How to invest in hydropower: types of schemes and limitations
Hydropower accounts for 16 percent of all electricity generation worldwide.
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What is hydropower?
Hydroelectric power or hydroelectric power is electricity generated by the flow of water. Simply put, hydroelectric power is generated when moving water flows through it and turns a turbine to generate electricity.
According to the Energy Information Administration, hydropower accounted for about 6.3 percent of all U.S. utility-scale electricity generation (at least 1,000 kilowatts of capacity) and 31.5 percent of all utility-scale electricity generation from renewable sources. In 2021, utility-scale power generation was 4,108 billion kilowatt-hours (kWh).
Hydro’s share of total electricity generation has fallen over the years due to increased use of other types of electricity generation such as solar and wind, but its contribution to the renewable energy mix remains significant. Hydropower accounts for 16 percent of all electricity generation worldwide, according to the International Finance Corporation.
How does water become electricity?
Hydropower has its roots hundreds of years ago when running water was used to turn a wheel that ground wheat into flour. Water was also used to turn leather straps that moved saws used in wood production. Today there are various systems that capture the flow of water in water turbines that generate electricity and storing this energy in storage batteries is a viable option.
river and storage systems
Traditional hydroelectric power plants include a run-of-river system, in which the flow of a river flows through a turbine, and a storage system, in which water from a reservoir is injected into turbines in a controlled manner.
In a pumped storage power plant, water is pumped into a reservoir, usually at an elevation higher than the water source, and the controlled release of water flows into a turbine. However, pumped storage systems tend to consume more electricity than they produce, resulting in negative net electricity generation balances.
Most hydroelectric power plants in the US have dams and reservoirs, but dams built decades ago were not designed to generate electricity — a small fraction are capable of doing so today.
wave energy
Wave energy is a type of energy that can generate electricity by capturing the kinetic energy of waves to drive a turbine. Its use is mainly offshore in open water. Wave power plants are not very widespread compared to run-of-river hydroelectric power plants, but the EIA estimates that the annual energy potential of the waves off America’s coasts could generate up to 2.64 trillion kWh annually.
Which areas in the US are ideal for hydroelectric power?
Hydropower relies on facilities that are close to a water source. Some areas in the US are ideal because of heavy rain or snowfall. The Pacific Northwest, for example, has more rainfall than parts of the continental U.S. Snow accumulates in the mountains during the winter, and in the spring this snowmelt feeds rivers and tributaries where hydroelectric power plants can be built to use the river or store water for turning turbines.
Almost all hydroelectric power in the US comes from onshore plants, with very little offshore production. In 2021, just five states accounted for more than half of all hydroelectric power generation in the US: Washington (27%), Oregon (11%), New York (11%), California (6%), and Tennessee (5%). ).
Many states have the potential to develop hydropower, although hydroelectric power generation is currently concentrated in only a few states.
energy information management
Almost all hydroelectric power generation in New York comes from the Niagara River, which empties into Niagara Falls. The state-controlled utility’s power plants at Niagara Falls produce 28.7 billion kWh of electricity each year, which is enough to power 287 billion 100-watt light bulbs.
How to invest in hydropower
There aren’t many publicly traded companies that focus solely on hydropower, and dedicated indices and exchange-traded funds are hard to come by. That may mean focusing on alternative renewable energy indices and ETFs. Stocks are typically utility companies that can build large power generation facilities. In addition, few publicly traded companies are available for trading as many utility companies that operate hydroelectric power are government controlled.
Stocks
- Brookfield Renewable Partners LP (NYSE: BEP) is focused on renewable energy and operates in more than 30 countries in North America, South America, Europe and Asia. Hydropower accounted for around 75 percent of total sales in 2022.
- IDACORP (NYSE: IDA) controls Idaho Power Company, a regulated electric utility that operates 17 hydroelectric power plants that draw water from a river and its tributaries in the state. Geothermal energy is also part of the mix of renewable energies.
- Ocean Power Technologies Inc. (NYSE: OPTT) develops systems that generate electricity by harnessing the renewable energy of ocean waves.
- Portland General Electric Company (NYSE: POR) is expanding its use of renewable energy, shifting away from coal and other fossil fuels. Because the focus is Oregon and there are few rivers and tributaries to build on, the potential construction of additional hydroelectric power plants within the state is limited.
Are there limits to increasing hydroelectric power generation?
Conservationists oppose the development of water resources in certain areas because of concerns about the impact of power generation plants on fish, wildlife and plants. This resistance can pose an obstacle to the construction of new plants, unless laws or court decisions permit such development.
Because hydroelectric power plants rely on water, drought or little rainfall or snow can severely affect hydroelectric power. Without water, the turbines would be idle.
Water sources and the power of water flow in rivers can also limit the construction of facilities. The Midwest offers little potential for hydropower construction, but the eastern and western states offer potential with their proximity to mountains.
