Nail in the coffin for small hydro

5 May 2022

A nine-fold cost increase by the Environment Agency has been described as the ‘final nail in the coffin’ for the small hydro industry in England. The British Hydropower Association says that this negates on government commitments to Net Zero and urges the agency to rethink its decision

The future of new, small hydropower development in England could be at risk following an almost 900% increase in licensing fees by the Environment Agency, the British Hydropower Association (BHA) has warned. The trade membership association for the UK hydropower industry described the “unaffordable £12,000 cost increase” as the “the final nail in the coffin of the small hydro sector” and for those wanting to build a carbon-free hydroelectric power scheme in England. 

Published by the Environment Agency on 9 March 2022, the BHA says “the absurd plan” comes less than 48 hours after Prime Minister Boris Johnson promised “much more use of renewables” and a fresh UK energy supply strategy to reduce reliance on Russian oil and gas, as a result of the war in Ukraine. 

The new abstraction charges were set to come into force on 1 April – giving potential hydro developers absolutely no time to avoid an unaffordable hike in costs. 

Simon Hamlyn, BHA’s Chief Executive says: “This unprecedented and unaffordable hike in charges for those simply applying for a licence to build a small hydro scheme is not only a sign of appalling inefficiency within the Environment Agency but flies in the face of the government’s commitment to Net Zero and the Prime Minister’s promise just two days ago. 

“The agency is actively slamming the final nail in the coffin of an important renewable energy source which should be a key focus for the government as energy prices soar. This unwarranted hike in cost of 895% is a staggeringly senseless move which will deter landowners, community groups and small businesses from developing new hydro schemes. We urge the Prime Minister to intervene and the Environment Agency to urgently rethink their decision.” 

Cease development

The cost of new abstraction licences for hydropower will increase from the current fee of £1500 up to £13,392, depending on the size of the scheme. The application fee had already increased 11-fold in 2014 from £135 to £1500.

The BHA says that since March 2020, 75 small hydro developments in England would have been deemed unfeasible as a direct result of these new costs, and that it will “certainly cease almost all new hydropower development in England for good”. 

In November 2021, the BHA responded in the strongest possible terms to the EA’s consultation on the proposed changes to abstraction charges and met with ministers and agency staff to warn that the charges act in direct opposition to existing government policy, published regulatory standards, and urgent Net Zero ambitions. 

The EA says that the new charging framework will protect the environment and England’s long term water supply for people and wildlife. However, BHA argues that as hydropower is non-consumptive and switches off when water levels are low it has absolutely no impact on water supply or drought conditions. It believes the huge fee increase for hydropower licences “has nothing to do with investment and is purely paying staff salaries”. 

“For 97% of schemes the Environment Agency’s proposed charges for applying for a new hydropower licence/permit represent an increase of 895% (from £1500 to £13,431) since 2014. We cannot support proposals that are counterproductive in the race to achieve net zero,” BHA says. “It is right for the government to address security of supply and drought risks but to do this at the particular expense of renewable electricity generation - which reduces the impacts of climate change - would be indefensible.”

Net Zero

Olly Paish, Director at Derwent Hydro Developments, in Derbyshire, which assists those developing new hydro schemes, says: “Since September 2021 when energy prices were starting to soar, the level of interest in hydro has gone up significantly. As a result of these ludicrous new costs proposed, interest will plummet. No one will go any further. It is a massive financial disincentive at a time when we need newer, greener energy sources.” 

He added that the government is actively putting in place a financial barrier which will hinder climate progress, and that “it’s a 180 degree about turn from Net Zero”.

The Net Zero strategy was published in October 2021, committing the government to ensuring that the planning system supports the deployment of low carbon energy infrastructure, and to streamlining the consent process to keep the UK on track for 2030 climate targets. 

The BHA says that the EA’s charging proposals will place a huge economic barrier opposing new small-scale hydroelectric power development in England, is in direct contravention to Net Zero commitments and is not joined up government. 

Mitigating for climate change is cited as a key driver behind the need to increase abstraction charges, and yet, the BHA states “there is absolutely no recognition in any of the EA documents referencing the contribution and benefits that additional run-of-river hydropower would bring to decarbonising electricity”.

BHA gives the example of National Parks and Areas of Outstanding Natural Beauty. Here, where there are often severe grid constraints and substantial wind and solar installations are forbidden, small hydro is the most cost effective and expedient way for many rural communities to transition to Net Zero. 

In particular, BHA says that hydroelectricity will also complement the requirement to move from fossil fuels to heat pumps and electric vehicle charging. The proposed charging regime will not only deter new hydro development, but also the ability of communities to move to EVs and heat pumps, “thereby locking in significant future carbon emissions”.

Economic impact

One of the key principles of the EA’s new charging scheme is to set charges that re-cover costs. However, the Environment Agency has confirmed that the economic information used for this latest assessment dates from 2013. 

The BHA says this is shocking and that the economic impact assessment applied to the hydropower sector lacks evidence and is of “a staggeringly poor quality”. 

“The economic impact assessment relating to hydropower applications is wholly unfit for purpose,” BHA states in its official response to the proposed EA charges. “It makes assertions and draws conclusions which are not supported by any meaningful, up-to-date facts, any relevant analysis, or even the most basic understanding of hydropower projecs.”

In conclusion, BHA says that the Environment Agency’s economic assessment “shows such a poor understanding of both our industry and the use of proper evidence to justify decisions which could have such grave consequences to the future development of this renewable resource”. f

j “It beggars belief,” the BHA continues, “that any government minister would be expected sign off a proposal underpinned by an impact assessment that makes assertions and draws conclusions which are not supported by any meaningful, up-to-date facts, any relevant analysis, or even the most basic understanding of how a commercial hydropower project is developed and operated.”


The association is urging the government to delay the price hike for 12 months, at the very least to allow developers to decide whether to progress schemes or not. 

Hamlyn adds: “The agency’s economic impact assessment attempted to conclude that there would be minimal impact on new hydro development, but it was not only ill-informed and badly written, it is a piece of work that the BHA regards as thoroughly inadequate for the gravity of sweeping conclusions it was attempting to support, and for which there was no prior engagement or factfinding with the sector. The whole sorry thing smacks of utter incompetence and a complete misunderstanding and misrepresentation of hydropower.” ?



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