Hydropower tax credits gaining bipartisan momentum

  • Water spills over the West Fork Upper Battle Creek diversion dam just before a valve to divert the water towards the Bradley Lake hydro project near Homer was opened Aug. 27, 2020. The $47 million state-owned project will provide low-cost hydro light and heat to an additional 5,000 Railbelt region homes, according to the Alaska Energy Authority. Pending legislation in Congress would offer up to 30 percent tax credits for a variety of hydropower projects from grid resiliency to improving fish passage. (Photo/Elwood Bremer/AJOC)

Federal legislation aimed at improving the nation’s hydropower infrastructure and led by members of the Alaska congressional delegation also has rare support from some of the leading industry and environmental players in the realm.

Sens. Lisa Murkowski and Maria Cantwell, D-Washington, submitted the Maintaining and Enhancing Hydroelectric and River Restoration Act to the Senate June 24. Rep. Don Young and Reps. Annie Kuster, D-New Hampshire; Brian Fitzpatrick, R-Pennsylvania; and Suzan DelBene, D-Washington, introduced a mirror bill by the same name to the House July 16.

At the core of the legislation is a 30 percent tax credit for investments in dam safety, environmental, such as fish passage, and corresponding grid resiliency improvements for hydro facility owners. The tax credit would also extend to wholesale dam removal projects.

According to data compiled by a coalition of the bills’ backers, which includes the National Hydropower Association, the American Society of Civil Engineers, American Rivers and the Association of State Dam Safety Officials among others, the roughly 90,000 dams across the country average nearly 60 years old and the tax incentives should accelerate the rehabilitation and removal. Approximately 2,500 of those dams currently produce power.

Young and Murkowski emphasized in separate statements that the legislation could lead to additional hydropower development in Alaska that directly displaces diesel-fired power relied upon in rural communities across the state.

A particularly key provision for Alaska would allow nonprofit hydro facility owners, such as electric cooperatives, and municipal-owned utilities that are common across the state to capture the tax credit through a direct payment from the federal government that would cover up to 30 percent of an eligible investment.

Overall, the legislation provides for up to $4.7 billion in tax credits for dam and grid improvements and another $4.5 billion in eligible tax credits for dam removals, according to the coalition of supporters.

Duff Mitchell, executive director of the Alaska Independent Power Producers Association and a member of the National Hydropower Association’s legislative committee said the legislation is the result of an “uncommon dialogue” in which the leaders of historically opposed hydro and environmental interest groups debated ways to address the growing issues of aging infrastructure that often doesn’t meet what’s accepted today environmentally such as fish passage.

“I think it’s a good bill for the industry; it’s good for recreation, the environment and grid resiliency. It’s a well thought out bill that supports our fish as well because it incentivizes dam owners to do the right thing,” Mitchell said of providing credits for environmental rehabilitation measures such as improving fish ladders or installing new turbines designed to mitigate impacts to aquatic life.

He projected the benefits for Alaska to be in the “hundreds of millions of dollars” if the legislation passes.

Homer Electric Association’s Grant Lake project on the Kenai Peninsula is one that stands to immediately benefit from the legislation, he added.

Located in the mountains just east of Moose Pass, the 5 megawatt capacity hydropower project would utilize what HEA leaders describe as a three-foot “weir” at the outlet of Grant Lake to raise the water level, noting that the lake is not salmon habitat because of a downstream barrier falls in the outlet creek.

HEA General Manager Brad Janorschke said in an interview that he believes the legislation would be “very applicable” to Grant Lake, which the utility secured a Federal Energy Regulatory Commission construction license for in August 2019.

“We are still full-speed ahead on that project,” he said, while also acknowledging that despite having the qualities for a good hydro development, the economics of the estimated $58 million Grant Lake hydro facility are still cloudy, as is the case with many similar projects across the state.

“We are really hopeful over the next 12 months that some legislation does pass in D.C.,” Janorschke said.

As for seeing one of the bills through — never a small task even with support from the administration — Murkowski and Young’s co-sponsors appear to be in positions to at least jumpstart activity on the measures.

Young’s spokesman Zack Brown noted that Washington’s Rep. DelBene is a member of the Ways and Means Committee where the House version currently resides and Young has a good working relationship with ranking Ways and Means Republican Kevin Brady of Texas.

“There is no doubt that buy-in on hydropower from the administration is certainly helpful, especially for committee Democrats who would be needed to get this bill approved,” Brown wrote in an email.

According to staff for Cantwell, the Washington Democrat recently received a renewed commitment from Senate Finance chair Ron Wyden, D-Oregon, who originally committed to including it in a committee markup last spring before, as often happens, the bill was delayed.

This time, it’s likely to be included in the clean energy portion of the roughly $3.5 trillion — and highly partisan — budget reconciliation package Democrats are starting to push in the Senate, according to Cantwell’s office.

Murkowski, who previously worked closely with Cantwell while they led the Energy and Natural Resources Committee for their parties, was highly critical of Democrats’ reconciliation spending plan in an Aug. 10, calling it a “blunt instrument.”

She said Cantwell is in a good position as a majority member of Senate Finance to keep the hydro bill alive, but she won’t be voting for the budget reconciliation bill Democrats appear to be developing regardless of what’s attached.

She also highlighted that Senate rules limit what can be included in a budget reconciliation package and some riders are rejected for not meeting the requirements, per the Senate parliamentarian.

“There’s no way that I will be a ‘yes’ vote on the reconciliation measure when you’re talking close to $4 trillion all over the board,” Murkowski said. “The fact that there may be a bill in there that I think is good policy — that’s one small measure in a basket of initiatives that is almost unlimited in scope and spending.”

Elwood Brehmer can be reached at [email protected].

08/10/2021 - 4:25pm