The U.S. Department of Energy (DOE) is directing $13 million toward nine research and development projects spanning eight states, aimed at enhancing hydropower’s responsiveness to fluctuating energy demands, officials announced March 5, 2026.
The funding, channeled through the newly renamed Hydropower and Hydrokinetic Office (H2O), formerly the Water Power Technologies Office, reflects a broader Trump Administration initiative to bolster American energy dominance. The office’s restructuring, completed in early 2026, places it under the Office of Energy Technology within the Office of Critical Minerals and Energy Innovation (CMEI), a move intended to accelerate the development of next-generation energy technologies. H2O is also integrating staff from the former Grid Deployment Office (GDO) and assuming responsibility for hydroelectric incentive programs.
Hydropower currently accounts for nearly 6% of total U.S. Utility-scale electricity generation and 88% of utility-scale stored energy capacity, according to the DOE. The new investments seek to maximize the sector’s ability to provide flexible and reliable energy, supporting grid stability and ensuring consistent power supply. The DOE also noted the potential of marine energy to power remote communities, defense operations and offshore industries, estimating that available marine energy resources in the U.S. Are equivalent to approximately 57% of current national power generation.
The financial incentives for hydropower were further solidified by the passage of the “One Considerable Beautiful Bill Act” in July 2025, which preserved key tax credits – Section 45Y for electricity production and 48E for project investment – through 2033. These credits, and the availability of elective pay for public power entities, are expected to stimulate investment in both the rehabilitation of existing hydropower facilities and the development of new projects, according to the National Hydropower Association.
The Hydroelectric Production Incentives program, established under Section 242 of the Energy Policy Act of 2005, provides payments for electricity generated from dams and other water infrastructure that either expand existing hydroelectric capacity or are constructed in areas with limited electric service. The program, administered by the Grid Deployment Office, has allocated $125 million in incentive payments to eligible owners and operators of qualified hydroelectric facilities. To qualify, facilities must be located in the U.S., utilize a water-powered turbine, be owned and operated by non-federal entities, and have begun generating energy for sale on or after October 1, 2005, or have undergone significant rehabilitation after being offline for at least five years.
In September 2024, the DOE announced a separate $430 million investment to modernize existing U.S. Hydroelectric power plants, signaling a continued commitment to upgrading the nation’s hydropower infrastructure.
