There are over 30 American states with Renewable Portfolio (or Electricity) Standards designed to encourage the production of renewable power (wind, solar, etc). While the targets and the definitions of “qualified renewable power” vary from state-to-state, one common denominator has been limiting the statutory definition of “qualified hydropower” only to electricity generated by smaller-scale hydro facilities.

Two reasons have usually been cited by environmentalists to justify the disqualification of large scale hydropower. One is the environmental impact of new hydro dams. The second is that a growing supply of clean, reliable, low cost electricity from large scale hydro projects constitutes “unfair competition” that will discourage the development of less reliable, higher cost electricity from wind, solar and other renewable power sources.

It has long been the position of the Government of Canada that discriminating between imported electricity based on the scale of the hydropower generation facility is a violation of NAFTA obligations, (there being no difference whatsoever in the actual imported product). However, such obligations generally lie with the national government, rather than the sub-national (state, provincial or municipal) level.

On June 4, 2010, outgoing Vermont Governor Douglas signed into law An Act Relating to Renewable Energy (H. 781) that, inter alia, removed the prior 200 MW limit on the size of a hydroelectric facility considered “renewable”. In becoming the first American state to recognize large scale hydro-electricity as a qualified renewable energy resource, the Vermont government cleared the way for Vermont power authorities to sign an attractively-priced long-term power contract with Hydro-Quebec.

Vermont’s decision to recognize hydroelectricity energy generation of any capacity as renewable energy adds a further complication in the already complex situation in Washington DC regarding a federal Renewable Portfolio Standard. Currently, the Kerry/Lieberman American Power Act proposes to maintain the status quo position – ie no national RPS, with a continuation of the current patchwork of state standards. However, Senator Bingaman’s Energy Committee has already passed a bill with a national Renewable Portfolio Standard that excludes large scale hydro. Meanwhile, Senator Graham and other pro-nuclear Senators have championed the idea of a national RPS that would expanding the definition of qualified renewable power to include at least “advanced coal” and nuclear power, if not large scale hydro. It therefore remains to be seen whether the current Kerry/Lieberman position (i) is a short-term tactic to attract support for their bill in the coming weeks through a subsequent amendment, or (ii) reflects their conclusion that the vastly different energy situations among the various states and regions means the matter is best left to the states as a matter of policy, not politics.

The Vermont decision also complicates the future tactics and strategies of Canadian governments. While the enactment by Congress of a new national RPS that qualifies large-scale hydro would be the ideal result for Canada, Vermont’s move suggests that the next best result for Canada may now be the Kerry/Lieberman idea of no national standard, (rather than a new national standard that disqualifies large scale hydro). On the one hand, one (discriminatory) national standard would at least be easier to attack than a plethora of different state standards. On the other hand, forgoing a national RPS and leaving the issue at the state level would allow Canadian provinces to dialogue with their American state partners in the various bilateral entities that oversee the reliability of the cross-border bulk power system (such as the Northeast Power Coordinating Council or the Midwest Reliability Organization).

The lesson of Vermont Bill H. 781 is clear. As the popular rhetoric of green energy continues to transform into the not-so-popular reality of rising hydro bills, a growing number of Americans will conclude that securing access to clean, reliable and low cost Canadian hydroelectricity is not such a bad idea after all.