Unpacking the Lame Duck Congress’ Holiday Present to Hydropower

By Malcolm Woolf, President and CEO, NHA, and Jeffrey Leahey, Vice President, SMI, Inc. (Strategic Marketing Innovations)

More than 40% of the legislation that became law during the recently-concluded Congress was enacted after the November 2020 elections, making the 116th Congress’s lame duck session one of the most productive in history.

Many in the hydropower industry are only now unpacking the provisions tucked away in the sprawling $1.4 trillion omnibus spending bill that will significantly impact the industry.

What Happened?

On December 22, 2020, Congress passed a massive spending package that included several longstanding legislative priorities of the hydropower and marine energy industries. Included in the package were:

  • An extension of the production and investment tax credits (PTC and ITC) for incremental hydropower, adding generation to non-powered dams, and marine energy
  • Reauthorization of the EPACT 242 and 243 hydropower production and efficiency incentives
  • Record appropriations funding for the U.S. Department of Energy’s Water Power Technologies Office (WPTO)
  • The Better Energy Storage Technology (BEST) Act for energy storage research and development, including pumped storage
  • A long-overdue reauthorization of the WPTO’s hydropower, marine energy, and pumped storage research and development initiatives

Why Does It Matter?

The pieces of legislation contained in the FY 2021 omnibus bill may have significant impact on the hydropower and marine energy industries’ bottom lines, with direct value realized through the tax credits, incentive payments, and/or future U.S. Department of Energy’s Water Power Technologies Office funding opportunities.

For the waterpower industry, we see 5 top takeaways from the end-of-2020 legislative package.

#1 Hydropower Gets Tax Credits for Another Year

The bill provides a 1-year extension of both the PTC and ITC through 2021 at existing credit rates for qualifying hydropower and marine energy resources. That means hydropower receives half-credit rate under the PTC (approximately 1.3 cents per kilowatt hour), and the full 30 percent rate under the ITC.

By way of comparison, wind received the same one-year extension with a 40 percent reduction to both the PTC and ITC credit rates; while solar got a two-year extension of their ITC through 2023 (the credit had until the end of 2021 before it expired) though still with the phasedown applied.

While good news for our industry in the short term, NHA is actively working to secure a longer-term extension, such as the 5-year extension proposed in the House Ways and Means Democrats’ GREEN Act released in February 2021.

#2 DOE’s Hydropower Grant Program Is Reauthorized for 5 Years

The Reliable Investment in Vital Energy Reauthorization (RIVER) Act provides a multi-year reauthorization of the EPAct 2005 Section 242 and 243 hydropower production and efficiency incentives for:

  • adding generation on a non-powered dam or conduit
  • efficiency improvements at existing hydro facilities

The bill also expanded the eligibility of the Section 242 program to include new small hydropower facilities in areas with inadequate electric service up to 20 MW.

After years of effort, NHA is excited to get this reauthorization bill over the finish line. The Section 242 production incentive has received $7 million in appropriations for the past several years, while the Section 243 efficiency incentive has never received funding.

NHA is continuing to work to secure funding for both programs at the full authorized amount of $10 million for each annually. Also, stay tuned for the release of a request for information from the DOE’s Water Power Technologies Office to update its program guidance document in light of the reauthorization.

#3 DOE Water Power Technologies Office Receives Record-Setting $150 Million

Funding for hydropower and marine energy research and development at DOE once again reached a new record level. The topline FY 2021 numbers are $109 million for marine energy and $41 million for hydropower, for a total of $150 million.

In addition to helping marine technologies reach full-scale commercialization, the funding supports advancements in hydropower turbine technology, innovations in environmental mitigation, and further research on the need and valuation of the grid benefits that pumped storage provides.

#4 Importance of Continued Federal Investment in Waterpower is Highlighted

The Water Power Research and Development Act (WPRDA) reauthorizes hydropower, marine energy, and pumped storage research and development initiatives under the DOE’s Water Power Technologies Office (WPTO). The provisions — some of which NHA has supported and sought for close to a decade –represent formal Congressional recognition of the value of the WPTO’s work.

NHA will seek to leverage the bill’s passage in the continuing effort to grow the WPTO and its programs. NHA is pleased to have secured passage of the bill and continues to engage with the WPTO to ensure its activities align with industry needs and priorities.

#5 Pumped Storage R&D Gets a Boost

The Better Energy Storage Technology (BEST) Act provisions included in the omnibus spending bill will further boost research and development activities to support energy storage. NHA worked to ensure that pumped storage was included and to secure pumped storage-specific language in the bill.

In addition, the BEST Act includes provisions establishing a competitive grant program for demonstration of pilot energy storage systems, as well as a demonstration initiative for long-duration energy storage projects, among others.

What’s Next?

Based on these legislative successes, NHA is raising its legislative ambitions to meet the Biden Administration’s stated goal of transitioning to a 100% clean energy grid by 2035. With the right policies in place, NHA believes we can significantly grow the waterpower industry and the climate benefits and grid services it provides.

The industry’s legislative priorities include:

  1. Tax incentives for existing facilities that make dam safety or environmental investments, as well as incentives for new pumped storage and a long-term PTC and ITC extension
  2.  Improvements to the Federal Energy Regulatory Commission (FERC) licensing and relicensing processes
  3. Full recognition of hydropower in any clean energy or climate legislation
  4. Increased funding of the DOE Water Power Technologies Office to match the full authorized levels under the Water Power Research and Development Act (WPRDA) and the Reliable Investment in Vital Energy Reauthorization (RIVER) Act.

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