Investment push needed for hydro to play crucial role in clean energy transition, says IEA report30 June 2021
Hydropower growth across the world is set to slow significantly over the next few years, a new report from the International Energy Agency (IEA) has suggested, meaning countries are at risk of not meeting net-zero emissions targets. To help combat this, a sweeping policy and investment push are needed to allow hydropower to support a faster expansion of solar and wind.
Over the next nine years, global hydropower capacity is expected to increase by 17%, led by China, India, Turkey and Ethiopia. However, this projected growth is almost 25% slower than the previous decade, the Hydropower Special Market Report says.
To reverse this slowdown, the report says a range of strong policy actions from governments are need to address the major challenges that are hampering faster deployment of hydropower. Such measures could include providing long-term visibility on revenues to ensure projects are economically viable and sufficiently attractive to investors, while still ensuring robust sustainability standards.
“Hydropower is the forgotten giant of clean electricity, and it needs to be put squarely back on the energy and climate agenda if countries are serious about meeting their net zero goals,” said Fatih Birol, the IEA Executive Director. “It brings valuable scale and flexibility to help electricity systems adjust quickly to shifts in demand and to compensate for fluctuations in supply from other sources. Hydropower’s advantages can make it a natural enabler of secure transitions in many countries as they shift to higher and higher shares of solar and wind – provided that hydropower projects are developed in a sustainable and climate-resilient way.”
The IEA special report provides detailed global forecasts to 2030 for the three main types of hydropower: reservoir, run-of-river and pumped storage facilities. It says that China is set to remain the largest hydropower market through 2030, accounting for 40% of global expansion, followed by India. However, the decreasing availability of economically attractive sites and growing concerns over social and environmental impacts has led to a decline in China’s share of hydropower additions.
The report highlights that between now and 2030, almost a quarter of global hydropower investment, amounting to US$127 billion, will be spent on modernising ageing plants, mostly in advanced economies including notably in North America and Europe. This projected investment however falls well short of the US$300 billion that the report estimates is needed to modernise all ageing hydropower plants worldwide.
While hydropower is still economically attractive in many regions of the world, the report highlights the major challenges it faces. New hydropower projects often face long lead times, lengthy permitting processes, high costs and risks from environmental assessments, and opposition from local communities. These pressures result in higher investment risks and financing costs compared with other power generation and storage technologies, thereby discouraging investors.
The IEA report sets out seven key priorities for governments looking to accelerate the deployment of hydropower in a sustainable way. These priorities are:
- Move hydropower up the energy and climate policy agenda.
- Enforce robust sustainability standards for all hydropower development with streamlined rules and regulations.
- Recognise the critical role of hydropower for electricity security and reflect its value through remuneration mechanisms.
- Maximise the flexibility capabilities of existing hydropower plants through measures to incentivise their modernisation.
- Support the expansion of pumped storage hydropower.
- Mobilise affordable financing for sustainable hydropower development in developing economies.
- Take steps to ensure to price in the value of the multiple public benefits provided by hydropower plants.
Earlier this month, the International Hydropower Association (IHA) released its 2021 Hydropower Status Report which also highlighted the need for rapid growth in hydropower to achieve net zero
Baihetan dam project in China. The report highlights that’s China is set to remain the largest hydropower market 2030, but that decreasing availability of economically attractive sites and growing concerns over social and environmental impacts has led to a decline in the country’share of hydropower additions.