International Energy Outlook 1999 - Hydroelectricity and Other Renewable Sources

Renewable energy use is projected to increase by 62 percent between 1996 and 2020. Almost half the increase is expected in the developing world, where large-scale hydroelectric projects still are being undertaken.

Low prices for oil and natural gas in world energy markets continued to diminish the potential for rapid development of renewable energy sources worldwide. Oil prices hit 20-year lows in 1998, in part because the Asian economic crisis resulted in lower worldwide demand. Even production cut agreements by some major oil producers, such as Saudi Arabia, Mexico, and Venezuela, failed to provide measurable price recovery during 1998.

On the positive side, the Kyoto Climate Change Protocol proposals to cut greenhouse gas emissions levels may provide an opportunity for growth in demand for renewable energy. Several European Union member countries have pledged to increase the use of renewables, and the European Union itself has pledged to increase installed wind capacity on the continent to 10 gigawatts by 2010 [1]. Overall, however, the International Energy Agency projects that some 853 gigawatts of total installed electricity generating capacity will be required by European members of the Organization of Economic Cooperation and Development by 2010 [2]. Denmark’s Energy 2000 program set a goal of 1.5 gigawatts of installed wind capacity by 2005, and 1.1 gigawatts had been brought on line by the end of 1997 [3, p. 23]. Germany’s Enquete Commission on “Preventative Measures to Protect the Earth’s Atmosphere” identified 29 measures to help the country reduce carbon emissions by 25 to 30 percent below their 1987 level, including the promotion of wind energy and photovoltaics [4].

Further, there are signs that some large energy companies, such as Enron Corporation, Royal Dutch/Shell, and British Petroleum (BP), are expanding their interest in renewables. In 1997 Enron Corporation acquired the American wind power developer, Zond Corporation, and German wind turbine manufacturer, Tacke Windtechnik GmbH. BP announced plans to increase its solar technology sales to $1 billion within 10 years, including plans to invest $6.5 million (U.S.) in its solar photovoltaic cell production plant in Madrid, Spain, in an effort to double production of solar photovoltaic cells [5]. BP also pledged to reduce the company’s greenhouse gas emissions by 10 percent relative to 1990 levels. Royal Dutch/Shell announced a similar objective to be achieved by 2002 [6].

In the International Energy Outlook 1999 (IEO99), the outlook for hydroelectricity and other renewable resources remains similar to that published in IEO98. Worldwide, hydroelectric and other renewable energy use is projected to increase by 62 percent over the forecast period, growing from 31 quadrillion Btu in 1996 to nearly 50 quadrillion Btu in 2020. Almost half the total growth is projected for the developing world, where large-scale hydroelectric projects boost the level of renewable energy consumption (Figure 57).

Figure 57. World Consumption of Hydroelectricity and Other Renewables by Region, 1970-2020

Sources: History: Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/ EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1999).

In the IEO99 reference case, projections of hydroelectricity and other renewables include only on-grid renewables. While noncommercial fuels from plant and animal sources remain an important source of energy, especially in the developing world, comprehensive data on the use of noncommercial fuels are not available and, as a result, are not included in the projections. Similarly, dispersed renewables (renewable energy consumed on the site of its production, such as solar panels used for water heating) are not included in the projections, because there are few extensive sources of international data on their use.

In North America, renewable energy use is projected to expand by 34 percent between 1996 and 2020, reaching a combined total of 15 quadrillion Btu for the United States, Canada, and Mexico (Figure 58). Over the forecast horizon, the renewables share of energy used for electricity generation holds steady for the region at 26 percent.

In the United States, much of the growth in renewable energy use for electricity generation is expected to be in the form of municipal solid waste (MSW), wind, and biomass [8]. The increased use of MSW is attributed mostly to the recovery and use of landfill gas (methane). The projected increase in biomass should be divided between industrial cogeneration and gasification combined-cycle units owned by electricity generators.

Figure 58. Consumption of Hydroelectricity and Other Renewable Energy in North America, 1996-2020

Sources: 1996: Energy Information Administration (EIA), International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1999)

The U.S. Department of Interior (DOI) has been working to decommission many hydroelectric dams in the country and to restore rivers to pre-dam states. As part of this effort, the Federal Energy Regulatory Commission (FERC) in 1997 ordered the removal of the 160-year old Edwards Dam spanning the Kennebec River in Augusta, Maine [9]. Edwards Manufacturing Company—which receives 97 percent of the dam’s revenues—and the State of Maine submitted a plan for removing the dam [10]. This was the first time that FERC used its dam-removal authority [11, 12].

DOI also announced an agreement to remove the 12-megawatt Elwha dam near Port Angeles, Washington, but the removal was delayed indefinitely when the U.S. Congress withheld $22 million needed to finance the project [9]. Although some small dams have been removed successfully—such as the 8-foot Jackson Street Dam used to divert water for irrigation in Medford, Oregon, and Roy’s Dam on the San Geronimo Creek outside San Francisco, California—efforts to dismantle many of the larger dams slated for removal have been delayed by Congressional action, including four Lower Snake River dams and a partially built Elk Creek dam in Oregon [13].

The installation of wind capacity in the United States has slowed in recent years, but there are signs that wind power production may increase substantially over the next several years. In 1997, the United States added 11 megawatts of wind capacity, but because of the phaseout of older projects, total installed capacity fell to 1,743 megawatts by the end of the year [14, p. 158]. There are, however, plans to add some 800 megawatts of new projects by the end of 1999 throughout the country (Figure 59). There are commercial wind projects under construction or planned for completion in Minnesota, Iowa, California, Colorado, Kansas, Nebraska, New Mexico, New York, Oregon, Texas, Washington, Wisconsin, and Wyoming [15]. Further, a 112.5-megawatt project in Iowa—which will be the largest single wind farm in the world—is scheduled to begin operating by June 1999.

Figure 59. Grid-Connected Wind Power Plants in the United States as of December 31, 1997

Source: International Energy Agency and National Renewable Energy Laboratory, IEA Wind Energy Annual Report 1997 (Golden, CO, September 1998), p. 159.

According to Assembly Bill 1890, the California Energy Commission (CEC) established a program to be funded by a small tax on every kilowatthour of electricity sold to ratepayers of Pacific Gas & Electric, Southern California Edison, and San Diego Gas & Electric from 1998 to 2002. The program will support the renewable energy industry as the State makes the transition to a fully restructured electricity market in which customers can choose among power suppliers [16]. The tax will raise an estimated $540 million for renewables, of which $162 million will be allocated to funding incentives for new wind, geothermal, landfill gas, biomass, digester gas, and small hydroelectric projects. The remaining funds will be used to support existing and emerging renewable electricity generating technologies.

On July 9, 1998, the CEC announced that some 56 proposed projects (representing 600 megawatts of new renewable energy projects) would have the opportunity to receive financial incentives funds of up to 1.5 cents per kilowatthour of electricity generated in the first 5 years of a project’s operation [17]. The projects represent 300 megawatts of wind energy, 157 megawatts of geothermal energy, 70 megawatts of landfill gas, 12 megawatts of biomass, and 1 megawatt each of digester gas and small hydropower.

Although there are still plans to add some large-scale hydroelectric power in Canada, the country has begun to focus on developing its wind resources and some small-scale hydroelectric projects. These alternatives to large-scale hydroelectric facilities are gaining favor because they are considered more environmentally friendly and less controversial.

A small-scale hydroelectric initiative that began in Newfoundland in 1992 has had mixed success. Two of the four projects proposed under the initiative—the 15- megawatt Star Lake project and the Rattle Brook project—were commissioned at the end of 1998. In September 1998, however, the province suspended development of the other two projects (the 12-megawatt Northwest River project and the 7-megawatt Southwest River project) pending a comprehensive review of the Canadian province’s energy policy [18].

Small hydro development is being reassessed in light of environmental concerns. Another consideration is that Newfoundland plans to develop more than 3.2 gigawatts of large hydro capacity on the Churchill River. Newfoundland & Labrador Hydro plans to construct a new dam and 2.2-gigawatt power project at Gull Island on the Churchill River [19], at an expected cost of about $2.1 billion (U.S.). Several additional hydroelectric projects have been proposed, including the $1.4 billion, 800-megawatt Muskrat Falls development and a 1-gigawatt expansion of the 5,428-megawatt Churchill Falls project.

Several wind energy projects currently are being developed in Canada. The first phase of Hydro Québec’s largest wind farm—the 100-megawatt Le Nordais project on Québec Province’s Gaspé Peninsula—began operating in September 1998 [20]. Seventy-six turbines are now operating, and the remaining 57 are expected to be on line by the end of 1999. When completed, the $103 million (U.S.) project—which is running about 3 years behind schedule—will provide enough power to serve 16,000 homes. In southwest Alberta, the Peigan Nation completed the installation of four 1-megawatt turbines in October 1998 in the first phase of a planned $129 million (U.S.), 101-megawatt grid-connected wind farm [21]. Initially, the project will be used to supply the Peigan Reservation’s 3,000 residents. Excess supply will be sold to the provincial Alberta Power Pool.

Another Alberta wind power project was completed by Calgary’s Vision Quest Windelectric in November 1997 [22]. The company is marketing its “Greenmax” program to sell emissions-free electricity to residential and commercial customers. Vision Quest installed two 600-kilowatt turbines in southern Alberta—one near Pincher Creek and one near Hill Spring [23]. The company expects to triple its output with additional wind facilities scheduled for completion by mid-1999 [24].

In October 1996, Hydro-Québec announced that it would purchase 10 megawatts of wind power per year over 10 years. In 1997, as part of its 5-year strategic plan, the provincial utility set a target to purchase 20 megawatts of renewable power per year for a 10-year period [25]. In March 1998, a parliamentary commission raised that to 30 megawatts per year. Hydro-Québec is reluctant to commit beyond this level because of concerns about the costs of using wind. The utility estimates that it presently produces power for an average 3 cents per kilowatthour, but the cost of producing wind-generated power has been estimated at twice that amount.

Renewable energy use in Western Europe is projected to grow by almost 70 percent over the 1996 to 2020 forecast period in the IEO99 reference case. By 2020, 7.6 quadrillion Btu of renewable energy is expected to be consumed for the generation of electricity, representing almost one-fourth of all energy consumed for electricity generation. In 1996, the renewable share of electricity generation in Western Europe was 19 percent. Many countries in the region—including the United Kingdom and Denmark—have set goals for increasing the penetration of renewables in the electric power sector.

Much of the focus on renewables in Western Europe is from individual countries interested in reducing greenhouse gas emissions to levels pledged under the Kyoto Protocol. Although most of the region’s hydroelectric resources have already been developed, there is substantial activity in developing alternative renewable energy sources, especially wind power. The European Union announced its intention to invest $11 billion to install 10,000 megawatts of new wind capacity by 2010 [1]. In 1997, Germany’s installed wind capacity reached 2,082 megawatts, surpassing that of the United States for the first time; Spain doubled its installed capacity reaching 421 megawatts in a one year period; and Denmark’s installed capacity reached 1,146 megawatts, doubling over the past 2.5 years and within 400 megawatts of the country’s target of 1,500 megawatts of wind capacity to be installed by 2005 [3, p. 16; 14, pp. 57, 134]. In fact, Western Europe accounted for 75 percent of the world increment of total installed wind capacity in 1997.

The success of Germany’s wind program can be attributed largely to government programs. In January 1991, the country’s Electricity Feed Law (EFL) became effective [14, p. 60]. The EFL requires that electric utilities purchase renewable generated electricity from independent power producers at a minimum price of 90 percent of their average electricity rate. In 1999, this will amount to about 10 cents per kilowatthour for wind and solar power, 8.9 cents for small hydroelectric power plants and biomass, and 7.2 cents for large-scale hydroelectric plants [26].

While Germany has not as a nation set wind installation targets, the country has pledged to reduce carbon dioxide emissions by 25 percent in 2005 relative to 1987 levels. Various government actions, such as the EFL and the “250 MW Wind Program,” have provided financial incentives to encourage the development of wind generation in Germany. The 250 MW Wind Program provides operators with a subsidy of 3.3 cents or 4.5 cents per kilowatthour, depending on whether the energy is fed into the grid or used by the owner of the wind turbine. Moreover, the states of Lower Saxony and Schleswig- Holstein have published specific wind energy targets. Lower Saxony expects to install 1,000 megawatts of wind energy by 2000 and Schleswig-Holstein 1,200 megawatts by 2010 [14, p. 56]

Germany’s largest wind power plant began operating in Denkendorf, Bavaria in September 1998 [27]. The $2.2 million project is constructed with rotors with 1.5 megawatts of installed capacity. The wind farm is expected to generate enough energy to supply the needs of 1,000 households.

The United Kingdom is another European country in which renewable energy sources may enjoy fast-paced growth over the next several years (Figure 60). The government has established a target of generating 10 percent of the country’s electricity with renewable energy by 2010 [28]. The development of renewables is supported through Renewables Obligations programs, in which the government pays a premium price for electricity generated from approved renewable energy projects for the duration of each project’s contract [29].

Figure 60. Consumption of Hydroelectricity and Other Renewable Energy in Selected Countries of Western Europe, 1970-2020

The United Kingdom’s Non-Fossil Fuel Obligation (NFFO) was created by the Electricity Act of 1989, the legislation behind the privatization of the country’s electricity industry. NFFO is a premium price market enablement mechanism intended to encourage the development of electricity generated from renewable resources. Similar schemes have been set up for Scotland (the Scottish Renewables Obligation—SRO) and Northern Ireland (the Northern Ireland NFFO—NI-NFFO).

The difference between the premium price paid for renewable electricity generation and the market price of electricity is financed by the Fossil Fuel Levy, paid by licensed electricity suppliers and passed on to consumers. It is anticipated that prices paid under the Renewables Obligations will converge with market prices under successive Orders, until renewables are able to compete with conventional generation without financial assistance. Beginning in 1990, the United Kingdom issued four NFFOs, two SROs, and two NI-NFFOs. A fifth NFFO and a third SRO were issued in 1998, and in November 1998 the Energy and Industry Ministry announced that 261 projects had been awarded, totaling 1,177 megawatts of installed capacity. Most of the projects are for landfill gas, but municipal and industrial waste, wind, and small-scale hydroelectric projects were also approved [30].

Because hydroelectric and other renewable resources in Italy are well established relative to those in other Western European countries, the IEO99 reference case projects growth of only about 1.0 percent per year between 1996 and 2020. Italy ranks fourth in terms of renewables consumption in Europe; only Norway, Sweden, and France consume more renewable energy [31, pp. 190 and 194]. The bulk of Italy’s renewable energy use is in the form of hydroelectricity and, to a much smaller extent, geothermal power [14, p. 79]. Over the past several decades, it has become increasingly difficult to find new sources for hydroelectric power plants and new geothermal resources. The Italian government has begun to look at ways to develop its wind energy resources, but commitments so far have been modest. In Italy’s 1998 National Energy Plan, the government set a target to install 300 megawatts of wind energy by 2000—only a fraction of the country’s present 66,000 megawatts of total installed generating capacity [14, p. 82].

Spain has experienced fast-paced growth in wind energy installations in recent years. Almost 100 megawatts of wind capacity was installed in the country in 1996, doubling to 421 megawatts in 1997, with 477 wind turbines installed at 14 wind farms [13, p. 134]. Although the pace of installation slowed, nearly 150 megawatts were added in 1998 [32]. Spanish regional wind energy programs have established targets for wind power increments that may add as much as 8,000 megawatts of installed capacity by 2012 [13, p. 134].

Several additional wind projects were either planned or under construction in Western Europe in 1998. In Norway, energy producer Norsk Miljo Energi Sor (NMES) announced plans to construct the country’s largest wind project, a 300-megawatt wind plant in the northern part of the country [33]. NMES also has plans to construct a second 300-megawatt wind facility in Vest-Agder. In Sweden, the 220-kilowatt Svante turbine located off the Coast of Nogersund began operating in 1998 [3, p. 135]. Work on the second generation of large wind turbines was begun in 1993 at the Naesudden site, where a 3-megawatt plant is being constructed. Sydkraft announced plans to build a 7.2-megawatt wind project on the island of Gipsön, outside Landskrona, for an estimated $7.7 million.

The economic downturn in southeast Asia will no doubt have some negative impact on near-term development of renewable projects; however, long-term projects begun before the crisis, such as China’s Three Gorges Dam, have continued for the most part on schedule. Developing Asia remains one place where large-scale hydroelectric projects are still being pursued, despite the controversy that usually surrounds them. China has announced plans to construct more than 20 hydroelectric projects between 1998 and 2020, both to generate much-needed electricity and to control flooding. A substantial number of the projects will have installed capacities exceeding 3.3 gigawatts.

The flood damage that devastated China in 1998 is estimated to total over $36 billion (U.S.) with more than 3,000 deaths and 5 million homes destroyed [34]. The Yangtze River valley was hit with eight flood crests over a 2-month period, and the flooding has strengthened desires to protect the population with hydroelectric dams along the river. By 2010, China plans to have installed flood control dams with more than 100 gigawatts of hydroelectric power, providing an estimated 30 percent of the country’s electricity [35].

China currently has 19 operable hydroelectric projects with installed capacities greater than 1 gigawatt. Hydroelectric power projects now under construction will have an estimated total generating capacity of 32 gigawatts. Other proposals for large-scale hydroelectric projects in China include one 12-gigawatt project and one 5.2-gigawatt project on the Jinsha River (a tributary of the Yangtze River); one 3.3-gigawatt project on the Dadu River (also a tributary of the Yangtze); and more than 20 other power projects planned for the Yalong River, the largest of which—the Jinping Hydroelectric Power Station—has a proposed capacity of 3.6 gigawatts [36, 37].

The State Power Corporation of China (SPC) has announced that the country will focus on developing large-scale hydroelectric projects [35]. In September, the SPC announced plans to invest $7.23 billion to construct five hydroelectric projects by 2010 [38], including the 1.5-gigawatt Gongboxia project, the 3.72-gigawatt Laxiwa project, the 5.4-gigawatt Longtan project, the 4.2-gigawatt Xiaowan project, and the 1.5-gigawatt Sanbanxi project.

Construction on the world’s largest hydroelectric project, the 18.2-gigawatt Three Gorges Dam, entered Phase 2 of a three-phase process in 1998 [39]. Although construction on the dam was temporarily suspended in August because of the extensive flooding along the Yangtze, Phase 2 is still scheduled for completion in 2003, when the dam will start generating electricity. Phase 3 should end in 2009 with the beginning of full power generation. About $3.7 billion has already been spent on construction of Three Gorges Dam, including temporary diversion of the Yangtze and draining of the building site so that construction of the dam can continue. Upon completion, the project will extend 1.4 miles across the Yangtze and will be 607 feet tall, creating a 370-mile-long reservoir, which will allow shipping through the central Yangtze to increase from 10 million to 50 million tons annually. The official Chinese estimate for the cost of the entire project is $25 billion.

Three Gorges Dam has been the subject of much controversy. Critics say that water pollution along the Yangtze will double as the dam traps more than 50 kinds of pollutants from mining operations, factories, and human settlements that used to be washed out to sea by the strong currents of the river [39]. Some believe that the heavy silt in the river will deposit at the upstream end of the dam and clog the major river channels of Chongqing. An estimated 1.1 million to 1.9 million people will have to be resettled before the reservoir is created; around 1,300 archaeological sites will have to be moved or flooded; and the habitats of several endangered species and rare plants will be jeopardized. In 1996, the U.S. Export-Import Bank declined to grant guarantees for U.S. companies hoping to work on Three Gorges Dam, citing the potential environmental problems; however, Export-Import banks in Canada and Germany have supported financing efforts for companies based in those countries, such as General Electric-Canada and Siemens.

There are many additional large-scale hydroelectric projects underway or planned in China. In 1998, China began trial operations of its largest generating unit to date—the first of six generators at the $3.4 billion Ertan hydroelectric power plant [40]. Located at Panzhihua City on the Yalong River, a tributary of the Yangtze’s upper reaches, Ertan is Asia’s second tallest dam. The project is expected to help ease the electricity shortage in Sichuan province, as well as to stem flooding from the upper reaches of the Yangtze. The second generator at the Ertan dam in southwestern Sichuan province started operating in November 1998. Ertan’s six generating units, each with a capacity of 550 megawatts, should be completed by the end of 1999, making the 3,300 megawatt power plant China’s largest electricity supplier. Construction on the project began in 1991. The project, unlike Three Gorges, has benefitted from support from the World Bank. Since May 1, 1998, the dam has held back about 40 percent of the Yalong’s flood waters to ease the water flow on the middle and lower reaches of the Yangtze.

The Tianshengqiao power station in Guangxi Zhuang Autonomous Region in southern China was scheduled to begin generating power by the end of 1998 [35]. Construction is also underway on a pumped-storage station in Tibet at Yamzho Yumco Lake. The Tibetan station is being constructed at an elevation of 12,000 to 15,000 feet, the highest project in the world. In 1997, China announced plans to build a hydroelectric project along Tibet’s Brahmapoutre river, near the Yalutsan mountain, which could generate a proposed 40 gigawatthours per year, double the amount projected for the Three Gorges Dam [41].

Until recently, China had developed little of its renewable energy resources beyond its hydroelectric power. By 1995, China had installed only 14 wind power farms with a combined capacity of 50 megawatts. Further, installed photovoltaic, geothermal, and ocean tidal power stations provided only 6, 32, and 11 megawatts of capacity, respectively [42].

At the start of 1996, more than 72 million people in rural areas still were not connected to the national electricity grid. Electricity demand for this part of the population is expected to be satisfied by developing new energy technologies, because grid expansion is too slow and expensive. More than 140,000 mini wind turbine units (60 to 200 watts) operate in China, of which more than 110,000 are located in Inner Mongolia. The annual production of mini wind turbines exceeds 21,000 units in the region. Chinese government forecasters estimate that the total installed capacity of mini wind turbines will be 30 megawatts in 2000 and 140 megawatts in 2020, with total power generation of 90 and 450 gigawatthours, respectively. In appropriate areas, decentralized wind power stations over 10 megawatts will be built and hybrid wind/diesel or wind/solar systems will be developed.

By the end of 1998, 71 Chinese wind turbines with capacities of 500 to 600 kilowatts were expected to be installed [43]. China is building four wind farms with a combined 190 megawatts capacity, which should be completed by mid-1999 [44]. The largest of the plants is a 100- megawatt farm to be built in Huitengxile, in the northern province of Inner Mongolia. Other projects include a 50-megawatt facility at Zhangbein in northern China’s Hebei province; a 20-megawatt facility at Pingtan in southeast China’s Fujian province; and a 20-megawatt facility at Chonming Island in Shanghai, east China. The projects are being funded with loans of between $65 and $120 million from the World Bank and a $10 million grant from the Global Environmental Facility.

The 20-megawatt facility at Shanghai’s Chonming Island is being installed as part of the local government’s plans to develop wind power in the city to reduce reliance on coal-fired electricity [45]. The farm, being built at Dongwangsha, will consist of 34 wind turbines. Energy demand in Shanghai has grown rapidly, as the city’s economy has grown by 10 percent annually in recent years and authorities are running out of suitable sites for new thermal power stations. Shanghai is expected to have 12,000 megawatts of thermal generating capacity by 2000.

China also has plans to develop more of its geothermal heat resources to generate power [46]. The country plans to build medium-sized geothermal power stations in the southwestern part of China. The stations are to be developed in Tibet and western parts of Yunnan and Sichuan provinces by 2020. Priority is to be given to geothermal resources with reservoir temperatures above 200 degrees centigrade in Tibet’s Yangbajing.

Similarly to China, India has begun focusing on large- scale hydroelectric projects to ease electricity shortages in the country. So far, 12 large-scale projects have been approved, all to be completed by 2002 [7]. The projects are expected to add a combined 3.7 gigawatts of installed hydroelectric capacity. In addition, 5.81 gigawatts of capacity are to be added by new state-sector projects and 350 megawatts by the private sector.

National Hydroelectric Power Corporation will construct five projects in Himachal Pradesh State and one each in Manipur and Sikkim. The Central Electricity Authority has been asked to give technical and economic approval to two 800-megawatt projects in Himachal: Parbaht Stage 2 and Kol Dam. India’s Energy Development Company Ltd. expects to commission its 9-megawatt Harangi Dam in April 1999. This facility is expected to generate about 36 million kilowatthours of electricity per year. In the northern states of Jammu and Kasmir, construction began in October 1998 on a 450-megawatt hydroelectric project on the Chinab River [47]. When completed, the facility is expected to provide 2,600 megawatthours of power per year.

The Indian government has begun a policy to promote development of hydroelectric power. The government plans to introduce a tariff subsidy to support the development of hydroelectric power in an effort to improve the nation’s energy mix [47]. At present, 78 percent of India’s electricity is fueled by coal and 13 percent by hydroelectricity and other renewables, with natural gas, oil, and nuclear contributing the remainder. The tariff is expected to raise an estimated $714 million annually. Other policy decisions provide that hydroelectric facilities with installed capacity up to 250 megawatts will not require technical or economic approval from the Central Electricity Authority, which at present scrutinizes every proposed project that exceeds 100 megawatts.

In 1992, at the start of the eighth Five-Year Plan, India’s installed capacity of small-scale hydroelectric projects was 93 megawatts. By the beginning of 1997, there were 216 such projects installed, with a combined capacity of 155 megawatts. Work is in progress on 208 projects that will provide 230 megawatts of installed capacity. India’s federal Ministry of Non-conventional Energy Sources (MNES) is promoting small-scale hydroelectric projects of up to 3 megawatts to develop remote rural areas. MNES conducted a nationwide survey and identified the potential for development of a combined 2,040 megawatts in 25 states and outlying islands [48]. Sites with a potential of about 600 megawatts have been offered by states for commercial development.

To further accelerate the exploitation of the small hydropower potential and to promote their commercialization, MNES has charted out several measures. Some of the main objectives and activities being undertaken during the ninth Five-Year Plan are small hydro resource assessment; encouragement to commercial small hydro projects; renovation and modernization of old small hydro projects; special incentive packages for northeastern states to exploit small hydro potential; upgrading of water mills; and intensification of industry-based research and development.

Although the development of wind power in India was among the world’s largest in 1995 and 1996, the market stagnated in 1997, mostly because the Asian economic slowdown made it difficult to secure financing for new development [1]. Further, India’s wind project have performed badly for a number of reasons, including a vast overestimation of wind resources in certain areas, poor project design and operation, and problems with the utility grid. To improve the record of wind projects, the Indian government plans to offer tax credits for electricity generated from wind projects, rather than merely offering the incentives to companies investing in their construction. A number of wind projects currently are under construction in India. Lagerwey Windturbine of the Netherlands is supplying 80 wind turbines for a 20-megawatt wind project in Puthlur, approximately 190 miles south of Hyderabad [49]. In June 1998, Lagerwey commissioned a 20-megawatt Indian facility located in the state of Tamil Nadu.

Several hydroelectric power projects were introduced in countries of developing Asia other than India and China in 1998. In Myanmar (formerly Burma), the country’s second largest hydroelectric project will be built, the 280-megawatt Paung Laung plant [50]. Upon completion (scheduled for 2002), the facility will raise Myanmar’s generating capacity by 30 percent [51].

Indonesia completed its largest hydroelectric plant in April 1998, the 1,000-megawatt Cirata plant in West Java [52]. The plant was constructed with $852 million in funding from the World Bank and Australia. Unfortunately, the country’s economic problems mean that the new capacity is not needed. The connection of the Cirata plant to the Java-Bali grid will bring total excess capacity to 9,300 megawatts. Java-Bali’s generating capacity is estimated at 15,000 megawatts, but peak load demand is only about 9,500 megawatts.

Despite lingering economic and political problems in Indonesia, Solarex—the business unit of Amoco/Enron Solar—expects to complete its $25 million solar rural electrification project [53]. The project, initiated in June 1998 in Jakarta, involves installing 36,400 solar systems throughout Indonesia. By the end of September 1998, more than 21,000 units had been installed, with the remaining 15,400 units scheduled to become operational by the end of 1999. Currently only 31 percent of all households in Indonesia have access to the national power grid, and the aim of the Solarex project is to bring electricity to those people who live in areas where national grid expansions are not expected within the next 5 years.

Construction on the $220 million Houay Ho hydroelectric project in Laos is nearly complete; however, the continuing economic troubles in Thailand—the largest expected purchaser of Houay Ho’s output—make the facility’s future somewhat uncertain. In September 1998, Thailand’s state power company, the Electricity Generating Authority of Thailand (EGAT), agreed to a slight adjustment in the established tariff pricing structure for its power purchase from Houay Ho [54]. EGAT agreed to raise the ratio of U.S. dollars in the tariff payment from 50 percent at present to 55 percent. The Houay Ho consortium of owners wanted EGAT to pay for the electricity in U.S. dollars exclusively because of the weakened Thai currency, the baht. The 30-year power sales to EGAT are contracted to begin in September 1999.

The three countries that comprise industrial Asia—Australia, Japan, and New Zealand—have different levels of renewable energy penetration. In New Zealand, more than 80 percent of electricity generation is attributed to hydroelectricity and other renewables. Both Japan and Australia generate about 9 percent of their electricity with renewables. In Australia, virtually all renewable energy is in the form of hydroelectricity. Of the 14.8 billion kilowatthours of renewable energy consumed in Australia in 1996, only 0.03 billion kilowatthours was contributed by geothermal, wind, and solar. In contrast, Japan consumed 3.4 billion kilowatthours of electricity generated from geothermal, wind, and solar energy.

All three countries have begun construction on renewable projects other than hydroelectricity. In New Zealand, Tararua Wind Power finally began construction work on the country’s first large wind farm, a 31.7-megawatt project located near Palmerston North, North Island. The project has been in planning stages since the end of 1995. Initially, it will consist of 48 660-kilowatt turbines, although the company could expand the project to 67 megawatts in the future. So far, the only other wind farm operating in New Zealand is a 3.5-megawatt facility that was completed in 1996 [55].

Growing interest in wind power in New Zealand has also resulted in a proposal by Shell International Renewables to develop offshore wind farms [56]. Shell believes that its expertise in offshore oil projects could be applied to the development of offshore wind. There are also hopes that offshore wind power would stop complaints about potential noise pollution, which have hindered wind power development in New Zealand. Opposition by residents of Makara, New Zealand, to a planned wind project because of noise concerns forced the Electricity Corporation of New Zealand to scale back the project.

There has also been some growth in Australia’s wind power installations. The country’s largest wind farm— the Crookwell plant in New South Wales—was commissioned at the end of August 1998 [57]. The 4.8-megawatt facility consists of eight 600-kilowatt turbines. Electricity generated from the plant will be sold to Great Southern Energy under a 20-year contract and marketed to customers who will pay a premium price for the “green” energy.

According to the International Energy Agency, at the end of 1996 Japan’s installed wind capacity totaled 14 megawatts—less than 2 percent of Asia’s 891 megawatts of total installed wind power capacity. Currently, the Japanese trading company, Tomen, is installing Japan’s largest wind farm in Tomamae, Hokkaido, in northern Japan. The 20-megawatt facility will more than double the installed wind capacity in Japan. It will consist of 20 wind power generators, each with a capacity of 1,000 kilowatts [58]. The $33 million project is expected to begin operating in October 1999. Electricity will be sold to Hokkaido Electric Power Company at an average cost of 8.5 cents per kilowatthour for a 17-year period, representing the first long-term commercial contract that a Japanese electric power company has signed for wind-generated electricity.

Many countries of Central and South America rely heavily on hydroelectricity for electricity generation. In Brazil—which accounts for about 40 percent of the region’s total installed capacity—86 percent of the 59 gigawatts of total installed capacity in 1996 consisted of hydropower. Hydroelectric dams also account for 50 percent or more of the total installed generating capacity in Chile, Colombia, Paraguay, Peru, and Venezuela.

Although many of the region’s hydroelectric resources have been developed, there are still plans to add substantial capacity over the forecast period, despite efforts in many Central and South American countries to diversify the fuel mix for electricity. Because dependence on hydropower can lead to brownouts and blackouts during times of drought, Brazil has been attempting to construct a natural gas infrastructure to bring gas from Bolivia and Argentina to fuel new gas-fired capacity. Standard & Poor’s DRI has estimated that the natural gas share of total generating capacity in Brazil will climb from 1 percent in 1995 to 21 percent by 2020, almost entirely at the expense of hydropower [59, pp. 62-63].

Brazil still has more hydroelectric projects under construction or planned for future installation than any other country in the Central and South America region. In September 1997, the final turbine was installed in the 3.0-gigawatt Xingó hydroelectric power facility on the São Francisco River at Piranhas [60]. The $3.1 billion project accounts for 25 percent of the installed capacity in northeast Brazil. Other large hydroelectric facilities currently under construction in Brazil include the 1.45-gigawatt Itá hydroelectric plant, which is scheduled for completion in mid-2000, and the 1.14-gigawatt Machadinho hydroelectric plant, which is scheduled for completion in 2003; both facilities are located on the Uruguay River. Construction on the $1 billion, 950- megawatt Lajeado dam near Palmas, Brazil, began in May 1998, and it should become operational by the end of 2003. Finally, there are also plans to expand the 12.6-gigawatt Itaipu project held jointly between Brazil and Paraguay [61]. The facility is to be expanded by 1,400 megawatts at a cost of about $200 million.

In Argentina, plans to add three 155-megawatt turbines, in addition to the expansion completed in 1998, will bring the Yacyreta hydroelectric plant to 3.1 gigawatts capacity [59, pp. 32-34]. The additional capacity is to be used to generate exports for Brazil and an agreement to construct a 291-mile transmission line for this purpose was finalized in 1998.

In Chile, construction began on the $500 million Ralco hydroelectric project on the BioBio River in 1998 [62]. The Spanish electric company, Endesa, had planned to bring the 570-megawatt project into operation by 2002, but work was suspended in October 1998 when the company was unable to reach an agreement with the indigenous Pehuenche people who must be relocated if the project is to be completed. Ralco has also been the subject of protest from environmental groups because of its potential environmental damage, as well as the issue of displacing the Pehuenche [63].

Peru has recently had a surge in hydroelectric projects [64]. Two plants were completed in the northwestern part of the country in 1997—the 12-megawatt Curumuy and the 34-megawatt Gallito Ciego. Six other projects are currently under construction (Figure 61). All the projects are relatively small, with installed capacities ranging between 16 and 142 megawatts.

In 1998, a number of renewable energy projects beyond hydroelectricity were begun. In Argentina, the World Bank issued a solicitation for a rural renewable energy program as part of its “Renewable Energy in Rural Market Project” [65]. The project, which is attempting to provide solar electricity to more than 100,000 households, also has several initiatives that include other renewable energy sources. One initiative envisions the installation of renewable energy power systems (solar, wind, or hydro) with capacities ranging from 3 kilowatts to 10 kilowatts, along with diesel generators to provide electricity to some 5,900 households that are less decentralized than those slated for solar systems. A second element will cover the installation of 2,900 small renewable systems to generate power for public facilities, such as schools and police stations. And in a third element, two pilot community wind systems will be installed. The program is expected to cost $187 million. Of that amount, $46 million will be provided by a World Bank loan, $14 million will come from a grant from the Bank’s Global Environmental Facility, and the remainder will come from provincial governments and other sources.

In a disappointment to environmentalists, Argentine President Carlos Menem signed a decree in 1998 annulling key parts of a bill that would have provided a tax incentive to wind and solar power developers [66]. The proposed legislation would have given wind and solar energy generators 1 cent for each kilowatthour of electric power generated from their projects [67].

There are several alternative renewable energy projects under way in Costa Rica. The country recently built a 20-megawatt wind farm at Guanacasta and is studying the effects of the wind farm on the national grid [67]. In addition, the Inter-American Development Bank successfully completed financing for a 27.5-megawatt geothermal plant, the first private-sector energy project in Costa Rica to be built on the basis of a build-own- transfer contract resulting from a private bid [68].

Development of renewable resources in Eastern Europe and the former Soviet Union (EE/FSU) remains limited primarily to expansion or refurbishment of existing hydroelectric units, especially in the FSU, where economic troubles have persisted since the Soviet collapse of the early 1990s, worsening even more with the devaluation of the ruble in the summer of 1998. In the IEO99 reference case, energy generated from hydroelectricity and other renewable resources grows by only 1.1 percent per year between 1996 and 2020, rising modestly from 2.2 to 2.9 quadrillion Btu (Figure 62).

Figure 62. Consumption of Hydroelectricity and Other Renewable Energy in Eastern Europe and the Former Soviet Union, 1996-2020

The economies of the countries of Eastern Europe have fared much better than those of the FSU. As a result, the prospects for renewables are somewhat better. Regional gross domestic product returned to positive growth in 1994, averaging 4.8 percent annually until 1997, when growth fell to 3.3 percent [69, p. 37]. Much of the increased energy use in Eastern Europe is expected to be in the form of natural gas use to displace coal and nuclear generation, but systematic growth of hydroelectricity is also expected in countries such as Slovenia and the former Yugoslavian Republics of Croatia, Serbia-Montenegro, and Macedonia, where undeveloped hydropower potential still exists [69, pp. 41, 47, 49]. Renewable energy use in Eastern Europe grows by 4.9 percent per year over the projection period, tripling to 2.0 quadrillion Btu in 2020 (Figure 62).

Several hydroelectric projects are being started in Macedonia. In May 1998, the World Bank approved a $35 million loan for the country’s power company, Elektrostopanstvo Na Makedonija (ESM), which will be used for three electric power sector projects [70]. The most important is a $26 million upgrade of six hydroelectric facilities: Vrutok, Raven, Vrben, Tikves, Spilje, and Globocica. The others involve upgrades to the dispatch center of the national power system ($5.5 million) and repair of ESM’s electricity distribution system ($3.5 million). Macedonia has also secured an $80 million loan from China for the new Kozjak hydroelectric plant, which was scheduled for completion in December 1998 [71]. This is the largest single investment in southeastern Europe to be supported by Chinese financial institutions.

The Yugoslav Republic of Montenegro also has plans to begin a number of hydroelectric projects. The country has plans to restart construction on the 450-megawatt Buk Bijela hydroelectric facility, which was begun in the early 1970s but suspended in 1974 [72]. The project would be a joint venture between Montenegro’s Elektroprivreda Crne Gore/Montenegro and the Bosnian Srpska Republic’s Elektroprivreda Rebublike Srpske. The plant, when completed, could supply 1,100 gigawatthours of electricity per year, with 400 gigawatthours going to Montenegro and the rest to Srpska. Montenegro also has plans to construct four or five hydroelectric plants on the Moraca River [73]. Final tenders for work on the 195-megawatt Andrijevo, 55.5-megawatt Raslovici, 55.5-megawatt Milunovici, and 55.5-megawatt Zlatica hydroelectric projects were to be issued by the end of 1998, with construction scheduled to begin in mid-1999.

In Slovenia, a number of projects are underway to modernize existing hydroelectric facilities. For the Drava hydroelectric power project, $35 million is being spent to refurbish and expand the facility [74]. Similarly, $21 million is being spent to rehabilitate the Soca hydroelectric power plant. There are also plans to construct two additional hydroelectric plants on the Soca River [75]. The 41-megawatt Doblar 2 and 20-megawatt Plave 2 should be completed by 2001, at an expected cost of $111 million. They are being designed as peak-demand plants to support the two existing stations on the Soca.

Mini-hydroelectric power stations are being developed in Bosnia and Herzegovina to replace infrastructure damaged during the Bosnian War. A 2-megawatt hydroelectric plant in Modrac that began operating in September 1998 [76] was the third mini-hydro plant completed since the Dayton Peace Accord came into effect. The $1.9 million project was financed by Elektroprivreda Bosne I Hercegovine and Sarajevo’s Vodorivreda Bosne I Hercegovine.

Development of renewable energy resources beyond hydroelectricity remains small in Eastern Europe. A German registered company, Baltic Energy GmbH, has presented a planning application to Estonian authorities seeking to build 17 1.5-megawatt wind power stations on the island of Saaremaa, Estonia’s largest offshore island [77]. The project, which caries an estimated cost of $25 million, aims to supply 30 percent of the island’s total annual electricity requirement. Baltic Energy hopes to arrange financing for 75 percent of the costs. The company is interested in undertaking the investment in cooperation with local investors and has invited a number of Estonian banks and energy enterprises to take a 25-percent capital holding in the venture.

In Africa and the Middle East, only hydroelectric power has contributed to any significant development of grid-connected renewable energy sources. In many African countries, hydroelectricity’s share of total installed electric capacity is quite high. For instance, in the Congo (Kinshasa), Ethiopia, Ivory Cost, Mozambique, and Zambia virtually all on-grid electricity generation comes from hydropower. In 1996, 0.6 quadrillion Btu of hydroelectricity and other renewables were consumed in Africa, and by 2020 that amount is projected to grow to 1.2 quadrillion Btu (Figure 63).

Figure 63. Consumption of Hydroelectricity and Other Renewable Energy in Africa and the Middle East, 1996-2020

In the IEO99 reference case, renewable energy use in the Middle East is projected to grow from 0.6 quadrillion Btu to 1.5 quadrillion Btu over the projection period. In this region, only Turkey has a sizable amount of hydroelectric capacity, with about half the country’s electricity needs being met by hydropower. Although Turkey has been aggressively developing its natural-gas-fired generation, numerous hydroelectric projects are currently under development—including the $32 billion Greater Anatolia Dam Project (GAP), which is projected to increase electricity generation by one-third by 2010 [78]. When completed, the GAP project will consist of 21 dams, 19 hydroelectric plants, and a network of tunnels and irrigation canals [79]. An expected 27,000 gigawatthours should be generated once the project is completed.

The Turkish Ministry of Energy and Natural Resources has plans to install a total of 113 hydroelectric units to meet the country’s growing demand for electricity—along with 33 lignite-fired projects, 27 gas-fired, 12 coal-fired, and 2 nuclear. The total investment needed to finance these electricity projects has been estimated at between $35 and $50 billion over the next decade [79]. Further, according to Turkish Energy Minister Cumhur Ersumer, in June 1998 the country had reached agreement with companies in the United States, Canada, Russia, Austria, and France for the construction of 21 turnkey hydroelectric power dams. The Netherlands has also proposed developing 5 turnkey hydroelectric facilities on the Firat, Isparta, Antalya, Aras, and Dicle rivers.

Several announcements were made in 1998 regarding the development of Ethiopia’s hydroelectric resources. In 1996, the country had only 372 megawatts of hydropower capacity, despite substantial hydroelectric potential [31]. In March, the country announced that work on seven hydropower dams was expected to be completed over the next 5 years, bringing total hydroelectric capacity to 713 megawatts [80]. The 72-megawatt Tisabay hydropower dam—located at the source of the Blue Nile—has already been completed, and a second 73- megawatt unit (Tisabay II) is expected to be operational in 2000. The 73-megawatt Finchaa IV unit in the west is expected to be completed by 2001, as is the 103- megawatt Gilgel-Gibe unit, which was financed with a $300 million World Bank loan.

Studies of hydroelectric potential on Ethiopia’s Tekeze, Gojeb, and Tisabay rivers suggest that the rivers could supply 523 megawatts of generating capacity [80]. Tenders are expected for work on the 203-megawatt Tekeze dam project—which will be the biggest in Ethiopia—and a 154-megawatt hydropower plant at the Gojeb dam. Two Norwegian companies, Nor-Plan and NorConsult, are to draw up a hydropower generation study for the Ethiopian Electric Light & Power Corporation. The 6-month study will examine the hydroelectric potential of the Genalle, Baro, and Geba river basins.

Ethiopia also made some advances in geothermal installation in 1998. A 35-megawatt geothermal plant in the country’s Rift Valley became operational in September [81], more than doubling the installed geothermal and other renewable energy capacity in Ethiopia, from 30 megawatts in 1996.

Although the penetration of renewable sources to grid-connected systems in Africa remains small, there are a number of projects aimed at bringing dispersed renewables to rural parts of the country. For instance, in October 1998, Shell International Renewables Ltd. and South Africa’s state utility, Eskom, announced plans to invest $30 million in the development of solar power in rural South Africa over the next 3 years [82]. The 50-50 venture will provide standalone solar power units to as many as 50,000 homes currently without electricity, at a cost of about $8 per month—about the same amount consumers in South Africa currently spend on less effective, unsustainable fuels [83]. The power units are capable of fueling three low-voltage lamps and a small television or radio for 4 hours per day and will cost about $800 to manufacture and install. Shell has estimated that it might take as long as 9 years to recover the $30 million investment, but that the project could supply some 2.5 megawatts of power to regions that are currently not able to access the nation’s electric power grid.