Hydropower Development: The Economic Impact of Hydropower

By: EconomyWatch   Date: 29 April 2010

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Hydropower development and economic progress are closely interlinked. The development of hydropower in Norway propelled its industrial and economic development.

Bhutan is next in line to fortify its hydropower sector with significant aid from the Austrian Development Cooperation.

A staggering 19% of the total global energy production is derived from hydropower, which refers to the process of generating electricity by using water. The five countries that account for more than half of the world’s hydropower production are Brazil, Canada, China, Russia and the US.

Experts acknowledge the striking correlation between hydropower development and a country’s economic development. Norway, one of Europe’s poorest countries a century ago, is today a highly industrialized, self-reliant and wealthy nation. Nearly 99% of Norway’s electricity supply comes from the electricity generated by its hydropower plants, which have a total capacity of 27,000 MW. The development of hydropower in Norway is believed to have propelled growth, economic development and overall expansion. The country’s current expansion efforts focus on moving from technical excellence in hydropower to capacity building.

On March 14, 2008, the Norwegian government proposed measures to gain public control of the country’s hydropower production plants and assets to ensure that hydropower concessions that are granted to other private companies will revert back to the state itself on expiry of the concessions. This will enable public ownership of hydropower assets in Norway in perpetuity.

Bhutan has made strategic moves to achieve economic development by developing its hydropower potential. The Bhutan Sub Program Energy 2005-2007 report, published by the Federal Ministry for Foreign Affairs on behalf of the Austrian Development Cooperation, throws light on the Asian nation’s progress in hydropower development. With a large percentage of its population living at subsistence levels, Bhutan has formulated serious reforms in the energy sector to capitalize on its vast potential for hydropower generation.

Experts estimate Bhutan’s hydropower capacity to exceed 30,000 MW as per a Master Plan that was drafted in 1990 and 1993. The plan also identified over 91 hydropower sites that would yield a capacity over 10,000 MW.

With capital-intensive hydropower projects in the pipeline, Bhutan is expected to witness a financial revolution. Bhutan secured €43.305 million in grants and as soft loans from the Austrian Development Cooperation in 2004. Bhutan’s relations with Austria remains centered on hydropower development that is expected to have a significant impact on rural electrification, social service sectors, job opportunities and overall economic progress. Further, with NORAD funding, Bhutan also benefits from Norwegian expertise in guiding the development of its hydropower restructuring process, power pricing and other core areas.

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