The global hydroelectric power market, which already represents 76% of all renewable global energy, has the potential to double to 2,000GW capacity by 2050 according to a new report from the World Energy Council, ‘Charting The Upsurge In Hydropower Development’, presented today in Beijing. This doubling could be achieved even earlier, if governments and multilateral banks give help to emerging economies where hydropower resources are under-utilised, notes the World Energy Council. Alex Forbes reports for World Energy Focus and Energy Post.

Amidst all the excitement about the growth of wind and solar power, it is easy to forget that by far the largest source of renewable energy is hydroelectricity. In 2013, hydropower capacity grew by 40 GW, more than wind or solar. And global capacity, notes the World Energy Council in a report released today, as part of the World Energy Resources series, is expected to double to 2,000 GW by 2050. But there will be challenges aplenty – not least in ensuring that hydropower is developed responsibly and sustainably.

It took a century for global hydropower generation capacity to reach 1,000 GW, a milestone it passed in 2013, when it generated 16.4% of the world’s electricity. According to scenarios prepared by the International Hydropower Association (IHA), the next 1,000 GW is expected to be realised by 2050 – perhaps sooner – as hydropower grows by 3-4%/year. The World Energy Council’s 2013 Symphony scenario, assuming a view of the world in which environmental sustainability has the highest priority, supports this assumption to 2050 mainly for the emerging markets. The growth expectations are lower in the Jazz scenario, where climate change is not a priority, but where free market principles apply.

Revival

Hydropower has been enjoying a revival driven largely by growing awareness that climate change is upon us and that the energy industry has to adapt. In a carbon-constrained world, hydropower starts to look very attractive. It is a renewable resource that unlike most other renewable resources does not suffer the problem of intermittency, which can play havoc with the management of power grids.

To the contrary, not only is hydropower well suited to baseload operation, it is highly flexible, and can incorporate an element of storage, and so is an ideal complement to the other intermittent renewable energy sources such as wind and solar power. As the report notes: “Storage hydropower, including pumped storage, represents 99% of the world’s operational electricity storage.”

“Risk has to be factored into the process of accessing finance, and hydropower projects, until they’re well-advanced in terms of their implementation, are high risk”

Hydropower is also a resource with large potential in many developing nations. And it can have additional advantages, some of which are hard to value in monetary terms, but which can be highly beneficial. For example, the world’s largest hydropower station – China’s 22.5 GW Three Gorges Dam – was built not primarily as an electricity generator but to control extreme floods.

“Before the project’s completion in 2007,” says the report, “a single disastrous flood event in 1999 passed through the site, causing economic losses in the region of US$26 billion, equivalent to the total investment cost of the entire project. When a similar flooding event took place in 2010, the dam was able to attenuate the peak flood flows, avoiding billions of dollars of economic damage, not to mention protecting the local communities.”

Which is not to say that the project is not an important generator of electricity. In 2014 it broke the world record for the most electricity generated by a hydropower project.

Dark period

The upsurge in hydropower development over the past decade followed a dark period for the industry. According to the Council’s hydro report, from 1999 through 2005, hydropower development stalled worldwide, reflecting the impact of the World Commission on Dams (WCD), convened to review the development effectiveness of large dams and develop guidelines for the development of new dams. A WCD report published in 2000 “challenged existing practices and proposed stringent guidelines for dams, which in turn caused a sharp decrease in investments”.

“The benefits of hydropower don’t always have a financial value”

From 2005 onwards hydropower development saw an upswing, which, says the Council’s report, “can be partly attributed to the impact of intensive efforts by the IHA and hydropower companies to negotiate sustainability guidelines for the sector”. The report adds: “Growing investments in and by emerging economies (mainly the BRICS, particularly China), continued interest in renewable energy, particularly with storage capacity and eventually participation in carbon markets/renewable energy credits have also contributed to the upswing.”

But the industry nevertheless faces some daunting challenges in realising its future potential, says International Hydropower Association CEO Richard Taylor: “The decision-making process required for projects to obtain permission to proceed into construction and operations can be very unpredictable. This is a big challenge because there are so many authorities and stakeholders involved.”

“There is also a lack of incentives to orientate investment towards hydropower. This has been borne out of misperceptions about the specific advantages of hydropower, compounded by the lack of reward in the market for those same advantages: the benefits of hydropower don’t always have a financial value.”

Taylor notes that “risk has to be factored into the process of accessing finance, and hydropower projects, until they’re well-advanced in terms of their implementation, are high risk. That risk-sharing will carry a premium. This is a problem for large-scale projects in particular, as these typically require high up-front capital costs, despite their very low operation and maintenance costs.”

Extraordinary growth

Other challenges, according to Hans-Wilhelm Schiffer, Executive Chair of the World Energy Resources Study at the World Energy Council, include:

a potential shortage in technical skills with an increase in demand

the energy-water-food nexus, where competing demands for freshwater may constrain hydropower development

the effects of sedimentation on the operation of hydropower plants and the host water body

managing the environmental and social effects of hydropower projects on the local area more effectively

the potential impacts of climate change on the sector

Geographically, Taylor expects to see substantial growth in Asia, Africa and South America, alongside further, though limited, development in North America and Europe. “Whilst there is a great deal of potential in Africa, we have seen relatively low amounts of deployment there to date, but the situation is poised to change,” he says. “As for Asia, which has the greatest potential for development, we are seeing extraordinary growth in hydropower capacity. China’s exceptional development is set to influence investment in neighbouring countries.”

A big boost for hydropower’s prospects has been a change of heart on the part of multilateral development banks, such as the World Bank, and environmental NGO’s

The Council’s report highlights the case of the Grand Inga project in the Democratic Republic of Congo, which has been in various stages of planning since 1972. “Successive governments have indicated support, although to-date the project has been unable to advance,” says the report. “More recently, in 2014, South Africa has indicated a renewed interest in this project as the major buyer of the electricity that would be generated, potentially providing the revenue certainty needed to move the project forward.”

Grand Inga is an example of the potential for large-scale regional hydro developments, notes Schiffer. “In some countries where the electricity supply market is saturated, hydropower schemes are a source of cheap, exportable electricity to more energy-hungry neighbours. Also, these large-scale schemes could serve as multi-purpose reservoirs, benefits from which include flood control and drought prevention. These value-added services could be key to the further development of large-scale hydropower.”

Big boost

A big boost for hydropower’s prospects has been a change of heart on the part of multilateral development banks, such as the World Bank, and environmental NGOs, such as the Nature Conservancy and the World Wildlife Fund (WWF). Instead of generally opposing large-scale hydropower developments, they have moved towards supporting them, so long as they are planned responsibly and sustainably.

Indeed, the World Hydropower Congress is being sponsored by The World Bank, The Nature Conservancy and the WWF. Also supportive has been the increasing involvement of private investors.

The World Energy Council’s Chair, Marie-José Nadeau, who is also senior executive at Hydro Québec, points out that the so-called water-energy nexus is of crucial importance to the development of hydropower. “A more water-constrained future, as population and the global economy grow and climate change looms, will impact energy sector reliability and costs. The fuel mix used to meet the rising energy demand has a direct impact on water resources. Moreover, water shortages are already being observed in many parts of the globe. In such a context, the importance of the water-energy nexus cannot be overemphasized”, she says.

As with carbon footprints, the water footprints of power generation options are increasingly being compared. “More and more, energy companies are expected to be transparent on their water use and on the related risks,” says Nadeau. “It is thus important that hydropower producers take a greater interest in and document their water footprints and that they showcase the many benefits of hydroelectricity, including low GHG emissions.”

Editor’s Note

This article was first published as a preview of the World Energy Council’s report on World Energy Focus, the free monthly web-based magazine of the World Energy Council.

The Report predicts that the regions where there is the highest potential for rapid growth are in China, India, Brazil and Southeast Asia. The schemes will be largely storage hydropower where water can be stored in reservoirs for additional purposes and run-of-river hydropower plants. These plants already exist in the Amazon basin, the Himalayas region and the Mekong and Irrawaddy river systems.

The Report gives examples of high users of hydropower which are China, who utilises 41% of its hydropower resources (worth up to 1.3million GWh per year) and India who utilises 21% of its hydropower resources (worth up to 0.5million GWh per year). Russia, which has the world’s largest resource of hydropower energy (worth up to 1.5million GWh per year) only utilises 10% of its resource. Another example of the high potential for the use of hydropower energy is in Indonesia which has the sixth largest hydropower resource in the world (worth up to 0.39 million GWh per year), yet only utilises 3% of its energy resources.

The full report, Charting The Upsurge In Hydropower Development, can be found here.