DOE Urged to Provide More Flexibility, Fund Eligible Hydro Projects Under Incentive Programs

March 7, 2023

by Paul Ciampoli
APPA News Director
March 7, 2023

The Department of Energy should provide for more flexibility for permits and authorizations and fund all eligible projects under hydroelectric incentive programs that will be implemented under the Infrastructure Investment and Jobs Act, the American Public Power Association and two other associations recently said in comments filed with DOE.

Section 40333 of the infrastructure law amended the Energy Policy Act of 2005 to establish section 247, which offers a new hydroelectric incentive payment to the owners and operators of qualified hydroelectric facilities for capital improvement projects directly related to supporting grid resiliency, improving dam safety, and environmental enhancements.

Incentive payments are limited to 30 percent of the cost of capital improvements, and only one incentive payment of no more than $5 million can be made to a single project per year. $553.6 million was appropriated for the provision.

In February, DOE issued draft guidance to inform its implementation of hydroelectric incentives in the Infrastructure Investment and Jobs Act.

APPA was joined by the National Hydropower Association and the Edison Electric Institute in Feb. 23 comments filed in response to the draft guidance.

The Associations asked that DOE provide funds to all eligible projects on an equitable basis. “Congress did not authorize DOE to create a prioritization structure between categories or within categories. It is impossible for DOE to create a system that could score the vast array of potential projects that could be eligible for Section 247 grants,” they said. “DOE should review each project to see if it is eligible for funding and, in the event of oversubscription, prorate such that eligible projects receive at least some funding.”

The groups noted that the draft guidance requires applicants to have received any and all permits and authorizations as a condition on eligibility. “This strict requirement significantly limits the population of potential investments to only those that are shovel ready. This was not Congress’ intent,” APPA and the other groups said. 

Projects that are still ongoing the permitting process should be eligible to apply for funding, they argued, noting that DOE has other programs that “obligate” funds pending the permitting process. “Actual outlay should remain conditioned on the project receiving all applicable permits.”

The groups also argued that the application period should be long enough to give applicants the opportunity to put together robust and complete applications, noting that the Section 247 program is new for both DOE and the industry. 

“The Associations have heard great interest in this program from member companies; however there are significant questions on what constitutes an eligible project and uncertainty as to what is required in the application package.”

APPA, EEI and NHA said that potential applicants will require varying degrees of resources to put together a complete application. “The Associations recommend at least a 90-day open window which gives potential applicants enough time to put together comprehensive applications.“

The Associations said they agree that projects where capital was spent (i.e., placed in service) after the IIJA was signed by President Biden, but before guidance was finalized are eligible.

However, due to the timing of the development of these projects, they were planned and undertaken without guidance from DOE, they pointed out.

“Therefore, they had no way to know what was required to apply for Section 247 funds. DOE should create a process such that these projects have a path to apply for these funds and cure any deficiencies so they can meet the spirit and intent of the guidance.” 

The Associations recommended that that DOE require only expenditures made after the final guidance is issued need to adhere to the Community Benefits Plan requirements in Section VIII and relevant requirements in Section XIII.  Alternatively, DOE could grant waivers in these cases.