The future of hydropower in Latin America and the Caribbean

Hydro-power is no longer what it used to be during the golden 1970s when the whole region was engaged in dash for hydro. Most of the best sites have already been developed and new sites face environmental restrictions so the long run marginal cost of hydro-power has increased relative to other alternatives. Today hydro faces stiffer competition from thermal power. The change in gas-fired power generation technology has made a difficult case even worse. A key feature of investments in hydroelectric power generation projects is that they require long term loans with extensive grace periods because they are capital-intensive, have a long construction phase with significant risks and have a long useful life. As a result, private developers prefer thermal plants. It is not only the environment that is conspiring against hydro development.

Nevertheless, there remain many instances in which hydro alternatives still may be the most economical way to produce power. Hydropower will most likely constitute the main source for Brazilian electricity for at least a decade., Venezuela still has not completed its development of the lower Caroní River Basin and may have interesting sites in the upper basin. Other countries, such as Peru and Ecuador, may either experience some delays in joining the dash for gas or may have important and competitive hydro developments available.

While there are still some old faces in the pipeline of potential projects involving large dams (some cheap and relatively problem- free like Corpus in the Paraná River, some more questionable like Boruca in Costa Rica), there are new sites like Cheves, a 520 MW high head project in the Huaura river in Perú, which for one reason or another didn't figure prominently in the old expansion plans of the golden age. Also, neglected by the earlier inventories are small and medium size sites or even scaled down versions of old projects. The development by the private sector of smaller, 25 MW, high head and relatively environmentally sound projects in Colombia and Costa Rica is an indication of what may lie ahead.