US
Hydropower
Council for International Development
Council for International Development
Ongoing Activities & Initiatives
US Hydropower to Play a Critical Role in World Summit on Sustainable Development
US Hydropower has been asked to coordinate with the
Bush Administration, US Department of State, and USAID to discuss private
sector issues at the upcoming World Summit on Sustainable Development. Hydropower is expected to play a critical role
because of its unique ability to address the sustainable development of energy
and water infrastructure.
US Hydropower believes that industry activities will
greatly enhance foreign government efforts to supply the ancillary benefits
of water development and energy to rural and urban areas. Hydropower’s unique qualities offer tremendous
benefits to the developing world. The
private sector cannot operate alone. Macro development planning and governance issues will require a
government to government relationship working with the finance community and
the private sector to most efficiently develop water resources and the competing
benefits that hydropower can provide. In developing countries where the cost of irrigation and water supply
for multipurpose projects in most cases cannot be recovered from the local
poor population, the revenue stream created by the sale of hydropower offers
unique opportunities to solve development needs. In order to work at the macro government level,
the industry will need the support of the US Government, and believes that
this partnership embraces the goals of global sustainable development.
US Hydropower has worked with member companies to identify
a project finance initiative to address the lack of project finance options
for hydropower. While the multilateral
agenda has focused on the restructuring of energy sectors in emerging markets,
private sector finance vehicles to finance necessary generation projects in
these newly formed markets have been ignored. Foreign governments and private sector must
work closely with the international finance community and development agencies
to quickly address this void. US Hydropower
is working with the Bush Administration, US AID and US Department of State
to address this issue as well as other sustainable development issues.
US Hydropower is working with the U.S. Agency for International
Development to address market concerns in the Central America region.
In September 2000, US Hydropower signed an MOU with the local trade
association to provide technical assistance on helping to resolve market barriers. U.S. companies have undertaken seven projects in Honduras and Guatemala,
all of which are very close to the financing phase but have been encountering
barriers. The Guatemalan government
has also asked the association to give it recommendations on how to move projects
forward.
US Hydropower will help the newly formed Generators
Association to make policy recommendations.
Members will partner with U.S. developers to address the market barriers
they are facing in the region. The
private sector will discuss lessons learned in other markets, and conduct
meetings with policymakers to educate them on the barriers they are facing.
US Hydropower has been asked by local private sector
in Guatemala to offer its expertise in how a trade association can most efficiently
represent its industry. The private
sector is also in need of technical assistance to help identify recommendations
to address market barriers and allow projects to move forward in the newly
restructured environment. US Hydropower expects financial closings on two
projects in Guatemala in the very near future.
A
Guatemalan Renewable Energy Law has been developed over the last few years
to encourage much needed renewable energy (mainly hydropower) investment.
As hydropower is a capital intensive energy resource, the recently restructured
energy sector in Guatemala favors thermal investment. The low life-cycle cost
and other development and environmental benefits of hydro are rewarded by
this new legislation. Implementation
of the Renewable Energy Law will be a critical step toward leveling the playing
field and allowing much needed investment to flow.
With several industry projects working to identify
viable financing schemes on near term projects, US Hydropower is working to
attract political support from the U.S. government including Capitol Hill,
USAID, and the U.S. Ambassador to Guatemala.
US Hydropower is also working through its members and their in-country
partners with the Guatemalan government and the Associacion Nacional de Generadores
private sector association to expedite implementation of the Renewable Energy
Law in Guatemala. The legislation
has already been signed by the Minister of Energy, and is now at the Office
of the President. The bill is expected
to be presented to the Guatemalan Congress shortly.
US Hydropower formed a coalition in September 1999
to work on several priorities in the Philippines. The association has been working with US AID, the U.S. and Philippine
Departments of Energy and Winrock International in this effort. The coalition was formed to identify potential
projects, business partners, and opportunities to make recommendations for
the emerging policy framework. The
newly passed legislation will open opportunities to provide critical input
on subsequent legislation, regulation, and legal issues to allow projects
to move forward. The Philippines is
the only market where industry expertise on policy framework has been requested
before it has been adopted. This represents
a tremendous opportunity to U.S. industry and the government of the Philippines
to attract investment. The U.S. industry
is very interested in discussing regulatory details.
New business partnerships have been formed as a result
of our association efforts over the last few years. An invitation to work closely with the small
hydro trade association and on the policy issues will provide more opportunities
to partner U.S. companies in the Philippines. There are several optimization projects being
discussed in Mindanao, and the asset privatization process will also offer
US Hydropower an opportunity to promote the interests of the U.S. hydropower
industry.
US Hydropower will be working with the members of the
coalition to provide additional policy recommendations in the regulatory implementation
process. US Hydropower will participate
in this process to communicate the investors’ view. Draft regulation will be unveiled to the industry
for its response. The industry needs
to be able to respond quickly to commenting on draft language, and needs to
work to partner U.S. and Philippine companies to take advantage of the restructured
energy sector.
US Hydropower is working to resolve market barriers
with member companies who are actively developing projects in India. US Hydropower has organized a public private
sector partnership with Indian and U.S. government representatives, and the
private sector, and plans to conduct an on-going policy effort for developers
to discuss investment and development issues developers are currently facing. In 1997, US Hydropower worked with US AID and
successfully conducted two policy meetings for developers to address currency
risk and credit issues. The Bhandardara
project was successfully financed in April 2000, and went on line July of
2001. The project is the first internationally
financed project on a private sector basis.
Several other projects will follow in its wake, if
we can continue an aggressive effort with the public private sector partnership.
We will focus on moving projects in the pipeline in several states,
and have been asked to help make recommendations to encourage hydropower investment
to several Indian government organizations at the state and central level.
US Hydropower members have already identified that
creditworthiness, deadlines, and jurisdictional issues are some of the major
barriers to project developers that will need to be addressed. This partnership will also promote greenfield
and modernization project priorities, and will help industry identify joint
venture partners and other business opportunities for participants.
US Hydropower plans to work with US AID, World Bank, the U.S. Commercial
Service, and US AEP on this effort, and expects to be able to resolve market
barriers to allow near term financial closure on projects, and to encourage
new projects and partnerships.
Currently, there is minimal investment flow in India
and therefore hydropower development activity is lagging and in serious jeopardy.
US Hydropower has proposed a Task Force on Hydropower Investment and
believes that its organization is a critical step to ensure that common goals
between all stakeholders, including policymakers and private sector, further
dialogue and find resolution on market barriers.
US Hydropower is planning an event with the Government of Himachal
Pradesh in March 2002, and anticipates that other state level task forces
will be established. US Hydropower also expects to coordinate key
meetings in Delhi with the Ministry of Power and the Power Trading Corporation,
and continues to discuss industry issues with local industry organizations
and associations.
Project Partnering and Identification of Market Opportunities and Policy
Input in Mexico
Mexico possesses many opportunities for U.S. hydropower
trade. There are more than 500,000
MW of hydropower potential, and about 10,000 MW of installed capacity, much
of which needs rehabilitation and upgrades to make it more efficient. Further studies have been done on 53,000 MW
of projects. Energy sector restructuring
activity will allow the private sector an increasingly larger role.
US Hydropower is working to partner several small projects in Mexico
with U.S. companies. The industry will help explore opportunities
to continue work to provide U.S. industry with information on market opportunities
in Mexico.
Public-Private Sector Partnership to work on Brazil
Market Conditioning Work and Business Partnering
US Hydropower has identified a need to support U.S.
companies who have purchased Brazilian electric sector assets. As new players in an emerging and restructured
energy sector, Brazilian investors have identified a need to coordinate comments
on the changing market. This feedback
and comment mechanism will be important for future investors also, and will
ensure that the market evolves to attract additional generation investment.
U.S. company partners for hydropower projects have
been identified in Brazil. Through
this partnering experience, the U.S. industry realizes that there is a need
to work closely with US AID and the Government of Brazil to help investors
reach financial closure. This success
will be critical for Brazil to attract other investors in small hydro. U.S. industry needs: 1) assistance on packaging potential power
purchasers to achieve investor confidence, 2) assistance from ANEEL to allow
industry recommendations on the remove barriers on financial incentives, currency
risk, land access, and permit issues; and 3) help to identify and promote
other hydropower investment scenarios for potential investors.
In order to allow investment to flow, project partnerships
also require assistance in working with ANEEL to overcome currency risk barriers
and identify long term financial incentives to improve energy efficiency or
optimization of existing hydropower assets by using innovative private investment
to implement state of the art technology and rehabilitation.
A public private sector partnership between the U.S. and Brazilian
governments and the industry will help to assure that the seven newly partnered
projects move forward, and that investors are encouraged to take on new investments.
The need for small hydropower
project development by international private sector investors has increased
significantly over the last few years. Small hydropower development has become a main focus for many markets
because the private sector prefers small projects due to shorter development
times, less market and political risk, and more manageable sums of investment
to be raised in the private market. Small projects are also many times considered to be more environmentally
benign, and offer other unique water development benefits in developing countries
to local communities. Several nations
have made small hydropower development a priority for investment, resulting
in various incentive programs and strategies to attract private sector investors.
US Hydropower is working on
a partnership activity with the US Agency for International Development which
include, data collection, project finance mechanisms, and market conditioning
and governance practices to allow investment to flow.
Hydropower
is a Clean Energy Technology with an Energy Efficiency Component. National energy plans around the globe demonstrate
a strong commitment to hydropower. New
or greenfield projects, and modernization of existing facilities are the two
major areas in which private investment is expected. Vast amounts of small and medium sized hydropower
project opportunities exist for U.S. hydropower investors. In addition, many
of the existing facilities could optimize their energy output by an added
20-40% by using upgrade, modernization or rehabilitation technologies which
U.S. companies are well placed to provide. In fact, many of the almost 656,000 installed megawatts of hydropower
could through energy efficiency improvements and investment in improvements
in power generation provide additional energy without involving additional
sites.
Hydropower will be a critical component in an overall
strategy to address global climate change concerns. The responsible balance of modernized hydro
sites combined with greenfield projects financed by the private sector will
help to mitigate the need for costly imported fuels, and will maximize sustainable
energy options for the future. In
Mexico alone, it is estimated that more than 1400 existing project sites require
such modernization, representing a substantial carbon offset at minimal investment.
US
Hydropower has been working with the White House, on Capitol Hill, and with
the International Finance Community In early 2001, US Hydropower initiated
an aggressive strategy to educate members of Congress and their staff about
the market and project finance barriers that our U.S. companies face in foreign
markets. This effort involved work
with more than 20 House offices and 5 Senate offices. US Hydropower members supported staff efforts by writing letters,
making telephone calls, and participating in briefings to educate Hill staff
about our concerns. Industry issues center around the excessive timelines and uncertain
project review processes encountered in foreign markets as they continue to
restructure and privatize their energy sectors. In addition, the industry has also faces uncertainty with the approval
process in obtaining multilateral or bilateral finance for hydropower projects.
In response to our efforts, subcommittees
on foreign operations in the Senate and House included 2002 report language
in the appropriations bill supporting a Public Private Sector Partnership
on Hydropower. The language was conferenced
on December 19, 2001. For the 2003
budget process, the subcommittees have committed to building a significant
program for U.S. hydropower industry activities and programs. This effort will include opportunities for
industry spokesmen to testify on industry issues and raise the visibility
of the U.S. hydropower industry in international community agenda.
Through our partnership with US AID, US Hydropower
members will intensify efforts to address the need for technical assistance
to the international finance community, foreign policy makers, and the private
sector on project finance, tax policy, foreign investment barriers, international
dispute resolution, international safety and environmental standards, currency
devaluation and convertibility barriers to hydropower investment.
This momentum is exactly the type of effort that the global hydropower
industry must generate to remove hydropower development barriers in foreign
markets and the multilateral and international finance community.
While the World Commission on Dams has set broad development guidelines,
the investment community -- in concert with private sector and foreign governments
hoping to attract investment -- must work closely to create innovative finance
mechanisms to bring investment to projects.
US
Hydropower expects to discuss new program plans resulting for 2002 appropriations
language with US AID leadership in February, and has already begun to discuss
an expanded program for hydropower in the 2003 appropriations process.
Update on Clean Energy Technology Export Program
US
Hydropower has been working on the Clean Energy Technology Export Initiative
since last spring. The program, co-chaired
by USAID, Department of Commerce, and the U.S. Department of Energy, has received
report language and is expected to be backed by the White House.
US Hydropower participated in a private sector meeting held by the
agencies on January 15th. The agencies are expected to report back to
Congress shortly on the program structure and activities to be undertaken. US Hydropower’s partnership language has given
strong guidance to agencies that the hydropower industry should play a major
role in this effort. US DOE has already
committed to fund activities in Mexico and Brazil under this new program.
For Further Information contact:
Debby Stone
US Hydropower Council for International Development
1500 K Street NW #330
Washington, DC 20005
Tel 202.383.2536
Fax 202.408.5406
debbys@us-hydropower.org