A collection of Futuregrowth thought leadership pieces, media articles and interviews.

Renewable energy: Why hydropower?

28 Jul 2021

Luzuko Nomjana / Investment Analyst*


This article was first published in the Futuregrowth Power Debt Developmental & Social Impact Bi-annual Report as at 31 March 2021. 

Hydropower is energy that comes from water, which is used to generate electricity. Modern hydro turbines can convert as much as 90% of the available energy into electricity, while the best alternative energy plants are only about 50% efficient. Unlike fossil fuel plants, hydropower plants operate without producing greenhouse gas emissions. Some renewable energies are dependent on daily or seasonal fluctuations, whereas hydropower provides consistent and generally predictable power generation, provided the flow of water is consistent.

Hydropower is one of various options within the renewable energy spectrum. It is the most predictable amongst renewable energy sources and, when designed and maintained according to specifications, boasts highly efficient systems and very low maintenance costs.

Kruisvallei hydroelectric generation project

The Futuregrowth Power Debt Fund was one of the first institutional investors in the REIPPPP. The Fund is invested in a diversity of renewable energy deals, with R8.1 billion in committed deals across 30 projects. The Fund’s recent investment in the Kruisvallei hydroelectric generation project is its first into this form of renewable energy.

Run-of-river hydropower

The Kruisvallei Hydro project is a run-of-river plant. Advantages of this type of hydro power include:

Day and night production: As the natural resource is a flow of water, it is able to generate electricity 24/7. The biggest risk to this is the necessary constant flow of water which obviously cannot be guaranteed in a natural river scenario. With Kruisvallei, however, this risk is largely mitigated as the plant is located along the Ash River whose water resource is from the Lesotho Highlands Water Scheme with guaranteed minimum flows for the duration of this scheme. The scheme itself supplies water from Lesotho to Gauteng via the Vaal River System.

Read, Kruisvallei hydroelectric generation project: Improving the lives of the local community

Longer life: These plants are able to run for around 50 years with relative ease if maintained properly. Solar PV and wind generally run for up to 25 years prior to requiring a substantial overhaul.

Potential drawbacks can be:

  • Cost: Hydro has a much higher cost per MW compared to Wind and Solar PV and thus commands a higher tariff. However, considering that hydro can generate power for much longer than wind and solar plants, the higher cost can be justified.
  • Water scarcity: It is often difficult to forecast the long-term flow of water from a natural river. This is especially the case in the context of global warming and increasing water scarcity.

Overall, we believe that hydropower has a fitting place in a diversified local energy mix.

 PDF version, Renewable energy: Why hydropower?

*Luzuko left Futuregrowth in May 2021.