Hydropower Stakeholders Identify Five Perceived Gaps and Potential Remedies in U.S. Supply Chain

Hydropower has a key role on the electric grid today and as it evolves to incorporate more variable renewable energy sources like wind energy and solar power. It will help ensure the grid remains reliable and stable, providing electricity to homes and businesses when they need it. A robust domestic supply chain is critical to ensure hydropower can continue to meet this need. The supply chain must be able to support new development and the refurbishments and upgrades necessary to modernize and expand existing facilities and achieve a clean U.S. electricity grid by 2035.

A 2022 analysis from the U.S. Department of Energy’s (DOE’s) Water Power Technologies Office (WPTO) identified challenges facing the domestic hydropower supply chain. Following this analysis, WPTO engaged the hydropower community for input on strategies to secure and encourage domestic manufacturing. WPTO established three areas of focus for this engagement.

• Define the market for rehabilitations and new construction of the hydropower fleet.
• Provide insights for policies, incentives, loan programs, and technology investments to encourage domestic content.
• Define the existing and required domestic hydropower manufacturing capabilities and workforce.

The office explored these topics and engaged with several industry organizations to gather input. WPTO and the National Hydropower Association (NHA) hosted input sessions in May 2023 and March 2024 to gain industry insight into existing supply chain issues and to identify and prioritize potential solutions. NHA, the Northwest Hydroelectric Association, and the Centre for Energy Advancement through Technological Innovation also surveyed the hydropower community on ways to encourage domestic content and manufacturing.

Stakeholder discussions and inputs centered on five perceived gaps in the domestic hydropower supply chain.

• Unpredictable and variable demand signals for materials and components. In general, hydropower systems have exceptionally long lives (e.g., 30–50 years), so replacements and refurbishment schedules have cycles that are years or decades. 
• Severely limited or nonexistent domestic suppliers for materials and components. Only one or two—or in some cases, no—domestic suppliers exist for materials and components.
• Federal contracting procedures and domestic content laws. These procedures and laws are in place to encourage domestic content. However, due to the magnitude of federal procurements, they don’t always result in supporting the domestic supply chain. For example, many federal procurements are set up as an all-inclusive contract, which may require up-front work that small businesses cannot support.
• Foreign competition, foreign subsidies, and ineffective trade policies. Discussions with companies in the hydropower industry highlighted inequitable competition from foreign companies and ineffective trade policies as issues in the hydropower supply chain. For example, several companies pointed out that some countries subsidize their steel and other industries, which enables them to undercut non-subsidized domestic prices.
• Shortage of skilled workers. Hydropower manufacturing and upstream support industries suffer from a significant lack of expertise in the workforce. As these industries have been offshored over the last 40 years, skilled workers have retired or moved to other industries.

Stakeholders also provided input on proposed remedies for these perceived gaps. 

• Lead with the federal fleet to prime the development of an aggregated, consistent demand signal. Nearly 50% of the domestic hydropower fleet is federally owned with an average age of approximately 65 years. The potential demand signal from refurbishments and modernizations of federal facilities can be significant. Stakeholders expressed interest in the evaluation of federal procurement processes to ensure that they are effective in developing the domestic supply chain while obtaining the hydropower and pumped storage hydropower equipment and services the federal fleet needs. Federal modernizations can also encourage the increased deployment of renewable energy sources while minimizing the impact of antiquated generation equipment on the nation’s waterways.
• Increase awareness of the domestic supply chain through the development of databases of domestic manufacturing and installations. Stakeholders also expressed that developing tools to predict demand is a way that WPTO can help both the federal and private fleets in this respect. Tools currently in development or undergoing enhancements include a database of domestic suppliers along the hydropower supply chain and a tool that allows users to see data (e.g., size, turbine type) on individual hydropower generation units.
• Work with other low-carbon technologies and industries to create a significant, steady, and predictable demand signal for common materials. While the demand from the hydropower industry is in the billions of dollars annually, stakeholders agreed that it is not sufficient to build out a domestic industry, especially in the material and component sectors. However, many of the components and materials used for hydropower systems (e.g., transformers and electrical steel) are also used in other clean energy technologies, such as wind energy, and for upgrading the electric grid. Further, industries such as ship manufacturing and defense supply chains also have commonalities with hydropower. These industries can be leveraged so that the aggregate demand can address gaps in their respective supply chains. 
• Continue workforce development efforts. According to stakeholders, there are more educational programs for other low-carbon energy technologies compared to hydropower. In addition to expanding academic programs, discussion centered on the idea that there is a vast array of experiential-type programs that can help raise the awareness of hydropower and its opportunities, including internships/fellowships/apprenticeships, experiential placements, job fairs, primary and secondary school competitions,  collegiate competitions, and programs that place veterans and other unique workforce segments in the industry.

This stakeholder input will guide DOE’s strategies to strengthen the domestic hydropower supply chain. With a more robust understanding of existing and required domestic hydropower manufacturing capabilities, DOE can better define the market for planned rehabilitations and new construction. This input can also inform policies, incentives, loan programs, and technology investments to encourage domestic content and help focus DOE’s workforce development efforts in areas that also support the domestic hydropower supply chain.

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