What Is The Energy Policy Act For Hydropower?

What is the Energy Policy Act for hydropower?

Hydropower is one of the oldest forms of renewable energy generation in the United States. The first hydroelectric power plant was built on the Fox River in Wisconsin in 1882. Today, hydropower accounts for about 7% of total electricity generation and 40% of renewable electricity generation in the U.S. (https://www.eia.gov/energyexplained/hydropower/)

In 2005, Congress passed the Energy Policy Act which included provisions intended to promote the expansion of hydropower in the United States. The act authorized incentives, streamlined licensing procedures, and provided research and development funding to support growth in the hydropower industry.

History and Context

The Energy Policy Act of 2005 (or EPAct 2005) was passed by the U.S. Congress and signed into law by President George W. Bush on August 8, 2005.

The Act was passed in the context of rising energy prices and growing dependence on foreign oil in the early 2000s. Key factors leading to its passage included:

– Instability in oil producing regions like the Middle East and Venezuela

– Increased energy demand from rapidly growing economies like China and India

– Record high crude oil prices reaching over $50/barrel

– Blackouts and electricity shortages in states like California in the early 2000s

The Act built upon previous energy and environmental policies like the Energy Policy Act of 1992 and the Energy Policy and Conservation Act of 1975. However, it went further in providing incentives and loan guarantees to spur domestic energy production from sources like oil, natural gas, coal, nuclear, ethanol, and renewable energy. The Act was seen as shifting U.S. policy towards greater energy self-sufficiency and security.

[1] https://www.iea.org/policies/1492-energy-policy-act-of-2005-energy-bill

[2] https://www.everycrsreport.com/reports/RL33302.html

Hydropower Provisions

The Energy Policy Act of 2005 included several major provisions related to hydropower in the United States. The Act aimed to incentivize and support increased hydropower generation through funding, regulation changes, and financial incentives.

Some of the key hydropower provisions in the Act included:

  • Authorizing incentive payments for hydroelectric power generation under Section 242. This established the Hydroelectric Production Incentive Program, which provides financial incentives of 1.8 cents per kilowatt-hour for new hydropower projects brought online.
  • Amending the Public Utility Regulatory Policies Act (PURPA) to encourage small hydro projects under 5 megawatts by requiring utilities to consider integrating them into their system. This change aimed to reduce regulatory barriers for small hydro projects.
  • Providing funding and loans for hydropower research and development through the Department of Energy. This included support for technology improvements to increase hydropower generation efficiency and capacity.
  • Directing the Departments of Energy and Interior to study potential hydropower generation from conduits and existing dams/impoundments that do not currently produce power. This was to identify opportunities to expand hydropower.

Overall, the hydropower provisions in the Energy Policy Act provided financial incentives, regulatory changes, and research funding to catalyze growth in hydropower generation across the United States.

Impact on Hydropower

The Energy Policy Act of 2005 had a significant impact on hydropower generation and capacity in the United States. According to an analysis by the U.S. Senate Committee on Energy and Natural Resources, the Act was instrumental in adding over 5,600 megawatts of new hydropower capacity from 2005 to 2013, representing over a 12% increase during that period.[1] This added capacity came from upgrades to existing plants as well as new small hydro and conduit projects.

The Act also helped drive growth in annual hydropower generation. Generation increased from 250 million megawatt-hours in 2005 to over 260 million megawatt-hours in 2013, a rise of nearly 5%. [2] The hydropower reforms and incentives in the legislation encouraged investment and development activity and allowed more existing projects to be economically upgraded and expanded.

Specific provisions that drove increased capacity and generation included the hydroelectric production incentives, which provided 1.8 cents per kilowatt-hour for new hydropower built at existing dams. [3] The Act also streamlined and improved the licensing process for hydropower projects to reduce costs and delays.


The hydropower provisions in the Energy Policy Act of 2005 faced criticism from environmental groups and local communities. According to American Rivers, the bill’s hydropower reforms “eliminate the ability of fish and wildlife agencies to require compromises when hydropower dams are up for relicensing.”1 By streamlining the regulatory process, critics argued the Act made it easier for dams to be relicensed without proper environmental reviews or mitigation requirements.

Local communities also raised concerns about how the Act’s hydropower provisions could impact them. Shorter licensing periods meant less frequent check-ins on how dams affect surrounding areas. Additionally, provisions that encourage non-powered dams to add electricity generation faced backlash for potentially disrupting local recreation or natural habitats without input from local stakeholders.

Some fiscal conservative groups criticized the Act’s incentives and subsidies for hydropower, arguing they distorted the energy market. They advocated for letting market forces determine the role of hydropower rather than government interventions. However, supporters contended the provisions helped level the playing field for hydropower to compete with heavily subsidized fossil fuel energy.


The hydropower provisions in the Energy Policy Act of 2005 have led to notable successes in increasing hydropower capacity and utilization of incentives. According to the U.S. Department of Energy, the Hydroelectric Production Incentive Program authorized under Section 242 of the Act has provided over $500 million in payments to hydroelectric facilities1. These incentive payments have helped spur investment in new hydropower projects and capacity upgrades at existing facilities.

Relicensing reforms under the Act have also made it easier to relicense existing hydropower plants, leading to increased capacity. By removing regulatory barriers, the Act ensured the continued operation of many plants that may have otherwise been shut down when their original licenses expired2. This has helped maintain affordable, renewable hydropower as part of the U.S. energy mix.

Case Studies

The Energy Policy Act of 2005 helped facilitate several notable hydropower projects across the United States. Here are some examples:

Grand Coulee Third Powerplant

The Grand Coulee Dam in Washington state underwent a major expansion with the addition of a third powerhouse thanks in part to the Energy Policy Act of 2005. This $209 million project added an additional 597 megawatts of renewable hydroelectric capacity to the dam. The project was officially completed in 2012.[1]

Cofferdam Hydroelectric Project

This 4.8 megawatt hydropower project in Kentucky was among the first wave of projects to take advantage of the Energy Policy Act’s incentives for small-scale hydropower at existing dams. The project involved installing new generating equipment at an existing lock and dam on the Kentucky River. It became operational in 2013.[2]

Ambassador Hydroelectric Project

Utilizing an existing dam for new hydropower generation, this small 3.2 megawatt project in Oregon was completed in 2010. The project was made financially viable in part by the Energy Policy Act’s investment tax credits for small hydro. The power generated serves local agricultural cooperatives.[1]

Future Outlook

The future of hydropower policy in the United States remains uncertain. While the Energy Policy Act of 2005 provided incentives to grow hydropower capacity, future policies may take a different approach. According to the Department of Energy’s New Vision for United States Hydropower, hydropower capacity could nearly double by 2050 through technology advances, continued policy support, and streamlining regulatory processes.

However, some experts argue that the environmental impacts of large dams and climate change effects on water resources may limit future growth potential. Rather than building new large facilities, the focus could shift towards optimizing existing infrastructure and adding small, low-impact hydropower. Upcoming policy debates will determine whether to build on the incentives and streamlining started by the 2005 Act, or change course with more emphasis on environmental sustainability.

Key Takeaways

The Energy Policy Act of 2005 included several key provisions related to hydropower:

  • The Act streamlined the licensing process for hydropower projects by setting firm deadlines and requiring federal agencies to coordinate their reviews.
  • It authorized incentives for efficiency upgrades and capacity additions at existing non-federal hydropower projects.
  • The Act also provided support for small hydropower projects by requiring FERC to examine a two-year licensing process.
  • Tax incentives were established for certain hydropower projects including those using ocean and kinetic energy.

These provisions were significant for the hydropower industry as they helped reduce costs and regulatory burdens associated with developing new projects and upgrading existing facilities. The streamlined licensing process in particular helped drive investment and growth in hydropower capacity over the following decade.

While not perfect, the Energy Policy Act provided meaningful reforms that benefitted U.S. hydropower development. Key takeaways are the Act’s focus on modernizing licensing and incentivizing upgrades to maximize generation from existing infrastructure.


[1] Energy Information Administration. “Hydropower Explained.” Accessed [date]. https://www.eia.gov/energyexplained/hydropower/history-of-hydropower.php.

[2] Department of Energy. “Hydropower Vision: A New Chapter for America’s 1st Renewable Electricity Source.” July 26, 2016. https://www.energy.gov/eere/water/articles/hydropower-vision-new-chapter-america-s-1st-renewable-electricity-source.

[3] Union of Concerned Scientists. “How Hydropower Works.” Accessed [date]. https://www.ucsusa.org/resources/how-hydroelectric-energy-works.

[4] Hydro Review. “The Energy Policy Act of 2005.” January 1, 2006. https://www.hydroreview.com/business-finance/the-energy-policy-act-of-2005/#gref.

[5] Hydropower Reform Coalition. “Energy Policy Act of 2005 Hydropower Incentives.” Accessed [date]. https://hydroreform.org/policy/epact-2005.

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