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Little hydro dams make a big splash

The impetus is growing for turning old dams into new sources of power -- and profit. High electric bills and the prospect of tax incentives are prompting more and more municipalities, utilities, and entrepreneurs to tap the power potential behind small dams in states from New Hampshire to Washington.

Bankers and brokers, who up to now have shied away from the unfamiliar world of small water turbines, are showing some interest in pumping money into a few of the almost 5,000 possible hydropower sites around the country.

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"The ground has been broken, and they [developers and financiers] can now see how it's done," says Eugene White, senior vice- president of EG&G, a Wellesley, Mass., energy research firm presently developing seven dams in New England.

Some examples:

* Marine Midland Bank of New York, in one of the first moves of its kind in the state, announced March 27 it will invest $50,000 for development of a 1.5 megawatt plant in Wappingers Falls, N.Y. The dam site is one of 26 targeted by the state for electricity generation.

* A large Midwestern brokerage firm recently told the Rhode Island consulting firm of Halliwell Associates Inc. that it would invest in any site that was regarded as profitable.

"At first we had to convince people that investing in them [small dams] was a good idea," says Halliwell engineer Todd Cormier, whose firm plans to develop 11 sites in Massachusetts and Rhode Island."But now it's no problem at all. We have all kinds of people after us."

* State officials in New Hampshire say they have been "besieged" by requests from developers under a program to lease state-owned dams to private entrepreneurs. The state hopes eventually to turn 76 abandoned dams into power producers.

In the past five months, reports the federal Energy Regulatory Commission (ERC), the number of permit applications for development of dam sites has gone from 78 to 161, while license applications have more than doubled over the past year.

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"It's the bargain of the day," says Ronald Corso, director of the ERC's division of licensed projects.

To investors and developers, water power looks attractive.The technology is well known. The primary energy source -- water -- is clean and renewable. And it is a perfect hedge against inflation: The cost of water won't go up.

The fledging industry is expected to get a boost in the way of new federal tax incentives. A measure tacked onto the oil wind-fall-profits tax bill, now awaiting President Carter's signature after receiving final congressional approval March 27, would give developers an 11 percent tax credit on projects smaller than 25 megawatts at existing dams. That would give small hydro developers the same credits awarded other renewable-energy developers

A key to future development, says Peter Brown, director of the Concord, N.H., Energy Law Institute, will be what price utilities are required to pay for electricity generated by small power producers. In New Hampshire, the first state to set a rate, utilities pay at least 4 cent per kilowatt hour for power produced.

But the state's public utility commission is considering raising that rate.

Even so, not everyone is likely to grind out profits from the spin of a waterwheel.

TSmall-scale hydro projects require large amounts of money -- often more than

A few states require that dam projects include expensive "fish ladders" on waterways where fish spawn by traveling upstream.

"Suddenly, people are looking at dams as gold mines -- but they're not. They're copper pennies," says Paul Ambrosino, a hydroelectric specialist with the Governor's Energy Office in New Hampshire. "The profit margin is slim, and hydro is still one of the most heavily regulated of all renewable energy sources."


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