At a glance

Europe's journey towards a renewable energy future is significantly powered by its hydropower sector. The potential lies not only in making the most of its geographical resources but also in modernising existing facilities, pioneering innovative small-scale and run-of-river projects, and advancing pumped storage for grid stability.

The success of this journey is contingent on supportive policy frameworks that incentivise investment in hydropower. As the intermittent share of Europe’s power mix increases, hydropower’s role as a flexibility provider supporting other renewable growth becomes ever more critical. To ensure grid stability, it is essential that electricity markets renumerate the ancillary services flexibility and the dispatchability that modernised hydropower facilities can provide.

With this potential in mind, 2022 was an exciting year for hydropower development in Europe. Notable projects in Switzerland (Nant-de-Drance), Portugal (Tâmega) and Turkey (Ysufeli Dam), contributed to an overall added capacity of 2,712 MW of hydropower including 1,780 MW of PSH. The year also saw investment in small hydro with Edison’s Palestro programme in Italy, a crowdfunded project that involved the local community. In Norway, 25 small hydropower plants were commissioned in 2022 for a total capacity of 163 MW and expected annual production of 530 GWh.

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In Austria, the Gemeinschaftskraftwerk Inn power plant has become a milestone on ways to achieve the goals of the European and regional energy strategies. It is the largest newly built run-of-river power station in the Alpine region and supports the integration of wind and solar.

We also see some early signs of positive policy development on a national level for PSH. As contributions by wind and solar continue to grow, national authorities are more focused on their PSH potential with policy and regulatory developments in the UK, France and Poland.

This development comes on the back of some of the worst droughts Europe has experienced and the energy crisis, brought on by the war in Ukraine. Regional electricity prices increased to levels that in certain occasions were 10 times higher than those recorded in 2020. This has resulted in lengthy discussions across Europe about price volatility and security of supply and the EU sought ways to optimise the electricity market design to tackle price volatility, further accelerate investments in renewables, and enhance the flexibility and resilience of the power system. This included the REPowerEU plan of May 2022 which worked to diversify energy supplies and reduce dependence on foreign fossil fuels, make energy savings, and accelerate the rollout of renewables.

As part of this plan the EU increased its 2030 renewable energy consumption targets to 45 per cent and introduced a revenue cap on inframarginal electricity generators whenever wholesale electricity prices exceed €180/MWh. The drought experienced during the latter half of 2022 led to reduced hydropower production, particularly in southern Europe, (~15 per cent); however, hydropower continued to play an important role throughout the continent, including providing water to agriculture, and responding to increases in unmet electricity demand due to a reduction in supply from nuclear power.

The EU is seeking ways to optimise the electricity market design to tackle price volatility, further accelerate investments in renewables, and enhance the flexibility and resilience of the power system.

The EU Commission launched a research programme in 2022, ETIP Hydropower, whose goal is to provide consensus-based strategic advice to the European Commission covering analysis of market opportunities, research & development funding needs, biodiversity protection and ecological continuity. This project will ensure that the voice of the sector will be heard and represented at the European level.

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Latest developments

Austria
The Gemeinschaftskraftwerk Inn power plant was created as a joint project between the Swiss municipality of Valsot and the Austrian municipality of Prutz. The dam offers 89 MW of installed capacity located on the river Inn and generates almost 440 GWh/yr of electricity while supporting the integration of wind and solar. It is the largest newly built run-of-river power station in the Alpine region and cost €600m. Financing included contributions from the European Investment Bank (€150m) and KfW IPEX-Bank (€90m).

France
The French government has recently carried out an extensive consultation to support PSH projects. In November 2022, one of the Pelton runners of the Grand’Maison power plant was replaced, the third out of four to be replaced. The new runners have been upgraded from 156 MW to 170 MW, providing around 9 per cent more power generating capacity.

Italy
Built on an existing water barrage created to regulate the water flow in the rice fields of Northern Italy at a cost of €10m, the Palestro project has been developed by Edison using a crowdfunding programme involving local communities, a first for Italy. With an installed capacity of 3.6 MW on the Sesia river; and generation of 13.5 GWh. This is an interesting example of how retrofitting non-powered dams can create new sources of renewable electricity with strong community buy-in.

Ireland
EU Member States have given the green light to invest €602m of EU funds in eight cross-border energy infrastructure projects. In Ireland, the Silvermines hydropower plant will receive €4.3m for researching and setting up a pumped storage facility at a historic mining site that will help reduce price volatility, contribute to market stabilisation and increase the flexibility resource of the island’s electricity system.

Norway
25 small hydropower plants were commissioned during 2022 for a total capacity of 163 MW and expected annual production of 530 GWh. The two most significant planned plants are Smibelg (33 MW) and Tokajjelet (27 MW).

Poland
In March 2023, the Polish Government introduced a new law to make it easier for PSH development, as they recognised there were barriers making investment harder. The new law allows PSH to be integrated into decisions across multiple permitting authorities, and to make PSH a ‘public purpose’ investment. Supported by the new streamlined authorisation process in Poland, the Polish utility PGE and the National Fund for Environmental Protection and Water Management are cooperating on the construction of a US$1.14bn project offering 750 MW at the Mloty pumped storage power plant in a drive to support the national grid's resilience and reliability.

Portugal
Construction continues to complete the Alto Tâmega power plant, which is part of the Tâmega Giga Battery project. The reservoir filling operations are expected in October 2023. This is the last stage prior to completion expected in mid-2024 of the Tâmega Giga Battery project. The project includes the construction of three power plants: Daivões, Gouvães and Alto Tâmega with a total installed capacity of 1,158 MW. Daivões was inaugurated in July 2022 and is a 118 MW Storage Plant. Gouvães was inaugurated in July 2022 and is an 880 MW pump storage plant. Finally, Alto Tâmega with a cost of circa €1.5bn, will have a storage capacity of 20 GWh and is expected to eliminate 1.2 million tonnes of CO2 emissions annually.

Romania and Bulgaria
Romania announced in 2022 that talks would resume with Bulgaria on building the Turnu Măgurele Nikopol hydropower plant on the Danube River. With this project the two countries would have 420 MW of installed capacity each.

Switzerland
In Switzerland, the recently commissioned Nant de Drance (pumped storage) owned by Alpiq, provides a total of 900 MW installed capacity. It has six Francis pump turbines with variable speed technology and 20 GWh storage (equivalent to 400,000 car batteries) with a total cost of circa US$2bn. Unlike many of the plants that preceded it, Nant-de-Drance uses variable speed pump-turbines. It is one of the most flexible assets in the world and power from this 900 MW facility can be available within two minutes. Due to its central location, it will be a key asset to stabilising the European grid.

Turkey
Construction on the Ysufeli Dam began in 2013 and it was inaugurated in November 2022, with full commercial operations starting in summer 2023. Standing at 275 metres, it is the tallest dam in Turkey and ranks among the top ten worldwide. It offers a total installed capacity of 558 MW and houses three 180 MW Francis turbine-generator units. Ysufeli Dam’s annual production is 1,900 GWh and which provides US$269m added value a year to the Turkish economy and meets the energy needs of 2.5 million households at a cost of US$1.8bn.

United Kingdom
In August 2022, the UK Government followed up its consultation on Large-scale Long Duration Energy Storage, by concluding that it has “an important role to play” but faces significant barriers to deployment under the current market framework. They indicated they would develop policies to enable investment by 2024 to ensure sufficient long duration energy storage. A proposal for PSH (Cruachan) was submitted for an expansion of an existing asset (+600 MW) in 2022. Owners Drax are awaiting approval from local authorities on expansion. The total new PSH capacity, if approved, would be 1,040 MW. SSE is providing a £100m investment boost to the Coire Glas PSH project which is expected to require a capital investment of over £1.5bn. The project, which received planning consent from the Scottish Government in 2020 will be capable of delivering 30 GWh (circa 1,500 MW). Gilkes Energy has unveiled scoping plans for its 900 MW Earba Pumped Storage Hydro Project in Scotland with a 33 GWh storage capacity. The developer is now starting public consultations on their plans.