HYDROPOWER MARKET ANALYSIS

High initial investment costs required for hydropower projects can hamper the growth of the global hydropower market. Developing large-scale hydropower plants involves massive financial investments at the start for activities such as feasibility studies, land acquisition, infrastructure development, and construction of dams, tunnels and powerhouse structures. These upfront capital costs can run into billions of dollars depending on the size and scale of the project. For instance, the construction of the Three Gorges Dam in China, one of the largest hydropower plants in the world, required an initial investment of over USD 22 Bn. Such large capital commitments discourage many potential investors and make hydropower generation an unattractive option especially for developing countries with limited financial resources.  Furthermore, the long gestation periods involved in hydropower projects also contribute to their high initial costs. It often takes 5-10 years for a hydro project to complete all stages from planning and design to commissioning. This prolonged development phase requires continuous funding support over many years, increasing carrying and financial charges. Project delays and cost overruns due to uncertainties around land and forest clearances, rehabilitation of displaced people, environmental clearances, and others further inflate initial capital costs.

 Opportunity: Developing small hydropower projects

Developing small hydropower projects can provide great opportunity to the global hydropower market. Small hydropower projects, which generate up to 25MW of power, are more accessible to develop as compared to large dams due to their smaller size and lower environmental impact. Many remote areas and communities around the world still lack access to a reliable power supply. Developing decentralized small hydropower resources could help electrify these off-grid regions in a sustainable manner.  There has been a growing emphasis on developing sustainable energy solutions globally. Small hydropower fits well into the renewable energy expansion plans of many countries. According to the International Hydropower Association, small hydropower projects accounted for over half of new hydropower capacity added worldwide in 2020.