HYDROPOWER MARKET ANALYSIS

Market Size and Trends

Global hydropower market is estimated to be valued at USD 251.58 Bn in 2024 and is expected to reach USD 356.36 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 5.1% from 2024 to 2031.

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Hydropower industry is witnessing significant growth due to increasing focus on renewable sources of energy globally. Many countries are investing heavily in hydropower projects to meet their rising need for electricity and shift towards clean energy sources to lower carbon emissions. Favorable government policies and regulations in various nations promoting the use of hydropower are further boosts the development of new projects.

Rising Concerns over Greenhouse Gas Emissions

Rising concerns over greenhouse gas emissions and their significant role in climate change have been driving the growth of global hydropower market in recent years. There is a growing realization worldwide that traditional thermal power sources which rely on burning of fossil fuels like coal are major contributors to carbon emissions. Hydropower, being a renewable source of energy which produces no greenhouse gases during power generation, is seen as a viable and sustainable alternative to reduce dependence on fossil fuels. Many countries have been increasingly focusing on adding more hydropower projects to decarbonize their energy mix and meet their nationally determined carbon reduction goals under the Paris Agreement. For example, according to data from International Hydropower Association, China had increased its total hydropower capacity from 179 GW in 2015 to 353 GW in 2021 through extensive development of new dams and reservoirs. Many developing nations in Asia and Africa are also exploring opportunities to develop domestic hydropower resources to fuel their industrial growth in a low carbon manner. International agencies like World Bank are actively supporting such nations to develop bankable hydropower projects.  Recent analysis by the UN Department of Economic and Social Affairs suggests that almost 60% of new power generation capacity added globally between 2022-2023 was from renewable sources like solar, wind and hydropower indicating a rising shift away from fossil fuels. This clean energy transition is projected to continue over the medium to long term horizon which will significantly accelerate investments into scaling up renewable capacity including hydropower projects worldwide. Nations are also increasingly recognizing the value of hydropower in providing much needed flexible power generation capabilities to balance intermittent renewable sources like solar and wind in the grid. This complements the growing share of variable renewables and strengthens the case for investment in pumped storage and reservoir based hydropower projects.

Market Concentration and Competitive Landscape

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Affordability and grid flexibility are key drivers spurring the growth of the global hydropower market. Hydropower is becoming increasingly viable economically compared to other renewable sources owing to lower installation and generation costs. According to the International Hydropower Association, the levelized cost of energy from hydropower projects commissioned in recent years ranges from $0.03-0.10 per kWh, making it competitive against fossil fuel alternatives in many parts of the world. Hydropower plant setup requires massive infrastructure but has operational life cycle lasting 80 years on average with minimal running costs. Once constructed, hydropower generation delivers reliable baseload electricity at low and predictable prices over the long-term.  Another important growth factor is the capability of hydropower resources to complement other intermittent renewable energy sources by acting as grid balancing solution. Hydropower facilities allow incorporating higher quantities of solar and wind power on electrical grids through load balancing abilities. Hydropower generation can be increased or decreased within minutes to adjust for fluctuations in power supplied from weather-dependent energy sources. This enhances overall grid stability and efficiency. For example, Eurostat data shows hydropower in European Union compensated for 61% of the variability in solar and wind-based renewable electricity generation during 2020-2021.

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High initial investment costs required for hydropower projects can hamper the growth of the global hydropower market. Developing large-scale hydropower plants involves massive financial investments at the start for activities such as feasibility studies, land acquisition, infrastructure development, and construction of dams, tunnels and powerhouse structures. These upfront capital costs can run into billions of dollars depending on the size and scale of the project. For instance, the construction of the Three Gorges Dam in China, one of the largest hydropower plants in the world, required an initial investment of over USD 22 Bn. Such large capital commitments discourage many potential investors and make hydropower generation an unattractive option especially for developing countries with limited financial resources.  Furthermore, the long gestation periods involved in hydropower projects also contribute to their high initial costs. It often takes 5-10 years for a hydro project to complete all stages from planning and design to commissioning. This prolonged development phase requires continuous funding support over many years, increasing carrying and financial charges. Project delays and cost overruns due to uncertainties around land and forest clearances, rehabilitation of displaced people, environmental clearances, and others further inflate initial capital costs.

 Opportunity: Developing small hydropower projects

Developing small hydropower projects can provide great opportunity to the global hydropower market. Small hydropower projects, which generate up to 25MW of power, are more accessible to develop as compared to large dams due to their smaller size and lower environmental impact. Many remote areas and communities around the world still lack access to a reliable power supply. Developing decentralized small hydropower resources could help electrify these off-grid regions in a sustainable manner.  There has been a growing emphasis on developing sustainable energy solutions globally. Small hydropower fits well into the renewable energy expansion plans of many countries. According to the International Hydropower Association, small hydropower projects accounted for over half of new hydropower capacity added worldwide in 2020.

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Large hydropower segment is estimated to hold 62.2% of the market share in the global hydropower market in 2024 due to its advantages. Their large scale allows them to harness substantial water volumes and generate huge amounts of electricity very cost effectively. Once constructed, the operating costs of large hydropower plants are also relatively low as compared to other renewable sources. This makes electricity from large hydros highly competitive on price.  Their large size also enables large hydropower projects to provide base load power capabilities. These can generate a steady supply of electricity around the clock to meet consistent energy demands. This makes them well-suited to industrial and commercial applications having constant power needs. The reliable, baseload supply of electricity from large hydropower boosts its appeal as compared to fluctuating sources like solar and wind. The substantial power output of large hydropower plants allows utilities to use them as the backbone of their power generation portfolio.

Insights, By Application: Industrial segment dominates the market due to its huge and consistent electricity demands

Industrial sector is the largest consumer of hydropower, provided its massive year-round electricity needs. Industrial segment is estimated to hold 43.3% of the market share in 2024. Manufacturing activities across various industries like metals, chemicals, paper, food processing, and others have huge and consistent demands for power. This makes hydropower an appealing option especially in areas where industries can leverage nearby hydro resources at competitive prices.  Some key industrial applications highly suited for hydropower include aluminum production, steel manufacturing, pulp and paper mills, and water supply and treatment facilities. These energy intensive processes require huge volumes of uninterrupted power, which hydropower is uniquely positioned to provide as a renewable and reliable alternative to fossil fuels. The ability of hydropower plants, especially large hydro projects, to function as baseload power sources makes them especially valuable to industries. Many manufacturing clusters are located close to river basins, thus, facilitating easier transmission of power from hydropower stations. This proximity and ability to directly harness local hydro resources supports industrial uptake of hydropower.

Regional Insights

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Asia Pacific region currently dominates the global hydropower market. Countries like China, India and Japan have a strong presence in this industry due to favorable geographical and climatic conditions with estimated 37.8% share in 2024. With plenty of hilly and mountainous terrain across the region, there is an abundance of river systems that can be effectively harnessed to generate hydroelectric power. China, in particular, has aggressively invested in hydropower production over the past few decades. It is now the global leader in installed hydropower capacity and hydropower generation.

Latin America region, especially countries like Brazil, is rapidly emerging as the fastest growing market for hydropower globally due to ongoing initiatives to expand renewable energy adoption and increase energy security. Brazil has a long history of utilizing its extensive river networks for hydroelectric projects. However, a concerted push in the past 5-7 years to build new dams and modernize older facilities has greatly augmented hydropower capacity. Countries in the southern cone of South America like Chile, Argentina and Uruguay are also actively developing run-of-the-river and pumped storage schemes to meet rising power needs as well as for cross-border electricity trade.

Market Report Scope

Key Developments

• In March 2024, The India-Bhutan joint vision document on energy launched during Prime Minister Narendra Modi's visit to Thimphu
• In 2023, Baihetan hydropower station won the 2023 FIDIC Outstanding Project Award
• In 2023, 2023, Tata Power Delhi Distribution Limited (Tata Power-DDL) signed a five-year, 200-MW medium-term hydro power purchase agreement (PPA) with NTPC Vidyut Vyapar Nigam Ltd (NVVNL) to meet projected peak demand. The agreement will supply hydro power to Tata Power-DDL from May to September, beginning May 1, 2023.
• In 2023, the three cascade hydropower stations along the Qingjiang River in Hubei Province, China, achieved their first full-capacity operation on September 23, 2023, with a peak output of more than 3.3 million kilowatts. The three stations are Shiquan, Xihe, and Ankang, and are an important part of the Northwest Power Grid. They are responsible for power generation, power grid peaking, and frequency modulation.

*Definition: The Global Hydropower Market refers to the worldwide market for hydropower generation from renewable sources such as rivers, dams and other flowing waterways. It covers the manufacturing, installation and maintenance of hydropower infrastructure including turbines, generators, dams and monitoring systems. It also includes consulting, engineering and project management services for new hydropower projects.

Market Segmentation

• Type Insights (Revenue, USD Bn, 2019 - 2031)
  • Large Hydropower
  • Small Hydropower
  • Other Sizes
•  Application Insights (Revenue, USD Bn, 2019 - 2031)
  • Residential
  • Commercial
  • Industrial
• Regional Insights (Revenue, USD Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • Israel
    • Rest of Middle East & Africa
• Key Players Insights
  • Siemens Energy
  • General Electric (GE)
  • Voith GmbH & Co. KGaA
  • TOSHIBA CORPORATION
  • FLOVEL Energy Private Limited
  • ANDRITZ
  • Natel Energy
  • Gilkes
  • Bharat Heavy Electricals Limited
  • SNC-Lavalin Group
  • Kolektor
  • Mavel, a.s.
  • Canyon Hydro
  • China Three Gorges
  • Alfa Laval
  • Hydro-Quebec
  • ABB
  • Engie