March 23 (SeeNews) - Government guarantees or off-take agreements with state-owned utilities can make long-term plans for the development of hydro power projects in Southeast Europe more predictable and hence more attractive for investors and banks, a senior KPMG official said.
Much potential for hydro power exists in the mountainous countries of Southeast Europe (SEE) like Albania, Romania, Bulgaria and the states of the former Yugoslav Federation. Yet, despite their vast potential, these countries have found it difficult to secure financing for large hydro power projects.
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Regarding the funding for large hydro projects, one of the most important drawbacks is the high initial investment and relatively long construction period, KPMG global head of power and utilities Peter Kiss told SeeNews in an emailed statement.
“However, the achievable electricity production cost of large hydro investments can be highly competitive. The high investment need is balanced out by the long lifetime, and low operation and maintenance costs but still the result is a relatively extended payback period.”
Over the long term, Kiss said, demand and prices - and thus payback, become uncertain. “Besides the economic reasons, capital investors might consider the country risks in the region to be still unfavourable.”
With hydro power poised to play an important role in meeting rising demand for higher and cleaner power output, governments in the region are faced with the challenge of striking the right balance between initiatives for improving the efficiency of existing hydro power plants and increasing their installed capacity while pushing for the development of new generation facilities.
“On-demand refurbishment of existing hydro power plants is unavoidable. It is less expensive than greenfield investments but still has significant possible gain mostly through the higher availability rate of the plants,” Kiss said.
On the other hand, new projects are needed to expand the renewable generation output and overcome the deficiency of peak capacity.
As for the role of small hydro power plants in meeting renewables targets in the region, Kiss doesn’t see them having a significant impact. “They rather have local importance through decentralized power generation.”
Following are details of technical hydro power potential, utilization rate and hydro power projects under development in 10 SEE countries issued by KPMG in October 2010 as part of a report on the hydro power outlook in central and eastern Europe:
Country |
Technical potential for annual hydro power output (GWh) |
Utilisation rate (%, 2008) |
Capacity of hydro power projects under development (MW) |
Albania |
15,000 |
24 |
n.a. |
Bosnia and Herzegovina |
24,000 |
19 |
1,316 |
Bulgaria |
15,000 |
24 |
1,826 |
Croatia |
9,000 |
59 |
453 |
Kosovo |
800 |
10 |
n.a. |
Macedonia |
5,000 |
18 |
347 |
Montenegro |
4,269 |
36 |
1,263 |
Romania |
35,000 |
48 |
1,662 |
Serbia |
19,000 |
53 |
3,180 |
Slovenia |
9,000 |
36 |
557 |