Consider the DOE’s budget for its water-power program, whose mission is to research, test and develop innovative technologies for generating electricity from water. The good news for the industry is that funding quadrupled this year, from about US $10 million last year to $40 million this year. But advocates of more water-power funding are quick to point out that the program was allocated no money in 2006 and 2007 and that it took a concerted lobbying effort to have it restored last year.

But even with the funding increase this year, the budget for the DOE’s water power program still pales in comparison to other sources of renewable energy. The department has allocated $175 million this year for solar energy technologies, $55 million for wind technologies, and $169 million for fuel cell technologies.

“Considering that just a few years ago the federal government provided no funding for hydropower R&D,” said Kristen Nelson, a spokeswoman for the trade group National Hydropower Association, “this [funding] will at least start us on the road toward meeting the Obama administrations goal of doubling renewable energy resources.”

Part of the new budget is planned to support ocean-based power, such as technologies that harness energy from tides and waves. The department said its priority is to reduce barriers to the development and deployment of these technologies and projects, including research and development funding for components and devices and more accurate ways to assess water-power potential. Money will also go toward environmental studies and what the department calls integrated national marine renewable energy centers.

DOE funding last year, for example, went toward a demonstration ocean wave power system developed by White River Junction, Vt.-based Concepts ETI and the expansion of national marine energy centers at Oregon State University, the University of Washington at Corvallis and Seattle and the University of Hawaii.

The DOE’s budget this year also includes money for conventional hydropower, such as power plants attached to dams and pumped storage, where water is pumped from a lower reservoir to a higher reservoir to meet anticipated peaks in electricity demand. The DOE’s budget is supposed to fund efforts to assess the current state of U.S. hydroelectric infrastructure and identify opportunities for increased and more valuable generation, such as through efficiency and capacity gains at existing power stations. Some funding also may be used for placing power stations at existing non-powered dams and in constructed waterways.

The Obama stimulus package, which has millions of dollars for renewable energy and other clean technology projects, wasn’t particularly kind to water-power either. It included $32 million specifically targeted for the industry to improve existing hydropower infrastructure, but not for emerging technologies, though there may be funding in broader-defined allocations, such as those to research institutes.

Hydropower has great potential as a source of renewable energy. At 96,000 megawatts (MW) of installed capacity, almost all of which is from conventional plants, it’s also already the largest source of renewable energy in the country. A 2007 report by the Electric Power Research Institute, a nonprofit research organization, estimates that the country could increase hydropower capacity by 23,000 MW by 2025. The increase would come from ocean and conventional sources and from fresh water hydrokinetic technologies, like those that harness power from rivers.

To achieve that build-out, however, three broad changes are needed, said Mike Bahleda, an independent consultant who was principal investigator for the institute’s report. They include more research and development funding, better economic incentives (water power is only given half as much as wind in federal production tax credits), and a streamlined regulatory environment (water projects are the only renewable source that need a federal approval). The study called for the DOE to allocate at least $37 million per year to water power, though the National Hydropower Association has called for $91 million starting in 2010 (the DOE will likely get $30 million in 2010 according to a tentative budget). 

“I think part of the lack of funding is tied to the regulatory issue,” said Bahleda. “If you want to put [renewable energy] megawatts online, you see that you can put money into wind or solar with a simpler regulatory environment.” Another reason is widespread lack of appreciation of the potential for generating electricity from water, Bahleda said. 

Of course the growth of any industry can’t fully depend on government support, and some would argue that industries shouldn’t depend on it at all, regardless of their potential. But venture capitalists, the traditional source of funding for emerging technologies, have largely resisted entering the water-power sector. Since 2002, U.S. water-power startups raised a total of $500,000 in 2004 and $2.6 million in 2008, according to Dow Jones VentureSource. That’s compared with $55 million in 2004 and $2.4 billion last year for solar startups.

Some of the reasons include high capital costs and regulatory and technological risks, according to John Miller, director of the New England Marine Renewable Energy Center, a center within the University of Massachusetts that promotes the development of ocean-based renewable energy for New England. Miller said the industry isn’t lacking for ideas — he gets a call a week from someone looking to develop a new ocean power technology. And he says there at least a few dozen startups in the country focused on ocean power, almost all of which are backed by private money, from angel investors and the like.

But the ocean power industry is relatively immature — there are no commercial plants in the United States, only a handful of pilot projects — and Miller believes that venture capital will start flowing once companies have proven their technologies. He forecasts that there will be commercial generation from wave and tidal plants within five years. Offshore wind is also considered ocean-based power, and that is further along, Miller said.

Houston, TX-based Hydro Green Energy is one of the few U.S. water-power startups to have attracted venture capital — it alone accounted for the $2.6 million raised last year.

The company has developed systems for generating power downstream from existing hydro plants and in the downstream portion of auxiliary or active navigational locks. One is a floating platform that suspends underwater hydrokinetic turbines at existing hydropower plants, and the other is a metallic lock gate with rows of underwater turbines. The lock gate systems could each generate between 5 and 50 MW of power.

“We got venture funding because we had a strong business plan and intellectual property, and we had tested our technology,” said Mark Stover, vice president of corporate affairs. The company already has installed a platform system in Hastings, Minn., and it hopes to install its first lock gate for a separate project in Minnesota next year. By 2011, Stover said the company could be developing 10 to 15 projects a year.

As forward thinking as venture capitalists often are, they’ve also been known to behave like pack animals. If Hydro Green Energy and a handful of other leading water-power startups can prove the economic viability of their businesses, venture capitalists might start jumping into the sector. Government funding might not change, but there’s nothing like the promise of profits to spur more investment in emerging industries.

Justin Moresco has been writing about sustainability and green issues since 2005, first as a correspondent in West Africa for IRINnews. He now focuses mainly on emerging clean technology and is based in the San Francisco Bay Area. Before becoming a journalist, he was a licensed civil engineer.