Water - Hydropower

hydropower

Hydropower

Hydropower is the world’s largest source of affordable renewable energy and accounts for about 20 percent of world electricity supply. More than 90 percent of the unexploited economically feasible hydropower potential is in developing countries, with one quarter in China.

Hydropower projects can provide multiple economic and environmental benefits to the world’s poor.Infrastructure must be developed with appropriate attention to social and environmental impacts. Hydropower offers a hedge against rising energy prices and can play an important role in energy trade and regional power pools. To help cope with climate change, hydropower offers an alternative to fossil fuels and the associated infrastructure can help countries cope with droughts and floods.

Hydropower investments have recently risen sharply, in response to rising energy prices, efforts to reduce carbon emissions, and a fragile but growing confidence in the sector. About 7 percent of the world’s unexploited hydro potential is now under construction. International commercial banks are increasingly using the Equator Principles for project assessment.

Key Challenges

	Internationally accepted good practice in hydropower development requires value to be defined by a "triple bottom line" the combination of environmental, social and economic benefits generated by each project. Environmental flows are a particular challenge for hydropower.
	The strategic role of hydropower needs to be defined at the country, basin, and regional levels.
	Successful projects require careful attention to preparation and supervision as well as improving the enabling environment. This in turn requires adequate resources, knowledge, and skills across multiple stakeholders.
	Project risks are inherent in the complexity and uncertainties of hydropower projects, including limited hydrological data and analysis, climate change, uncertain geology, multi-disciplinary and cross-sectoral project design, and construction management.
	Key constraints lie in high capital costs, lack of financing, shortage of comprehensive planning and adequately assessed project pipelines, unsettled conditions for private sector participation, lack of capacity throughout the industry and client countries, and weak regulatory and policy frameworks.

World Bank Response

After a decade of declining lending, the World Bank has recently approved major projects in Africa and Asia, along with rehabilitation projects in Eastern Europe. Projects range from small local plants and rehabilitation of existing facilities to multipurpose transnational projects and pumped storage. Bank approvals for hydropower have risen from $250 million/year in 2002-04 to more than $800 million in Fiscal Year 2008. Along with lending, the Bank provides technical assistance, knowledge sharing, policy dialogue, and analytical work.