A Positive Outlook for Hydropower

As diverse as the globe itself, the world of hydropower development is a heterogeneous one, despite the industry-wide use of a single resource — water. Nonetheless, some consistent themes are emerging, in particular a renewed focus on sustainability and a reappraisal of the role hydropower can play in the modern energy age, as our global hydropower outlook reveals.

Staff Report

Policymakers in North America are trying to further encourage the private development of hydroelectric generating capacity at existing, federally-owned infrastructure

Africa: New development and cross-border cooperation

Reliable power for African countries is key, and hydroelectric generation development is key to power. It is normal for environmental and technological concerns to occupy the most difficult challenges hindering the development of hydroelectric generation projects. But as it relates to hydropower in Africa, one can make a convincing argument that political instability and physical safety outweigh all other considerations.

Although ideological, armed regional conflicts rage in Nigeria, Kenya, Somalia, Egypt and elsewhere in Africa, increasingly countries are trending toward developing cross-border hydropower potential for indigenous use.

In early 2014, high-level leaders from Africa and Europe formed the Africa-European Union Energy Partnership (AEEP) to formulate pathways that could best provide energy access to 100 million Africans by 2020. Hydroelectric power would play a key role, and the more than 450 participants from 40 countries who attended formal meetings collectively set a goal of creating 10 GW of new hydropower.

AEEP said it hopes to “reinforce the dialogue between policy-makers and stakeholders from the private sector, civil society and academia on topics corresponding to the Africa-EU Energy Partnership 2020 targets: energy access, renewable energy market development, energy efficiency and cross border interconnections.”

The Zambezi Watercourse Commission (ZAMCOM) is seeking to modernize the Zambezi Water Information System (ZAMWIS) to meet needs of Zambezi riparian countries of Africa.

The Zambezi River Authority (ZRA) last year recruited consultants to perform dam failure analyses for dams and hydropower projects on the Zambezi including 1,600-MW Batoka Gorge, 900-MW Kafue Gorge and 750-MW Kafue Gorge Lower on the borders of Zimbabwe and Zambia, and 2,040-MW Cahora Bassa and 1,500-MW Mphanda Nkuwa in Mozambique.

South Africa’s Cabinet has advanced to Parliament a treaty for joint development of the 40,000-MW Grand Inga hydroelectric complex with the Democratic Republic of Congo (DRC). The DRC is an area of Africa that holds the continent’s largest hydropower potential.

The Grand Inga Treaty, which provides a framework for facilitating power generation from the giant hydro project on the Congo River in DRC, will also provide for power transmission to the DRC-Zambia border.

The DRC received a US$73.1 million technical assistance grant from the World Bank’s International Development Association for the 4,800-MW Inga 3 Basse Chute (Lower Falls) project, advancement of three mid-sized (10 to 100 MW) hydro projects and an Inga-Kolwezi-Zambia border transmission line.

Small hydro supports the development of other green technologies (wind, solar) and favors the EU’s objectives to decentralize the production of energy

The 350-MW Inga 1 and 1,424-MW Inga 2 hydroelectric projects currently are undergoing refurbishment. Additionally, the proposed 4,800-MW Inga 3 project is considered a step toward development of the 40,000-MW Grand Inga complex.

Ratification of the treaty would enable development of Phase 1 of the project, which is to provide 2,500 MW to South Africa and contribute to regional integration, energy security, access to energy, and economic growth in an environmentally sustainable manner.

The World Bank is studying hydropower development potential in sub-Saharan Africa. As an example its study measures the benefits of international cooperation on transboundary rivers of sub-Saharan Africa in the hydro-rich Senegal River Basin.

Via the current study, the World Bank said it wants to assess its role and elaborate a strategic plan for future engagement in Africa’s untapped hydropower potential. It said the study would focus exclusively on medium and large-scale hydropower.

Work is to include a review of key trends over the past decade, compilation of information on Africa’s hydropower potential, and analysis of constraints and opportunities for future hydro development.

In December 2014, the World Bank financed a multi-sector analysis of investment options, including safeguarding the ecological status, of the Cubango-Okavango River Basin of southern Africa.

The Cubango-Okavango River system rises in Angola, flows past Namibia and terminates in the Okavango Delta, the largest wetland in southern Africa, in Botswana’s Kalahari Desert. These three nations formed the Permanent Okavango River Basin Water Commission (OKACOM) to plan and execute transboundary water cooperation.

Expected for a Dec. 2015 completion date, a World Bank project would develop a multi-sector analytical tool that has a multi-basin dimension. This would extend the current Multi-Sector Investment Opportunity Analysis tool developed in the Zambezi River Basin and produce a model and methodology that might be of use in other international river basins in Africa.

Europe: Racing to the next frontier

There are (at least) three overarching themes that can be expected to continue in Europe’s hydropower sector into the coming year.

The first is the focus on small hydro. Development of new small projects (defined here as 30 MW or less) and rehabilitation of existing ones is ongoing in Bosnia, France, Germany, Scotland and Switzerland, to name just a few locations. We also recently reported on TradeLink Solutions Energy Group in England seeking US$3.7 million in investments “to finance the development of new hydropower schemes.” To date the company has rehabilitated and refurbished and either developed or partnered in the development of 10 hydro schemes in the UK, all less than 1 MW in capacity.

Why small hydro for this continent? According to the European Small Hydropower Association, small hydro (which ESHA defines as 10 MW or less) supports the development of other green technologies (wind, solar) and favors the EU’s objectives to decentralize the production of energy. ESHA says in 2010 there was an installed capacity of more than 13.5 GW of small hydro within the EU-27.

The second theme is pumped-storage interest, and development. For example, a recent study commissioned by Voith Hydro indicated expansion of pumped-storage development in Germany is important, with the potential to add nearly 24 GW of new capacity in two states. Voith recently received a contract to modernize four motor-generators at the 1,045 MW Vianden plant between Luxemburg and Germany.

Brazilian developers have continued development of a number of large projects – including the 11.2-GW Belo Monte, 1.8-GW Teles Pires, and the 3,750-MW Jirau, amongst others

In addition, work is under way to increase capacity at the 220 MW Erzhausen Pumped-Storage project in Germany. This would involve increasing storage capacity of the reservoirs; planned storage levels are below the existing dam crests. Pumped storage will continue to be a hot topic for Europe over the coming year, particularly for those countries adding significant intermittent (wind and solar) renewable capacity.

The third theme? Europe is THE hotbed for marine and hydrokinetic energy development. We anticipate continued growth and change in that sector, as in-water testing progresses and the MHK industry experiences some settling in the form of companies changing hands or closing up shop altogether.

Recently, Scotland’s European Marine Energy Centre (EMEC) and the Offshore Renewable Energy Catapult collaborated to give wave and tidal energy technology developers an opportunity to test their components for free. This move, intended to strengthen MHK in Europe, is key, as “The U.K.’s wave and tidal industry … could be worth around US$112.8 billion cumulatively by 2050,” according to EMEC.

In other news, Lockheed Martin has been awarded a contract to deliver a 1.5 MW turbine to be used by Atlantis Resources Ltd. at its MeyGen site in Scotland’s Pentland Firth. Nautricity recently secured a grid-connected test berth at EMEC for its Contra Rotating Marine Turbine or CoRMaT. And Tocardo Tidal Turbines acquired Swanturbines Intellectual Property.

Europe looks to be reaching the next frontier in its hydropower development, given that most sites for traditional large hydro have been tapped.

South America: Brazil still the powerhouse for a continent

With Brazil second only to China in cumulative hydroelectric production, the country’s prolonged drought remains a significant issue throughout South America given the importance of Brazil’s economic contributions to the entire continent. The dry spell is Brazil’s worst since the government began keeping records in the 1930s, and with many projects being of the run-of-river variety, the scant availability of water is forcing operators to deactivate plants and municipalities to enact rationing.

Still, Brazilian developers have continued development of a number of large projects — including the 11.2-GW Belo Monte, 1.8-GW Teles Pires, 3,750-MW Jirau, 807.5-MW Tres Irmaos, 700-MW Sao Manoel and 373.3-MW Santo Antonio do Jari, amongst others — despite the drought, solidifying the country’s status as South America’s hydroelectric hotbed.

The country’s federal power regulator has expressed concern, given that the agency has announced a plan allowing distributors to seek higher rates for energy generated by qualifying hydropower projects. The price per MWh cap has increased by about 150% since this past June and is intended to help sustain interest in the hydro market.

Meanwhile, the focus in many other South American countries seems to be on the modernization and rehabilitation of existing plants instead of new construction. Plant upgrades and new development in many South American countries has relied heavily on private financing from overseas investors, though operators from around the globe continue showing interest in markets that are becoming increasingly hungrier for electricity.

The foreign investment trend is expected to continue as these upgrades represent relatively inexpensive sources of revenue, making South America noteworthy to equipment suppliers and distributors as operators look to squeeze more production from their assets.

Driven by increasing power demand from urbanisation, as well as a region-wide governmental push for reform, hydropower occupies a major role in regional energy development for Asia.

As in many parts of the world, the tidal energy sector is also beginning to garner more interest — particularly in Chile and Argentina. Chile, which imports more than 90% of all energy it consumes, signed agreements in 2014 to develop a marine energy research center. Argentina has also been cited as having some of the most significant tidal power potential in the world, making the country an interesting prospect as the sector moves toward commercial feasibility.

North America: Pumped storage gains traction

Though many western states — most notably, California — have also experienced record-setting drought conditions over the past year, the major emphasis in the United States continues to be the passage of state and federal legislation aimed at simplifying and expediting the development process.

Specifically, policymakers are trying to further encourage the private development of hydroelectric generating capacity at existing, federally-owned infrastructure that, according to a 2014 U.S. Department of Energy report, could equal as much as 65 GW of undeveloped potential.

Pumped-storage hydropower is also garnering interest due in no small part to the renewable portfolio standards being implemented by many states.

These renewable standards have also been an important driver for hydropower in Canada as many states along the border continue to debate whether or not imported Canadian power is eligible to be included in their portfolios.

The decision could be a significant boom for Canadian developers, but there are still a number of legislative obstacles that must be overcome before Canadian hydropower plays a more significant role in the U.S.

Still, Canada’s hydroelectric market remains strong. The sector already accounts for the majority of all Canadian electricity generated and consumed, and large projects like the 3,074-MW Lower Churchill, 1,100-MW Site C, 1,485-MW Conawapa and 824 MW Muskrat Falls further cement hydro’s position.

Meanwhile, Canada’s Bay of Fundy represents one of North America’s most promising bastions of marine and hydrokinetic development, with Canada’s Fundy Ocean Research Center for Energy (FORCE) announcing a number of agreements with technology developers and other research agencies to advance Canada’s MHK sector.

As in other regions, however, the commercial-scale viability of ocean energy remains an issue, though FORCE’s partnerships and location could eventually put the test site on par with Europe’s EMEC and other significant MHK installations.

Asia: China backs regional hydropower

An extremely diverse collection of markets, resources, drivers and constraints, Asia is nonetheless characterised by accelerating economic development. Driven by increasing power demand from urbanisation, as well as a region-wide governmental push for reform to open up energy markets to investment, hydropower occupies a major role in regional energy development.

World Bank forecasts on economic growth suggest an acceleration to 7.4% in 2016 for the South Asian region, driven by a strong expansion in India, coupled with favourable oil prices which are benefitting the economies of net oil importers. Commenting on the forecast World Bank South Asia Chief Economist Martin Rama points to further drivers for clean energy development, saying: “Cheap oil gives the opportunity to rationalize energy prices, reducing the fiscal burden from subsidies and contributing to environmental sustainability”.

For example, the report notes that India has already taken steps to introduce carbon taxation to address the negative externalities from the use of fossil fuels.

While India is clearly a regional powerhouse, China has established its position as the central player in both developing its domestic resources and financing hydropower projects across the region.

According to the International Energy Agency’s (IEA) Key World Energy Statistics 2014 edition, China produced more than 23% of the global total of hydropower capacity, not far off 900 TWh annually.

Illustrating the country’s immense financial muscle, the Beijing-based Asian Infrastructure Investment Bank (AIIB) has a reported US$50 billion foundation from which it plans to spur infrastructure growth in developing Asian countries with projects that include hydroelectric facilities.

Formed by the Chinese government as a multilateral development bank with the potential to rival the World Bank and the International Monetary Fund (IMF), AIIB began operations in October 2014.

And, more recently, Nepal’s investment board approved a plan by China’s Three Gorges International Corp to build the US$1.6 billion West Seti river hydropower project.

Reportedly the largest single foreign investment into Nepal, the project in the northwest of the country will be rated at 750 MW once complete scheduled for 2021-2022.

Indeed, according to the US Energy Information Agency (EIA) China’s state-owned enterprises such as the Export Import Bank of China and China Development Bank financed some 46% of all new hydropower capacity additions in Cambodia, Laos and Myanmar, all countries actively developing their considerable hydropower resources. The combined percentage of hydroelectric generation relative to total generation in these three countries is expected to rise to 96% in 2030 from 80% currently.

However, there are limits to the development boom. For instance, China’s environment ministry reportedly refused to approve a planned hydropower development – the 1,000 MW Xiaonanhai project on the Jinsha River under development by the Three Gorges Project Corporation. Last year the 13,860 MW Xiluodu project — the world’s third-largest hydropower plant — was also completed on the Jinsha.

Nonetheless, there is no doubt that global hydropower development will be lead by Asia and Asia will be lead in turn by China.

Africa: Gregory B. Poindexter is Associate Editor of HRW-Hydro Review Worldwide
Europe: Elizabeth Ingram is managing editor of HRW-Hydro Review Worldwide
America’s: Michael Harris is Associate Editor of HRW-Hydro Review Worldwide
Asia: David Appleyard is Chief Editor of HRW-Hydro Review Worldwide

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