Wednesday, May 22, 2013

Dam Futures

Glen canyon dam imageA standard environmental history of American dams unfolds something like this: As a nation, we had a long love affair with dams.  And while they helped our nation grow into an industrial power, the environmental side-effects were immense: lost forests and farmland, drowned canyons, and, perhaps most importantly, devastated fisheries.  Yet even after some of those consequences became apparent, the story goes, dam-building marched on, powered by bureaucratic inertia and the seemingly unstoppable engine of pork-barrel politics.  Finally, in the 1980s, we stopped, but by then we had built approximately one dam for every day of our national existence.  As former Secretary of the Interiror Bruce Babbitt once put it, “we overdosed.”  We’re now starting to take dams out, and those dam removals often lead to dramatic environmental improvements.  But, in the standard narrative, the removals aren’t coming nearly fast enough.

I agree with this story, and most of the underlying facts aren’t really in dispute.  But another narrative of dams lingers on, particularly — but not exclusively — in the reports of the government agencies that manage much of our hydropower.  In this story, hydropower remains an essential part of our energy mix.  Hydropower still comprises approximately 7 percent of our national energy-generating capacity (globally, the percentage is higher).  While that number may seem small, it dwarfs the contributions of wind, solar, geothermal, and other renewables.  For a few key reasons, that 7 percent is also particularly useful.  First, the greenhouse gas emissions of existing hydropower are minimal, at least in the United States.  Second, both solar and wind power are somewhat intermittent in their availability, and studies finding that we can rely much more heavily on renewable energy (like this one here, which Lesley McAllister recently blogged about) generally assume that hydropower will even out some of the dips in the supply curve. 

Hydropower’s share also could grow.  Some recent studies have identified huge amounts of untapped hydropower capacity, much of it at sites where we already have dams (the United States has  approximately 80,000 non-hydropower dams).  How much of that capacity is economically available, given a reasonable set of environmental constraints, is a hotly debated question. But at least some capacity for expansion exists, and renewable portfolio standards or—dare we hope—a price on carbon could make expanded hydro look much more economically appealing.   In this alternative narrative, then, hydro occupies a crucial and potentially dynamic role in our energy future.  And this narrative is not just idle storytelling.  In multiple bills, including, most recently, the Water Resources Development Act recently passed by the Senate, Congress has signaled its continuing enthusiasm for hydropower.

Penobscot diagramWe often think that our energy needs inevitably will conflict with environmental protection, and these two narratives might on their face seem to reinforce that view. But is the tension between these narratives unavoidable?  The answer, perhaps surprisingly, is "not always," and a case study illustrates the possibilities.  On the Penobscot River in Maine, an ambitious dam removal project is currently underway.  Once completed, the project (which I’ve blogged about here, and which is described in more detail here, here, and here) will involve multiple dam removals and fish passage improvements on the dams that remain.  Hundreds of miles of river habitat will be opened to the river’s many anadromous species — fish that breed in freshwater, but spend most of their lives in saltwater — and scientists anticipate exponential increases in their populations, with benefits for both freshwater and saltwater ecosystems.  All of this will happen without any loss of hydropower.  By moving and upgrading facilities, Black Bear Hydro LLC, which owns the dams, will be able to sustain its present generating capacity.   Both the upgrades and the environmental improvements arose out of one big negotiated deal, with environmental groups and the Penobscot Indian Nation essentially offering support for what otherwise would have been contentious license renewals (as well as a substantial financial payment, which some of the groups helped raise) in return for the environmental improvements.  In short, on the Penobscot, environmental improvements and hydropower efficiency upgrades were closely, and legally, linked.

Great works 1 Great works 2

 

 

 

 

 

 

 

The Great Works Dam site, before and after.

Could that be repeated?  Physically, it seems possible.  Most river basins in the United States contain multiple dams, and trading removals or improved fish passage in some locations for energy upgrades in others seems like a sensible step.  But the legal challenges are substantial.  On most rivers, many different entities own the dams, creating a significant coordination challenge, and public governance of watersheds is famously fragmented.  As anyone who has worked with FERC licensing knows, renewing even a single license is a long and difficult process, and linking multiple licensing processes together sounds like a formidable task.  Consequently, the legal challenges are daunting.

But are they insurmountable?  I don’t yet know.  But over the next few months, I’ll be taking a close and careful look at hydropower law to try to figure these questions out.  The research project goal, ultimately, is to identify legal reforms that will allow our hydropower system to sustain or increase its benefits while reducing, hopefully substantially, the environmental burdens it imposes.

-Dave Owen

Glen Canyon Dam image from wikimedia.com; other images courtesy of the Penobscot River Restoration Trust.

May 22, 2013 | Permalink | Comments (0) | TrackBack (0)

Tuesday, May 21, 2013

Auction Results in California Cap and Trade

The California Cap and Trade Program’s third auction was held last Thursday 5/16/13, and the results were released today.  I’ve been watching the auction results to see what clues they offer as to whether California’s program will suffer from the suite of problems associated with overallocation (low allowance prices, delayed emissions reductions, and large allowance banks).

Overallocation, however, really only becomes clear in retrospect.  Indeed, it is precisely the unknowns of the future that make overallocation hard to avoid.  There might be a recession that reduces allowance demand, or there might be solid economic growth.  There might be technological change that reduces allowance demand (fracking, for example), or not.  Economic change and technological change are just a couple of the exogenous factors that have contributed to overallocation in past programs (others include weather fluctuations, the success of legal challenges, etc.). 

Yet there are hints to be gleaned from the results of allowance auctions.  One can look at whether the allowances are selling for more than the reserve price.  They didn’t for several years in the Regional Greenhouse Gas Initiative (RGGI), but a reform in February to tighten the cap have led to slightly higher allowance prices (latest auction results here).  In California, they are, and the third auction looks better by this measure than did the second (see the Settlement Prices below).  One can also look at the extent to which the auction is oversubscribed or not.  RGGI’s auctions have often been undersubscribed.   In this latest Claifornia auction, there were almost double the bids for allowances (1.78 times) than there were allowances. But this is down from California’s February auction, in which there were almost two and a half times (2.47) more bids than available allowances.  Notably, all three of California “advance auctions,” which sell allowances that cannot be used for several years, have been undersubscribed (see below).  These advance auction allowances have always sold at the reserve price ($10 in 2012, $10.71 in 2013).

I do think there is some "early overallocation" in California’s program, meaning that program caps are above business-as-usual (BAU) emissions in the early years.  Indeed, an analysis by Energy GPS (discussed here) finds that the 2011 emissions of the entities regulated by California’s cap and trade program were about 12% lower than the 2013 cap (140.8 mmtCo2eq emitted, as compared to the 2013 cap of 160.4 mmtCo2eq).  The analysis further forecasts that the 2013 cap will be about 8% higher than 2013 emissions.  Whether overallocation becomes a real problem for the California program (as it has not just for RGGI, but also for the EU Emissions Trading Scheme), will depend on many factors, several of which are out of California's control.        

- Lesley McAllister 

Auction

Allowances Offered

Allowances Sold

Settlement Price

11/14/12

Current Auction

(2013 Vintage)

23,126,110

23,126,110

$10.09

11/14/12

Advance Auction

(2015 Vintage)

39,450,000

5,576,000

$10.00

2/19/13

Current Auction

(2013 Vintage)

12,924,822

12,924,822

$13.62

2/19/13

Advance Auction

(2016 Vintage)

 
  9,560,000

 
  4,440,000

 

$10.71

5/16/13

Current Auction

(2013 Vintage)

14,522,048

14,522,048

$14.00

5/16/13

Advance Auction

(2016 Vintage)

 
  9,560,000

 7,515,000

$10.71

May 21, 2013 | Permalink | Comments (0) | TrackBack (0)