Frequently Asked Questions on Section 243: Hydroelectric Efficiency Improvement Incentives Program

Q: What types of hydropower facilities are eligible?
Hydroelectric facilities at existing dams that were placed in service before November 15, 2021 (enactment of the Bipartisan Infrastructure Law), are eligible to apply for an efficiency improvement incentive.
The hydroelectric facility must be operable at the time an application is submitted. Non-operable facilities are not eligible for a payment.
Dams are defined as any structure for impounding or diverting water. This definition generally includes a broad range of conventional and conduit hydroelectric projects, that are connected to dams or diversions, such that these projects would be eligible to apply for a payment as long as they meet the other criteria noted above.

Q: What are the eligibility criteria for the incentives?
The Department released guidance for the Section 243 incentives on March 22, 2023. Capital improvement(s), as defined in Section II of the guidance, that increase the efficiency of a hydroelectric facility by at least 3% are eligible for an incentive payment.
The capital improvement(s) must be made on the hydroelectric facility side of the point of interconnection or common coupling with the electric utility, or in a facility that remotely controls hydroelectric facility operations (refer to section III of the guidance).
Capital improvement(s) at an eligible hydroelectric facility must have applied for all Federal, State, and/or Tribal authorizations and have, initiated, requested, or completed any required federal environmental review processes under the National Environmental Policy Act of 1969 (refer to section V of the guidance).
Only materials procured or other costs incurred after November 15, 2021, for capital improvement(s) at an eligible hydroelectric facility are eligible for incentive payments (refer to section V of the guidance).

Q: What are examples of eligible capital improvements?
Example 1: A capital improvement that improved the efficiency of one unit by at least 3%, while other units in a facility were unchanged, would be eligible for an incentive payment as long as the other criteria noted above were met.
Example 2: A capital improvement that reduces the losses in the water conveyance system resulting in an efficiency gain of at least 3% due to increase in net head would be eligible for an incentive payment as long as the other criteria noted above were met.
Example 3: A capital improvement that reduces the losses in the water conveyance system resulting in an efficiency gain of 2% due to increase in related net head and an increase of 1.5% efficiency due to improved trash racks and intake structure resulting in total efficiency improvement of 3.5% would be eligible for an incentive payment as long as the other criteria noted above were met.

Q: I’m confused by the definition of “Hydroelectric Facility”. Can you clarify and provide some examples?
Section II of the guidance provides definitions for Dam, Hydroelectric Facility, and Hydroelectric.
The statute and the definitions contained in the guidance permit a wide range of hydroelectric facilities and capital improvement projects to be eligible for this program. An illustrative list of examples is provided below; however, in all cases, all other criteria specified in the guidance must be met for an application to be eligible for an incentive payment:
Example 1: A hydropower plant with three hydroelectric units makes capital improvements to improve the efficiency of one of the hydroelectric units. An application could be submitted including the information related to the efficiency increase at the improved hydroelectric unit, without reference to the other units that were not improved.
Example 2: A hydropower plant with three hydroelectric units makes capital improvements to improve the efficiency of two of the hydroelectric units. A single application could be submitted including the information related to the efficiency increase at both improved hydroelectric units, without reference to the unit that was not improved. Alternatively, individual applications could be submitted for each of the improved hydroelectric units without reference to the other units in the facility.
Example 3: A hydropower plant with one or more existing hydroelectric units adds a new hydroelectric unit of a smaller capacity to enable the hydropower plant to operate more efficiently at a wider range of flows. An application could be submitted including all the information necessary to demonstrate how the operation of the old and new units would change to increase the total efficiency of the hydropower plant.

Q: Can you provide additional examples of how efficiency improvements would be calculated under different scenarios?
Example 1: A hydropower plant has 4 units of 5MW each, with independent water conveyance systems for each unit, with a peak unit efficiency of 80%. All units are working according to the unit capacity. The applicant uses one of the Hydropower Facility Efficiency Increase Tools available on the GDO website to calculate the efficiency increase.
- Unit 1 – Efficiency increase calculated in the spreadsheet works out to 3%.
- Unit 2 – Efficiency increase calculated in the spreadsheet works out to 2%.
- Unit 3 – Efficiency increase calculated in the spreadsheet works out to 2%.
- Unit 4 – Efficiency increase calculated in the spreadsheet works out to 1%.
Some of the options available to a potential applicant could include:
- Submit an application for Unit 1 only.
- Submit an application for Unit 3 and Unit 4. The efficiency increase under this option is NOT cumulative (2+1=3). The applicant will need to provide a proof that the combined Facility Efficiency shows an efficiency increase of at least that 3% (please see the calculation in tab ‘Example – Facility Efficiency’ of the ‘Hydropower Facility Efficiency Tool’ spreadsheet).
- Submit an application for Unit 1 and Unit 2. The efficiency increase under this option is NOT cumulative. The applicant will need to provide a proof that the combined Facility Efficiency (as calculated in tab ‘Example – Facility Efficiency’ of the ‘Hydropower Facility Efficiency Tool’ spreadsheet) shows an efficiency increase of at least 3%.
- Submit an application for Unit 1, 2 and Unit 3. The efficiency increase under this option is NOT cumulative (2+2+1=5). The applicant will need to provide a proof that the combined Facility Efficiency (as calculated in tab ‘Example – Facility Efficiency’ of the ‘Hydropower Facility Efficiency Tool’ spreadsheet) shows an efficiency increase of at least 3%.
- In conjunction with the unit upgrade for Unit 4, the following capital improvements are made:
  The trash racks and intake structure are refurbished to reduce intake losses, resulting in a net head increase of 1.5%.
  The penstock diameter is increased and relined to reduce conveyances losses, resulting net head increase of 2%.
The net head gain is additive resulting in a 3.5% increase. Though the resulting efficiency improvement may be more than the required 3% increase, it will depend on the unit’s performance at the higher head and related flow. This can be calculated in the ‘Hydropower Facility Efficiency Tool’ spreadsheet by adding a column for improved net head after improvements and using the relevant unit flow and efficiency.
Q: What documentation may be requested during potential periodic progress reports?
Periodic progress reports may be requested or required of applicants (refer to section VII of the guidance). Documentation or reporting requests could include but are not limited to: 
- Summaries of work or completed tasks;
- Summaries of expenditures (labor and materials) with invoices;
- Documentation related to previous, current, and/or potential delays;
- Photos; and
- Metrics or other data related to funding from the Infrastructure Investment and Jobs Act
Q: If it takes longer than expected to complete the capital improvements would a time extension be granted? For example, if National Environmental Policy Act of 1969 review takes longer than expected?
Applicants may request time extensions to any milestones set by DOE. DOE will review requests for time extensions and may approve or deny requests for time extensions at their sole discretion (refer to section VII of the guidance).