The hidden risks in hydropower projects

Hydropower is increasingly becoming a major source of renewable energy for emerging markets throughout Asia.

Managing the not-so-obvious risks associated with developing and operating hydropower schemes is often a key challenge in securing project finance and gaining or maintaining a social licence to operate.

“Power projects, especially in developing countries, are increasingly scrutinised by international financing organisations when providing project funding” said Dr Eleni Taylor-Wood, Principal Consultant, Environmental and Social Science at specialist power and water consulting firm Entura.

“These entities, such as the Asian Development Bank, the International Finance Corporation and the World Bank, recognise that growth must be both inclusive and environmentally sound to reduce poverty and build shared prosperity for today’s population and future generations.”

Managing risk across all stages of a project can improve the viability of a project and the overall project outcomes.

What are the risks?

It is critical that both governments and hydropower entities understand the opportunities and risks of major projects, not only at the development stage, but also throughout the ongoing operation and management of the scheme.

Typically, some of the key risks to be considered include:

• Is there an identified need, what is the future demand, and is there a market?
• What is the best energy option?
• Could any political or public sector issues affect the project?
• Is there the institutional capacity to advance the project?
• How available is the resource? Will climate change affect availability?
• Is the site appropriate? Are there other options?
• Can you connect into the grid, and where? What systems enhancements might be required?
• Who are the key stakeholders and how can they be engaged?
• What are the possible environmental and social impacts, and how can they be avoided, mitigated, offset or compensated?
• What safety issues are associated with development, construction and operation, and how can they be managed?
• What are the ongoing operational costs?
• What are the ongoing operational requirements, such as compliance requirements, condition assessments, performance monitoring, maintenance strategy and planning, and training to build operator skills?
• How will you manage unforeseen stakeholder, technical, financial, social and environmental issues?

Using international standards and sustainability assessment frameworks to manage risks

International standards and sustainability assessment frameworks can help guide a comprehensive review of risks and, in some cases, identify further opportunities to increase positive outcomes from projects.-

In 2010, the International Hydropower Association launched the Hydropower Sustainability Assessment Protocol, a framework for assessing the sustainability of hydropower projects across the world. This framework can be used to help guide a hydropower project from the early stages of consideration through to operation, identifying issues and gaps for consideration, as well as be used to assess the project’s sustainability performance.

There are only eleven accredited assessors able to officially apply the Protocol worldwide. Entura’s Dr Eleni Taylor-Wood and Dr Helen Locher are among this select group of accredited assessors, having undertaken assessments of hydropower projects in Europe, South Asia, South-east Asia and South America.

One step at a time

“Evaluating the risks in stages means that the cost of evaluation can be minimised should the project be judged unviable at any point. Not all risks can be avoided, but many can be minimised or mitigated,” explained Dr Taylor-Wood.

Early identification of key risks allows companies to manage these risks throughout a project, minimising corporate, technical, environmental and social impacts and their associated costs, including damage to corporate reputation should an unmanaged risk develop into a crisis.

Self-assessment and capacity building

“I believe that for hydropower developments to be sustainable, we need to use the lessons of the past to innovate in the present and protect the future,” said Dr Taylor-Wood.

“This means learning from mistakes and carefully assessing and managing technical, corporate, economic, environmental and social risks right across the project lifecycle, so that developments contribute positively to social, environmental and economic goals.”

Entura uses a unique, tailored self-assessment tool to assist power companies and developers to understand the risks and opportunities facing their projects and to build capacity to assess, monitor and report on those projects.

This tool is based on the assessment criteria identified in guidelines and standards such as the Hydropower Sustainability Assessment Protocol and those used by the International Finance Corporation.

In addition, it can be adapted to include other standards or to assess compliance with criteria relevant to a client’s requirements or obligations (such as internal policies and/or permit or concession conditions).

Benefits include easier access to finance, better ability to anticipate and respond to stakeholder concerns, and avoidance of delays and problems through the project development pipeline.

Entura provides expert advice to help clients:

• develop a better understanding of risk identification, assessment and sustainability, across all project stages
• self-assess a project against recognised guidelines and standards to identify whether key issues, risks and opportunities have been considered and identify potential gaps for further consideration
• meet international financing requirements
• assess viability or conduct a due diligence of a project
• undertake assessments against the Protocol
• address risk issues to improve the overall sustainability performance of projects
• build institutional capacity to develop, operate and/or maintain power schemes.

eleni.taylor-wood@entura.com.auIf you would like to discuss how we can assist you with assessing your project or how you can assess and track your own progress towards improved risk minimisation and sustainability, please contact Dr Eleni Taylor-Wood on +61 3 6245 4582 or Shekhar Prince on +61 412 402 110.

About the author

Dr Eleni Taylor-Wood is Entura’s Principal Consultant, Environmental and Social Science. Eleni has 20 years’ experience successfully managing large-scale, complex projects that run over several years, as well as providing expert advice and independent review for a range of infrastructure and planning projects. She has worked on projects around the world including in Australia, Mozambique, South Africa, Iceland, Colombia, India, Malaysia, Mekong, Solomon Islands, Fiji and Papua New Guinea. Her experience covers a vast gamut of studies including: environmental and social impact assessment and management; strategic management of wetlands and waterway; feasibility and approvals for new hydropower projects, environmental flow determination and assessment, and sustainability assessments. Eleni is currently one of eleven Accredited Assessors under the Hydropower Sustainability Assessment Protocol worldwide.

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Reliable, renewable energy now powering South Africa

In many developing nations, governments and utilities are scrambling to bring much-needed power to their people and industries to improve quality of life and drive economic growth.

Small hydro (around 40 MW or under) from run-of-river schemes is an ideal solution to contribute to growing and greening the energy mix in developing countries, providing clean and reliable power from a country’s rivers without the significant environmental or social impacts of large dams or the economic and environmental costs of fossil fuels.

The Neusberg hydropower project – a run-of-river small hydropower project near Kakamas in the Northern Cape of South Africa – is one small but effective step towards South Africa’s ambitious goals of raising the living standards of its growing population and supporting vital economic activity through encouraging the development of renewable energy by independent power producers.

What is the Neusberg hydropower project?

Using the power of the mighty Orange River, the Neusberg hydropower project creates electricity by diverting some water for a short distance as it runs downstream from the existing Neusberg Weir, returning the water back to the river after it runs through the hydroelectric plant’s three 4010 kW turbines.

The Neusberg project is highly efficient, producing 10 MW of reliable and sustainable baseload power for the equivalent of up to 5000 homes with no adverse impacts on irrigation, fish or environmental flows.

Success through collaboration, innovation and expertise

The Neusberg project needed a particularly innovative design solution and effective planning and collaboration for it to meet the needs of the region, satisfy the requirements of all major authorities and stakeholders, and still achieve the objectives of the developer.

And that’s where specialist power and water consulting firm Entura drew on its extensive experience in hydropower development to find the right answers to move the project towards successful completion.

For example, developing all the necessary tender and contractual documentation and negotiating and achieving regulatory approvals are critical administrative steps but can prove challenging.  Entura’s owner’s engineer services helped the Neusberg project overcome these development-stage hurdles – such as helping to achieve the vital water use licence by proposing suitable designs for the project and then working through a collaborative process to modify the designs to meet the authority’s requirements while still achieving the developer’s objectives.

Tailored solutions for tricky challenges

A major challenge for the Neusberg project was to produce economical and reliable power to relieve pressure on the electricity network at the same time as ensuring adequate water supply for irrigation by local fruit-growers throughout the construction and operation of the project. Other specific local requirements also needed to be met, such as maintaining the ability of the Neusberg Weir to meaningfully measure river flow, maintaining the aquatic environment and minimising the impacts from construction activities.

• To guarantee an uninterrupted supply of water to the local irrigation scheme, construction of the hydro project called for clever planning. Since an existing irrigation canal ran through the powerhouse site and needed to remain in operation, a temporary diversion canal was created to allow the powerhouse and forebay to be constructed in two stages without interrupting irrigation supply.
• To ensure that the flows into both the hydroelectric project and the irrigation canals are sufficient, a weir was placed at the offtake for the hydro project providing passive protection against the water level in the reservoir being drawn down. The level of the top of the weir was carefully designed so that the length of the weir was reduced – lowering construction costs while providing the protection required for the irrigation canal and allowing sufficient flow into the headrace canal.
• The Neusberg Weir is a very important flow measuring structure as it provides accurate information on the flow in the Orange River to both South Africa and Namibia. The hydro project takes water away from the weir, so to restore the ability to measure flows, two devices were installed – an instrument in the canal upstream of the powerhouse, and the weir in the tailrace. The measuring weir in the tailrace provided an extra benefit for the aquatic environment, by acting as a barrier to fish movement and enabling fish to find their way to the existing fish ladder to travel upstream.
• To minimise costs and impacts of construction, the design of the Neusberg project dispensed with the typical aboveground powerhouse structure. Instead, the concrete roof of the powerhouse has a removable hatch allowing equipment to be lowered through the roof by crane into the turbine chamber.

Community benefits both now and into the future

The Neusberg project has brought an ongoing social and economic boost to the local community that goes well beyond providing an important source of electricity. During the construction phase, it created much-needed local employment in a region in which opportunities are scarce, and supported local and national businesses through spending on goods and services.

But the benefits keep flowing long after construction is finished, as the local community has a
15 per cent ownership stake in the hydropower scheme and an 8 per cent stake in operation and maintenance contractors, ensuring that the community trust will share in the project’s success for many years to come.

Entura’s role in the Neusberg project

Entura has played a vital role in the successful civil design and was also responsible for the electrical and mechanical construction of the Neusberg project by drawing on our day-to-day experience of owning, operating and maintaining hydropower assets for more than 100 years as part of Hydro Tasmania, Australia’s largest renewable energy producer and water manager, and an equity stakeholder in the Neusberg project.

If you would like to discuss how Entura can help you develop a hydropower scheme that can meet your power needs in a cost-effective and sustainable way, please contact Christoff LeGrange on  +27 21 202 2231 or Shekhar Prince on +61 412 402 110.

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