As Relicensing Looms, Aging Dams Face a Reckoning
By Felicity Barringer | Bill Lane Center for the American West, Stanford University
Thursday, March 7, 2019
POTTER VALLEY, Calif. – More than a century ago, the people of Mendocino County in California needed electricity to fit into the industrialized world. So engineers generated power by building two dams and reconfiguring two rivers. For decades thereafter, people fashioned steadily improving lives around the new landscapes. At the same time, beset by environmental insults, the annual runs of salmonids in the Eel River withered.
Inevitably, priorities changed. As building the dams and creating the 9.2-megawatt Potter Valley project solved the need for electricity, a new need developed: irrigation. Tens of thousands of acre-feet of Eel River water were diverted to supply the power station at the headwaters of the Russian River’s East Branch. Then it flowed on, supplying cities and farmers and nurturing Mendocino and Sonoma County’s expanding agriculture – once pears and hops, now dominated by wine grapes.
The current need: repair the harm caused by the dams. That will cost so many tens of millions of dollars that the project’s owner, Pacific Gas & Electric – already losing money on it – is cutting its losses. It will not seek a new federal license.
This decision mimics PG&E’s recent moves away from other small hydroelectric projects, like the 12-megawatt Narrows project on the Yuba River in Nevada County, which PG&E sold last year to a local water agency. It also echoes decisions by the northwestern utility PacifiCorp, which, at a cost of $37 million, breached its 14.7 megawatt Condit Dam on the White Salmon River in Washington.
The Potter Valley Project: More Than Just a Dam
Choices Ahead for Owners of Small Hydroelectric Projects Across the West
Dam by dam, owners of smaller hydroelectric projects around the West look at them with a cold eye as relicensing looms. Created with optimism a century ago, dams are now seen as fish-killers and river-distorters. New energy sources are getting cheaper. After decades of operation, owners approach relicensing knowing that, if they are to continue generating a single watt of electricity, they must fix the problems.
Tens of millions of dollars are often at stake. The Federal Energy Regulatory Commission licenses hydroelectric projects for up to 50 years, but sometimes just one year at a time to ensure problems are resolved. Limited revenue from electricity may not justify expensive remediation. Before it was sold off, a financial analysis of the Narrows project showed costs would have outweighed profits by more than $12 million over the first five years.
Depending on how it finally turns out, the narrative of the Potter Valley project could be a cautionary tale for other dam owners whose stakeholders are at odds. Or it could be a roadmap to reconciling competing interests. Whatever the lesson, the project is part of a larger transformation in how people understand debts owed to the environment. And how they are repaid. “[The Potter Valley project] is a subset of a much larger body of problems,” said Scott Greacen, conservation director at Friends of the Eel River, a conservation organization that is seeking to restore natural streamflows. Over the decades, “we took a lot of capital out of natural systems. Now the bills are coming due.”
Fighting climate change is another urgent need. One way is by creating carbon-free electricity – what dams do. The historian Heather Lee Miller, a staffer at Historical Research Associates in Washington, believes that if all governments classify small hydroelectric projects’ energy as renewable, subsidies could change the financial picture.
“Certainly some of the dams are in terrible places,” she said. Others, like PacifiCorp’s 1.1-megawatt project at Wallowa Falls in Oregon, are being relicensed. “There’s a backlog of dams that aren’t in the right spot,” she said, but added that, as the climate changes, it would be wrong to think small hydro-electric projects have no future.
What is the difference between projects like Wallowa Falls being relicensed and those, like Potter Valley, being abandoned by big electric companies? Economics are central. Relicensing the Potter Valley project promised to be daunting even before PG&E, facing hundreds of millions of dollars of wildfire liabilities, declared bankruptcy. “It now looks like PG&E’s overall incentive structure has shifted,” Greacen said. “They have given up.”
Who Decides the Future? A Stakeholder Group Struggles to Find Compromise
The federal government determines the terms of PG&E’s exit. FERC will solicit interest from others to run it. If no one comes forward, it will order PG&E to develop a decommissioning plan that may or may not include removing facilities.
PG&E’s finances are private, but the economic analysis done for the Narrows project on the Yuba River offers guidance.
Jeff Bodington of San Francisco, the financial analyst who did it, said, “these projects made sense at the time they were built and perhaps for decades thereafter. Many still make sense.” But “some may make sense day in and day out, but when a license expires, relicensing can be very costly. A small project cannot absorb big relicensing costs. For each relicensing, he said, “these questions get asked. Are there fish impacts? Recreational impacts? Other impacts?”
The Potter Valley project had many impacts. The region’s congressman, Jared Huffman, created a working group of all stakeholders — water agencies, local and county governments, tribes, federal and state wildlife specialists and environmental groups – to hash out what the project should become and what happens to the dams.
Asked if the Potter Valley project is an electrical project or a water distribution project, Congressman Jared Huffman said simply. “Yes.” He added, “The question is, whether it can be both of those things and a fish recovery project.”
Dams a Mortal Threat to Fish Runs, Scientific and Regulatory Consensus Holds
In the past two decades, the federal government agreed with scientists that salmon and steelhead runs in the Eel River are threatened. A 2010 report from the Center for Watershed Sciences at the University of California, Davis, concluded, “coho salmon, Chinook salmon and steelhead are on a trajectory to extinction in the Eel River basin.”
The culprits listed in that report include early 20th-century commercial fishing and mechanized logging whose clear-cuts on the hillsides caused erosion that silted up the river. Floods in 1955 and 1964 added silt and changed the river’s course. All that hampered fish passage, but not as much as Scott Dam, built in 1922. It blocks dozens of miles of spawning areas. The report said, “the loss of salmonid habitat upstream of Scott Dam means there are fewer areas to serve as refuges for salmonid and steelhead… during environmentally unfriendly periods such as extended droughts.”
Eel River Diversions Were Slashed in 2006… But Then Russian River Fish Suffered
In 2004, the Federal Energy Regulatory commission ordered the diversions cut back from what was then 160,000 acre-feet annually. Now they average 72,000 acre-feet. These inter-basin diversions help fish in the Russian River. The Eel River water flows through a mile-long tunnel to generate electricity at a powerhouse on the banks of the East Fork of the Russian River. The water not used by the Potter Valley Irrigation District and other local diverters ends up behind the Coyote Valley dam in Lake Mendocino and is released periodically into the Russian River.
The state Water Resources Control Board requires the Sonoma County Water Agency to keep minimum stream flows on the Russian River to maintain fish spawning and migration and support recreation. The Eel River water transfers help them do that, according to Don Seymour, a principal engineer at the Sonoma County Water Agency.
The agency has had difficulty meeting its minimum instream flow requirements while not depleting Lake Mendocino. It won’t be easy to serve its urban, industrial and agricultural customers and help its endangered fish recover if there is less water in Lake Mendocino.
Help for Spawning Fish Could Cost Tens of Millions of Dollars – or Hundreds
Joshua Fuller, the National Marine Fisheries Service’s expert on salmonid runs in the Eel River, agrees that the Russian River fish do benefit from the Eel River water — but says access to the upper Eel River is crucial for reviving its salmonids.
Different strategies give fish access to spawning grounds. These include dam removal, a fish ladder, or hauling fish in trucks. Fuller heads one of two working groups in Congressman Huffman’s ad hoc committee weighing Potter Valley’s future. His group on fish passage is about to pick the two best of available solutions.
Good fish ladders are expensive. In August, the Lost Coast Outpost reported that a 2017 engineering report prepared for PG&E “found that constructing a functional fish ladder at Scott Dam would likely cost between $55 million and $93 million.” It would be “challenging to build, complicated to operate, very costly, and would have uncertain effectiveness.” Removing Scott Dam would be at least as expensive. Increasing the size of Coyote Valley dam, which holds back the Russian River, could cost $300 million.
Where could the money come from? As Congressman Huffman said, “If you look around at any stakeholder in either basin, none of them has the capacity to solve this problem and pay for it on their own. The only way to do this is to come together and unlock state and federal money.” His stakeholders group could sign a legal agreement giving the project a way forward without litigation.
PG&E’s January 25 announcement that it wanted out of Potter Valley complicates the plans being developed in the ad hoc committee. Huffman said that the glue binding potentially antagonistic stakeholders “is the fact that everybody’s at risk. There are really lousy solutions” possible “for everyone, no matter what their perspective.”
As Hydropower Profits Dwindle, Paying off Environmental Debt Gets Harder. But Renewable Energy Mandate May Help
The details of the project’s role in two different water basins are unique, but it has one thing in common with others: its owners are disinclined to pay environmental debts. “There’s the broader context of what’s going on in electricity markets,” said an energy consultant who would not speak for attribution. “With historically low wholesale energy prices, utilities, not surprisingly, will operate their lowest-cost units. Particularly if you have old infrastructure.”
But a new reality is emerging. Climate change puts a different perspective on the future of some small projects: states like California mandate a largely, or entirely carbon-free electric portfolio 25 years hence. “Resources that are 100 percent renewable are the new black,” he said. “That creates an opportunity for resources that have been ugly ducklings.” Todd Olson, a spokesman for PacifiCorp, which relicensed the Wallowa dam in 2017, said, “We went through the whole analysis many times over. We ultimately kept it because it is renewable, and there are other community values.”
Residents of Lake, Mendocino, and Sonoma Counties feel the Potter Valley project is crucial to them. “We’re talking about legacies now,” said Fuller of the fisheries service. “This project has been going on so long, cultures, families and generations are built around it. Say the project goes away: life is going to change for people.”
Data doesn’t yet show a clear trend of small hydropower projects’ owners walking away from them, although Mr. Bodington did say, “The trend is more getting taken down than put up.” Dozens of licenses are due for renewal in the next decade. Studies begin years before a license expires; the Potter Valley project’s license expires in 2022.
Whether or not Scott Dam is removed, and whether or not that decision is part of a wider trend, Mr. Huffman does see attitudes on dam removal changing. “Each time there’s a successful dam removal, it is demystified a little bit,” he said. “You should naturally see things get little bit easier, where dam removal makes sense going forward. But it’s always going to be case by case.”