NCPA - National Center for Policy Analysis

Federal Regulations Discourage Renewable Energy

December 13, 2013

Federal regulations are making it difficult for cities to take advantage of renewable energy such as small-scale hydropower, say Megan E. Hansen, Randy Simmons, Ryan M. Yonk and Ken J. Sim of the Mercatus Center.

Small-scale hydropower differs from large-scale hydropower, as it usually does not require dams. Instead, river water is diverted into a pipeline and carried through a turbine, which powers a generator and produces electricity. These small hydropower systems have big potential:

  • A system generating 10 kilowatts of energy can power a large home or a small resort.
  • It is possible for small and low-power hydro projects across the United States to generate 30,000 megawatts of energy. That would be enough to power over 65,000 homes per year.

These hydro projects have little if any environmental effects (as no fuels are burned in the process), but the federal permitting process is nonetheless burdensome. When Logan City, Utah, sought a license for a water turbine in the city, it faced so many regulations and costs that the city says that it will not embark upon similar projects in the future:

  • The project took four years and ended up costing nearly $3 million. Had the project taken place in Canada rather than the United States, Natural Resources Canada estimates that the total cost would have been between $225,000 and $375,000.
  • The Federal Energy Regulatory Commission (FERC) oversees all permits for hydropower plans. The process is so onerous that license-seekers sometimes have to obtain permits from up to 25 different agencies. It can take years to meet requirements regarding water quality and endangered species impacts.

These hydro projects would make economic sense were it not for the burdensome regulations that increase the costs of these ventures.  Hydropower has a conversation rate of 90 percent, compared to an average of 50 percent for other forms of electricity generation, making it the most efficient form of power.

Source: Megan E. Hansen, Randy Simmons, Ryan M. Yonk and Ken J. Sim, "Logan City's Adventures in Micro-Hydropower: How Federal Regulations Discourage Renewable Energy Development," Mercatus Center, December 3, 2013.


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