GENERATION REPORT: HYDROPOWER

and wind which are smaller in scale and decentralised, thus having minimal impact on the ecology and livelihood.

“Solar and wind power projects usually have lower costs and construction times associated, making these projects more attractive for many Asian markets,” Fitch said. Thoo said that hydropower generation in the Mekong region experienced severe shortages amidst dry spells, which would result in markets considering additional conventional thermal power generation to make up for the deficit.

As this move is not aligned with their carbon emission reduction targets, they are including non-hydropower renewables such as biomass and waste power, according to Fitch Solutions.

Due to this, non-hydropower renewables generation in non-hydropower renewables are expected to grow at an annual average rate of 8.4% from 2022 to 2031, faster that the 3% annual growth of hydropower. Generation from nonhydropower renewables may overtake hydropower in 2024.

Even against strong opposition, the Asia power project pipeline is dominated by hydropower projects, according to Fitch’s Key Projects Database. Out of the 574 hydropower projects, 314 are in India with a total capacity of 107 GW.

However, in the past 10 years, 22 projects have either been cancelled or suspended with a generation capacity of 17 GW. Fitch expects hydropower capacity in India to grow 17 GW from 2022 to 2031.

Attracting investments

Hydropower projects would need strong government support to ensure “adequate management of social and environmental impacts” and water management, said Carlos Torres Dias, head of Power Research at Rystad Energy. Governments will play a crucial role in attracting necessary investments in hydropower through incentives and creating a “suitable business environment,” according to the report by the International Renewable Energy Agency (IRENA).

For investors, controlling the capital expenditure on the development side, and the type of rate they are getting from the sale of power is important, according to Fishman.

Governments should offer developers access to lower interest rates or loans or set them up with lenders that are willing to give more preferential conditions to promote hydropower development.

“On the sales side, the developer needs to know that they’re going to sell their power at a good rate and that they can see a path to profitable profitability after a certain number of years,” Fishman said.

“If they don’t have that, it doesn’t make much sense for even the largest, wealthiest investors to be investing if they don’t see a pathway to profit,” he added.

Some of the incentives the governments could implement include relief from taxes and duties, concessional grants or loans, accelerated asset depreciation, subsidies based on environmental performance, subsidies for services by the power generation, capital cost contributions, and support for structures for the deployment and testing of new technology, according to the IRENA, citing the report from the University of Cambridge.

Governments can also help in streamlining concessions and licensing processes, which could reduce uncertainty and make the projects attractive to investors.

IRENA also noted that international and multi-stakeholder cooperation can play a part in the development of the hydropower sector as the industry, governments, and regulators have to collaborate in developing solutions to address challenges.

An area where cooperation amongst stakeholders is critical is river basin management, it said.

“International cooperation, through the sharing of experiences and best practices, can accelerate the creation of favourable policies and regulations relevant to hydropower,” it said.