Framework aims to drive greater funding for hydropower’s future

Hydropower operators are to receive a framework by which they report their emission levels in a move which has been described  as fundamental to the ability of the sector to access further funding.

The Climate Mitigation Guideline has published by Open Hydro. The organisation said the framework is the first of its kind and much needed in the hydropower industry. It gives hydropower operators a framework by which they can report their emissions that has been created specifically to the industry.

Frameworks for carbon accounting have already been published but are not specific to hydropower, which is complex due to geography, age, construction materials, sediment flow and many more individual factors to each hydropower utility. The need for an industry-specific framework has been causing significant problems, especially in attracting the finance needed to renovate existing and build new assets.

“The hydropower industry is one of the oldest renewable energies and represents 70% of global renewable energy generation,” Open Hydro explained. “Yet, we need to double its capacity in order to reach our net zero targets by 2050. Even with this being the case, far too little climate-aligned investment is reaching the sector to enable this increase in capacity – investment needs to increase by 590% to reach the level needed to reach the capacity level for hydropower’s part in our global renewable energy requirements. And it needs to be climate-aligned finance because of the financial market around such large investments in today’s economy.

“We have already for years been issuing climate bonds and carbon credits for companies investing in renovations that reduce carbon emissions. And energy price is negotiated based on Power Purchase Agreements that rely on credible assessments of the emissions per unit of energy.”

Due to difficulties with reporting in the hydropower sector as a result of not having a framework specific to the industry, hydropower operators have been doing their best to present reports and cases for funding, Open Hydro explained. Yet, investors have been rejecting or slowing the approval of funding applications because of questions about the accuracy of carbon accounting for projects. This has reached a level where 80% of applications for finance experience time overrun, which leads to significant costs .

CEO of Open Hydro, Cristina Diez says: “We see this as an important milestone in hydropower’s journey towards enabling a net zero future. With more finance flowing into hydropower, we have the opportunity to avoid over 230 million tonnes of greenhouse gas emissions. I am thankful to the operators who saw how important this advancement is and gave their time to many working group sessions, reviews of the document and now into championing it to get it widely adopted within their organisations and the sector”.

Open Hydro said they decided to create a working group of industry leaders and top financiers to work through the industry’s challenges like how to account for these complex assets, with the best practises and science-based methods available to date.  The group includes experts from leading electric utilities such as EDP (Portugal), EPM (Colombia), ICE (Costa Rica), Statkraft (Norway) and financiers such as EIB and FMO.

Marian Rojas Acosta of Instituto Costarricense de Electricidad says: “Participating in the testing phase of the Open Hydro’s Climate-change Mitigation Guideline was very valuable. We could attend the spaces created to provide input and share knowledge about the reporting practices, as well as allowing us to broaden the perspective of the scope of these reports, when considering incorporating risks and opportunities generated by climate change”