How system-scale planning and management of hydropower can yield economic, financial and environmental benefits

The Nature Conservancy is working with partners to test, refine, and implement science-based approaches to influence practices and support policy changes to help governments achieve energy needs while protecting rivers and the services they provide to people. To read more about how we’re working to influence hydropower and river development, download our latest report, The Power of Rivers: A Business Case.

Spanning nearly a quarter of Colombia’s land area and housing three-quarters of its population, the Magdalena River basin is in many ways the social, cultural and economic heart of the country. The basin is responsible for 75 percent of Colombia’s agricultural production and 86 percent of its GDP, and is home to thousands of animal species, including more than a hundred fish species that are endemic to the region.

The Magdalena basin also generates 70 percent of Colombia’s hydropower, with 35 dams currently operating and nearly 100 sites for potential new hydropower projects identified. To Colombia, these new projects represent an important source of low-carbon energy for its growing population, but decisions about where new dams are developed and how they are operated could have significant economic and environmental impacts for the river basin and the people and nature that depend on it.

Balancing Energy and Environment

This scenario is not unique to Colombia. To maintain the climate within safe boundaries, the entire world must rapidly decarbonize its energy systems, including a tripling of generation from low-carbon sources of electricity. Hydropower is projected to be an important contributor to this growth, representing nearly US$2 trillion of investment between now and 2040.

But this development will also affect sectors beyond power generation. In river basins across the world, hydropower development and management will have potential impacts—positive and negative—on other water resource services that provide an estimated value of up to US$770 billion per year. And by disrupting river connectivity and altering water flows, hydropower can have significant impacts on freshwater ecosystems. These disruptions can be especially detrimental for fisheries, which are a key source of food for hundreds of millions of people in some of the river basins with the most projected hydropower development.

With so much on the line, the expansion of hydropower must be done right. If planned in isolation—at the scale of individual projects, or without consideration for objectives beyond power generation—hydropower projects will generally fail to achieve their full economic potential and could have negative social and environmental consequences for more than 300,000 kilometers of rivers and the communities that depend on them.

Thinking at the System Scale

Planning and managing hydropower projects at the system scale—in the context of the entire river basin—can reduce these negative impacts and ensure that hydropower dams achieve their full potential contribution to a country’s strategic objectives for energy and water. Unfortunately, governments often believe that system-scale planning will result in implementation delays and projects that are less attractive financially.

This does not have to be the case, though. The Nature Conservancy has developed a system-scale planning method to identify options that provide similar levels of generation as business-as-usual approaches. The result of testing this approach in a variety of river basins around the world, showed potential improvement ranging from a modest 5 percent to more than 100 percent for various water-management services and environmental resources, such as irrigation and fisheries. We call this process Hydropower by Design.

By implementing a transparent, stakeholder driven, system-scale approach, Hydropower by Design can better inform decisions made about water and energy development and management. Rather than delaying decisions or investments, these system-level tools and approaches may actually reduce project-level uncertainty and delay, and thus reduce investment risk. This approach is described more fully in a new report, The Power of Rivers: A Business Case, developed by The Nature Conservancy in partnership with McGill University, The University of Manchester and PSR.

Lower Cost, Lower Impact

Hydropower by Design makes it possible to capture the values from optimizing the interaction of water services at the system scale, therefore maximizing benefits for people while minimizing impacts to nature. In effect, this reduces the likelihood of environmental and social impacts and subsequent delays, cost overruns or even cancellations. Hydropower by Design generates sets of development options, or portfolios of projects, that show superior internal rate of return values for projects, given their lower risk for delay. This increase in financial value in turn can “pay for” economic, social or environmental objectives, so countries can afford to be strategic in their planning.

Hydropower by Design does not represent an entirely new process—instead, governments and developers can integrate its principles and tools into existing planning and regulatory processes, ranging from generation options assessments to basin master plans or strategic environmental assessments. Colombian government agencies have already done this, aiming to minimize impacts from future hydropower development.

The Colombian government’s decision to prioritize a system-scale approach to hydropower planning and water services management means a more sustainable future for the Magdalena River basin and the millions of people who live there. And once again, fortunately, Colombia is not necessarily alone in this scenario. As The Power of Rivers: A Business Case demonstrates, it’s possible to achieve a sustainable future, one that encourages low-carbon energy and provides broader benefits to people and minimizes impacts to the environment. That’s a better deal for everyone.

Read the Nature Conservancy hydropower report here.

SEforALL Note: This story was originally published by Nature Conservancy and can be found here.