Hydropower saw double growth in 2024

From the newsletter

About 4,507 MW of new hydropower capacity came online in 2024, double the 2023 additions, according to a new report by the International Hydropower Association (IHA). Hydropower is (re-)emerging as a crucial component of the clean energy transition and seeing increased investment. At Least 16,000 MW of projects are currently under development.

• Tanzania led with 1,880 MW, followed by Ethiopia at 1,200 MW, and Uganda at 605 MW. Morocco came fourth with 350 MW capacity from the only pumped storage hydropower (PSH) plant in Africa that came online in 2024.

• Small hydropower projects could help Africa connect most of its rural population which currently accounts for a bigger share of unelectrified. 

More details

• Large-scale projects like the 40,000 MW Grand Inga in the DR Congo continue to face hurdles, primarily financial and governance concerns, along with opposition from local communities. However, the World Bank has recently shown renewed interest in the Inga project, providing $1 billion in funding for technical support. Other projects like Malawi's 360 MW have recently received funding, a clear show of confidence in the sector.

• Smaller hydropower projects are increasingly attracting private investment, with notable progress in countries such as Burundi, Uganda, Ivory Coast, and Eswatini. The International Finance Corporation (IFC) is supporting new models for private-sector participation, including programmes to pre-develop concessions for auction to private delivery partners. This approach aims to streamline project delivery by reducing the need for redesigns and renegotiations, potentially unlocking a new wave of privately financed ventures.

• Modernisation of existing hydropower assets is also a strategic priority. The African Development Bank (AfDB) has launched the Africa Hydropower Modernisation Programme, backed by an initial budget of $9.72 million. This programme aims to support the refurbishment of 12 privately led projects across eight countries.

•  According to an IHA assessment, about 4,600 MW of hydropower capacity is in high need of modernisation, and an additional 10,100 MW is in medium need. These upgrades are expected to not only secure the production of existing assets but also bring 800 MW of currently idle units back online and increase capacity by up to 1,600 MW.

• While Africa holds a significant pipeline of approved hydropower projects, progressing them to final investment decisions and construction remains a key challenge. Over 18,500 MW of approved projects are currently stalled. These delays are often due to issues such as offtake risk, high foreign exchange hedging costs, and concerns among lenders regarding project bankability and risk exposure.

• To address these barriers, the Abuja Action Plan was launched in May 2024, proposing practical recommendations to de-risk projects, attract finance, and accelerate delivery. The plan calls upon African governments to champion sustainable hydropower, develop clear long-term energy plans, and implement policies that support decarbonisation through hydropower. It also urges international financing institutions to support renewable energy infrastructure and encourages faster permitting processes for projects.

Our take

• Given the increasing integration of variable renewable energy sources like wind and solar, and climate change impacts on hydrology, Africa should heavily invest in pumped storage hydropower.

• Africa needs to streamline its permitting and approval processes. Simplifying these procedures will accelerate the delivery of new projects and, crucially, boost investor confidence in a sector that has historically been hampered by long-term risks.

• There's a clear need for cross-border cooperation in managing water and energy. This is especially true given how climate change is affecting water availability and flow. Collaborative efforts, like those seen in Central Asia, would enable more efficient water resource management and help balance energy demands across different regions.