HYDROPOWER MARKET ANALYSIS

Hydropower Market Size and Trends

Global hydropower market is estimated to be valued at USD 251.58 Bn in 2024 and is expected to reach USD 356.36 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 5.1% from 2024 to 2031.

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Hydropower industry is witnessing significant growth due to increasing focus on renewable sources of energy globally. Many countries are investing heavily in hydropower projects to meet their rising need for electricity and shift towards clean energy sources to lower carbon emissions. Favorable government policies and regulations in various nations promoting the use of hydropower are further boosts the development of new projects.

Rising Concerns over Greenhouse Gas Emissions

Rising concerns over greenhouse gas emissions and their significant role in climate change have been driving the growth of global hydropower market in recent years. There is a growing realization worldwide that traditional thermal power sources which rely on burning of fossil fuels like coal are major contributors to carbon emissions. Hydropower, being a renewable source of energy which produces no greenhouse gases during power generation, is seen as a viable and sustainable alternative to reduce dependence on fossil fuels. Many countries have been increasingly focusing on adding more hydropower projects to decarbonize their energy mix and meet their nationally determined carbon reduction goals under the Paris Agreement. For example, according to data from International Hydropower Association, China had increased its total hydropower capacity from 179 GW in 2015 to 353 GW in 2021 through extensive development of new dams and reservoirs. Many developing nations in Asia and Africa are also exploring opportunities to develop domestic hydropower resources to fuel their industrial growth in a low carbon manner. International agencies like World Bank are actively supporting such nations to develop bankable hydropower projects.  Recent analysis by the UN Department of Economic and Social Affairs suggests that almost 60% of new power generation capacity added globally between 2022-2023 was from renewable sources like solar, wind and hydropower indicating a rising shift away from fossil fuels. This clean energy transition is projected to continue over the medium to long term horizon which will significantly accelerate investments into scaling up renewable capacity including hydropower projects worldwide. Nations are also increasingly recognizing the value of hydropower in providing much needed flexible power generation capabilities to balance intermittent renewable sources like solar and wind in the grid. This complements the growing share of variable renewables and strengthens the case for investment in pumped storage and reservoir based hydropower projects.

Affordability and grid flexibility are key drivers spurring the growth of the global hydropower market. Hydropower is becoming increasingly viable economically compared to other renewable sources owing to lower installation and generation costs. According to the International Hydropower Association, the levelized cost of energy from hydropower projects commissioned in recent years ranges from $0.03-0.10 per kWh, making it competitive against fossil fuel alternatives in many parts of the world. Hydropower plant setup requires massive infrastructure but has operational life cycle lasting 80 years on average with minimal running costs. Once constructed, hydropower generation delivers reliable baseload electricity at low and predictable prices over the long-term.  Another important growth factor is the capability of hydropower resources to complement other intermittent renewable energy sources by acting as grid balancing solution. Hydropower facilities allow incorporating higher quantities of solar and wind power on electrical grids through load balancing abilities. Hydropower generation can be increased or decreased within minutes to adjust for fluctuations in power supplied from weather-dependent energy sources. This enhances overall grid stability and efficiency. For example, Eurostat data shows hydropower in European Union compensated for 61% of the variability in solar and wind-based renewable electricity generation during 2020-2021.