GLG News by Michael Bahleda

Implications: The basis for awarding carbon credits will determine if we take steps to clean existing emissions or move to new technologies in response to global climate issues. If credits are based on production, change will be incremental as will the associated cost impacts. Awarding credits based on system load will encourage development of non-fossil generation sources and accelerate carbon reduction.

Analysis:   The Puget Sound Business Journal article discusses the local implications in the ongoing debate as to where carbon cap and trade limits will be set and how carbon credits will be allocated. This is a regional debate with national policy implications The balance point between awarding offset credits based on production vs. load will determine how aggressively fossil based generators will need to move to reduce emissions. If the majority of the credits are awarded to fossil based producer the transition to lower emissions will be slowed and the impacts on the cost of generation will be more limited.

If credits are awarded based on load it will have implication on how aggressively non-fossil based renewable energy generators can bring new facilities on line. If credits are based on megawatts generated or customer served, utilities will be encouraged to seek non-fossil based sources of generation such as hydropower, solar, wind etc. Providing new generation from these non-fossil sources not only will meet load growth without the need for additional carbon credits, it will also provide an additional revenue stream in the form of tradable carbon credits. Non-fossil based generators will have the potential to sell carbon credits regionally and eventually in a national trading system.

These credits will provide the incentive to develop available hydro potential that is not currently economic along with other intermittent renewable forms of generation such as wind and solar. Expansion of these renewable forms of energy will make regions that are early adopters more attractive for growth and new industry.

The next Congress will struggle to balance the regional economic interest with the need to respond to a global climate issue. The details of that balance will determine the rate at which the U.S. moves from fossil based generation.

Implications: Canadian efforts in Nova Scotia are demonstrating how government and industry can work together to encourage emerging hydroelectric technologies. In the U. S., hydropower is being overlooked in the efforts to add reliable, domestic renewable energy to the U.S. generation portfolio. For a fraction of the research funding and incentives provided to the wind industry, hydropower could add nearly double the name plate capacity of all the current wind capacity in the U.S.          1. The 12,000+ MW of nameplate wind capacity in the U.S. was achieved with government research support of $1 billion over 28 years.           2. For a fraction of that support hydro could provide almost double that figure (23,000 MW) in additional hydroelectric capacity by 2025.           3. To achieve the additional generation capacity hydro needs efforts in 3 areas:          a. Economic incentives          b. Investment in RDD&D          c. Regulatory support

Analysis:  Developments in Canada, particularly the demonstrations in the Bay of Fundy show how government and industry can work together to develop promising technologies.  This partnership is not working as effectively in the U.S. The effect is that we are not capitalizing on a valuable addition to our renewable portfolio. A recent article in Hydro Review magazine that I co-authored (Hydro Review, Vol XXVI, No. 8, January 2008 pgs 10-15) discusses the amount of hydroelectric generating capacity that could be added in the United States. The article based on research done for the Electric Power Research Institute (EPRI) lays out the potential for building on the existing 75,000+ MW of hydroelectric capacity and adding new capacity in the form of:

        Improved generation at existing facilities,
        New generation at existing dams and,
        Emerging wave and tidal technologies.  

The article highlights the 23,000 MW of nameplate capacity that could be added by 2025. To achieve this potential new capacity will require a 3-pronged approach:

             a. Economic incentives 
             b. Investment in RDD&D
             c. Regulatory support  

Economic incentive in the form of Production Tax Credits (PTC) and Clean Renewable Energy Bond (CREB) programs and Renewable Portfolio Standards (RPS) should fully recognize hydropower as a valuable contributor.  Various forms of these programs currently exist, but they are not applied uniformly to all types of hydroelectric generation. Fully applying these incentives to traditional and emerging hydro technologies would provide the financial underpinning to allow new projects to move forward.  

Like all technologies, innovation is a key to growth. Investment in research, development, demonstration and deployment (RDD&D) are crucial to improving technology and demonstrating its potential.  The Department of Energy has provided extensive support to the wind energy which has resulted in growth from virtually zero to over 12,000 MW of nameplate capacity over the past ~30 years. For a fraction of the amount devoted to wind development, hydropower could add 23,000 MW of new capacity. The capacity will be in the form of emerging wave and hydrokinetic technologies (tidal) combined with improved applications for more traditional hydro technologies. In 2008 DOE has budgeted $10,000,000 for hydro related research but this only meets a portion of the need.  

Regulatory support is the third area where the outlook needs to change if hydropower is to achieve its potential. Emerging technologies offer huge potential for offshore hydro generation (wave & tidal). Conflicting goals and requirements among resource agencies and regulators at the state and federal level create delays and disincentives.  The FERC’s recent efforts with their Pilot License Program are a good effort but increased action by other federal and state agencies are needed if the potential is to be realized.  

If we are serious about developing reliable domestic renewable energy, then we can not afford to allow the significant potential that expanded hydropower capacity represents go untapped. Given hydro's higher average capacity factor, dispatchablity, zero emissions and zero fuel cost, it should a generating source we embrace and encourage.

Implications:

Congratulations are indeed due to Lunar Energy for their proposed 8 MW tidal project. As was noted in the analysis by Mr. Aldersey-Williams, it is a long way from announcement to operation, but it appears there is support and momentum for this effort to move forward in Britain. This nascent industry is going to go through a long period of development before it fulfills it potential. In the U.S. the coordinated support to take this industry to commercialization appears to be lacking, and this may result in the U.S. losing the opportunity to be a leader in this emerging technology much as it did in the wind industry.

If the U.S. is going to compete in the emerging world market of renewable kinetic water power technologies, it must institute programs that put this emerging technology on a level playing field with other renewable technologies. Those programs must include research funding, production incentives and proportional regulatory requirements.

Analysis:

In the late 70’s, wind research in the U.S. received strong government support in the form of research funding and a regulatory regime that did not place unnecessary burdens on development. The results were the launching of an international industry. As concerns for oil and gas prices diminished in the 80’s, efforts in the U.S. declined and development shifted overseas. Most notably, the European market has lead the way in technology development and systems deployment both on and offshore. U.S. deployment is once again picking up due to tax incentives and Renewable Portfolio Standards (RPS), but much of the research advance is going on overseas.

The emerging hydropower technologies are seeing this pattern repeat itself with the likely impact that the technologies will be developed and deployed overseas first. This will lead to other countries being able to take advantage of these reliable renewable energy technologies first; it will also mean others will benefit from the expansion of engineering and manufacturing jobs these new technologies will create. If the U.S. is going to share the benefits of these gains and capitalize on the domestic potential of these emerging tidal and wave technologies, it must:

Invest in research and development

Provide adequate incentives

Develop a regulatory scheme that does not handicap new technology

Investment in research is critical to any new technology coming to market. By one limited account, from 1999 - 2006, Britain spent over $ 230 million for research, development and infrastructure support to develop wave and tidal technologies. By contrast DOE spending on all hydroelectric research in 2006 was less than $500,000 and taken to zero in 2007. This simple comparison points to where the new developments are likely to occur.

In the 2005 Energy Policy Act (EPAct 2005), production tax credits (PTCs) for wind were extended for 2 years.

EPAct 2005 also included a reduced credit for capacity and efficiency improvements at existing hydroelectric facilities. It did not include wave, tidal or emerging hydrokinetic technologies. Without incentive programs comparable to other renewable technologies, wave and tidal generations will be severely handicapped as capital goes to programs that can utilize the credits.

Regulatory structure can serve as a support or hindrance to development. Currently, wind is not required to meet any national regulatory standards as is imposed on hydroelectric development. The growth in wind generation reflects a balance of local regulation with local concerns. FERC and DOI Mineral Management Service permit and license process revisions that reflect a balance of environmental concerns with technological development and deployment could accelerate waterpower energy commercialization in the U.S.

If the U.S. is going to compete in the world market of renewable kinetic water power technologies, it must support the development of these emerging technologies. To put them on a level playing field with other renewable technologies will require programs with long term commitments to research funding, production incentives and proportional regulatory requirements.

Implications:  

Nova Scotia Power’s award to Open Hydro to install a utility scale demonstration of an underwater turbine highlights a potential turning point for the hydroelectric industry that may mark the beginning efforts to reinvigorate this segment of the renewable energy industry.

1. The effort is significant because the Bay of Fundy, where the demonstration will be conducted, represents the potential of over a 1000 MW of non-green house gas emitting generation.

2. The installation involves no dams or other enclosures eliminating many of the environmental concerns.

3. Demonstration of the technologies could open the way for development of greater tidal and in-stream resources in both Canada and the U. S.

Analysis:

The Bay of Fundy represents one of North America’s largest tidal resources for energy production. With an estimated potential of over 1000 MW, the Bay represents a significant non-carbon emitting generation source to respond to growing demand for renewable energy in Canada. Transmission interconnects between Canada and the Northeast could create the opportunity to also provide renewable power for New England meeting growing power needs and providing Renewable Energy Credits (REC). Participating in the New England market gives the power produced from the Bay three potential income components:

1. Energy

2. Time of day capacity ( due to the predictability of tidal action)

3. Renewable energy credits

As noted in the article, environmental impacts are expected to be relatively benign. Deployment of the technologies is still in a very early phase but they appear to address many of the environmental issues that have contributed to the lack of growth in the traditional hydroelectric area. Because these free flowing turbines depend on the velocity of the tides as opposed to a drop in elevation associated with traditional hydroelectric generation, no diversions or dams are required. This combined with the much slower velocity of the turbines greatly reduces the potential impact to fish passage. It also eliminates the concern of trapped sediments behind the dam. Tidal flow direction that reverses four times each day also greatly reduces concerns about sediment deposition.

The primary reason these developments are significant is the vast potential they could open in both Canada and the U.S., when applied to rivers in addition to tidal application. The Department of Energy has estimated that there is potentially as much as 95,000 MW of additional domestic hydro capacity in the U.S. Full utilization of these resources would more than double domestic hydroelectric production which currently produces 7% of U.S. electricity and 75 % of its renewable generation. Environmental concerns associated with dam building have been a major factor halting the development of these resources. Successful demonstration of the kind of in-stream technologies proposed for the Bay of Fundy would respond to many of the environmental concerns and reopen these resources for development. Development would help meet needs for reliable domestic renewable energy that responds to growing green house gas concerns.

Implications:  

As worldwide installed wind capacity increases and appears to be poised for continued growth in the U. S., it is important to remember some key issues related to continued development in the U.S. for the long term.

1. Nameplate capacity does not always equate to the same megawatt-hours per year
2. Intermittent generation sources require back-up from more dispatchable sources
3. Transmission capacity will be a large factor in adding new generation

Analysis:

Nameplate capacity does not always equate to the same megawatt-hours per year

Total installed wind nameplate capacity in 2006 was 9,149 MW and is expected to yield 24,800,000 MW-hrs of generation for an approximate capacity factor of 30%. The installed wind capacity in 2004 was 6,740 MW which produced 14,200,000 MW-hrs for a capacity factor of 24%. It is clear that actually generation will be dependent on regional wind conditions in any given year. Although nameplate capacity is growing at a very respectable percentage it still represents a very small portion of the grid requirements and impacts on the electrical system. U.S. generation in 2004 was 3,970,550,000 MW-hrs of which wind represented approximately 0.36 % and only about 4% of renewable generation.

U.S. Renewable Generation (MWHs) 2000 to 2004 (DOE/EIA 2006).

Renewable Technology	Annual Generation (MWHs x 106)
	2000	2001	2002	2003	2004	%
Conventional Hydroelectric	275.6	217.0	264.3	275.8	269.6	75%
Biomass	60.7	57.0	61.5	61.3	60.0	17%
Geothermal	14.1	13.7	14.5	14.4	14.4	4%
Solar	0.5	0.5	0.6	0.5	0.6	<1%
Wind	5.6	6.7	10.4	11.2	14.2	4%
Total	356.5	294.9	351.3	363.2	358.8	100%

Intermittent generation sources require back-up from more dispatchable sources

Full nameplate capacity is only available when the wind is blowing which is often in non-peak periods. As more intermittent renewables such as wind are brought on line, they will require additional capacity from sources that can be more predictably dispatched. Currently these are usually thought of as natural gas and hydropower. In an expanding market, the cost and availability of this back-up power will impact the attractiveness of intermittent power sources. Wind does not yet bear the full burden of providing reliable power 24 hours per day. Growing capacity will highlight this cost to the system.

Transmission capacity will be a large factor in adding new generation

In Texas which as seen the largest growth in wind generating capacity, the industry has already seen transmission constraint issues limit the power that can be delivered. In the upper Midwestern states, where a majority of new wind potential exists, the system is hampered by a lack of major load centers to use the new capacity and inadequate transmission capacity to move the power to major markets. Solving the infrastructure issues will be critical to expanding utilization of intermittent generating sources such as wind.

None of these issues will limit winds growth in the immediate future. Because it represents such a small % of system capacity there is currently less focus on balancing this environmentally desirable intermittent source with system requirements. Over the long term, system capacity requirements and transmission constraints will influence the attractiveness and economics of wind capacity. As you look at the growth potential of wind and other intermittent generation, it is important to keep these long term constraints in mind.

Implications:

Ocean Power Technologies, Inc. (OPT) recent agreement with Pacific Northwest Generating Cooperative (PNGC Power) to work cooperatively to develop the Reedsport OPT Wave Park in Douglas County, Oregon is another sign of utilities growing interest in using emerging wave and tidal technologies to help meet their renewable energy requirements. In supporting the development of wave technologies, PNGC is helping to lay the ground work for the growth of a renewable generation form that offers great potential and responds to aesthetic and reliability concerns associated with other renewable energy sources such as wind and solar.

The Reedsport project along with projects in Hawaii and Makah Bay, WA are among the first domestic projects to use wave energy to meet the growing need for reliable, domestic, renewable energy. The Electric Power Research Institute (EPRI) estimates that this emerging hydro technology could yield as much as 2100 TWh/yr or approximately 10% of the U.S. domestic demand for electricity.

Analysis:

EPRI studies estimate the total wave power flux potential in the U. S. at 2100 TWh/yr. The majority of this capacity is along coasts of:

Alaska

Hawaii

California

Oregon

Washington

The technologies to develop these resources are in their very early stage of development, comparable to wind development in the early ‘70’s. Harnessing wave energy for electric production offers several advantages over other renewable energy sources. Wave energy is more predictable and therefore more dispatchable then other energy forms. Because of its significantly lower profile, it has fewer aesthetic issues than wind. With proper siting it should also offer fewer environmental impact concerns.

Although this represents a significant domestic resource there are several major issues that will effect how quickly the technology can be developed and deployed for commercial scale application. These issues fall into 3 primary categories:

Research

Regulatory Process

Incentives

Research

Because these are new technologies in a new application there are a number of open questions both regarding operations issues and environmental impacts. On the technical side, work in the U. S. is building on the more advanced efforts in Europe. Several technologies have been deployed at the European Marine Energy Center (EMEC) and are demonstrating promising performance.

Environmental impacts due to the actual operation of the equipment are believed to be relatively minor due to the limited motion of most of the systems. The area needed for commercial deployment of many of the systems may be an issue due to the size of the area necessary to install a commercial scale development. Demonstrations such as the Reedsport project will begin to answer these questions.

Because many of the companies pursuing these technologies are still relative small there is a need for coordinated governments support for research to be able to advance at a reasonable pace. Thus far the federal effort in this area has been lacking. Last year the Department of Energy stopped funding its hydroelectric research program. Although there have been some efforts at the state level, notably in Oregon and New York, there is still a need for coordinated research efforts to answer fundamental environmental and operational questions .

Regulatory Process

Both the Federal Energy Regulatory Commission (FERC) and the Mineral Management Service (MMS) are currently working through the issues of how these new technologies will fit into their existing regulatory requirement (in the case of FERC) and proposed new guidelines (in the case of MMS). FERC currently has over 40 preliminary permit applications pending, some for competing sites. MMS is not accepting new applications as it looks at formulating its regulatory structure for the Outer Continental Shelf (OCS). In both these situations developer and their potential backers are left in a uncertain situation as to what will be the ultimate regulatory requirement for proposed projects, who will have final jurisdiction and how will competing agency requirements be resolved. Financial backers are faced with an ill-defined situation to make decisions regarding investment in these promising new technologies.

Incentives

The history of the wind industry has shown that if a new energy technology is going to achieve its potential it needs encouragement. Over the past 30 years wind has progressed from a promising concept to its current capacity of approximately 10,000 MW with the help of direct government research and incentive programs such as the Production Tax Credit (PTC). The PTC serves the laudable purpose of improving the financial picture for fledgling technologies and allowing them to compete with more established technologies and their long established infrastructure.

Under the Energy Policy Act of 2005, PTC was extended to 2008 and the definition was expanded to include efficiency and capacity improvements at traditional hydroelectric facilities. Although ocean, tidal and ocean thermal technologies were identified in the Energy Policy Act in other provisions, they were not included in the PTC. The definition of power sources that can take advantage of the PTC and corresponding Clean Renewable Energy Bond (CREB) programs should be expanded to include tidal, ocean current, wave, ocean thermal and kinetic flow in rivers, stream and manmade channels. The effective dates for the program should be extended from its current 2008 expiration to at least 2016. This will provide a degree of certainty on which developers and funders can make decisions regarding which projects to pursue.

The Reedsport project is part of a promising beginning. If programs are enacted to encourage development of these emerging technologies, the U.S. could see wave technologies providing new generation that greatly exceeds current wind generation with fewer reliability and aesthetic issues.