Looking forward to new business10 June 1998
Europe has a well-developed water power infrastructure and long experience of building dams. But there is still business to be done in the region, as a recent IWP&DC report* reveals
Europe currently operates around a third of the world’s hydro power capacity — more than 200GW of installed capacity. Of that total, some two-thirds is in Western Europe, and a third is sited in Eastern Europe and the former USSR. This capacity generates something over 800TWh of electricity per annum for the region, and as this figure has grown little in the past five years observers might be forgiven for thinking that the industry is static. That is far from the truth, as the International water power & dams business report reveals.
There is no argument about one point: the water power and dams industry in Europe is a mature one, with a very long history. As is made clear in this issue (pages 11-13), some dams that are still in operation as we approach the end of the second millennium were already in operation at the end of the first, and some are even older. The development of hydroelectric power is of course much more recent, but in Europe it still has a history of several decades.
In many European countries it is true that the years of rapid expansion are over, and are unlikely to return. In Western Europe providing additional electric capacity is not the overriding concern it is in some other parts of the world, while the upsurge of interest in maintaining the environment has made the development of large dam projects problematical. Although the industry in Europe is still vibrant, its focus has changed, and it has a different complexion in different areas.
In Eastern Europe and Russia, simple figures for generation reveal that less electricity has been supplied by hydro power plants in recent years. This is an effect of the wholesale restructuring of the electricity supply industries in these countries over the past decade. While they were centrally-planned economies these countries provided electricity at a price well below the cost of production. Now the aim is different: to operate the electricity supply industry on a commercial basis. In most countries the single electricity provider has been spilt into several generating and supply companies, and electricity prices have been increased, often by several hundred percent. Other industries are also restructuring; the combined effect has been to reduce electricity demand and leave those countries with overcapacity.
The overcapacity has made it difficult in some cases to continue with long-planned new hydro capacity, and this difficulty has been exacerbated by the lack of funds for investment. But most commentators agree that overcapacity is likely to be a short-lived effect, and in a few years it is expected that electricity demand will begin to rise again. Some investment continues to be made in new projects, albeit on a smaller scale than was originally planned. In a new development, governments — who traditionally funded infrastructure projects such as dams — are beginning to consider funding from private investors. Whether such private sources can successfully provide funding for hydro projects is often questioned, but the consensus is shifting. Whereas in the past investors would have asked whether private financing was possible, now the question asks how private financing can be made to work.
Meanwhile, work is mainly focused on upgrading and refurbishment of existing plants, and construction of new plants is restricted to smaller projects.
In Western Europe, by contrast, hydro generation is still increasing. Once again, the picture is not consistent over the region but some trends can be discerned. Partly, these trends are dependant on the function of the dam infrastructure. In the northern, ‘green’ countries — ie those where rainfall follows a fairly consistent pattern throughout the year — the main function of dams is to provide electric power, and this need has been largely met. In these regions there is little investment in wholly new dam building. Instead, attention has focused on refurbishment and uprating.
Dams built several decades or more ago have reached the age where the service they give is re-assessed. The dam structure itself may be altered or increased in height to increase the amount of water stored and hence power produced. More frequently it is the power generation part of the structure that undergoes refurbishment or in some cases complete replacement (an example is Cleuson-Dixence in Switzerland, discussed on pp16-25 in this issue).
In southern countries dams are more frequently ‘multi-function’ structures. As well as providing a source of electrical power they have important roles to play in water storage and flood control.
Some trends are identifiable in design, construction and operation:
•Construction design is increasingly being conducted by civil contractors and equipment suppliers, rather than international consultants. In an environment of increased cost pressure and risk mitigation, professional project management is using modern information tools to monitor and control construction schedules and costs. Project managers are increasingly being asked to offer a variety of skills and to be aware of the environmental and social issues associated with their projects.
•A general trend in design is to move towards smaller reservoirs that cause less flooding, resettlement and loss of habitat.
•The development of the ‘roller compacted concrete’ dam has been a major development in dam design, allowing costs to be reduced dramatically.
•Concrete-faced rockfill dams have become more popular, because they are small in volume and easy to place, even in poor site conditions and adverse weather.
•Costs and manufacturing times have been reduced by enhancements in computer-aided manufacturing and the trend towards welding rather than casting turbine runners.
•Computer-aided monitoring and control has reduced costs and increased the operational flexibility of plants.
The directions being taken by the water power and dam business in Europe can be illustrated by examples taken from several countries across the region.
Italy in the 1960s and 1970s saw a huge amount of dam and hydroelectric plant construction, and at that time water power formed the majority of the country’s power supply. In the 1980s large power stations were still being commissioned but since then the focus of dam building has shifted to multipurpose dams, used for irrigation, flood control and civil and industrial supply. During the 1990s a large number of such dams were built; at the same time hydro power’s share of the country’s installed electricity capacity was falling as the electricity utility ENEL invested in thermal power stations. Hydro generation now accounts for around 30% of installed capacity, and the country has 545 dams in operation.
The 1990s also saw the introduction of competition into Italy’s electricity supply industry, following the National Energy Plan produced by the government in 1990. As a result ENEL, which accounts for some 79% of all electricity production in Italy, has been ‘unbundled’. In the hydro sector this took the form of a 1997 restructuring in which the hydro generation facilities were split into eight sub-divisions.
Independent power producers already account for some of Italy’s capacity and private sector hydro projects have been proposed. However, uncertainties following the restructuring are likely to make potential investors nervous of investing in such projects.
As a result, most dam building is still being undertaken for water management purposes. Here, the industry is seeing plenty of action: 45 new dams are under construction, most in the south of the country. Finally, there are many opportunities in repair and rehabilitation. This is particularly important for dams sited in the Italian Alps. These are exposed to severe weather conditions, — seasonal freeze-thaw cycles, along with mechanical aggression by ice and chemical aggression by Alpine water.
Around 20% of Russia’s generating capacity is supplied by hydroelectric stations, thanks to large construction programmes between the wars and in the 1950s-1960s. Older plants were replaced by larger units in the 1980s, but the change was not accompanied by the expected improvements in efficiency. The political changes in Russia have led to a restructuring of the electricity supply industry and the development of a vocal opposition in the country, both of which developments have been mostly detrimental to plans for investment in further large hydro capacity.
Russia’s gross theoretical hydro power potential is around 2.9M GWh per annum, of which 852,000GWh represents economically and technically feasible development. Much of this resource is in the Siberian, Central Asian and Far Eastern regions. It is likely that most new capacity will be built in remote mountainous regions, instead of lowland areas, to minimise environmental damage. These facts also act to delay construction of large-scale hydro power: the areas are the least well-connected parts of the Russian electricity grid, and as a result bringing large-scale capacity on line in these sites would require a corresponding investment in the grid. The split of the ESI into regional groupings has exacerbated this effect.
Nevertheless, several plants are under construction. The 3000MW Boguch-anskoy plant in Siberia is well advanced, for example, and there are plans to add 400MW to the pumped storage plant at Zagorsk in the Central region.
More electrical capacity is needed in Turkey, and the country’s hydro power generating capacity has risen steadily since 1980: then it stood at 11.4TWh, but by 1996 it had reached 40TWh. Hydro’s share of generation is around 40%, depending on water levels, and there is still more capacity to be exploited.
The State Hydraulic Works has said that exploiting all of Turkey’s potential would require some 684 dams and 486 hydro power plants, and while such a huge programme is not feasible Turkey has some ambitious programmes. The Great Anatolian Project, for example, envisages construction of some 22 dams, 19 power stations and irrigation systems on the Euphrates river.
In the past Turkey has relied on state funding to complete its projects, believing that private finance was more readily available for thermal projects. Recently, however, it has become more bullish about private investment and in 1996 the Ministry of Energy and Natural Resources announced plans to complete 19 small and medium sized projects, totalling 1534MW, on a BOT basis.