Hydropower: Federal and Nonfederal Investment

Kelsi Bracmort
Specialist in Agricultural Conservation and Natural Resources Policy

Charles V. Stern
Specialist in Natural Resources Policy

Adam Vann
Legislative Attorney

The 112th Congress has examined numerous energy sources to determine their contribution to the nation’s energy portfolio and the federal role in supporting these sources. Hydropower, the use of flowing water to produce electricity, is one such source. Conventional hydropower accounted for approximately 8% of total U.S. net electricity generation in 2011. The use and support of hydropower is likely to remain an active issue area for the 113th Congress.

Hydropower has advantages and disadvantages as an energy source. Its advantages include its status as a continuous, or baseload, power source that releases minimal air pollutants during power generation relative to fossil fuels. Some of its disadvantages, depending on the type of hydropower plant, include high initial capital costs, ecosystem disruption, and reduced generation during low water years and seasons.

Hydropower project ownership can be categorized as federal or nonfederal. The bulk of federal projects are owned and managed by the Bureau of Reclamation and the U.S. Army Corps of Engineers. These projects are typically authorized and funded by Congress. Nonfederal projects are licensed and overseen by the Federal Energy Regulatory Commission (FERC).

Considered by many to be an established and renewable energy source, hydropower is not always discussed alongside clean or other renewable energy sources in the ongoing energy debate due to its potential environmental impacts. However, hydropower proponents argue that hydropower is cleaner than some conventional energy sources, and point to recent findings that additional hydropower capacity could help the United States reach proposed energy, economic, and environmental goals. Others argue that the expansion of hydropower in the form of numerous small hydropower projects could have environmental impacts and regulatory issues similar to those of existing large projects.

The 113th Congress may face several issues as it addresses how hydropower fits into a changing energy and economic landscape. For example, existing large hydropower infrastructure is aging; many of the nation’s hydropower generators and dams are over 30 years old. Proposed options to address these concerns include increasing federal funding, utilizing alternative financing, privatizing federally owned dams, and encouraging additional small-capacity generators, among other options. Whether to significantly expand or encourage expansion of hydropower is likely to require congressional input due to the uncertainty surrounding the clean and renewable energy portfolio within power markets. Potential expansion of hydropower projects could take place by improving efficiency at existing projects or by building new projects, or both. For instance, H.R. 267 would grant small hydropower projects with a capacity of 10 megawatts or less an exemption from licensing requirements, promote conduit hydropower projects, and require FERC to examine the feasibility of a two-year licensing process to promote hydropower development at nonpowered dams and closed-loop pumped storage projects, among other things. Another important topic is the rate at which FERC issues licenses for nonfederal projects, which some find slower than ideal. Others defend the licensing process due to the environmental and other statutes with which agencies must comply. Other controversial issues related to hydropower in the current Congress include funding for potential changes to the rate structure of the Federal Power Marketing Administration (PMAs) and federal support for removal of hydroelectric dams. Legislation to address these issues was introduced in the 112th Congress in the House (H.R. 2842 and H.R. 6247) and the Senate (S. 629).


Date of Report: January 22, 2013
Number of Pages: 28
Order Number: R42579
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Electric Power Sector: A Compendium

This Compendium contains a wealth of information on topics including energy tax incentives; energy storage for power grids and electric transportation; privacy and cybersecurity for smart meter data; EPA’s mercury and air toxics standards; lighting industry trends; federal agency authority to contract for electric power and renewable energy supply; potential energy sources qualifying under the Clean Energy Standard; EPA’s proposed rule for cooling water intake structures; and a discussion of whether biopower is carbon neutral.

The electric power industry is in the process of transformation. Since 1978, technology improvements, changes in the economics for generating electricity, and new federal laws and regulations (such as the Public Utility Regulatory Policies Act of 1978, the Energy Policy Acts of 1992 and 2005, the Energy Independence and Security Act of 2007, and Federal Energy Regulatory Commission (FERC) orders, have created a new competitive landscape for electricity. Competition is occurring on the wholesale level, and some states have moved toward retail competition. Other states have retreated from open markets due to concerns over impacts on power prices. Congress continues to face the issue of how much to intervene to ensure a reliable and affordable supply of electricity throughout the United States.

The electric utility system is vulnerable to outages due to system operator errors, weather-related damage, terrorist attacks, and shortages of transmission and generating capacity. The blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for operations improvements and greater standardization of operating rules. Pursuant to the Energy Policy Act of 2005, FERC named the North American Electric Reliability Corp. as the electric reliability organization required by the act. The ERO is developing mandatory and enforceable standards for the sector to ensure bulk power reliability.

Another provision in EPACT05 required the Secretary of Energy to study congestion on the transmission system. A competitive bulk power market depends on adequate infrastructure. Transmission systems were developed for limited movements of electricity, not the regional power transfers that have become common. Even though transmission of electricity is considered interstate commerce, siting transmission lines remains the responsibility of the states. EPACT05 gives the Secretary of Energy the federal power of eminent domain to obtain rights-of-ways for transmission lines in designated areas if states do not act to site them. Congress is expected to continue oversight on the implementation of EPACT05.

The electric power sector is dependent on adequate fuel supply. The power system has become increasingly dependent on natural gas to fuel new power plants, raising concerns about dependence on a fuel sometimes viewed as supply-limited and subject to price volatility. The most abundant domestic fossil fuel is coal, but the future use of coal is uncertain due to global warming concerns. Greater use of nuclear power may be constrained by the cost of building new plants and the availability of federal financial supports. One answer may be renewable power, but these technologies are still under development and are dependent on federal financial incentives. The resolution of these types of issues, which raise concerns over what kinds of new power plants should be built and how they should be fueled, may ultimately turn on congressional decisions on climate change.

Date of Report: January 22, 2013
Number of Pages: 438
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U.S. Wind Turbine Manufacturing: Federal Support for an Emerging Industry

Michaela D. Platzer
Specialist in Industrial Organization and Business

Increasing U.S. energy supply diversity has been the goal of many Presidents and Congresses. This commitment has been prompted by concerns about national security, the environment, and the U.S. balance of payments. Investments in new energy sources also have been seen as a way to expand domestic manufacturing. For all of these reasons, the federal government has a variety of policies to promote wind power.

Expanding the use of wind energy requires installation of wind turbines. These are complex machines composed of some 8,000 components, created from basic industrial materials such as steel, aluminum, concrete, and fiberglass. Major components in a wind turbine include the rotor blades, a nacelle and controls (the heart and brain of a wind turbine), a tower, and other parts such as large bearings, transformers, gearboxes, and generators. Turbine manufacturing involves an extensive supply chain. Until recently, Europe has been the hub for turbine production, supported by national renewable energy deployment policies in countries such as Denmark, Germany, and Spain. However, support for renewable energy including wind power has begun to wane across Europe as governments there reduce or remove some subsidies. Competitive wind turbine manufacturing sectors are also located in India and Japan and are emerging in China and South Korea.

U.S. and foreign manufacturers have expanded their capacity in the United States to assemble and produce wind turbines and components. About 470 U.S. manufacturing facilities produced wind turbines and components in 2011, up from as few as 30 in 2004. An estimated 30,000 U.S. workers were employed in the manufacturing of wind turbines in 2011. Because turbine blades, towers, and certain other components are large and difficult to transport, manufacturing clusters have developed in certain states, notably Colorado, Iowa, and Texas, which offer proximity to the best locations for wind energy production. The U.S. wind turbine manufacturing industry also depends on imports, with the majority coming from European countries, where the technical ability to produce large wind turbines was developed. Although turbine manufacturers’ supply chains are global, recent investments are estimated to have raised the share of parts manufactured in the United States to 67% in 2011, up from 35% in 2005-2006.

The outlook for wind turbine manufacturing in the United States is more uncertain now than in recent years. For the past two decades, a variety of federal laws and state policies have encouraged both wind energy production and the use of U.S.-made equipment to generate that energy. A continuing challenge for the industry is uncertainty about one main federal policy tool in the deployment of wind power, the production tax credit (PTC), which Congress has extended eight times and let lapse on four occasions. Most recently, the PTC expired at the end of 2012, but a few days later, Congress extended it through year-end 2013. At least a dozen wind turbine manufacturers announced layoffs or hiring freezes at U.S. facilities in 2012, citing concern about the PTC’s future as one reason. Other factors affecting the health of the U.S. wind industry are intense price competition from natural gas, an oversupply in wind turbines, and softening demand for renewable electricity.


Date of Report: January 16, 2013
Number of Pages: 38
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Electrical Power: Overview of Congressional Issues

Richard J. Campbell
Specialist in Energy Policy

The electric power industry is in the process of transformation. The electricity infrastructure of the United States is aging, and uncertainty exists around how to modernize the grid, and what technologies and fuels will be used to produce electricity in the future. Congress will likely be faced with policy issues regarding how the modernization of this vital industry will unfold.

For most of the 20th century, coal has been the dominant fuel used to produce electricity. In 2011, coal was the fuel used for almost 42% of power generation in the United States. However, coal use for power generation seems to be on the decline. In April 2012, for the first time in history, the amount of electricity generated from natural gas equaled that of coal (according to Energy Information Administration statistics) with each fuel claiming about 32% of the market. The future of coal as a fuel for power generation seems to be in question. Two major reasons are generally seen as being responsible: the expectation of a dramatic rise in natural gas supplies, and the impact of environmental regulations on an aging base of coal-fired power plants. The electric utility industry values diversity in fuel choice options since reliance on one fuel or technology can leave electricity producers vulnerable to price and supply volatility. However, an “inverse relationship” is developing for coal vs. natural gas as a power generation choice based on market economics alone, and policies which allow one fuel source to dominate may come at the detriment of the other.

Upgrading the nation’s transmission system to accommodate current and future uses, and ensuring the reliable functioning and the security of the grid, has been a major concern for the federal government. Federal law has already tasked the Federal Energy Regulatory Commission with responsibility for the bulk electric system, but cybersecurity of the grid and protection from a major geomagnetic disturbance event caused by solar storms are key issues. The recent damage sustained to the electrical grid by Hurricane Sandy in New York and New Jersey and difficulty in restoring electricity service underscore the age and fragility of the power system, and how electricity service might benefit from hardening and modernization of various power systems. Growing concerns over greenhouse gas (GHG) emissions, other environmental costs associated with burning fossil fuels, and existing or anticipated state and federal policies addressing these issues are leading some utilities and energy providers to deploy more renewable energy technologies to meet power demands, and potentially increasing the need for new transmission lines to incorporate clean energy sources.

New environmental regulations under development would impose new requirements on coal-fired power plants. Some of these rules would be implemented at the federal level, while others would be implemented at the state level. The Environmental Protection Agency (EPA) also issued standards for greenhouse gas emissions which would require all new power plants to restrict carbon dioxide emissions. EPA has yet to propose rules for GHG emissions from existing power plants, as is required by court order. Much attention has focused on the resulting finalization of these regulations, and their potential to contribute to power plant retirements, with some in the electric power industry expressing concern that reliability could be impacted.


Date of Report: January 14, 2013
Number of Pages: 14
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Electric Power Sector: A Compendium

This Compendium contains a wealth of information on topics including energy tax incentives; energy storage for power grids and electric transportation; privacy and cybersecurity for smart meter data; EPA’s mercury and air toxics standards; lighting industry trends; federal agency authority to contract for electric power and renewable energy supply; potential energy sources qualifying under the Clean Energy Standard; EPA’s proposed rule for cooling water intake structures; and a discussion of whether biopower is carbon neutral.   The electric power industry is in the process of transformation. Since 1978, technology improvements, changes in the economics for generating electricity, and new federal laws and regulations (such as the Public Utility Regulatory Policies Act of 1978, the Energy Policy Acts of 1992 and 2005, the Energy Independence and Security Act of 2007, and Federal Energy Regulatory Commission (FERC) orders, have created a new competitive landscape for electricity. Competition is occurring on the wholesale level, and some states have moved toward retail competition. Other states have retreated from open markets due to concerns over impacts on power prices. Congress continues to face the issue of how much to intervene to ensure a reliable and affordable supply of electricity throughout the United States.

The electric utility system is vulnerable to outages due to system operator errors, weather-related damage, terrorist attacks, and shortages of transmission and generating capacity. The blackout of 2003 in the Northeast, Midwest, and Canada highlighted the need for operations improvements and greater standardization of operating rules. Pursuant to the Energy Policy Act of 2005, FERC named the North American Electric Reliability Corp. as the electric reliability organization required by the act. The ERO is developing mandatory and enforceable standards for the sector to ensure bulk power reliability.

Another provision in EPACT05 required the Secretary of Energy to study congestion on the transmission system. A competitive bulk power market depends on adequate infrastructure. Transmission systems were developed for limited movements of electricity, not the regional power transfers that have become common. Even though transmission of electricity is considered interstate commerce, siting transmission lines remains the responsibility of the states. EPACT05 gives the Secretary of Energy the federal power of eminent domain to obtain rights-of-ways for transmission lines in designated areas if states do not act to site them. Congress is expected to continue oversight on the implementation of EPACT05.

The electric power sector is dependent on adequate fuel supply. The power system has become increasingly dependent on natural gas to fuel new power plants, raising concerns about dependence on a fuel sometimes viewed as supply-limited and subject to price volatility. The most abundant domestic fossil fuel is coal, but the future use of coal is uncertain due to global warming concerns. Greater use of nuclear power may be constrained by the cost of building new plants and the availability of federal financial supports. One answer may be renewable power, but these technologies are still under development and are dependent on federal financial incentives. The resolution of these types of issues, which raise concerns over what kinds of new power plants should be built and how they should be fueled, may ultimately turn on congressional decisions on climate change.

Date of Report: January 16, 2013
Number of Pages: 438
Order Number: C12012
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