HomeRegional NewsAfricaA guide to hydropower projects and investors navigating climate risks

A guide to hydropower projects and investors navigating climate risks

In the face of increasingly variable climatic and hydrological conditions, investors, owners and developers have been searching for international guidance to help them make the right decisions for the planning, building, upgrading and operating of hydropower projects.

Determining hydropower’s resilience to climate risks will be essential to developing new projects and evaluating existing assets.

This article first appeared in ESI Africa Issue 3-2019.
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Recognising the need and demand for guidance, the International Hydropower Association (IHA) launched the Hydropower Sector Climate Resilience Guide at the World Hydropower Congress in Paris in May 2019 – a guide that will help the hydropower industry become more resilient to the impacts of climate change.

The guide was coordinated by IHA and developed with technical and financial support from the European Bank for Reconstruction and Development (EBRD), the World Bank Group (WBG) and its Korea Green Growth Trust Fund (KGGTF). The guide acknowledges that, while hydropower is a low-carbon source of power and provides essential adaption services, hydropower infrastructure can be susceptible to climate risks. For hydropower operators, failure to adequately consider these climate risks may lead to shortcomings in technical and financial performance.

As the World Bank Group’s global lead hydropower and dams, Pravin Karki, commented: “Climate risks, if not adequately addressed in planning and operations, could drastically undermine hydropower investments. There is an urgent need to actively prepare for the resiliency of hydropower assets in the face of increased frequency of extreme weather events and rapid changes in hydrological patterns to reduce the risk of climate related disruptions.”

Another critical consideration is that, by not assessing climate change-related opportunities, investment decisions may not adequately recognise the role of hydropower infrastructure in providing climate related services. This includes its role in supporting the greater use of less flexible forms of electricity generation such as wind and solar power.

The six-phase methodology introduced by the Hydropower Sector Climate Resilience Guide looks at climate risk screening, data analysis, climate stress testing, climate risk management, and monitoring, evaluation and reporting. Importantly, it is applicable to both greenfield and upgrade projects and to projects of all scales and in all geographies.

Departing from traditional approaches that rely on historical information about past climatic and hydrological conditions, the guide provides a practical framework for assessing the projected impacts of climate change on hydropower systems. This includes guidance for selecting appropriate measures and operational procedures across a range of scenarios, and for developing climate risk management plans.

Over a three-year period, the guide was developed in consultation with major hydropower developers, owners and operators, intergovernmental and not-for-profit organisations, international consultancies and independent experts. A beta version was created by Mott MacDonald, under contract to the World Bank, and released in September 2017. The beta version was adapted and developed from the Decision Tree Framework, which incorporates concepts of decision-making under climate change uncertainty for the water sector, developed for the World Bank by Dr Casey Brown and Dr Patrick Ray.

Albania’s state-owned hydropower operator KESH was one of the organisations to have piloted the guide, leading to its recent adoption of a climate risk management plan. The plan was adopted as part of a loan agreement with the EBRD and lists a range of structural and non-structural adaptation measures. “Building know-how in the field of climate resilient hydropower operation is an essential element of our strategy to sustain and further develop our position as a leading electricity generator in the Western Balkan region,” said KESH’s CEO, Agron Hetoja, announcing the climate risk management plan last year.

In January 2019, representatives from the testing process, as well as hydropower operators, lenders and the advisory expert panel, shared their experiences and feedback at a technical workshop hosted by IHA and EBRD in London. These important inputs assisted in preparing the guidance. As one of the workshop participants, Denis Aelbrecht, head of EDF’s hydro engineering technology group, attested, the guide provides an “opportunity to bridge advanced science about climate and climate change resilience together with industrial and engineering practice”.

For companies and investors in many parts of the world, climate related financial disclosure is rapidly becoming a legal requirement. Hydropower companies will be expected to disclose to regulators, investors and shareholders how such risks are being managed including measures to build resilience. This guide will therefore be highly relevant for hydropower operators and investors seeking robust ways of demonstrating the resilience of their projects. It will also facilitate assessments of climate risks and resilience measures required by financial institutions’ emerging rating systems.

Achieving consensus around the Hydropower Sector Climate Resilience Guide has been extremely valuable. This approach will also be important for other infrastructure and technologies where there is a need to consider the impacts of climate change. Major international institutions recognise that the guide will, in the words of Craig Davies, head of climate resilience investments at the EBRD, “play an important role in helping financial institutions to scale up both the quantity and the quality of their investment in climate-resilient hydropower.”

Part of the guide’s appeal to investors, industry, governments and civil society is that it complements existing internationally recognised Hydropower Sustainability Tools, such as the Hydropower Sustainability Guidelines on Good International Industry Practice (HGIIP), which define expected performance for the hydropower sector across a range of environmental, social, technical and governance topics, including climate change mitigation and resilience.

The guide also supports assessment tools used to measure project performance, such as the Hydropower Sustainability Assessment Protocol (HSAP) and the Hydropower ESG Gap Analysis Tool (HESG). These tools are used to examine whether a project is climate resilient and so, by following the guide, hydropower projects are more likely to achieve good assessment scores.

As even more investors, developers and policy-makers look to improve their decision-making processes in light of climate change, this guide will become a vital instrument in their toolkit. It will help to ensure that hydropower continues to make a significant contribution to achieving the targets of the Paris Agreement and the Sustainable Development Goals for many years to come. ESI

About the author

Richard M Taylor is the CEO of the International Hydropower Association (IHA) and has been in the hydropower sector since 1985. He became a founding board member of IHA in 1995. Richard has been engaged in United Nations initiatives on water (WWDR and UNEP), energy (UNIDO and UNDESA), and climate change (UNESCO and IPCC).


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