HRW-Hydro Review Worldwide

Hydropower Outlook

Hydropower is all set to continue its resurgence given the trends in investment.

By David Appleyard

For decades, large scale hydropower developments have been viewed as something of a pariah within the renewable energy sector. Indeed, despite an acknowledged contribution to sustainable energy development - hydropower's global kWh contribution dwarfs all other renewable technologies - it has largely been excluded from considerations that benefit other forms of renewable power generation and has weathered widespread criticism over projects deemed unsustainable.

All that is changing, though, and today the prospects for large scale hydropower development look better than they have done for decades. According to the latest figures available from the International Hydropower Association (IHA), some 30 GW of new hydropower capacity was commissioned in 2012, including about 2 GW of pumped storage. Naturally this scale of development has been accompanied with significant investment in all regions, notably South America, Asia and Africa.

On the back of these figures, IHA identifies three clear trends that are expected to see both investment and development growth for the hydropower sector in the coming years.

Top of the list is the continued drive for regional development where the increasing demand for secure supplies of both power and water places hydropower at a nexus of international collaboration to manage water and develop power systems across national boundaries. As a result, hydropower is both supporting and benefitting from a general trend of building transmission lines between countries and pooling of power across borders.

An example comes from Central America and its Electrical Interconnection System (SIEPAC) project connecting Guatemala, El Salvador, Honduras, Costa Rica, Nicaragua and Panama with an 1,800 km transmission line. The region has significant hydropower potential, but large scale investment and development has been hampered by the small size of the individual local markets. With an investment of US$405 million - funded primarily by loans from the Inter-American Development Bank, Central American Bank for Economic Integration and Corporacion Andina de Fomento - SIEPAC opens up opportunities to trade both regionally and into the large markets of neighboring Colombia and Mexico. The 300 MW interconnector was fully commissioned mid-2013 and has accompanied a wave of hydropower development.

For instance, statistics provided by Panama's Empresa de Transmision Electrica S.A. show the country's installed hydro capacity grew by more than 13% in 2012, some 282 MW of additional power. The increase, in the context of Panama's 2.43 GW of total installed capacity, is attributed to a number of new run-of-river hydropower projects that came online or received upgrades. Included in that figure are the 5.35 MW El Fraile, 25.8 MW Gualaca, 33.8 MW Lorena, 56.8 MW Bajo de Mina, 88.2 MW Baitun, 13.1 MW Hidropiedra and 58.7 MW Prudencia projects.

Another regional example, though on a significantly larger scale, comes from the 2,375 km Rio Madeira transmission project in Brazil. Claimed as the longest power transmission line in the world, it is connecting 6,450 MW of hydro projects in Porto Velho region of the Amazon - the Santo Antonio and Jirau Dams on the Madeira River - to the large, heavily populated cities of the south. Due for final completion this year, this 7,100 MW, 600 kV HVDC line began commercial operation in the middle of 2013. In December, Alstom won a separate contract to supply generation equipment to Santo Antonio, bringing the entire plant to 3,568 MW. This new part of the project will be concluded in December 2016, Alstom says.

Hydropower construction throughout the world is showing encouraging signs of growth.

New investment in hydro

A second key trend identified by IHA is the increasingly global nature of hydropower investment. Examples come from South Korea's investment in Pakistan.

In 2012, according to Pakistan's Board of Investment, the 147 MW run-of-river Patrind Hydropower Project was set as an independent power producer (IPP) development. Backed by Korea's K-Water and Star Hydro Power Limited (SHPL), 25% of the US$400 million cost of the development on the river Kunhar will come from them, while 75% will be financed by banks, including Export Import Bank of Korea, Asian Development Bank, International Finance Corporation and Islamic Development Bank.

Following this deal, a consortium of Korean companies - including K-Water but with Korean Midland Power and Posco Engineering and Construction - signed memorandums of understanding for US$3 billion worth of deals for two hydropower plants on the Indus River in the Kohistan-Khyber Pakhtunkhwa district of Pakistan, the 665 MW Lower Pallas Valley and 496 MW Spat Gah plants.

Africa is also benefitting from this type of trans-national infrastructure investment. In the country's largest private sector investment to date, 2012 saw the commissioning of Uganda's 250 MW Bujagali hydro station, which meant electricity production exceeded demand for the first time.

Subsequently, in mid-2013, the country signed a deal with China's Sino-Hydro Group Ltd. for the construction of the $1.65 billion Karuna project on the White Nile River. This 600 MW installation is backed by Chinese credit worth a reported 15% of the total cost.

In September 2013, Uganda's President, Yoweri Museveni, launched construction of Karuma, which is due for completion in 2018.

The USA is also reportedly getting in on the action, considering financing some of the Democratic Republic of Congo's $12 billion Inga 3 hydropower project. According to an interview with Bloomberg, Rajiv Shah, the head of the U.S. Agency for International Development, reportedly said the USA may add the project to a $7 billion U.S. government energy program known as Power Africa.

Along with these types of trans-national investment deals supporting large-scale development opportunities that were previously out of reach, private sector investment is also seeing growth. This development has often been accompanied by renewable energy support policies.

Future trends

With interest and investment in hydro picking up, investment in technology research and development has followed suit. Of particular note is the increased investment in tidal and marine hydrokinetic technologies, environmentally benign and fish friendly architecture and pumped storage.

IHA estimates that some 516 MW of tidal and ocean hydropower was installed by the end of 2012, with a pipeline of at least 3 GW in the longer term.

Variable speed pumped-storage turbines have also been a particular focus in light of their role in supporting variable output renewable energy technologies such as wind and solar. For instance, a paper published recently by California's Stanford University researchers examined the cost effectiveness of energy storage systems, finding that pumped-storage hydropower offers not only one of the highest ratios in terms of "energy stored on invested" of any storage system examined, but also provides a number of ancillary benefits that make it an attractive means of capturing excess energy.

This agreeable operational profile has already seen a number of pumped-storage installations being upgraded to variable speed, such as the 485 MW Le Cheylas plant in France, and there remain further opportunities in Europe and elsewhere.

It's certainly wrong to suggest that hydro development presents nothing but opportunity, realizing its incredible global potential means surmounting some major challenges. Nonetheless, these broad trends suggest that, sustainably developed, hydropower's innate opportunities for clean energy and water management, grid stability and storage mean that its recent period of significant growth will continue through 2014 and beyond.


David Appleyard is chief editor of HRW-Hydro Review Worldwide.


North America

Drivers behind new investment in the North American hydropower sector are diverse, reflecting the different markets. For example, Canada gets 59% of its electricity from hydropower, according to the International Energy Agency, and the country continues to develop large projects. In the USA, hydropower produces just under 8% of all electricity, and new development mostly consists of small projects or retrofitting hydropower equipment in existing infrastructure.

Many hydro projects are being built in Canada, ranging in size from 1,100 MW Peace River Site C in British Columbia to 695 MW Keeyask in Manitoba to 62 MW Jimmie Creek in British Columbia. Consideration is even being given to an up to 150 MW pumped-storage project in Alberta. Given Canada's vast hydro potential, there are opportunities for the country to export excess capacity to the USA. This is happening in several cases, including from the Canadian province of Manitoba to the U.S. state of Wisconsin.

Legislative triumphs in the USA have breathed new life into hydropower development. For example, in early April, a U.S. Senate committee approved a bill that would extend tax credits for hydroelectric power. These credits can be used to spur new development. Some projects being proposed that could take advantage of this include the 36.4 MW Red Rock plant in Iowa, an unnamed 30 MW run-of-river facility in Washington State, and the 3 to 5 MW 45-Mile facility in Oregon. Given the favourable government atmosphere toward hydropower, it is reasonable to expect further support for this valuable renewable resource.

- By Elizabeth Ingram, senior editor

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