Hydropower Plant Construction Market Trends

Hydropower Plant Construction Market Drivers

Escalating Number of Government Policies

• Governments across the globe are adopting policies to enhance renewable energy, of which hydropower is the leading part. Policies like feed-in tariffs, subsidies, and long-term energy plans are fostering investment in hydropower plants. For example, China's National Energy Administration has a vision to attain at least 62 GW of installed capacity by 2025 and 120 GW by 2030, equivalent to 75% of the existing global installed capacity. These policy platforms are key drivers of hydropower development on a world-wide scale.

Surge in Hydropower Electricity Generation

• Hydropower delivers continuous and stable power, which has earned it favor to stabilize grids for energy supply, particularly where the energy requirements change constantly. Compared to solar and wind renewable energies, hydropower has the capability of supplying base-load generation of electricity. This consistency is essential for energy security, especially as nations aim to decrease dependence on fossil fuels and achieve climate objectives. Moreover, hydropower's capacity to rapidly modulate output makes it an asset in balancing supply and demand on the energy grid.

Hydropower Plant Construction Market Restraints

Climate Uncertainty

• The growing incidence of weather extremes, including droughts and unpredictable rainfall patterns, is a major challenge to the construction and operation of hydropower plants. For example, Canada, which uses hydropower for 62% of its electricity generation, has faced extended droughts resulting in a dramatic fall in electricity exports to the US in 2023. Likewise, India's hydroelectric power generation fell by 16.3% in the year ended March 31, 2024, its biggest fall in 38 years, mainly because of scanty rains. These climatic uncertainties not only influence current energy generation but also discourage investment in new hydropower projects on account of the uncertainty regarding water supply.

Financial and Operational Risks

• Hydropower projects are high-cost and hence prone to operational and financial pitfalls. In India, the likes of the Subansiri Lower 2,000 MW HEP have also witnessed cost escalation, with the cost tripled since inception. Moreover, natural disasters have necessitated higher insurance charges for hydropower companies by nearly 20-50%, further propelling costs. Such financial volatilities in addition to the operational risks in terms of delayed construction and upkeep add to hesitations from investors, which might deter the commissioning of fresh hydropower ventures.