Global hydropower generation to fall in 2023

Article tags EnergyBrazilCanadaChinaGlobalSpainTurkeyUnited StatesVietnamCountry Analysis

The downward revision of our hydropower forecasts was prompted by disappointing generation data for the first half of 2023 in several countries, including China. We now forecast that global hydroelectricity generation will decline by an estimated 1.8% in 2023, after an uptick in 2022 that was led by increases in Brazil, the US, Canada, Turkey and Vietnam (all major hydropower producers). 

Hydroelectricity is the biggest global source of clean energy, so increasing occurrences of droughts and high temperatures—exacerbated by climate change—will raise energy security risks for countries, prompting the need to fill the gap with fossil-fuel based power generation. Although we currently expect the hydropower dip in 2023 to be temporary, increasing frequency and intensity of extreme weather events presents a major downside risk to our hydropower generation forecast, likely leading to a higher than expected emissions trajectory. 

Decline in the world’s largest hydropower producing region  

The decline in 2023 will be led by the drop in China, where we expect hydropower production to decrease by 7% year on year. Dry weather conditions since the second half of 2022 have severely affected hydropower generation. Generation in the first half of 2023 was down by 22% compared to the same period in 2022. The southwestern part of the country, which produces more than half of China’s hydroelectricity in a normal year, was among the worst affected. The effects of the ongoing El Niño weather phenomenon will probably bring heavy rains in the area and across southern China, but it is unlikely to shift the full-year generation picture markedly. The country accounts for about a third of global hydropower production, so this fall will be enough to offset any gains in other parts of the world. 

The worst of El Niño‘s drying conditions in Asia will be felt in Vietnam, a major hydroelectricity producer which gets about 30% of its electricity supply from hydropower plants. Ongoing droughts in hydropower-rich regions of the country are now expected to reduce Vietnam’s hydropower generation by about 8% in 2023. 

Divergent trend in North and South America

Hot and dry weather conditions are also being experienced in much of the US and Canada, pulling down their potential for hydropower generation. Canada depends on hydropower to meet about 60% of its electricity needs, and generation in 2023 is expected to remain at similar levels to 2022. A power deficit arising out of hydro electricity supply may spur higher generation from gas-fired power stations. In the US dependence on hydropower is low, but generation in the first half of this year was down by 7% compared with the same period in 2022, owing to drier than normal conditions in key hydro-power states. We expect hydropower generation in the US to decline slightly in 2023.   

Brazil, on the other hand, experienced wetter conditions last year which pushed up annual hydropower generation by 17% in 2022. The country is the world’s second largest producer of hydroelectricity, which accounts for more than half of total domestic power generation. Generation in 2023 is so far holding up at roughly the same levels as in 2022, and we do not expect any major downturn during the rest of 2023, resulting in annual growth of 1%. 

Europe: better than 2022, but below average

European hydropower production took a major dip in 2022 due to severe droughts and high temperatures in the region, which resulted in extremely low water levels in major rivers adversely affecting hydropower generation. A mild winter in 2022-23 resulted in low snowfall in the Alps, which means less meltwater to replenish river flows during the summer months. That, in addition to low precipitation during the year, has kept hydropower generation below average in the first few months of 2023–and even below 2022 levels in some European countries. A notable exception is Spain (the fifth largest hydropower producer in Europe), where due to more rainfall hydropower generation increased by about 37% year on year during the first six months of 2023 after an extremely dry 2022, which saw hydropower output collapsing by 33% from a year before. The increase in Spain’s hydropower generation has helped to offset declines elsewhere in the region. 

Additionally, improving weather conditions will mean that in countries such as France, Sweden and Norway, hydropower generation will increase this year from 2022 levels, although remaining lower than the historical average.   

Turkey, a major hydropower producer which gets about 20% of its electricity supplies from hydroelectricity, has suffered drought conditions since 2022 and is expected to register a severe drop of 18% in hydropower production in 2023 compared to last year. That has resulted in power cuts and soaring domestic electricity and gas prices in the country.  

A muted outlook for hydropower generation increases the risk to European energy security in 2023, as the region continues to struggle with the lack of Russian gas to fulfil its power supply needs. However, an improving outlook for nuclear power in countries such as France, and greater solar, wind and LNG import capacity addition last year, accelerated by the effect of Russia’s war in Ukraine, would help ease some of that pressure. 

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.

Tue, 08th Aug 2023 Article tags EnergyBrazilCanadaChinaGlobalSpainTurkeyUnited StatesVietnamCountry Analysis