4. The Current Cost of Hydropower

Hydropower is a capital-intensive technology with long lead times for development and construction due to the significant feasibility, planning, design and civil engineering works required. There are two major cost components for hydropower projects:

» The civil works for the hydropower plant construction, including any infrastructure development required to access the site and the project development costs.

» The cost related to electro-mechanical equipment.

The project development costs include planning and feasibility assessments, environmental impact analysis, licensing, fish and wildlife/biodiversity mitigation measures, development of recreation amenities, historical and archaeological mitigation and water quality monitoring and mitigation.

The civil works costs can be broadly grouped into categories:

» Dam and reservoir construction;

» Tunnelling and canal construction;

» Powerhouse construction;

» Site access infrastructure;

» Grid connection;

» Engineering, procurement and construction (EPC); and

» Developer/owners costs (including planning, feasibility, permitting, etc.).

For developments that are far from existing transmission networks, the construction of transmission lines can contribute significantly to the total costs. Accessing remote sites may also necessitate the construction of roads and other infrastructure at the site.

The electro-mechanical equipment for the project includes the turbines, generators, transformers, cabling and control systems required. These costs tend to vary significantly less than the civil engineering costs, as the electro-mechanical equipment is a mature, well-defined technology, whose costs are not greatly influenced by the site characteristics. As a result, the variation in the installed costs per kW for a given hydropower project is almost exclusively determined by the local site considerations that determine the civil works needs.

There has been relatively little systematic collection of data on the historical trends of hydropower costs, at least in the publically available literature (IPCC, 2011). Such information could be compiled by studying the costs of the large number of already commissioned hydropower projects. However, because hydropower projects are so site-specific, it is difficult to identify trends. This would require detailed data on the cost breakdown of each project and require a significant investment in data collection, time and analysis. Until such time as analysis of this type is completed, it is therefore difficult to present historical trends in investment costs and the LCOE of hydropower.