Hydropower Group Pushes to Expand Tax Break Through 2018

The U.S. hydroelectric power industry, seeking a five-year extension of a federal tax credit, is lobbying for political support beyond the three Western states that account for half its production capacity.

The National Hydropower Association, whose members include Duke Energy Corp. (DUK), released a map today showing the industry supports more than 1,900 U.S. companies, most located east of the Mississippi River.

The industry is lobbying to preserve or even expand a 1.1 cent-per-kilowatt hour tax break that expires at the end of 2013. Doubt about the tax break’s future is already slowing development for projects that require long lead times, industry officials say, echoing an argument used by wind- and solar- energy producers.

The map shows “the broad economic impact that our hydro industry has in our communities,” Linda Church Ciocci, executive director of the Washington-based group that includes the New York Power Authority and Exelon Corp. (EXC), said in an interview.

While hydroelectric power may summon images of huge engineering projects, such as Washington state’s Grand Coulee Dam completed in 1942, Ciocci said including the tax credit in a 2005 energy law has increased development.

The industry had “minimal growth” through the 1990s and most the next decade, the group said in a March 27 letter to Senators Jeff Bingaman, a New Mexico Democrat, and John Cornyn, a Texas Republican. Both sit on the Senate Finance Committee.

Slow Growth

Since 2005, 85 projects to upgrade or expand facilities in 22 states received the production tax credit, according to the letter, costing taxpayers about $75 million. The projects can supply power for about 84,533 homes, according to the trade group. Wind and solar growth has been faster.

Hydro accounted for 6 percent of total U.S. electricity in 2011, and about 63 percent of the power from renewable sources. More than half of U.S. hydropower is generated in Washington state, Oregon and California, according to the Energy Department.

Hydro Green Energy LLC, a Westmont, Illinois, company that adds hydropower generation to dams used for irrigation or flood control that don’t generate electricity, is developing 33 projects in 15 states. The plan is to produce about 400 megawatts of power, enough for about 230,000 homes, and each project will create 140 jobs, according to the company.

Projects Delayed

Uncertainty about the future of the tax credit led Hydro Green to delay 11 of the 12 projects under review at the Federal Energy Regulatory Commission, which oversees the electricity market, according to the association. The trade group wants the break extended to 2018.

Only 3 percent of the dams in the U.S. can produce power, giving the industry room to expand with sufficient government incentives, Ciocci said.

The association, which is holding its 2012 convention in Washington this week, also is lobbying for quicker permitting at the commission, which now can take five years. Wind producers receive a 2.2 cent-per-kilowatt hour tax credit, double that is available to the hydro industry.

Industry executives will hold a rally on Capitol Hill tomorrow in their effort to back renewal of the tax benefit.

While bills extending renewable tax credits have been introduced in the House and Senate with bipartisan support, some Republicans are seeking an end to energy subsidies as Congress seeks ways to trim the deficit.

To contact the reporter on this story: Jim Snyder in Washington at jsnyder24@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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