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Hydropower is currently the nation’s largest source of clean, domestic, renewable electricity.
How it works
Hydropower is all about the conversion of water’s kinetic or potential energy into usable energy that powers machinery or stores electricity. The real question is, where does water’s energy come from?
There are numerous ways water moves in our ecosystem. The most obvious one is ocean waves powered by the gravitational force of our moon, the heavy winds of our atmosphere, and possibly earthquakes. Less obvious is the water cycle powered by our sun which evaporates the water up to the clouds and then precipitates back down, causing lakes and rivers to flow in and out of oceans.
Dams, turbines, and generators convert all of these forces from water into usable electricity fed right into our power grid.
Hydroelectric power is by far the most efficient source of energy in terms of thermal efficiency. Thermal efficiency is the percentage of heat energy transformed into work. Nuclear reactors give off immense heat that is not captured and thus wasted. In fact, you could consider heat as negative work because it may require additional cooling systems to ensure machinery does not overheat.
The problem with high efficiency from an investor’s perspective is that opportunity for improvement (growth) is also limited. The resources and time required to increase efficiency exponentially grows as it approaches 100% because the amount of residual heat convertible to work diminishes as it’s captured. However, there is real opportunity in cutting costs and increasing output in order to power the entire U.S.
From the World Bank, it is increasingly clear that hydroelectric is extremely important to countries like Albania, Norway, Nepal, and Namibia, where it produces 95%+ of the country’s energy needs. However, global warming has spurred fears about the reliability of hydroelectric. As temperatures rise, droughts and floods are more common, which leads to erratic behavior of water. Erratic behavior reduces predictability and increases inefficiency as hydroelectric generators are left stagnant during droughts and then, during floods, overproduce electricity that is wasted surplus.
Changing weather patterns and rising temperatures have made countries look toward wind and solar for long term renewable energy solutions; natural gas provides a more eco-friendly substitute to fossil fuels and coal. However, hydropower is here to stay because of its efficiency and reliability today. The moves toward wind and solar are a hedge against a climate we cannot control.
One of the biggest benefits of hydroelectric power is its ability to activate and deactivate quickly, which helps meet spikey or bursty demands for power. Hydropower also benefits emergency usage during blackouts. Water doesn’t stop moving, and unlike solar power, hydroelectricity works at night. Natural gas is providing the same benefits for bursty demand 24/7 while also withstanding any impacts from climate change. Hence, this is why you see the growing demand for natural gas and dropping demand for hydroelectric in the chart above; it’s to manage future risk.
About 13.46% of US power comes from renewable energy, 52% of which comes from hydroelectric. Hydroelectric therefore produces 7% of the US’s electricity. However, 95% of America’s utility-scale energy storage comes from pumped-storage. Pumped-storage is a hydroelectric energy storage built from two water reservoirs at different elevations. As water moves from the higher one to the lower, it passes through a turbine which produces electricity. With surplus energy in our grid, these pumps are reversed to move water from the lower reservoir to the higher one, thus ‘recharging’ the energy storage.
Tidal power is a non-polluting, reliable, and predictable form of hydropower that converts the energy of tides into usable work. Tidal power does not emit any greenhouse gases, nor does it contribute to global warming.
Tidal power can be harnessed in three methods:
Semi-permeable barrages can be built across estuaries with a high tidal range. Barrages allow tidal waters to fill an estuary and empty out through the turbines, and since the water is traveling through the turbines, energy is generated.
Mini-dams and tidal turbines can be built to harness offshore tidal streams.
Dams with hydraulic turbines are built to harness the energy from waves.
The ocean and the seas are an untapped resource, and thus, tidal power plants can be built along coastlines of every continent that requires substantial power use. While the technology might be underdeveloped and the initial fixed costs are high with ongoing capital expenditures, with increased innovation and investments in tidal energy, tidal power can be a huge source of renewable energy in the future.
In 2018, the US Department of Energy produced a report supporting large investment in hydroelectric called Hydrovision. In general, the report highlights the potential of untapped hydropower, which could grow from 101 GWh (gigawatts) to 150 GWh by 2050. An additional 36 GWh of pumped storage capacity can also be added, which is about 3% of US energy usage.
Only 3% of the 84,000 dams in the US produce power. Hydrovision proposes a plan to upgrade these dams to produce power which could total an additional 12 GWh. However, there’s ongoing complexity of upgrading these dams due to the various needs of its stakeholders. Dams serve other purposes such as flood control, irrigation, and navigation which may be affected if the dam is upgraded to generate power.
For more information on the possible opportunities for hydroelectric, the full report is linked above.
Examples of Hydropower Stocks
Duke Energy ($DUK) - second largest investor-owned hydroelectric operator in the U.S.
Brookfield Renewable Partners ($BEP) - one of the largest investors in renewable energy including hydro in North and South America, Europe, India and China.
Ocean Power Technologies ($OPTT) - a pioneer in renewable wave-energy technology that converts ocean wave energy into electricity called the PowerBuoy.
TransAlta Renewables Inc ($TRSFW) - owns and operates renewable power generation facilities such as hydro in Canada and the U.S.
While hydroelectric power is seeing headwinds from climate change, it still provides large percentages if not almost all of the power for numerous countries. Pumped-storage appears to be one of the most efficient ways of utilizing water to store potential energy for back-up power, and demand for energy storage will likely grow as our world depends more on energy reliability. The rivers, oceans, and water cycle provide incredible opportunity for free energy power by the sun and the moon; let’s not forget that more than 70% of the earth’s surface is water. There’s a reason why water powered machinery has been used for thousands of years; it’s hard to beat.
"Hydropower Vision: New Report Highlights Future Pathways for U.S. ...." 26 Jul. 2016, https://www.energy.gov/articles/hydropower-vision-new-report-highlights-future-pathways-us-hydropower. Accessed 23 Mar. 2021.
"Water Power Technologies Office | Department of Energy." https://www.energy.gov/eere/water/water-power-technologies-office. Accessed 24 Mar. 2021.
"Hydroelectric Power." http://www.riversimulator.org/Resources/Legal/GCD/HydroPowerUSBRpamphlet.pdf. Accessed 23 Mar. 2021.
"Electricity production from hydroelectric sources ... - World Bank Data." https://data.worldbank.org/indicator/EG.ELC.HYRO.ZS. Accessed 24 Mar. 2021.
"Available - National Hydropower Association." https://www.hydro.org/waterpower/why-hydro/available/. Accessed 24 Mar. 2021.
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