Energy in Crisis: The impact of climate change on the hydropower industry

Since the first hydro-electric plant began operations in Wisconsin in 1882, developers have prioritised the most efficient locations, where rivers consistently flow fast enough to spin turbines.

However, fast forward to present day, and the most suitable sites for hydro plants have already been utilised, leading developers worldwide to explore higher-risk, and steeper locations, which can lead to landslides and flooding.

The risks are exacerbated by climate change, resulting in more frequent and intense weather changes. Increased storms and rainfall in some areas, coupled with droughts in others, pose heightened risks for countries developing hydropower. Additionally, new projects often emerge in the developing world, which is already disproportionately affected by climate change.

Several new dam designs rely on outdated climate data that underestimates current and future weather extremes. Given that hydropower is the largest source of renewable energy and likely to remain so, the potential consequences are significant.

Himalayas

A notable case study of the balancing act between achieving renewable energy and the costs to the environment, exacerbated by climate change, is the Himalayas in India. India is one of the largest hydroelectricity producers in the world.

In February 2021, a glacier broke in Uttarakhand, India, causing a flash flood that killed over 200 people and smashed two hydroelectric dam projects. Climate change which is causing melting glaciers and permafrost is exacerbating the frequency and intensity of landslides in the Himalayas.

A similar flash flood took place in 2013 in Uttarakhand, which left more than 5,700 people dead. Links were quickly identified between the disaster and the numerous hydropower construction projects in the area, suggesting that the project had exacerbated the intensity of the floods.

The policy director at International Rivers, said that the “disaster is a costly wake-up call,” … “It shows that nature will strike back if we disregard the ecological limits of fragile regions like the Himalayas through reckless dam building and other infrastructure development".

After investigating, experts in the field called for hydropower development in this “disaster-prone” region to cease. Indian governmental agencies ignored the warnings and continued their efforts to build dams on Himalayan rivers. There are still numerous plans to build hydropower plants in Uttarakhand and in other parts of the Indian Himalayas.

Regional competition

China and India's shared rivers have also driven hydropower projects in the Himalayas. For example, in November 2020, China's Power Construction Corporation announced plans for a massive dam on the Yarlung Zangbo river. In response, India declared intentions to build its own project on the Siang, the Yarlung Zangbo's main tributary, to “offset the impact” of China’s project.

The water issues are grounded on broader political issues between the countries, with India previously accusing China of weaponizing water, amid fears that China could block off water supply, or cause the flooding of India, if a war broke out between the two nations.

Similarly, Turkey, has created dams in the headwaters of the Euphrates, which causes tensions due to the restricted water flows to neighbouring countries, including Iraq and Syria. It is estimated that Turkey’s various dam and hydropower construction projects have reduced Iraq’s water supply along the two rivers by 80% since 1975. In Rojava, the withholding of water flow has previously caused impacts to agriculture and access to water for communities, both of which have been heightened by low rainfall.

Civil unrest

Due to the risks associated, hydroelectric dams frequently encounter opposition from local communities and environmentalists worried about ecological damage and social consequences.

In India, and globally, businesses, insurers and investors should conduct significant environmental impact assessments, actively engage affected communities, and implement strategies to mitigate risks. Supporting this, governments should create a regulatory framework around protecting natural resources, communities and ensuring risk management through audits and control mechanisms.

Droughts

On the other end of the scale, the irregularity of weather patterns caused by climate change is causing droughts, which result in inadequate water levels in rivers and reservoirs critical for hydroelectric power.  

Several of Europe's biggest hydroelectric facilities, including plants in France and Italy, experienced sharp drops in electricity generation in the first half of 2022 due to hot weather and scarce rainfall. To offset the missing hydro volumes, operators had to buy power at high prices, causing businesses to suffer financially. This was heavily impacted by the increase in gas prices following Russia’s invasion of Ukraine. Hydropower generation fell to its lowest levels in more than two decades in 2022.

In Africa, many countries rely heavily on hydropower. The electricity grids of Lesotho, the Central African Republic, DR Congo, Ethiopia, Uganda, Zambia, Sierra Leone and Mozambique all generate at least 80% of their power through hydroelectric sources.

In late 2022 and early 2023, Zambia and Zimbabwe endured power cuts and load shedding, due to a drought that caused water levels at the Kariba Dam hydroelectric facility to fall to critically low levels.

This highlights the risks of relying on a single large hydro source, suggesting smaller and more geographically distributed plants may prove more reliable long-term. Additionally, diversifying into other renewable sources can also make national power supplies more resilient as hydro becomes less reliable in a changing climate. A blended approach, utilising multiple sources, would make countries most resilient.

At AnotherDay, we routinely help our clients who are looking to enter new and frequently challenging markets. We recognise the importance of understanding the local market landscape and wider threat environment so that decision-making is as informed as possible. This can include risk management, specific threat assessments looking not only at the security landscape but also on a political, environmental, and regulatory level, and country risk analysis.

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Each week, our Threat Intelligence team will be analysing a different energy industry as part of our Energy in Crisis series (including Nuclear, Wind, Solar, Hydroelectric and more). Follow us here or on LinkedIn to stay up-to-date with the latest analysis.