Region, Increasing risk of hydropower investments

, SEE Energy News

According to a report published by CEE Bankwatch, EuroNatur, Riverwatch and WWF Adria in late July, large greenfield hydropower investments in southeastern Europe face major risks and low realization rates.

Although hundreds of small hydropower plants, which are highly damaging for biodiversity, have been built across the region in the last decade, attempts to build greenfield hydropower plants of larger than 10 MW have largely been unsuccessful, with only Albania and Slovenia managing to do so.

Vulnerability to drought, legal issues, increasing public resistance and lack of financing are among the factors which have stopped a slew of large hydropower projects in recent years, including two on the Vjosa river in Albania, two in North Macedonia’s Mavrovo National Park, and several on the rivers Moraca and Vrbas in Montenegro and Bosnia and Herzegovina.

Hydropower, together with coal, has traditionally played a major role in southeast Europe, but climate change is challenging this role. Albania has added around 600 MW in large plants and several more hundred megawatts of smaller plants since 2010, yet average hydropower generation barely increased between 2010 and 2020. In Bosnia and Herzegovina, Croatia and Montenegro, which added only small hydropower plants, average generation even decreased slightly.

Undeterred, the region’s governments and utilities are keen to build even more large hydropower. Bosnia and Herzegovina is particularly ambitious, planning at least 12 large dams despite its failure to complete a single large greenfield plant in the last decade.

Financing is becoming more scarce as the European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD) and Germany’s KfW have become more cautious of late, leaving Chinese and Turkish banks, as well as the US International Development Finance Corporation (DFC), among the few willing to bet on such a risky sector.

Yet despite Chinese companies being involved in several projects in Bosnia and Herzegovina, including the HPP Ulog on the upper Neretva, a series of three HPPs on the Bistrica, and potentially also another three plants on the upper Drina, the only confirmed Chinese financing is for the controversial 160 MW HPP Dabar, for which a 180 million euros Eximbank loan was signed in January this year.

Pippa Gallop from the CEE Bankwatch Network said that hydropower generation in the region is going up and down like a yo-yo due to climate change, making it futile to add more dams. This is most obvious in countries like Albania, Bosnia and Herzegovina, Croatia and Montenegro that are already quite hydropower dependent. It is utterly incomprehensible that as of the end of 2021, Montenegro only had 2.5 MW of solar capacity installed. Diversification of renewables and a serious ramping up of energy efficiency is urgently needed.