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GSR 2015

54 02 MARKET AND INDUSTRY TRENDS plant that came on line in 2014, which is one of many examples of small hydropower projects expected to advance rural electrification in developing countries.34 As of 2012, global installed capacity of small plants of 10 MW or less was estimated at 75 GW.35 Small hydropower has been credited for its suitability for improved rural electrification and for its potential for socially inclusive and sustainable development.36 Global pumped storage capacity at the end of 2014 was estimated to be as high as 146 GW, with as much as 2.4 GW of capacity added in 2014.37 One project completed during the year was on the island of El Hierro, the smallest of the Canary Islands. The 6 MW project is small in scale but large in significance. The island is now self-sufficient in power thanks to the combination of wind power (11.5 MW) and the pumped storage facility, which together displaced a diesel plant.38 In Austria, the 430 MW Reisseck II pumped storage facility was completed in early 2015.39 As of early 2015, several new variable-speed pumped storage plants were planned or under construction in Europe, and one existing plant was being retrofitted for variable-speed operation. Variable speed capability for new and refurbished pumped storage plants improves pumping efficiency; it also provides the flexibility to match the level of pumping at any given facility with conditions on the grid, as it enables power regulation capabilities in both generation and pumping modes.40 The 1,000 MW Linthal plant under construction in Switzerland will be the first high-capacity variable speed pumped storage dam when completed in 2015.41 Other notable pumped storage facilities on the horizon include the 1.3 GW Ingula pumped storage facility in South Africa, to be operational in 2015, and a 2.1 GW plant to be built in Egypt.42 Pumped storage is not the only way to use hydropower for active reserve power. Norway, the United Kingdom, and Germany agreed in 2014 to build two 1.4 GW interlinks to enable Norway’s significant hydropower capacity to function as a balancing reserve for its southern neighbours, particularly in the context of variable renewable power.43 The topic of sustainability remains prominent in the context of hydropower development. In 2014, the World Bank acknowledged the Hydropower Sustainability Assessment Protocol, launched in 2011, as a useful and complementary tool for developing sustainable hydropower projects, but it noted that it did not replace the Bank’s own policies and safeguards in this regard.44 The US Congress acted in 2014 to require improved social and environmental safeguards for project funding, and the World Bank Group announced in early 2015 that it sought to improve safeguards related to resettlement practices.45 In early 2015, the US government registered its opposition to the Bank’s funding of the 108 MW Gulpur project in Pakistan on grounds of inaccurate and inadequate environmental risk assessment.46 A number of projects have been delayed or cancelled due to concerns about social and environmental impacts. In Turkey, the 1.2 GW Ilisu dam on the Tigris River continued to be stymied by geopolitical factors in 2014, due in part to controversy over the eventual flooding of ancient archaeological sites.47 In India, local opposition caused further delays for the 2 GW Lower Subansiri project.48 In Vietnam, allegations of illegal land acquisitions and mismanagement prompted authorities to consider revoking investor licences.49 Among the complaints is the impact of dams on downstream agriculture as well as failure by developers to plant trees to compensate for deforestation.50 ■■ HYDROPOWER INDUSTRY Industry continued innovation towards ever more flexible, efficient, and reliable hydropower facilities. Hydro equipment manufacturers responded to the growing need for pumped storage, in part to integrate rising shares of variable renewable power.51 Likewise, there is a growing demand, particularly in North America and Europe, for refurbishment of power plants— not only to increase their efficiency and power output, but also to improve their environmental performance to meet new regulatory requirements.52 Another driver for innovation is the demand for lower generating costs, which has contributed to the development of very large machines to achieve high operating efficiencies. Examples include the two 800 MW units installed at China’s Xiangjiaba plant in 2014.53 The hydropower sector is responding to growing climate change risk with increased research into associated vulnerabilities and is, in some instances, incorporating climate change resilience into project design and operations.54 Such considerations include potential and projected changes in river flows, dam safety in the face of extreme floods, projected variability in electricity generation, and optimisation of turbines and other design parameters for greater variability in river flow.55 The most significant providers of hydropower equipment are Alstom (France), Andritz Hydro (Austria), and Voith Hydro (Germany), each with about equal market shares. Together they account for about one-half of the global market.56 Other notable manufacturers include Harbin (China), Dongfang (China), and Power Machines (Russia). Andritz Hydro reported that both sales and new orders were down for the second consecutive year because the global market has shrunk in recent years. However, the company said that it was looking forward to some large projects in South America and Africa, along with global growth in refurbishment of existing plants and small-scale hydropower facilities in emerging countries where lower absolute investment costs may be particularly important.57 For Voith Hydro, 2014 sales were down 5% relative to 2013, but new orders were up 24% over the same period.58 However, Voith saw significant opportunities in refurbishment of existing plants, particularly in North America, Russia, and Eastern Europe.59 The one weak spot in the market, according to Voith, was the Latin American market, where projects were delayed on account of political and economic conditions.60 Voith also noted the continuing concern that revenue to pumped hydro facilities for peak power may not be adequate in the current context of growing peak solar PV generation.61 Alstom’s proposed merger with General Electric in 2014 raised preliminary concerns from the European Commission in relation to potential loss of competition in some market segments, but the Commission expressed no concerns about the joint company’s hydropower activities.62

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