How Much Does A Hydropower System Cost?
Hydropower is a form of renewable energy that harnesses the power of flowing water to generate electricity. It works by using the kinetic energy of falling or fast-moving water to spin turbines connected to generators. As the turbines spin, they convert the mechanical energy into electrical energy. Hydropower is considered a clean and sustainable source of electricity since it does not emit greenhouse gases or cause air pollution.
Global hydropower capacity has been steadily growing over the past decades, supplying around 17% of the world’s electricity in 2020 according to the International Energy Agency [1]. With concerns over climate change and energy security, hydropower is expected to play an increasingly important role in the global renewable energy mix. However, building hydropower systems requires significant upfront investments. Understanding the costs involved is important for governments, utilities, and developers when planning new projects and calculating cost-competitiveness against other energy sources.
Upfront Costs
The most significant upfront costs for hydropower projects come from dam and reservoir construction, turbine and generator equipment, and transmission infrastructure.
Building the dam and reservoir accounts for the largest share of upfront costs. According to the U.S. Department of Energy, dam construction can cost anywhere from $1 million to $10 billion depending on the size and site conditions 1. Labor, materials, site development and permitting are major contributors.
Purchasing and installing the turbines and generators is another major capital expenditure. Large turbines and generators for utility-scale projects can cost $500-$1000 per kW of installed capacity2. The powerhouse structure to house the equipment also adds to costs.
Finally, building new transmission lines to get power to customers represents around 15-25% of the total installed cost of hydropower projects3. The transmission infrastructure must be sized appropriately for the generation capacity.
In total, building a new hydropower plant from scratch can cost $1,500-$5,000 per kW installed4.
Ongoing Costs
Ongoing costs for hydropower systems include maintenance, operations, environmental mitigation, and regulatory compliance. According to the International Renewable Energy Agency (IRENA), operation and maintenance costs for hydropower range from 1.5-2.5% of initial investment per year. This covers regular maintenance of turbines, generators, and other mechanical equipment as well as monitoring and operations labor.
Environmental mitigation often represents a significant ongoing cost factor for hydropower. Fish ladders, minimum flow allowances, and other measures are often required to minimize impacts to wildlife. One study found mitigation costs ranged 3-4% of initial investment.
Compliance with regulatory requirements related to dam safety, licensing, environmental protection also contributes to ongoing expenses. License renewal every 30-50 years often triggers new mitigation and compliance costs.
Cost Factors
Several key factors influence the costs of building and operating a hydropower system:
Size of the system – In general, larger hydropower systems that can generate more electricity have higher upfront construction costs but lower costs per kilowatt hour. Smaller “micro” systems have lower construction costs but higher operating costs per kWh. Larger dams and reservoirs also require more land and greater environmental mitigation costs.
Location and site considerations – Building hydropower at an existing dam or canal typically costs less than constructing a new dam and reservoir from scratch. However, costs vary significantly depending on the site’s topography, geology, accessibility, and distance to transmission lines. More remote locations with challenging terrain or weather can increase transportation, equipment, and construction costs.
Source of water – Using an existing flowing river requires building fewer structures than creating a reservoir and controlling water flow. Run-of-river systems avoid damming costs but may require backup power sources when water flow is low. Pumped storage reuses water between an upper and lower reservoir but requires pumping costs.
Transmission needs – New transmission lines must often be built to connect hydropower to the grid, which can add significantly to costs. Upgrading existing transmission lines also adds expense.
Overall, a detailed site-specific analysis is required to accurately estimate costs based on these and other factors like permitting, environmental mitigation, operations and maintenance needs, financing terms, and more. Larger systems benefit from economies of scale but face higher upfront installation costs.
Cost Per Kilowatt Hour
The cost per kilowatt hour for hydroelectricity can vary greatly depending on the size, location, and technological complexity of the installation, but generally falls within a range of 2 to 8 cents per kWh. According to the International Hydropower Association, the global weighted average cost for hydroelectricity was around 4.7 cents per kWh in 2018, making it one of the most cost competitive sources of renewable energy (Facts about Hydropower – International Hydropower Association).
In comparison, electricity from solar PV cost an average of 5 to 17 cents per kWh in 2018, while onshore wind power was around 4 to 8 cents per kWh. Fossil fuel sources like coal and natural gas can produce cheaper electricity at 3-5 cents per kWh, but have high environmental costs that are not reflected in their market prices. Hydroelectricity provides a reliable, renewable power source that can achieve costs comparable to or even lower than fossil fuels in some locations.
Factors like project scale, reservoir size, seasonal rainfall and river flow all impact the generation capacity and annual output of a hydro plant, which directly affect the kilowatt-hour cost. Large-scale projects with dams and reservoirs provide more control over electricity production than small run-of-river systems. Pumped storage facilities that can store and generate electricity on demand also achieve high utilization and low operating costs.
System Lifespan
The lifespan of hydropower infrastructure, especially dams, is an important factor in determining long-term costs. According to the U.S. Energy Information Administration, the typical lifespan of a hydropower plant is between 50-100 years [1]. The Indiana Office of Energy Development states that hydroelectric facilities have an average lifespan of 100 years [2].
The long lifespan of dams and other hydropower infrastructure means that while upfront costs may be high, these investments can generate low-cost electricity over decades. This long lifespan offsets the initial costs and contributes to hydropower often having a low cost per kilowatt-hour. Proper maintenance and upkeep is required however to maximize lifespan and minimize lifetime costs.
Small vs Large Systems
There are considerable cost differences between small and large hydropower projects. Large hydropower systems typically have lower costs per kilowatt hour (kWh). According to IRENA, the levelized cost of electricity (LCOE) for large hydropower projects ranges from $0.02 to $0.19/kWh, while small hydropower can range from $0.03 to $0.25/kWh (IRENA). The main factor driving the lower costs for large systems is economies of scale – the ability to spread fixed costs over more kWh of generation.
Small hydropower systems under 10 MW have the advantages of faster permitting, reduced environmental impacts, and the ability to be built in remote locations not suitable for large dams. However, they lack the economies of scale of large projects. Large hydropower dams over 30 MW benefit from much lower costs per kWh but have longer lead times, greater environmental impacts, and higher upfront capital costs (IEA).
In summary, large hydropower achieves lower operating costs but higher initial investment, while small systems are quicker to develop but cost more per kWh generated over their lifespan.
Pumped Storage
Pumped storage hydropower (PSH) facilities function like giant batteries that use water and gravity to store energy. They pump water from a lower reservoir to an upper reservoir when electricity demand is low. The water is then released to generate electricity when demand is high.
Pumped storage facilities have unique costs compared to conventional hydropower. A 2020 PNNL study found that a 2,400 foot head PSH facility is expected to cost around $1,800/kW for construction and installation [1]. Higher elevation differences can reduce tunneling costs.
Total project costs for PSH range from $106-$200 per kilowatt-hour of storage capacity according to a 2020 GreenTech Media article, compared to $393-$581 per kWh for lithium-ion batteries [2]. PSH can provide 12+ hours of storage vs 2-4 hours for lithium-ion.
Micro Hydropower
Micro hydropower systems are small-scale hydroelectric power installations that typically produce up to 100 kW of electricity. They are designed for a small river or water source and are used to provide electricity for a home, farm, or a small community.
Micro hydropower systems tend to have lower costs compared to larger hydroelectric installations. According to studies, micro hydropower costs range from $1,500 to $4,000 per kilowatt of installed capacity (Micro-Hydro Power: Is It Right for My Farm?). The costs can vary considerably based on site conditions and system requirements. Key factors affecting the costs include the turbine size needed, availability of water, and whether an existing structure like a dam or mill race can be used.
For a small home system generating 1-5 kW, the total installed costs often range from $3,000 to $20,000. Larger micro hydropower systems producing up to 100 kW may cost between $50,000 to $200,000. Significant cost savings can be achieved with DIY construction and use of local materials. Overall, micro hydropower can provide an affordable and sustainable electricity source for remote, off-grid applications.
Conclusion
In summary, there are various costs involved with hydropower systems, both upfront and ongoing. The main upfront costs are construction, equipment, and permitting, which can range from a few thousand dollars for micro hydropower systems to billions of dollars for large dam projects. Ongoing costs include maintenance, operations, licensing fees, and more.
The total cost per kilowatt hour for hydropower is relatively low, averaging around 5 cents in the US, making it one of the cheapest renewable energy sources. However, costs can vary significantly depending on the size of the installation and site-specific factors like topography and weather conditions. Large systems benefit from economies of scale while small systems are more affordable upfront.
Looking ahead, rising construction costs and more stringent environmental regulations could increase hydropower costs in some contexts. However, technological improvements and optimized dam operations may help lower costs by increasing efficiency and energy production at existing facilities. Overall, hydropower remains one of the most cost-competitive sources of renewable energy.
Hydropower system costs are an important consideration, but are just one factor in the growing development of hydropower worldwide. Low operating costs, proven reliability, ability to meet grid flexibility needs, and environmental benefits help make hydropower an attractive choice despite high upfront capital costs, especially for large projects.
