Small Hydro Power (SHP) Overall Institutional Set-up - National Level

China - institutional set-up

India - institutional set-up

Uganda - institutional set-up

Brazil - institutional set-up

Peru - institutional set-up

China

China has 17% of the earth’s hydropower resource and has installed over half of the world’s SHP capacity (31,200MW). The economic SHP resource is estimated to exceed 70,000MW. 90% of the number of stations and 30% of this total capacity is in the mini-hydro and micro-hydro range. The use of small-scale hydropower to achieve rural electrification is a major characteristic of renewable energy development in China, started in the 1950s with strong central government lead. At present, there are over 600 counties (accounting for 30% of all of China’s counties) that rely mainly on small-scale hydropower for electricity (serving over 300 million people) and there is a programme for rolling this out to 400 more counties.
Since 2000, the rate of commissioning of new small hydro capacity has been increasing to an average of 2,000 MW per year and posting healthy annual average growth of over 7%. The country has built up such an experience in SHP that it now has a strategy of ‘going-out’ to other developing countries to help develop projects (usually with Chinese technology).

Financing SHP in China

Each year, the Chinese Government invests EUR30 million in the development of small-scale hydropower, attracting additional substantial investments from local governments, enterprises, and individuals of a further EUR10 billion. However with declining government investment in the sector, other sources are often required to bring targeted projects to development, and the Clean Development Mechanism (CDM) is one avenue that Chinese developers are now considering.
The financing of hydropower in China is currently stable. The 4 major Chinese (state) banks lend to hydro projects as they are considered low risk and their loan terms are usually 3-5 years and financing negotiations take only 3 months. Some companies already have credit ratings up to fixed amount of capital which enables them to borrow up to this ceiling in one month. Meanwhile small hydro power is attractive to commercial Chinese banks, who are very active in the sector. The Ministry for Water Resources also continues to provide low interest loans for SHP development, worth about RMB300 million per year.

SHP Policy in China

A new ‘Renewable Energy Promotion Law’ was approved by the National People’s Council in February 2005 which targets 10% of the country’s electricity generation being supplied by renewables by 2020. This is ambitious given that China’s GDP may quadruple in the next 15 years, (perhaps) requiring the total grid installed capacity to (perhaps) have reached 1,000GW. Nevertheless, experts have suggested that 60,000MW of SHP capacity be developed from the yet untapped small hydro resources and certainly, with the enactment of this law in 2006, faster SHP development can be expected.

SHP Industry in China

China has a wide range of domestic SHP turbine manufacturers (about 80 in total) as well as construction companies that specialize in SHP infrastructure and these have been supported since the early 1960s to deliver the technology to the sector and are therefore well-established. However there is scope for technology transfer to improve performance and quality to European standards, and introduce more advanced systems particularly, in the area of automated control.
In April 2003, the Ministry of Water Resources (MWR) released guidelines for the modernization of hydropower systems in rural China, which provide further direction and standards for small hydropower development. Its overall objective is to modernize 50% of rural hydropower plants by 2010, and modernize 100% of the rural hydro sector by 2015.

India

India has an estimated SHP potential of about 15,000 MW. From 495 SHP projects an aggregate installed capacity of 1,693 MW has been installed to date. Besides these, 170 SHP projects with an installed capacity of 479.26 MW are under implementation. The share of SHP in all renewables is 31%, only wind is larger at 55%. A database has been created for most potential sites by collecting information from various sources and the State Governments. The database for SHP projects created by the Ministry of Non-Conventional Energy Sources (MNES) now includes 4,233 potential sites with an aggregate capacity of 10,324 MW.
India has exploited 30% of its low-head SHP but there is still minimal development in remote and mountainous areas. Overall, the share of hydro in the Indian electricity grid mix has dropped from 50% to 25% in the last few decades. Yet hydropower is highlighted as playing a key role in expanding the current power capacity, which is 20-30% below demand.

SHP Policy in India

The overall policy of the government is to encourage private sector participation for the power generation field and the SHP sector is moving towards attaining commercial status in the country. SHP projects are increasingly becoming economically viable. It has been recognised that SHP can play a role in improving the energy position in some parts of the country and in particular in remote and inaccessible areas. SHP in remote areas can be focussed on contributing to a national clean energy strategy as well as electricity for processing, communications and health care needs.

Financing SHP in India

A special incentive package has been developed for the promotion of the SHP programme in the North-Eastern states (Sikkim, J&K, Himachal Pradesh and Uttaranchal), giving capital grants per MW. The capital support is to cover 90% of the project cost with support limits for various ranges of projects (below 100 kW, 100kW to 1MW and up to 25 MW).
The development of commercial projects has been the emphasis in 2003-04 covering projects up to 25 MW with subsidy from MNES. In total, 47 commercial projects with a total capacity of 164 MW have so far been supported and 35 of these (in Andhra Pradesh, Karnataka and Himachal Pradesh) have been commissioned by the private sector.
The Indian Renewable Energy Development Agency (IREDA) is the financial institution that provides the loans for setting up SHP projects. It has a strong track record with US$128 million disbursed for 118 SHP projects (180MW) so far and is currently handling a second World Bank financing package designed for SHP.

The MNES has been implementing a scheme of providing financial support for Renovation / Modernisation and capacity up-grading of old SHP Stations. The main aim of the scheme is to renovate the plants, to extend their life with improved performance and reliability. The MNES has so far supported 12 projects for their renovation and modernisation and the scheme has been rationalised and extended to cover projects up to 25 MW.

SHP Industry in India

In comparison to China, much of the demand for equipment cannot be met locally, so there are opportunities for export of systems, or joint venture manufacture under license. There is a lack of major SHP players in India and relatively inexperienced first generation entrepreneurs are coming forward for setting up the projects, therefore there is scope for selling SHP expertise and services.
Certain European manufacturers already have joint ventures in place. Norway has a bilateral agreement to supply turbines, and USA and China are both strongly promoting their technology.

Uganda

Hydro resources are abundant in Uganda, especially along the Nile and to date only 320MW capacity of hydro projects have been installed (and only 16.7MW of these are SHP). At the same time, the electrification level of the 25M population is very low with only 1% electrified in rural areas.
Uganda also has an enormous potential from its mini-hydro energy resources in non-Nile sites, which have not been fully exploited and can be developed for independent grids to supply power in isolated areas of the country. A recent report from the Ugandan Renewable Energy Association, summaries available information from reports on some of potential mini-hydro sites for development.

SHP Policy in Uganda

The power market in Uganda has opened up, making it easier for the private sector to participate. Power generation, transmission and distribution used to be the monopoly of Uganda Electricity Board (UEB). Under the Electricity Act, 1999, of the Power Sector Reform and Privatization Strategy, the Electricity Regularity Authority (ERA) was established to regulate generation, transmission, distribution, sale, export, import and supply of electric energy.
A key component in the Power Sector Reform has been a new regulatory system, undertaken by the ERA, which will promote competition for the generation and marketing of electricity by enabling third parties to connect to transmission systems and utilise these assets. A tariff structure has been formulated and the charge rate and terms and conditions of electricity services provided by transmission and distribution companies investigated.
The non-Nile mini-hydro sites are available on about 71 rivers, identified in a detailed inventory (supported by the Royal Netherlands Embassy and ADB) having good potential for power production. The total capacity of these sites is about 200MW. Only a few have been developed for small power supply schemes.

Financing SHP in Uganda

Although recent studies indicate that the market for SHP in Uganda is indeed strong, a key concern for Ugandan SHP projects will be on the financing aspect. Access to public sector funding for SHP is more important in Africa than in other regions, as there has been a marked decrease in international lending to African nations ($1B in the mid-1990s to $100M in 2002). Public-private co-operation with bilateral concessional funding is a model that has been suggested for Uganda and could also apply to many nations of the continent.
Uganda has also seen the benefit of the CDM in providing additional financing for SHP, with projects supported by the Prototype Carbon Fund (PCF), which will buy the carbon emission reductions. Two plants of 5.1 and 1.5 MW have recently been built and operation of the projects and management of the carbon abatement is being handled by a private company (Ilskog, 2004).
A German SHP turbine-manufacturing firm have recently proposed that mini-hydro power stations (between 1 - 1,000kW of power) that do not need dams to operate, have a strong potential to supply rural areas in Uganda to ease the high demand on the national electricity grid, which has generation capacity falling short of demand by 120MW in the evening peak and 25MW during the day (African Energy 2005).

Brazil

Hydropower is a major energy resource in Brazil and hydro generating capacity already provides 88% of Brazil’s electrici-ty. According to the World Energy Council, between 1980 and 1999 capacity more than doubled to 11GW yet only 35% of the huge potential has been harnessed so far, especially along the many rivers in the north.
Small-scale hydro in Brazil is defined as plants with a capacity of 1 to 30 MW and an area of reservoir limited to 3km. By 1999 there were 331 small hydro plants in operation, totaling 604.6 MW, most of them dating from the 1910s to the 1950s (Guilherme et al, 1999). Since then approximately 300MW of new SHP capacity has been built, bringing the total to about 900MW. Another 1,400MW capacity were proposed for development before 2008 and these are currently in various stages of permissions, approval and financing.

SHP Policy in Brazil

Within the 1998 Law for SHP which created incentives for the sector (Law 9658), owners of plants can sell power directly to large consumers (who demand over 500kW), they can use the grid system with at least a 50% discount on distribution charges and can avail of special funds to generate energy in remote areas (especially in the north).
SHP companies supplying hydroelectric technology that have already entered the Brazilian market are mainly from USA and Canada, Spain as well as the long-established local branches of large companies such as ABB and Siemens.

Financing SHP in Brazil

The emphasis for SHP development is currently in the north and northwest, which has a large concentration of rivers and remote villages along them. The aim is to replace diesel generators in these villages and every SHP project can qualify for carbon financing.
The Federal Government provides a number of financial incentives to owners/developers of small-scale hydro schemes and various international banks and agencies are also active in the sector in Brazil. The Program for Energy Development in States and Municipalities (PRODEEM) is a recent example of a pu-blic–private partnership initiative that has supported small-scale renewables for electrification of remote communities.
USAID is running an energy program between 2003 and 2008 in Brazil worth $1.2 million this year, the primary goal of which is to reduce greenhouse gases by developing and encoura-ging biomass fuels, solar and wind power, and small-scale hydropower plants. A secondary goal is to reduce poverty and improve the quality of life for communities that currently lack access to reliable energy.

Source: Small Hydropower for Developing Countries (ESHA)

Peru

Institutional and Financial Framework for Development of Small Hydropower (ESMAP, 2008)