Latest Small Hydropower developments in the Member States

• Austria
• Finland
• France
• Germany
• Italy
• Spain and Portugal
• Sweden and Norway
• United Kingdom

Austria

In Austria discussion on support schemes – a recommendation from Austrian Small Hydropower Association to have a possibility to opt for feed in tariff rather than direct investment support. This would improve the planning reliability for small producers when starting new projects. The FIT rate should be comparable with other European countries as in the past it was rather low.

Finland

Background

The larger sector of Finland’s Small Hydro 1-10 MW in plant size includes 73 power plants of which about 50% have an age of 40-60 years and about 30% are older than 60 years, thus there’s a remarkable need for upgrading and renewal. Local power or energy companies own the plants of this sector and its rated power is 284 MW. The annual normalized production is about 860 GWh (effective operation is about 3000 h/a). The additional energy potential of the larger sector of Finland’s Small Hydro is 144 MW/392 GWh per annum. This potential lies mainly in refurbishment, adding on rated power and dredging of head- and tail water area. A delay of these works can be explained with economic constraints and it seems that also the larger sector needs financial public support.

The smaller sector of Small Hydro <1MW includes 79 plants, connected to the national grid and approximately 30-40 plants smaller than 100 kW which are producing energy off-grid for the owners use. Small private companies own the sector’s power plants. The rated power of this sector’s 79 plants is 57 MW and the annual normalized production is about 250 GWh (effective operation is about 4400 h/a). The additional energy potential of the smaller sector of Finland’s Small Hydro is 200-235MW/800-100 GWh per annum.

About half (50%) of this potential lies in new sites, about 35% lies at numerous abandoned (presently out of use) plants and about 15% lies at about 800 small, micro sites (rated power smaller than 100 kW). The relatively large potential of the smaller sector of Finland’s Small Hydro can be explained with strong economic constraints and the present governmental grant for energy-investment of 20-25% allows practically only investments in necessary automation. Support of the energy production at hydropower plants smaller than 1 MW is 4,2 €/ MWh per annum which is about 5-10% of the energy price paid to small plants. It is obvious that the public support presently available does not attract at private investment at present energy prices paid. Only a significant increase of economical values will make the utilization of the energy potential possible.

There is still the dispute ongoing whether small hydro should be developed or should be all rivers and rapids environmentally preserved and brought back into natural condition. The development of Finland’s Small Hydro goes back several hundred years to the time of Mills and many of the oldest water licenses originate to the Governors under Swedish or Russian reign. The right to use hydropower was all times highly valued and practically all sites have a license.

Licenses are in Finland site dependent and eternal. The owner of the license has to take care of the regulation of the watercourse his plant is located in; even his hydropower plant is kept out of production! Taking-up production might need an updating of the license and unfortunately this procedure is not well defined in the legislation and practical applications scatter widely! However any ZERO-Small Hydro approach would need political acceptance, significant redemption fees and environmental “naturalization” work. Annual maintenance and operation costs would not have the hydropower production as a backbone, but would need budgetary funds until the end of time. Without economical comparisons the green ZERO-Small Hydro approach might look attractive to environmentalists, but when it comes to the question: “Who will pay for it?” the story looks different.

In the beginning of the year 2008 the Small Hydro Association in Finland was invited on the 20.03.2008 by the Ministry Employment and the Economy to give a statement on the draft of the later “Report in compliance with the RES-E-Directive on the national objectives concerning electricity produced from renewable energy sources and the implemented as well as the planned measures in Finland which will achieve these objectives.” Then there was still hope that the power and energy potential of the whole Small Hydro Sector would be chosen for the RES development of Finland’s resources. Unfortunately since then it has become obvious that the Finnish approach has not been planned to utilize the low end of the small hydro potential.

Status on small hydro – February 2011

The following major decisions made investment climate and profitability of the smaller SHP sectors energy production even worse than they were two years ago:

1. Small Hydro was not approved at the RES feed-in tariff system.

2. Small Hydro will receive a governmental energy investment grant, which will possibly apply to a maximum percentage (40%) approved by the European Union. The finally site dependent grant percentage will be given priority at scaled high technology applications as well as economic considerations might be applied. It will be difficult for small projects at the low end of the sector to receive maximum grants.

3. The applicability for provision of the grant has been raised from 1 MW to 10 MW and a boosting of bigger sites investments can already been noticed.

4. Up to the end of last year 2010 all producers on small scale (<1MW) RES-energy received a production grant which was for Small Hydro 4.2€/MWh per annum. The administration of this grant was based on energy sales information provided by the energy-receiving grid. Starting with the ongoing year 2011 all production grants including Feed-in tariffs for different RES-energy productions as well as fixed production grants, which are optional for wind energy and bio energy and an only option for small hydro are administrated by the Energy Market Authority. Anew and very bureaucratic system to control the grant shall be applied as follows:

• The grant shall not be approved if the annual production is less than 200 MW, which means that in a dry year power plants smaller than 100 kW (30-100 kW) will not receive any grant. On the other side small plants are suggested to connect to the grid and by law they cannot rejected by grid companies, although the grid operator can set technical demands for provision on high quality energy and metering which can become very expensive for the small plant. At the same time when grid connection is advertised the production grant is withdrawn.

• The production will have to be certified by accredited consultants as any commercial statement on the bought energy by the buying company or the Energy transferring local grid company is not good enough. Those commercial statements would be free of charge and the quality of energy measurement has a legal base issued by the ministry of employment and the economy under which the Energy Market Authority is acting!

• The third production grant limiting issue is that each of the RES-sectors has a production ceiling. That means if near the year 2020 the upper limit or production target of 0.5 TWh per normalized year and RES-hydro-power there is a threat that no new projects would be accepted for the production grant.

It is obvious that the whole small scale RES-sector faces problems stated here as well.

Some years ago the distribution in energy production was an important point of the energy concept. Now the idea of having production near the user as well as energy security aspects doesn’t seem to be important anymore.

Finland will soon get a new water legislation – can bring new environmental barriers to Small Hydro sector.  

France

The implementation of the Water Framework Directive creates the key barriers for small hydro development in France: Balance between the implementation of the WFD and RES directives is urgently needed.

a. The sole focus of the administration in order to reach good status of water is the restoration of ecological continuity.

b. The River Basin Management Plans focus essentially on the efforts needed to restore the quality of water and aquatic environments. Not much is said about the importance of renewable energy production.

c. Priority is given to the destruction of old abandoned sites (not yet existing SHP) identified as the main source of disturbances of the hydrology and morphology of the rivers.

d. Administrative and regulatory barriers: more and more studies are required; procedures are very complicated and time-consuming for obtaining authorizations.

e. Eel-plan measures: The administration is asking for specific equipment (e.g. iron bars) which are very expensive without any results in efficiency.  A Research and development program is actually running but action is required already before results have been received.

f. Inflation of administrative Regulations: the rules are too complicated and numerous and there is a lack of staff who would be knowledgeable with the regulations.

g. New river classification is currently being prepared: French administration moves fast: For example, good status of water in rivers has been identified before the publication of the criteria needed exists. There is no scientific justification for the identification. It is claimed that SHP is not compatible with good water status but without any scientific proof.

• Simplification of the regulations is needed

• Need to receive results from R&D and scientific results before decisions are made.

• Balanced view of producers and nature protection representatives should be taken into account.  

Germany

The German SHP faced regulatory demand to improve its load management capability.

Since January 1th 2011 any SHP with > 100 KW has to show that it can quickly respond on any demand of grid operators to reduce power if necessary for grid stabilization.

Hydro power will be able to show from now on, its favorable ability to play a major role in future load dependent grid operation.

Italy

The RES energy in Italy is growing also thanks to great performance of hydropower production that represents more than 70% of RES-E. The last three years (2008-2009-2010), thanks to the extraordinary hydrological conditions occurred, were very positive for hydropower production that reached record values, among the highest in the last 10 years.

There’s an ongoing a debate now in Italy on a new incentive scheme for all the RES-E which should revolutionize the current one, especially with regard to power plants with a capacity exceeding 5 MW. The government has proposed a new scheme based on tenders for installation bigger than 5 MW. APER, with support of other European Associations (ESHA and EWEA), pointed out some criticalities of the tendering system, also related to experiences of other EU countries.  Indeed countries which had adopted a price based tender mechanisms such as the UK, France, Portugal, Spain or Ireland, have subsequently abandoned this kind of support scheme in favor of other mechanisms.

A tender-based support mechanism has the following main weaknesses.

• An increased risk in the project development phase: since the outcome of the tender is unknown and unpredictable, for those who have not been selected in the process, development and authorisation expenses become "sunk costs".
• An increased rate of mortality of selected initiatives: in the case of an underestimation of clearing prices and as a result of dumping behaviour, the outcome of the tender may lead to prices which are too low, meaning that many projects may be abandoned.
• A high level of uncertainty - both in terms of obtaining the incentive (thereby affecting access to credit and the development phase of a project) - due to the low predictability of the level of support.

 Experience shows, however, that successful support mechanisms:

• Are well-designed and managed;

• Are simple and transparent with low administrative costs;

• Ensure high investor confidence;

• Reach high effectiveness in deployment; o Have high conformity with power market and other policy instruments. 

Spain and Portugal

From Iberia important concerns are arising:

The Spanish retroactive cuts on total production hours receiving the feed in tariff is a hot topic of the moment. This also affects the SHP sector, although at a lower scale than for other technologies.

In Portugal tenders for granting new power capacity were launched in the end of 2010. In these tenders the feed in tariff was increased, so that the candidates could increase the mandatory upfront payment to the Government, which was the only award criteria considered. This structure has completely distorted the advantages of the SHP projects. New tenders will be launched in 2011, and industry hopes that rules change, introducing criteria of quality and experience, of both promoters and their projects.

Sweden and Norway

Sweden and Norway are anticipated to establish a common market for electricity certificates by January 1, 2012. If this is implemented it will lead to a higher and awaited liquidity of the electricity certificate market but at the same time there is uncertainty in which direction the prices will go for the Swedish producers who are already in the system now.

• Administration of data: The Swedish Energy Agency has started a long-term effort to take over the administration of data from the Statistics Sweden. Simultaneously with this work a quality control is performed.

• Residual flow: According to law 5-20 % of total flow can and are being claimed as residual flow for new SHP and when re-licensing.

• Licensing procedures: Many SHP actors report complicated procedures for obtaining a license, uncertainty as to whether an application will result in a license, high costs, an abnormally long waiting period and involvement of many different authorities. The expensive, complicated and time consuming process reduces the number of applications as well as the number of applications approved.

• Refurbishment: When applying for legal permission for increased capacity (Refurbishment) practice so far has required only taking into account the increased production. But in 2010 Kammarkollegiet have in some cases asked for a complete re-licensing of the plant, which may lead to demands on residual flow and fish paths and a reduced interest for improvements. It remains unclear what will happen in the future.

• Water Framework Directive has recently been transposed into Swedish law but there is still no precedential verdict giving guidance on how it will be implemented in practice.

• SHP has both local and global benefits, but it also faces criticism from some organizations, mainly fishery associations, for the negative impact on the local environment. It is often difficult to evaluate the different arguments, thus the debate is made more emotional than factual.