Sirelark Divider Graphic
Divider graphic

Renewable Energy Risk Insights: Re-assessing Hydroelectricity

The potential of large-scale hydroelectric schemes in the United Kingdom has dried up. Since the 1950s and 1960s, most viable sites for producing hydroelectricity on a large scale have been identified and utilised, leaving little room for further growth at this level.

However, schemes on a smaller scale remain untapped. The existing potential of small-scale hydroelectric schemes represents about 1 to 2 per cent of overall UK energy-generating capacity, according to recent government studies. As an investor or developer hoping to capitalise on this potential, it is important to understand the risks and rewards of harnessing the possibilities of hydroelectric power.

Understanding the Technology

Hydroelectric power is generated from the energy in moving water. The flow of water in rivers or man-made installations such as dams turns turbines, which convert the water’s kinetic energy into electrical energy through their rotation. The amount of electrical energy produced depends on the rate of flow and the ‘head’, or vertical distance, the water falls through.

There are three main types of hydroelectric schemes:

  • Storage schemes enclose water in a dam reservoir that fuels the turbine and generator, which are usually located within the dam itself.
  • Run-of-river schemes exploit the natural flow of a river to power turbines, sometimes diverting water to a remote powerhouse containing the turbines and generator.
  • Pumped storage schemes use two reservoirs to anticipate customer demand for electricity—when demand is low, such as during the night, water is electrically pumped to a higher basin to create power when demand returns. However, pumped storage schemes are not considered renewable energy because they rely on electricity.

You should inspect the proposed location of your small-scale hydroelectric scheme and measure its head to determine which type of method will be most effective.

Installing a Small-scale Hydroelectric Scheme

Small-scale hydroelectric schemes are able to power several houses or even a small community. Upfront costs are high, but any installations should last for decades if the location has the following:

  • Regular rainfall
  • Adequate water pressure (more than 2 metres of head)
  • A water intake valve above a weir or behind a dam
  • A water transport system
  • A flow control system
  • A turbine and generator
  • An outflow

You can offset high upfront costs with Feed-in Tariffs (FIT) which reward renewable energy generation. The FIT programme provides additional benefits for exporting excess renewable energy to the grid. In order to participate in the FIT programme, developers must meet stringent environmental protection requirements. For more information, visit the Office of Gas and Electricity Markets’ website, located here.  

As a general rule, capital costs rise as head decreases. The average capital cost is about £2000 to £3,000 per kW capacity. This figure is a rough estimate and depends on several factors, including:

  • The state of any existing infrastructure, such as an unused mill
  • Willingness to assist the manufacturer or installer
  • Type of hydroelectric resource available
  • Type of hydroelectric scheme used

Before undertaking any formal feasibility studies, make sure you contact the appropriate local authority for specialist advice. Also be prepared to acquire environmental permits from the Environment Agency (England and Wales), the Scottish Environmental Protection Agency or the Northern Ireland Environment Agency.

Assessing the Risks

While the largely untapped market of small-scale hydroelectric schemes can produce predictable, renewable energy, it is not without risk. The general risks of installing these types of hydroelectric schemes include:

  • Failure of water turbines
  • Damages from water surges
  • Effects from water hammer, a pressure surge due to a sudden change in the direction of water flow
  • Disruptions and repair challenges due to the typically rural location of hydroelectric sites
  • High repair costs compared to other renewable energies
  • Increased risk of natural disasters such as landslide, snow slide and flooding
  • Labour-intensive installation process

Supporting Your Endeavour

Because small-scale hydroelectric schemes have been overlooked in favour of larger projects, you stand to profit from this oversight. Fully understanding and managing your risks in this endeavour can help ensure future success.

For more information on transferring your risk when installing and operating a small-scale hydroelectric scheme, contact the insurance professionals at Sirelark Risk Services today.

For more useful articles and resources, please join our mailing list:

The content of this publication is of general interest and is not intended to apply to specific circumstances or jurisdiction. It does not purport to be a comprehensive analysis of all matters relevant to its subject matter. The content should not, therefore, be regarded as constituting legal advice and not be relied upon as such. In relation to any particular problem which they may have, readers are advised to seek specific advice from their own legal counsel. Further, the law may have changed since first publication and the reader is cautioned accordingly. © 2013 Zywave, Inc. All rights reserved.

Latest blog posts