The future energy system needs hydropower

In conjunction with publication of the third review in its Energy Review series, Fortum held a seminar in Stockholm, Sweden, on 18 November 2015, focusing on the future of hydropower.

​Emissions-free hydropower is needed in combating climate change, but the profitability of hydropower production has weakened due to the historically low electricity prices, tighter regulatory requirements, and increasing taxation. 


Hydropower is an emissions-free, flexible and cost-efficient way to balance the fluctuating production of other renewable energy sources. Wind and solar power in particular are very weather-dependent, so hydropower is needed as balancing power to offset fluctuations in energy supply and demand. Different interpretations of environmental legislation, long permit processes, and heavy taxation, however, hamper the utilisation of hydropower’s full potential. 


“Political objectives aim to increase hydropower and other renewable energy sources. Meanwhile, environmental legislation and regulations are essentially preventing new investments or even the modernisation of existing hydropower plants. This is very concerning,” says Per Langer, Executive Vice President, Hydro Power and Technology, Fortum.


The legislation and political actions related to hydropower should take into consideration local environmental impacts as well as climate change mitigation and hydropower’s role in the current and the future energy system. Fortum’s Energy Review notes that there must be common objectives, regulations and practices at the EU level, nationally and locally. In addition, in terms of taxes and subsidies, hydropower must be on equal footing with other renewable energy production forms.


Hydropower is a significant energy source in the EU, Norway and Switzerland, where it accounts for nearly 20% of electricity production. A considerable part of this production comes from the Nordic countries, primarily Norway and Sweden. Over half of the electricity production in the Nordic countries is based on renewable, practically carbon-free hydropower. Historically, hydropower has been a central factor in the electrification and industrialisation of the Nordic society.


Fortum’s key messages on hydropower: 

• Hydropower is renewable, emissions-free, competitive and a flexible way to produce energy.

• As more and more weather-dependent renewable energy production is introduced to the system, more balancing power is needed. Hydropower is an efficient and climate-friendly way to produce this balancing power.

• A large amount of variable renewable energy in the system causes high volatility in the power price. Hydropower used in combination with other renewables contributes to more stable power prices and system stability.

• Hydropower production is currently subject to significantly higher taxation than other renewable energy production; this puts it in an unfair competitive position. The taxation value for hydropower should equal that of other generation forms.

• Regional, national, and EU environmental legislation, acts and legal practices should be based on the same sustainable environmental, climate and energy policy priorities so that also global climate and environmental concerns are taken into consideration alongside local issues.