Phase 1:

Background & Objectives

The hydropower sector has been systematically misunderstood for decades. Social, environmental and economic impacts associated with large dams are often understated during project assessments, while at the cost of ecosystem health and livelihood security.

Poor project assessments enable approval of risky projects, which then often face ESG and operational delays, together with cost overruns and reputational issues.

These impacts are severe at the local level, but can be scaled to have national and regional implications as a result of the cumulative nature of multiple dams.

We therefore urgently need a better way to assess the true costs and benefits of hydropower.

This is the rationale for Riverscope.

 

Riverscope was developed to:

· Assess the ESG risks associated with real hydropower investments, based on quantitative and qualitative data;

· Demonstrate the impact of these risks on a project’s viability, as well as their potential broader implications;

· Compare risk-adjusted project financials with the financial case for alternatives;

· Provide a set of recommendations for relevant stakeholders based on the findings.

Riverscope in detail

Riverscope is split into three interlinked components of assessment:

Rapid Assessment

The Rapid Assessment compares projects across 17 subnational level ESG-related indicators, derived through a statistical assessment of 281 cases.

The process uses geospatial comparative statistical analysis to determine the ESG risk potential for a given hydropower project’s location.

Financial Assessment

We have developed an Expected Delays Model to predict the potential for project delays.

The model reflects an exponential relationship between ESG risk and delays where the higher the ESG risk score, the more likely a project will face delays.

We then have a Discounted Cashflow Model to determine the impact of these delays on the financial viability of a project, using metrics like NPV and LCOE.

Deep Dive

The final component is a qualitative review which investigates key project documents, academic journals, reports, local accounts and news articles, where appropriate.

This review process ensures the Rapid Assessment is accurate while also highlighting potential model limitations and gaps in the quantitative assessment.

General findings

ESG risks are systematically underestimated by hydropower developers and financiers, which means that any investment into hydropower should be reviewed.

The hydropower sector should not have access to concessional finance, given its poor commercial, social and environmental case, especially when compared to alternatives.

Where large hydropower projects are pushed forward, high social and environmental standards are needed to improve impact and mitigate risk. To date this has been largely inadequate.

Demand growth and distribution has been directly affected by COVID-19. These uncertain future demand profiles call for a more gradual approach to energy roll out, facilitated by alternatives.

 

Hydropower is both a contributor to and victim of climate impact. Run-of-river projects are lower impact options, yet they are more vulnerable to climate impacts.

Large hydropower projects can create regional political tensions over their impacts on transboundary river systems. There is an increasing need to better understand the cumulative and transboundary impacts of hydropower so these can be factored into regional-level energy planning.

Large hydropower is often developed with intention of bulk energy exports. But high risks and implementation challenges often make hydropower a driver of debt rather than development.

More detailed documentation of the project