What makes a HPP project a success or a failure?

What makes a HPP project a success or a failure?

Author: Dr Lorenc Gordani

Legal Adviser in Albania Energy Market

electricity market development preliminary stage market development electricity market river basin

Hydropower energy is the form of investment considered of most economic interest to be developed up to here in practice. Notwithstanding a huge number of concessionary permission given, a large part has not started yet and are in doubt if it will be done. Given the importance at many levels for the economy, with interest is understanding why investments in hydropower plants have remained up to now on paper, similarly to many wind, biomass or other projects.

The hydropower investments poses a complex challenge due to the interdependence of many factors that make necessary the in-depth study phase before any their practical deployment. On this, in the country as in the rest of the region (apart the Kosovo), there is no authority to provide, through a central system, data related to the past, the present and the future, a support of a decision on an investment in the hydro power sector.

Therefore, assuring these data and information on the most important issues of the potential of a hydroelectric project, with respect to the river basin, the hydrographic basin and the river as a whole, is the first step to be taken. Only by fully implementation of the “bottom up” approach applied in the river basin and not just the “country” approach, a technical validity of each project can be ensured in the planning of the hydropower plant.

Further, each greenfield project but also rehabilitation HPP, should address among the first aspects the fundamental issues related to the profitability of energy production. For this reason, future energy development strategies need to be developed and updated at least over the next 15 years (i.e. referring to the period we are writing to the prospects of the 2030-2035) and long-term outlook up to year 2050.

Project development will need to be promoted on the basis of clear environmental sustainability criteria to avoid possible suspensions or even blocking of work. How essential is the knowledge of competitive context within other renewable energy sources (PV, wind, biomass) and advantages in the regional area of reference. Further detailed electricity market development studies are required to assess the competitive potential of penetration in the framework of the liberalise retail electricity market development and its optimal supply mix under the conditions of the electricity demand development by 2050.

Timely inspections of the technical status is required to prepare high-quality specifications and to ensure effective tendering procedures and implementation of planned activities and works activities with subcontractors or direct entrepreneurship are required. Only if the above is fully implemented can be start talking of the possibility of a profound and realistic analysis of financing needs, taking into account currently available necessary funds and features on the supply side of financing needs.

In conclusion, the foregoing is just a synthesis of the precautionary steps, in order to put much needed project finance mechanics into motion. Aspect that has seen in the practice to be often underestimated in the preliminary stage. Further, normally there are a lot of handicaps, even for the projects that go ahead, with the problems that came out only after the construction and commissioning of the plant is done.

On the other hand, if all the requirement of preliminary stage are followed, it would allow not only to improve the interests of financial institutions but also help to attract trusted private investors, particularly risk averse. As well as this would lead to work in close contact with IFIs, focusing on developing tailored solutions that cover funding needs and the creation of specialized insurance products that are the basic for implementing complex projects such as development of hydropower projects.

Disclaimer: The ownership and the opinion expressed pertain to their author. While all the effort are made to ensure the accuracy of this publication, it is not intended to provide legal advices as individual situations may differ and should be discussed with an expert. For any specific technical or legal advice on the information provided and related topics, contact us through “lorenc_gordani@albaniaenergy.org”.

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