Hydro power’s reliance on climatic conditions may mean that predicted changes could adversely affect power production. Gareth Harrison and Bert Whittington discuss the potential impact of climate change on hydro power investment

The increased use of renewable energy is a critical element in the fight to reduce emissions of greenhouse gases and limit climate change. Hydro power is currently the major renewable source contributing to electricity supply, and its future contribution is anticipated to increase significantly. However, the successful expansion of hydro power is dependent on the availability of the resource and the perceptions of those financing it. Global warming and changes in precipitation patterns will alter the timing and magnitude of river flows. This will affect the ability of hydro power stations to harness the resource and may reduce production, implying lower revenues and poorer returns.

Electricity industry liberalisation implies that, increasingly, commercial considerations will drive investment decision-making. As such, investors will be concerned with processes such as climate change that have the potential to alter investment performance.

Climate change is expected to be the outcome of increases in atmospheric concentrations of greenhouse gases resulting from human activities. The emissions are caused, in part, by fossil-fuelled electricity generation, and as world energy demand is expected to at least triple by the end of the twenty-first century, emissions and concentrations are expected to rise considerably. The impact of climate change could be significant especially if less developed countries expand their electricity supply systems using fossil fuels.

In an attempt to control greenhouse gas concentrations and slow down the greenhouse process, governments are aiming to cut or stabilise emissions relative to 1990 levels. To achieve this target, the energy sector will have to change the way it operates: it could reduce its reliance on fossil fuels, use more renewable energy, and practise greater energy efficiency. Together with other means, such measures should allow the climate to reach and stabilise at a new equilibrium level.

Many greenhouse gases, including carbon dioxide (CO2), occur naturally and keep the earth warm by trapping heat in the atmosphere. However, since the industrial revolution, manmade sources of CO2, such as transportation and the burning of fossil fuels, have added greatly to atmospheric concentrations.

Enhanced levels of greenhouse gas concentrations are predicted to cause a significant rise in temperature over the next century, with rates of increase anticipated to be greater than at any time in the recent past. The current consensus is that under present rates of economic and population growth, global mean temperatures will rise by around 3?C by the end of the century. However, there are indications that the increase may be as much as 5.8?C.

Many predictions of future climate are based on the output of complex numerical general circulation models (GCMs) which simulate physical processes in the atmosphere and oceans. Although GCMs differ in the detail of their methodologies, most agree on the general temperature trend.

There are many potential impacts of climate change, including loss of land due to sea level rise, damage from increased levels of storm activity, and threats to bio-diversity.

Under the Kyoto Protocol most countries agreed that they would limit greenhouse gas emissions. As electricity production accounts for a significant portion of the emissions, much of the burden will fall on this sector. Increased use of renewable energy sources, including hydro power, is one suggested way in which the emissions targets can be met. Unfortunately, the very fact that renewable energy resources harness the natural climate means that they are at risk from changes in climatic patterns. As such, changes in climate due to higher greenhouse concentrations may frustrate efforts to limit the extent of future climatic changes.

At first glance, rising global precipitation would seem to provide opportunities for increased use of hydroelectricity. Unfortunately, such increases will not occur uniformly over time or space, and many regions are projected to experience significant reductions in precipitation. In addition, the temperature rise will lead to increased evaporation. The combination of changes in precipitation and evaporation will have profound effects on catchment soil moisture levels. The soil provides storage and regulates runoff regimes. Drier soil absorbs more rainfall, tending to reduce the quantity of water available for runoff, while more saturated soils absorb less rainfall, increasing the likelihood of flooding.

In river basins that experience significant snowfall, higher temperatures will tend to increase the proportion of wet precipitation. This may increase winter river flows, lead to an earlier spring thaw and reduce summer low flows.

All change

Climate change impact studies have, in general, relied on rainfall runoff models to translate changes in precipitation and temperature into altered river flows. GCMs provide information on how climatic variables may change in the future. Unfortunately, each GCM tends to predict a different change in temperature and precipitation which results in significant, and often contradictory, differences between the resulting river flow impacts. An alternative is to examine basin sensitivity to changing climate through the application of uniform changes in precipitation and temperature.

A study was undertaken in 1995 which examined climate impacts on several major rivers. For the Zambezi, GCM scenarios suggested that mean annual runoff may decline by 17% or rise by 18%. The most severe change occurred with the Nile. Under one scenario, mean flows fell to less than a quarter of their historic level. Overall, it was discovered that river basin sensitivity increases with aridity, and this, to some degree, explains the severe fall in Nile flows.

Despite differences between the study techniques used and river basin characteristics, the following conclusions have been drawn:

• Runoff is relatively more sensitive to precipitation change than temperature change.

• River basins tend to amplify changes in precipitation.

While changes in annual runoff are a useful indicator, often the seasonal changes are more profound. For example, a 1995 study found that for the Mesohora basin in Greece a 20% fall in precipitation accompanied by a 4?C temperature increase resulted in a 35% reduction in annual runoff. However, the impact on summer flows was almost twice as large, with the fall in winter limited to 16%. This pattern is repeated in many other studies and is a result of changes in soil moisture content.

Hydro power potential is defined by the river flow, and therefore changes in flow due to climate change will alter the energy potential. More importantly, as most hydro power schemes are designed for a particular river flow distribution, plant operation may become non-optimal under altered flow conditions.

The capability of a given hydro installation to generate electricity is limited by its storage and turbine capacities. These place limits on the amount of carryover storage to allow generation during dry spells, and also the degree to which benefit can be derived from high flows.

A number of studies have examined the impact of climate change on hydro power production. Published results suggest that the climate sensitivity of energy production is related to the storage available – in general terms the greater the degree of storage the lower the sensitivity. Additionally, turbine capacity limits the ability of schemes to take advantage of higher flows.

Repaying debts

Hydro is characterised by low operational costs but high capital costs. As a result, the debt repayment period for a hydro scheme is often significantly longer than for fossil fuelled plant. Despite high fossil fuel costs, hydro will often be at a disadvantage and would not be favoured by short term orientated investors. As with all generation methods, electricity sales revenue is the only way of servicing the capital debt. If reductions in runoff and output were to lead to reductions in revenue, this would adversely affect the return on investment and hence the perceived attractiveness of the plant. Therefore, there is a possibility that potential schemes would not be pursued.

If potential hydro schemes are abandoned or production from existing facilities is limited by runoff changes, then the likely alternative is that fossil fuelled stations will have to be constructed to cover the deficit. Not only would this require additional capital to be used, but would also probably result in additional carbon emissions.

Many large hydro power developments in less developed countries have been built with the intention of stimulating economic development. Often, these are internationally financed and repaid in hard currency. Reductions in revenue may make it difficult to repay the debt, severely stressing weak economies, while the shortfall in electricity availability will hamper governments’ development attempts.

The magnitude of capital investment required for hydro power installations, together with the increasing penetration of private capital in the industry, makes it imperative that project analysis takes account of potential climatic effects.

To assess the threat that climate change poses to future hydro power investment, there is a requirement for a robust methodology. The diverse nature of hydro power installations and climatic conditions precludes any form of accurate regional or global analysis at this stage. Therefore, an analysis on a case by case basis is necessary.

To assess the impact on investment it is necessary to consider the problem from the standpoint of a potential investor. They will primarily be concerned with the impact on a range of investment indicators and, as such, a methodology derived from traditional hydro power appraisal was devised.

The techniques of hydro power appraisal are long established. However, the continuing reliance on historic flows to indicate future flow conditions is not prudent given the prospect of climate change. Some recent project appraisals have attempted to deal with climate change by uniformly altering river flows. Unfortunately, this practice is inadequate as it fails to take into account the tendency of a river basin to amplify precipitation changes.

The use of a rainfall runoff model removes the reliance on historic flows by providing a link between climatic variables and river flows. This enables the relationship between climate and financial performance to be examined effectively.

The rainfall runoff model is calibrated using monthly historic river flow and climate data. Following this, suitable operational, financial and economic data enables simulations to be rapidly carried out.

To meet these required specifications, new software has been developed. Named HydroCC (climate change), the software is written in Microsoft Visual C++ to facilitate data entry and simulation control. The data requirements are extensive, ranging from catchment details, to financing assumptions and time-series data. The primary data source is a time-series of historic climate data and clearly, the longer the series the better. However, 30 years was taken as the minimum to ensure acceptable simulation.

The software was tested using an actual planned scheme. The chosen scheme has limited reservoir storage capacity and is intended to operate as a run-of-river plant. The river flow regime is highly seasonal and is not influenced by snowfall. Basic operational and financial information was extracted from a traditional feasibility study of the scheme. Simulations indicated that the software delivers production estimates and investment measures that are comparable with figures found in the feasibility study.

Sensitivity study

A sensitivity study was carried out, with the model driven by historic precipitation and temperature data uniformly changed to simulate climate change. Results suggest that runoff and energy production are both sensitive to rainfall change, and that runoff changes are significantly greater than the precipitation variation. Although storage is limited, production sensitivity is lower than runoff. Energy production is less sensitive to increases in flow as much of the excess flow is spilled.

Although these results are only preliminary, they indicate that the financial performance of the scheme is sensitive to rainfall changes. Furthermore, they imply that in regions that experience reduced rainfall, hydro power could become less competitive. As such, investment in hydro power projects will be less likely, and the ability to limit climate change will be reduced.

Gareth Harrison and Bert Whittington, Energy Systems Group, Department of Electronics & Electrical Engineers, The University of Edinburgh, King’s Buildings, Mayfield Road, Edinburgh EH9 3JL, UK

The original paper was presented at Hydropower 01 in Norway, 20-22 June 2001. Conference proceedings can be ordered from A A Balkema publishers, email: orders@swets.nl, URL: wwww.balkema.nl