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For decades, the hydropower industry has prioritized licensing and permitting reform. Due to many inefficiencies in the status quo regulatory framework, costly delays and high uncertainty have become frequent issues.
In addition to these challenges, the rise of non-capacity amendments, which are being required by the Federal Energy Regulatory Commission (FERC) for non-substantial work (e.g. trash rack replacement, parking lot expansion), are causing harmful delays to hydropower facilities and exacerbating an already costly and uncertain permitting process. Ultimately, if these issues persist, many hydro owners may exit the market and surrender their licenses at a time where the United States needs robust support from all renewables to achieve its clean energy goals.
To better understand the issue, National Hydropower Association (NHA), which has been alerted to the increasing number of non-capacity amendments by its membership, utilized a Pacific Northwest National Laboratories’ “Hydropower eLibrary” tool to perform an analysis of FERC’s eLibrary data. During the analytic review, NHA determined there was a statistically significant upward trend in the number of non-capacity amendments submitted to FERC from 2000 – 2023. Additionally, the analysis shows that FERC’s average timeframe to complete the review of a license amendment request after 2019 has nearly doubled when compared to the period prior to 2019.
The trends revealed during NHA’s analysis allude to an increasingly harsh regulatory landscape for hydropower, threating the longevity of assets. Through increased advocacy, the industry can demonstrate to both Congress and FERC the importance of addressing the issues facing the hydropower licensing process.
UNDERSTANDING THE ISSUES
For decades, licensing and permitting reform have been a major priority for the hydropower industry. There are many inefficiencies in the status quo regulatory framework, which often result in costly delays and high uncertainty. This lack of confidence in the process can stifle development and depresses new investment into hydropower facilities, jeopardizing long-term grid reliability. Efforts to streamline the licensing process and address this well-known issue through permitting reform are underway.
However, over the last several years, a new challenge has quietly emerged within the broader permitting process, frustrating and confusing hydropower owners: non-capacity amendments. Now, in addition to grappling with licensing and relicensing obstacles, existing hydropower facilities must also contend with increasing regulatory scrutiny around routine activities. This includes in-kind replacements, repairs, and other minor work that does not substantially alter the project works or have an adverse environmental impact.
Historically, these changes would occur under standard license Article 3, which prohibits “…substantial alteration or addition not in conformity with the approved plans to any dam or other project works under the license or any substantial use of project lands and waters…” without prior Commission approval. Lately, however, FERC staff are increasingly requiring licensees to file non-capacity amendment applications for this non-substantial work, like replacing trash racks, replacing a turbine, or expanding a nearby parking lot that does not expand the site boundary. With a formal license amendment request comes a full public comment period, additional environmental analysis, and, ultimately, a prolonged approval timeline for otherwise basic adjustments.
These tasks are crucial to maintaining dam safety and responsible water stewardship. These plants and reservoirs are a vital source of clean energy, water, irrigation, and recreation for local communities across the country. Delaying and neglecting proper maintenance of these assets adversely impacts the health and longevity of a hydropower facility and is a disservice to its many stakeholders. Moreover, by requiring non-capacity amendments without clarity, FERC is exacerbating an already costly and uncertain permitting process. If, at any time, routine work can prompt a full amendment process complete with consultation and environmental review, the cost of regulatory complexity now extends well beyond initial licensing/relicensing. Attaching these surprise costs to the upkeep of a long lead time asset like hydropower threatens a stable return on investment.
When faced with these growing challenges, many hydro operators will simply exit the market and surrender their licenses entirely. Investors, similarly, will place their capital elsewhere, despite the inherent value of hydropower to the grid. To prevent this outcome, more must be done to address the rise in non-capacity amendments.
Over the last several years, an increasing number of NHA members have come forward with anecdotal evidence suggesting an increase in required non-capacity amendments. Yet, there has been no explicit change in federal policy associated with this reported change in agency behavior. The Commission did not institute a rulemaking process, nor did Congress pass any laws modifying the language of Article 3.
Although FERC has not formally acknowledged a top-down change in agency interpretation of what constitutes “substantial,” the fact remains that hydropower owners are experiencing otherwise. This could be due to a variety of causal factors, including a consistent change in Commission practice. To determine whether these member experiences are isolated, project-specific incidents or if they are illustrative of a broader trend, further analysis was required.
As discussed in further detail below, NHA’s analysis of eLibrary data has found the following trends:
- There is a statistically significant upward trend in the number of non-capacity license amendments submitted to FERC from 2000-2023.
- There has been a 165% increase in the number of non-capacity amendments between 2019-2023 as compared to 2000-2019, suggesting a sudden causal change during that time. This data does not support the hypothesis held by FERC that aging infrastructure or evolving state policy is the cause for the increase in amendments. If FERC was correct, the data would show a gradual increase from 2000-2023 without a sudden step-change post 2019.
- The average time it takes to complete a non-capacity license amendment from first submittal by licensee to final issuance by FERC has nearly doubled since 2019, taking approximately 500 days compared to just 253 days prior to 2019. This trend coincides with the increase in non-capacity amendments during that same period, suggesting that, as agency workload increases, the time it takes for FERC to complete amendments is growing longer.
These trends support evidence collected from NHA members in a qualitative survey, which found that there has been a notable change in the Commission’s interpretation of “substantial changes” to project works, resulting in an increase in lengthy and burdensome non-capacity license amendments.
RESULTS OF DATA ANALYSIS
The FERC eLibrary hosts tens of thousands of documents, including individual dockets on hydropower licensing. While it represents a potentially rich source of data, the lack of advanced search, sort, and export functions in the eLibrary has historically limited the potential for analysis.
Fortunately, PNNL developed a new web tool for browsing and sorting through the hydropower eLibrary data; the tool is titled the “Hydropower eLibrary.” Using said tool, NHA was able to investigate whether there was a statistically significant upward trend in hydropower non-capacity amendment submittals to FERC.
The histogram below shows the number of documents classified as “Application to Amend License or Exemption,” which include the “non-capacity” and “non-power” keywords, cleaned to remove supplemental documents and duplicates. This data was exported in bulk and manipulated with Excel and Python.
As the graph suggests there is a strong, positive slope in non-capacity amendment submittals overtime, with a notable jump in 2020 and onward. With a p-value well within the threshold of statistical significance, the upward trend is not the result of random chance.
Consequently, the data suggests that the sample feedback received from NHA membership is representative of the larger FERC-regulated hydropower population. More than ever before, licensees are required to submit non-capacity amendments for non-substantial activities, as opposed to relying on Article 3 for approval. It is important to note that this trend does not reveal causation, as there is no formal policy change to conduct a “before and after” analysis around, making it difficult to isolate any one variable as being responsible for this increase.
However, we can use the notable spike in amendments post-2019 as a threshold for comparison. When conducting a Welch’s t-test, wherein variance between two averages is tested, NHA found that there is, on average, a 165.21% increase in the number of non-capacity amendments filed after 2019 when compared to the period before 2019, with a large negative t-statistic.
This analysis suggests that the causal variable driving these amendments likely emerged suddenly around 2019 and are unlikely to be associated any gradual changes overtime, such as slowly aging dam infrastructure or evolving state/local environmental regulations. Rather, the stark contrast could suggest a more deliberate action, such as a top-down change in FERC interpretation of what is “substantial”. However, without more information, it is not possible to say for certain. This underscores the importance of notice and comment rulemaking proceedings to the formation of sound policy.
While it does not demonstrate causation, the proven upward trend in non-capacity license amendments does have measurable effects. One such effect is seen in the long wait times for FERC approval of non-capacity license amendments, which is a relatively intuitive outcome. As more amendments enter the review pipeline, staff resources and efficiency remain constant, workload increases, and approval takes longer. To illustrate this cause and effect using eLibrary data, NHA analyzed the time elapsed between the first submittal to FERC and the final issuance from FERC on a sample of non-capacity license amendments matched by docket number. Next, NHA visualized these results and compared the average time elapsed for these proceedings to the Commission’s official average timeline for these types of amendments.
The beeplot below shows a cross reference of all Application to Amend License or Exemption documents with “non-capacity” and “non-power” keywords paired with their respective FERC Formal Notice and Order/Opinion | Delegated Order document types, plotted by time delta. This data was also exported in bulk and manipulated using Excel and Python. For simplicity, the graph only shows the span from 2013-2023. The green dots represent completed proceedings with issued Orders/Opinions. Yellow dots represent the last FERC notice associated with an amendment. These likely show outstanding amendments still being processed or those abandoned without conclusion.
Through conversations with Commission staff, they’ve indicated that a license amendment request will be handled in approximately 6 months (182 days). Our sample of 350 completed non-capacity amendment proceedings from 2000-2023 found a standardized average of 364 days, which is 50% higher than the FERC estimate. This again validates the experience of hydropower owners who are frustrated by prolonged approval times for basic tasks.
Approving the replacement of flashboards, for instance, should not take an entire year. Unfortunately, these delays appear to be compounding as the backlog in amendments builds. As evidenced by the upward clustering of the distribution from 2019-2023, when more non-capacity amendments enter the pipeline, the time delta rises. This visual trend was verified by additional analysis, which found a 97.9% increase in the average time elapsed from 2019 onward compared to before. This coincides with the overall increase in non-capacity amendments, suggesting that, as more applications come in, the time it takes to process a single amendment increases.
Furthermore, the notable increase in outliers above 500 days corroborates yet another challenge echoed by owners across the country: unpredictability. Perhaps the only thing worse than a delayed non-capacity amendment is the uncertainty surrounding that delay. When it comes to how long the process takes, the data shows that the non-capacity amendment process is becoming less predictable. In fact, the process was never predictable to begin with, as evidenced by the overall wide range of the dots across all years, with most clustering occurring between 100-1000 days.
WHY IT MATTERS
Overall, these trends reveal an increasingly harsh regulatory landscape for hydropower, as even the slightest alterations push asset owners into a game of roulette against time. Now is the moment for Congress and the Commission to recognize and address this growing problem in hydropower licensing.
The increase in non-capacity amendments, and the average time it takes to approve these amendments, presents a real and present danger for the longevity of hydropower assets.
Without reform, many hydropower facilities may choose early retirement and license surrender. With nearly 16GW of hydropower licenses set to expire between 2020-2035, much is at stake for grid reliability and the nation, as well as the world’s, climate goals.
