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Central and Eastern European Hydro Power Outlook PDF

136 Pages·2010·7.03 MB·English
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ENERGY AND NATURAL RESOURCES Central and Eastern European Hydro Power Outlook kpmg.com KPMG in Central and Eastern Europe’s Energy & Utilities Advisory Practice © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Central and Eastern European Hydro Power Outlook | 3 Dear Reader, It is my pleasure to introduce the Central and Eastern European Hydro Power Outlook, which has been prepared by the KPMG in Central and Eastern Europe’s Energy & Utilities Advisory Practice located in Budapest, Hungary. Based on the interest for our previous publications covering electricity, natural gas, renewable and nuclear energy, as well as the district heating sector we have assembled this report with the ultimate aim of highlighting the most important opportunities in the region’s hydro power sector. On the following pages, it was our aim to turn market data into meaningful analysis, thus offering KPMG’s insight on available opportunities for business organizations and institutions interested in the Central and Eastern European hydro power sector. Péter Kiss Partner, KPMG Global Head of I trust that this report will prove to be useful to you and I wish you all the best Power & Utilities on your participation in, the development of the CEE hydro power sector, whether you are an investor, supplier or any other stakeholder on the market. Sincerely, © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Central and Eastern European Hydro Power Outlook | 5 Table of Contents Executive Summary 7 6.8. Kosovo 72 6.9. Latvia 74 1. Defi ning CEE Energy Markets 11 6.10. Lithuania 77 2. Introduction of the Technology 15 6.11. Macedonia 80 2.1. Hydroelectricity 15 6.12. Montenegro 83 2.2. Types of Hydroelectric Power Plants 16 6.13. Poland 86 2.3. Major Turbine Types and their Application 19 6.14. Romania 89 2.4. System Balancing Capabilities of Storage 20 6.15. Serbia 93 and Pumped Storage HPPs 6.16. Slovak Republic 96 2.5. Possible other Roles of HPPs, their 22 6.17. Slovenia 99 Dams and Reservoirs 7. A Leading Example – Austria 102 2.6. Environmental Impacts 23 8. Public Acceptance of Hydro Power 105 3. Regulations 29 8.1. Gabčíkovo-Nagymaros Hydro 105 3.1. Are All Hydro Plants Renewable? 29 Power Project 3.2. EU Regulations for Water Policy and 30 8.2. Mardøla and Alta Hydro Power Projects 106 Renewable Energy 8.3. Hainburg Hydro Power Project 106 3.3. Greenhouse Gas Emission Measures 33 8.4. Freudenau Hydro Power Project 106 4. Electricity Demand Trends in the CEE Region 37 8.5. Conclusions 107 4.1. History 37 9. Economics of a Hydro Investment 109 4.2. Future Outlook 38 9.1. Investment/Operation Cost Ratio 110 4.3. Special Demand for Renewable Energy 39 Sources Including Hydro Power 9.2. A Comparison with Other 116 Power Plant Types 5. Importance of Hydro Power in the CEE Region 41 9.3. Cooperation and Cost Sharing 121 6. Country Profi les 47 10. Investment Potentials 123 6.1. Albania 49 Acronyms 126 6.2. Bosnia and Herzegovina 52 6.3. Bulgaria 56 What can KPMG Firms Offer to the Hydro 129 6.4. Croatia 60 Power Sector? 6.5. Czech Republic 64 6.6. Estonia 67 6.7. Hungary 69 © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 6 | Section or Brochure name © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Central and Eastern European Hydro Power Outlook | 7 Executive Summary Hydroelectric generation is not new to Central and Eastern Europe (CEE). Hydro power’s key advantage – the absence of fuel costs – has historically underpinned signifi cant development, meaning that many of the obvious plant locations have been exploited, especially under the socialist regimes after World War Two. Hence hydro facilities account for almost 29,000 MW, or 23% of the total 127,000 MW generating capacity in CEE, and every country, from Estonia to Bulgaria, has some hydro installations. In Albania and other countries in the Balkan Peninsula, hydro dominates the generation mix. After 1990, in the fi rst years of transition to a market economy, the closure of heavy industry (and subsequent reduced electricity demand) coupled with political uncertainties, meant a reduced pipeline for new power projects in many CEE countries. However, political stabilization and economic progress in the past decade have led to an upturn in electricity demand – albeit somewhat interrupted by the recent global economic crisis. This turnaround, coupled with the need to replace ageing and often ineffi cient, polluting plants, has focused minds once more on the need for new investment in generation capacity. Furthermore, the growing emphasis on clean energy, as mandated by the European Union, plus concerns regarding security of fuel supplies, makes investment in hydro power all the more attractive. As this report highlights, the good news is that there remains huge potential for hydro development within CEE, where the total technical hydro capacity could generate an estimated 176,300 GWh per year. In reality, current output stands at 62,700 GWh, meaning the regional utilization rate is a mere 30%. This potential includes even those countries which already boast signifi cant levels of hydro investment. In Albania, for example, hydro facilities account for 87% of total generation capacity and an astonishing 97% of electricity generated. Yet an analysis by the World Energy Council reveals Albania is exploiting only one-quarter of its total water-sourced potential. © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 8 | Central and Eastern European Hydro Power Outlook Similarly in Bosnia-Hercegovina, the utilization rate of the technical hydro potential is a mere 19%, meaning the country could, under ideal conditions, generate an annual 24,000 GWh – fi ve times its current annual output. Lithuania, for example, currently utilizes less than one-third of its technical hydro potential, which amounts to an annual 3,000 GWh. Poland is even more wasteful; the 2,700 GWh it sources from hydro generation being a mere fi fth of its technical potential. But the most profl igate country in the region regarding water resources is Hungary, where hydro facilities amount to just 46 MW (0.6% of the total) and generate a paltry 200 GWh annually (again, 0.6% of the total). This is just 3% of Hungary’s technical potential, where hydro capacity could generate 8,000 GWh annually, or about 20% of net production. Hungary’s failure to harness its water resources to provide more electricity provides a series of case studies illustrating the pros and cons of hydro power – both real and perceived. Hungary, together with the then Czechoslovakia, sought to tap into its potential hydro power when in 1977 the two countries announced plans for a system of dams and hydro-power stations on the Danube, which formed the common border between the two countries for some distance. Known as the Gabickovo-Nagymaros Hydro Power Project, the scheme was intended to prevent fl ooding, improve navigability and provide generation capacity of 880 MW (to be shared between the two countries) at full capacity. However, in Hungary the project was soon criticized by environmentalist groups, and it became a safe channel for protest by the growing anti- communist opposition during the 1980s. Shortly after the fi rst democratic elections in 1990 Hungary unilaterally abandoned the scheme, although Slovakia completed a simplifi ed version of the project on its territory. As this report notes, there are certainly many environmental (and often political and social) factors that require careful evaluation when planning any hydro project, most particularly large schemes that involve damming rivers to hold back large volumes of water. However, the creation of such dams often yields a number of secondary outcomes, which can further enhance the value of such schemes. These include the use of the reservoir for water sports and leisure activities (as has occurred in Slovakia in the modifi ed Danube scheme) and in some locations the dams themselves form useful communication links between riverbanks. Indeed, with careful planning and consultation between all parties involved, hydro schemes can garner the support of the general public and, at best, become the ideal ‘win-win’ development. © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Central and Eastern European Hydro Power Outlook | 9 This report emphasizes the experience of Austria, where a combination of 154 large and 2,400 hydro generators, built within the framework of clearly-defi ned regulatory support system, now provides 60% of the country’s electricity needs. However, even in Austria, projects have foundered, most notably the Hainburg hydro scheme of the 1980s, where environmentalists, ignored by the authorities, fomented protests and eventually forced the abandonment of the project. Austria learned its lessons, and just a few years later created intense public involvement for its proposed Freudenau hydro scheme in Vienna. The result was a 70% yes vote for the scheme in 1991, and seven years later the project was completed, providing over 1,000 GWh annually to the grid since 1998. As our study stresses, Austria’s ability to so successfully exploit hydro power offers many lessons for other countries in the region. The Austrian banking sector, state and regional authorities function effectively, hence they have the means to provide systematic planning and support to hydro projects. Many of the states in the region lack Austria’s administrative skills, nor do they possess the fi nancial means to fully fund even small hydro schemes (which are more expensive than large projects per kW installed). Furthermore, much of the region’s potential hydro power will require some form of guaranteed electricity pricing to create a sound business case and attract external fi nance. Under these conditions, the most crucial role of the CEE states is to each create a sound regulatory and legal environment to assure potential investors (both domestic and international) that their money is safe and that it will earn a steady, if unspectacular, return. From this study it is clear that much potential exists across CEE to develop hydro power, particularly (but not only) in mountainous countries such as Albania, Romania, Bulgaria and former Yugoslavia. This potential includes hydro generation in all its forms, including renewal of older, ineffi cient facilities, new projects involving both large and small generators, and pumped-storage schemes that help system balancing and utilize low-cost electricity at times of low demand. In addition, environmental concerns and public sentiment generally support the use of clean energy. But to exploit these potentials in practice will require governments and utility companies to employ a wide-ranging skill-set from careful, in-depth technical and fi nancial planning to innovative public relations techniques. © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. © 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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