Saw Kill Project
Bard College is the owner of two small dams along the Saw Kill, and is investigating the possibility of converting those dams to productive use for low impact hydropower production. Interested in learning more? Read the most recent blog posts and updates here.
There are over 6000 dams in New York State of various sizes and histories. Collectively they represent a significant potential for alternative power generation along with solar, wind, and geothermal.
Bard College, in cooperation with stakeholders from the Saw Kill Watershed Community, the Town of Red Hook, Dutchess County, along with other State and Federal representatives embarked on a journey to explore and better understand the issues involved in implementing small hydro power projects in New York State.
Options for Small Scale Dams
Check out the most commonly asked questions about microhydro.
Question: What is Dam-Free Micro-Hydropower?
Dam-Free Micro-Hydropower means generating electricity using natural elevation changes without a human-made barrier to local and migratory species: no dams, no impoundments minimal environmental impacts. What is needed though is a steep elevation change like a waterfall.
Question: How do I identify a good site for potential Dam-Free Micro-Hydropower development?
On streams that flow year-round and carry water even in the dry summer months, waterfalls of 6 feet or more in height already fulfil the basic requirements of a small dam-free micro-hydropower system (see Figure 16 for more detail on the necessary head-flow requirements). More on the physical requirements for a dam-free micro-hydropower system can be found in the Dam-Free Micro-Hydro Feasibility Report.
Question: How does the statewide potential of Dam-Free Micro-Hydropower compare to the otherwise existing hydropower development potential?
Dam-related micro-hydropower development is limited by the number of existing non-powered dams - about 6,600 in New York State. But many of the dams do not make good candidates for hydropower development due to environmental, dam safety and flood concerns or the overall condition of the dam. But as the example of the Lower Saw Kill shows, there a multiple possible locations for dam-free hydropower development within the landscape of existing dams.
Question: Does Dam-Free Micro-Hydropower have to fulfil the same permitting requirements as conventional hydropower?
Generally, yes; the permitting process might be shorter and easier, though, as many of the environmental, dam safety and flood issues, normally to be addressed during the hydropower permitting process, do not apply.
Question: What is the main benefit of Dam-Free Micro-Hydropower?
Dam-Free Micro-Hydropower systems do not rely on or are limited to the existence of historic dams and thus do not promote barriers to fish migration, do not pose the same kind of safety and flood concerns, and do not unnaturally impound water.
Question: As a CDG host, will I need legal representation?
Anyone considering setting up a CDG as a host is required to use a legally binding contract that is approved by the PSC. It is advisable to seek counsel when creating the subscriber contract, to ensure that it satisfies New York law and PSC program rules, while also protecting your business interests.
Question: How much effort is it to manage the CDG?
Once the CDG is setup, managing a CDG primarily involves maintaining and billing the subscriptions. Each month the utility will send the CDG host information on how much credit was applied to each subscriber. The host uses that information to prepare the bill for each subscriber. If the CDG is set up like a shareowner or Community Supported Hydropower (CSH) model then the subscriber will prepay for a year or in perpetuity (or perhaps a fixed monthly amount if that is what is agreed to). If subscribers drop out, or if generation increases and there is need, effort will be required to obtain new subscribers.
Question: What are typical questions from new subscribers?
Typical questions from new CDG subscribers include:
- What benefits can I expect from this program?
- Do I need to send you a year’s worth of my electric bills?
- Can I opt out easily?
- Are you an ESCO?
- Am I buying part of the hydro plant by signing up?
- As a subscriber, do I have to maintain anything?
- What happens if I move?
- How much will I save on my electric bill?
- Will I lose money if there is a drought?
- Is there a subscription cost or any other fee?
- How does the billing work?
- What percentage of your production do I get credit for?
- Am I changing utilities?
- Why do I have to pay a second bill? Can’t you just bill me through the utility?
- Can I use automatic payment or a credit card?
Question: How much effort is it to sign a new subscriber?
Signing up subscribers to a CDG involves marketing, or sales, just like any other product. Electricity consumers are increasingly aware of climate change and GHG emissions and are interested in green energy, which is a positive factor. However, explaining the CDG program in a clear and understandable way can be a challenge, particularly as it relates to explaining monetary crediting for host using the Value Stack price. More information on the challenges of marketing a CDG are available in our CDG Model Description.
Question: How can I estimate the value stack for my project?
NYSERDA provides a tool to estimate the value stack for your project, available at https://www.nyserda.ny.gov/All-Programs/Programs/NY-Sun/Contractors/Value-of-Distributed-Energy-Resources/Solar-Value-Stack-Calculator
Question: What is the Value Stack?
The Value Stack is the compensation mechanism in use for small commercial DER in New York State, comprised of multiple layers of locational and time dependent values reflecting the value that a particular DER provides to the grid. (See Value Stack description in the CDG Model Description.)
Question: How does the pricing and billing work? As a host, how much do I charge CDG subscribers?
The price a CDG host can charge a subscriber per kWh is a term defined in the contract between the subscriber and host. Unless the utility offers automatic billing, CDG billing takes place in two stages; first the utility applies a credit on the subscriber’s electric bill that offsets the amount of electricity consumed; and second, the CDG host collects payment for that credit by sending each subscriber a bill the subsequent month. The nature of the credit applied by the utility may be volumetric (credits applied in kWh) or monetary (a dollar credit), depending on whether the CDG host account is non-demand or demand meter. For a non-demand metered host, the credit is a volumetric kWh credit, and the host can send the subscriber a bill that charges the agreed upon price per kWh. For a demand metered host, the credit is applied to the subscriber bill as a monetary credit using the Value Stack compensation mechanism. The host can then send the subscriber a bill charging the same amount as the utility credit, or a different amount if the contract between the subscriber and host so dictates.
Question: What happens if the kWh generation exceeds the sum of kWh used by all subscribers.
CDG hosts can adjust the allocations as necessary on a monthly basis if kWh generation exceeds the sum of kWh used by all subscribers. Each year on the anniversary of the establishment of the CDG, the CDG host has the opportunity to distribute excess credits with the annual allocation request. A CDG host can add new subscribers at any time to ensure that all credits will be consumed. If a CDG host does not apply 100% of credits to subscriber accounts then they are forfeited at the end of the anniversary year.
Question: What happens if the CDG produces more kWh than planned (due to higher flows) and that output exceeds the amount of energy that the subscriber consumes?
This is a term that is defined in the contract between the CDG host and subscribers. Where the contract allocates a fixed percentage of output as a credit and the amount allocated is larger than anticipated, it will still be applied as a credit. If the credit exceeds the subscriber’s consumption, then the credits can carry forward to a future billing period. The CDG host and subscriber have flexibility to reduce future allocation percentages to ensure that the subscriber is not receiving more credit than they can use.
Question: What if a subscriber uses less or more energy than they subscribed to receive?
The contract between the host and the subscriber should clearly state what happens in this instance. If the subscriber receives less credit than she/he consumes, then they will be charged the regular price for any kWh they consume from the utility that are in excess of the credit applied. If the subscriber uses less energy than the credit applied, then the contract will typically provide that excess credits carry forward to future billing cycles, and that the host may adjust the percentage of output allocated to that subscriber to better match the subscriber’s consumption.
Question: What does the bill look like for CDG subscribers?
CDG Subscriber Bills CDG subscribers will receive two bills - their electric bill comes from the utility as before, and they also receive a bill from the CDG host (unless the utility has already implemented automated billing). The bill from the utility looks similar to before, only it will have a credit on it applying the percent output of the CDG that was agreed between the subscriber and host, as either a monetary or volumetric credit. The bill from the host to the subscriber is sent by the host, and charges the subscriber the amount due to compensate the host for the credit applied to the subscriber on the utility bill the previous month.
Question: Who is responsible for utility grid upgrade costs?
The host customer is responsible for the cost of transformer upgrades. If you are hiring a company to install your system, check with your agent/contractor, as they may cover this cost on your behalf. For microhydro systems 25 kW or less installed at a residential account, the host is responsible for the cost of $350 towards the total cost of the transformer upgrade. For micro hydro systems installed at non-residential accounts, the host cost share is determined on a case-by-case basis by the utility, but is subject to review by the PSC if the customer requests it. These costs can include the total costs for upgrades to ensure the adequacy of the distribution system which would not have been necessary but for the interconnection of the net metered DG resource (as per PSL §66-l(3)(c)(iii)). See NYSSIR Appendix E.
Question: Will my microhydro system require upgrades to the utility grid?
For systems 50 kW or less, if any utility grid upgrades are deemed necessary, they will be itemized by your utility in your notification of acceptance to proceed with your proposed installation. Common upgrades for systems 50kW or less include: transformer upgrades and secondary service upgrades. For systems above 50 kW up to 5 MW, this will be analyzed during the preliminary screening analysis which may require a supplemental and/or Coordinated Electric System Interconnection Review (CESIR) to finalize the specific upgrades necessary to interconnect your proposed system.
Question: Will I need a transformer upgrade?
You may. The transformer size feeding your home or business was originally designed appropriately for the load (kWh usage). In cases where your proposed DG system size exceeds your normal load the existing transformer size may be insufficient. This also includes the aggregate of any existing DG or DG in queue on the transformer prior to your proposed installation. Without upgrading the transformer, the DG system could overload the transformer and cause the customers fed from the transformer to experience high voltage and/or other power quality issues.
Question: Does the utility provide a high level interconnection feasibility overview for a site prior to the submission of an interconnection application?
Yes, utilities will provide you with the option of submitting a Pre-Application, Appendix D of the NYSSIR, at the cost of $750 prior to submitting a complete interconnection application. If you choose to submit a full application within 15 Business Days of the utility’s pre-application results, the additional $750 interconnection application fee will be waived. (See page 9 of the NYSSIR). For more information check with your utility.
Question: What is a demand metered host?
A demand metered host is a generation source connected to the utility using a demand meter and demand billing rate; typically in New York this applies to sites with 2,000+ kWh of monthly consumption on site. This may vary between distribution utilities. Whether a CDG host is demand metered or non-demand metered decides whether CDG subscribers see volumetric or monetary (Value Stack) credits on their bill.
Question: What is a demand meter?
A demand meter measures the peak level of demand within set periods of time (as brief as 15-minute intervals) rather than just measuring the overall level of electricity use. This allows the utility to recoup the cost of maintaining the capacity to provide intensive bursts of electricity to those customers who need it, rather than distributing these costs onto all customers - even those with more consistent electricity needs or use less electricity in total.
Question: What kind of meter do I need at my microhydro site?
Microhydro Electrical Meter: If you are installing a DG source (grid-connected), your utility will install a digital net meter with an Encoder Receiver Transmitter (ERT). This device utilizes radio frequency technology to transmit readings to meter readers over a short range, and ensures accuracy. These meters operate in both forward and reverse directions to enable net metering.
Question: Does my site need to be inspected?
Yes, it is the host's responsibility to obtain all necessary permits and electrical inspections, as well as ensure that the system passes an interconnection functional test before the utility will allow interconnection.
Question: Will I lose power during a utility outage?
Yes, electric service will be interrupted during utility outages unless a battery back-up system or stand-by generator is also installed. For safety reasons, Distributed Generation systems are required to shut down and/or disconnect from the utility grid when an outage occurs to prevent electricity from back feeding into the lines to avoid injury to repair crews and the public. It is possible to install the hydropower system so that it actively disconnects the generator from the utility grid; the generator would then be able to supply electricity to your house during the utility outage. Depending on the frequency and duration of power outages in your neighborhood, the additional expense for the necessary equipment to also allow the microhydropower system to operate off-grid may or may not be justified.
Question: What sized system should I install?
The optimal system size for a CDG depends on a multitude of factors and site-specific parameters including but not limited to head, flow, on-site loads and cost. The first consideration when determining the maximum potential output of a system based on head and flow should always be what is environmentally sustainable. Once that is determined, the cost of construction and feasibility of using the output, either by the owner or shared with other customers via CDG, might swing the decision towards a smaller but more cost-efficient system. Talk to your developer about your goals and restrictions in microhydropower design.
Question: How do I apply for interconnection?
Applying for Interconnection: If you are working with a contracted installer, that installer will offer you the opportunity to sign an agent authorization letter and will submit the interconnection application to the utility on your behalf. Appendix F of the NYSSIR provides the following checklist:
- Complete standard application form (Appendixes B & C)
- New York State Standardized Acknowledgement of Property Owner Consent Form – For Systems above 50 kW up to 5 MW Only (Appendix H)
- For residential systems rated 50 kW and below, a signed copy of the standard contract (Appendix A)
- Letter of authorization, signed by the Customer, to provide for the contractor to act as the customer’s agent, if necessary
- If requesting a new service, a site plan with the proposed interconnection point identified by a Google Earth, Bing Maps, or similar satellite image. For those projects on existing services, account and meter numbers shall be provided
- Description / Narrative of the project and site proposed. If multiple DG systems are being proposed at the same site/location, this information needs to be identified and explained in detail
- DG technology type
- DG fuel source / configuration
- Proposed project size in AC kW
- Project is net metered, remote, or community net metered
- Metering configuration
- Copy of the certificate of compliance referencing UL 1741
- Copy of the manufacturer’s data sheet for the interface equipment
- Copy of the manufacturer’s verification test procedures, if required
- System Diagram – A three-line diagram for designs proposed on three phase systems, including detailed information on the wiring configuration at the PCC and an exact representation of existing utility service. One-line diagram shall be accepted for single phase installations
Question: Why don’t I just do net metering instead of setting up a CDG?
Net metering is only allowed to net against the energy consumed on-site where the generation source is metered. A CDG allows a host to generate more output than is consumed on-site and allocate it to other subscribers in the same utility service territory. If the host owns multiple properties within the same utility territory, remote net metering may also be an option.
Question: What is net metering?
Net metering is a method for those using qualified generating systems, such as microhydro, to be credited for electricity generated in excess of their usage, and is achieved by allowing participating customers’ meters to measure electric flows in reverse and forward directions. When the customer’s generator is producing less energy than the customer is using, the electric meter will measure the supplemental energy passing from the utility to the customer and register the flow of electricity in a forward direction. When the customer’s generator is producing more energy than the customer is using, the electric meter will measure the excess energy passing from the customer to the utility and register the flow of electricity in a backward direction. The surplus energy is subtracted, or “netted,” from the energy supplied by the utility to the customer, thus “net metered.” Therefore, the utility is only able to see the net difference between what was generated and what was consumed during a billing period.
Question: What other costs will be added to the rate by the utility?
Receiving electricity from the CDG instead of the utility, impacts the energy supply side of your utility bill, the utility will continue to charge you delivery, which includes your service charge, cost of distribution and transmission and other charges. The specific amounts depend on the subscriber’s service class as well the respective utility. For more information on your energy bill, have a look our CDG economics blog post.
Question: How long does it take to get responses from the utility?
Credit allocation forms are submitted to the utility once per month and the utility has 30 days to respond and update credit allocations. Specific response times for other inquiries vary from utility to utility.
Question: How quickly can a subscriber join a CDG?
If a subscriber is joining a CDG that is already active, it typically takes just one billing cycle to add that subscriber to the program. If the CDG is not yet operational and accepting new subscriptions, then a subscriber may not see billing credits appear on their bill until the host has found enough subscribers for the utility to activate the CDG.
Question: Can you set up a CDG host, register subscribers and complete the process online?
The documentation and forms required by the PSC and the utilities are available online for download, however the process is handled through emails and other communications between the host and the utility.
Question: What paperwork does the utility require to add customers as CDG subscribers?
The CDG host must sign up subscribers using a contract with their utility that complies with program rules. This includes the interconnection agreement and related documents, host self-certification form, subscriber allocation form and additional documents including certification of creditworthiness, cyber security standards, landowner consent (even if the host is the landowner) and other necessary information. The host also will need to analyze each subscriber’s average monthly consumption to determine the appropriate percentage of output to allocate to each subscriber. Each utility provides a process to look at individual customer historic consumption data. Once the appropriate percentage of generation output is determined for each customer, the host completes the utility’s CDG allocation form.
Question: How long does the CDG host application process with the utility take?
The length of time to complete the application process may vary greatly depending on how quickly the host can secure contracts with subscribers, the interconnection process and other factors. Once all the application paperwork is submitted, the utility typically takes sixty (60) days to activate the credit allocations for each subscriber.
Question: How do I approach interconnection as a part of the process to apply to be a CDG host with my utility?
Interconnection is a necessary component of establishing a CDG. The CDG procedures require a host to execute the required interconnection contract provided in the Standardized Interconnection Requirements addendum in the utility tariff. The technical specifications and requirements and costs for interconnection will be site specific and can be determined by contacting your distribution utility. After a potential host determines that interconnection is feasible, they can proceed with the remaining paperwork required by the utility to establish a CDG. Interconnection for projects with a nameplate capacity of 50 kW or less have an expedited six step process to interconnection. Larger systems (50 kW to multi-MW) use an 11-step approach that provides a more detailed application processing arrangement, often requiring an impact study, known as coordinated electric system interconnection review (CESIR). Utilities must provide the ability to applicants with systems 25 kW and less to submit their application for interconnection via the Web. The best first step is to reach out to the interconnection or Distributed Generation (DG) department of your local utility.
Question: How do I find out who my utility is?
If you are a current electricity customer then your utility is already sending you an electric bill each month. If you are uncertain, you can use this mapping tool created by New York State: https://data.ny.gov/Energy-Environment/NYS-Electric-Utility-Service-Territories/q5m9-rahr
Question: What is the utility’s role in CDG?
The utility is required by the Public Service Commission to offer CDG opportunities to customers in its service territory. Their role is to accept interconnection of a CDG host generation source, subject to the PSC rules and utility tariff, and to facilitate the application of generation credits on the billing accounts of any customers who have subscribed to the CDG.
Question: Where can I find more information about CDG?
See Microhydro CDG Model Description or download a detailed report about microhydro Community Distributed Generation.
Question: Is there a waiting list to become a CDG host?
Each utility has limited capacity to accept CDG hosts, and allocates that space in a first come first served basis. First, the utility receives applications and the potential CDG host reserves a spot by signing the interconnection agreement. For those hosts using the Value Stack compensation mechanism, the Market Transition Credit (MTC) has a total capacity limit that varies by utility territory and is available on a first come - first serve basis.
Question: What documents do I need to apply to be a CDG host?
Each distribution utility requires an interconnection agreement and related documents including the host self-certification form, subscriber allocation form, certification of creditworthiness, cyber security standards, landowner consent (even if the host is the landowner) and other necessary information. The exact requirements and nature of the forms may vary between the utilities. The CDG host must also register as a Distributed Energy Resource (DER) with the Public Service Commission, which requires the Distributed Energy Resource Supplier Registration Form as well as the following material:
- Copy and proof of acceptance of your registration with the NYS Department of State and a copy of your certificate of assumed name (if applicable);
- Sample sales agreements, including customer disclosure statements, and sample bills for each customer class for each material category of the CDG or On-Site Mass Market products or services that will be offered;
- Copies of information and promotional materials used for mass marketing purposes for each product offering;
- A list of entities, including contractors and sub-contractors, that market on behalf of your company;
- The NYS DPS Office of Consumer Services Service Provider Form [NYS DPS Office of Consumer Services Service Provider Form]
Question: Who can subscribe? What are the requirements for CDG subscribers?
CDG subscribers are utility customers who contractually agree to purchase generation output from a Community Distributed Generation host. They can be individual residential account holders or commercial accounts. The CDG subscriber remains a customer of their utility company who will bill them for delivery and transmission and additionally used electricity. To be a CDG subscriber, the customer must be in the same utility territory and NYISO zone as the CDG host.
Question: What happens with the offtaker’s current electricity provider / retailer with a PPA?
An offtaker can enter into a PPA with a site owner or PPA provider to begin using the electricity generated by the microhydro instead of their current source of supply. In most cases, the offtaker remains connected to the grid and has access to additional and back-up power if needed.
Question: How do I find a PPA-offtaker for my microhydro generation?
If you have a site with microhydro potential and want to find someone else (an offtaker) who may want to use the energy, talk to your neighbors, including local businesses and ask them! You may find that people are increasingly interested in going green, and that they will find a local source of green energy to be very appealing.
Question: What are some typical causes of system downtime or outages?
Planned maintenance and repairs may need to occur, such as changing bearings or valves. Unplanned maintenance and repairs may include the need to unclog an inlet screen, replace broken equipment, no operation from drought (long periods of low flow), or even electrical grid outage (if facility is grid-connected).
Question: What happens to the PPA if the project goes offline?
The typical PPA charges the offtaker an agreed upon price per kWh delivered. If the plant goes offline or ceases to operate, it is not delivering electricity, and the offtaker will not be charged. In the instance where a microhydro plant goes down, either for maintenance or because of some natural damage or other reason, the offtaker can resume receiving power from the utility at their current rate until the plant becomes operational again. The PPA provider cannot guarantee the offtaker anything about the price the utility may charge if the plant goes down.
Question: How will a microhydro project which is not eligible for the federal production tax credit attract investors?
Solar and wind PPAs rely on tax incentives to attract investors, however hydropower is not currently eligible for federal tax credits. A PPA may still be possible even without tax credits, if the cost of construction, permitting and maintenance can be recovered within the desired period of time for the investor based only on the agreed upon payment schedule of the offtaker.
Question: What is the typical return on investment (ROI) time period?
This may vary, but most investors prefer to see a return within 6 years in order to invest in the project. From the offtaker perspective, there is no upfront capital investment and entering into a PPA can be cashflow positive from day one. Developers will likely realize their investment objective within six years thanks to incentives, depreciation and other financial benefits.
Question: How is the pricing of the PPA structured? Is it a fixed rate per kWh? Is there an escalator?
The pricing for the PPA considers the total cost of permitting, design and construction, as well as expected costs for operation and maintenance. That amount will be used to schedule a repayment term over as many years as it is necessary to pay off the costs while still allowing for a reasonable return on investment for the party providing the initial cash. There is usually an escalator, as much as 3 to 4% per year, but not always. Sometimes the payments are flat for the full term, in which case the initial payment is likely to be slightly higher than what the offtaker is used to paying for electricity, but the payments in later years will be proportionally lower than market rates.
Question: How does the kWh rate for a microhydro PPA in New York compare to existing grid rates?
The economics of the project should work out so that the initial kWh rate you pay is slightly less or equal to your current electricity rate. This may vary depending on your service territory and other factors, such as the costs specific to the permitting, design and construction of your project.
Question: Can I profit from a PPA?
A PPA allows you to secure predictable and moderate electricity prices. Usually the initial rate starts out lower than your current rate, and the modest escalator is a lower rate than how utility rates are expected to increase over time. As a result, a PPA should save you money in the long run.
Question: As a site with microhydro potential considering a PPA, what costs will I have to outlay initially?
In many instances interested site owners might have to pay a consultation fee for a professional site assessment with a hydropower developer. Based on that initial assessment a general project and study plan can be developed to set up a PPA. Further costs would be accounted towards the total project costs as defined in the PPA contract.
Question: What are the soft costs from permitting, real estate, legal and underwriting?
The project’s soft cost are closely related to the hydropower system size and complexity, and site specific parameters like existing infrastructure, property size, proximity to on-site loads or the utility grid, and environmental water quality and habitat concerns.
Question: What if I want to sell my property / move?
A property owner who installs a microhydro plant with a PPA developer will want to have the option in their contract to assign the contract over to a future property owner.
Question: Who owns and profits from the RECs in a PPA model?
The RECs are owned by the PPA developer who uses their value as an additional revenue stream to pay off the initial cost of construction. In New York, the PPA developer will have the option to sell both RECS and the output to the offtaker in a bundled contract, if the offtaker is interested in claiming the renewable energy attributes. Or, the PPA developer may sell the RECs to NYSERDA, which offers solicitations for RECs twice each year.
Question: Do you get to use rebates and tax credits with a lease?
No, the owner of the equipment uses rebates and tax credits.
Question: What is a payment escalator?
Most leases have an implied interest rate, referred to as a payment escalator. This may run from 0% to as high as 4%. If you sign a lease with a 3% payment escalator and your first payment is set at $100/month in the first year, then in the second year your payment will increase to $103/month. Every year after your payments will continue to increase by 3%. The escalator is still likely to reflect a savings when compared to residential utility rates, which increased an average 15% in the United States between 2008 and 2018. Find key indicators and statistics about electricity on the website of the Energy Information Administration.
Question: What happens to my lease if I sell my property?
Often a lease will allow you to transfer your monthly lease payments to the new property owner, as long as they meet the lease holder’s credit criteria. You may also have the option of purchasing the system outright or having the property buyer do so.
Question: Do I need to own my home to qualify for a microhydro lease?
Yes. If you are looking to install a microhydro plant where you live, but you do not own the property, then leasing is probably not for you. The lessor or owner of the system will require the owner of the property to grant access and other rights, which typically cannot be conveyed by a non-owner.
Question: Can you terminate the lease and require the hydro company to remove the system?
Whether you can terminate the lease depends on the terms of the lease, but is a fairly common provision. A lessor should request this option before signing the lease, to give themselves the flexibility to make this choice in the future.
Question: What happens at the end of a lease term?
At the end of a lease term, some providers will offer a renewal term, perhaps on an annual basis for a period of additional years. You may also have the option to purchase the system at fair market value, which requires an independent valuation.
Question: Who repairs and maintains the system if I lease it?
The company that owns the system will be responsible for any repairs. The responsibility to pay for additional repair costs will be defined by the lease. A lessee should be aware of these responsibilities before agreeing on a lease.
Question: Who handles the environmental assessment, the permitting and coordination with local, state and federal agencies?
In most cases, a site owner would want to hire a hydropower developer to assist in the environmental and site assessment, facility design and permitting – regardless of whether the site owner ultimately wants to lease or directly own the hydropower system. The developer would act as an agent for the site owner and coordinate with all relevant resource agencies and stakeholders to ensure a successful permitting procedure. For more information on microhydro permitting, see our permitting section.
Question: How does leasing work?
A lease is an agreement with a company that owns the system. You enjoy the electricity from the system for the length of your lease. If you choose to lease your system, you are paying only a small portion of the system cost at the outset, and then making fixed lease payments over time to the system owner, a hydro developer company. You may choose to lease to own, but you do not actually own the system until the end of the lease term, when all the lease payments have been made and ownership transfers from Lessor to Lessee. Leasing is an excellent choice if tax credits are available, but your tax bill is less than the value of the tax credit for your system. It is also ideal if you don’t want to pay any up-front cost or take out a loan, or if you credit score is below 650.
Question: Under what circumstances does a loan make sense?
There are circumstances when it makes sense to take out a loan to finance your microhydro project; these are some of them:
- You are comfortable owning and maintaining the system yourself or hiring a company to deal with maintenance but still being the ultimate responsible party for the microhydro plant.
- If federal tax credits are available, your tax bill is larger than the tax credits you will get from the system.
- You are comfortable taking out a loan and have a good credit rating.
Question: What questions should I ask if I am considering owning?
If you're interested in owning your own microhydro system, ask yourself:
- Do you want the responsibility to own or do you prefer that someone else deal with the responsibilities?
- Do you have the cash to pay the up-front costs?
- Are you able to benefit from tax credits, if applicable?
- Are you willing to spend cash reserves or take out a loan? Is your credit strong enough to get a loan?
Question: Should I buy or lease my system?
There are many factors to consider when deciding whether to buy or lease your system. These factors relate to your project economics, your creditworthiness, your willingness to assume responsibility for a microhydro project as well as your appetite for tax credits (if applicable). First you need to look at the total cost of the system. Ownership requires the up-front capital cost of designing, permitting and constructing the project. If you do not have the cash, you mitigate the up-front costs by taking out a loan. With a loan, you are the owner, but you are borrowing money from a bank to pay the capital cost of the system. A loan is simply financing, just like purchasing an automobile with a loan. It allows you to take advantage of all the savings associated with your own renewable energy generation source. If in effect, the federal renewable energy tax credits, such as the investment tax credit (ITC) may allow an owner of a system to use 30% of the value of the system as a tax credit, which works for individuals who have tax liability they would like to reduce with tax credits. If you don’t have the cash and do not want to take out a loan you can consider a lease-to-own model. Or, you can also lease a system with no plan to transfer ownership at the end of the lease. With a lease, you are not the owner of the system, you are just paying the leasing company for a long term (usually 20 years). If you choose to lease-to-own, then the ownership of the system will transfer to you at the end of your lease term. The lease allows you to make an environmentally friendly choice without bearing the responsibility of owning a system, while reducing your electricity bill and using a predictable monthly payment structure based on a kWh rate that is established at the beginning of the lease term. A lease versus loan have some things in common. For example, the environmental benefits are the same and monthly payments are typically structured to be less than your current electric bill. If you have the resources available and have the tax appetite for tax credits, and/or are willing to take out a loan, then all things else being equal, owning your system even if it is financed with a loan is a preferable choice.
Question: Do I need to interconnect with the electricity grid?
The answer depends on your project’s goals, the environmental setting and how close your micro hydropower site is to the meter where your electricity is consumed. To use net energy metering or remote net energy metering, you will have to interconnect the hydropower system with the electricity grid. If you are considering defecting from the grid, you can configure your project off-grid – without interconnecting with the electricity grid.
Question: How much power do I need to fully offset the use in my home?
The power needs of your home depend on the same factors as your electricity (or energy) needs, but the use patterns play an increased role. For example: For a single 20-Watt light bulb to be operated, an off-grid hydropower system has to provide a power of 20 Watts; so if you have five of these 20-Watt bulbs located in 5 different rooms of your home, and you tend to switch them on and off when entering or leaving a room, in the ideal case your home could be supplied by a 20-Watt hydropower system; but if all 5 of the bulbs are switched on by the same switch, a potential hydropower system will need to be 5 times as large to provide the necessary power. In other words: the power demand depends on how many (and which) appliances and devices you intend to use simultaneously: running the washing machine, the dryer, the toaster oven, the TV and lights at the same time creates a higher power demand than staggering the use of these appliances. With an on-grid hydropower system, these power spikes (created by simultaneous use of appliances) are covered by the utility, but an off-grid system needs to balance them directly or with the help of a battery system. We recommend obtaining an assessment your home's power needs and consider energy efficiency upgrades as part of the hydropower design process.
Question: How much electricity do I need to fully offset the consumption in my home?
How much electricity your microhydro project needs to generate to offset the consumption in your home depends on:
- the size of your home,
- quality of building envelope,
- the number of inhabitants and their use patterns,
- the degree of electrification of your home (electric heating, electric cooking, electric warm water), and
- the energy efficiency (also age) of your appliances and devices.
Question: How long is a typical microhydro PPA term?
A microhydro PPA may run from 15 to 25 years. The terms will vary dependent on the specific cost of the project and consumption of the offtaker.
Question: Who owns the hydroelectric plant in the PPA model?
The PPA developer owns the plant, with a long-term agreement to sell all of the electrical output to the offtaker. Sometimes at the end of the term there is an option for the offtaker to buy the plant from the developer at fair market value.
Question: How do I know if the PPA is the right financing model for my project?
If you are interested in regular monthly payments and prefer to have a professional hydro developer deal with building and operating your project than a PPA could be a great way to go.
Question: What is a CDG host?
The CDG host is the entity that manages and sells electricity to subscribers who elect to participate. In most cases the CDG host operates or owns a renewable energy project that generates more electricity than can be used on site. The host defines the stipulations for subscribers to join the CDG. More about the basics and essential elements of New York CDGs.
Question: What are the key CDG requirements?
The key CDG requirements are to have an eligible renewable energy source, an interconnection agreement with the distribution utility, and a group of at least ten subscribers who sign a CDG contract.
Question: What are “Community Renewable Energy” and “Community Distributed Generation”?
Community Renewable Energy refers to a renewable energy project that is shared by a community (like community solar or hydro). In other words, instead of a single owner using the output from a renewable energy project, with a Community Renewable Energy project, the output is shared by a group of individuals, businesses or other entities who consume electricity. Community Distributed Generation (CDG) is New York State’s program that allows distributed renewable energy resources to share their output with retail customers.
Question: What is “micro hydropower”?
Micro hydropower refers to hydroelectric systems that produce up to 100 kilowatts of electricity. Most of the hydropower systems used by homeowners and small business owners, including farmers and ranchers, would qualify as micro hydropower systems. "Micro" refers to systems up to 100 kilowatts, but a 10-kilowatt micro hydropower system can generally provide enough power for a large home, a small resort, or a hobby farm.
Question: Is power from a micro hydropower system considered clean energy?
Hydropower is considered "clean energy" because it is produced without the burning of fossil fuels. However, a micro hydropower system can have other environmental impacts at the site of the system and further downstream.
Question: What are the environmental impacts of a micro hydropower system?
Micro hydropower systems are one of the lowest CO2 sources of energy that are available. The reason that hydropower has an effect on GHG is not the power generation itself, but the changes made to surface land and water in order to generate hydropower, particularly when the reservoir is new. However, a micro hydro facility might use no sizable impoundment of water, or at least a much smaller reservoir that covers a smaller area, much of which may have been rocky stream beds before. The increased contribution of GHG is most pronounced in the earliest years after the reservoir has been established. A micro hydro installation on a dam that has been in place for decades would not be likely to introduce significant new GHG sources.
Question: Will more dams be built to create these systems?
Micro hydropower is being considered in New York State because there are over 6,600 legacy dams that already exist. These existing dams present a unique opportunity for owners to install a micro hydro system on a pre-existing dam. This website provides resources for considering micro hydro on an existing dam.