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Thesis: Hydropower has been an integral part of many countries' shift to renewable energy, but this power comes at a larger cost. In addition, as countries continue to build their renewable energy portfolios, hydropower doesn’t have much capacity to grow its share in the market beyond where it is currently.

Credit Enel Green Power

Hydropower

As we continue our search for the optimal energy source (or sources) for humanity’s future, we’re now discussing hydropower energy. Essentially our goal is to answer the question: “Is hydropower energy going to be part of our future solution?”

To begin, let’s give some helpful general education to people (so no worries if you haven’t delved into the depths of wind energy before – I haven’t either).

What is hydropower?

Hydropower uses the flow of water to generate electricity. Most people associate hydropower with very large dams, collecting energy from large, man-made reservoirs through water pressure. However, there are many other different types and uses for hydropower applications.

Most hydroelectric power plants have a reservoir of water, a gate/valve to control how much water flows out of the reservoir, and a place where the water ends up after flowing downward. The water contained in the reservoir contains potential energy. Hydropower generates electricity using the elevation difference created by a dam or other water diversion structure. Water flows in on one side (usually at the top) and flows out on the other side (usually far below).

The volume of the water flow and the change in elevation (the fall) from one point to another determines the amount of available energy. In general, the greater the water flow and the higher the fall, the more electricity a hydropower plant can produce.

As the water falls the potential energy is converted into kinetic energy. The water pushes against the blades of a turbine, transferring that kinetic energy to power a generator and produce electricity.

What are the different types of hydropower?

There are a couple of different types of hydropower energy: impoundment, diversion, pumped storage, and tidal energy.

Credit Department of Energy

Impoundment:

The impoundment is the most common type of hydroelectric plant. In an impoundment facility, a dam is used to control the flow of water stored in a large pool or reservoir. When more energy is needed, more water is released from the dam. As described above, once the water is released, it flows downward and through a turbine, producing electricity.

Electricity generation may be used fairly flexibly to meet the regular demand as well as during peak demand. The water may be released to meet changing electricity needs or other needs, such as flood control, recreation, fish passage, and other environmental and water quality needs.

Credit Department of Energy

Diversion:

A diversion (sometimes called a “run-of-river” facility) channels a portion of a fast-flowing river through a canal to utilize the natural decline of the river in elevation and the river’s speed to produce energy. These facilities have limited flexibility to scale to peak power demand and other variations in demand. Usually, they’re just used for normal capacity.

Some of these diversion systems may not require the use of a dam. They can even be “damless” with channels that move the part of a river/stream through a powerhouse before the water rejoins the main river (similar to that shown in the image above).

Credit Department of Energy

Pumped-Storage:

Pumped storage is a type of hydropower that works similarly to a giant battery. A pumped-storage facility collects the energy produced from other sources (solar, wind, and nuclear power) and stores it for future use. Energy from these sources is used to pump water uphill from a pool at a lower elevation to a pool located at a higher elevation.

Then, when there is a high electricity demand, water from the higher pool is released, which follows the example above–running downhill and powering a generator. These systems are usually engineered so they reuse the same water multiple times to generate electricity at a later time.

Credit Clean Energy Ideas

Tidal:

In the 1900s, engineers developed ways to use tidal movements to generate electricity in areas where there is a significant tidal range–lots of water going in and out (a large difference between high tide and low tide).

There are currently three different ways to get tidal energy: tidal streams, barrages, and tidal lagoons.

For most tidal energy generators, turbines (similar to wind turbines but just underwater) are placed in tidal streams. A tidal stream is a fast-flowing body of water created by tides. Unlike the wind, tides are predictable and stable, producing a steady, reliable stream of energy. Placing these turbines is complex because these machines are large and disrupt the tide they are trying to harness. These turbines are most effective in shallow water because they produce the most energy and allow ships to navigate around the turbines.

Another type of tidal energy system uses a structure similar to a dam called a barrage. The barrage is installed across the opening of an ocean bay or lagoon that forms a tidal basin. Gates on the barrage control water levels and flow rates that allow the basin to fill up on the incoming high tides and to empty through a turbine system on the outgoing tide. A two-way tidal power system generates electricity from both the incoming and outgoing tides. As the tides come in, it pushes the turbine inside the barrage, and as the tide goes out, it pushes the turbine inside the barrage.

Tidal lagoons are similar to barrages as they use man-made tidal lagoons to capture energy. These lagoons can be constructed along a natural coastline, working as the lagoon is filling and emptying. However, energy output from these lagoons is likely to be low as there’s little influx of flow into and out of the lagoon.

Credit ScienceDirect.com

What are the different sizes of hydropower?

Hydropower comes in a variety of sizes from 1 kW to over 100 MW. There are many different ways people classify hydropower sizes, but today I’ll use the following: large, medium, small, and micro.

Large Hydropower - 100 MW+

Large hydropower plants are used to generate electricity for large cities. To generate large amounts of hydroelectricity, massive amounts of water are necessary, usually contained in lakes, reservoirs, and dams. These large-scale hydropower facilities can easily be turned on and off to meet the peak electricity demands throughout the day. There are several different types of large hydroelectric power plants: conventional hydroelectric dams, large-scale pumped storage facilities, large-scale diversion plants, and some large-scale tidal power plants.

Medium Hydropower - 10-100MW

Medium hydropower plants are used to generate electricity for medium-sized cities. These can utilize dams, reservoirs, and powerhouses often alongside medium-sized rivers or small dams connected to larger reservoirs to generate electricity. However, medium hydropower facilities have lower environmental impacts compared to large-scale hydropower plants.

Small Hydropower - 1-10MW

Small hydropower plants are used to generate small communities with the possibility to supply electricity to the regional grid. These smaller facilities are often developed on small rivers or as small dams connected to a pool/reservoir. Small hydropower systems can also be integrated into existing dams, canals, pipelines, and other infrastructure to produce additional electricity.

Micro Hydropower - Less than 1MW

Micro hydropower plants are used to generate tiny amounts of energy for small factories, isolated communities, or smaller applications (1-2 houses). Many provide power for areas that aren’t connected to any electricity transmission grid. These are a popular source of renewable energy due to their lower cost and minimal environmental impact.

Credit IEA Hydropower

History of Hydropower

Humans have been harnessing water to perform work and generate energy for thousands of years. Over 2,000 years ago, the Greeks used water wheels for grinding wheat into flour. In the 3rd century B.C., the Egyptians used water screws for irrigation.

The evolution of the modern hydropower turbine began in the mid-1700s when Bernard Forest de Belidor wrote Architectrue Hydraulique. This started many innovative processes, slowly expanding the power and electrical potential of hydropower. The first use of hydropower to generate electricity in the United States was in 1880 to power 16 arc lamps at the Wolverine Chair Factory in Michigan. The first hydroelectric power plant to sell electricity opened on the Fox River in Wisconsin in 1882.

In 1893, the alternating current method allowed power to be transmitted longer distances, culminating in the Redlands Power Plant in California. In the past century, many innovations have enabled hydropower to become an integral part of the renewable energy mix in the United States.

Credit Toshiba Clip

Hydropower Energy Use Cases

Hydropower is a popular energy source already, but, like other renewable energy sources, it can’t just be deployed everywhere.

Hydropower plants perform best in areas where there is a large, consistent flow of water from a river, stream, or other water source. In addition, there needs to be a significant elevation drop (or gradient) which creates the water pressure. These locations need a suitable area to build a dam or reservoir to store and control the water flow. Stable bedrock or geology is needed to support the weight of the dam and other infrastructure. Optimal locations are near power transmission lines or a population center to distribute the generated electricity.

Conversely, locations with the following characteristics are bad for hydroelectric facilities:

• Flat terrain with minimal elevation changes
• Arid or drought-prone regions with insufficient water supply or seasonal fluctuations
• Widespread, shallow water sources (large, wide rivers) rather than concentrated rivers
• Competing water usage needs to agriculture, industrial processes, or municipal water supply
• Insufficient water flow from rivers/streams

Only a relatively small portion of the United States is estimated to have ideal geographical characteristics to support a large-scale hydroelectric power facility. Claude, a generative AI platform by Anthropic, estimates that around 3% of the total land area in the United States would be considered suitable terrain for hydropower generation.

These regions include the Pacific Northwest, Alaska, the Northeast, and certain areas of the Rocky Mountains and Appalachians.

So, while hydropower provides a significant portion of United States electricity today, the geographical constraints mean there is a limited additional untapped potential for major new hydroelectric facilities. Only a small number of water-rich, mountainous areas remain viable for future large-scale development.

Credit United States Energy Information Association

Currently, there are around 1,450 conventional hydroelectric power plants and 40 pumped-storage plants operating in the United States. Most of the energy produced by hydropower plants is produced at large dams on major rivers.

In 2021, hydroelectric power produced 31.5% of the total renewable electricity in the United States, and 6.3% of the total electricity (across all sources).

Credit Statista

Some states, like Washington, Idaho, and Oregon produce a majority of their energy from hydropower (which makes sense since they have many large waterways).

Credit ResearchGate

On a world scale, many countries have the potential to produce large amounts of hydropower (as seen in the graph above).

Credit Statista

Yet, there’s still large amounts of progress to be made on a world scale. Many countries already produce a majority of their energy from hydropower. However, around 50% of all hydropower is produced by just 4 countries: China, Brazil, Canada, and the United States.

As you can see from the graph above, it’s easy for a smaller country (like Nepal or Costa Rica) to achieve a high deployment of hydropower, but harder for larger, land-locked countries like Germany or Kazakhstan to produce a majority of their energy from hydroelectric power.

Credit LinkedIn

Hydropower Economics

The total costs for hydropower vary significantly depending on the site, design, and materials choice. For our calculations, I’m going to assume a 100MW plant.

Manufacturing, Construction, & Installation Costs

One thing is for sure, people don’t truly know how much a dam will cost when they project it. A report in 2013 published by the University of Oxford examined 245 large hydropower dams in 65 countries built between 1934 and 2007. The conclusions were that the costs of dam construction were underestimated by 96% on average and that construction times were 44% longer than first estimated.

As for specific manufacturing costs, it’s hard to fully calculate them, so here’s an analysis by the United States Department of Energy in 2021:

As you can see, the spread is quite large, recently ranging from around $2,500/kW to $7,500/kW. Their analysis continues, estimating the average capital costs for constructing large hydropower stations were around $4,000/kW - $5,000/kW.

Using that average for our calculation, we can estimate that our 100MW project would cost around $500M.

Breaking down these costs a bit further, it’s estimated that the reservoir accounts for around 25% of total costs. Building tunnels for the water and other equipment is around 14% of total costs. The powerhouse, shafts, and electromechanical equipment together account for around 30% of total costs. Other costs, such as planning, civil works, and more account for the remaining 31% of total costs.

Another report suggests that 65-70% of the total costs are related to civil engineering (building and designing the plant), 15-20% of the total costs are related to regulations and environmental concerns, and the remaining 10% for the turbine, generator, and control systems.

The International Renewable Energy Agency’s hydropower report in 2012 detailed the cost breakdown for smaller hydropower plants as the following:

This data isn’t perfectly comparable with our large 100MW plant, but you can see that the percentage cost breakdown varies significantly depending on the plant.

For a further breakdown of these costs, FinmodelsLab provides the following breakdown of the startup costs for beginning a project:

For further context:

Cost of land and site preparation: Acquiring the land and preparing the site for a hydropower plant can cost a significant amount depending on location, site accessibility, land grading, and excavation requirements. For a small plant, this can range from $100k - $500k, however, for larger projects this cost can be over $1M. Factors such as accessibility, slope, and water availability will impact the cost of this site preparation.

Construction and installation of infrastructure and equipment: Recent studies cite the construction and installation costs for a hydroelectric plant to cost between $1k - $10k per kilowatt. This cost depends on the plant’s capacity, location, and type. FinmodelsLab cites that the construction of the Hoover Dam, one of the most famous hydroelectric plants in the United States cost around $49M to build in the 1930s (approximately $850M today).

Another significant factor in this cost is the type of hydropower plant. A diversion (run-of-the-river) plant requires fewer infrastructures such as a smaller dam, turbine, and generator. This cost is lower than costs for a pump-storage plant that needs more infrastructure.

The choice of equipment also drastically affects the cost. High-quality turbines that generate more electricity per unit of water and require less maintenance are more expensive than lower-quality ones (and can be more cost-effective in the long run). Also, the use of advanced technologies, such as computer-controlled systems that optimize water flow can increase the cost of the facility but lead to higher efficiency and cost savings in the long run.

Purchase and installation of turbines and generators: The cost of purchasing and installing turbines is one of the larger expenses when constructing a hydropower plant. Recent data suggests that for a smaller plant, the costs can range from $75k - $300k; for a medium-sized plant, the costs can range from $1M - $10M; and larger facilities can cost $10M+.

The installation process can vary depending on plant type and significantly add to the costs. Some estimates put the total cost around 10% - 20% of the overall plant cost.

Transmission and distribution of equipment and infrastructure: Transmission and distribution infrastructure are difficult to estimate, as they depend on how close the plant is to the end-user. Recent data puts the cost for transmission lines up to $2.5M per mile (which gets expensive fast if the plant isn’t close to civilization).

Environmental impact studies: When starting to build a hydropower plant, the impact on the environment can be immense. Environmental impact studies are carried out to assess the potential impacts on local flora, fauna, water quality, air quality, and many other factors. The main environmental impact of a plant is the alteration of natural waterways. The cost breakdown for these studies and measures is detailed below:

• Environmental impact studies: $50k - $500k
• Mitigation measures for alteration of natural waterways: $10k - $100k
• Mitigation measures for construction impacts: $10k - $100k

Permitting and regulatory fees: Permitting and regulatory fees vary depending on the location and size of the plant. The estimated average cost of a typical 5 MW plant is around $130k. These costs are necessary expenses that ensure the plant is built and operated in compliance with environmental regulations and safety standards.

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As you can see, these costs vary significantly depending on the size and type of plant being constructed, so it’s difficult to truly estimate a proper average cost for a single plant.

Operation & Maintenance Costs

Once built, large-scale hydropower plants usually require little maintenance and operation costs. Especially in large systems of multiple plants installed along a river, centralized control can reduce operation costs to very low levels.

Because hydropower relies on the power of moving water (and not another type of fuel), there are no price fluctuations or costs to acquire the fuel to consider.

A report by the International Renewable Energy Agency cites that operation and maintenance costs for a large-scale hydropower project to average around $45/kW/year. For our 100 MW project (100,000 kW), the costs would be $4.5M per year. These costs include upgrades and refurbishments that significantly improve the performance of the plant.

Credit EcoWatch

Overall Costs

The Indiana Department of Energy cites that hydropower plants usually last around 50-100 years. For our 100 MW plant lasting 50 years, we can project out the costs as the following:

• Manufacturing, Construction, and Installation: $115M - $1,250M
• Operation and Maintenance: $4.5M for 50 years = $225M

This places the total cost over the 50 years anywhere from $400M - $1,500M.

Claude estimates that consumers pay around $0.03 - $0.15 per kWh for hydropower electricity.

Credit Wikipedia

Similar to the graph above, hydropower is generally estimated to have a capacity factor of 35-50%.

So, to calculate the revenue for our 100 MW hydropower plant, we can simply take the number of hours in a year (365 x 24 = 8,760) multiplied by the price per kWh and the capacity factor. The results can be seen in the table below:

So, our plant makes anywhere from $9.2M - to $65.7M (quite a spread). Over 50 years that works out to be anything from $460M - $3,285M. Maybe to put this into perspective, let’s talk about the payback period, or the time required to recoup the funds expended in building the plant (the break-even point).

As you can see, there are still many scenarios in which our investment is paid back during the 50 years (as seen in green), and even more scenarios in which our investment is paid back during the 100 years (as seen in orange).

Hopefully now you can see why people make investments in hydropower.

Considering alternate examples of smaller plants, RenewablesFirst, a United Kingdom-based group has a graph of the following information:

As you can see from the graph above, you can see economies of scale present with hydropower plants. This is because hydroelectric projects of any size have a substantial fixed-cost element in the design and installation stages. As the plants scale up in size, this cost can be spread over more output, lowering the average cost per kW.

Hydropower Costs in Comparison

When it comes to energy sources, cost estimates are only valuable in comparison to other types of energy:

Credit Our World in Data

As you can see from the chart above, the cost of hydropower energy is comparable with other sources of renewable energy. However, that doesn’t tell the whole story.

If you look at the hydropower line specifically, you’ll see that over the last couple of years, the cost of hydropower has actually been increasing. This is illustrated more clearly in the chart below:

Credit Statista

But why is this cost increasing?

It’s difficult to truly estimate, but here are some possibilities:

Construction costs: Building new large-scale hydropower plants requires massive capital investment. Construction costs for these major projects have been rising significantly due to factors like higher materials prices, labor costs, and supply chain constraints.

Environmental mitigation expenses: As communities continue to become more and more concerned about the environment, there are increasing costs associated with efforts to mitigate the environmental impacts of hydropower. This could include fish ladders for migration, habitat restoration, river flow management, and operational constraints to reduce ecosystem disruption.

Relicense and upgrade costs: Many existing hydropower facilities have been in operation for decades and are facing expensive refining processes and the need to upgrade aging equipment and infrastructure to modern standards.

Limited remaining site availability: Less economically viable locations require higher costs to access remote areas or poor terrain.

Financing challenges: It has become more difficult and costly to finance massive hydropower construction projects given the high capital needs, long timelines for approval and completion, and the overall risks involved.

Credit Oak Ridge National Laboratory

Pros of Hydropower

Pro #1: Renewable source of energy

Hydropower is one of the best sources of clean energy, relying solely on water to produce energy. However, not everyone considers it “renewable” as hydropower creates a large negative impact on localities. So, this may be a pro or a con, depending on who you are. Either way, hydropower can take a seemingly renewing fuel and turn it into electricity, a powerful feat.

Pro #2: Flexibility

For most hydropower facilities (excluding diversion facilities), there are reservoirs of water able to be called upon at any time. This means that the level of energy produced can be easily flexible to the demand. All it takes is controlling how much water gets released. For more energy, just release more water. For less, close the tap a bit.

Pro #3: Pairs well with other renewables

Specifically, pumped-storage hydropower facilities pair very well with other renewables, taking any extra energy generated and storing it for future use. In addition, as I mentioned above, hydropower is a very flexible energy source, meaning it can be used easily to fill in the gaps when other renewables are at a lower capacity.

Pro #4: Inexpensive to operate

As you saw above in the economics section, hydropower plants are very inexpensive to run once they are constructed. The only ongoing costs are maintenance related. This provides more stability for the owners and surrounding population as they can be relatively sure that the hydropower plant will continue to produce energy as long as there is water available.

Pro #5: Energy security

Hydropower, like most other renewable forms of energy, relies on inputs that aren’t specific to one country or another (the downstream of rivers can be argued here, however). This allows countries with hydropower plants to feel a sense of security, not needing to rely on fossil fuel imports or nuclear material from other countries.

Pro #6: Creates lakes/reservoirs

A large dam on a river creates a large body of water behind it. These bodies of water are actually very helpful to the localities, bringing in tourists, storing water for local agriculture, and many more. In addition, the infrastructure necessary to build large hydropower plants stimulates the local economy, creating jobs and revenue for local businesses.

Pro #7: Large capacity

Certain hydropower plants can run almost all of the time. Plants with large reservoirs attached can release large amounts of water for a sustained amount of time if truly necessary.

Credit Clou Global

Cons of Hydropower

Con #1: Limited application beyond current capacity

As mentioned above in the use cases section, many of the best sites for hydropower plants already have an existing plant. This leaves very few options for additional capacity in the future, making each plant built potentially more expensive and less efficient. Unlike other sources of energy such as solar, where you can continue to place panels wherever there is light, there are only a small number of water sources capable of sustaining a hydropower plant.

Con #2: Adverse environmental impact

A large hydropower plant that creates a reservoir that previously didn’t exist may negatively affect the local environment. A dam can change the natural water temperatures, obstruct fish migration, affect water chemistry, alter river flow characteristics, and do many more types of damage. In addition, many greenhouse gases are released as the natural plants at the bottom of the new reservoir decay.

In addition, reservoir water will have higher than normal amounts of sediments and nutrients, which can cultivate an excess of algae and other aquatic weeds. These can crowd out other river animals and plant life.

Con #3: Expensive up-front cost

As mentioned in the economics section above, most of the costs associated with hydropower plants are up-front for the construction and installation of the plant. This can preclude many people from investing in hydropower as the capital required is large and the payback period can be very long. It’s easier for wary investors to purchase lower-cost solar panels.

Con #4: Susceptible to climate change disruption

Ultimately, hydropower plants rely on water to produce energy. As the climate continues to change, this can negatively impact hydropower facilities. The United States Department of Energy states the following:

The most important climate change effects impacting future hydropower generation are likely to be earlier snowmelt, change of runoff seasonality, and increasing frequency of extreme high- and low-runoff events.

Con #5: Risk of flood in lower areas

Many people have seen a movie or documentary where a dam breaks (Frozen 2, Superman 1978, The Day After Tomorrow, San Andreas, etc.), creating a massive outflow of water that destroys everything in its path. This is a risk associated with creating large dams holding massive reservoirs.

The Association of State Dam Safety Officials cites that in the period from 2005 to 2013, state dam safety programs reported over 170 dam failures that, without intervention, would likely have resulted in the dam collapsing. That’s quite a few. When you consider that there are around 91k dams in the United Stataes, that number seems a lot smaller, around 0.1%, but it’s still a risk.

Con #6: Potential to displace people

Another hidden cost of hydropower plants is their ability to displace local people. The International Displacement Monitoring Center cites that an estimated 80 million people globally have been displaced by dam projects alone. Why does this happen?

The creation of a hydroelectric dam creates a large reservoir that can submerge existing settlements, farmlands, or other areas where people live and work. This flooding can have other effects, including, but not limited to, reducing fishing areas local communities rely on for their livelihoods and sustenance, reducing forests, wildlife habitats, or other natural resources that local communities may depend on for food, fuel, or other necessities.

Credit Seattle.gov

Hydropower is a Good Energy Source

Hydropower has proved to be a great source of energy employed across the world. Countries have invested billions in dams and other hydropower facilities. It provides a good, stable source of energy for a variety of reasons, summarized below:

• Mitigating climate change: To accomplish recent climate pledges, hydropower has continued to be utilized as a non-carbon-producing energy source in many countries and continues to be utilized as climate goals become more stringent.
• Improve energy security: Locally generated hydropower reduces dependence on important fossil fuels. Hydropower provides countries with much-needed energy autonomy.
• Health benefits: Expanding hydropower production curtails the use of fossil fuels (and the subsequent production of CO2) which drastically improves public health outcomes now and in the future.
• Flexibility and reliability: Hydropower plants can quickly adapt to changing energy demands by adjusting the flow of water, making them valuable for load balancing and grid stability.
• Energy storage capability: Many hydropower plants have reservoirs that can store water for later use, effectively functioning as large-scale energy storage systems.

This combination of environmental and economic benefits has driven many countries to adopt hydropower as a major source of energy.

Is hydropower the “best” solution?

Unfortunately, hydropower is very restricted in its capabilities to grow as more and more viable water sources become occupied by existing plants. The lack of growth potential will limit hydropower from dominating future energy production.

Anywho, that’s all for today.

-Drew Jackson