Hydropower Outlook 2012: Continued Large-scale Development in North America

The U.S. Energy Information Administration (EIA) develops an outlook for international energy markets every year. The most recent report, the International Energy Outlook 2011 (IEO2011), released in September 2011, projects markets through 2035. As part of its assessment of these markets, EIA analyzes policies and incentives intended to support generation sources such as hydropower. Here’s a look at the potential future of hydro generation in North America and how current policies could drive or stall growth of this resource.

The countries of the OECD Americas (the United States, Canada, Chile, and Mexico) currently account for the largest regional share of world electricity generation, with 26 percent of the total in 2008. That share will decline, said the EIA as non-OECD nations experience fast-paced growth in demand for electric power. By 2035, the EIA predicts that nations of the OECD Americas together will account for only 19 percent of the world’s net electric power generation.

The United States is by far the largest consumer of electricity in North America. U.S. electricity generation including both generation by electric power producers and on-site generation will increase at an average annual rate of 0.8 percent from 2008 to 2035. Canada, like the United States, has a mature electricity market, and its generation will increase by 1.4 percent per year over the same period.

EIA said that Mexico/Chile’s electricity generation will grow at a faster rate – averaging 3.2 percent per year through 2035 – reflecting the current less-developed state of their electric power infrastructure (and thus the greater potential for expansion) relative to Canada and the U.S.

In the U.S., coal is the leading source of energy for power generation, accounting for 48 percent of the 2008 total. In Canada, hydroelectricity provided 60 percent of the nation’s electricity generation in 2008. Most of Mexico/Chile’s electricity generation is currently fueled by petroleum-based liquid fuels and natural gas, which together accounted for 66 percent of total generation in 2008.

The predominant fuels for generation in the U.S. and Canada are expected to lose market share by 2035, although electricity generation capacity will continue to be added. Coal-fired generation will decline to 43 percent of the U.S. total, and hydropower will fall to 54 percent of Canada’s total in 2035. In contrast, in Mexico/Chile, natural-gas-fired generation will increase from 48 percent of the total in 2008 to 58 percent in 2035.

Generation from renewable energy sources in the United States will increase in response to requirements in more than half of the 50 states for minimum renewable shares of electricity generation or capacity. Although renewable generation in 2035 in the IEO2011 reference case is 17 percent lower than in last year’s outlook (due to a variety of factors, including lower electricity demand, a significant increase in the availability of shale gas, and revised technology and policy assumptions), the share of renewable-based generation is expected to grow from 9.7 percent in 2008 to 14.3 percent in 2035.

It’s important to note that for this report, EIA’s predictions are based on U.S. federal subsidies for renewable generation expiring as enacted. If those subsidies were to be extended a larger increase in renewable generation would be expected, according to EIA.

In Canada, generation from natural gas is expected to increase by 3.8 percent per year from 2008 to 2035, nuclear by 2.2 percent per year, hydroelectricity by 0.9 percent per year, and wind by 9.9 percent per year. Oil-fired generation and coal-fired generation, on the other hand, decline by 1.0 percent per year and 0.6 percent per year, respectively.

In Ontario – Canada’s largest provincial electricity consumer – the government plans to close its four remaining coal-fired plants (Atikokan, Lambton, Nanticoke, and Thunder Bay) by December 31, 2014, citing environmental and health concerns. The government plans to replace coal-fired generation with natural gas, nuclear, hydropower, and wind.

The renewable share of Canada’s overall generation is expected to remain roughly constant throughout 2035. Hydropower is expected to remain the primary source of electricity in Canada. From 60 percent of the country’s total generation in 2008, hydropower will drop to 54 percent in 2035. As one of the few OECD countries with large untapped hydroelectric potential, Canada currently has several large- and small-scale hydroelectric facilities either planned or under construction.

Hydro-Québec is continuing the construction of a 768-MW facility near Eastmain and a smaller 150-MW facility at Sarcelle in Québec, which are expected to be fully commissioned by 2012. Other hydroelectric projects are under construction, including the 1,550-MW Romaine River project in Québec and the 200-MW Wuskwatim project in Manitoba.

The EIA does not anticipate that all planned projects will be constructed, but given Canada’s past experience with hydropower and the commitments for construction, it believes that new hydroelectric capacity will account for 25,563 MW of additional renewable capacity added in Canada between 2008 and 2035.

The EIA said that the combined electricity generation of Mexico and Chile will increase by an average of 3.2 percent annually from 2008 to 2035 – more than double the rate for Canada and almost quadruple the rate for the United States. In Mexico, the government has recognized the need for its electricity infrastructure to keep up with the fast-paced growth anticipated for electricity demand. In July 2007, the government unveiled its 2007-2012 National Infrastructure Program, which included plans to invest $25.3 billion to improve and expand electricity infrastructure.

As part of the program, the government has set a goal to increase installed generating capacity by 8.6 GW from 2006 to 2012. Natural-gas-fired generation in Mexico and Chile is set to more than double from 147 billion kilowatt-hours in 2008 to 418 billion kilowatt-hours in 2035.

Most of the renewable generation in Chile and Mexico is from hydroelectric dams. Hydroelectric resources today provide about 85 percent of the region’s renewable generation mix, with another 9 percent from geothermal energy. There are plans to expand hydroelectric power in both countries in the future. The IEO2011 predicts that hydropower will account for almost 75 percent of Mexico/Chile’s total net generation from renewable energy sources in 2035.

In Mexico, there are two major hydroelectric projects underway: the 750-MW La Yesca facility, scheduled for completion by 2012, and the planned 900-MW La Parota project, which has been delayed and may not be completed until 2018.

In addition to efforts to diversify its electricity fuel mix, Chile has a number of new hydroelectric plants planned or under construction. Pacific Hydro has plans to construct another 650 MW of hydroelectric capacity on Chile’s Upper Cachapoal River. Construction on the first phase of the development began in 2009. The first hydro plant in the system, the 111-MW Chacayes power plant opened in October 2011. The entire development should be completed in 2019, when the 78-MW Las Maravillas project is scheduled to begin operation.

This article is an edited excerpt from the Energy Information Association’s International Energy Outlook 2011, released in September 2011. You can view the entire report here.

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