Hydro Here and Now: Money Problems

Hydropower worldwide faces numerous challenges, and most of these cross geographic boundaries.

These challenges can range from opposition to new development from environmental groups and local stakeholders to the need for rehabilitation of aging facilities to the importance of properly managing cross-border water resources.

But the challenge I see the most: Coming up with the money.

For example, very recently the country of Georgia reached out to its neighbor Iran to invest money in the construction of hydroelectric plants. Only about 20 percent of Georgia’s water supplies are used to generate power, and more electricity is needed.

The money shortage is even a problem for hydro projects under construction. In Zimbabwe, work halted on the 12-MW Tokwe-Mukosi plant while the government sought to raise $60 million needed to complete the dam and pay contractors. This isn’t the first time work on this facility has been halted for financial reasons; it happened in 2008 as well.

There is money out there, as recent transactions show. The World Bank Group is providing a loan of US $22.5 million to help Nepal implement its Power Sector Reform and Sustainable Hydropower Project. And the African Development Bank approved at least US $138 million in financing to develop the 147-MW Ruzizi 3 project between Rwanda and the Democratic Republic of Congo.

But, on occasion, a hydro project just works out to be unprofitable to develop. This was the case in the state of California in the U.S., when the Sacramento Municipal Utility District announced it would not proceed with construction of the 400-MW Iowa Hill pumped-storage project. From initial cost estimates of $520 million in 2007, projected cost had risen to $1.45 billion in 2016 and SMUD said, “… it is likely there will be more economical alternatives for satisfying Sacramento’s energy storage needs in the long term.”

Money is always going to be an issue, I suppose that will never change. And if the money needed to develop the world’s vast hydropower potential, and help ensure clean electricity for its inhabitants, isn’t available through more traditional channels, there is a need to change the formula. That’s why many countries are seeking to attract private investment funds. Unfortunately, that shift means the entire hydropower market must be even more focused on finances, to ensure the return on investment justifies the outlay. But if all of those important aspects can come together, I see a bright future for hydropower worldwide!

Lead image: Currency. Credit: Shutterstock.

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