The US hydropower supply chain is struggling. Here's how it might recover

(Credit: American Hydro)

From workforce constraints to dwindling domestic manufacturing, the U.S. hydropower industry’s supply chain suffers from limited domestic capacity in the downstream and midstream sectors. A new report from the National Renewable Energy Laboratory (NREL) paints a broad picture of the domestic hydropower supply chain and provides recommendations to improve manufacturing capabilities.

The U.S. Department of Energy (DOE) conducted supply chain “deep dives” on renewable energy technologies, including hydropower and large power transformers. Since the deep dives were published, the Water Power Technologies Office (WPTO) has focused on improving its understanding of the hydropower supply chain and developing strategies for addressing supply chain challenges. The report, Hydropower Supply Chain Gap Analysis, was prepared by NREL for DOE and WPTO.

Because the challenges outlined in the deep dives are most acute for large systems greater than 100 MW, NREL’s report focuses on large systems but expects that its recommendations will improve the supply chain for all hydro systems regardless of scale. Additionally, since the federal government owns almost 50% of the nameplate capacity for conventional hydropower systems with 40% (18 GW) of these units being at least 100 MW, the federal fleet is used to prime the development of the supply chain for the rest of the industry, NREL said.

State of the supply chain

The analysis focused on the upstream and midstream sectors of the hydropower supply chain, as they have “limited” domestic capacity, NREL said.

Upstream supply chain components include raw material extraction, concentration, and processing into engineered materials. The U.S. has strong iron mining and steel production capabilities, NREL said, but it has limited to no mining of the trace metals used in steel, and it imports more than 40% of its copper. Additionally, there are only two domestic facilities with forging capabilities for large hydropower shafts (50-75 tons) and a single domestic foundry that can cast large turbine runners greater than 10 tons.

In the midstream supply chain, the first stage is composed of the manufacture and assembly of hydropower components like hydrogenerators and turbines. Some U.S. companies manufacture components, but international competition is “intense,” NREL said, and acquiring components for 100-MW or larger systems is difficult to procure domestically — only one foundry is capable of producing castings greater than 10 tons, and no domestic manufacturers exist for hydrogenerators greater than 20 MW.

Gap analysis

Five “major” gaps in the domestic hydropower supply chain were identified in the report.

1. Unpredictable and variable demand signals

The development of a domestic hydropower supply chain is held back by an unpredictable and highly variable demand for materials and components, NREL said. Hydropower systems typically have long lives, so replacements and refurbishment schedules have cycles that last years or decades.

2. ‘Severely’ limited or nonexistent domestic suppliers for hydropower
materials and components

There are no domestic facilities for hydrogenerator manufacturing greater than 20 MW, and a single facility for less than 20 MW.

The following materials and components only have a single domestic facility or supplier:

Windings greater than 100 MW for large hydrogenerators
Large forgings (50-75 tons) for large hydropower shafts
Foundry with casting capabilities greater than 10 tons for large turbine runners
Grain oriented-electric steel (GOES) for U.S. transformer manufacturers

Additionally, there are two domestic suppliers of non-oriented electric steel (NOES) for U.S. hydrogenerator manufacturers

3. Federal contracting procedures and domestic content laws

The report identified several procurement regulators and/or general practices that NREL says inhibit the development of the domestic hydropower supply chain, including bonding requirements, specifying pre-contract design work, all-inclusive contracts, and focusing exclusively on the initial capital outlay rather than the total project life cycle cost.

4. Foreign competition, foreign subsidies, and ‘ineffective’ trade policies

NREL said discussions with companies in the hydropower industry highlighted “inequitable” competition from foreign companies and “ineffective” trade policies as other issues in the hydropower supply chain.

Several companies noted that other countries subsidize their steel industries, and China develops “pods” of manufacturing capability to shorten the supply chain, making it more cost-effective.

5. Shortage of skilled workers

Hydropower manufacturing and upstream support industries suffer from a “significant” lack of workers with appropriate expertise, the report said. These industries have been offshored over the last 40 years, leaving skilled workers to retire or move to other industries.

NREL’s recommendations

NREL said DOE and the WPTO should consider the following recommendations to address hydropower supply chain concerns:

Lead with the federal fleet to prime the development of an aggregated, consistent demand signal with the largest producers by examining federal procurement processes and developing best practices for the refurbishment of the domestic fleet. Improve federal procurement processes to include multi-entity or multi-project long-term contracts and ensure that small businesses can compete for federal contracts. Develop best practices for refurbishments to ensure a predictable, steady, demand.

Develop domestic supply chain and end-user datasets to increase awareness of current and expanding capabilities of the domestic supply chain and installed hydropower fleet. WPTO is funding the development of two databases at Oak Ridge National Laboratory: a comprehensive database of suppliers in the hydropower supply chain, and an expansion of the HydroSource tool to provide unit and component-level information on the existing domestic fleet.

Work with other low-carbon technologies to create a “significant,” steady, and predictable demand signal for common materials.

SAVE THE DATE! GridTECH Connect is the interconnection event, offering electric utilities, grid operators, project developers, policymakers, and advocates a unique opportunity to join forces and improve the critical issue of interconnection. Register now for GridTECH Connect Northeast in Newport, Rhode Island, October 28-30, 2024!

The session Workforce constraints and their impact on interconnection timelines, taking place October 29 from 11:30 AM – 12:15 PM, will delve into workforce constraints across the renewable energy industry from manufacturers to project developers, utilities, and RTOs. Panelists will discuss workarounds and ways to maximize the limited manpower available.

Continue workforce development, including continuing collegiate competitions like the Hydropower Collegiate Competition and Marine Energy Collegiate Competition; in addition to acting on recommendations from the Hydropower Workforce report.

Originally published in Hydro Review.