Bill would create federal tax incentive for existing U.S. hydropower

U.S. Senators Maria Cantwell (D-WA) and Lisa Murkowski (R-AK), along with Debbie Stabenow (D-MI) and Dan Sullivan (R-AK), have introduced legislation to help ensure that existing hydroelectric facilities can continue to provide emissions-free, affordable electricity.

The Maintaining and Enhancing Hydroelectricity and River Restoration Act of 2022 creates a new federal tax incentive to encourage safety, security, fish migration, water quality and public use upgrades at hydropower plants in the U.S. The bill also establishes a new federal cost-share to encourage the removal of obsolete river obstructions that harm the health of river ecosystems and inhibit outdoor recreation opportunities.

“Clean and affordable hydropower is the backbone of Washington state’s economy and prosperity,” said Senator Cantwell. “This measure will help ensure we can meet our urgent emission reduction goals while restoring miles of fish habitat.”

“Small hydro projects across Alaska are already demonstrating innovative practices while powering neighborhoods and communities. I’m proud to help lead this legislation, which will facilitate investments in Alaskan projects, while protecting our critical fisheries and waterways,” said Senator Lisa Murkowski. “This bill incentivizes and taps into the immense renewable resources available in our state, and it will also help lower energy costs for Alaskans.”

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Hydroelectricity “is an irreplaceable component of any regional or national greenhouse gas emission reduction goal,” according to a release. Hydropower also can provide black start capabilities and grid voltage support and integrate and balance increasing amounts of intermittent renewable energy sources. However, many hydroelectric facilities are decades old and need costly upgrades to keep them operating safely.

The act leverages the federal tax code by providing a 30% federal investment tax credit that would spur investments in dam safety and environmental improvements. Eligible investments include adding fish-friendly turbines or other fish passage infrastructure, managing river sediment to improve habitat, upgrading or replacing floodgates and spillways, and improving public use of and access to public waterways impacted by existing dams. The legislation includes a direct pay option that allows not-for-profit public power entities to access these incentives.

The bipartisan bill would also support efforts to remove non-power-producing river barriers, including abandoned or obsolete dams, dikes or embankments. Private, state, local and non-profit groups could use the 30% federal tax incentive, with a direct pay option, to support efforts to demolish and remove unnecessary barriers with the owner’s consent. Removing obsolete river obstructions can provide new outdoor recreation opportunities, add fish and wildlife habitat, spur local economic development, and increase the resilience of rivers to the effects of climate change.

A recent joint proposal from the hydropower and river conservation community estimated that increased support for existing dam removal efforts could double the removal rate over the next 10 years. That would result in the removal of 2,000 obsolete river obstructions and restore ecosystem functions essential for salmon recovery by opening up 20,000 miles of free-flowing river habitat.

“Our nation’s efforts to transition to a clean energy grid has stopped just short of the finish line, as it failed to recognize the importance of hydropower’s existing fleet,” said Malcolm Woolf, president and chief executive officer of the National Hydropower Association. “With the right tools, our industry can make environmental enhancements, bolster dam safety and prevent the hydropower fleet from retiring – outcomes that will lead to healthier rivers and a more reliable grid.”

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Author: Elizabeth Ingram