IEA’s Sustainable Recovery Plan puts focus on hydropower modernisation

24 June 2020

The new Sustainable Recovery Plan released by the International Energy Agency in response to the Covid-19 pandemic and economic crisis being felt across the world has a strong focus on hydropower modernisation.

The plan seeks to show governments what they can do to boost economic growth, create jobs and put global greenhouse gas emissions into structural decline. It sets out over 30 policy measures to be carried out over the next three years requiring about US$1 trillion of additional annual investment (from both the public and private sectors). According to the IEA, the potential benefits of such measures include the creation of roughly 9 million jobs, global GDP being 3.5% higher and GHG emissions falling by 4.5 billion tonnes. 

Specifically, for the hydropower sector, the report states that hydropower has proven to be extremely resilient during the Covid-19 crisis, but challenging conditions such as lower wholesale prices have put revenues and capital flows at risk. 

The report points out that well-advanced modernisation projects would not only generate skilled jobs but also avoid a steep decline in low-carbon electricity generation and support more flexible operations. The plan includes an additional US$20 billion being spent each year, over the three years, mainly to support continued generation from existing facilities. Such levels of spending would create tens of thousands of jobs in the sector and extend the operations of around 50GW of existing capacity.  

Upgrades and construction work at hydropower projects create about 3 jobs per million dollars of capital spending. This is higher than wind (1.5 jobs) but lower than solar PV on a utility-scale (9 jobs). The sector already employs about two million people globally.

To support hydropower development, the report notes the benefits of loan guarantees and preferential loans, where available, to lower the cost of financing. Longer-term policies such as carbon pricing, capacity payment mechanisms and enhanced flexibility markets are also mentioned.

The GHG abatement costs (< USD 5 per tCO2-eq) of modernising hydropower facilities are very low compared to extending the lifetime of nuclear facilities and new build wind and solar. In addition, the report estimates that an additional 1 GW of hydropower capacity avoids about 3 Mt CO2 emissions if displacing coal. 

The longer-term benefits of hydropower modernisation to improving electricity security, reducing prices and building resilience was also highlighted.

On 9 July, the IEA will host the Clean Energy Transitions Summit in an effort to identify how-to step-up actions to support the proposals set out in the report.

“Trillions of dollars will be spent by governments on the economic recovery,” commented the International Hydropower Association’s Chief Executive Eddie Rich. “As the report demonstrates, sustainable hydropower can not only deliver long term cheap and clean energy, but also tens of thousands of skilled jobs with the right support. It should be near the top of the shopping list.”

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