Hydropower

Outlook for Small Hydro in the Americas

RE Outlook 2003 – The hydro industry can look forward to modest gains over the next few years in both North America and Latin America, both in terms of new projects and more favorable treatment from policy makers.

RE Outlook 2003 – January 15, 2003 – The hydro industry can look forward to modest gains over the next few years in both North America and Latin America, both in terms of new projects and more favorable treatment from policy makers. Most such gains will come from “small” hydro – the definition of which varies, but is generally considered to be under 50 MW of capacity. In the United States, ultra-long licensing periods and high capital costs of construction have combined to price most new hydro (both large and small) out of the market. Thus, the hydro industry’s focus is on “incremental hydro,” consisting of relatively small-scale capacity additions or efficiency improvements, or both, at existing hydro plants. These improvements generally are cost-effective and technically simple to implement, with a less intensive degree of regulatory oversight required. An estimated 4,000 MW of incremental hydro is believed to be feasible in the U.S., especially if helped along by inclusion in renewable incentive programs such as tax credits or renewable portfolio standards. Encouragement of incremental hydro was included in proposed national energy legislation that almost, but not quite, made it out of Congress in 2002. Meanwhile, both legislative and regulatory efforts to bring more speed and certainty to the hydro licensing process are expected to gain momentum in 2003. In Canada, where hydropower is the backbone of the electric power system, some utilities have taken steps to encourage new small hydro development by soliciting development proposals from non-utility sources. Small hydro development initiatives have begun in Quebec and British Columbia, with further progress expected in 2003 toward turning individual project concepts into reality. Finally, in Latin America, hydro continues to be a mainstay both of existing generation and of future resource planning in those countries that would otherwise need to rely on expensive imported oil or gas, particularly in Central America. Outside of Brazil, Argentina and Chile, most country’s electricity markets, while growing rapidly, remain small in absolute terms (a few thousand MW at most). This scale of market lends itself to the addition of relatively small projects, such as small hydro, which might appear insignificant by North American standards but are well-suited for their local markets. Numerous small hydro projects are in the planning and development stages throughout Latin America, although far fewer are actually under construction. Growth in this region depends, among other factors, upon the economic and political stability of each country and its corresponding attractiveness to foreign investors. About the Author Christopher Hocker is Senior Vice President, Corporate Affairs, for CHI Energy, Inc. of Stamford, Connecticut, a subsidiary of Enel SpA of Italy and owner/operator of a diversified portfolio of Renewable Energy projects in the Americas totaling nearly 600 MW. He served as president of the National Hydropower Association, a trade association representing the U.S. hydropower industry, in 2000-2001. He can be reached at [email protected]