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Brookfield Renewable Partners has signed yet another deal to power a tech giant’s data centers with one of its existing hydroelectric plants, heralding a potential lifeline for America’s aging dams.
In its quarterly earnings call with investors this month, Brookfield said it had signed a 20-year contract with Microsoft “at one of our hydro facilities” in the nation’s largest grid system, PJM Interconnection.
The deal is part of a broader agreement, announced last year, to supply Microsoft’s data centers with 10.5 gigawatts of renewable electricity. But it’s the first contract under that framework to support a specific hydroelectric facility. Brookfield declined to disclose which of its dams is part of the deal. Near Lancaster, Pennsylvania, the company operates at least two stations with a combined capacity of nearly 700 megawatts in PJM’s 13-state territory. On the earnings call, Brookfield suggested it may acquire a third plant in the grid system.
The move comes nearly four months after Brookfield signed the biggest deal for hydropower in history: a $3 billion agreement to supply Google’s data centers with up to 3 gigawatts of power for the next two decades.
It also comes at a make-or-break moment for the U.S. hydropower sector, which is one of the few forms of always-on, carbon-free energy available in a country clamoring for clean electrons. Most projects are decades old and will have to undergo relicensing processes over the coming years.
Both of Brookfield’s hydroelectric facilities in Pennsylvania — the 252-megawatt Holtwood Hydroelectric Project, first opened in 1910, and the nearly 418-megawatt Safe Harbor Hydroelectric Project, built in the early 1930s — are up for relicensing in the next five years.
As part of the Google and Microsoft deals, Brookfield said it was able to “upfinance” both facilities, a term that typically describes when private equity companies refinance an existing loan and borrow more money on top of the remaining balance. That could be an indicator that the data center deals are helping Brookfield fund the upgrades and other requirements needed to obtain new operating licenses.
“We continue to evaluate the opportunity to acquire hydro [plants] which would fit well within our portfolio,” Connor Teskey, president of Brookfield Asset Management, said on the earnings call.
Nearly 450 hydroelectric stations totaling more than 16 gigawatts of power-producing capacity are slated for relicensing across the U.S. in over the next decade. That’s roughly 40% of the nonfederal fleet (the government owns about half the country’s hydropower facilities).
The relicensing process for hydropower is uniquely onerous, involving multiple federal, state, and local regulators. Some power plant owners and advocates have accused regulators of using the process to try to squeeze the facilities for additional benefits, such as paying for roads or infrastructure unrelated to a dam itself, which owners say they can’t afford. Faced with relicensing, some stations have simply shuttered, their owners deciding it’s easier to surrender their permits than to make costly upgrades and regional investments needed to win support.
“This is major infrastructure. These facilities cost billions of dollars,” Malcolm Woolf, the National Hydropower Association’s chief executive, previously told Canary Media. “They’re like bridges and roads. They get a license for 50 years. The state agencies view [the relicensing process] as an opportunity to extract concessions from what they view as a deep pocket.”
In the 1970s, he added, “maybe the industry was a deep pocket.”
“But now,” Woolf said, “with the low cost of other fuels like wind and solar and gas, it’s driving these facilities to bankruptcy and to surrender licenses.”
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