Small Dams Could Pump Out Big Power, Says Boulder Startup

6/27/13Follow @MichaelXBD

Think of a hydroelectric project, and what comes to mind?

Probably the giant Hoover Dam, or the Three Gorges megaproject in China. They’re projects that generate a lot of cheap, clean electricity at a continuous rate, but come at the cost of major disruptions to ecosystems and communities.

That’s part of the reason why environmentalists have very mixed feelings about hydroelectricity. In the U.S., the pendulum has swung against building new hydroelectric projects, and many dams are being deconstructed.

But there’s an abundance of smaller dams all over the country on quiet rivers or reservoirs that haven’t ravaged the landscape and don’t generate electricity. These “non-powered” dams are a huge untapped source of clean power and, if Gravity Renewables is right, profits.

Gravity Renewables is a Boulder, CO-based company that owns, operates, and develops small hydroelectric power plants. The company launched last year, bought its first hydroelectric plant in March, and closed a $3.16 million investment round earlier this month. The round is in addition to a prior undisclosed amount of money it raised when it incorporated last year.

The company isn’t in the dam-building business, chief operating officer Ted Rose said. What Gravity Renewables is trying to do is retrofit existing dams in an environmentally sensible way so they can generate power. It would own power plants and, in some cases, even the dams.

Rose said Gravity Renewables has exclusive permits to study and consider building nine projects, including ones in Ohio and Kentucky. It also owns a power station in upstate New York and is in the process of buying several more. The company said it has 28 megawatts of hydroelectric projects operating and under development in the U.S.

The New York power station already is generating revenue, and the business model is generating interest.

“We are well on our way to profitability,” Rose said. “We’re attracting a lot of attention in the hydroelectricity world,” Rose said.

The dams Gravity Renewables and other “small hydro” companies are looking at were built for flood control or irrigation, often are part of developed recreation areas or are near towns, and are close to existing power grids.

According to the Army Corps of Engineers, there are more than 87,300 dams in the U.S., and only about 3 percent produce electricity. Adding “non-powered dams” to the grid could create 12 gigawatts of carbon-free power, a 2012 Department of Energy study found.

There are hundreds or even thousands of non-powered dams that could be converted in a way that makes sense economically and environmentally, Rose said.

Gravity Renewables is part of the larger movement to “small hydro,” Rose said. The word small should be kept in mind.

Much of the potential 12 GW in the DOE report would come from upgrading non-powered dams that could generate more than 100 MW. The report assumes one megawatt can power up to 400 homes.

The power plants Gravity Renewables is interested in are much smaller, Rose said. They’d generate between one and 10 megawatts and be added to dams that range anywhere from 8 to 100 feet high. The power plants would have one to four turbines.

Power plants of that size don’t have to be very big—they don’t need much more than a turbine and generator, and some could be as small as a shed. Building them would not be a huge disruption to the local river system.

Gravity Renewables also will buy dams with old power plants and upgrade them with modern equipment. Many small dams produce millions of kilowatt-hours of clean energy each year and have for decades.

Some are showing their age and the equipment needs to be upgraded, but their owners are having money problems. Falling energy prices also put the squeeze on the owners of small power plants.

“With energy prices on the wane, that really hits the small projects hardest because revenues fall and that money was supposed to go into infrastructure improvements and investments, and all of a sudden that money’s no longer there,” Rose said.

Investors interested in energy projects tend to overlook small projects, Rose said.

The team and investors behind Gravity Renewables have decades’ worth of experience in the renewable energy industry. Gravity Renewables formerly was a consultancy that helped negotiate power purchase agreements, renewable energy credits, and financing deals—the key components of building distributed energy projects.

When the team began looking at the hydropower industry, it saw an opportunity, Rose said.

Gravity Renewables pivoted to try to capitalize. Its investors are Lorem Partners, Canoe Financial, Summit Energy Development Group, high-net worth individuals, and family funds

The round that closed in June was oversubscribed, according to Rose.

Michael Davidson is the editor of Xconomy Boulder/Denver. He covers startups, venture capital, clean tech, energy, aerospace, telecoms, and whatever else happens above 5,280 feet. Contact him at mdavidson@xconomy.com. Follow @MichaelXBD

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