Session: For more information:

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1 Session: For more information:

2 Macroeconomic Benefits of Hydropower Quantifying the value of multipurpose hydropower projects: a glimpse of the IEA Hydro Annex IX work Niels Nielsen, Secretary, IEA Hydro With acknowledgements to Statkraft and Hydro Tasmania IHA World Congress, Beijing, China May 2015

3 IEA Implementing Agreement for Hydropower Technologies & Programmes Since 1974, the International Energy Agency (IEA), has provided a structure for international co-operation in energy technology R&D The Implementing Agreements (IA) of the IEA are the vehicles of co-operation between countries and organisations focusing on particular energy sources Research projects are conducted by working groups of the Implementing Agreements called Annexes IHA World Congress, Beijing, China May 2015

4 Organizational Structure (2015) INTERNATIONAL ENERGY AGENCY (IEA) Renewable Energy Working Party (REWP) Hydropower Implementing Agreement Annexes (Working groups) Annex II Small Scale Hydropower Annex IX Valuing Hydropower Energy and Water Services Annex XI Renewal & Upgrading of Hydropower Plants Annex XII GHG Emissions from Freshwater Reservoirs Annex XIII Hydropower and Fish IHA World Congress, Beijing, China May 2015

5 Valuing the Non-Power Benefits of Hydropower Setting the scene: Gradual Trends Historical: an inexpensive electricity solution, mainly publically funded Recent past: broader recognition of multipurpose services (water/energy/transport) Current: Increased appreciation of sustainability and greater complexity of power and non-power benefits, more private equity IHA World Congress, Beijing, China May 2015

6 Valuing the Non-Power Benefits of Hydropower The future: Mega Trends E&Y: MegaTrends 2015 defines Resourceful Planet as one of six transformative global forces that will define the future Absolute population growth, economic development and affluence will drive an increasing demand for natural resources. Added value is needed from resource developments IHA World Congress, Beijing, China May 2015

7 Valuing the Non-Power Benefits of Hydropower Define, promote, recognise and benefit from the full value of hydropower Existing and new hydropower schemes can deliver multiple objectives including: decarbonisation of the energy sector (climate change adaptation), energy services, water services (multi-purpose hydropower), re-electrification of manufacture and industrial complexes, transport systems (vehicles, trains etc.) data management IHA World Congress, Beijing, China May 2015

8 Objectives of IEA Hydro Annex IX... to enhance the understanding of Types of energy and non-energy services hydropower provides to energy security, water security and sustainable development Potential consequences of providing such services for the hydropower sector in terms of required adjustments in operation, maintenance and development practices; Appropriate economic assessment methods to quantify the value of these services; Allocating costs of providing multiple services between the various stakeholder; Regulatory frameworks, market mechanisms and business models that sustain or hamper the optimal deployment or development of multipurpose hydropower projects The Annex work is a collaborative process open for input from interested parties IHA World Congress, Beijing, China May 2015

9 Quantifying the value creation of services provided by multipurpose HPPs beyond electricity generation Power services Ancillary services Non-power services Water management services (quantity & quality) Environmental services Regional development services Human development services Energy security Climate change mitigation Increased deployment of variable renewables Policy arenas Water security Climate change adaptation Socio-economic development Policy-making and implementation of regulatory framework in the areas of: o Water (e.g. implementation of EU Water Framework Directive) o o Energy (e.g. value of ancillary services for energy security) Climate change (e.g. value of CC mitigation & adaptation measures) o Development (e.g. regional indirect + multiplier effects) IHA World Congress, Beijing, China May 2015

10 Ancillary services stabilising the electric grid and contributing to energy supply security : Inertial response Governor response, frequency response or primary frequency control Frequency regulation, regulation reserve or secondary frequency control Flexibility reserve Contingency spinning reserve Contingency non-spinning reserve Replacement/Supplemental reserve Load following Load levelling / Energy arbitrage Generating capacity Integration of variable energy resources (VER) Portfolio effects Reduced cycling of thermal units Reduced transmission congestion Voltage support Improved dynamic stability Energy security Transmission deferral Black start capability

11 A) Water quantity management Flood / drought control Ground water stabilisation Increased water availability for other uses B) Water quality management Oxygenation and temperature dispersion Cleaning of water courses from debris Improved sediment management Habitat protection (granting coverage with water) Barrier to saline water intrusion

12 C) Contribution to regional development Catalyst effect for other water uses through increased availability of freshwater such as: Navigation (transport) Irrigation (agriculture) Leisure and tourism Aquaculture Water supply (domestic and industrial) Improved infrastructures (roads, access ramps, etc) Catalyst effect for energy intensive industries aluminium, pulp and paper, aviation, shipyards, IT, etc.

13 D) Human development Project related investments to improve living standards of people such as: Health services Education Sanitation Community services Housing Livelihoods Nutrition and food supply

14 E) Environmental services The projects global and local environmental services: - Reduction of GHG emissions - Reduction of atmospheric emissions - Creation of wetlands - Micro-climate around reservoirs - Carbon storage

15 Annex IX Approach Develop a methodological handbook (2015) covering: economic assessment methods to estimate & document the value of specific energy & water management services Templates with information metrics for the assembly of case studies Case studies from different river basins (2016) across the world with assessment methods validated by internationally recognised economists Synthesis report (2016/17) with highlights from case studies focused on meeting Annex objectives Communication material & dissemination (2017) IHA World Congress, Beijing, China May 2015

16 Methodological Handbook (outline) Executive Summary +. Overview matrix 1. Introduction 2. Objectives 3. Study scope 4. Definition of multipurpose hydropower services 5. Basic Methodological concepts 6. Existing economic assessment methods: strengths & weaknesses; recommendations for appropriate use 6.1 Market price 6.2 Public pricing 6.3 Production cost method 6.4 damage cost, avoided cost, alternative cost and restoration cost 6.5 Hedonic pricing (property cost) 6.6 Travel costs 6.7 Willingness to pay/contingent valuation 6.8 Contingent ranking 6.9 Choice modelling / Conjoint Analysis 6.10 Group Valuation 6.11 Unit values 6.12 Adjusted unit values 6.13 Value function transfer 6.14 Meta-analytic value function transfer 7. Synthesis, including comparative matrix 8. References Annex Information gathering templates

17 Which methods are suitable to value the different MPHPS? Multipurpose Hydropower Services (MPHPS) Price based (Market price, public pricing) Market valuation Market Valuation Production based (Production function, factor income) ECONOMIC ASSESSMENT METHODS Cost based (avoided, alternative mitigation costs) Revealed Preference (Hedonic pricing, travel cost method) Hypothetical behaviour Stated preference / Simulated Valuation (Willingness to pay, contingent ranking, choice modelling, group valuation) Estimation of value transfer (Unit values (uv), adjusted uv, value function transfer, meta-analytic vft ) Power Services Non Power Services Water quantity and quality management Environmental services Regional and human development IHA World Congress, Beijing, China May 2015 N.B. This is an example for illustration purposes only!

18 Thank you for your attention! For more information on IEA Hydro: Please contact Mr. Niels Nielsen, Secretary, IEA Hydro at or visit For more information on Annex IX: Please contact Ms. Karin Seelos, Operating Agent Annex IX at IHA World Congress, Beijing, China May 2015