Hydropower on verge of investment boom

European hydropower projects are on the brink of a flood of investment from institutional investors, according to new research from asset manager Aquila Capital.

Hydropower accounts for more than two thirds of the capacity produced by renewable energy, but currently just 7% of European institutional investors have any exposure to it.

By contrast, 37% have investments in solar PV and 29% have money in wind power.

However, this could be about to change according to Aquila Capital’s new study: Real Assets – Hydropower Investments.

While hydro plants are mostly owned by large and medium-sized energy suppliers, several of these firms are selling their hydro assets in order to offset losses incurred by their exposure to the gas sector, caused by falling electricity prices.

Some firms are also selling regional hydro plants as they consolidate their businesses to improve efficiency and focus on their core operations.

The report argues that institutional appetite for hydropower will grow as investors increasingly recognise the benefits of building a diversified portfolio of renewable energy assets. Typical correlation coefficients to other renewable energy investments such as wind solar are low, while the technology also produces long-term, stable cash flows.

Damned if you don’t

The global hydroelectric power market, could double to 2,000GW by 2050, according to a recent report by the World Energy Council (WEC).

The WEC claimed hydropower has seen a resurgence since 2005 due to a ‘better understanding of what the technology can provide’, including energy storage and flood or drought mitigation.

That report also identified a change in attitude from private investors and NGOs such as the World Wildlife Fund and the National Trust, who are now supporting hydropower schemes.

A University of Copenhagen study at the end of 2014 claimed we are seeing an‘unprecedented boom in hydropower dam construction’ with 3,700 major dams expected to be built in the next twenty years. 

Brad Allen

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