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Building effective regulatory frameworks for hydropower

On Thursday 4 September at World Water Week 2014 in Stockholm, we collaborated with the International Institute for Environment and Development (IIED) and the International Union for Conservation of Nature (IUCN) to convene a seminar on Building effective regulatory frameworks for hydropower: lessons from water governance.

Cameron IronsideThe interactive seminar brought together different perspectives on how regulation for hydropower investments can become more effective in safeguarding against environmental and social concerns, and thus deliver better projects for local communities and downstream ecosystems.

Speakers from the convening organisations were joined by a range of guests including representatives of the Asian Development Bank, the Nature Conservancy, Statkraft, Electricité de France (EDF), the Overseas Development Institute, and more.

Stephen Sparkes, vice president at Norwegian energy company Statkraft, gave a private sector perspective on how regulations can facilitate project development through promoting standards.

He said: “Regulatory frameworks produce risk for private investments, and the optimum situation is to have a national regulatory framework which mirrors international best practice, not only in theory but also in practice the world around.  

The expectations of the lenders, the understanding of the investor and the government are often not aligned and that means the outcomes are often inconsistent.” – Stephen Sparkes, Statkraft

Stephen discussed some of the challenges in working within regulatory frameworks on the ground. “Former ways of doing things often dominate,” he said. “So although the rules  and regulations are clearly defined and parliament is approved, people especially at lower levels of the government in remote areas where projects are usually located still continue to do it the old way.

“There is often a lack of capacity, funds and resources at the local level, and this brings serious challenges for the investor. The expectations of the lenders, the understanding of the investor and the government are often not aligned and that means the outcomes are often inconsistent.”

He presented cases from Laos, Albania and Turkey which highlighted practical examples of addressing a lack of local government capacity and performance on the ground, and national legislation and policies not aligning with international best practice.

Jean Comby, EDF’s managing director for hydropower in France, presented a case study on why the Nam Theun 2 project, situated on a tributary of the Mekong River in Laos, is financially, socially and environmentally viable.

Nam Theun 2 has been operational since 2010, with an installed capacity of 1,070 MW. Although only 5 per cent of its output is used in Laos (95 per cent is sold to Thailand), it accounts for 20 per cent of the country’s domestic electricity needs.

EDF is the largest of three shareholders in the project, owning 40 per cent. Thai company Electricity Generating Public Company Limited owns 35 per cent, while state-owned Laotian company Lao Holding State Enterprise owns the remaining 25 per cent.

Jean explained how a series of social programmes have been implemented as part of the project. “6,000 people – 1,300 families – have been impacted by the reservoir, and we have been in consultation with the people for about ten years,” he said. “We worked with them to find a new location for the communities, to remain as near to their own villages as possible.

“We built 14 new villages with furnished houses. We built roads and wells. In each village we built a community building, schools and dispensaries.

A second programme, aiming to improve the livelihood of the people within the first five years, provided a fishery at the reservoir and a community forestry.

Prior to these programmes being implemented, only 31 per cent of children aged five to nine and 10 per cent aged ten to 14 were able to go to school. A recent survey shows that 90 per cent of all children are going to school.

The project also features two environmental programmes: one for compliance, and another focused on water quality. The social and environmental programmes cost US$ 140m, which is about 10 per cent of the total project cost. 

In conclusion, Jean said: “It is necessary to have a much consultation with the government and the population as possible.

“The second thing is to have a clear understanding of environmental and social impacts, and to link them to technical aspects. The third is to have close monitoring, and the fourth is a good handover to the villagers.”

Cameron Ironside, sustainability director at IHA, spoke about countering perceptions that social and environmental regulations delay projects, and how tools like the Hydropower Sustainability Assessment Protocol can work alongside regulation in raising standards.

“Most of the developed world holds its hydropower without any reference to social and environmental regulation, so we’re largely asking the rest of the world still developing hydropower to incorporate stuff that wasn’t incorporated previously,” he said.

“This often leads to environmental and social issues being seen as an impediment for hydropower. The question is, how do we remove that impression and show that regulations can be incorporated into projects and not serve as a delay?”

He described the protocol as “a common language that can be used in the absence of regulation, but that also complements regulation”.

Explaining how it works in practice, he said: “It breaks down all the aspects related to hydropower topics – environmental, social, economic technical – so you can see where the individual weaknesses are around a specific topic. 

“So it provides a framework around which you can actually measure power from a sustainability criterion, but it is also reasonably simple to apply, and comparatively it’s a very fast way to look at these issues.”

Concluding, he said: “We need to incorporate social and environmental decision-making alongside technical and economic decision-making and streamline that into the process so it becomes a standard process, rather than an additional burden that seems to come afterwards and cost additional money.”

You can find out more about the seminar here, and information about the Hydropower Sustainability Assessment Protocol here. Related case studies will be available soon.