For most forms of renewable energy, especially wind and solar, the “One Big Beautiful Bill Act” that the GOP-controlled Congress passed this summer was bad news.

Just a few years after congressional Democrats and President Joe Biden expanded tax credits aimed at boosting renewable energy development, the new law terminates them years ahead of schedule.

One form of renewable energy was spared, though: hydropower. It’s not entirely clear why the industry did not meet the same fate as other power sources, but certain investments in hydro projects remain eligible for federal tax credits into the 2030s. But while it should be a good time for the hydro sector, the industry’s confronting a once-in-a-generation problem too.

The U.S. isn’t building much new hydropower these days. Electrons generated by water flowing through turbines account for about 6% of our electricity, and it’s been at that level for the last few decades.

“The reality is, we've sort of tapped the biggest potential sources of hydro power in the United States and our nation's grid,” said Jennifer Garson, a partner with the energy consulting firm Waypoint Strategy Group. She previously worked at the U.S Department of Energy’s Water Power Technologies Office.

“There are only so many rivers that you can actually dam and be able to still provide safe passage for fish and build them in an environmentally compatible way,” she said.

We already blocked a lot of those rivers to generate power many decades ago. Think, the Hoover Dam, for example.

The problem with those federal tax credits that hydro projects can tap into for the next eight years is that they're for new electricity generation. But there are a few ways that hydro companies can access them, even if they’re not building the next Hoover Dam. One way is to significantly upgrade existing hydro facilities.

“The electric generating equipment, the generator, the turbine, all the parts that are used to make power,” said Malcolm Woolf, president and CEO of the National Hydropower Association. Upgrade enough of that stuff, and the owner of a hydro facility can get a tax credit.

The other way is to add hydropower turbines to existing dams that don’t have them. There are a lot of those.

“There are 90,000 dams in America, and only 3% are used for power generation. The rest are used for flood control, irrigation, water storage,” Woolf said.

But all of those other uses for dams also make for a big hurdle for hydro projects: Permitting and licensing.

“Depending on where you are in the country, you could have as many as 10 or more different entities that have a right to have a permit in the process,” said Caitlin Grady, an associate engineering professor at George Washington University.

“There's fish and wildlife, both at the federal and the state level. There are permits or reviews associated with things like the Endangered Species Act, with the Clean Water Act,” said Grady.

Many entities get input in the licensing process for good reason, Grady said: Dams on rivers impact wildlife habitats and surrounding communities.

But for hydropower operators, the challenge is the time it takes to license a facility: eight years, on average, according to the National Hydropower Association.

“It's longer, on average, than licensing a nuclear plant, which is kind of crazy,” Grady said.

Those hydro licenses usually last for 50 years. But the last big wave of hydro development in the U.S. was about 50 years ago. So, hundreds of facilities are up for re-licensing. 

That’s what the company FirstLight Power is navigating with two of its hydro facilities in Massachusetts. 

“We are now in year 13 of the five-year licensing process for these projects,” said Justin Trudell, the company’s president and CEO.

And the process isn’t finished. This summer, several groups appealed the company’s state water quality certification, arguing it hasn’t done enough to mitigate erosion and impacts on certain fish species, among other issues.

So, Trudell said, FirstLight is waiting to make upgrades to its facilities while it operates them under an extension of its old license.

“We're kind of stuck saying, ‘Look, we know where we need to go, but while this process is playing out, we can't get there,’” he said.

Trudell said FirstLight has the means to keep its Massachusetts facilities running, but some smaller hydro operators haven’t survived relicensing. Over 60 facilities have surrendered their licenses in recent years, according to the National Hydropower Association.

The challenge, according to energy consultant Jennifer Garson, is finding investors who are willing to wait for a return.

“Sometimes capital providers may not have the patience for the length of time that it will take to recoup the investments made into rehabilitating and re-licensing these projects,” she said.

There is one source of capital that could come to hydro’s aid: Big tech looking to power data centers. In July, Google signed a $3 billion agreement to buy hydropower in Pennsylvania. The hydro industry hopes other tech companies follow suit.