Hydropower is one of the most effective sources of renewable energy, producing by far the most energy per unit of capacity of all our renewable investments.  When combined with the storage capacity of reservoirs in the existing portfolio, we think it is a compelling investment,” says Tom Williams, Partner and Head of Energy and Infrastructure at Downing LLP. “It will play a key role in furthering the transition to net zero.” [1]

Williams was speaking about one of the company’s recent acquisitions in the hydro industry. In May 2022 Downing Renewables & Infrastructure Trust (LSE: DORE) announced that it had entered into an agreement to acquire, through Downing Hydro AB (DHAB), a 100% interest in two operational run-of-river hydropower plants in Sweden. The plants were renovated between May 2014 and September 2019 and have an aggregate forecast annual production of around 18GWh.

DORE says the newly acquired plants will be fully integrated into its existing hydropower operational, control and dispatch arrangements. This will increase the number of DHAB hydropower plants to 19 and the total forecast annual production of the hydropower portfolio to 174GWh, a 60% increase since 31 December 2021.

DORE's investment strategy focuses on diversification by geography, technology, revenue and project stage. It says that this is designed to increase the stability of revenues and the consistency of income to shareholders.

In a recent interview with Environmental Finance [2] Williams said that to mitigate against the seasonal and variable factors of the renewable technologies it invests in (hydro, solar and wind), the company invests “across a spread of geographies and technologies whose generation profiles bear little correlation to one another”.

As Williams explained, geographical diversification gives the opportunity to invest in various renewable technologies as topography differs. For example, the UK’s geographical features don’t lend themselves to hydropower in the same way that Sweden’s do. Whilst operating in multiple geographies gives a better chance of consistent energy generation, as does differing generation profiles. For example, when it is raining, hydropower is the most effective technology but solar will suffer, but when it is sunny there is less chance of wind or rain.

To date, DORE’s hydropower investments in Sweden have been at existing operational hydropower plants which are mostly run-of-river and have been in situ for decades. Williams says the company has a significant programme to bring the plants up to date “with the very latest in modern environmental standards, which also forms part of our rationale of investing in these assets”. 

Most recently, DORE won the accolade of Renewables Fund of the Year at the 2022 Environmental Finance Sustainable Investment Awards. [3]

These global awards seek to recognise asset managers, analysts and data providers that incorporate environmental, social and governance standards across all asset classes – fixed income, listed and private equity, debt funds, multi asset funds, infrastructure funds and fund of funds. 

Williams said that the company was delighted with “another milestone that recognises DORE's ESG framework and strategy”. He reaffirmed their commitment to ESG and said: “we will build on this success by executing our ambitious growth plans across renewable energy sectors and geographies”. 

British investment

British International Investment (BII), the UK’s development finance institution formerly known as the CDC Group, is to invest up to US$200 million in African hydropower alongside Norwegian Investment Fund, Norfund, and renewable energy solutions provider Scatec. [4]

This will be the largest investment in hydropower in BII’s 74-year history. Norfund is seeding the partnership with their existing share in the joint venture with Scatec, plus further capital commitments of up to US$100 million over the next several years.

Norfund and BII together hold a 49% stake in Scatec’s African hydropower portfolio. This includes a mixture of operating assets, as well as several assets under development, including:

  • The proposed 205MW Ruzizi III hydropower plant which will provide power to Rwanda, Burundi and the Democratic Republic of Congo.
  • The 120MW Volobe hydropower plant in Madagascar.
  • The 350MW Mpatamanga project in Malawi, among others. 

BII estimates that in a decade the clean electricity provided by the joint venture’s new assets could support the creation of at least 180,000 further jobs, avoid at least 270,000 tCO2e of GHG emissions annually, and meet the equivalent demand of more than three million people.

“Hydropower is critical for providing clean baseload and peaking power, especially in landlocked countries in Africa, as the continent countries transition away from fossil fuels towards a net zero future,” says Chris Chijiutomi, Managing Director, Head of Infrastructure Equity, Africa and Pakistan at BII. “BII along with its partners will play a key role in providing inclusive and sustainable finance to support hydropower in sub-Saharan Africa. It is great that we are partnering with Norfund and Scatec in this partnership.”

UK Minister for Africa, Vicky Ford, added: “Investing to bolster Africa’s hydropower sector is a strong step toward helping to meet the energy demands of three million people in countries most at risk to the impacts of the climate emergency. Through these projects, UK finance will enable job creation and drive clean productive growth across the continent.”

Investing in Africa

An additional 40GW of hydropower capacity, along with a huge increase in investment, will be required by 2030 to help transform the African energy sector and achieve development goals. As recently stated by the International Energy Agency (IEA) in its Africa Energy Outlook 2022, African hydropower will require a doubling of investment to achieve this, with 60% expected to come from the private sector.  

Eddie Rich, Chief Executive of the International Hydropower Association (IHA) says the IEA’s report shows the vital role that hydropower can and must play in enabling Africa’s sustainable development.

“To unlock private investment governments and policy makers need to reward the vital low carbon flexibility provided by hydropower. Projects can and must be developed sustainability, with the Hydropower Sustainability Standard providing a benchmark by which to assess projects,” he says. [5]

As the IHA highlighted in its 2022 Hydropower Status Report, major investment is needed in Africa’s electricity grid infrastructure as, despite its size, the region only has 26,000km of high voltage transmission lines. In comparison, India, with a similarly sized population, has 430,000km. With electricity demand expected to triple by 2040, efforts are being made to improve and increase transmission and distribution assets in Africa. [6]

“Some African countries are leading the way forward,” the IHA report states. Construction of a transmission line connecting Kenya to Ethiopia, the longest in East and Central Africa, is near completion, with a capacity of 2000MW. While the government of Angola is set to reap the benefits of investing in transmission lines to harmonise access to the country’s national resources. A 343km long transmission line connecting the north and south grids and allowing for the transfer of approximately 1000MW of hydropower is set to be operational in 2023.  This was financed largely by the African Development Bank (AfDB). 

In 2021, AfDB also provided financing to the Southern African Power Pool towards the cost of the Baynes hydropower plant 400kV transmission line project between Angola and Namibia, which is scheduled for completion in 2025.

Speaking in September 2022, AfDB President Dr Akinwumi Adesina has also urged Japanese businesses to invest more in renewables and other vital sectors in Africa, including the hydropower industry.

At the 8th Tokyo International Conference on African Development (TICAD8), Adesina said investment opportunities and returns on investment in Africa are among the highest in the world and urged participants to assess Africa’s investment opportunities based on facts and evidence, and not on perceptions. 

“In 2020, Moody’s Analytics performed a ten-year cumulative assessment of global infrastructure debt default rates, by region. It found that Africa was the region with the second lowest cumulative default rate, after the Middle East. That is proof once again that infrastructure as an asset class in Africa is solid, secure, and profitable,” Adesina said.

Speaking by video link at the event, Japanese Prime Minister Fumio Kishida said Japan had achieved its goal of contributing US$20 billion to Africa within the private sector and announced new commitments. He said Japan “will provide co-financing of up to US$5 billion, together with the African Development Bank, in order to improve the lives of African people.”

Strong business case

Looking wider afield, investment in hydropower needs to grow five-fold from 2018 levels if the Paris Agreement goals are to be achieved. This is the view of Gauri Singh, Deputy Director-General of the International Renewable Energy Agency (IRENA), who was speaking at the fourth meeting of the Collaborative Framework on Hydropower in June 2022. [7] The meeting was attended by more than 60 participants from 35 Members and States in Accession to discuss critical challenges and potential solutions for the global development of sustainable hydropower. 

IRENA’s recently released report, World Energy Transitions Outlook (WETO), suggests that to meet climate goals, hydropower installed capacity, including pumped storage, should more than double by 2050 from 1.3TW to 2.9TW. WETO estimates the necessary investments in conventional hydropower to be around US$85 billion per year.

Speaking at the meeting, Rebecca Ellis, Policy Manager with the IHA, said there is a vital role for pumped storage in addressing the climate crisis but that the lack of a strong business case has hindered private sector investment in its development.

To help promote hydropower development and facilitate investments in the sector, IRENA is organising the International Conference on Hydropower Investment in Developing Countries, along with the Government of Switzerland. To be held in Geneva, Switzerland during October 2022, the conference will explore significant funding opportunities in the Asia-Pacific region, Latin America, and Africa and “zero in on countries that face immense challenges in raising finance to tap into their hydropower potential”.


A new report from WWF is encouraging the insurance industry to step up and support the development of sustainable hydropower. Published in July 2022 and called Insuring A Nature-Positive World: An Insurers Guide to Hydropower, it acknowledges that insurance companies play a key role in facilitating new hydropower projects and act as investors, risk managers and insurers. [8]

“Hydropower projects are complex and costly infrastructure projects. In most cases, private companies will not engage in the construction of new hydropower projects without insurance coverage, and private investors will insist on relevant insurance being in place before committing to invest,” the report states. “Insurers therefore play a key role in facilitating the hydropower sector and their support is urgently needed to prevent high-impact hydropower projects.”

Insurers are encouraged to promote sustainable hydropower development by:

  • Creating ESG policies for underwriting hydropower investment.
  • Declining cover for hydropower projects in protected areas.
  • Requiring an independent and credible social and environmental impact assessment.
  • Requiring a maximum greenhouse gas threshold.

The IHA welcomes the new report and says it would appreciate the opportunity to work more closely with insurers, encouraging them to consider joining the Hydropower Sustainability Council to become more involved with the internationally recognised Hydropower Sustainability Standard. [9]

Tax credit

Over in the US, the National Hydropower Association says that the country’s most significant climate legislation to date will help create investment certainty and transform the electricity sector. [10]

In August 2022 President Joe Biden signed the Inflation Reduction Act 2022 into law which will accelerate the development of new pumped storage hydropower projects and hydro generation at existing dams.

“Hydropower development is capital intensive. And for over a decade, our industry has been advocating for long-term extension of renewable tax credits at a rate that puts us on par with wind and solar,” says Malcolm Woolf, CEO of the NHA.” This law rightfully provides hydropower with tax parity, and, by moving to a technology-neutral approach, ensures that it is never left behind again.

“Flexible, carbon-free generation like reservoir hydropower and long-duration energy storage are essential to firm up our increased reliance on variable resources like wind and solar. Hopefully, the new 30% investment tax credit for energy storage will jumpstart development of new pumped storage for the first time in a generation,” Woolf added.

However, the NHA is disappointed that the existing hydropower fleet, which currently serves an estimated 30 million Americans, “may have been overlooked”. Provisions to encourage environmental improvements at existing hydropower facilities were not included in the act. NHA says it looks forward to working with Congress to preserve the nation’s hydropower fleet “as we cannot address climate and ensure a reliable grid without the nation’s second largest renewable electricity resource”. 


[1]  https://www.downing.co.uk/news/dore-acquires-18gwh-hydropower-portfolio-and-announces-intention-to-raise

[2]  https://www.downing.co.uk/news/downing-renewables-and-infrastructure-trust-dore-the-power-of-diversification

[3] https://www.downing.co.uk/news/dore-wins-renewables-fund-of-the-year

[4] British International Investment to invest up to $200 million in African hydropower alongside Norfund and Scatec – British International Investment (bii.co.uk)

[5] www.hydropower.org/news/hydropower-growth-in-africa-needs-to-double-to-meet-iea-projections#:~:text=The%20report's%20Sustainable%20Africa%20Scenario,come%20from%20the%20private%20sector.

[6] www.hydropower.org/publications/2022-hydropower-status-report

[7] www.irena.org/newsroom/articles/2022/Jun/IRENA-Members-Back-New-Blueprint-for-Hydropower-Advancement

[8] www.worldwildlife.org/publications/insuring-a-nature-positive-world-an-insurers-guide-to-hydropower

[9] www.hydropower.org/news/wwf-report-urges-insurers-to-help-improve-hydropowers-sustainability#:~:text=27%2F7%2F2022-,WWF%20report%20urges%20insurers%20to%20help%20improve%20hydropower's%20sustainability,can%20facilitate%20sustainable%20hydropower%20development

[10] www.hydro.org/news/nha-statement-on-passage-of-inflation-reduction-act