Internalized Costs of Hydro

What is meant by "internalized costs"?

Internalized costs are the costs which can be accurately accounted for in our current systems. In energy production, these costs typically consist of capital costs, financing costs, operation and maintenance costs, and exploration costs. Some energy options incur these costs in various stages such as extraction, transportation and refinement. Profits and taxes are excluded wherever possible in order to isolate the pure cost of production.

Internalized costs of hydro

The internalized costs of hydropower vary greatly depending on the location. In locations with great water resources and the perfect topography and rock structure for the construction of dams, hydropower can be produced at costs below even the cheapest coal plants. Unfortunately, such locations are in limited supply, implying that hydro cannot economically meet more than a few percent of society's energy needs. As shown below, hydropower has already maxed out in the rich world several decades ago, but is still growing rapidly in the developing world (mainly due to China).


Internalized costs of hydropower are dominated by capital costs and these costs can vary by as much as an order of magnitude between different counties. For example, this IEA report gives capital costs for Chinese hydropower in the vicinity of $1000/kW and Japanese hydropower in the vicinity of $10000/kW.


The LCOE of hydropower is given below as a function of the two most important variables: plant capital costs and financing costs. Other assumptions include O&M costs of $5/MWh, a plant lifetime of 50 years and a 50% capacity factor. The Excel datasheet used to create this figure can be accessed here.



The cost of using hydroelectricity for heat is given below.



As outlined in the previous article on the internalized costs of nuclear, transport costs using hydroelectricity will be estimated based on optimistic projected technologically mature synfuel production costs. Since hydro can function both in a baseload-dominated system (where synfuel production would take place in low demand periods at night and over weekends) and in a variable-dominated system (where synfuel production would take place during times of wind/solar peaks), a 40% capacity factor will be used for the synfuel plant



In order to assist in finding the consensus view on the internalized costs of hydropower, please follow these simple commenting guidelines:

Three types of comments are welcome, each introduced by a keyword:

  1. DATA: Please give your opinion on any of the numbers presented in the article. Of particular interest is the average global capital cost of a hydropower plant at commissioning ($/kW) and the discount rate excluding investor profits (%). Each DATA comment will be weighted by the number of "likes" when the data is ultimately processed.
  2. REBUTTAL: If you strongly disagree with an existing DATA comment, please write a short rebuttal. The "likes" received by a REBUTTAL comment will subtract from the "likes" of the DATA comment. A REBUTTAL comment can once again be rebutted to reduce its weighting.
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Miscellaneous guidelines:

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Many comments are welcome. More data = greater accuracy.