels of environmental impact mitigation.
Increasing Hydropower Generation
EPAct 2005 includes several provisions to help encourage the growth of hydropower generation in the United States.
Production Tax Credit
Incremental hydropower (new energy at existing facilities through additions of capacity and efficiency improvements) and “qualified” (run-of-river hydropower at existing FERC-licensed non-hydropower dams) are now eligible for a production tax credit (PTC) for renewable energy outlined in Section 45 of the IRS code.
A ten-year tax credit of 0.9 cents per KwH is available for hydropower placed in service by Jan. 1, 2008. Top
Tax Credit Bonds
A new category of tax credit bonds is now available for non-tax paying hydropower generators. The goal is to create financial incentives for public power and electric cooperatives to build qualified renewable energy projects. Qualified projects mirror those under the Section 45 PTC.
Incentive Payments
Two incentive programs were created to help increase hydropower generation in the country. One is for developing new hydropower projects, and the other is for increasing efficiency at existing projects. Both programs need appropriations for funding.
Federal Purchase Program
Incremental hydropower is now included in the federal power purchase program for renewable energy. The program requires the federal government to purchase a certain percentage of its electricity from renewable energy sources. The percentages are as follows:
Commitment to research and development (R&D)
The Department of Energy must conduct a program of “research, development, demonstration, and commercial application for cost competitive technologies to enable the development of new and incremental hydropower, including fish-friendly turbines and advanced technologies to enhance environmental performance and yield greater efficiencies.”
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