Fund manager bets on new source of renewable power: old river dams

January 14, 2021

Opportunity comes after truce between US environmentalists and the hydropower industry

Dams built long ago to control floods or ease river transport are gaining attention as a potential zero-carbon electricity source in the US, as environmentalists and the hydropower industry drop their longstanding antagonism in the face of climate change.

Hydroelectricity is like wind, solar and nuclear power in that it emits no planet-warming carbon dioxide, yet hydro capacity has not grown for decades after big dams became impossible to build.

As an alternative, investors are looking to install power houses at older, smaller dams that were not designed to generate electricity. A fund manager named Climate Adaptive Infrastructure this week said it would provide capital to retrofit dams constructed for purposes such as flood control, navigation and irrigation.

The projects — in the states of Kentucky, Louisiana, Mississippi, Ohio, Pennsylvania and West Virginia — involve “no new dam construction, but a huge source of clean energy”, said Bill Green, CAI’s managing partner.

Together the 22 sites would produce 250 megawatts, enough to supply more than 100,000 homes. CAI intends to invest up to $150m in equity capital, with federal tax credits and debt accounting for the rest of the $800m total value of the projects.

The projects were first proposed years ago by Rye Development, a Boston-based hydropower company, but have been slow to advance towards construction. Rye has asked the Federal Energy Regulatory Commission to extend deadlines to commence construction under its licenses to sell power, according to public records.

In 2018 the University of Pittsburgh signed a contract to buy the power from a 17MW project Rye is pursuing on the Allegheny river in Pennsylvania. CAI is betting other projects will gain momentum as energy consumers such as tech companies seek out renewables, having made pledges to make their power use carbon free.

The US has almost 80,000MW of hydroelectric capacity, about half of it in California, Oregon and Washington. On the US grid, it is second to wind as a source of renewable energy, accounting for 7 per cent of total generation last year.

Construction of large dams ended after the 1970s amid evidence that they killed fish and damaged regional ecosystems.

But environmentalists have begun to soften opposition to hydropower as they weigh local impacts of damming rivers against the dangers of climate change. Last October, hydropower groups and environmental advocates signed a “joint statement of collaboration”, which identified installing power turbines at non-powered dams as an opportunity.

“If you are using existing dams, you are reducing the demand to build new dams,” said Bob Irvin, president of American Rivers, a conservation group. “As long as you are powering non-powered dams that are otherwise going to remain in place, it really is a no brainer.”

Private capital could hasten the electrification of non-powered dams. In the past decade, 35 dams have added power houses that brought 465MW on line, according to the National Hydropower Association. By 2030, powering these dams could add 3,600MW in capacity under the most ambitious scenario modelled by the US Department of Energy.

Only 3 per cent of the 90,000 dams in the US were currently equipped to generate electricity, the hydropower association said. Many of the best sites are owned by the Army Corps of Engineers, including a majority of the dams to be funded by CAI.

- By Gregory Meyer - Financial Times