FERC Commissioners Comment on Hydro

All five commissioners of the Federal Energy Regulatory Commission share their perspectives on hydropower and its future in the U.S. energy mix, including grid integration issues and the outlook for this important renewable resource.

The Federal Energy Regulatory Commission in the U.S. is responsible for ensuring reliable, efficient and sustainable energy for customers. To achieve that mission, FERC regulates the interstate transmission of natural gas, oil and electricity. FERC also regulates natural gas and private, municipal and state hydroelectric projects.

In this hydro interview, all five FERC commissioners answer our questions about hydro, ranging from their experience with this resource to its future in the U.S. energy mix.

Chairman Kevin McIntyre

Q: You previously worked in the global energy practice at law firm Jones Day, counseling and representing clients in the hydropower sector. Can you tell us a little bit about that?

A: I joined FERC as Chairman in early December 2017. Prior to joining FERC, I had the privilege of serving as co-lead of the global energy practice at the Jones Day law firm. At the firm, I had an expansive and diverse FERC practice, where I counseled and represented clients in nearly all energy industry sectors, including hydropower.

I also note that when I was a very junior lawyer, one of my earliest regular duties was to assist other attorneys in the firm in the compilation of a monthly circular that we informally called the Hydro Report, which proved to be for me a very good introduction to the hydropower industry, its fundamentals, its evolution and its challenges.

Q: What is your general attitude towards hydropower? How do you think hydro will fit in the U.S. energy mix going forward?

A: I support an “all-of-the-above” strategy for satisfying our nation’s energy needs. I recognize the critical role that hydropower has historically played, and should continue to play, in meeting those needs. Hydropower provides generation and a robust set of ancillary services, including voltage support, frequency regulation, spinning and non-spinning reserves, and black start capabilities. These services can be employed to improve the resilience and reliability of our nation’s energy system. Hydropower also provides many non-developmental benefits, including recreation, water supply and flood control.

FERC licenses hydropower projects – its original statutory role dating to 1920. There is significant potential for new hydropower across the U.S, and more than 300 hydropower projects will have entered FERC’s relicensing process by 2025. I believe that it is incumbent upon FERC to look for opportunities to remove market barriers, reduce regulatory burdens, and improve agency processes for all energy resources, including hydropower, while continuing to attend fully to its statutory responsibilities.

Commissioner Cheryl LaFleur

Q: As you are the longest-serving commissioner at FERC at this time, what are your unique perspectives on hydropower?

A: When I first came to FERC, I thought I knew about hydropower, having some experience with hydro facilities on the Connecticut and Deerfield rivers in New England. However, I have learned a great deal more over the past eight years on the Commission.

I quickly learned that our jurisdiction over hydropower licensing is one way in which we closely interact with members of the public. When I run into members of the public who have heard of FERC, it is frequently because they live near a hydro facility or on a reservoir.

The interests of those who live near hydro facilities are just one of the many multiple interests FERC has to balance as part of our licensing under the Federal Power Act. We are required to consider electric generation and transmission, protection of environment including fish and wildlife, irrigation, flood control, navigation, cultural resource protection and recreation. I am frequently reminded of the tensions among different interests and the need to make the best decisions we can to protect the overall public interest.

In my past life, I was very involved in designing and running safety programs. When joining the Commission, I learned that hydro projects, including the dams, are one of only two substantive areas (the other being LNG import/export facilities) over which we have safety responsibility that lasts throughout the life of the project and not just during licensing. After a hydro project is built and throughout its operation, FERC’s office of dam safety has an important role in inspecting dams and ensuring dam safety for the protection of the public as well as employees at the facilities. This is a critically important part of our work. In early 2017, I visited Oroville Dam after the spillway collapse, a very significant event that will have lasting implications for our dam safety program.

Q: What is your opinion on hydroelectricity contributing to addressing grid issues?

A: Hydro generation is one of our oldest generation technologies – the original renewable generation – and also an important current opportunity.

I have frequently observed that nearly all energy issues involve a balance among three core values – reliability, cost and the environment. Hydro scores well on each of these dimensions. Beginning with cost, hydro (once constructed) is a very affordable resource, with a stable cost not subject to fuel price fluctuations. Turning to reliability, hydro is a highly flexible resource that contributes capacity, energy and ancillary services. Hydroelectric facilities can be flexible and highly responsive in operation, so they are a critical part of keeping the lights on and supporting grid stability. Electricity generated from hydropower is among the fastest ramping of the energy sources and can go from zero power to maximum output rapidly and predictably. This makes it well-suited to meeting changing loads and maintaining the balance between electricity supply and demand. Finally, regarding the environment, hydro is emission- and carbon-free. It also works well with variable renewable resources such as wind and solar, and it is an important part of generating electricity without contributing to climate changes.

Q: What is your opinion about the topic of new pumped storage development in the U.S.? Is it needed? Is it likely to happen?

A: We have seen an increase over the past several years in pumped storage applications at the Commission. Investment in variable resources such as wind and solar is driving the need for energy storage to help balance those resources. Pumped storage is the original and largest form of storage. Like other storage technologies, pumped storage is a Swiss-army knife because of the number of different services it can provide to the grid, including capacity, energy, a range of ancillary services, and ramping. In February 2018, FERC issued Order No. 841 on electric storage participation in organized markets to require that storage – including pumped storage – be allowed to compete to provide any service it is technically capable of providing.

I do note that pumped storage can be expensive to construct and difficult to license because of the varied interests that have to be evaluated and considered. I do believe that both existing and new pumped storage – as well as other hydro technologies – offer tremendous value and will be an important part of our energy future.

Commissioner Neil Chatterjee

Q: You have extensive experience in energy policy work. Where does hydro fit in the U.S.’s future energy policy?

A: Hydropower is an essential part of our nation’s all-of-the-above energy strategy. It delivers an enormous amount of cost-effective electricity to U.S. consumers and businesses each year. In fact, approximately 7% of the electricity generated in the U.S. in 2017 came from hydropower. But hydropower’s importance is not just a question of the total megawatt-hours of energy it contributes to the grid: hydropower is clean, emissions-free and, actually, is the original form of energy storage. As our grid moves toward a more flexible system integrating large amounts of variable wind and solar power, hydropower’s ability to balance intermittent resources 24/7 will become increasingly critical for grid reliability and resilience.

Q: President Trump has mentioned hydropower as part of his discussion of infrastructure work needed in the U.S. Does this mean hydro may get increased attention?

A: I believe that’s a fair assumption. The administration has voiced its commitment to an all-of-the-above energy strategy, including hydropower as an important part of that strategy. It’s also important to note that hydropower facilities have a number of societal benefits beyond its contributions to our energy mix. Among other examples, they can provide flood control services and recreational benefits. And hydropower has played a uniquely important role in U.S. history, as it was a prime mover in introducing electricity to many rural areas of the country. All of those factors taken together make a strong case for hydropower being an integral component of the administration’s efforts to strengthen our nation’s energy infrastructure for the 21st century.

Q: In your opinion, are there policy or regulatory changes that can help pave the way for more hydro development work in the U.S.?

A: We at FERC are constantly looking at ways to better perform our regulatory responsibilities, including those related to hydropower development. In fact, one of the first actions taken by the Commission after I became chairman in August 2017 was to establish a 40-year default licensing term for hydropower projects. That relatively simple policy change improved regulatory certainty for all stakeholders, including developers considering new or expansion hydropower projects, as well as those looking at relicensing their existing hydropower projects. More recently, the Commission was one of a number of federal agencies executing a Memorandum of Understanding implementing Executive Order 13807’s One Federal Decision Policy. In signing that MoU, FERC has committed to reviewing its processes and working closely with other agencies to streamline environmental reviews associated with licensing of major infrastructure projects such as hydropower facilities. These are just some of the examples of our dedication here at the Commission to determining ways we can improve efficiencies and, therefore, better enable hydropower development.

Commissioner Robert Powelson

Q: Dam safety considerations have come to the forefront as a result of the Oroville Dam incident in California. How is FERC responding to this?

A: FERC is taking a proactive role to ensure that dam safety remains a top priority. As we review the January 5, 2018, independent forensic report regarding the Oroville incident, we are focusing on how to improve our dam safety policies, processes and practices to identify and prevent other incidents, regardless of magnitude, that could result from similar dam safety and organizational factors that contributed to the Oroville incident. We expect our regulated dam owners to have similar internal discussions. To facilitate such discussions, we have sent a letter to all project licensees with high-hazard dams requesting that their dam safety personnel read the independent forensic report, discuss it with senior management, and determine how the findings may apply to their facilities and dam safety programs.

Q: Hydropower is the lowest-cost power generation resource globally, but in the U.S. we have low-cost natural gas. How might this continue to affect hydro?

A: Wholesale prices for electricity vary throughout the U.S. due to many factors, and I cannot predict the future with any certainty. However, hydropower generation resources are capable of providing many reliability services, such as frequency response, voltage control and ramp capability. They are also a type of zero-carbon generation. So as our nation’s generation resource mix continues to evolve and different jurisdictions grapple with complex issues like resource adequacy, renewable energy resource integration, environmental goals, and grid reliability, it is likely that the impacts to hydropower resources, like other forms of electricity generation, will be diverse and region-specific.

Q: You have some interest and background in cyber security. Does FERC have any initiatives under way in this area that might affect hydro?

A: Cyber security is certainly a priority for FERC, and we do have several initiatives that are tailored to hydropower. On January 1, 2016, the Division of Dam Safety and Inspections (D2SI) implemented a cyber security program for licensed projects to increase protective measures against malicious cyber events. The initial process included a self-assessment tool (e.g., a cyber security checklist) for licensees to evaluate their current cyber security measures. Since 2016, the D2SI Security Team has also conducted annual security webinars to facilitate compliance with the hydropower security program. These webinars address both physical and cyber security and have featured a briefing on threats, vulnerabilities, and recent cyber attacks related to critical infrastructure to increase dam operator/owner awareness of cyber security issues.

Commissioner Richard Glick

Q: You have previously worked for utilities that had hydro in their generating portfolios. What is your general attitude toward hydropower?

A: Hydropower plays an important role in the resource mix, both in terms of providing clean, emissions-free generation and, increasingly, in helping to integrate variable energy resources, such as wind and solar. That is particularly true in the West, which has significant hydro resources and rapidly increasing levels of wind and solar generation.

Q: Does FERC have any plans to change the licensing process for hydropower, for example to make the process less time-consuming?

A: That is really a question for Chairman McIntyre, who sets the agenda for the Commission as a whole. I will note that I support efforts to make licensing processes more efficient wherever the Commission is able to do so, provided that we can still meet our obligations to evaluate the safety of the project and to address any effects it may have on the environment and surrounding communities.

Q: What can people in the hydro industry do to keep this clean, renewable resource in legislators’ minds going forward?

A: As I mentioned, hydropower has an important role to play as the generation mix changes and zero-emissions resources play a bigger role in meeting the nation’s electricity demands. It is important for hydropower interests to discuss the potential for hydropower to facilitate this transition, including by helping to integrate increasing quantities of variable energy resources, such as wind and solar. The development of additional pumped storage, in particular, can play a critical role in this regard.