Waterpower Intelligence Theater – Sponsored Content – Do we have a Blindspot about Public Safety When Considering Redevelopment of Existing Hydro?

The failure to redevelop aging hydro facilities, especially under 10 MW, is leading to a growing risk to public safety. In fact, with more than 500 sites already at that point, the risks to public safety may already be here and will continue to rise.


In the process of working through a number of redevelopments over the past 10 to 15 years, professionals at the KGS Group have come to realize that this risk to public safety is real and will grow in an accelerated manner in the years to come. However, we also are keenly aware that there is much more value to these generating stations beyond the electricity they generate. We think this reality is important and are making an effort to bring awareness of what we have learned to the hydropower industry and propose a possible approach to address the issue.

The argument we propose is that hydro not only generates power but, unlike any other form of power generation, it maintains infrastructure on which the public depends for safety, navigation, irrigation, recreation, and flood control.

We now wish to bring this to the attention of the industry to determine whether there is value we should recognize to justify redevelopment of these sites for the long-term safety of the public and the continue benefits these reservoirs provide to the public.

If we are to change the perspective of investors, policy makers, and the public on the long term value of these numerous small hydro sites, then we need to first reach a consensus within our industry.

Background
Much of the risk is a problem of scale. There are currently over 500 hydro sites in the U.S. and Canada over 100 years old and their owners face the following dilemma:
1) Their ability to generate a revenue is falling (which we can demonstrate), while their operating costs are rising. There is therefore a risk of financial failure of the owners of these sites.
2) Justifying the capital to redevelop sites under about 10 MW so it can operate for the next 100 years is very difficult based on the value of electricity today. 70% of these sites from this period are under 10 MW.
3) Because owners cannot justify redeveloping 70% of these 500 sites, what do they do?
-- Run to failure? Are these sites at end of life? (yes they are)
-- Run to bankruptcy?
-- Decommission the powerhouse? Then where is the ongoing revenue to support the O&M for the dams and spilling equipment?
-- Remove the dam? Will it be possible to get a social license to remove it? Who covers the cost?

What happens if owners fail to care for their dams? Or simply walk away? Neither the Federal Energy Regulatory Commission (FERC) or dam safety guidelines truly address the growing risk of the owners' financial stability so we may have a blind spot.

We believe that it is time for the industry to acknowledge the value of the non-power benefits of the reservoirs at many of these sites. The argument we propose is that hydro sites, unlike any other form of power generation, have two jobs. They not only generate power, but they maintain infrastructure on which the public depends for safety, navigation, irrigation, recreation, and flood control. As with any public infrastructure, there needs to be a source of revenue to maintain these assets. We propose that any economic analysis for redevelopment consider the non-generation benefits to close the financial gap, if it exists, for redevelopment.

Perhaps, this is the key to renewing the hydro fleet.

Presenters

Stefan Kohnen

Speaker

Principal/Regional Manager at KGS Group