13 February 2018

Leaders from the investment community along with hydropower developers have voiced support for a new model of delivering sustainable hydropower projects.

The Hydropower Preparation Facility concept was praised at an IHA workshop on 5 February 2018 in the City of London, which aimed to identify innovative financing solutions for hydropower, including green bonds.

The workshop was attended by 50 senior executives including IHA members from across the globe. It was hosted by King & Spalding LLP and sponsored by Brookfield Renewable.

A common theme of discussion was the high upfront costs and risks associated with financing the early-stage preparation of hydropower projects relative to other renewable technologies, including solar and wind.    

According to one of the panellists, Paul Kunert, Chief Executive of Joule Africa, despite the urgent need for clean energy, funding for hydropower projects has been “languishing” next to other technologies.

“Hydropower could be the clean, green backbone in Africa, where it is a largely untapped resource. It has a different profile in terms of availability in comparison with other renewables.”

But, Mr Kunert said, “there is currently a mismatch between the enormous need for energy and the amount of private-sector money that is ready to be deployed.”

Richard Taylor, Chief Executive of IHA, opened the discussion by introducing the emerging hydropower facility concept, which would help governments select and prepare the most appropriate hydropower projects before putting them out to tender.

The model, which was proposed by IHA at the 2017 World Hydropower Congress in Ethiopia and endorsed by SEforALL, could generate a pipeline of new, well-prepared projects, he said.

“The host government gets projects which would have a better strategic fit within the country, and would be guided by international good practice in sustainability,” said Mr Taylor. “For a developer, it increases the project’s bankability and confidence that it will enjoy strong support.”

Jason Lu, Head of the Global Infrastructure Facility (GIF), a partnership of governments, multilateral banks and investors, established in 2015, described the concept as a “a very relevant proposal”.

“It is indeed time for the industry to think about a more effective and sustainable project preparation or development model.” Such a facility could deal with issues including “the time that it takes, the money it takes, and the risk involved,” he said. “This is really overdue. It is time to take it seriously.”

The sentiment was echoed by fellow panellist Pravin Karki, Global Lead for Hydropower and Dams at the World Bank, who commented that “hydropower will have a very important role to play in the future, as confirmed by all credible scenarios for clean energy development.”

The workshop was opened by Kelly Malone, Partner and Global Head for Power at King & Spalding, who outlined the range of lenders and financial instruments, including green bonds, for developers to consider when seeking finance, or re-finance, for hydropower projects.

Mr Malone highlighted the Hydropower Sustainability Assessment Protocol developed by a multiple stakeholder group including IHA, saying it is a “powerful tool” for promoting compliance by project sponsors. “It has enormous potential to gain credibility in the market,” he said.

In another panel discussion, Anna Creed, Head of Standards at the Climate Bonds Initiative (CBI), outlined the growth of the green bond market, which saw more than 1,500 green bond issuances totalling US$155 billion in 2017.

Workshop participants heard how IHA is working with the CBI and partners to agree internationally recognised hydropower eligibility criteria for green bonds. The criteria will build the confidence of investors on the sustainability credentials of hydropower projects.

André Abadie, Managing Director and Global Head of Environmental and Social Risk Management at J.P. Morgan, closed the final workshop session by saying: “Hydro needs to have a place at the table in terms of the energy future.

“It would be remiss of us not to push and continue to articulate that hydro has a role and - from a green, sustainability and social impact perspective - can be well managed.”

Visit the workshop webpage to see the full list of speakers. IHA members and attendees can download password protected presentations.