Statement: EU sustainable finance rules would undervalue hydropower
22 December 2020
The International Hydropower Association (IHA) has responded to a public consultation by the European Commission on new rules to define sustainable finance.
While the association welcomes and supports the need for an EU Taxonomy on sustainable activities in order to drive investment in renewable energy, IHA believes the proposal as drafted “raises serious concerns” for the development of a flexible, efficient, and affordable low-carbon energy mix.
As well as failing to treat all renewable energy sources equally, the proposed definition of sustainable electricity storage to exclude open-loop pumped storage hydropower facilities would limit the continent’s clean storage options.
In a statement, Eddie Rich, Chief Executive of IHA, said: “Renewable hydropower is a reliable, versatile and low-cost source of clean electricity generation and responsible water management. In order to boost and balance variable renewable energy sources like wind and solar in the European power grid, we will need more hydropower in the decades to come.
“The EU Taxonomy proposal as drafted risks disincentivising investment in sustainable hydropower projects at the very time we need to scale up access to the vital flexibility and storage services that they provide. Without hydropower, Europe’s clean energy goals and power system resilience could be at risk.”
The draft rules fail to take account of the significant energy storage capacity in Europe’s existing conventional hydropower facilities. These facilities are capable of producing electricity instantaneously to support the integration of variable renewable energy, notes IHA in its response which is publicly available on the EU website.
IHA notes that, under proposed climate mitigation criteria, hydropower is subjected to a life-cycle greenhouse gas emissions assessment, while other renewables such as wind and solar are not. This is despite numerous studies including from the Intergovernmental Panel on Climate Change (IPCC) confirming that hydropower has average life-cycle emissions at similar, or even lower levels than other renewables.
“Hydropower has a long history in Europe, and it remains a leading source of low carbon and renewable electricity,” notes IHA’s response. “In fact, given hydropower’s many flexibility services, it will be increasingly important to balance the growing levels of variable renewable energy on the European grid.
Read more about hydropower in Europe
Read the response in full:
IHA’s response to the European Commission’s Draft Taxonomy Delegated Regulation on climate change mitigation and adaptation
While the International Hydropower Association (IHA) welcomes and supports the need for an EU Taxonomy and its goals, the draft delegated act in question raises serious concerns for the hydropower industry.
Hydropower has a long history in Europe, and it remains a leading source of low carbon and renewable electricity. In fact, given hydropower’s many flexibility services, it will be increasingly important to balance the growing levels of variable renewable energy (VRE), primarily wind and solar, on the European grid. Hydropower can provide large quantities of both power capacity and energy to support short, medium and long-term flexibility. In addition, it is a highly efficient and reliable source of electricity.
With the EU’s policy framework incentivising a rapid roll-out of VRE, combined with a phasing-out of fossil-fuel plants, hydropower will have a unique role in managing the growing need for flexibility in the power grid. Furthermore, hydropower projects provide essential freshwater management services that can increase the system’s resilience to flood and drought, while conserving water.
Despite this, aspects of the draft delegated act may both reduce the competitiveness of the hydropower industry and make it harder to attract the investments needed to support the EU’s 2050 climate-neutrality target. IHA’s specific concerns are as follows:
1. Climate change mitigation criteria unfairly targets hydropower (Annex 1, Section 4.5)
The draft climate mitigation criteria fail to treat all renewable electricity generation technologies equally. While hydropower is subjected to climate mitigation criteria, including a life-cycle GHG emissions assessment, other renewables such as wind and solar are not. This is despite numerous studies including from the Intergovernmental Panel on Climate Change (IPCC) clearly starting that hydropower has average life-cycle emissions at similar, or even lower levels than other renewables (24gCO2e/kWh compared to, for example, 48gCO2e/kWh for utility scale solar PV).1 The IPCC’s findings are similar to a study carried out by IHA using the globally recognised G-res Tool.2
Moreover, hydropower projects, especially in Europe, provide numerous freshwater services that can place constraints on how and when a hydropower facility is operated. For example, drawing down a reservoir to provide flood protection and environmental downstream flows, or conserving water (i.e., not producing electricity) in order to store water for drought protection and serve irrigation or municipal water demand. An assessment that focuses solely on power generation would neglect the non-power services offered by a hydropower project. Therefore, any life-cycle assessment needs to account for this, as the G-res Tool does.
All renewable electricity generation technologies should be treated equally with respect to the climate mitigation criteria.
2. The DNSH (Do No Significant Harm) criteria needs to align with current EU legislation (Annex 1, Section 4.5)
The DNSH as currently drafted places additional, unnecessary, burdens on the hydropower industry. The text (criterion 3) goes beyond the scope of the Water Framework Directive (WFD) which will cause unintended consequences. It is critically important that the text is aligned with the WFD to avoid creating greater uncertainty for industry and national authorities.
3. Electricity storage definition restricts Europe’s system-wide flexibility options (Annex 1, Section 4.10)
Specifically, on pumped storage, the proposed ineligibility of open-loop facilities (or “mixed pumped storage”) as an electricity storage technology is ill-advised. Both open and closed-loop pumped storage facilities can achieve high levels of sustainability and this needs to be assessed and determined at the project level. At a time when the services provided by pumped storage will become even more important to a rapidly evolving grid, Europe should not be further restricting its system-wide flexibility options.
In addition, the draft delegated act fails to properly take account of the significant energy storage capacity in Europe’s existing conventional hydropower facilities. These facilities are capable of producing electricity instantaneously to support the integration of VRE.
4. Including hydropower as an activity within section 7.6 – ‘Installation, maintenance and repair of renewable energy technologies’ (Annex 1, Section 7.6)
Hydropower is currently excluded as one of the measures within this activity. This seems to be an oversight and should be rectified. Europe has one of the oldest hydropower fleets in the world and the Commission should be supporting all efforts to not only maintain current operations, but to modernise and optimise the fleet for changing market requirements. Modernising ageing hydropower facilities is also one of the most environmentally friendly means to add capacity, flexibility and efficiency gains to the system.