Hydropower industry dynamics: U.S. and China to procure a major revenue chunk via favorable regional regulatory framework
Published Date: June 21, 2017 Author: Saipriya Iyer
With the globe treading on the path of renewable energy adoption, hydropower industry is expected to chart out a rather profitable roadmap over the years ahead. This is evident from the efforts that are undertaken by the governments of various countries to promote the usage of sustainable energy sources. Developed & developing nations have been installing large-scale hydropower plants to produce electricity via sustainable sources. For instance, India’s utility-scale hydroelectric capacity was worth more than 40,000 MW as of March 2016. This number is approximately more than 14% of the country’s overall utility electricity generation capacity, which is expected to drive the regional Hydropower industry.
Water is one of the oldest, and most reliable source for generating electricity on a large scale. In accordance with the same, it can be safely assumed that hydropower market has already established its footprints across the globe since long. For instance, Australia houses more than 100 hydropower plants, and the Snowy Mountains Hydro-electric Scheme, which is reputed to be the nation’s biggest hydropower generator. This behemoth was launched in 1972 and has an astounding capacity of 3,800 MW. With 9 power stations and 16 dams, it accounts for almost 50% of the country’s hydro output and is a major driver of Australia hydropower industry.
The Three Gorges plant located in Yichang, in the Hubei province of China is reputed to be the largest hydroelectric power plant in the world, and helps propel the regional hydropower market. The project reportedly, had kickstarted in 1993 by the China Three Gorges Corp., via its subsidiary, the China Yangtze Power, and was completed in 2012. The plant boasts of 32 turbines with an individual capacity of 700 MW, and 2 power generators of 50 MW. The electricity generated from this plant contributes to a significant percentage of the regional power generation, with the annual power output estimated to be around 85 TWh, thereby fueling China hydropower industry share.
The increasing depletion of fossil fuels and other non-renewable energy sources and the rising demand for reliable, uninterrupted power supply are also expected to drive hydropower industry over the coming years. Hydropower market report compiled by Global Market Insights, Inc., states that this industry, having had an installation capacity of 1,000 GW in 2016, is anticipated to cross 1,300 GW by 2024, in terms of volume, growing at a CAGR of 2% over 2017-2024. According to the World Energy Council, in 2015, power generation via hydropower held more than 71% of the overall sustainable energy. The governments of various countries have been undertaking measures to increase this number with an aim to reduce carbon emissions and supply continuous electricity to homes and factories across the globe, thereby propelling hydropower industry.
The U.S. government, in March 2016, had provided extended tax credits for renewable energy utilization, including hydrokinetic & hydropower. In 2014, the Federal Government made an investment of more than USD 3.5 million to encourage the production of hydroelectricity, thereby stimulating hydropower market. This investment, apparently, was endorsed under Section 242 of the Energy Policy Act. Favorable government initiatives such as tax rebates and other financial incentives will complement the business landscape of hydropower industry in the years to come.
U.S. held more than 50% of North America hydropower market in 2016 and is expected to grow at a rate of more than 2% over 2017-2024, pertaining to the extensive availability of reserves and a stringent regulatory landscape. The region houses many companies that are increasingly investing in hydropower industry. For instance, in 2015, Rey Development declared that it would invest around USD 60 million for installing hydroelectric power stations in the country. In addition, the rising measures to reduce carbon emissions and the considerable number of untapped reserves will boost the regional hydropower industry in the years to come.
Recently, in April 2017, it was estimated by the Energy Information Administration that the hydroelectricity CUF (capacity utilization factor) is more than 60% as opposed to 25% CUF of solar PV, which will further stimulate hydropower market. The government has been introducing strict norms to reduce the number of GHG emissions. For instance, in 2015, the UNFCCC (United Nations Framework Convention on Climate Change) and the Canada West Foundation signed a deal to jointly contribute and eliminate GHG emissions.
Capacity-wise, small hydropower industry seems to have an impressive growth rate of more than 2.5% over 2016-2024, as per a hydropower market analysis compiled by Global Market Insights, Inc. A favorable regulatory framework to reduce carbon emissions and the low construction costs are also forecast to propel small hydropower industry over the years to come. The ECOWAS (Economic Community of West African States), in 2015, had introduced the SSHP (Small-Scale Hydro Power) program with an aim to achieve more than 30% of the overall energy production from hydropower by 2020, under the EREP (ECOWAS Renewable Energy Policy), which will impel global hydropower market.
Europe has carved a crucial place for itself in the regional landscape of global hydropower industry. The region is expected to comply with the directives of the European Union. As per the EU Renewable Directive (2009/28/EC), all the EU states have to achieve 20% of their overall energy consumption from renewable sources. Adhering to which, in 2014, the power generation from hydropower accounted for more than 13% of the overall demand, driving the regional hydropower market. Speaking on similar lines, France hydropower industry size is slated to surpass 30 GW in terms of capacity, by 2024. Stringent regulations toward renewable energy production and concerns to reduce GHG emissions are expected to stimulate the regional hydropower industry.
Mini capacity products are renowned to have minimal impact on the environment, owing to which they held more than 2% of the overall hydropower industry share in 2016. In February 2016, the University of Science and Technology of Hanoi (USTH) in Vietnam had installed a mini capacity grid connected power station of 60 MW across 48 locations with a capacity spectrum between 100 KW to 7500 KW. Such initiatives are expected to further stimulate the growth of mini hydropower market.
In September 2016, the Government of Malaysia had launched the Sarawak Alternative Renewable Energy Scheme that is designed to incorporate micro hydropower plants for rural electrification in Malaysia. This act is expected to spur micro & pico hydropower market over the coming years. In addition, Philippines plans to construct more than 150 micro hydropower plants with a power generation capacity of up to 50 MW, which will further propel the segment growth. Rising concerns regarding the harmful effects of carbon emissions will also fuel micro & pico hydropower industry.
The demand for electricity subject to its numerous applications across the globe has only increased all through the years. This factor is anticipated to fuel China hydropower industry. This developing economy is achieving milestones in terms of industrialization and economic growth. Subject to the development of numerous professional domains and the rising trend of urbanization, China hydropower market is expected to generate an appreciable revenue by 2024.
The grapevine suggests that China aims to make an investment of USD 3.6 billion in the Myistone facility of Myanmar with an aim to generate around 6,000 MW of electricity from hydropower by the year 2030. In addition, in accordance with China’s 13th Five Year Plan, the government has announced plans to install hydroelectric power stations with an overall capacity of 340 GW by 2020, which is anticipated to drive China hydropower market over the coming years.
The ever-increasing demand for uninterrupted power supply has prompted an increase in the deployment of large capacity products in colossal projects. This has also prompted an urgent yet efficient upgradation of the existing power generation facilities. Large capacity plants are more than 30 MW in terms of size, and the U.S. alone houses a capacity of more than 80,000 MW. Large capacity accounted for more than 80% of the overall hydropower market share in 2016 and is anticipated to grow remarkably over the years ahead, subject to its excellent features and extensive deployment. Companies operating in hydropower industry have also been focusing on installing large capacity products to generate sufficient electricity to fulfill the global demand. For instance, in 2013, Alstom had been awarded a contract valued at USD 24.4 million by Agder Energi, in order to upgrade the Iveland II hydroelectric plant situated in Norway. This plant has generating capacity of around 150 GWh, while receiving 50 MW of additional power. Furthermore, in 2016, Andritz deployed three hydroelectric stations in Brazil and Nicaragua, the costs of which amounted to more than USD 75 million, to provide reliable and continuous electricity supply. These efforts are certain to bear fruit and lead to an appreciable growth of global hydropower market.
Speaking of Brazil, the country houses two of the largest hydropower plants in the world – the Itaipu and the Tucuruí Hydropower Complex, both of which have a significant role to play in the overall growth of Brazil hydropower market. The latter is the fourth largest hydroelectric plant in the world, and its first phase included the construction of 12 generating units with an individual capacity of 330 MW, while the second phase encompassed 11 generating units with a capacity of 370 MW each.
The Itaipu facility, on the other hand, is the world’s second largest hydropower facility, and encompasses 20 turbines with an individual capacity of 700 MW. It accounts for more than 17% of Brazil’s overall energy consumption and an astounding 72.5% of Paraguay’s energy consumption. The presence of these facilities and several other plants across this region are major factors driving Brazil hydropower market.
As per reliable hydropower statistics, favorable policies and regulations implemented by renowned institutions such as the World Bank, the Climate Aligned Bonds Initiative, and Aquila Capital will propel large hydropower industry. This can primarily be catered to the increasing demand for electricity across the emerging economies such as India, Brazil and China, where large capacity hydroelectric facilities are deployed mostly for government and electric utility projects. In 2015, the Climate Aligned Bonds Initiative had allotted more than USD 41 billion of green bonds to increase the worldwide hydropower market share to 13% of the overall energy production.
Hydropower industry is characterized by the participation of renowned biggies including China Yangtze Power, Tata Power, China Three Gorges, Agder Energi, General Electric, Ontario Power Generation, Hydro-Québec, Voith, and ABB. These participants are involved in extensive mergers & acquisitions to consolidate their business position. Voith, for instance, acquired Vortex Hydrosystemes Inc., based in Canada, in February 2013, to establish a manufacturing facility in the city of Quebec. This was done primarily with the aim to develop improvised hydropower products and offer specialized consulting services. In fact, the equipment for the second phase of the Tucuruí Hydropower Complex project was supplied by a consortium of GE Hydro, Alstom, Odebrecht, and Inepar-Fem. With an increasing number of corporations and regulatory bodies coming up with profitable initiatives to meet the global electricity demand, hydropower market is set to witness an appreciable commercialization over the years ahead.
Global Market Insights, Inc. has a report titled “Hydropower Market Size, By Capacity (Micro And Pico Hydropower, Mini Hydropower, Small Hydropower, Large Hydropower), Industry Analysis Report, Regional Outlook (U.S., Canada, Mexico, France, Italy, Spain, Austria, Germany, China, India, Philippines, Japan, Vietnam, Nigeria, Kenya, Brazil, Peru, Ecuador), Price Trends, Competitive Market Share & Forecast, 2017 – 2024” available at https://www.gminsights.com/industry-analysis/hydropower-market