KPMG CEE Hydro Power Oulook

ENERGY AND NATURAL RESOURCES
Central and
Eastern European
Hydro Power Outlook
kpmg.com
KPMG in Central and Eastern Europe’s

Energy & Utilities Advisory Practice
© 2010 KPMG Tanácsadó Kft., a Hungarian limited liability company and a member firm of the KPMG network of independent
member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Central and Eastern European Hydro Power Outlook | 3
Dear Reader,
It is my pleasure to introduce the Central and Eastern European Hydro Power

Outlook, which has been prepared by the KPMG in Central and Eastern
Europe’s Energy & Utilities Advisory Practice located in Budapest, Hungary.
Based on the interest for our previous publications covering electricity, natural
gas, renewable and nuclear energy, as well as the district heating sector we
have assembled this report with the ultimate aim of highlighting the most
important opportunities in the region’s hydro power sector.
On the following pages, it was our aim to turn market data into meaningful
analysis, thus offering KPMG’s insight on available opportunities for business
organizations and institutions interested in the Central and Eastern European
hydro power sector.
Péter Kiss
Partner, KPMG Global Head of I trust that this report will prove to be useful to you and I wish you all the best
Power & Utilities on your participation in, the development of the CEE hydro power sector,
whether you are an investor, supplier or any other stakeholder on the market.
Sincerely,
Table of Contents
Executive Summary 7 6.8. Kosovo 72

6.9. Latvia 74
1. Defining CEE Energy Markets 11
6.10. Lithuania 77
2. Introduction of the Technology 15 6.11. Macedonia 80
2.1. Hydroelectricity 15 6.12. Montenegro 83
2.2. Types of Hydroelectric Power Plants 16 6.13. Poland 86
2.3. Major Turbine Types and their Application 19 6.14. Romania 89
2.4. System Balancing Capabilities of Storage 20 6.15. Serbia 93
and Pumped Storage HPPs 6.16. Slovak Republic 96
2.5. Possible other Roles of HPPs, their 22 6.17. Slovenia 99
Dams and Reservoirs
2.6. Environmental Impacts 23 7. A Leading Example – Austria 102
3. Regulations 29 8. Public Acceptance of Hydro Power 105

3.1. Are All Hydro Plants Renewable? 29 8.1. Gabčíkovo-Nagymaros Hydro 105
3.2. EU Regulations for Water Policy and 30 Power Project
Renewable Energy 8.2. Mardøla and Alta Hydro Power Projects 106
3.3. Greenhouse Gas Emission Measures 33 8.3. Hainburg Hydro Power Project 106
8.4. Freudenau Hydro Power Project 106
4. Electricity Demand Trends in the CEE Region 37
8.5. Conclusions 107
4.1. History 37
4.2. Future Outlook 38 9. Economics of a Hydro Investment 109
4.3. Special Demand for Renewable Energy 39 9.1. Investment/Operation Cost Ratio 110
Sources Including Hydro Power 9.2. A Comparison with Other 116
Power Plant Types
5. Importance of Hydro Power in the CEE Region 41
9.3. Cooperation and Cost Sharing 121
6. Country Profiles 47
10. Investment Potentials 123
6.1. Albania 49
6.2. Bosnia and Herzegovina 52 Acronyms 126
6.3. Bulgaria 56 What can KPMG Firms Offer to the Hydro 129
6.4. Croatia 60 Power Sector?
6.5. Czech Republic 64
6.6. Estonia 67
6.7. Hungary 69
6 | Section or Brochure name
Executive Summary
Hydroelectric generation is not new to Central and Eastern Europe (CEE).

Hydro power’s key advantage – the absence of fuel costs – has historically
underpinned significant development, meaning that many of the obvious plant
locations have been exploited, especially under the socialist regimes after
World War Two.
Hence hydro facilities account for almost 29,000 MW, or 23% of the total
127,000 MW generating capacity in CEE, and every country, from Estonia to
Bulgaria, has some hydro installations. In Albania and other countries in the
Balkan Peninsula, hydro dominates the generation mix.
After 1990, in the first years of transition to a market economy, the closure
of heavy industry (and subsequent reduced electricity demand) coupled with
political uncertainties, meant a reduced pipeline for new power projects in
many CEE countries.
However, political stabilization and economic progress in the past decade have
led to an upturn in electricity demand – albeit somewhat interrupted by the
recent global economic crisis.
This turnaround, coupled with the need to replace ageing and often inefficient,
polluting plants, has focused minds once more on the need for new investment
in generation capacity.
Furthermore, the growing emphasis on clean energy, as mandated by the

European Union, plus concerns regarding security of fuel supplies, makes
investment in hydro power all the more attractive.
As this report highlights, the good news is that there remains huge potential for
hydro development within CEE, where the total technical hydro capacity could
generate an estimated 176,300 GWh per year.
In reality, current output stands at 62,700 GWh, meaning the regional utilization
rate is a mere 30%.
This potential includes even those countries which already boast significant
levels of hydro investment.
In Albania, for example, hydro facilities account for 87% of total generation
capacity and an astonishing 97% of electricity generated. Yet an analysis by the
World Energy Council reveals Albania is exploiting only one-quarter of its total
water-sourced potential.
8 | Central and Eastern European Hydro Power Outlook
Similarly in Bosnia-Hercegovina, the utilization rate of the technical hydro

potential is a mere 19%, meaning the country could, under ideal conditions,
generate an annual 24,000 GWh – five times its current annual output.
Lithuania, for example, currently utilizes less than one-third of its technical
hydro potential, which amounts to an annual 3,000 GWh. Poland is even more
wasteful; the 2,700 GWh it sources from hydro generation being a mere fifth of
its technical potential.
But the most profligate country in the region regarding water resources is
Hungary, where hydro facilities amount to just 46 MW (0.6% of the total) and
generate a paltry 200 GWh annually (again, 0.6% of the total).
This is just 3% of Hungary’s technical potential, where hydro capacity could

generate 8,000 GWh annually, or about 20% of net production.
Hungary’s failure to harness its water resources to provide more electricity

provides a series of case studies illustrating the pros and cons of hydro power –
both real and perceived.
Hungary, together with the then Czechoslovakia, sought to tap into its potential
hydro power when in 1977 the two countries announced plans for a system of
dams and hydro-power stations on the Danube, which formed the common
border between the two countries for some distance.
Known as the Gabickovo-Nagymaros Hydro Power Project, the scheme was

intended to prevent flooding, improve navigability and provide generation
capacity of 880 MW (to be shared between the two countries) at full capacity.
However, in Hungary the project was soon criticized by environmentalist

groups, and it became a safe channel for protest by the growing anti-
communist opposition during the 1980s. Shortly after the first democratic
elections in 1990 Hungary unilaterally abandoned the scheme, although
Slovakia completed a simplified version of the project on its territory.
As this report notes, there are certainly many environmental (and often political
and social) factors that require careful evaluation when planning any hydro
project, most particularly large schemes that involve damming rivers to hold
back large volumes of water.
However, the creation of such dams often yields a number of secondary

outcomes, which can further enhance the value of such schemes. These
include the use of the reservoir for water sports and leisure activities (as has
occurred in Slovakia in the modified Danube scheme) and in some locations the
dams themselves form useful communication links between riverbanks.
Indeed, with careful planning and consultation between all parties involved,
hydro schemes can garner the support of the general public and, at best,
become the ideal ‘win-win’ development.
This report emphasizes the experience of Austria, where a combination of 154 large
and 2,400 hydro generators, built within the framework of clearly-defined regulatory
support system, now provides 60% of the country’s electricity needs.
However, even in Austria, projects have foundered, most notably the Hainburg
hydro scheme of the 1980s, where environmentalists, ignored by the authorities,
fomented protests and eventually forced the abandonment of the project.
Austria learned its lessons, and just a few years later created intense public
involvement for its proposed Freudenau hydro scheme in Vienna. The result
was a 70% yes vote for the scheme in 1991, and seven years later the project
was completed, providing over 1,000 GWh annually to the grid since 1998.
As our study stresses, Austria’s ability to so successfully exploit hydro power

offers many lessons for other countries in the region. The Austrian banking
sector, state and regional authorities function effectively, hence they have the
means to provide systematic planning and support to hydro projects.
Many of the states in the region lack Austria’s administrative skills, nor do they
possess the financial means to fully fund even small hydro schemes (which are
more expensive than large projects per kW installed).
Furthermore, much of the region’s potential hydro power will require some
form of guaranteed electricity pricing to create a sound business case and
attract external finance. Under these conditions, the most crucial role of the
CEE states is to each create a sound regulatory and legal environment to
assure potential investors (both domestic and international) that their money is
safe and that it will earn a steady, if unspectacular, return.
From this study it is clear that much potential exists across CEE to develop
hydro power, particularly (but not only) in mountainous countries such as
Albania, Romania, Bulgaria and former Yugoslavia.
This potential includes hydro generation in all its forms, including renewal
of older, inefficient facilities, new projects involving both large and small
generators, and pumped-storage schemes that help system balancing and
utilize low-cost electricity at times of low demand.
In addition, environmental concerns and public sentiment generally support the use
of clean energy. But to exploit these potentials in practice will require governments
and utility companies to employ a wide-ranging skill-set from careful, in-depth
technical and financial planning to innovative public relations techniques.
1. Defining CEE Energy

Markets
For the purposes of this study, the Central and Eastern European region is
defined as the 17 countries – Albania, Bosnia and Herzegovina, Bulgaria,
Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania,
Macedonia1, Montenegro, Poland, Romania, Serbia, Slovakia, Slovenia – lying
east and north of the EU-15 (neighbouring Germany, Austria, Italy and Greece)
and west of Russia, Ukraine, Moldova and Belarus – see Figure 1).
Ten out of 17 of the above listed CEE countries are EU members at present,
with Croatia being very close to receiving an accession date and Macedonia
also on the path of accession.2
Figure 1: The CEE Region in European Context
Central and
Eastern
European
countries
This study aims to collect and organize data, identify major trends and describe
the similarities and differences between the countries in the CEE region.
Many of the CEE countries have shown remarkable economic development

during the last decade. This development is expected to continue, which is
represented by the fact that many of the CEE countries are regarded as having
“converging” markets rather than emerging ones, meaning their economies
are in the process of achieving parity with those of the EU-15 countries and
are thus characterized by strong economic growth while having EU-based
regulations and policies, offering reasonable risk-return ratio for investors.
1 The country is often referred to as Former Yugoslav Republic of Macedonia; in the current report we
refer to it as Macedonia
2 Source: European Commission Enlargement Newsletter
http://ec.europa.eu/enlargement/press_corner/newsletter/index_en.htm accessed on 23 April 2009
The current financial turmoil has hit some of the CEE countries hard, the Baltic
countries were influenced the most, but others, such as Hungary and Romania
also needed to apply for IMF credit to ensure their stability.
As international firms in the region affected by the economic downturn tried to

stabilize their production in their countries of origin (mainly Western Europe)
their Eastern branches were more exposed to suffer losses. The economies of
the CEE countries heavily rely on these firms’ resulting performance drop.
The rate of foreign investments coming in to the CEE region was also reduced
significantly, but as financial stress is appearing to ease these countries also
have a better outlook for the future.
Their major economic indicators and population data can be found in the table
which follows.
Economic and Population Data – Central and

Eastern Europe
EU member states
EE Bulgaria (BG)
GDP: 90.51 billion • GDP growth: -4.9% • Population: 7.1 million
LV Czech Republic (CZ)
GDP: USD 256.6 billion • GDP growth: -4.1% • Population: 10.2 million
LT
Estonia (EE)
Hungary (HU)
PL
Latvia (LV)
CZ GDP: USD 32.4 billion • GDP growth: -17.8% • Population: 2.2 million
SK Lithuania (LT)
HU
SI Poland (PL)
HR RO
RS
GDP: USD 690.1 billion • GDP growth: 1.7% • Population: 38.5 million
BA
Romania (RO)
ME KO BG
MK Slovakia (SK)
AL
Slovenia (SI)
Non EU member states

Albania (AL)
GDP: USD 22.9 billion* • GDP growth: 3.7% • Population: 3.7 million
Bosnia & Herzegovina (BA)
GDP: USD 29.07 billion* • GDP growth: -3.4% • Population: 4.6 million
Croatia (HR)
GDP: USD 79.21 billion • GDP growth 2006: -5.2% • Population: 4.5 million
Kosovo (KO)
GDP: USD 5.3 billion* • GDP growth: n/a • Population: 1.8 million
Macedonia (MK)
GDP: USD 18.77 billion* • GDP growth: -1.5% • Population: 2.1 million
Montenegro (ME)
Serbia (RS)
All GDP figures are quoted in Purchasing Power Parity and are 2009 estimates.
* Albania, Bosnia & Herzegovina, Macedonia and Kosovo have large informal economies that might reach
50% on top of the official GDP.
Source: World Factbook, CIA, 2010 Population data represent 2010 estimates.
Source: Alstom
2. Introduction of
the Technology
Defining Hydro Power Plant Terms This chapter aims to give you an overview on the basics of hydro-based
electricity generation regarding technology. Figure 2 shows the general
Dam schematic structure of a usual Hydro power plant (HPP) to introduce the basic
A structure made out of concrete or locally
terms.
available material constructed in the water
flow to block its way in order to gather water.
Reservoir Figure 2: Schematic Cross Section of a Hydroelectric Dam

The reservoir is the artificial lake or water
Hydroelectric Dam
buffer created by the dam.
Head Reservoir
The head is the elevation difference between Long
the upstream and downstream water. Powerhouse Distance Electrical power
Powerline substation
Intake
Intake
Generator
The headwater is lead through the intake
to access the penstock after passing
the gate. The gate is closed if the power Pensto
ck
generation needs to be halted. Turbine
River
Penstock
High pressure steel penstock pipes deliver
the incoming headwater to the turbine. In
case of low head power plants penstocks Source: KPMG
are substituted by open waterways.
Turbine 2.1. Hydroelectricity

A turbine is a rotor in a housing that
converts energy from the water flow into Hydro power plants convert the energy of the waterflow into electricity.
useful work and delivers it to the generator
The electricity generation capability is determined by the following factors:
through the rotation of its shaft.
volume of water, the flow, the level of the head created by the dam and the
Generator efficiency of the power plant technology. The relevant rule of thumb is the
The generator utilizes the useful rotational following: the greater the head, the reservoir size and the flow, the more
work of the turbine to convert it into electricity. electricity is produced. Or in other words a HPP with higher head needs smaller
reservoir and runoff for the same amount of electricity to be produced.
Pump
In case of pumped storage power plants
the water needs to be pumped upwards A typical HPP consists of a dam, reservoir, penstocks or waterways, a
into the upper reservoir. The pump is powerhouse (including turbine and generator) and an electrical power
utilized to fulfil this task. substation. The dam stores water and creates the needed head level;
penstocks carry water from the reservoir to turbines inside the powerhouse;
Tailwater
Tailwater is the downstream water which the water rotates the turbines, which drives generators that produce electricity.
is disposed by the turbine. The electricity is then transmitted to a substation where transformers increase
voltage to allow transmission to consumers.
Spillway
A structure used to release excess water
through dam without producing electricity.
2.2. Types of Hydroelectric Power Plants
Run-of-river plants
Figure 3: Schematic Cross Section of a Run-of-River Hydroelectric Dam
Headwater
Run-off
water
Generator
Source: KPMG Turbine
The most common types amongst hydroelectric power plants are the run-
of-river power plants (see Figure 3) whereby the natural flow and elevation
drop of a river are used for the generation of electrical power, and there is only
minimal or no storage of water.
These power plants are constructed on rivers with a consistent and steady
flow. Large reservoirs are required on rivers with great seasonal fluctuations in
order to operate power stations during the dry season resulting in the necessity
to impound and flood large tracts of land. In contrast, large impoundments of
water are not required for run of river projects. Instead, some of the water is
diverted from a river, and sent into the penstock. The penstock feeds the water
downhill to the power station’s turbines. Because of the altitude difference
between headwater and tailwater, potential energy from the water up river is
transformed into kinetic energy on its journey downriver through the penstock,
giving it the pressure required to spin the turbines that in return transform this
kinetic energy into electrical energy through a generator unit. The water leaves
the generating station and is returned to the river without altering the existing
flow or water levels of the tailwater. According to the definition of ENTSO-E the
filling period of these plants is determined in less than two hours.
Storage Hydroelectric Power Plants
Figure 4: Schematic Cross Section of a Storage Hydroelectric Dam
Head race Surge tank

tunnel
Storage
basin
Generator
High-pressure
pipeline array Turbine
Source: KPMG
There is not any strict threshold between run-of-river and storage type HPPs
in term of technical parametres; the distinction can be made by the purpose
of the dam in case of the two types. While run-of-river HPPs need the dam to
create the appropriate head- and tailwater level difference for the operation of
the turbines, the storage type HPPs (see Figure 4) – also known as “reservoir”
HPPs – need the dams to store the appropriate amount of water on rivers where
the natural parametres of the river are not suitable to ensure stable, continuous
operation, or flexibly adjustable performance is needed, which results in the
necessity to impound and flood large tracts of land. A reservoir allows for the
scheduled use of the potential energy of the water that flows from a higher to a
lower elevation. These power plants are able to produce electricity throughout
the year since the reservoir has the capacity to store extremely large quantities
of water to offset seasonal fluctuations in water flow.
These plants exploit the potential energy in the difference in altitude between
the waters of a naturally fed high-level reservoir and a power generation plant at
a lower level.
The reservoir usually fills up during the rainy season and the water lasts for the
whole year till the next summer season. In these hydroelectric power plants a large
reservoir is constructed behind the dam wall. ENTSO-E divides such plants in two
categories, namely pondage is characterized by a filling period of between 2 and
400 hours and reservoir plants with a filling period exceeding 400 hours.
The water flows from the reservoir through pressure pipes or tunnels to drive
the turbines of power plants located in valleys.
Pumped Storage Power Plants
Figure 5: Schematic Cross Section of a Pumped Storage Hydroelectric Dam
Upper basin Barrage intake structure
Cavern
Head race
tunnel
Lower basin
Generator
High-pressure Turbine
dustribution pipeline
Pump
Source: KPMG
Pumped storage power plants (PSPPs – see Figure 5) are usually considered
power plants, but they are in fact electricity storage facilities. They are a special
type of storage HPP since not (only) a river is blocked by a dam, but the water
is (also) pumped up from a lower basin to fill the reservoir. The losses from the
pumping process (whose efficiency is around 75-80%) makes the plant a net
consumer of energy overall. PSPPs store energy in the form of the water’s
potential energy that was pumped from a lower basin or river to a higher basin.
Pumping activities normally take place at night to exploit the excess electrical
power of the off-peak demand period for pumping. As soon as demand increases
during the day, the water is fed back to drive the turbines of the power plant.
This is all controlled by the push of a button and the generators begin to produce
electricity within seconds. Pumped storage is the largest capacity form of energy
storage technologies available for electricity grid operators.
The main purposes of these plants are balancing the electricity demand and
satisfying peak demands along with utilizing electricity surplus on the other
side. The mandates for pumped storage plants can be various:
1. To fit the production of low flexibility power plants (like nuclear power plants)
to the demand
2. To increase revenue by selling more electricity during periods of peak

demand, when electricity prices are highest
3. To balance out the demand volatility of the power grid as an immediate

response primary reserve
4. To balance out the production volatility of some renewable generation

technologies (like wind, solar, tidal) and
5. To ensure best efficiency load for thermal power plants (like coal/biomass
fired steam turbine based plants).
Other types
There are two additional types of HPPs, namely tidal and wave. Connected
to oceanic or sea water movements, these plant technologies are currently
in a pilot phase; consequently, in this study we are restricting our focus to
conventional landlocked hydro power generation technologies.
Figure 6: Francis turbine 2.3. Major Turbine Types and their Application
The history of the hydraulic wheel dates back to antiquity. Water wheels were
already being utilized by mankind in the ancient Greek and Roman era and
throughout medieval Europe.
Depending on the characteristics of a HPP, different types of water turbines are

utilized to generate electricity. The two main categories are reaction turbines,
and impulse turbines.
Reaction turbines
The runners of reaction turbines are under water and exploit water speed
(kinetic energy) and pressure difference. Reaction turbines are used mainly at
low (<30 metres) and medium head (30-300 metres) operations.
Source: Alstom Most common types are:
Figure 7: Kaplan turbine Francis

Designed by James B. Francis in 1849, the Francis turbine was the first and
today still the most common water turbine technology in the world, reaching
more than 90% efficiency that was further improved later to reach about 95%.
This reaction turbine is mainly utilized for medium altitude and medium water
flow with a wide range of applicability.
Kaplan
This double regulated reaction turbine is a modification of the Francis turbine
designed by Victor Kaplan in 1913. The regulation ability of both flow and blades
make this turbine type capable of operating at a high efficiency level within
a wide range of operational parameters. It is utilized at smaller altitude head
operations, where water flow is significant.
Source: Alstom
Figure 8: Pelton turbine Impulse (or Action) Turbines
Impulse turbines utilize the kinetic energy of a free falling water jet that is
transformed by a nozzle to drive the turbine. They are neither submerged into
the water, nor utilizing water pressure differences before and after the turbine.
The most common type is:
Pelton
Lester Allan Pelton designed this type of impulse turbine in 1879, directly
Source: Alstom
utilizing the kinetic energy of the drop of a water jet from a high altitude that
reached 92% of efficiency after being optimized by William Doble around 1895.
Pelton turbines are used for very high altitude heads and light water flow.
Turbines Utilized in Pumped Storage Plants
There are two basic types of units utilized in pumped storage power plants.
1. Reversible type turbines utilized in pumped storage power plants are able
to work both in pump and turbine mode in order to be able to reverse water
flow in off-peak operation mode, and fill the high reservoir. For example
modified Francis turbines are used for this purpose.
2. Separate turbine and pump units can also be installed in pumped storage
plants thus separate instruments are used in the two operation modes of
the plant.
The efficiency of a pumped storage power plant constitutes of two parts:
 The efficiency of the pumping mode
 The efficiency of the turbine mode
This results in a lower overall efficiency than in case of other HPPs.
2.4. System Balancing Capabilities of Storage and

Pumped Storage HPPs
Storage and especially pumped storage HPPs can fulfil special function which
only a limited number of other power plant types are able to cover (at all or
efficiently). This function is the balancing of the electricity system with an aim
of fitting the actual production to the demand. This is one of the major tasks
of the system operators which is required because the predicted demand
schedule never matches exactly the realized consumption. Although the
capabilities of such power plants are given appliances need to be selected and
installed accordingly to be able to fulfil this role without drastically shortening
the expected lifetime of the plant.
Why is balancing becoming increasingly important?
It can be attributed to several factors:
1. Total demand is growing, which results in more required balancing capacity

in the system.
2. Wind and solar installed capacities are increasing their market share rapidly
which makes for numerous volatile facilities whose production is not
accurately predictable, generating extra balancing needs.
3. Nuclear power is undergoing a renaissance which could result in an

enormous extra installed base load capacity. Even if third generation nuclear
reactors are capable of following the demand curve, it is uneconomic to run
them in peak mode instead of base load due to their large initial investment
costs.
4. Fossil fuelled plants usually have a narrow optimal performance level,

thus operating them at that level results in higher efficiency, lower relative
consumption and emission.
5. CHP plants without heat storage capabilities supplying heat at off-peak

electricity demand periods are not exploiting their capability to produce low
emission electricity.
Both storage and pumped storage HPPs can be rendered capable to provide
supply-side ancillary services such as balancing out:
 positive deviation of demand from the schedule by increasing production

(if available), or
 negative deviation of demand from the schedule by decreasing production.
Pumped storage power plants can also balance out the electricity system
surplus in off-peak periods by demand side balancing – consuming the
electricity necessary to pump water to the upper reservoir.
These two flexible HPP types are favourable for system operators to be able
to stabilize and optimize the electricity systems they are responsible for,
minimizing the risk of a possible frequency fluctuation, overload or black out.
Storage hydro plants are able to provide these services without additional
emission. The pumped storage power plants do not have real competition in
electricity storage of the same achievable size and effectiveness given the
current status of technology.
2.5. Possible other Roles of HPPs, their Dams and

Reservoirs
HPPs are commonly considered energy purpose facilities only, but in fact
they may play other important roles. In several cases these other aspects are
the primary reasons for building a dam on a river, and the generators are only
extra features. From the energy industry’s perspective regarding a new HPP
investment these other aspects need to be taken into account particularly
when looking for financing and investors, or convincing decision makers and
the public.
Navigation
Navigation dams resolve the problems of seasonality and raise the water levels
of shallow river sections.
The inland water channels of Europe suffer from seasonality and changing
water levels. These symptoms make continuous commercial navigation
impossible without the help of navigational purpose dams.
Flood Control
In several cases the primary purpose of building dams for reservoir

hydroelectric power plants is actually flood control. In this case, the installation
of hydro power facilities entails only smaller incremental investments.
Irrigation
Agriculture is often exposed to seasonal weather changes. This risk can be

mitigated by using the water in a reservoir for irrigation to maintain a constant
level of agricultural production.
Recreation
The enhanced water surface created by a dam is usually favourable for

recreational purposes.
Source: Andritz Hydro
Bridge
Dams create interconnection between riverbanks, terminating the natural

separation of the two sides.
2.6. Environmental Impacts

Just like all known technologies there are several possible negative impacts
of hydroelectric systems that have recently been increasingly coming into
focus. While most of the major dams have been completed within the
last six decades, some of the environmental effects may not be realised
yet, but being aware of the possible consequences these effects can be
avoided or minimised. Environmental effects are perhaps the most topical
aspects of sustainability for hydropower in the European context, however
proper sustainability assessment also requires consideration of social and
economic effects. An awareness building toolkit for hydro developers is the
“Sustainability Guidelines” (2004) issued by the International Hydropower
Association.
These guidelines introduce several environmental issues that must be

addressed for an HPP development.3
Water quality
Changes in water quality are likely to occur within and downstream of the
development as a result of impoundment. The residence time of water within
a reservoir is a major influence on the scale of these changes, along with
bathymetry, climate and catchment activities. Major issues include reduced
oxygenation, temperature, stratification potential, pollutant inflow, propensity
for disease proliferation, nutrient capture, algal bloom potential and the release
of toxicants from inundated sediments. Many water quality problems relate to
activities within the catchment beyond the control of the developer.
3 International Hydropower Association – Sustainability Guidelines, 2004

The Guidelines have been developed into the more comprehensive 2006 “Sustainability Assessment
Protocol” (Protocol). From 2008 the “Hydropower Sustainability Assessment Forum” (Forum)
has been working to produce an enhanced Protocol due in 2010. The Forum is a collaboration
of international representatives from governments, the finance and hydropower sectors, and
environmental and social civil society organisations.
Sediment transport and erosion
The creation of a reservoir changes the hydraulic and sediment transport

characteristics of the river, causing increased potential sedimentation within
the storage and depriving the river downstream of material. Sedimentation
is an important sustainability issue for some reservoirs and may reduce the
long-term viability of developments. Reduction in the sediment load to the river
downstream can change geomorphic processes (e.g. erosion and river form
modification).
Downstream hydrology and environmental flows
Changes to downstream hydrology impact on river hydraulics, instream and

streamside habitat, and can affect local biodiversity. Operating rules should
not only consider the requirements for power supply, but also be formulated,
where necessary and practicable, to reduce downstream impacts on aquatic
species and human activities.
Rare and endangered species
The loss of rare and threatened species may be a significant issue arising from
dam construction. This can be caused by the loss or changes to habitat during
construction disturbance, or from reservoir creation, altered downstream flow
patterns, or the mixing of aquatic faunas in inter-basin water transfers.
Hydropower developments modify existing terrestrial and aquatic habitats, and

when significant changes cannot be avoided, mechanisms to protect remaining
habitats at the local and regional scale should be considered in a compensatory
manner.
Passage of fish species
Many fish species require passage along the length of rivers during at least
short periods of their life cycle. In many places the migration of fish is an annual
event and dams and other instream structures constitute major barriers to
their movement. In some cases the long-term sustainability of fish populations
depends on this migration and developing countries’ local economies can be
heavily reliant on this as a source of income.
Pest species within the reservoir (flora & fauna)
In some regions a significant long-term issue with reservoirs, irrespective

of their use, is the introduction of exotic or native pest species. The change
in environment caused by storage creation often results in advantageous
colonisation by species that are suited to the new conditions and these are
likely to result in additional biological impacts. In some instances, proliferation
may interfere with power generation (e.g. clogging of intake structures) or
downstream water use through changes in the quality of discharge water (e.g.
algal bloom toxins, deoxygenated water).
Health issues
The changes brought about by hydropower developments have the capacity

to affect human health. Issues relating to the transmission of disease, human
health risks associated with flow regulation downstream and the consumption
of contaminated food sources (e.g., raised mercury levels in fish) need to be
considered. The potential health benefits of the development should also be
identified.
Construction activities
Construction needs to be carried out so as to minimise impacts on the

terrestrial and aquatic environment.
Where a new development is planned, there is a range of activities that can

result in environmental impacts, both terrestrial and aquatic. Noise and dust
may also be issues where the development is close to human habitation.
In addition to the above environmental impacts there is other possible harm

that can be done to the environment although these may not pertain to
European circumstances, have less importance or can be fully mitigated.
Greenhouse Gas Emission During the Initial Flooding of a Reservoir
It is accepted that hydropower is a low carbon energy technology. However,

greenhouse gas emissions (GHG) emissions, mainly methane, can be
produced by the decomposition of organic matter in anoxic conditions at the
bottom of reservoirs. Proper assessment requires comparison between pre
and post impoundment GHG emission conditions in order to yield a net result.
In most cases, net GHG emissions are likely to be low but there has been no
scientific consensus on measurement and calculation of the phenomena.
As a result, since 2008 UNESCO and IHA have hosted an international
scientific research project (Project), which published the state of the art “GHG
Measurement Guidelines for Freshwater Reservoirs” in 2010 (Guidelines).
The Guidelines and Project pave the way for scientific consensus as well as the
development of a database and predictive modelling tools.
Water Evaporation
The water “footprint” of hydropower projects is an emerging issue, particularly

in regard to evaporation from reservoirs. Proper assessment requires
comparison between pre and post impoundment watercourse evaporation
and plant transpiration conditions in order to yield a net result. The increased
temporal and spatial water management that a reservoir provides compared to

natural conditions must also be factored in. While net evaporation is likely to be
low in most cases, presently there is no scientific consensus regarding how to
measure and calculate this, and ongoing debate on whether evaporation from
reservoirs may be regarded as water loss.
A failure to consider the introduced environmental effects might result

in serious harm, but most of these impacts can be mitigated if profound
assessment is executed and the right preventive actions are selected. This
task is preferably done before construction is started, but in case of existing
facilities corrective actions can also make substantial achievements. Before
making an investment decision the cost of all the necessary auxiliary preventive
facilities should be taken into consideration to gain a full picture of the total
overall investment and operational costs.

3. Regulations
In this chapter we introduce the common legislative background relevant to

hydro power investments.
3.1. Are All Hydro Plants Renewable?

A common assumption regarding HPPs that they are renewable, because
they are producing electricity from renewable potential or the kinetic energy
of flowing water, but electricity produced in pumped storage units from water
that has previously been pumped uphill should not be considered as electricity
produced from renewable energy sources.4 In addition to this some regulators/
governments acknowledge all scales of hydro generation renewable, but
others consider that possible aspects like
 disruption of aquatic ecosystems and birdlife,
 adverse impacts on the river environment,
 release of significant amounts of GHG at construction and the initial flooding

of the reservoir,
 dislocation of people living in the reservoir area,
 potential risks of sabotage and terrorism, and
 in rare cases catastrophic failure of a dam wall
as good reasons for handling large hydro separated from other renewable
energy sources.
On the other hand governments might offer investment subsidies for small
hydro investments to foster reaching their renewable goals while excluding
large hydro from such renewable incentives based on its relatively low
generation cost and reasonable return potential, but the threshold between
large and small hydro may vary country by country even inside the EU. In our
analysis we use 10 MW as a border line between large and SHPPs.
4 Source: Directive 2009/28/EC
3.2. EU Regulations for Water Policy and

Renewable Energy
Directive 2000/60/EC of the European Parliament and of the Council

establishing a framework for the Community action in the field of water
policy5
Based on environmental concerns the protection of European waters has

become a key issue, and as a result, the Directive aiming to establish a single
system of water management came into force in 2000, which covers all types
of water such as rivers, lakes, coastal waters, estuaries, groundwater, etc.
Accordingly, the model supported by the EU determines natural geographical
and hydrological units, and river basins, disregarding administrative and political
boundaries.
On the one hand, the most important goal of the Directive is to protect
European waters and avoid environmental burdens; on the other hand, there
are essential uses of water such as flood protection and drinking water supply
in which cases the policy objectives can be overridden (although there might be
a significant impact on the surroundings). Accordingly, the approach towards
hydro power generation is not fully clear in the Directive. However, the aim of
environmental protection and related authorization procedures may increase
investment costs or even hinder the realization of some projects. Furthermore,
the implementation of the Directive may have an impact on project economics
in the future, as a key innovation is that it calls for all types of water services to
be charged at a price that reflects all occurring costs.
As an example, this means that the price of electricity generated from an HPP
may cover the damage caused to ecosystems by the reservoir. Based on the
timetable for implementation insisted in the Directive water pricing policies
have to be introduced by 2010 at the latest.
5 Source: http://ec.europa.eu/environment/water/water-framework/index_en.html
Promotion of Renewable Energy in the EU
The European Commission outlines the priority activities and objectives of the
Community regarding energy sources, identifying three major objectives:
 achieving security of supply
 improvement of the competitiveness of the European economy
 ensuring sustainability.
The development of renewable energy utilization – particularly energy from

wind, water, solar, geothermal and biomass – is thus a central aim of the
European Union. Increasing the share of renewable-based generation in
the total energy consumption mix will significantly reduce greenhouse gas
emissions in the EU.
In order to promote renewable energy sources, the European Commission has

implemented the Directives (EU level regulations) discussed in the following
section.
COM (97) 599 White Paper: Energy for the future – renewable sources of
RES-E shares and targets for EU
energy
according to Directive 2001/77/EC
RES-E %, RES-E %, In 1997, the Commission published a White Paper on renewable energy which
1999 2010 defined a strategy and action plan to promote the market penetration of
EU-15 13.9 22.1 renewable energy sources, with a target of doubling their use by 2010 (from
6% of total consumption in 1996 to 12% in 2010).
EU-10 5.4 11.1
EU-25 12.9 21
A key element of the action plan was the establishment of European legislation
Source: European Small Hydropower Association to provide a stable policy framework and clarify the expected development of
http://www.esha.be/index.php?id=43 renewable energy in each Member State.
The two key pieces of legislation (Directives 2001/77/EC and 2003/30/EC) set
indicative 2010 targets for all member states and required actions to improve
the access, growth and development of renewable energy.
Directive 2001/77/EC: Directive on Electricity Production from Renewable

Energy Sources
In Directive 2001/77/EC, all member states adopted national targets for the
proportion of electricity consumption from renewable energy sources. The
indicative targets set in the Directive add up to a 22.1% average share of
electricity produced from renewable energy sources as a percentage of gross
electricity consumption by 2010 in the EU15. With the 2004 accession, the
EU’s overall objective became 21%. Additionally, the Directive encourages the
countries to use national support schemes, as well as eliminate administrative
barriers with respect to renewable energy investments; it encourages grid
system integration, and lays down the obligation to provide renewable energy
producers with guarantees of origin if requested.
Directive 2003/30/EC: Directive on the Promotion of the use of biofuels

and other renewable fuels for transport
The Biofuels Directive entered into force in May 2003, promoting the use of
biofuels for EU transport. It stipulates that national measures must be taken
by member states aiming at replacing 5.75% of all transport fossil fuels with
biofuels by 2010.
Regular assessments and reports have been prepared on the EU’s progress
towards its 2010 targets and on its efforts in general to develop renewable
energy. The reports issued in 2007 as well as the Renewable Energy Roadmap,
highlighted the slow progress member states were making and the likelihood
that the EU as a whole would fail to reach its 2010 target.
The Commission therefore proposed a new, more rigorous legislation covering

all renewable energy and set new targets for 2020 to ensure a stable regulatory
framework for the decade ahead. This new Directive has been approved on 26
March 2009 and repealed Directives 2001/77/EC and 2003/30/EC.
Directive 2009/28/EC: Directive on the promotion of the use of energy

from renewable sources and amending and subsequently repealing
Directives 2001/77/EC and 2003/30/EC
Directive 2009/28/EC of the European Parliament and of the Council of 23

April 2009, on the promotion of the use of energy from renewable sources,
published in the Official Journal of the European Union on 5 June 2009, is a
step forward. This Directive establishes a common framework to promote the
use of energy from renewable sources and sets mandatory national targets for
the overall share of this energy in gross final consumption of energy.

The Directive also establishes rules relating to joint projects between member
states and other countries, guarantees of origin, facilitating administrative
procedures, and accessing networks.
Directive 2008/0016: Directive on the promotion of the use of energy from

renewable sources
This Directive established a 10% share of renewable energy (including biofuels

and RES-E) in the transport sector as well as an overall binding target of a 20%
share of renewable energy sources in final energy consumption and binding
national targets by 2020 for every member state in line with this overall target.
Each member state would be required to ensure the support of renewables
through national action plans and support schemes in order to accomplish
these goals.
3.3. Greenhouse Gas Emission Measures
The Kyoto Protocol
The Kyoto Protocol to the United Nations Framework Convention on Climate

Change (UNFCCC) adopted at the Rio de Janeiro United Nations Conference
on Environment and Development in 1992 was introduced to strengthen the
international response to climate change.
The UNFCCC intended to prevent the unlimited growth of greenhouse gas

emissions on a global level. However, it didn’t entail any mandatory limit
for countries, but rather the treaty included provisions for updates (called
“protocols”) that would set binding emission limits. The principal update was
the Kyoto Protocol, which was adopted in 1997. The Protocol prescribed at least
a 5% emission reduction at a global level by 2012 against the 1990 baseline.
All EU countries are parties to the Convention and have ratified the Kyoto
Protocol. Developed countries have committed themselves to reducing their
collective emissions of six key greenhouse gases by at least 5%.
This is set down in a legally binding burden-sharing agreement (in Council

Decision 2002/358/EC of 25 April 2002).
Kyoto Mechanisms (ET, CDM and JI)
Generators that cannot comply with the mandatory emission limits have an
alternative to either purchase additional emission allowances on the open
market (Emission Trading – “ET”) or implement a project under the umbrella
of the Clean Development Mechanism (CDM) or the Joint Implementation
(JI) scheme. If a company implements such a project, it receives Certified
Emission Reduction (CER) or Emission Reduction Unit (ERU) certificates which
can be surrendered as a substitute for emission allowances.
Under JI, any country that has emission reduction targets (termed an Annex I
country) can invest in emission reduction projects in any other Annex I country
as an alternative to reducing emissions domestically. In this way countries
can lower the costs of complying with their Kyoto targets by investing in
greenhouse gas reductions in any Annex I country where reductions are
cheaper, and then applying the credit for those reductions towards their
commitment goal.
Under CDM, industrialized countries with a greenhouse gas reduction

commitment (Annex B countries) can invest in projects that reduce emissions
in developing countries as an alternative to more expensive emission
reductions in their own countries.
The CDM allows net global greenhouse gas emissions to be reduced at a

much lower global cost by financing emissions reduction projects in developing
countries where costs are lower than in industrialized countries.
European Union Emission Trading System – EU ETS
In order to adopt the UNFCCC on a more practical level, the EU issued Directive
2003/87/EC establishing the EU ETS. This is a market-based mechanism that
translates Kyoto Protocol commitments to an operational level. It has been in
operation since 2005, covering more than 40% of the total GHG emissions of
the European Union and serves as a market mechanism for buying and selling
CO2 emission credits, each of which allow the owner to emit greenhouse
gases of 1 tonne of CO2 equivalent.
Under the framework of the EU ETS, emission allowances can be traded just
as any other commodity. The EU ETS covers several industries, among which
power generation has the largest GHG emission level.
Copenhagen Climate Change Conference (2009)
The Kyoto Convention will come to its end in 2012, thus as a successor a similar
treaty was expected to be signed in Copenhagen in December 2009 for the
post-2012 period, but the end result is widely considered a failure.
In aggregate the Copenhagen Climate Summit did not achieve its initial goal,
however the participants signed a memorandum which expresses the non-
binding common understanding of keeping the global climate change under
2 degrees’ increase of temperature without containing explicit commitments
to emission reductions to achieve that goal. This document will be the basis of
the next UN Climate World Summit, which takes place in Mexico between 29th
November and 10th December in 2010.
Source: Alstom
4. Electricity Demand Trends

in the CEE Region
Due to population increase and economic growth (not taking into consideration
the current financial economic slowdown) energy demand in general and
electricity consumption are increasing globally. This latter trend can also be
observed in the Central and Eastern European region, although the change in the
political and economic systems in the early 1990s resulted in a drop of electricity
consumption in many countries.
Figure 9: Electricity Consumption Development in the CEE6 Region

1990–2008 (1990=100%)
120%
100%
80%
60%
40%
20%
0%
2004
2006
2000
2003
2008
2005
2002
2007
1994
1990
1996
2001
1993
1998
1999
1995
1992
1997
1991
Source: World Bank data and KPMG estimates based on national statistics, EIU and UCTE data
4.1. History
CEE countries maintained centrally-planned economies during the communist
era, and partially based on the principle of facilitating the development of heavy
industry they consumed a significant amount of electricity, which totalled
about 339 TWh7 in 1990. After the change of system many of the large but
at the same time uneconomical sectors were closed down which caused a
significant decrease in electricity demand within the region: total consumption
was almost 23%7 less in 1993 than the corresponding value in 1990. Issues
occurring on a country level such as monetary problems or the civil war in the
Balkans as well as the initial general downturn of social welfare arising in line
with the transformation also influenced consumption in a negative way.
Since then the electricity consumption of the region has recovered: the total
demand of the region exceeded 348 TWh8 in 2007. One reason for this is that
national governments have taken several actions in order to stabilize the newly
established market-based economies (monetary restrictions, privatization, etc.),
6 Including Montenegro and Kosovo

7 Source: World Bank
8 Source: World Bank
Figure 10: Distribution of Electricity which resulted in continued economic growth in the following years. As the
Consumption by Sector in the CEE9 standard of living has also risen, the significance of residential and commercial
Region consumption in total electricity demand has increased and thus these sectors
have taken over the earlier role of heavy industry.
100%
90%
In the meantime, most of the countries in the CEE region have joined the
80% European Union, which through the entry criteria and by influencing country-
70% level decisions afterwards further facilitated stabilization and economic growth.
60% In line with the goal of establishing a single European electricity market, actions
fostering full liberalization have been implemented in CEE countries, which
50%
could result in a more transparent market with lower prices and in this way in
40%
additional demand. On the whole, EU membership has thus also increased
30% directly or indirectly the electricity consumption of the region.
20%
10% Although demand for electricity is in general relatively constant compared to that
0%
of other products (as it is a necessity good), due to the recent financial turmoil
1990 2007 the electricity industry is facing a downturn as well. Industrial production has
Industry decreased significantly in the region, and household consumers are using less
Transport electricity in this insecure environment. As illustrated in Figure 11 below, monthly
electricity consumption in the CEE region has been lower than the previous year’s
Households
consumption since October 2008.
Services
Other sectors
Source: World Bank data and KPMG estimates Figure 11: Monthly Electricity Consumption in the CEE – Change in
based on national statistics, EIU and UCTE data Percentages Compared to Previous Year (2008–2009)
Financial crisis and related drop of demand
8%
2008/2007 2009/2008
6%
4%
2%
0%
-2%
-4%
-6%
-8%
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb
Source: UCTE
4.2. Future Outlook

The development of electricity consumption shows an increasing trend
globally, which is expected to continue in the future. Although the remarkable
economic growth of the CEE countries has slowed down due to the global
financial crisis, they are still considered to be “converging” markets, which
9 Including Bulgaria, Czech Republic, Estonia, Croatia, Hungary, Lithuania, Latvia, Poland, Romania,
Slovenia, Slovakia
implies that after stabilization the economic performance of the region is

likely to resume its pace. In the coming decades all countries in the region
are expected to become EU member states, which may further facilitate
their development process. To sum up the introduced trends, in line with the
economic growth of the region the level of electricity consumption looks to
significantly increase in the long term.
4.3. Special Demand for Renewable Energy Sources

Including Hydro Power
Based on rising electricity consumption and on increasing concerns over
climate change and energy security, the utilization of renewable energy
sources has become a key issue worldwide. Among others, the European
Commission has implemented and supported several actions aiming to grow
the renewable proportion of gross electricity consumption within the European
Union, which has an influence on most of the CEE counties. As a result, the
share of renewables in power generation – and thus in consumption – has
shown an increasing trend during the last decade in the region, with the key
contributors being hydro, biomass and wind.
In parallel with the promotion of the utilization of renewable energy sources

from the supply side, more and more consumers on the demand side are
becoming aware of environmental issues in connection with electricity
production and use. Accordingly, in line with the liberalization of the European
electricity market and with the expansion of individual consumers’ room for
decision-making, the opportunity of purchasing so-called green electricity has
arisen in some countries.
As an example, the Netherlands was the first country in Europe that promoted
green power to consumers and suggested an extra charge for it to cover
environmental concerns. Initially, in 1995 1% of electricity utility EDON’s
customers (recently part of RWE Group) had signed up to the scheme, through
which they could purchase 25-100% of their electricity from renewable energy
sources. At that time, the additional charge was 4 cents per kWh on top of
the regular price of 21 cents. The idea proved to be relatively successful as all
utilities in the country now offer such a green energy scheme.10
Through this process, consumers support the electricity providers’ overall

reliance on renewable energy sources, thus fostering the spread of sustainable
energy-related technologies. Although such a special demand for renewable
energy sources is not common within the Central and Eastern European
region, it is expected to become more important in the future, thus this trend
may result in a significant additional demand for green energy, including
electricity generated from HPPs considered renewable.
10 Source: http://www.ucc.ie/serg/pub/green.pdf
5. Importance of Hydro Power

in the CEE Region
Hydro power plays an important role in the energy production of the Central and
Eastern European region today with a share of approximately 23% of the total
installed capacity. Electricity generation from hydro power makes a substantial
contribution to meeting the increasing electricity demand and is currently
the most used resource which is not fossil fuel- or nuclear-based electricity
generation technology. Hydro is one of the two energy sources along with fossil
fuel that is utilized in all CEE countries for electricity generation.
Figure 12: Share of hydro generation capacities in the CEE region (2008)
Installed capacity (MW)

Country Share of hydro
Total Hydro
Albania 1,670 1,446 87%
Montenegro 870 660 76%
Latvia 2,566 1,560 61%
Croatia 3,762 2,007 53%
Bosnia and
4,021 2,064 51%
Herzegovina
Macedonia 1,493 586 39%
Romania 16,582 5,843 35%
Serbia 8,355 2,831 34%
Slovakia 7,453 2,478 33%
Slovenia 2,894 879 30%
Bulgaria 11,359 2,993 26%
Lithuania 5,070 1,027 20%
Czech Republic 16,480 2,175 13%
Poland 32,509 2,327 7%
Kosovo 1,522 44 3%
Hungary 7,746 46 1%
Estonia 2,738 5 0%
Total 127,090 28,971 23%
Figure 13: Capacity mix in the UCTE and CEE region, 2008
70% 65.9%
60%
52.6%
50%
40%
30%
22.7%
19.0% 17.1%
20%
10.1% 11.3%
10%
1.3%
0%
Thermal Hydropower Nuclear Other RES
CEE region UCTE

Source: UCTE, BALTSO, Latvenergo, LEI, ERO KS, Statistics Estonia, USAID-NARUC
Comparing this ratio to that of the UCTE region11, which is 20%, we can see that
hydro power is a more popular source of electricity in the CEE region.
One reason to which this can be attributed is the favourable geographic situation
of many of the countries in the region. Looking at the topographic map one can
fairly easily tell which countries might bear significant opportunities. Countries
lying on the Balkan Peninsula, in the Carpathian Mountains and at the eastern
slopes of the Alps harbour such potential.
The following page contains a summary map of the installed hydro power
capacities of the CEE countries. It is predictable, but still interesting to see how
hydro’s proportion in the capacity mix and the topographic conditions of a country
correlate.
11 The UCTE region includes: Austria, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia,
the Czech Republic, Denmark, Germany, France, Greece, Hungary, Italy, Luxemburg, Macedonia,
Montenegro, the Netherlands, Poland, Portugal, Romania, Serbia, Slovenia, Slovakia, Spain,
Switzerland
Figure 14: Installed capacities and topographic features of 2%
the CEE region EE
0 MW
5 MW
98 %
1%
LV
38%
1535 MW
25 MW
61 %
2% 20%
26%
LT
1001 MW
26 MW
52 %
Hydro
Thermal
Nuclear
Other RES
1%7%
PL
2176 MW
151 MW
92 % Country code
Large hydro
1% 13%
1%
2
CZ
Small hydro
1870 MW
305 MW 1%
30%
33
65% SK
%
2254 MW
224 MW
36 %
7% 1%
% HU
24%
30
24
SI
%
39 MW
863 MW 8%
%
1% 7 MW
68
RO
35
16 MW
%
46 % HR
4895 MW
45%
1970 MW
54%
7 MW
57
34
RS %
%
37 MW
2818 MW
66
BA 13 MW
%
49%
51%
2056 MW
3%
8 MW
1%
KO % 26
18
%
BG
35 MW
24
2480 MW
%
ME 9 MW
97% 513 MW
649 MW
55%
13%
MK
39%
11 MW
AL
76 % 536 MW
61 %
1432 MW
50 MW
14 MW
Source: KPMG analysis
87%
Another reason is for hydro having a higher share in the CEE than in the
UCTE countries is that western European countries have higher electricity
consumption per capita which results in relatively higher installed capacity
needs. After approaching the limitations of exploiting economically feasible
hydro capacities they have had to turn to other sources.
But given a comparison of the UCTE countries and the CEE region in terms of
installed hydro capacities divided by the populations of the countries, things
may look different. In this case the UCTE countries have 241 MW per million
capita installed capacity of HPPs versus 229 MW in the CEE region12.
Besides the fact that hydro power currently makes up a substantial share of the
total installed generating capacity, arguments for the increasing utilization of
hydro power are based on its advantages compared to other sources of energy
that are largely based on low OPEX, effective, sustainable and renewable
energy source through which energy can be stored in large quantities and
which are able to play a major role in power system balancing.
Figure 14 shows the share of hydro power in the total generation capacity
of the CEE region. We can see that the share of hydro power within the total
installed capacity varies considerably between countries, ranging from ~0%
to ~87%. The differences in countries reflect both topographic and climate
constraints or suitability. The table shows that hydroelectricity is of elemental
importance in Albania, Montenegro, Latvia, Croatia and Bosnia-Herzegovina.
The following chart shows the technical hydro power potentials of each country
of the CEE region. Most of the potential for future hydro power expansion
lies in Romania, former Yugoslav republics (Kosovo, Bosnia and Herzegovina,
Serbia, Slovenia, Croatia, Montenegro and Macedonia), Bulgaria and Poland.
Yet despite the vast potential for future development, these countries have
found it difficult to secure financing for large hydro power projects. Out of
the top five countries it should be noted that two countries have enormous
potential considering their size: Bosnia and Herzegovina and Kosovo.
12 Source: UCTE, KPMG analysis
Figure 15: Technical Hydro Power Potential vs. Utilization in the CEE Region
Net
Technical Unused technical
generation Utilization
Country potential potential
in 2007 rate
(GWh/year)13 (GWh/year)
(GWh/year)
Bosnia and
Herzegovina 4,552 24,000 19,448 19%
Romania 16,794 35,000 18,206 48%

Bulgaria 3,570 15,000 11,430 24%
Albania 3,657 15,000 11,343 24%
Poland 2,668 14,000 11,332 19%
Serbia 10,011 19,000 8,989 53%
Hungary 208 8,000 7,792 3%
Slovenia 3,212 9,000 5,788 36%
Macedonia 881 5,000 4,119 18%
Croatia 5,284 9,000 3,716 59%
Montenegro 1,536 4,269 2,733 36%
Slovakia 4,306 7,000 2,694 62%
Lithuania 861 3,000 2,139 29%
Czech Republic 2,367 4,000 1,633 59%
Latvia 2,671 4,000 1,329 67%
Kosovo 76 800 724 10%
Estonia 28 263 235 11%
Total 53,682 176,332 113,650 36%
Sources: World Energy Council, 2009, 2007, Kosovo Ministry of Energy and Mining, UCTE, BALTSO,
KPMG analysis, 2009
13 The World Energy Council determined the “technically exploitable capability” for end of 2005, but as
hydro technology is mature, the potential is not expected to change.
6. Country Profiles
The aim of this chapter is to give you a short overview of the current status
of hydro power in each country belonging to the CEE region. Through several
recurring elements in the country profiles the goal is to provide a comparable
overview of the CEE countries. These elements are as follows:
 The characteristics of electricity generation: This comprises a quick wrap

up of the country’s generation characteristics including the distribution of
installed electricity generation capacities among the major types of energy
sources and the generation mix.
 Hydro capacities: The distribution of installed HPP capacities is introduced,

including the major large HPPs and the share of large and small HPPs within
the total HPP installed capacity. As a general rule we consider HPPs with
less than 10 MW of installed capacity small HPPs. Consequently large
HPPs have at least 10 MW installed capacity. An overview of the age of the
existing HPPs is distributed into four categories: <10 years, 11-20 years,
21-30 years, 30< years.
 RES and RES-E targets and RES-E share: As an indication of possible

SHPP developments, the binding RES-E targets for 2010 and RES targets
for 2020 set by the relevant EU directives 2001/77/EC and 2009/28/EC
are demonstrated. The relevance of this information is underlined by the
fact that HPPs are obvious tools for meeting these targets. Some non-EU
countries also have available RES or RES-E targets that we also indicate in
the study.
 Introduction of current hydro development projects: The major HPP

developments of each country have been compiled into charts based on
publicly-available information from various sources.
 Major rivers: As an indicator of potential opportunities major data on

the most important rivers of a given country have been collective. This
information should be considered indicative.
 Relevant legislation and regulatory bodies: Electricity and green energy-

related laws or other regulations are listed and the regulatory bodies relevant
to HPP developments and their tasks are introduced.
 Applied green generation support schemes: One of the most important

questions regarding SHPP developments remains state electricity price
incentives. One of the three typical systems is introduced in each of these
countries:
1. Obligatory off-take and feed-in tariff system: TSOs/DSOs are obliged to

buy the electricity generated by green generators at a price
predetermined by the state.
2. Green certificate and green quota obligation system: green generators

sell their electricity production on the market, but additionally they
earn tradable green certificates after the generated amount of electricity.
Market players are obliged to procure a certain amount of green
certificates representing that a certain percentage of the electricity sold
or consumed by them is covered by RES-E. The prices of both electricity
and green certificates are defined by the market.
3. Premium system: green generators have to sell the electricity on the

market at market price, but they also receive a fixed premium per each
kWh from the state as a subsidy.

6.1. Albania
Hydroelectricity
Fossil fuels
• 86.6% • 97%
• 13.4% • 3%
Total installed capacity: Total electricity

1,670 MW generation: 3,770 GWh Source: Albanian Energy Regulatory Entity; USAID-NARUC, 2008
Major operational HPPs Characteristics of electricity generation

Installed
Electricity generation in Albania is dominated by large hydroelectric facilities.
Name Type* capacity River
(MW) It is the country where hydro contributes most to the generation mix with a
97% share in the CEE region as of 2008. The total installed power generation
Komani S 600 Drini
capacity is 1,670 MW, including 1,446 MW hydro and 224 MW thermal.14
Fierza S 500 Drini
The major player on the electricity market is the Albanian Power Corporation
Vau i S 250 Drini (KESH), but the Government of Albania is in the process of restructuring with
Dejes
the aim of accelerating private-sector participation in the energy sector.
Ulza S 27 Mati
Shkopeti S 25 Mati Albania has six large HPPs accounting for about 96% of the total electricity
generation15. These power plants are situated along three major rivers: Drini,
Bistrica S 23 Bistrica
Mati and Bistrica. The three largest HPPs are constructed on the Drini River
*S: Storage; RoR: Run-of-river; PS-T: Pumped comprising more than 80% of the country’s installed capacity16.
storage – turbine; PS-P: Pumped storage - pump
There are about 90 SHPPs in Albania, with installed capacity ranging from 0.02
MW to 9.2 MW, however, among these only 36 power plants are in operation.
Fifty-four percent of the operating SHPPs are privately owned17.
Installed HPP capacities Prospects for hydro generation

Installed
Albania does not have any binding target regarding the share of renewable
Size capacity
(MW) energy in final consumption.
Large HPPs (>10 MW) 1,432
The country is known for its enormous hydro power potential. The technical
Small HPPs (<10 MW) 14 potential would enable 15,000 GWh18 per annum and the country has exploited
only 24% of this, which was 3657 GWh18 in 2008.
Source: Albanian Energy Regulatory Entity
14 Source: www.ere.gov.al
15 Source: www.bruessel.austria.be/al/news/local/AKBN.ppt
16 Source: http://www.energy-community.org/pls/portal/docs/36341.PDF
17 Source: http://www.kepa.uoa.gr/PROMITHEAS2_Conference_Policy_Business_Sessions.htm
18 Source: World Energy Council
Age of large HPPs Recent hydro power development studies have defined new sites for the
1,600 complete exploitation of Albania’s main rivers. There is however, a concern
to increase reliability in dry years when hydro power output is significantly
1,400
reduced. Biomass, solar and wind energy could be important in Albania’s future
1,200
as the country has very good potentials of these energy sources.
1,000
MW
800 The total hydro power potential on the Drini River is 1,750 MW of which
600 77% has already been utilized. There are projects for the construction of two
400
additional large HPPs with a total installed capacity of 400 MW.
200
According to the above-mentioned studies, the Mati River has a hydro potential
0
<10 11–20 21–30 >30 of 112 MW and only 40% of it has been exploited yet. There are already two
years years years years HPPs built along the river and there is the possibility for a third one.19
On the Vjosa River the hydro potential is 400 MW. Currently there are no plants
along the river, but according to estimates eight dams could be constructed.
Technical and economic feasibility studies for HPPs construction projects
exist20.
HPP developments According to recent studies, 41 new sites have been chosen for small HPP
Installed installations with a technically feasible potential of around 140 MW21.
(MW) The existing HPPs provide inadequate supply for the population. The energy
Skavica S 350 Drini sector is currently being privatized and the government is determined to solve
its energy problems by offering concessions for the construction and operation
Devolli S 320 Devolli
of HPPs on all of its major rivers.
Kalivaci S 90 Vjosa
Ashta S 50 Drini Legislation

Total 810
Relevant legislation in Albania consists of:
*S: Storage; RoR: Run-of-river; PS-T: Pumped
storage – turbine; PS-P: Pumped storage - pump  Law “On concessions” (2006)
 Ministers Council Decision “On approval of rules for evaluation and

concession procedures” (2008)
 Ministers Council Decision “For the organization and function of

Concession’s Treated Agency” (ATRAKO) (2007)
 Ministerial decision “On regulations approval for the administration of

the documents and requests for concessionary agreements and “Bonus
evaluation criteria” (2007)
 South-East European Energy Community Treaty (2006)
19 Source: http://www.kepa.uoa.gr/PROMITHEAS2_Conference_Policy_Business_Sessions.htm
20 Source: Hydro energy in Albania accessed at www.akbn.gov.al
21 Source: RES Opportunities in South East Europe, 2008
Major rivers  Law “On facilitating conditions establishment for new power generation
Length Drop Runoff resources construction” (2002)
River
(km) (m) (m3/s)
 Law “On foreign investments” (1993)
Buna 44 6 672
 Law “On water reserves” (1996)
Drini 160 278 352
Vjosa 192 335 204 Albania currently only supports hydro power generation through its renewable
Mati 115 121 103 generation support scheme. A feed-in-tariff for SHPPs below 15 MW was
introduced in 2008.
Semani 85 47 95.7
Shkumbini 181 1,205 61.5
Ishmi 74 115 20.9
Erzeni 109 1,300 18
Regulatory bodies
The Ministry of Economy, Trade and Energy (METE) is the highest state
authority responsible for energy policy-making. Its main function is to
promote steady and sustainable economic development.
(http://www.mete.gov.al/index.php?l=e)
The regulatory functions of the state in the power sector are exercised
by the Electricity Regulatory Entity (ERE). ERE has the responsibility of
regulating the performance of market participants, under appropriate rules
and regulations and in accordance with transparent procedures.
(http://www.ere.gov.al/index.php?lang=EN)
The National Agency of Natural Resources (AKBN) is a public entity,

which protects and administrates the interests of the Albanian Government
in the areas of mining, hydrocarbons, hydro power and energy. AKBN, as a
subordinate institution under the Minister of Economy, Trade and Energy,
advises and provides government opinion on studies and projects within
its activity area, as well as promoting the natural resources of the country.
(www.akbn.gov.al)
6.2. Bosnia and Herzegovina

Hydroelectricity
Fossil fuels
• 51.3% • 34.4%
• 48.7% • 65.6%

4,021 MW generation: 13,220 GWh Source: UCTE, 2008
Installed HPP capacities Generation Characteristics

Installed
Electricity generation in Bosnia and Herzegovina (BiH) originates exclusively
Size capacity
(MW) from domestic energy resources: coal (black and lignite) and hydro power. Total
installed capacity for electricity generation in BiH was 4,021 MW, of which
2,064 MW comprises HPPs and 1,957 MW in thermal power plants in 200822.
Small HPPs (<10 MW) 8 Apart from major HPPs and thermal power plants, the existing generation
capacities in Bosnia and Herzegovina also include some small hydro power
Source: UCTE, 2008
connected to the distribution network.
The power sector in BiH consists of three vertically integrated monopolies:

Elektroprivreda Bosne i Herzegovine (EPBiH), Elektroprivreda of the Republic
of Srpska (EPRS) and Elektroprivreda Hrvatske Zajednice Herceg-Bosna
(EPHZHB)23. These power companies are interconnected and there is no
competition among them; they are virtual monopolies within their exclusive,
ethnically-based service territories.
Major operational HPPs

Installed capacity
Name Type* River
(MW)
Čapljina PS 430 Trebisnjica
Višegrad S 315 Drina
Salakovac S 210 Neretva
Trebinje S 168 Trebisnjica
Jablanica S 165 Neretva
Rama S 160 Rama
Grabovica S 117 Neretva
Bočac S 110 Vrbas
Dubrovnik S 108** Trebisnjica
Jajce RoR 90 Pliva
Mostar S 75 Neretva
Peć-Mlini RoR 30 Tihaljina
*S: Storage; RoR: Run-of-river; PS-T: Pumped storage – turbine; PS-P: Pumped storage – pump
** The installed capacity of Dubrovnik HPP is 216 Mw. It is situated on the river border of Croatia and
Bosnia and Herzegovina and used jointly, therefore half of the installed capacity value is indicated.
22 Source: UCTE, 2008

23 Source: http://ebrdrenewables.com/sites/renew/countries/BosniaHerzegovina/profile.aspx
Age of large HPPs The large HPPs provide the vast majority of BiH’s hydro-based electricity
1,400
production with their more than 99% share of the hydro generation capacity.
1,200
The average age of the HPPs in BiH is over 32 years. The oldest HPPs were
1,000
built during the 1950s and are owned by EPRS.
800
MW
600
Prospects for hydro generation
400
200 As Bosnia and Herzegovina is not a member of the EU, associated EU

directives do not define any binding targets for the country for gross electricity
0
<10 11–20 21–30 >30 consumption generated from renewable sources (RES–E). BiH has not
years years years years
developed its own energy strategy yet; therefore the state does not have any
requirements for the level of RES–E.
Forests and forestland make up more than the half of the country’s territory.
As a result of this, there is a significant biomass generation potential in BiH.
Currently there is neither any wind power installed in BiH nor any complete
wind atlas available in BiH. However according to recent studies the estimated
technical potential for wind power generation is 2,000 MW 24.
Major rivers Bosnia and Herzegovina’s geography includes fast-flowing mountain streams
Length Drop Runoff and powerful rivers that are very well suited for hydro electricity production.
River
(km) (m) (m3/s) The total installed capacity represents 26% of the theoretical potential (8,000
Sava 311 15 1,513 MW), 30% of the technical potential (6,800 MW) and 37% of the economic
potential (5,600 MW)25. According to estimates, the technically potential
Driva 345 352 371 capacity could generate 24,000 GWh annually. 26
Neretva 208 1,225 233
As a result of the above, there is a significant hydro potential among rivers of
Una 207 274 202
BiH that the government and investors should be aware of.
Bosna 271 471 174
Currently the most urgent task in Bosnia and Herzegovina is the rehabilitation
Vrbas 240 1,687 102
and reconstruction of most of the HPPs. Additionally, the construction of new
Sana 140 801 90 hydro plants and reservoirs for water supply is also envisioned.
Trebišnjica 99 167 24
There are more than 10 projects in the preliminary design phase with a total
installed capacity of 1,316 MW, though it is quite likely that there are more
proposals hidden from public scrutiny.
24 Source: www.kepa.uoa.gr/2008_Presentation_CRES.ppt
25 Source: http://ebrdrenewables.com/sites/renew/countries/BosniaHerzegovina/profile.aspx
Legislation
The legal framework for electric power sector in Bosnia and Herzegovina is
defined by the following27:
 Law on transmission, regulator and system operator of electricity in Bosnia

and Herzegovina (2002)
 Law on electricity in the Federation BiH (2005)
 Law on electricity in the Republika Srpska (2003)
 Law on establishing Transmission Company in Bosnia and Herzegovina (2004)
 Law on establishing Independent System Operator in Bosnia and

Herzegovina (2004)
 South-East European Energy Community Treaty (2006).
BiH has a feed-in tariff system in operation with a purchase obligation; however,
there are no other incentives for renewable power generation investments.28
HPP developments
Installed capacity
Name Type* River
(MW)
Buk Bijela S 450 Drina
Glavaticevo S 188 Neretva
Dabar S 160 Trebisnjica
Konjic S 125 Neretva
Ustikolina S 63 Neretva
Mostarsko Blato S 61 Listica – Jasenici
Nevesinje S 61 Trebisnjica
Srbinje S 55 Drina
Krupa S 49 Vrbas
Banja Luka Low S 37 Vrbas
Bileća S 30 Trebisnjica
Vranduk S 21 Neretva
Novoselija S 16 Vrbas
Total 1,316
*S: Storage; RoR: Run-of-river; PS-T: Pump storage – turbine; PS-P: Pump storage - pump
27 Source: http://www.energy-community.org/pls/portal/docs/85835.PDF
28 Source: Energy Efficiency and Renewable Energy – Bosnia and Herzegovina – national study’s
summary by Plan Beu
Regulatory bodies
The State Electricity Regulatory Commission (SERC) is an independent

and non-profit institution founded pursuant to the Law on transmission,
regulator and system operator of electricity in Bosnia and Herzegovina
and it is in charge of the transmission of electricity, transmission
system operations and international trade of electricity, according to the
international norms and European Union standards. (http://www.derk.ba)
The Federal Ministry of Energy, Mining and Industry implements policy

and enforces the laws as determined by the legislative body, executes the
administrative supervision of implementation of laws and other regulations
and enacts regulations for implementation of laws and other regulations.
(http://www.fbihvlada.gov.ba)
The Regulatory Commission for Electricity in the Federation of Bosnia

and Herzegovina (FERC) was founded pursuant to the Law on electricity,
in order to prevent monopolies in the electric power sector, streamline
electricity consumption, enable third-party access to the distribution
network, and does everything for the purposes of the gradual electricity
market opening. (www.ferk.ba)

6.3. Bulgaria
Hydroelectricity Fossil fuels
Other renewables Nuclear power
• 26.3% • 9.1%
• 1.0% • 0.1%
• 55.0% • 55.9%
• 17.6% • 34.9%


Installed
The total installed capacity for electricity generation in Bulgaria was 11,359 MW
Size capacity
(MW) in 200829. The country’s hydro power stations’ installed capacity is 26.3% of
total capacity and they are almost fully owned by the National Electric Company
“NEK” (Natsionalna Electricheska Kompania EAD) which is responsible for
Small HPPs (<10 MW) 513 transmission, system operation and electricity generation.
Source: Electricity System Operator (ESO EAD),
2008
Installed
Name Type* River
capacity (MW)
PS-T 864
Chaira Chairska
BSC Cascade
PS-P 788
PS-T 375
Belmeken Krika
PS-P 104
Sestrimo S 240 Krika
Momina Klisura S 120 Krika
Teshel HPP S 60 Buinovska
Vacha Cascade
Devin HPP S 80 Vacha

PS-T 160
Orfeus PSHPP Vacha
PS-P 45
Krichim HPP S 80 Vacha
Batak HPP S 40 Matnitsa
Cascade
Batak
Peshtera HPP S 125 Matnitsa

Aleko HPP S 66 Stara
Kardzhali HPP S 106 Arda
Dolna Arda
Cascade
Studen Kladenets
S 60 Arda
HPP
Ivailovgrad HPP S 104 Arda
*S: Storage; RoR: Run-of-river; PS-T: Pumped storage – turbine; PS-P: Pumped storage - pump
Source: NEK (Natsionalna Electricheska Kompania) Annual Report, 2008
The majority of the installed capacities in Bulgaria is owned by NEK; 97% of

hydro power is generated by its 14 largest HPPs, with a total installed capacity
of 2,480 MW30 (excluding pumped storage facilities). They are operated within
four hydro power cascades: Belmeken-Sestrimo-Chaira (BSC), Vacha, Batak
and Dolna Arda. All are used to cover peak loads and to balance out the grid
system. The average age of large Bulgarian HPPs is approximately 30 years.
29 Source: UCTE
30 Source: http://www.nek.bg
Age of large HPPs Prospects for hydro generation

1,800 Under an EU Directive (2001/77/EC) for the promotion of electrical energy
1,600 produced from renewable sources in the domestic electricity market, Bulgaria
1,400 has the obligation to achieve an 11% share of RES-E in gross electricity
1,200
consumption by 2010. It also has a proposed binding RES Directive target
for the share of energy from renewable sources in final energy consumption
1,000
MW
of 16% by 202031. The share of RES-E in gross electricity consumption was

800 7.5% in 2007 (although the share of hydro is relatively high in the capacity mix,
600 generation of pumped storages is not considered to be renewable). This share
400 decreased by 3.7% points compared to data from 2006 when this ratio was
200 11.2%, reaching the 2010 renewable electricity target.
0
<10 11–20 21–30 >30 Currently RES-E is generated almost exclusively from hydro energy utilization.
There is presently minimal electricity production from geothermal, wind, biomass
or photovoltaic sources, however, studies reveal that Bulgaria has very promising
renewable development opportunities due to its favourable climate and geographic
characteristics that in practice have not yet been effectively exploited.
RES goals Bulgaria has vast technical hydro power potential, which could generate 15,000
GWh32 per annum. Approximately 24%33 of this potential had been utilized as
Percentage
of RES of 2008. The country has tremendous wind energy potential and it has a sizable
reserve of geothermal energy. There is a great opportunity to utilize biomass as
2010 – RES-E goal 11%
well: 60% of the overall land area consists of arable and agricultural lands, and
2020 – RES goal for final 16% approximately 30% is forest cover.
energy consumption
2007 – RES-E utilization 7.5% Bulgaria has published a draft version of its new Energy Strategy in August
2008 in order to define national objectives. According to the draft of the
“Bulgarian Energy Strategy by 2020”34 the national target for RES will be met
by promoting the use of biomass, SHPPs and wind power. In the medium-
term, hydro resources (small and large HPPs) will continue to play a dominant
role in the generation of electricity from renewables, contributing to exceeding
the national RES target.
Major rivers
Length Drop Runoff The Bulgarian government believes that a significant contribution to the
River
(km) (m) (m3/s) national target achievement would be the implementation of small hydro
Danube 472 24 6,100 power projects. There are a significant number of SHPPs under construction
with a total installed capacity of 18 MW35.
Maritsa 322 2,335 107
Struma 290 2,112 76
Arda 241 1,381 72
Iskar 368 2,476 54

32 World Energy Council
33 Source: UCTE
34 Source: Bulgarian Energy Strategy by 2020 – draft version, http://www.mee.government.bg/doc_vop/
EnergyStrategy_ENG_22_01_2009.pdf
35 Source: http://ebrdrenewables.com/sites/renew/countries/Bulgaria/default.aspx
Large hydro power projects under construction (such as the rehabilitation

of Dolna Arda, or the construction of Tsankov Kamak36), or in the process of
deliberations (like Gorna Arda and hydro power sites along the Danube river
between Nikopol-Turnu Mugurele and Silistra-Calarasi) are also in the pipeline.
HPP developments
Installed capacity
Name Type* River
(MW)
Nikopol & Turnu
N/A 880 Danube
Mugurele
Silistra & Kalarash N/A 530 Danube
Gorna Arda S 170 Arda
Tsankov Kamak S 80 Vacha
Surnica N/A 62
Dolna Arda rehab S 61 Arda
Shreden Iskar N/A 25 Iskar
SHPPS 18
Total 1,826
Legislation
The main pieces of related domestic legislation are:
 Renewable and Alternative Energy Sources and Biofuels Act (2007)
 Energy Act (2003)
 Energy Efficiency Act (2004)
 Ordinance on Setting and Applying Prices and Rates of Electricity (2002)
 Regulation for Certification of the Origin of Electric Power Generated by

Renewable and/or Combined Generation Sources, Issuance of Green
Certificates and Trading (2005).37
36 Source: http://reports.andritz.com/2007/print/andritz-report-2007-en-customer-project-hydro-power.pdf
37 Source: Renewable Energy Country Profiles (2008), Promotion and Growth of Renewable Energy
Sources and Systems supported by the European Commission
A combination of feed-in tariffs, tax incentives and purchase obligation exists.

The relatively few incentives make penetration of renewables especially
difficult, as the current commodity prices for electricity are still relatively low.
A green certificate system to support renewable electricity developments
has been proposed. Bulgaria recently agreed upon an indicative target for
renewable electricity, which is expected to provide a good incentive for further
promotion of renewable support schemes.
Regulatory bodies
The Ministry of Economy and Energy (MEE) is a state body responsible

for the development of policies related to the energy sector. It was created
in 2005 after the merger of the Ministry of Economy and the Ministry of
Energy and Energy Resources (MEER).
(http://www.mi.government.bg/eng/)
The State Energy and Water Regulatory Commission (SEWRC) is the

main independent institution established in 1999, responsible for the state
regulation of activities in the energy sphere and water supply as well as in
sewerage services. In the energy sector, SEWRC carries out monitoring
of the energy markets, prices and license regulatory control in regard to
generation, transmission and distribution of electric power, transmission
and distribution of natural gas, electric power and natural gas trading,
generation and transmission of heating energy.
(http://www.dker.bg/index_en.htm)
The Energy Efficiency Agency (EEA) is a budget-supported legal entity

with the status of executive agency to the Minister of Energy and Energy
Resources, created in 2002. Its functions are related to development of
programmes and projects for enhancing the energy efficiency and use
of renewable energy sources, providing funds for their co-financing and
implementation. (http://www.seea.government.bg/)
6.4. Croatia
Other renewables
• 53.3% • 46.3%
• 1.5% • 0.4%
• 45.2% • 53.3%


Installed
The Croatian electricity sector is run by the Hrvatska Elektroprivreda (HEP), a
Size capacity
(MW) national electricity company engaged in electricity production, transmission
and distribution. HEP generates about 95% of the power within Croatia. The
remaining 5% is generated by industrial cogeneration plants and small private
Small HPPs (<10 MW) 37 HPPs. With an eye on accession, in July 2001 the government passed energy
legislation that brings the Croatian electric sector in line with EU standards.
Source: Electricity System Operator (ESO EAD),
2008
The total installed power generation capacity was 3,762 MW in 2008, of
which 2,007 MW was hydro, 1,700 MW thermal and 55 MW other renewable
sources38.
The Croatian HPPs are predominantly located along the Adriatic coastline and
near the Slovenian-Croatian border.

Installed capacity
Name Type* River
(MW)
Zakučac S 486 Blato
PS-T 276 Zrmanja and Štikada
Velebit
PS-P 240 Zrmanja and Štikada
Orlovac S 237 Buško Blato
Senj S 216 Gacka and Lika
Dubrovnik S 108** Trebišnjice
Varaždin RoR 87 Drava
Vinodol S 90 Gorski kotar
Čakovec RoR 82 Drava
Dubrava RoR 82 Drava
Gojak RoR 55 Mrežnica and Dobra
Kraljevac S 46 Cetina
Peruća S 60 Cetina
Đale S 41 Cetina
Rijeka RoR 37 Rječina
Miljacka RoR 24 Krka
Sklope S 23 Gacka and Lika
PS-T 12 Buško Blato
Buško Blato
PS-P 10 Buško Blato
** The installed capacity of Dubrovnik HPP is 216 Mw. It is situated on the border river of Croatia and Bosnia
and Herzegovina and used jointly, therefore half of the installed capacity value is indicated.
38 Source: UCTE
Age of large HPPs Most of the Croatian HPPs are old; the first HPP was constructed in the 1890s;
the majority of the operational hydro plants were constructed during the
1,800
1960’s, while the most recent were constructed in the late 1980s39. For the
1,600
last 15 years mostly refurbishment of the older HPPs has taken place, which
1,400 in some cases has made for increases in the installed capacity and turbine
1,200 efficiency.
1,000
MW
800
Currently, the total amount of installed power in SHPPs is 37 MW. According
to studies, the economic potential is estimated at around 177 MW and 699
600
suitable locations have been identified for further development of SHPPs40.
400
200
0
<10 11–20 21–30 >30
years years years years In Croatia, the share of renewable energy in gross electricity supply – excluding
the generation of large scale HPPs – was 1.8%41 in 2007. In accordance with the
relevant regulations (EU Directive 2001/77/EC), this ratio should have reached
5.8% by 201042.
RES goals
Percentage However, including large scale HPPs, the share of renewable energy sources in
of RES gross electricity generation was 23% in 2007, which is relatively high compared
2010 – RES-E goal 5.8% to some other countries43.
2020 – RES goal for final n/a The present RES-E is based on hydro and wind power. The country’s technical
energy consumption hydro power potential could generate 9,000 GWh annually.44 Approximately
2007 – RES-E utilization 1.8% 59% of this potential is presently being utilized based on UCTE’s 2008 data.
The most promising renewable energy resource besides them appears to be
geothermal. There are good biomass project opportunities in Croatia as well,
but further studies must be performed to identify specific opportunities.
Major rivers
Length Drop Runoff There is a need for the construction of new HPPs in Croatia not only
River
(km) (m) (m3/s) because of the consistent growth of power consumption, but also because
Danube 188 11 3,206 of the forthcoming shut down of old facilities. There are several projects
in the pipeline for development of both large and SHPPs with a total
Drava 323 115 556
installed capacity of around 453 MW. The biggest investment would be the
Sava 562 57 255 construction of the Novo Virje HPP on the Drava River with a total installed
capacity of 138 MW.
Cetina 105 385 105
Krka 73 242 50
Gacka 61 457 15.5
39 Source: Hydro Power Potential in the Sava River Basin

40 Source: National Energy Programme
41 Source: Eurostat
42 Source: Directive 2009/28/EC on the promotion of the use of energy from renewable sources
43 Source: Eurostat
HPP developments
Installed capacity
Name Type* River
(MW)
Novo Virje S 138 Drava
Ombla S 69 Rijeka Dubrovacka
Podsused n/a 43 Sava
Lešće n/a 42 Gojačka
Kosinj n/a 22 Lika
Drenje n/a 39 Sava
SHPPs 100
Total 453
Legislation
The relevant legislation in Croatia comprises:
 Energy Sector Development Strategy (2002)
 Programme of Implementation of the Energy Sector Development Strategy

– PROHES (1994)
 National Energy Programmes (MAHE, 1997)
 Law on Energy (2001)
 Law on Electricity Market (2001)
 Law on Regulation of Energy Activities (2001)
 Environment Protection and Energy Efficiency Fund (2003)45
Croatia has a feed-in tariff system in place, which can be complemented with
interest free loans, capital grants for eligible producers and a tax exemption for
solar generation investments.
45 Source: Renewable Energy Country Profiles (2008), Promotion and Growth of Renewable Energy
Sources and Systems supported by the European Commission
Regulatory bodies
The Croatian Parliament determines and passes the legal framework

for the energy sector, receives direct reports from the Croatian Energy
Regulatory Agency, reviews and approves financial proposals and global
energy policy stated in the Energy Sector Development Strategy.
(http://www.sabor.hr/Default.aspx?sec=361)
The Government of the Republic of Croatia submits proposals for

financing energy needs to the Parliament, and establishes the energy policy
including principles of environmental protection, which also includes energy
efficiency and energy production from renewable sources.
(http://www.vlada.hr/en)
The Ministry of Economy, Labour and Entrepreneurship with its Energy

and Mining Division, is the ministry in charge of energy policy. The Ministry of
Economy submits energy needs and policy proposals to the Government, and
drafts secondary legislation and regulations in collaboration with the Croatian
Energy Regulatory Agency. (http://www.mingorp.hr/defaulteng.aspx)
The Croatian Energy Regulatory Agency (HERA) has been founded as an

autonomous, independent and non-profit public institution based on the Act
on the Regulation of Energy Activities , in order to establish and implement
regulation of energy activities. (www.hera.hr)
Croatian Energy Market Operator (HROTE)

HROTE was established in March 2005 in accordance with the legislative
changes related to the restructuring of the energy sector in the Republic
of Croatia. The duties of the market operator are set out in the Electricity
Market Act. HROTE carries out the activities of organizing the electricity
market as a public service. It also promotes the development of the
electricity market through its operations which are overseen by the Croatian
Energy Regulatory Agency. (http://www.hrote.hr/en/)
6.5. Czech Republic

• 13.2% • 3.1%
• 1.2% • 0.3%
• 64.2% • 64.1%
• 21.5% • 32.5%

Installed HPP capacities Characteristics of hydro generation

Installed
The electricity sector in the Czech Republic is made up of coal-fired thermal,
Size capacity
(MW) nuclear and hydroelectric power stations and a small contribution from other
renewable sources. The 2008 total installed capacity for electricity generation
was 16,480 MW.46 Sixty-five per cent of generation capacity is owned by Czech
Small HPPs (<10 MW) 305 Energy Works (CEZ), the country’s former incumbent electricity producer.
The remainder is owned by independent producers. The majority of installed
Source: CEZ, UCTE, 2008
capacity is based on coal (64.2%), while shares of nuclear and hydro plants are
21.5% and 13.2%. Total installed capacity for hydroelectricity is 2,175 MW.47
Excluding two pumped storage facilities of 650 MW and 450 MW all other large
hydroelectric power stations are situated on the Vltava River where they form a
cascade system called the Vltava Cascade.

Installed capacity
Name Type* River
(MW)
Dlouhé Stráně PS 650 Divoká Desná
Dalešice PS 450 Jihlava
Orlík S/RoR 364 Vltava
Slapy S/RoR 144 Vltava
Lipno S/RoR 120 Vltava
Štěchovice II PS 45 Vltava
Kamýk S/RoR 40 Vltava
Štěchovice I S/RoR 23 Vltava
Střekov S/RoR 20 Vltava
Vrané S/RoR 14 Vltava
46 Source: UCTE
47 Source: UCTE
Age of large HPPs The most important HPP in the country is the Dlouhé Stráně Hydroelectric
1,400 Power Station situated in Moravia, which has the largest reversing water
turbine in Europe, the largest head and the largest installed capacity in the
1,200
Czech Republic, at 2 x 325 MW.
1,000
800 There are approximately 1,50048 SHPPs in the country contributing to a total
MW
600 installed capacity of 379 MW, equivalent to 17% of the Czech Republic’s total
400 hydro capacity.
200
Total technical hydro potential of the Czech Republic could generate 4,000
0
<10 11–20 21–30 >30 GWh per annum, however roughly 59%50 of this was utilized in 2008.
The first large HPPs were commissioned in the 1930s and most have an
average age of more than 30 years,51 employing old technology.
RES goals Prospects for hydro generation

Percentage According to the relevant EU Directive (2001/77/EC) the Czech Republic has the
of RES
obligation to achieve an 8% share of RES-E in gross electricity consumption
2010 – RES-E goal 8.0% by 201052, with a binding RES Directive target for the share of energy from
renewable sources in final energy consumption of 13% by 202053
2020 – RES goal for final 13.0%
energy consumption
Currently Czech renewable electricity generation is dominated by HPPs,
2007 – RES-E utilization 4.7%
but wind and biomass are also experiencing strong growth and will be
major contributors to achieving the RES targets. No further areas exist to
accommodate large HPP development, meaning there is no room for growth in
this sector. However, there is still unexploited potential for SHPPs to be built in
the mountainous regions of the Czech Republic.
Major rivers
River Length Drop Runoff The Czech Republic aims to improve energy efficiency and energy substitution
(km) (m) (m3/s) (renewable fuel sources in place of fossil fuels) through the support of projects
Elbe like SHPPs at Ceske Kopisty and Steti. Revitalization of its existing HPPs is
249 1,258 303
(Labe) considered to be of high importance as well54.
Vltava 430 1,016 150
Morava 284 1,228 120
Eger 251 314 38

(Ohře)
Svratka 174 609 27.2
Lužnice 204 130 24.3
48 Source: www.esha.be
50 Source: UCTE
51 Source: www.cez.cz
54 Source: http://ebrdrenewables.com/sites/renew/hydro.aspx
Legislation
Relevant legislation in the Czech Republic includes:
 National Energy Policy until 2030 (2004)
 National programme for the energy management and use of renewable

sources of energy for 2006 – 2009.
There are relatively high feed-in tariffs with 15-year guaranteed support by
investment funds. Producers can choose between a fixed feed-in tariff and
a premium payment (green bonus). For biomass cogeneration, only a green
bonus applies. Feed-in tariff levels are announced annually.
HPP developments
Installed capacity
Name Type* River
(MW)
Ceske Kopisty/Steti n/a 12 Labe
SHPPs (rehab) 89
Total 101
Regulatory bodies
The Energy Sector within the Ministry of Trade and Industry is a state
body responsible for the development and implementation of national
energy policies, plans and programmes. (http://www.mpo.cz/)
The Czech Energy Agency is a national organization responsible for the

promotion of energy efficiency and renewable energy sources.
(http://www.ceacr.cz/)
The State Energy Inspection Board is the inspection body supervising the
activities of the energy sector. Its responsibilities are defined in the Energy
Act. (http://www.cr-sei.cz/)
The Energy Regulatory Office is the national regulatory authority in the

energy sector. Its main tasks are defined as the support for economic
competition, for the use of renewable and secondary energy sources, and
protection of consumers’ interests in areas of the energy sector where
competition is not feasible. (http://www.eru.cz/)
6.6. Estonia
Other renewables
• 0.2% • 0.3%
• 2.4% • 1.3%
• 97.4% • 98.1%

2,738 MW generation: 10,579 GWh Source: Statistics Estonia, BALTSO, 2008

Installed
Estonia’s power system is dominated by Eesti Energia AS, a state-owned
Size capacity
(MW) company engaged in power production, transmission, distribution and sales.
In 2008, the country’s total installed capacity amounted to 2,738 MW of which
Large HPPs (>10 MW) 0
2,668 MW came from thermal, 65 MW from wind power and 5 MW from hydro
Small HPPs (<10 MW) 5 sources55.
Source: BALTSO, 2008
Estonia has a long history of using hydro power. The first SHPPs were
established around the turn of the 20th century. The hydro power industry
has played a considerable role in Estonia’s total electricity generation
(approximately 28%) with a total installed capacity of more than 27.5 MW
before World War II56. Unfortunately, most of these SHPPs were destroyed
during the war.
RES goals
Percentage Although Estonia has numerous rivers, it is a relatively flat country and has
of RES modest hydroelectric potential. It does not have any large HPPs, only small
scale hydro power facilities. Its most significant HPPs are two SHPPs –
2010 – RES-E goal 5.1%
Linnamäe, and Keila SHPP – accounting for only 0.1 % of the country’s total
2020 – RES goal for final
25% installed capacity57.
energy consumption
2007 – RES-E utilization 1.5% Major rivers
Installed capacity
Name Type* River
(MW)
Narva 77 30 400
Emajõgi 101 3.7 70
Pärnu 144 76 48.2
As a member of EU, Estonia has mandatory targets set by the Directive on

the promotion of the use of energy from renewable sources. In accordance
with this, the country has the obligation to reach a 5.1% share of RES-E on
gross electricity consumption by 201058 and a 25% share of RES in the final
consumption of energy in 202059.
55 Source: Baltso, Annual Report 2007

56 Source: http://ebrdrenewables.com/sites/renew/countries/Estonia/profile.aspx#hydro
57 Source: BALTSO, 2008
Currently, renewable energy is mainly produced by SHPPs and wind parks,

but the biomass sector has very promising potential in Estonia as well. As a
result of this, the Government considers wind and biomass to be the major
contributors toward achieving the binding targets set by the EU60.
Studies have shown that the country’s technical potential for hydro power
could generate 263 GWh per annum, which is only exploited to a small extent
(11%); even though larger hydroelectric projects are not possible, there are
many places throughout the country where smaller environmentally-friendly
projects might be feasible.
The government’s short-term perspective is the rehabilitation of previously

constructed SHPPs and the construction of new hydroelectric facilities with a
total output of 5 MW61.
Legislation
The relevant legislation in Estonia comprises:
 Energy Law (1997)
 Electricity Market Act (2003, amended in 2004)
 Long-Term National Development Plan for the Fuel and Energy Sector until
2015 (2005)
 National Energy Efficiency Programme (2007).
There are feed-in tariffs paid for 7–12 years but not beyond 2015. The single
feed-in tariff level is available for all technologies. The relatively low feed-in
tariffs make new renewable investments very difficult.
Regulatory bodies
The Ministry of Economic Affairs and Communications through its

Department of Energy defines, implements, and regulates the enforcement
of energy policy. (http://www.mkm.ee/)
The Ministry of the Environment, established in 1989, it is responsible for

organizing and coordinating international relations in environmental matters.
(http://www.envir.ee/)
The Estonian Energy Market Inspectorate (EMI) was established in 1998.

EMI is responsible for implementing the state control, supervision and
monitoring of the fuel and energy market, including the issuance of market
licenses and price controls. (http://www.eti.gov.ee/)

60 Source: http://ebrdrenewables.com/sites/
renew/countries/Estonia/default.aspx
6.7. Hungary
• 0.6% • 0.6%
• 6.7% • 4.2%
• 69.2% • 55.3%
• 23.5% • 39.9%

Installed HPP capacities Characteristics of electricity generation

Installed
The great part of Hungary’s energy industry is privately owned. However, the
Size capacity
(MW) former state monopoly MVM (“Hungarian Power Companies”), in addition to
some of power plants, has retained the transmission network and also controls
cross-border capacities through its subsidiary, MAVIR. Furthermore, the
Small HPPs (<10 MW) 7 company, which used to be the single buyer of electricity, still plays a dominant
role in the Hungarian electricity system despite the market opening.
Source: UCTE, 2008
In 2008, 69.2% of the installed capacities (5,360 MW) were thermal units,
while 23.5% (1,822 MW) were nuclear installations.62 In the Hungarian
Major operational HPPs generation mix renewable sources are predominantly biomass (wood) co-fired
in conventional thermal power plants. A small amount of wind and biogas
Installed
Name Type* capacity River generation capacity also exists.
(MW)
Kisköre While Hungary is crossed by many rivers, it is a relatively flat country with moderate
S 28 Tisza hydro resources; the existing total installed capacity was 46 MW in 200863.
(Tisza II.)
Tiszalök
RoR 11 Tisza There are 31 hydro power generators in Hungary – by far the largest of which
(Tisza I.)
are the Kisköre and Tiszalök units on the Tisza River in the eastern part of
storage – turbine; PS-P: Pumped storage - pump Hungary, owned by the state through Tiszavíz Hydro Power Plants Ltd., with
capacities of 28 MW and 11 MW respectively.
The average age of the large HPPs in Hungary is approximately 40 years.

45
Hungary has a relatively low renewable energy share in gross electricity
40 consumption compared to other EU member CEE countries: its goal is 3.6%
35 by 2010. Hungary has already met this objective through its intensive biomass
30 usage, but additional significant efforts will be needed to reach the 2020
25
objective of the Directive on final energy consumption (13%)64.The present
MW
RES-E is based on biomass, wind power and hydro. Aside from these, the most
20
promising renewable energy resource appears to be geothermal.
15
10 The country’s technical hydro power potential is around 8,000 GWh65; as the
5 second largest river in Europe, the River Danube bears a great deal of this
0
potential (72%) but on the Hungarian section of the river these resources are
<10 11–20 21–30 >30
62 Source: UCTE
63 Source: www.mavir.hu
65 Source: World Energy Council, 2009
RES goals not utilized. In the communist era efforts were previously implemented to
Percentage jointly build a large HPP system (Gabčíkovo-Nagymaros Hydro Power Project)
of RES with the former Czechoslovakia, but the project was later terminated by the
2010 – RES-E goal 3.6% Hungarian state due to political opposition: near the time of the change of the
regime the rising opposition considered defeating its construction an iconic
2020 – RES goal 13% opportunity to weaken the system.
In addition to existing HPPs, the development of a limited number of small and
micro-sized HPPs is in progress. Besides the implementation of new sites,
existing facilities are also being modernized. The renovation of the Tiszalök HPP
is being accomplished in three phases and is set for completion in 2010.
HPP developments
Installed There are also far-reaching plans on several possible locations for the construction
Name Type* capacity River of a pumped storage hydroelectric power plant in Hungary in order to rationalize the
(MW) energy system and to support the extension of the Paks Nuclear Power Plant and
SHPPs 3 a greater number of wind turbines to be installed. However none of the pumped
*S: Storage; RoR: Run-of-river; PS-T: Pumped storage plans had been approved by the authorities as of 2009.
Major rivers
Drop
River Length (km) Runoff (m3/s)
(m)
Danube 417 40 2,350
Tisza 596 42 820
Dráva 357 45 653
Rába 215 108 63
Hernád 118 69 28
Legislation
The relevant legislation in Hungary includes:
 Act No. 86/2007 on Electricity
 Governmental decree No 389/2007. (XII. 23.) on Obligatory off-take and

purchase price of electricity generated from waste or from renewable
energy sources, or by CHPG
 40/2008 Parliamentary Decree on the National Energy Strategy 2008-2020

(IV.17.)
 Act No. 57/1995 on Water Management.
An obligatory off-take and feed-in tariff system is present in Hungary for electricity
generation from renewable sources. This regulation contains the actual tariffs.
There are fixed feed-in tariffs (since January 2003, amended in 2005) combined
with purchase obligation and grants. The support is granted for the payback
period of the facility.
Regulatory bodies
The Ministry of Transport, Telecommunication and Energy (KHEM or

MTTE) is responsible for the execution of energy-related acts, and issues
enforcement decrees in the energy sector including mining. It is supported
by the Hungarian Energy Office and Hungarian Mining and Geological
Office. (http://www.khem.gov.hu/en)
The Ministry of Environment and Water is the central coordinating and

regulatory administrative body for environmental and water-related issues,
setting related policies, and forming legislation.
(http://www.kvvm.hu/index.php)
The Hungarian Energy Office (MEH or HEO) is the general supervisory

body for the gas, electricity and district heating markets. It issues licenses
for trade, supply, distribution, transmission and storage, and supervises
the operation of the market participants, approves the terms of business
thereof, examines consumer complaints, prepares regulated price
levels, undertakes price reviews and sanctions non-compliance and may
suspend or withdraw licenses. The Hungarian Energy Office acts under
the Government’s control and the supervision of the Minister of Transport,
Telecommunication and Energy. (http://www.eh.gov.hu/)
Based on appeals or as a supervisory body, first instance decisions related

to environmental issues are reviewed by the National Inspectorate for
Environment, Nature and Water. The authority work performed by regional
inspectorates is coordinated and controlled by the National Inspectorate.
As a first instance authority - set by legislation for environment, nature and
water - the National Inspectorate issues permits for certain activities, gives
expert authority opinions, and imposes fines and penalties.
(http://www.orszagoszoldhatosag.gov.hu/)

Installed
In 2008, the total installed generation capacity of Kosovo was 1,522 MW
Size capacity
(MW) including 97.1% thermal and 2.9% hydro.
The electricity sector in Kosovo is dominated by a vertically integrated power
Small HPPs (<10 MW) 9 generation company, Kosovo Energy Corporation (Korporata Energjetike
e Kosovës, “KEK”). KEK operates two lignite power plants with an overall
Source: ERO KS, 2008
capacity of 1,478 MW.66
Major operational HPPs Kosovo has three HPPs that supply electricity directly to local distribution
Installed
systems: HPP Ujman with an installed capacity of 35 MW that is operated by
Name Type* capacity River an irrigation company (Hidrosistem Ibar- Lepenac); SHPP Lumbardhi with a
(MW) generating capacity of 8.3 MW; and SHPP Radavc with an installed capacity of
Ujman S 35 Iber 0.34 MW operated by private producers67.
storage – turbine; PS-P: Pumped storage - pump The first HPP to be built in Kosovo was a SHPP at Radavc that was put into
operation in 1934. Besides SHPPs, presently HPP Ujman is the only HPP
generating electricity in the country, commissioned in 1983.

40 The present RES-E is generated only from hydro power. However, there is
35 800 GWh68 technical potential for hydro power in Kosovo that is barely being
30 utilized.
25
The Ministry of Energy and Mining (MEM) of Kosovo set annual and long-term
MW
20
indicative targets (2007-2016) for electricity produced from renewables.
15
10 As a first priority, MEM is to increase the consumption of RES-E, and there are
5 plans for revitalization of the existing SHPPs and for construction of new ones.
0 A recent study identified 18 technically suitable and economically feasible
<10 11–20 21–30 >30 sites69 for construction of SHPPs, with a total installed capacity of 64 MW70,
representing an important step towards the realization of this objective.
Currently, one of the biggest energy-related projects in Kosovo is the

construction of the country’s largest HPP that will be situated along the White
66 Source: www.kek-energy.com
Drin River. HPP Zhur will have an installed capacity of 305 MW, thus the
67 Source: Reforms in Kosovo’s power system,
installed hydro power capacity of Kosovo will significantly be increased, while
2008
there will still be room for further investments. The project is expected to be
68 Source: Ministry of Energy and Mining http://
www.lignitepower.com/pdfdocs/brochure-en.pdf
launched in Q4 2010.
69 Source: Renewable Energy Resources of Kosovo,
Ministry of Energy and Mining
70 Source: Energy Strategy of Kosovo 2005-2015
HPP developments Major rivers

Installed Drop
River Length (km) Runoff (m3/s)
Name Type* capacity River (m)
(MW) White Drin 156 221 56
White
Zhur S 305 Ibri 42 274 33
Drin
SHPPs 64 Sitnica 90 61 9.5
Total 369 Lepenci 60 1,490 9
Morava e Binçes 60 n/a 6
Legislation
Relevant legislation in Kosovo consists of:
 Law on Electricity (2004)
 Law on Energy Regulatory (2004)
 Energy Strategy of Kosovo 2005-2015 (2005)
 Kosovo National Plan on Energy Efficiency (2009-2016) (2009).
Kosovo is in the initial phase of renewable energy utilization and as such, there
is no support scheme in place yet, however, introduction of a feed-in-tariff
covering SHPPs is expected soon.71
Regulatory bodies
The Ministry of Energy and Mining (MEM), established in 2004, is a body

responsible for the implementation of Government policies in the fields of
energy and mining. (http://www.ks-gov.net/mem)
The Energy Regulatory Office (ERO) was established in 2004 to exercise

economic regulation in the energy sector independently from any
Governmental Department. (http://www.ero-ks.org/)
The Kosovo Environmental Protection Agency (KEPA) performs

regulatory tasks related to environmental protection at the national level.
It is responsible for preparing reports and analyses to the Government of
Kosovo on the environmental state and natural assets of the country.
(http://www.ks-gov.net/akmm/)
71 Source: http://www.ero-ks.org/Price%20and%20Tariffs/Price%20ang%20Tariffs%202008/Pergjigje_ndaj_
Komenteve_Hidrocentralet_e_vogla_eng.pdf
6.9. Latvia
Other renewables
• 60.8% • 58.7%
• 1.0% • 1.8%
• 38.2% • 39.4%

2,566 MW generation: 4,549 GWh Source: BALTSO, Latvenergo, 2008

Installed
In 2008, the country’s total installed capacity was 2,566 MW, consisting of
Size capacity
(MW) 1,560 MW hydro, 981 MW thermal and 25 MW other renewable sources72.
Large-scale hydroelectric power is the dominant source of electricity in Latvia,
Small HPPs (<10 MW) 25 providing 58.7% of total electricity generation.
All of the large scale HPPs are owned by Latvenergo AS, a state-owned energy
utility whose core business is the generation and sale of electricity and thermal
energy. Kegums HPP is the oldest power plant on the river Daugava and the
average age of the Latvian large HPPs is roughly 45 years. With an output of
869 MW, Plavinas HPP is the second largest HPP in the European Union in
terms of installed capacity73.
Age of large HPPs
1,800
1,600
Installed capacity
1,400 Name Type* River
(MW)
1,200
Plavinas S 869 Daugava
1,000
MW
Riga S 402 Daugava

800
Kegums S 264 Daugava
600
400
200 In recent years, the number of SHPPs in Latvia tripled. Currently there are
0 about 150 SHPPs in the country with a total installed capacity exceeding
<10 11–20 21–30 >30
years years years years 25 MW74. This rapid development of small-scale hydro plants was mainly
stimulated by the regulations adopted by the government on the purchase of
electricity produced in small power plants.
72 Source: Baltso Annual Report 2008

73 Source: www.latvenergo.lv

Percentage
Latvia has a high rate of renewable electricity production based on hydro
of RES
power, however there is still room left for further developments. Technical
2010 – RES-E goal 49.3%
potential is 4,000 GWh73 per annum, of which 67% is already utilized. In
2020 – RES goal for final addition to hydro, the country has wind power and biomass generation
40%
energy consumption capacities as well.
The target in the framework of Directive 2001/77/EC for Latvia is 2010 is 49.3%
of electricity consumption from renewable sources, and is to be expanded to
40% of total energy production by 202075.
Major rivers
Length Drop Runoff The Daugava HPP is a proposed hydro power project that will deliver up to 300
River
(km) (m) (m3/s) MW power. Additionally, there are plans for the construction of HPP Jekabpils
Daugava 352 100 678 with a total output of 30 MW and for the utilization of 80% of the country’s
potential for small scale hydro power76.
Lielupe 119 10.8 106
Gauja 452 234 70.7

HPP developments
Venta 178 49 44
Installed capacity
Name Type* River
(MW)
Daugava S 300 Daugava
Jekabpils n/a 30 Daugava
SHPPs 24
Total 354
Legislation
The relevant legislation in Latvia consists of:
 Energy Law (1998, amended in 2001)
 Law on Electricity Market (2005)
 National Energy Programme until 2020
 Guidelines for Energy Sector Development 2007-2016
 The Strategy for the Utilization of Renewable Energy Sources 2006-2013
 Regulations on Electricity Generation from Renewable Energy Sources

(2007).

There is a quota obligation system (since 2002) combined with feed-in tariffs.
Frequent policy changes and the short duration of guaranteed feed-in tariffs
have resulted in a high level of investment uncertainty. The main policy
instrument was reformed in 2007, maintaining the basic structure of the
scheme. At a national level there are yearly quotas and a mandatory purchase
framework set up for RES-E (combined with tendering for wind).
Regulatory bodies
The Ministry of Economics develops and enforces the structural policy

of the national economy and ensures the representation of the economic
interests of Latvia abroad, develops the policies of industry, energy, internal
market, business activities, as well as competitiveness and technologies.
(http://www.em.gov.lv/)
The Ministry of Environment has the responsibility to prepare and

implement a national policy for environmental protection, nature protection,
preservation and rational use of natural resources and planning of regional
development, to draft legal acts within its jurisdiction, harmonizing
them with requirements of the European Agreement and the European
Commission, as well as ensure their implementation. The Department of
Climate and Renewable Energy Sources of the Ministry of Environment is
directly involved with energy and environment issues and policies. Its main
tasks are the introduction of innovative and best available technologies in
the field of energy and ensuring an increase of the RES share in the Latvian
energy balance. (http://www.vidm.gov.lv/)
The Construction, Energy, and Housing State Agency is an institution

operating under the supervision of the Ministry of Economics. The main
function of the Agency is the development of energy programmes and
establishment of cooperation with local and foreign governmental and no-
governmental institutions. (http://www.ma.gov.lv/)
6.10. Lithuania
• 20.3% • 7.0%
• 1.7% • 1.0%
• 52.4% • 21.0%
• 25.6% • 71.0%

5,070 MW generation: 12,300 GWh Sources: BALTSO, Lietuvos Energija 2008

Installed
Lithuania has two large HPPs: PSP Kruonis with an installed capacity of 900
Size capacity
(MW) MW and HPP Kaunas with a net output of 101 MW, both owned by Lietuvos
Energija, the main energy company in Lithuania.77
Small HPPs (<10 MW) 26 The total installed capacity of these 2 HPPs and the SHPPs of Lithuania added
up to 1,027 MW in 2008, contributing 20.3% to the total installed capacity in
Lithuania (5,070 MW). Besides hydro, 2,655 MW came from thermal, 1,300
MW from nuclear and 88 MW from other renewable sources78.
Major operational HPPs The first HPP to be built was HPP Kaunas in 1960; PSP Kruonis was erected
in 1992. Most of the SHPPs were built in the period 1990-2000 when their
Installed
Name Type* capacity River development became an attractive business for private investors.
(MW)
According to the relevant EU Directive (2001/77/EC), Lithuania has to achieve
Kruonis PS 900 Nemunas
a share of RES-E of 7% by 201079. It also has a binding target of 23% for the
Kaunas S 101 Nemunas share of RES in final energy consumption by 202080.
storage – turbine; PS-P: Pumped storage - pump Renewable generation capacities are essentially based on the hydro sector,
however Lithuania has very good potentials in the fields of biomass and wind
power.
Age of large HPPs Due to the topographical conditions of the country, the potential for hydro
1,000
power utilization is rather low, estimated to be 3,000 GWh81 annually.
Approximately 29% of this is being utilized.
800
600 In order to improve utilization of effective hydro energy resources, there are
MW
400 plans for the construction of SHPPs with a total output of 55 MW by 2020
200 in Lithuania. This will be completed in two stages; during the first stage the
0
abandoned SHPPs will be rehabilitated, whilst during the second stage new
<10 11–20 21–30 >30 SHPPs will be built on new sites in line with environmental requirements.

79 Source: Eurostat
RES goals In order to improve utilization of effective hydro energy resources, there are
Percentage plans for the construction of SHPPs with a total output of 55 MW by 2020
of RES in Lithuania. This will be completed in two stages; during the first stage the
2010 – RES-E goal 7% abandoned SHPPs will be rehabilitated, whilst during the second stage new
SHPPs will be built on new sites in line with environmental requirements.
2020 – RES goal for final 23%
energy consumption
The development of two large HPPs (Birstonas and Alytus) on the middle
2007 – RES-E utilization 4.6% section of Nemunas River is also planned. The total installed capacity of each
HPP would be about 75 MW. Moreover, the capacity of the Kruonis pumped-
storage HPP is also expected to be increased by constructing additional four
generating units in the long term, but in the foreseeable future one unit of 250
Major rivers
MW installed capacity is to be added.
Length Drop Runoff
River
(km) (m) (m3/s)
HPP developments
Nemunas 359 80 616
Installed capacity
Neris 235 118 182 Name Type* River
(MW)
Kruonis PS 250 Nemunas
Alytus S 75 Nemunas
Birstonas S 75 Nemunas
SHPPs 55
Total 205
Legislation
 National Energy Strategy until 2025 (2007)
 National Energy Efficiency Programme for 2006-2010 (2006)
 Law on Energy (2002 amended in 2007)
 Law on Electricity (2002)
 Procedure for the Promotion of Generation and Purchase of Electricity

generated from Renewable Energy Sources
The main policy for the support of renewable energy is a feed-in tariff system
introduced in 2002. The tariffs are combined with a purchase obligation
guaranteed for 10 years. Investment subsidies are also available.
Regulatory bodies
The Ministry of Energy, established in 2009, is responsible for

implementing state policy and developing international cooperation in the
energy sector.
The State Enterprise Energy Agency, founded in 1993, is responsible

for preparation of legal, economic and organizational energy efficiency
measures for implementation of national policy. It is engaged in organizing
international cooperation in the energy sector, and coordination of foreign
technical assistance to the energy sector in accordance with the priorities
laid down in the National Energy Strategy and National Energy Efficiency
Programme. (http://www.ena.lt/)
The Ministry of Environment is the main managing authority of the

Government of the Republic of Lithuania forming the country’s state policy
of environmental protection, forestry, utilization of natural resources,
geology and hydrometeorology, construction, provision of residents with
housing, utilities and housing, as well as coordinates its implementation.
(http://www.am.lt/VI/en/VI/index.php)
Source: Freudenau Hydro Power Plant, Austria

6.11. Macedonia
Hydroelectricity
Fossil fuels
• 39.2% • 15.0%
• 60.8% • 85.0%

1,493 MW generation: 5,863 GWh Source: University Ss. Cyril & Methodius Skopje, 2009; UCTE, 2008

Installed
In 2008, the total installed generation capacity of Macedonia was 1,493 MW
Size capacity
(MW) including 586 MW hydro and 907 MW thermal82.
The country has seven large hydro generation systems whose overall installed
Small HPPs (<10 MW) 50 capacity represents 28% of the estimated technical potential of 2,100 MW83.
The great majority of these belong to AD ЕLEM (Electric Power Company of
Source: University Ss. Cyril & Methodius Skopje,
2009
Macedonia), a state-owned company responsible for electric power generation.
The Mavrovo Cascade, totalling 206 MW with its three plants (HPP Vrutok, HPP
Raven and HPP Vrben), is the most complex facility within the Macedonian
electric power system. In the total installed hydro capacity in the country, this
facility contributes 35% of the total.
Age of large HPPs The first HPPs were built at the end of the 1950s and their average age in
Macedonia is 36 years.
400
350
There are SHPPs up to 5 MW having a generation capacity of 49.6 MW in
300
Macedonia, which is only 19% of the theoretical potential (256 MW84) for small
250
MW
hydro. In order to further utilize the remaining potential, more than 400 sites
200
have been identified for the construction of SHPPs in the country.
150
100
The reason behind the low level of the potential’s utilization in the past is the
50
lack of investments for modernization and expansion of the existing capacities,
0
<10 11–20 21–30 >30 as well as for construction of new capacities.

Installed capacity
Name Type* River
(MW)
Vrutok S 172 Mavrovska
Mavrovo
Raven RoR 22 Mavrovska
Cascade
Vrben RoR 13 Gorna Radika
Tikves S 116 Crn Drim
Shpilje S 84 Crn Drim
Kozjak S 50 Treska
Globocica S 42 Crn Drim
*S: Storage; RoR: Run-of-river; PS-T: Pump storage – turbine; PS-P: Pump storage - pump
82 Source: UCTE, 2008
83 Source: Incentives and barriers for the
development of renewable energy sources,
Macedonia: country analysis
84 Source: www.esha.be
Major rivers Prospects for hydro generation

Length Drop Runoff
River The only renewable energy source used in Macedonia for electricity generation
(km) (m) (m3/s)
is hydro power. However, there is further space for improvement as the
Vardar 300 640 174
technical potential for hydro power is estimated to be 5,000 GWh85 per annum.
Crni Drim 45 241 116 Additionally, the country has very good unexploited potentials for geothermal,
biomass and wind.86
Strumica 81 341 9
Macedonia has defined its strategy for energy development for the period
2008-2020. This strategy has a goal to increase the share of renewable
energy sources in final energy consumption by 20% compared to 2006 data.
According to the plan, this ratio should be 22.8% by 202087.
The strategy for energy development also envisages the revitalization and
utilization of the existing HPPs and construction of new HPPs with a total
installed generation capacity of 953 MW88.
The biggest hydro project development is the construction of Cebren, a

pumped storage HPP located in the southern central part of Macedonia.
This HPP is designed with reversible units and an installed capacity of 332 MW
in turbine mode and 347 MW in pump mode.
HPP developments
Installed capacity
Name Type* River
(MW)
PS-T 332
Cebren Crn Drim
PS-P 347
Vardar Cascade
S 324 Vardar
(including 13 HPPs)
Galiste S 193 Crn Drim
Boskov Mort S 68 Mala
Sv. Petka S 36 Treska
Total T 953
P 347
85 World Energy Council

86 Source: EnerCEE, Slovenian Energy Programme 2004
87 Source: In 2006, RES in final energy consumption was 16.5%.
88 Source: ELEM, Macedonian Power Plants
Legislation
 Strategy for Energy Development in the Republic of Macedonia for the

period 2008-2020 with a vision to 2030 (Draft version, 2009)
Macedonia applies a feed-in tariff scheme for the promotion of SHPPs among
other renewable electricity generation sources. Purchase obligation is defined
and the off-take is guaranteed for 20 years.
Regulatory bodies
The Ministry of Economy is responsible for strategic planning and

legislation development. One of the bodies of the Ministry of Economy is
responsible for energy sector-related issues and it is in charge of conducting
the energy policy of the state, developing laws and sub-laws on energy and
implementing the policy for energy sector restructuring.
(http://www.economy.gov.mk/default-en.asp)
The State Energy Agency, established in 2004, is responsible for

professional technical support on data management, strategy analysis,
policy and project assessment and implementation coordination.
(http://www.ea.gov.mk/)
The activities related to regulating specific issues connected with the

performance of energy activities specified in the Law on Energy are
performed by the Energy Regulatory Commission (ERC) of the Republic
of Macedonia. (http://www.erc.org.mk/DefaultEn.asp)
The Macedonian Centre on Energy Efficiency (MACEF) is responsible for

increasing energy efficiency and environmental protection at a national level
by implementing measures and investing in capacity building in cooperation
with governmental institutions, local municipalities, engineers, sponsoring
organizations and ecologists. (http://www.macef.org.mk/en/index.html)
6.12. Montenegro
Hydroelectricity
Fossil fuels
• 75.9% • 57.1%
• 24.1% • 42.9%

870 MW generation: 2,691 GWh Source: UCTE, 2008

Installed
Montenegro’s installed generation capacity includes hydro (660 MW) and thermal
Size capacity
(MW) (210 MW) which equates to a total installed capacity of 870 MW in 200889.
The electricity sector is run by the state owned by a vertically integrated
Small HPPs (<10 MW) 11 company, Montenegrin Electric Enterprise (Elektroprivreda Crne Gore AD
Niksic, EPCG) that is responsible for carrying out activities in electricity
Source: UCTE, 2008
generation, transmission, distribution and supply.
Major operational HPPs The country’s two large HPPs (Piva and Perucica) are of particular importance
to the Montenegrin energy sector, providing more than 74% of the country’s
Installed
Name Type* capacity River generating capacity. Beside these large HPPS, there are seven SHPPs of
(MW) insignificant capacity for electricity production.
Piva S 342 Piva
Montenegro’s HPPs are old; the first ones were constructed during the 1950s
Perucica S 307 Zeta
and the latest HPP has been put into operation in 197690.
Based on the Energy Community Treaty for South Eastern Europe (ECSEE
Treaty), the Republic of Montenegro has defined desired strategic aims to
Age of large HPPs be achieved through utilization of its renewable energy sources. The country
has agreed to achieve a 3-5% share of energy from renewables in its final
700
energy consumption by 2015 and a 2.5% share of SHPPs generation in gross
600 electricity consumption by 201591.
500
MW
400 Montenegro’s renewable electricity generation is dominated by hydro

300 generation. Large hydro plants have an installed capacity of 649 MW, while
200
small hydro plants account for less than 2% in terms of capacity92.
100
There is a considerable hydro power potential for SHPPs in Montenegro. The
0
<10 11–20 21–30 >30 technical hydro power potential in main and small water flows is about 11,000
years years years years GWh annually, of which only approximately 14% was being utilized as of 200793.
89 Source: UCTE
90 Source: Socio economic analysis of the northern region of Montenegro, 2008
91 Source: Strategy for the development of small hydro power plants, Government of the Republic of
Montenegro (2006)
92 Source: Montenegrin Electric Enterprise, accessed at: http://www.epcg.co.me/enindex.html
Major rivers The Government plans to construct SHPPs with total installed capacity of 5
Length Drop Runoff MW by 2010 as well as to provide an additional 15 MW in a number of sites
River
(km) (m) (m3/s) in the period until 2015. This means that within eight years, the installed
Moraca 112 1,600 152 capacities and production in SHPPs should triple in comparison with what
existed at the end of 2007.94 Based on recent plans, until 2025, the annual
Tara 110 666 64 electricity production of SHPPs may reach 78 GWh in Montenegro.92
Piva 82 189 34
In addition to the construction of new HPPs, the long-term goal of the
Cehotina 100 732 22.4
Government of the Republic of Montenegro is the maintenance, rehabilitation
and modernization of the existing HPPs, primarily the major revitalization of
HPP Perucica which would imply total increase of the existing power of the
power plant by 59 MW.93
HPP developments
Installed capacity
Name Type* River
(MW)
Kostanica N/A 544 Kostanica
Moraca HPPs
S 238 Moraca
(including 4)
Ljutica N/A 224 Ljutica
Komarnica N/A 168 Komarnica
Perucica Rehab S 59 Zeta
SHPPs 20
Total 1,263
Legislation
The relevant legislation in Montenegro consists of the following:
 Energy Law of the Republic of Montenegro (2003)
 Strategy on energy development up to 2025 (2007).
Montenegro has no renewable support system in place, however the country

has been very active in establishing the foundation of an efficient energy
market, and thus initial steps have been taken in order to facilitate future
renewable energy utilization.
93 Source: http://re.jrc.ec.europa.eu/biof/pdf/data_gathering_res_istanbul/montenegro.pdf
94 Source: http://www.gov.me/eng/
Regulatory bodies
The Ministry for Economic Development was established in 2006.

This state body is responsible for monitoring the situation within the energy
sector, for providing inputs for and supporting the preparation of energy
strategy development proposals, as well as for creating laws and other legal
documents on energy. (http://www.gov.me/eng/minekon/)
The Regulatory Energy Agency of the Republic of Montenegro,

founded in 2004, is an independent and non-profit organization with public
authorization. The Agency’s main activities include the implementation of
the Energy Law and revision and approval of market regulations within the
energy sector. (http://www.regagen.cg.yu/)
Source: Freudenau Hydro Power Plant, Austria

6.13. Poland
Other renewables
• 7.2% • 1.8%
• 1.5% • 0.7%
• 91.4% • 97.5%


Installed
Existing capacities for electricity generation in Poland include HPPs and
Size capacity
(MW) thermal power plants. In 2008, the country’s total installed generation capacity
amounted to 32,509 MW95, which was largely based on domestic coal.
Small HPPs (<10 MW) 151 Hydro power makes up a 1.8% share of the total amount of electricity
generated in the country with 2,668 GWh and 7.2% of the total domestic
Source: UCTE, 2008
installed capacity with 2,327 MW.96 There are more than 700 HPPs in operation
and most of them are located in the southern and western part of the country.
State-controlled power generation and distribution companies operate the
majority of these HPPs, while some are privately owned.

Installed capacity
Name Type* River
(MW)
PS-T 680
Zarnowiec Piasnica
PS-P 800
PS-T 500
Porabka-Zar Soła
PS-P 540
PS-T 200
Solina San
PS-P 60
Włocławek S 160 Vistula
PS-T 150
Zydowo Radew
PS-P 136
PS-T 93
Niedzica Dunajec
PS-P 89
PS-T 80
Dychów Bóbr
PS-P 30
Roznów R/RoR 50 Dunajec
Koronowo S 26 Brda
Debe S 21 Narew
Tresna S/RoR 20 Soła
Porabka S/RoR 14 Soła
95 Source: UCTE
96 Source: UCTE
Age of large HPPs The Elektrownie Szczytowo-Pompowe SA company (Pumped Storage Power
Plants Company, “ESP”) operates 23 hydroelectric power plants in Poland
1,200 accounting for approximately 75% of the total installed capacity in the country’s
1,000 hydroelectric power plant system97. In addition to ESP, ZZW Czorsztyn-Nidzica-
Sromowce Wyżne SA is another major hydroelectric power plant operator in
800
MW
Poland.
600
400 The average age of Polish HPPs exceeds 30 years, whereas the newest hydro
plant has been put into operation in 200098.
200
0
<10 11–20 21–30 >30 Prospects for hydro generation
According to the EU Directive on the promotion of the use of energy from
renewable sources, Poland’s objective for the share of RES-E is 7.5% by 201099.
RES goals For the share of renewable energy sources in final energy consumption, Poland
Percentage has a proposed target of 15% by 2020100.
of RES
2010 – RES-E goal 7.5% Currently, hydroelectric power plants play the most significant role in the
production of renewable energy in Poland, but still only about 19% of the
2020 – RES goal for final
15.0% 14,000 GWh101 annual technical potential is being tapped.
energy consumption
2007 – RES-E utilization 3.5% The country has thousands of sites where small hydroelectric power plants
could be built102. Roughly 70% of the total capacity is available in the Vistula
River basin and the Oder River, coastal rivers account for the remaining 30%.
Major rivers The Government’s long-term objective is the construction of small HPPs as
Length Drop Runoff well as modernizing some existing facilities, in particular transforming them
River
(km) (m) (m3/s) into peak-load pumped-storage water power stations. This requires working
Vistula 1,047 1,106 1,054 out a water management strategy in Poland. The largest HPP development is
the Mloty HPP project which will have a total installed capacity of 786 MW.
Oder 742 194 574
Narew 448 72 328

HPP developments
Warta 808 181 195
Installed capacity
Name Type* River
(MW)
Mloty PS 786 Bystrzyca
SHPPs 9
Total 795
97 Source: www.elsp.com.pl/
98 Source: Datamonitor, KPMG analysis
99 Source: Eurostat
102 Source: http://www.warsawvoice.pl/
Legislation
 Law on Energy (1997, amended in 2006)
 Guidelines for Poland’s Energy Policy until the year 2020 (2000)
 Strategy for the Development of Renewable Energy Sector (2001)
 Long-term Strategy for Sustainable Development for Poland Until 2025
There is a green certificate and quota obligation system in place. Obligations on

electricity suppliers with targets are specified from 2005 to 2010 and penalties
for non-compliance are enforced.
Regulatory bodies
The Energy Department of the Ministry of Economy is responsible

for the implementation of tasks related to shaping energy policy and the
regulatory environment in the scope of the power and heat engineering
sectors. (http://www.mg.gov.pl/)
The Polish National Energy Conservation Agency (KAPE) is a non-profit

national organization founded in 1994. The strategic aim of KAPE is to
develop and promote governmental, regional, local and individual initiatives
on energy efficiency and renewable energy sources utilization.
(http://www.kape.gov.pl/)
The Energy Regulatory Office (URE) issues operating licenses and

monitors developments in prices and tariffs. It is also responsible for the
promotion of energy efficiency. (http://www.ure.gov.pl/)
6.14. Romania
Hydroelectricity Nuclear power
Fossil fuels
• 35.2% • 28.1%
• 56.9% • 54.6%
• 7.8% • 17.3%


Installed
Electricity generation in Romania is primarily made up of thermal power plants
Size capacity
(MW) (coal, natural gas and oil) with the remainder fulfilled by hydroelectric and
nuclear facilities. The total installed capacity was 16,582 MW in 2008 including
1,300 MW nuclear, 9,431 MW thermal, 5,843 MW hydro and an additional 8
Small HPPs (<10 MW) 948 MW of other renewable sources103.
Source: UCTE, 2008
In Romania there are 362 hydroelectric power plants whose overall annual
production of 16,794 GWh104 represent 48% of the 35,000 GWh105 technical
potential. Geographically, the hydroelectric reserves of the country are
concentrated along the Danube and in the valleys of rivers emerging from the
mountain core of the country.
All of these HPPs are owned by Hidroelectrica SA, a state-owned company

Age of large HPPs responsible for the production and delivery of hydroelectric power.
3,500
The most important hydroelectric power plant of Romania is Portile de Fier I
3,000
(Iron Gate I or Đerdap I) on the River Danube, shared by Serbia and Romania.
2,500 It is one of the largest hydroelectric power plants in Europe with an installed
2,000
capacity of 2,224 MW. At completion in 1972, it had an installed capacity of
MW
2,052 MW of electricity divided equally between the two countries. Since then,
1,500
the Romanian part of the dam has been modernized and the nominal capacity
1,000 of the HPP was increased from 1,026 MW to 1,166 MW. On the Serbian part of
500
the dam modernization is still in progress.
0
<10 11–20 21–30 >30
The average age of Romanian hydroelectric plants is around 31 years. The first
years years years years HPPs were built in the 1950s while the majority were built at the end of 1980s.
103 Source: www.entsoe.eu

104 Source: UCTE

Installed capacity
Name Type* River
(MW)
Portile de Fier I RoR 1,166 Danube
Lotru- Ciunget S/RoR 510 Lotru
Retezat S 335 Raul Mare
Portile de Fier II106 RoR 314 Danube
Mariselu S 221 Somesul Cald
Vidraru S 220 Arges
Stejarul-Bicaz PS 210 Bistrita
Ruinei S 153 Bistra Marului
Galceag PS 150 Sebes
Sugag S 150 Sebes
Bradisor S 115 Lotru
Nehoiasu – Surduc
PS 110 Basce Mare
Head
Tismana S 106 Tismana
Remeti PS 100 Dragan
Turnu RoR 70 Olt
Munteni PS 58 Iadului
Tarnita S 45 Somesul Cald
Racaciuni RoR 45 Bistrita
Vaduri RoR 44 Bistrita
Sasciori PS 42 Sebes
Nehoiasu – Siriu Head PS 42 Basce Mare

Percentage
As per the European Union Directive (2001/77/EC), Romania should produce
of RES
33% of its electricity from renewable energy sources including large HPPs and
2010 – RES-E goal 33%
8.3% excluding those by the year 2010107. The country’s binding target for the
2020 – RES goal for final share of energy from renewable sources in final energy consumption is 24%
24%
energy consumption for 2020108.
The present RES-E is generated from hydro power utilization. The Romanian
government is planning to implement a new programme for increasing the
use of renewable energy including photovoltaic, wind energy, biomass, and
geothermal energy.
106 Source: The total output of Portal de Fier II (Iron Gate II) is 540 MW divided equally between Serbia and
Romania
107 Source: http://epp.eurostat.ec.europa.eu/portal/page/portal/energy/data/database
108 Source: www.euractiv.com/en/energy/eu-renewable-energy-policy/article-117536
Major rivers The country is considered to have the highest wind energy potential in the
Length Drop Runoff region and the third highest geothermal potential of European nations. Its
River
(km) (m) (m3/s) wind resources are well documented, and there is a broad range of existing
Danube 1,020 65 6,500 applications from small autonomous units for rural areas to large off-shore
potential. The potential market for biomass and solar applications is very large
Siret 470 295 240 but specific incentives will be needed so this potential can be realized.
Olt 615 1,060 174
Romania’s hydro power potential is extremely vast; it has an abundance of water
Mures 695 1,268 155
flows and mountains. Its rivers flow over a total length of 30,000 kilometres and
Someş 345 130 120 the country has about 2,500 lakes. As a result, there are numerous opportunities
for hydro developments. Currently, several hydroelectric power plants, whose
Prut 695 129 110
total capacity comprises 1,662 MW, are under construction. These projects
Jiu (Zsil) 331 1,875 94 began 20-25 years ago, but were stalled due to the lack of financing. The
Argeş 350 2,025 73 Romanian government considers realizing a 1,000 MW hydroelectric pumped-
storage power plant in Tarniţa-Lăpuşteşti as a priority objective of the Energy
Ialomiţa 417 2,155 40
Strategy of Romania for 2007-2020.The second largest recent development is
the Nehoiasu HPP along the Buzau River, situated in the central part of Romania,
whose installed capacity is set to reach 166 MW.
HPP developments
Installed capacity
Name Type* River
(MW)
Tarniţa – Lăpuşteşti PS 1,000 Someşul Cald
Nehoiasu PS 166 Buzau

Cosmesti S 40 Siret
Rîul Alb PS 36 Riul Alb
Rastolita PS 35 Rastolita
Valea Sadului S 35 Jiu
Others
325
(10<HPP<30 MW)
Small and micro
25
HPPs
Total 1,662
Legislation
Relevant legislation in Romania is as follows:
 Energy Law (2007)
 Law on electricity (2007)
 Law on energy efficiency (2006)
 National Strategy for Energy Efficiency (2007-2020)109 (2007)
 Government Decision regarding the “Strategy for the Promotion of

Renewable Sources of Energy” (2003)
 Government Decision regarding the “Promotion of electricity produced from

RES (2004).
A system of tradable green certificates is in place, including a purchase obligation

for distribution companies and the obligation to fulfil an annual quota of purchased
green electricity since 2004, available for SHPPs under 10 MW installed capacity.
Regulatory bodies
The Ministry of Economy and Commerce (MEC) is responsible for

drawing up the national energy strategy in terms of evolution, covering
power and thermal energy, hydroelectric and nuclear power, oil, natural gas,
mineral resources, and mine-geology fields. (http://www.minind.ro/)
The Romanian Energy Regulatory Authority (ANRE) established according

to the Law no.99/2000, is organized as an independent public legal entity of
national interest under the co-ordination of the Prime Minister. ANRE’s mission
is to create and implement fair and independent regulations to ensure efficient,
transparent and stable functioning of the electricity and heat market, while
protecting the interests of consumers and investors. (http://www.anre.ro/)
The Ministry of Agriculture, Forests, Water and Environment (MAPAM)

is responsible for the development of the general environmental policy
and specific legislation related to water management and environmental
protection. Responsibility for the implementation of the environmental
policy at the local level lies with local authorities. (http://www.mapam.ro/)
The Romanian Agency for Energy Conservation (ARCE) is in charge of

promoting energy efficiency at the national level. Responsibilities include
energy efficiency policymaking and programme implementation. ARCE has
legal authority, its operational and financial autonomy subordinate to the
Ministry of Economy and Commerce.
The Romanian Ministry of Environment and Sustainable Development

promotes the Romanian environmental policy, creates the legal framework
and the short- and long-term strategy of Romania regarding environmental
protection. (http://www.gov.ro/)
109 The main objective of this strategy is the

identification of possibilities and means to
increase energy.
6.15. Serbia
Hydroelectricity
Fossil fuels
• 33.9% • 28.6%
• 66.1% • 71.4%


Installed
The Serbian electricity sector is run by the 100% state-owned Elektroprivreda
Size capacity
(MW) Srbije (“EPS”), the only electricity provider in Serbia110. The country’s total
installed capacity was 8,355 MW in 2008, including 5,524 MW of thermal and
2,831 MW of hydro111.
Small HPPs (<10 MW) 13
There are 10 HPPs with 50 hydro units run by two enterprises in Serbia. The
Source: EPS Annual Report, (Technical) 2008
larger player is HPP Djerdap Plc. which consists of four generating plants:
Djerdap I,II (Iron Gate or Portile de Fier), Pirot and Vlasina. The other, HPP
Drinsko-Limske Plc., includes the following subsidiaries: Bajina Basta (a
storage type and a pumped-storage plant), Limske, Zvornik and Elektromorava
(operating SHPPs).112

Installed capacity
Name Type* River
(MW)
Djerdap I RoR 1,058 Danube
Bajina Basta PS 614 Drina
Bajina Basta RoR 364 Drina
Djerdap II RoR 270 Danube
Vlasina S 129 Vlasina
Bistrica S 102 Lim
Zvornik RoR 92 Drina
Pirot S 80 Nisava
Potpec RoR 51 Lim
Uvac S 36 Lim
Kokin Brod S 22 Lim
HPP Djerdap I is owned and operated jointly by Romania and Serbia. When
the HPP was completed, it had a total capacity of 2,052 MW that was divided
equally between the two countries. Romania has rehabilitated its side of the
dam, increasing its total capacity by 140 MW, while the modernization of the
generating units on the Serbian side is in process.
110 Source: http://www.eps.rs/english.htm

111 Source: UCTE
112 Source: http://www.eps.rs/onama/hydroplants.htm
113 The total output of Djerdap II (Iron Gate II) is 540 MW divided equally between Serbia and Romania
Age of large HPPs The age of an average Serbian HPP is 36 years. Construction of the first HPPs
started at the beginning of the 1950s and these were put into operation in 1955.
2,000
1,500 Prospects for hydro generation

MW
Since Serbia is not a member of the EU, there are no binding targets set for the
1,000
country.
500
Serbia has extensive unused potential for production from hydro and biomass
capacity and there is some potential to use wind energy as well114. However,
0
there are several obstacles to increasing the production of these renewables
<10 11–20 21–30 >30
years years years years – for one, the lack of the proper regulatory environment is a key roadblock to
further advances. While several laws are in place, often there is no guidance on
how to implement them.
Major rivers According to recent studies, about 55% of the 18,200 GWh total technical hydro
power potential has been utilized up to now115. The largest part of the remaining
Length Drop Runoff
River potential is in the catchment areas of the Drina and the Morava Rivers.116
(km) (m) (m3/s)
Danube 450 48 4,000
There are around 900 potential locations for the utilization of small hydro power
Sava 206 10 1,564 in Serbia. The total potential for SHPPs is 500 MW and only less than 3% of it
Tisa 160 7 794 has already been exploited117.
Drina 220 298 371 Among the top priorities of the Serbian government is the revitalization of the
Great existing HPPs as well as the development of new hydro power sites, including the
185 67 232
Morava construction of the Brodarevo and Ribarici HPPs118 by EPS and the development of
Ibar 272 233 60 3,000 MWs of installed hydropower capacity by RWE at several sites.
Within the framework of Serbia’s energy development strategy, the

government has recently accepted plans for the construction of three big
hydroelectric power plants on the Danube near Novi Sad and Bezdan and for
the construction of a hydroelectric power plant on the Sava River. The details of
the plans for these developments have not yet been published.
HPP developments
Installed capacity
Name Type* River
(MW)
RWE (including
RoR, PS 3,000 Danube, Morava, Drina
several plants)
Brodarevo RoR 51 Lim
Ribarici S 49 Ibar
Svodje S 48 Vlasina
Vrtuci S 32 Djetina
Total 3,180
114 Source: Serbia’s capacity for energy efficiency and renewable energy, accessed at: http://www.watersee.
net/files/sava_river/8_Djuric.pdf
115 Source: The value of hydro potential is calculated by KPMG based on the information of the following two
sources, because the technical potential data of the World Energy Council dates from 2005 thus includes
Kosovo: World Energy Council, http://www.lignitepower.com/pdfdocs/brochure-en.pdf
116 Source: www.eps.rs/razvoj/potentials.htm
117 Source: Renewable Energy Policy, Republic of Serbia
118 Source: http://www.eps.rs/razvoj/newfacilities.htm
Legislation
Serbia has an extensive body of laws addressing energy issues including the
following119:
 Energy Development Strategy (2005)
 National Energy Efficiency Programmes (2002)
 Ratification of Kyoto Protocol (2007).
The Energy Development Strategy foresees efforts to improve the use

of renewable sources, including the adoption of additional legislation,
implementation of investment projects, establishing new expert institutions
and the training of additional experts. Despite these ambitious plans, the lack
of necessary regulations to enable these laws appears to have prevented their
full implementation until recently.
Regulatory bodies
The Ministry of Mining and Energy is the leading institution in the energy
sector, in charge of preparation of proposals for the Government’s adoption
of energy legislation regulations and instruments, and conducting the
relevant laws, secondary legislation and regulations.
(http://www.mem.sr.gov.yu/)
The Energy Agency of the Republic of Serbia (EARS), established

by the Energy Law, is a regulatory body with all the rights, liabilities and
responsibilities stipulated by the Energy Law and other regulations.
(http://www.aers.org.yu/IndexEng.asp)
The Energy Efficiency Agency (SEEA) is an independent state organization

focusing on providing counselling, expertise and education on energy
efficiency and renewable energies. It was founded in 2002 by the Ministry of
Mining and Energy. (http://www.seea.sr.gov.yu/English/Prezentacija1.htm)
119 Source: Renewable Energy Sources, Republic of Serbia
6.16. Slovak Republic

• 33.2% • 15.7%
• 0.8% • 1.1%
• 36.4% • 26.6%
• 29.5% • 56.5%


Installed
Slovenské Elektrárne, a.s. (SE) is the national power generation utility in
Size capacity
(MW) Slovakia, accounting for over 80% of power generation in the country and
operating 67% of Slovakian hydro power facilities. In 2008, the total installed
generating capacity was 7,453 MW, consisting of 2,478 MW hydro, 2,714 MW
Small HPPs (<10 MW) 224 thermal, 2,200 MW nuclear and 61 MW other renewable sources120.
Source: UCTE, 2008
Hydro power has played a major role in Slovakia’s electricity generation ever since
the first large HPP was constructed in the 1950s. HPPs in Slovakia are quite old,
their average age 44 years. Currently there are 243 hydroelectric power plants
making up a 15.7% share of the total electricity generated in Slovakia.

Installed
Name Type* River
capacity (MW)
Čierny Váh PS 735 Váh
Gabčíkovo S/RoR 720 Danube
Liptovská Mara PS 198 Váh
Mikšová RoR 94 Váh
Žilina S/RoR 72 Váh
Nosice R 68 Váh
Ružín PS 60 Hornad
Považská Bystrica RoR 55 Váh
Kráľová S 45 Váh
Madunice S 43 Váh
Lipovec RoR 38 Váh
Sučany RoR 38 Váh
Hričov S 32 Váh
Others
250
(10 MW<HPP<30 MW)
120 Source: www.entsoe.eu
Age of large HPPs Much of the hydroelectric development in Slovakia is throughout the Váh River
900
valley, with more than 20 HPPs found there whose total installed capacity is
1,600 MW.
800
700
Moreover, there are approximately 180 SHPPs operating in Slovakia with a total
600
capacity of 58 MW121 and it is expected that a significant amount of additional
MW
500
small hydro capacity will be realized in the mid-term.
400
300
The average age of large hydro installations in Slovakia is approximately 30
200
years.
100
0
<10 11–20 21–30 >30 Prospects for hydro generation
Under the EU Directive (2001/77/EC), Slovakia has a binding target to reach a
31% share of RES-E by 2010122. It also has the obligation to achieve a 14% share
of energy from RES in final energy consumption by 2020123.
RES goals
Percentage In Slovakia, biomass, wind and hydro power have the highest additional mid-
of RES term potentials of all renewable energy sources. However, current renewable
2010 – RES-E goal 31% electricity generation is almost solely based on hydro power generation.
The government needs to recognize and support RES sector development in
2020 – RES goal for final 14% order to utilize other RES potentials.
energy consumption
The technical hydro power potential for electricity generation is estimated at about
7,000 GWh124 annually, thus approximately 62%125 of this was harnessed in 2008.
The Slovakian hydro power development programme focuses on the continued
and increased utilization of hydro power via rehabilitation of existing facilities and
Major rivers construction of new ones. The major projects designed to enhance hydro power
Length Drop Runoff potential utilization are the HPP Sereď (51 MW) and the HPP Nezbudská Lúčka
River
(km) (m) (m3/s) (23 MW) on the Váh river and PSPP Ipeľ (entailing 600 MW on river Ipeľ).
Danube 172 32 2,320
Váh 367 196 152 HPP developments

Hron 278 789 55 Installed capacity
Name Type* River
(MW)
Hornád 193 891 31
Ipel’ PS 600 Ipel'
Poprad 144 1,567 22
Sereď S 51 Váh
Nezbudská
RoR 23 Váh
Lúčka
SHPPs 93
Total 767
121 Source: Austrian Energy Agency

122 Source: Eurostat
124 Source: Energy Policy of the Slovak Republic
125 Source: UCTE
An extended development programme exists that has identified 250 potential

sites on major Slovakian rivers as suitable for the development of SHPPs, with
capacities of 0.1 to 5 MW, which could amount to a total installed capacity of
93 MW126. The site which bears the greatest potential for SHPPs is the Hron
river, where 23 small-scale hydro power facilities can be constructed127.
Legislation
The following regulations are relevant in Slovakia:
 Programme Supporting Energy Savings and Utilization of RES (2000)
 Renewable Energy Concept (2003)
 Energy Policy of the Slovak Republic (2006)
 Energy Security Strategy of the Slovak Republic (2007).
A programme exists for supporting RES and energy efficiency, including feed-
in tariffs and tax incentives. The system of fixed feed-in tariff for renewable
electricity was introduced in 2005. Prices are set so that the rate of return on
investment is 12 years when drawing a commercial loan.
In the past weak support, lack of funding and lack of longer-term certainty have
made investors very reluctant.
Regulatory bodies
The Ministry of Economy (MHSR) is a central body of state administration,

which is responsible for policy-making in the energy sector, and bears the
mandate to develop energy legislation. Within the MHSR the “Section of
Manufacturing and Energy Branches Policy” is in charge of related tasks.
(http://www.economy.gov.sk/)
The Regulatory Office for Network Industries (ÚRSO), established in

2001, is responsible for the technical and financial regulation of the energy
sector. It sets the calculation of energy prices for heat, gas and electricity
generation, distribution and transmission.
(http://www.urso.gov.sk/sk/udaje-o-urade)
The Slovak Innovation and Energy Agency (SIEA) acts as the advisory
body to the Ministry of Economy as well as to the Regulatory Office, and
is involved in creation of a legal framework and its harmonization with
the EU energy acquis. SIEA participates in the development of local and
regional policies and cooperates with other state administration bodies on
development of legal and economic instruments supporting the efficient
and environmentally friendly utilization of energy.
(http://www.sea.gov.sk/index.htm)
126 Source: Austrian Energy Agency

127 Source: Slovenské Elektrárne, www.seas.sk/
6.17. Slovenia
Hydroelectricity Nuclear power
Fossil fuels
• 30.4% • 22.7%
• 45.4% • 38.1%
• 24.2% • 38.4%


Installed
In 2008, the country’s total installed power generation capacity was 2,894 MW,
Size capacity
(MW) consisting of 1,315 MW thermal, 879 MW hydro and 700 MW128 nuclear.129
The economic hydro power potential of the country in terms of installed
Small HPPs (<10 MW) 16 capacity is estimated to be between 7000-8500 GWh out of which
approximately 46% has already been exploited130.
Source: UCTE, 2008
The Drava River is the country’s major source of hydroelectric power. There are
eight large hydroelectric plants along the river constituting the Dem Cascade
which has an overall 581 MW of installed capacity131. These HPPs are owned and
operated by the Dravske Elektrarne power company. Soske Elektrarne manages
a cascade on the Soča River (Sel Cascade)132, representing about 136 MW in total

Installed
(MW)
Zlatolicje S/RoR 120
Formin S/RoR 116
Dem Cascade
Ozbalt S/RoR 73
Vuhred S/RoR 72
Drava
Mariborski Otok S/RoR 60
Fala S/RoR 58
Vuzenica S/RoR 56
Dravograd S/RoR 26
Avče PS-T 185
Avče PS-P 180
Sel Cascade
Doblar II. S/RoR 40
128 Please note that the Krsko nuclear plant is fully

Solkan S/RoR 32 Soča
included in the capacity mix of Slovenia as it is Doblar I. S/RoR 30
located in the territory of this country. However,
Plave II. S/RoR 20
as it was a joint project, half of the generated
electricity belongs to Croatia based on the Plave I. S/RoR 14
bilateral agreement. Mavcice S/RoR 38
Seng Cascade
129 Source: http://www.entsoe.eu

Vrhovo S/RoR 34
130 Source: Targets, strategies and measures till
the year 2020 on the field of green electricity Medvode S/RoR 25 Sava
production in Slovenia accessed at: http:// Moste S/RoR 21
www.esv.or.at/fileadmin/res_e_regions/WP_1/
Bostanj S/RoR 34
Regional_strategy_-_Summary_Slovenia.pdf
131 Source: www.dem.si/eng/ *S: Storage; RoR: Run-of-river; PS-T: Pumped storage – turbine; PS-P: Pumped storage - pump
Age of large HPPs generating capacity. Savske Elektrarne has four hydroelectric power plants on the
Sava River whose installed capacity totals 127 MW (the Seng Cascade)133.
700
600 The first HPPs in Slovenia were built at the end of the 1930s and their average
500
age is approximately 40 years.
400
MW
In addition to the country’s large hydroelectric power plants, there is a number

300 of small units along the Sava and Soča rivers and various other rivers and
200
streams. Most of these SHPPs were built before the end of the 1980s, and
therefore need to be refurbished to keep them operational.
100
0 Renovation of these units will increase their efficiency and could add as much
<10 11–20 21–30 >30 as 150 MW in generating capacity134.

RES goals In accordance with the relevant EU Directive (2001/77/EC), Slovenia has a
Percentage binding RES-E target of 33.6% by 2010135. It also has the obligation to achieve a
of RES 25% share of RES in final energy consumption by 2020136.
2010 – RES-E goal 33.6%
HPPs represent the highest share among RES and the highest potential in Slovenia
2020 – RES goal for final for the future. Out of the annual 9,000 GWh137 technical potential, 36%138 was
25.0%
energy consumption
utilized in 2008. Beside hydro, the greatest potentials lie in combined heat and
2007 – RES-E utilization 22.1% power from biomass and the construction of wind power plants.
In the short term, the Slovene government’s renewable energy strategy is to

concentrate on the refurbishment of the existing small scale HPPs, as well as
increasing the capacity of large-scale units.
Major rivers
Length Drop Runoff Currently there are only a few plans for the construction of SHPPs in Slovenia.
River
(km) (m) (m3/s) The main barrier to building SHPPs is the complicated process of license acquisition.
Drava 144 188 300
The Government’s long-term objective includes developing pumped-storage
Sava 221 1,088 255
power plants: the first plant (Avče) was commissioned in 2009, while the HPP
Soca 95 1,037 140 Kozjak, with a total capacity of 400 MW, along the Drava River, and four hydro
sites along the Sava River, which could add 189 MW of new hydro capacity to
the system. These HPPs will be located at Blanca, Brezice, Krško and Mokrice.
HPP developments
Installed capacity
Name Type* River
(MW)
Kozjak PS 400 Drava
Blanca RoR 43 Sava
Brezice RoR 42 Sava
132 Source: www.sel.si/ Krško RoR 40 Sava

133 Source: www.seng.si/eng/ Mokrice RoR 32 Sava
134 Source: http://ebrdrenewables.com/sites/ Total 557
renew/Shared%20Documents/Country%20
Notes/old%20website%20country%20profiles/ *S: Storage; RoR: Run-of-river; PS-T: Pumped storage – turbine; PS-P: Pumped storage - pump
Slovenia.pdf
135 Source: Eurostat
136 Source: Directive 2009/28/EC on the promotion
of the use of energy from renewable sources
138 Source: UCTE
Legislation
Relevant legislation in Slovenia includes139:
 Law on Energy (1999, amended 2006)
 Regulation on CO2 emission tax (1996, amended 2002)
 National Energy Programme (2004)
 Decree on Prices and Premiums for Purchase of Electricity from Qualified

Producers (2004).
A feed-in system and premium, CO2 taxation exists as well as public funds
for environmental investments. Renewable electricity producers can choose
between fixed feed-in tariff and premium systems. Tariff levels and premiums
are defined annually by the Slovenian government. Tariffs are guaranteed for
five years, and then reduced by 5%, and after 10 years are reduced by 10%
(compared to the original level). The relatively stable tariffs combined with long
term guaranteed contracts make the system quite attractive for investors.
Regulatory bodies
The Ministry of the Economy has overall responsibility for energy policy in
Slovenia through its Directorate for Energy headed by the State Secretary
for Energy. The Ministry of the Economy is responsible for the preparation of
the national energy strategy as well as for support programmes to promote
the efficient use of energy. Furthermore it is responsible for energy tariffs,
legislation and exploitation licenses. (http://www.mg.gov.si/en/)
The Energy Agency of the Republic of Slovenia acts as an independent

regulatory body for liberalizing the energy market, opening up the market
to newcomers, licensing new entrants and ensuring fair competition. It is
responsible for maintaining a sustainable level of electric power production
in presently-existing power plants, promoting RES in line with EU targets
and meeting Kyoto Protocol targets (CO2 emissions reduction by 2008-2012).
(http://www.agen-rs.si/en/)
The Ministry of the Economy/Energy and Mining Inspectorate performs

assignments that involve overseeing implementation of the regulations and
general documents regulating electrical and thermal energy. The Inspectorate
oversees whether legal persons or individuals adhere in their work to the
laws, technical regulations, standards and other regulations governing the
areas of electrical and thermal energy, the gas and oil pipeline networks and
pressurized containers. (http://www.mg.gov.si/en/)
The Environmental Agency is a body of the Ministry of the Environment and

Spatial Planning. It performs expert, analytical, regulatory and administrative
tasks related to the environment at the national level. Thus the Agency’s
mission is to monitor, analyze and forecast natural phenomena and processes
in the environment, and to reduce natural threats to people and property.
(http://www.arso.gov.si/en/)
139 Source: http://www.res-progress.eu/index.php?action=documents&lang=NL
7.0. A Leading Example – Austria

Other renewables
• 59.4% • 60.6%
• 6.9% • 6.5%
• 33.7% • 32.8%

20,590 MW generation: 67,088 GWh Source: E-Control, 2008
Installed HPP capacities Austria is a landlocked country of roughly 8.3 million people in Central Europe,
Installed traditionally belonging to the western part of Europe. The territory of Austria
Size capacity covers 83,872 square kilometres of highly mountainous terrain due to the
(MW) presence of the Alps. Only 32% of the country is below 500 metres, and
Large HPPs (>10 MW) 11,381 its highest point is 3,797 metres (Großglockner), resulting in high levels of
precipitation and mountainous rivers. This topography ensures favourable
Small HPPs (<10 MW) 847
conditions for hydro generation, namely 75 TWh per year technical potential
Source: E-Control, 2008 of which 54.2% was utilized in 2008.140 However without systematic state
support, commitment and long term planning Austria could not have become
one of the countries with the highest renewable shares in total generation.
There are 154 large HPPs in Austria – 90 run-of-river and 64 storage and
pumped storage – with an overall yearly output of 35,862 GWh and a total
of about 2,400 small hydropower plants with an output of electrical energy
volume of 4,816 GWh in 2008.141 The above values place Austria among the
highest ranking countries in terms of hydro and other renewables based
electricity production in the UCTE.
Verbund is the market leader in electricity generation from hydro power:

20 storage and pumped storage power plants are to be found high in the Alps,
and a total of 88 large run-of-river power plants are operated by it on all the
country’s main rivers. The company in charge of production of electricity from
hydropower is Verbund-Austrian Hydro Power AG. It operates a total of 108
HPPs with a maximum combined output of more than 6,000 megawatts and an
average annual generation of around 22.8 TWh.142
In Austria nuclear generation is completely missing from the generation mix,

although there was a nuclear plant built in Zwentendorf an der Donau. Via
a public referendum in 1978, the completed plant was never allowed to go
online. This event shows the strength of public sentiment in Austria.
140 E-Control
141 E-Control
142 Verbund-Austrian Hydro Power AG
143 Commission Staff Working Document –
The support of electricity from renewable
energy sources, 2008
How does Austria support investments in the hydro sector?
Hydro plants are eligible to receive a feed-in tariff for their production as a state
subsidy for 10+2 years. From 2006 onwards, full feed-in tariffs for new renewable
electricity generation are available for 10 years, while for the 11th and 12th years
gradually decreasing incentives are available (75%, 50%). Feed-in tariffs are
announced annually and their value is dependent on the production of a plant.143
Mid-scale HPPs (10-20 MW installed capacity) receive investment support of

up to 10% of their direct investment costs, with a maximum of EUR 400/kW.144
HPPs producing more than 25 GWh/annum are classified as the lowest feed-in
tariff category (EUR 37.7/MWh).
What are the roots of success for the Austrian hydro generation sector?
1. Enormous technical potential
2. Commitment of the state and the society
3. Friendly economic climate
4. Strong financial backing
As is apparent, Austria is in an optimal situation with regard to hydro power

generation. It has reached a two-thirds share of RES-E in total generation,
mostly via utilization of hydro power. Large HPPs are already present at the
country’s most main sites, so the opportunities of the country are limited. New,
large run-of-river and storage hydro investments appear unlikely; only three
projects in the 20-100 MW range exist. However, a number of large pumped
storage plants, with a cumulated installed capacity of approximately 3000
MW, are under development, including Obervermuntwerk II, Feldsee, Koralpe,
Gepatsch, Kaunertal II, Kühtai, Malfon, Tauernbach,145 Reisseck II, Limberg II,
Limberg III, Jochenstein, and Tauermoos. Development opportunities for the
more widely accepted small- and (with some constraints) mid-scale (10-20 MW
installed capacity) HPPs, which are subsidized by the state. Favourably situated
CEE countries are at an earlier stage of development, still having some sites
available for large hydro investments and a bulk of small hydro sites. Applying
the right legislation and incentives, this enormous potential can be realized.
144 http://www.pedz.uni-mannheim.de/daten/edz-kr/gdv/08/2008_03_progress_country_profiles.pdf
145 http://www.wasser-osttirol.at/media/veoe_mai_09_s8.pdf
8. Public Acceptance of
Hydro Power
A complex hydro power investment, especially for large HPPs, can involve
economical, technological, as well as social, environmental and political factors.
As public acceptance may be a key issue in connection with the realization
of such a project, all of these aspects must be dealt with at the same time
and they must receive proper emphasis to adequately and consciously
communicate them to the public.
Based on previous experience regarding European hydro power developments,

in some cases the lack of public involvement and adequate communication
have had a major impact on the outcome of planned hydro power projects.
Public opposition at a local level brought on by various reasons can generate
extensive campaigns against the construction of a dam and its auxiliary
facilities, while the support of a majority of stakeholders might speed up the
process and even go hand in hand with lower costs and decreased risks.
In the following sub-sections some European examples will be introduced as

an indication to show the importance of public acceptance and emphasize the
necessity of facilitating extensive public participation and the need for sufficient
PR activities from the very beginning; however, in some special cases the right
timing is also a must.
8.1. Gabčíkovo-Nagymaros Hydro Power Project

The Gabčíkovo-Nagymaros Dam Project was started in 1977146 within the
framework of an international treaty between two (at the time socialist)
countries: Hungary and the former Czechoslovakia. The aim of the enormous
project was to dam the Danube, all the way from Bratislava to the Danube Bend
above Budapest, thus to utilize the potential of the river and generate a large
amount of peak load hydroelectricity. In 1989, when the Gabčíkovo Project was
already close to completion, Hungary decided to renege on its commitments
and insisted on the termination of the Treaty in 1992.
The reasons cited were potential environmental harm, but politics were clearly
just as important as the environment: public opposition against the project
became a symbol of fighting against the socialist system and the project’s
shutdown is now considered to be an important milestone of the process
which led to the country’s political changes in 1989. As a result, the completed
facilities of the Hungarian portion were demolished and the site (the Danube
Bend) has been rehabilitated. However, the topic is still a hot button issue for
politicians and Hungarian society.
146 Source: http://www.slovakia.org/history-gabcikovo.htm
The Slovak portion of the cascade was completed along with detouring
the Danube from Hungary to a channel in Slovakia and started its base load
operation (instead of peak load as was planned originally) in 1992, generating
tension between the two countries which ended up in legal deliberations at
the Hague International Court of Justice, resulting in an adversely interpreted
judgment without leading to any practical progress.
8.2. Mardøla and Alta Hydro Power Projects

Even though Norway has around a 99% share of hydro power in its generation
mix, producing enough electricity for huge exports, Norwegians have
traditionally protested against HPP projects as they typically divert the flow
of rivers, thus harming the environment. The first major and confrontational
public opposition actions occurred in the 1970s, aiming at the protection of
the Mardøla River, but there have also been serious conflicts in relation to
plans that resulted in a strong impact on the Alta River in 1980. The significant
number of people who participated in these demonstrations from all around
the country tried to hinder dam construction by showing up on the project sites
and blocking the way for workers and their equipment. Although the projects
were still realized, at the end of the day the protests had major implications
for the incorporation of conservation concerns into Norwegian hydro power
policy.147
8.3. Hainburg Hydro Power Project148

By the time the government decided to build the Hainburg hydro scheme
in 1983, several similar type projects were already in operation in Austria.
However, this was the first time when environmental concerns were raised
by experts from various fields. Despite this, the project passed through all
procedures and acquired all necessary licenses successfully. When the
experts’ concerns were overridden, activist groups supported by the media
occupied the construction site and stopped construction.
Eventually, the government decided to suspend further construction in 1985,

and the project concession was cancelled within the same year. Although
several alternative plans were discussed later on, the Hainburg hydro scheme
project failed due to inadequate communication and lack of public involvement.
8.4. Freudenau Hydro Power Project

As a result of the previous negative experience, the approach towards hydro
power development projects has been changed at the governmental level
in Austria and the construction of Freudenau HPP is considered to be a best
practice with regards to public involvement and PR activities.
147 Source: www.cicero.uio.no/media/1424.rtf

148 Source: http://www.boku.ac.at/iwhw/
integratedflood/Nachtnebel_Module4_
PublicPP.pdf
The initial plans of hydro power the Freudenau project, which is in fact located
in Vienna, dates back to 1985. As part of the planning process, in addition to
preparing a feasibility study, a contest was organized for hydro power experts,
architects, landscape designers and ecologists. The aim of this competition
was to identify an optimal design for the dam by taking into consideration
the requirements of harmonious integration into the environment, ecological
aspects as well as the needs of local people. An international jury selected one
of the proposals. Public discussions were also held among other intensive PR
activities. Following these efforts the project’s documentation was submitted
to the responsible water authority for approval in 1988. The provincial
government of Vienna required an environmental impact assessment and
suggested a referendum be held in the city. Further improvements were made
based on the recommendations of 10 different expert groups and following a
broad information campaign performed by the development company, more
than 70% of participants approved the construction of the power plant in a vote
in 1991.149,150
Construction commenced in 1992 and commissioning finished in 1998. Since

then the power plant has been providing a significant amount of electricity to
Vienna and to the whole country based on a renewable energy source. Its peak
performance is 172 MW while its annual production is 1,037 GWh.151 Besides
this it is a multi-purpose plant: in addition to improving navigation canals and
groundwater levels, it also offers advantages in terms of urban planning and
ecology.
8.5. Conclusions
Based on the previous detailed European examples public acceptance can
play a key role in the success (or failure) of a hydro development project. The
involvement of experts and the public at all levels may facilitate a project’s
realization, while the lack of adequate participation and communication may
result in enormous losses and project failure. Project objectives have to be
transparent and beneficial for all parties as well as for the planner/developer
who must be credible in order to convince stakeholders. Developing and
transitional countries are considered less sensitive regarding environmental
issues and accept hydroelectricity en gross as a favourable green technology.
Still, voices of the opposition are rapidly rising all over the world, so large
infrastructural investments must address these aspects which need to be
handled carefully.
There are several tools that can be used such as public hearings, informational
materials, requesting expert opinion, harmonization of interests, referendums,
etc. Although these actions might increase investment costs they considerably
decrease the related risks.
149 Source: http://www.ieahydro.org/reports/Annex_VIII_CaseStudy1204_Freudenau_Austria.pdf

150 Source: http://www.boku.ac.at/iwhw/integratedflood/Nachtnebel_Module4_PublicPP.pdf
151 Source: www.andritz.com
Source: Alstom
9. Economics of a Hydro
Investment
One of the main motivations of investing into different types of HPPs is the fact
that these facilities are able to produce electricity without incurring fuel costs.
By the utilization of water flow the generation-related expenditures of such a
power plant are stable irrespectively of changes in the price of fossil fuels like
oil, natural gas or coal, which is of key importance considering the instability of
prices as well as the recent economic situation. Furthermore, the need for fuel
imports decreases, thus related risks are eliminated too. Another advantage
of HPPs is that contrary to other broadly used renewable generation methods
these facilities can be significantly larger which allows for economies of scale.
However, compared to some other power plant types a more significant

initial capital expenditure is needed per each kW of installed capacity for
hydroelectricity, but the cost can vary widely based on the size, type and
location of the facility. Besides the fact that huge efforts may be necessary at
the beginning, in line with the long life-time of these power plants the payback
period of such projects can last relatively long, thus usually governments or
large corporations fund these schemes. Moreover, as the impact of a hydro
investment may be significant depending on the technology and impact from
an environmental and a social point of view, public and state support is a must
at both local and national levels.
When a financial decision must be made about investing into an HPP project
several factors must be considered. The success of the project is determined by
geographical characteristics, the availability and prices of other energy sources
and further related costs of generation with different technologies, as well as
by potential future electricity demand, support schemes and the risks entailed
in certain countries or regions, etc. Moreover, hydro power investments also
involve other aspects: externalities must be taken into consideration, such as
alternative utilization of a man-made lake and the dam itself (which can shorten
the payback period by generating additional revenues or cost sharing) and
negative impacts like the loss of a certain terrain for example.
In the following sections some of the previously mentioned aspects will be

introduced in more detail and thus the characteristics of hydro investments in
general will be summarized.
For our investigation we used the dataset of a European Commission staff

working document152 that was prepared for the Second Strategic Energy
Review in 2008 and also applied as a basis for the Strategic Energy Technology
Plan Information System (SETIS) energy cost calculator153 prepared by the
European Commission. Although there exists literature mentioning lower
cost factors for hydro developments, the conclusions drawn support the
long-term advantages of hydro generation technologies against benchmarked
technologies from an economic point of view. To preserve comparability we
decided to use this source as the basis of the following analysis. However,
detailed economic analysis must be done before deciding on such an
investment, as the costs are highly dependent on location and other factors.
9.1. Investment/Operation Cost Ratio
Generation Cost Structure
As mentioned above, although the initial investment might be relatively high

for an HPP, these facilities can operate for a long period: 50 years or more;
several plants still in operation were built more than 100 years ago, and there
is no need for fuel to generate electricity. However, it is hard to determine the
actual cost of generating electricity by using the energy the water’s potential
or kinetic energy, as production related expenditures vary from plant to plant
based mainly on the size and complexity of the facility and on the technology
applied. On the whole, similarly to several other industries, the larger the HPP,
the lower the unit cost is.
Figure 16: Cost structure of HPPs including initial capital investments

and O&M costs for 50 years of operation (in EUR 2007)
14,000 O&M cost

Capital investment
12,000
10,000
EUR/kW
8,000
6,000
4,000
2,000
0
Hydropower
2 MW
Hydropower
10 MW
Hydropower
20 MW
Hydropower
75 MW
Hydropower
250 MW
Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2008:2872:FIN:EN:PDF
152 Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2008:2872:FIN:EN:PDF

153 https://odin.jrc.ec.europa.eu/SETIS/SETIS1.html
In case of SHPPs (under 10 MW) both production-related costs and initial

investments can differ considerably depending particularly on the head of the
plant. Moreover, capital expenditures are also influenced by the flow rate, local
geological and topographical characteristics, the type of HPP (run-of-river,
storage, pumped storage) and the equipment applied (turbines, generators),
and as a consequence the volume of related civil engineering works needed.
Those projects which operate with low head and high flow usually require a
relatively higher initial investment.
Large HPPs usually have a greater impact on their environment, thus obtaining
all necessary licenses might take longer compared to smaller ones, which can
result in delays and cause extra losses. Besides external costs to be taken into
consideration, there is a greater potential for cooperation and cost-sharing
as these facilities can generate significant additional revenues with multiple
functions.
As a result large HPPs are usually competitive players in the electricity

generation market compared to other conventional technologies, while smaller
plants, particularly those operating with a low head, could face difficulties
without additional incomes such as state-level support or lack of extra charge
allocated to electricity producers using fossil fuels for GHG emission.
As for the future, the cost of generating electricity in HPPs will probably
remain stable, as this is a mature technology with low development potential.
However, it is conceivable that installation-related capital expenditures may
increase in the coming years, as within the last century many of the suitable
locations have already been utilized, thus in many countries of the region
only sites with less favourable conditions remained. Accordingly, further
development efforts will probably concentrate on the installation costs –
predominantly for small hydro plants. Recently, the most expensive facilities
are the ones with low water heads and the cost per installed kW decreases
rapidly as the height increases till about 15 metres (above this level capital
expenditures get more and more stable). On the whole, this reveals two main
directions of potential technological improvement in the future: reducing costs
for heads smaller than the above mentioned 15 metres, and developments
supporting reduced installation costs for facilities smaller than 250 kW as
available sites for larger HPP projects could be limited in the coming years.154
Prospects in the CEE Region
Besides geographical and technological characteristics determining the

success of HPP investments by influencing the cost of generating electricity,
the economic environment must be supportive in order to run a profitable
business. When analyzing the feasibility of such a project several aspects
need to be taken into account. The current demand for electricity and current
off-take prices on the target market or end-user tariffs have to be calculated,
154 Source: http://www.esha.be/fileadmin/esha_files/documents/publications/publications/State_of_the_Art.pdf
as well as possible future trends in order to forecast future revenues. Among

others the generation mix, import dependency and the energy strategy of the
target country should also be taken into account, so that the need for hydro-
based electricity generation compared to other technologies can be analyzed.
Furthermore, a support system is implemented in most of the countries that
may cover different types of hydro-based electricity generation, as well as EU
or state funds that might be available to facilitate the realization of renewable
and/or strategically important projects.
A comparison of the estimated generation cost and the current end-user tariffs in
a target country could provide a starting point for analyzing the viability of a specific
project. In Figure 17 a summary of relevant information on each CEE country is
provided. The two left columns show the range of electricity generation related total
costs in EUR/MWh in for both large and small scale HPPs. Electricity retail prices for
medium size households and medium size industrial consumers without taxes in
the CEE countries as of 2007 are also included.
Figure 17: Hydro generation cost in the EU versus electricity prices in the CEE region (2007)
200 193 electricity prices – household consumers
electricity prices – industrial consumers
180
160 151 possible effect of state subsidies
140
129
EUR/ MWh
expected future development

120
of electricity prices
102
100 93 95 90 89 86 84
81 78 77
80 75 74
70 70 69 67 66
64 58 58
60 63
54 54 55
51 53 49 55 47
44
40 3732 33
37 25
20
0
Generation cost
range – large hydro
Generation cost
range – small hydro
Slovakia (SK)
Hungary (HU)
Poland (PL)
Slovenia (SI)
Romania (RO)
Albania (AL)
Croatia (HR)
Kosovo (KO)
Bulgaria (BG)
Macedonia (MK)
Serbia (RS)
Czech Republic (CZ)
Montenegro (ME)
Lithuania (LT)
Estonia (EE)
Latvia (LV)
Bosnia and
Herzegovina (BA)
Source: KPMG elaboration based on data provided by working papers of the European Commission, Eurostat, Energy Community
As for ranges of generation cost it should be noted that the minimum

and maximum values originate from the working papers of the European
Commission155 which summarize information about certain projects. Their
scope includes countries beyond the CEE region with relatively high GDP,
labour cost and consumer prices. Thus, it is likely that the level of generation
costs in the countries surveyed can be found somewhere in the lower segment
of the higher ranges, close to the minimum level.
Electricity prices presented in the figure are average values based on

information provided by Eurostat and Energy Community. Accordingly, it
is conceivable that lower prices exist in case of large industrial consumers
and higher prices for small households. Therefore, the exact prices shown
in the figure serve as a basis for a general comparison only. In addition, the
figure shows the situation as of 2007, and while generation costs of HPPs are
expected to remain stable, electricity prices are expected to grow in the long
run after economies recover from the global financial crisis.
Based on the the comparison provided in Figure 17, generating electricity in

HPPs is likely to become profitable in most CEE countries. Based on 2007
electricity prices, projects aiming to develop large-scale facilities appear risky
only in Macedonia and Serbia, while 70% of the countries (including most of
the large ones) provide an appropriate economic environment for SHPPs – even
if there were no subsidies other than off-take price based support.
The electricity generation cost values for SHPPs presented here include all
relevant expenses, however the opportunity of applying for various state
subsidies has not been taken into account in the comparison. External support
in the form of feed-in tariffs, green certificates, investment subsidies, etc.
results in additional funds or revenues, thus decreasing generation cost
directly or indirectly. Therefore, although it is more expensive to produce
electricity in SHPPs compared to large facilities, such development projects
often proved to be excellent investment opportunities in the past. For more
detailed information about the impact of support systems on the economics of
SHHPs, please see Figure 18. Please note that the following prices are average
values in most EU member states. In case of the Czech Republic a range is
shown as the tariff setting methodology can be chosen by the generators
from feed-in-tariff and green premium. Furthermore, average prices could not
be determined in some non-EU countries, thus – instead of discrete values –
ranges are provided based on minimum and maximum tariffs determined by
national regulations.
Figure 18: Generation cost of SHPPs in the EU versus relevant feed-in-tariffs in the CEE region (2007)
193 maximum price

200
176 minimum price
180
160
140
EUR/MWh
113
120
94 94 93 92 92 91
100 81 78 77 75
80 91 68
65 58
60 63 52 50
57 54
40
42
36 31
20
0
Latvia (LV)
Macedonia (MK)*
Croatia (HR)
Poland (PL)
Slovenia (SI)
Czech Republic (CZ)
Romania (RO)
Serbia (RS)*
Slovakia (SK)
Hungary (HU)
Bulgaria (BG)
Montenegro (ME)*
Albania (AL)*
Kosovo (KO)*
Lithuania (LT)
Estonia (EE)
Bosnia and Herzegovina (BA)*

Generation cost range – small hydro
Source: KPMG elaboration based on data provided by European Renewable Energies Federation - Prices for Renewable Energies in
Europe, Report, 2009 and www.ceteor.ba/images/stories/savjetovanje/403.pdf
*Please note, that tariffs are calculated based on 2009 information and modified with inflation in order to present comparable values given
in EUR
2007
Again generation cost calculations are based on worldwide experience, thus

the CEE cost range is expected to sit in the lower segment of the indicated
range.
As can be seen in Figure 18 all CEE countries promote electricity generation

in SHPPs and have some kind of a support system that can include, among
others, a feed-in-tariff system. However, based on the maturity of the market
and the history of regulation, on policies and on geographical characteristics
a wide range of prices might occur in different countries; tariffs can also vary
within one country primarily depending on the parameters of the facilities.
When comparing generation costs to takeover prices of local markets, it is
apparent that most CEE economies provide a beneficial environment for SHPP
investments – profitability may be uncertain in Lithuania, Estonia and Bosnia
only. However, it has to be taken into account that generation costs presented
in Figure 18 provide a range of reference only, while focusing on specific
project characteristics it is conceivable that investing in SHPPs still might result
in a pay off in the above cited countries.
After a global, high level analysis of the opportunities in a target country – as

part of a usual power plant project feasibility check – the next step should be a
detailed merit order analysis of the target country’s power generation sector,
which is defined by installed capacities and generation costs. The merit order
along with a demand forecast indicate how high the utilization ratio of the
planned plant will be. In general, as HPPs (excluding pumped storage power
plants) generate electricity at a very low-cost level as they operate without
consuming fuel, such units are usually placed in the first section of the merit
order rankings. Figure 19 illustrates a fictive merit order with price/cost plus
margin on the Y-axis and demand/production volume on the X-axis.
Figure 19: Merit order analysis – hydros usually take first place in the
ranking (Capacity A or Capacity B)
Demand
P
Pe Export
P(e-r)
Supply
curve
Renew-
ables
Q
Q Q+Qe-
Q+Qe
Qr
Capacity A Capacity B Capacity C Capacity D Capacity E
9.2. A Comparison with Other Power Plant Types

As emphasized in this report, producing electricity via HPPs is relatively cheap
compared to other technologies.
In general a power plant’s main costs comprise:
 initial capital expenditures
 operation and maintenance related expenses and
 fuel costs, if applicable (for thermal and thermonuclear plants or if fossil fuel
is burnt as secondary fuel as for concentrating solar power).
European Union working papers156, which provide reliable data about certain EU
power plants, were used as a basis for compiling the main expenses of various
technologies. In addition to providing information about natural gas, oil, coal,
nuclear-fuelled power plants and renewable generation methods, a distinction
is made between special production types within these categories as well.
The result is a more comprehensive analysis.
Figure 20 shows a comparison of several power plant types’ capital

expenditures by providing cost ranges for each technology as well as an
reference cost level, which is determined by the European Commission.
156 Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.

do?uri=SEC:2008:2872:FIN:EN:PDF
Figure 20: Range and accepted reference level of overnight capital expenditures by power generation
technology (2007)
8,000
7,000
6,000
5222
5,222
4,909
4909
5,000 4,700
4700
EUR/kW
3969
3,969
4,000
3,280
3280
3,029
3029
2,799
2799
3,000 2,350 2559
2,559 2622
2,622
2,193
2,089
2089
1,880
1880
2,000 1,619
1,321 1,462 1598
1,598
1,253 1,191 1,410
1410
1,044
1,000 663 836
324
0
Open Cycle Gas Turbine (GT)
Combined Cycle Gas Turbine (CCGT)
Combined Cycle Gas Turbine with CCS
Internal Combustion Diesel Engine
Combined Cycle Oil- fired Turbine
Pulverised Coal Combustion (PCC)
Pulverised Coal Combustion with CCS
Circulating Fluidised Bed Combustion (CFBC)
Integrated Gasification Combined Cycle (IGCC)
Integrated Gasification Combined Cycle with CCS
Nuclear fission
Biomass combustion steam cycle – small scale
Biomass combustion steam cycle – large scale
Biogas plant
Landfill gas
On- shore Wind
Off- shore Wind
Photovoltaics
Concentrating Solar Power
Hydropower – small scale (2 MW)
Hydropower – large scale (20 MW)
Source: European Union with KPMG elaboration Hydropower – large scale (250 MW)
As is apparent in the figure, fossil fuel-based technologies, especially natural

gas fired power plants, are the cheapest per kW in terms of initial investment
needs. Oil and coal are somewhat more expensive in terms of capital
expenditure, and power plants equipped with carbon capture and storage
related facilities may cost even more. The installation of nuclear power plants
involves enormous investments on the whole that result in upper-level costs
per kW compared to the other prevalent technologies representing a high
share in TPES. Renewable energy generation usually requires a high level of
capital expenditure (excluding on-shore wind and landfill gas), and solar power
is the most expensive among the technologies considered here. In general,
HPPs are relatively competitive regarding the reference investment cost per
installed kW – although they might necessitate varying but always-significant
initial outlays depending on their size. The investment cost of an SHPP per
1 kW of installed capacity is considerably more expensive than large facilities.
However, in order to provide a more comprehensive comparison of

technologies, a wider scale of factors must be considered such as the life-time
of the facilities, O&M related expenses and fuel costs.
As an example, HPPs usually have a longer economic life than other types of
plants: 50 years or more compared to an average of 25 years for natural gas-
fired technologies. This aspect will also be taken into consideration in the cost
structure of different technologies in Figure 21 which follows.
Modern hydro plants are usually automated and require only a few on-site
personnel, thus operation and maintenance costs are also typically low.
In Figure 21 the annual O&M expenses per kW of different power generation
technologies is presented in EUR2007. It should be noted that, similarly to Figure
20 presenting capital expenditures, an accepted reference level and range are
shown based on European Union153 working papers. However, ranges for this type
of costs for HPPs were not disclosed, thus reference levels have been calculated
for the analyzed HPP facility sizes: 2 MW, 10 MW, 20 MW, 75 MW and 250 MW.
Figure 21: Range and accepted reference level of annual O&M costs by power generation technology (2007)
350
300
272
256
250
209
200
EUR/kW
150 141
136
120
94 94
89
100 84 84 89
73 78
63 68
52 57
42 42 37 42
50
26
10
0
Combined Cycle Gas Turbine (CCGT)
Combined Cycle Gas Turbine with CCS
Internal Combustion Diesel Engine
Combined Cycle Oil - fired Turbine
Pulverised Coal Combustion (PCC)
Pulverised Coal Combustion with CCS
Circulating Fluidised Bed Combustion (CFBC)
Integrated Gasification Combined Cycle (IGCC)
Integrated Gasification Combined Cycle with CCS
Nuclear fission
Biomass combustion steam cycle – small scale
Biomass combustion steam cycle – large scale
Biogas plant
Landfill gas
On-shore Wind
Off-shore Wind
Photovoltaics
Source: European Union with KPMG elaboration
There is a notable divergence in annual O&M costs per kW among HPPs

depending on the size of facilities. Small-scale biomass combustion cycles’
and biogas plants’ O&M costs are reasonably higher compared to the
average, while the operation of landfill gas plants are quite expensive as well.
Reference values for fossil fuel generation tend to be low with the exception
of technologies with CCS. Nuclear power plants are reckoned rather expensive
primarily because of the special safety requirements. When analyzing
renewable generation related O&M costs, hydro appears beneficial compared
to others, although large-scale facilities remain competitive.
When evaluating the viability of various power generation technologies, fuel cost
also has to be taken into consideration – if it applies. As for an HPP there is no
fuel consumption, such a comparison on its own does not make sense. Figure
22 shows how high CAPEX, mid-range O&M expenses and non-existent fuel
expenditures compare to the cost structure of 19 other generation technologies.
Figure 22: Range of production cost structure in case of various power plant types (annual values in EUR2007,
corrected with load factor)
1,000
900
800
700
EUR/MWh (2007)
600
500
400
300
200
100
-
Off- shore Wind
Internal Combustion
Diesel Engine
On- shore Wind
Hydropower – large scale
Hydropower – small scale
Hydropower – small scale

Integrated Gasification
Combined Cycle (IGCC)
(20 MW)
(75 MW)
(250 MW)
(2 MW)
(10 MW)
Circulating Fluidised Bed
Combustion (CFBC)
Combined Cycle Gas Turbine
(CCGT)
Combined Cycle Oil-fired
Pulverised Coal Combustion

(PCC)
Turbine

Biogas plant
Landfill gas
Nuclear fission
Photovoltaics
Biomass combustion steam
cycle – small scale
Biomass combustion steam
cycle – large scale
Fuel costs O&M costs Capital investment
Source: http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2008:2872:FIN:EN:PDF with KPMG elaboration
Final values have been calculated based on high and low case scenario
production cost levels provided by the European Union158 distributed among
fuel, O&M and CAPEX costs159.
Large-scale hydro power generation can be cheaper than other technologies,

but its production cost varies over a wide scale, meaning that the parameters
of a site highly influence the cost of production through CAPEX. SHPPs are
also competitive on the market, although their similarly wide production costs
range can obstruct their economic benefit on conventional (or even some other
renewable) technologies, so again careful site selection is vital for return on
investment.
Most importantly, hydro power technology is capable of beating any other

generation technologies in terms of generation costs, but to exploit this
advantage sites need to be chosen very carefully to keep CAPEX (first of all)
and OPEX as low as possible. In spite of the fact that enormous unexploited
hydro power potentials are available in the CEE region, economically optimal
sites are only available in a limited number, determined by three parameters:
1. geographic characteristics
2. current status of hydro power exploitation (the ratio of occupied sites) and
3. electricity price level.
First mover advantage is vital in this sector to obtain the most valuable
locations.
CCGT, coal and nuclear fission plants represent the cheapest power plant
technologies which challenge the competitive advantage of large scale HPPs.
Fossil-fuel power plants are more expensive than the lower limit of HPPs’
cost range. Their range is much narrower, less dependent on geographical
determination, but more dependent on fuel costs. Gas and oil-fired plants are
relatively cheap to build, but they may be less profitable because of significant
fuel costs even if a low price scenario is assumed.
Coal-fired plants represent a lower cost level, but they face an obligation to
purchase vast CO2 quotas in the future, while renewable generators including
HPPs could avoid this obligation.
Nuclear fission plants represent a slightly higher cost level than fossil plants,
including higher CAPEX and OPEX, but bear lower fuel cost. Thus nuclear
plants’ cost level is more predictable than fossil/thermal plants’.

159 Please note that for Concentrating Solar Power the use of natural gas for backup heat production is assumed
Another large advantage exists for hydropower versus low cost fossil or even
nuclear plants. Due to the low level of variable costs hydro facilities are not
excluded from the merit order, as long as the price covers the variable O&M
costs. In comparison gas-fired plants are immediately closed out of the merit
order or start generating loss as soon as they are unable to cover their high fuel
costs and their O&M costs.
The chart above illustrates convincingly the economic competitiveness of hydro

power generation technologies as the only renewable technology capable
of outpacing thermal power plant technologies, purely in terms of economic
viability.
9.3. Cooperation and Cost Sharing

Large hydro dams typically provide alternative utilization opportunities, such
as irrigation, flood control, navigation, recreation, interconnection for road
transportation and utilities, etc. that may result in extensive cooperation, and
as consequence cost sharing opportunities for stakeholders; thus this can
attract additional investors interested in other sectors. Such cooperation can
result in both CAPEX and OPEX reductions for a power generation investment
or additional income from the secondary utilization depending on the nature
of the cooperation. Also, applying for state support can be a realistic option, as
such cooperation opportunities are broadly considered as state responsibilities
and, additionally, during construction many jobs may be created for locals
and opportunities usually arise for service providers, thus likely resulting in
prosperity for the local economy. Furthermore, due to the formation of a lake
recreational possibilities may arise that facilitate tourism.
In contrast, utilization of existing weirs and dams by installing power generation

capacities could remarkably reduce their initial investment costs as well as
decrease the level of overall environmental burden by saving on fossil fuels
and eliminating their emissions. Consequently, for a multi-purpose dam (which
provides additional equity, incentives or future revenues for the project) both
risks can be reduced and the payback period can be shortened.
10. Investment Potentials
Hydro Power Potential Index Although hydro power bears the largest share of generation among the
of CEE countries renewable technologies, still less than one-third of the technical hydro power
potential is being exploited in the CEE region. This tremendous unused
2 technical potential promises a number of project opportunities and the
favourable long term financial attributes of HPPs make HPP investments
9
attractive for strategic investors.
11 It should be noted that HPP investments, especially large HPP investments

have a significant downside regarding achieving public consensus (as
illustrated in several cases), but by involving all shareholders in the planning and
implementation processes and employing the appropriate preventive actions
6 these risks might be mitigated.
2
Hydro Power Potential Index
11
As a comprehensive summary of both country profiles and the economic

17
aspects this report provides an indicative tool for comparing the countries
37
13 28
surveyed here: the Hydro Power Potential Index is based on unused technical
90
7
potential, average electricity prices and the electricity consumption of the
individual countries. It is aimed at creating a ranking regarding the investment
41 9 17 potential density of countries in the CEE region.
16
203
The formula of the index is as follows:
x > 30
30 ≥ x > 15 Unused technical HPP potential (GWh) * Electricity price (EUR/kWh)
/1000
Electricity consumption (GWh)
15 ≥ x > 8
8≥x
The higher index figure indicates better potential. Please note, that in order to
facilitate the analysis the final values were divided by 1,000.
As the illustration reveals, some of the small countries on the Balkan

Peninsula such as Albania, Bosnia-Herzegovina, Montenegro or Slovenia have
tremendous untapped hydro investment potential, but the unused potential of
other CEE countries leaves opportunity for hydro power investments.
Small Hydro Potential Index This index does not incorporate state subsidies offered for these investments
of CEE countries by the region’s governments. Overall prospects can be radically altered by
this factor, but naturally in a positive way. In order to take this aspect into
14 consideration as well, another similar index was created aiming to rank the
potential of small hydro investments in the CEE region, but it was necessary
n/a to devise index provisions, because of the limited availability of relevant
information. In case of SHPPs only economic potential was available in terms of
19 installed capacity (MW) instead of technical potential of electricity production
(GWh) as in the previous index. In line with the previously introduced index
the price of electricity was also incorporated, however, the maximum offered
subsidized off-take price was used. In order to facilitate the analysis the final
21 values were multiplied by 100.160
25 Unused economic SHPP potential (MW) * Maximum off-take price (EUR/kWh)

*100
61 Electricity consumption (GWh)
4
101 The result of the calculation shows that – again – some of the Balkan countries
74 158
may be the best places to invest in SHPPs, highlighting the attractiveness
114
180 of Romania. In general, less developed countries with a higher level of
state support combined with sufficient geographical characteristics (like
362 71 52
Montenegro and Macedonia) provide a more beneficial environment for such
281
175
project developments, while, as could be expected, flat countries appear to be
less attractive (like the Baltics and Hungary).161
x > 150
150 ≥ x > 75
75 ≥ x > 40
40 ≥ x
160 Please note that there is no reliable data available with regard to the economic potential for small hydro
in Latvia. However, based on geographical characteristics, on information provided by the World Energy
Council and on the renewable strategy of the country (a target of 50MW small hydro is set for 2010 while
an annual generation of 150-300 GWh up to 2025 is assumed), it is conceivable that the potential is
relatively low. Furthermore, trustworthy information regarding this topic could not be found for Bulgaria
either.
161 The rankings of Romania and Slovakia are definitely a surprising. However, the economic potential used
in the calculation is based on information provided by the World Energy Council as of 2005 and might be
out of date due to technological development and changes to the market environment. Thus, although in
fact in these countries there is a significant amount of existing installed SHPP capacity, the relatively low
index values might be a result of unreliable data for hydro potential and should be evaluated accordingly.
SWOT Analysis
This SWOT analysis is aimed to shed light on the major positive and negative
attributes of HPP investments:
Strengths Opportunities
 No fuel requirement  Unused hydro potentials

 Low operational costs  EU RES and RES-E targets and
 The highest efficiency amongst Kyoto mechanisms stipulate
all generation technologies (amongst other renewable)
hydro investments
 Power generation without direct
GHG emission  Hydroelectric upgrade of
existing dams
 Controllable performance
 Electricity system balancing
capabilities
 Multipurpose capabilities
(navigation, irrigation,
flood control, etc.)
 Stable water supply
 Long lifetime
 Matured technological background
Weaknesses Threats
 Location dependent technology  “Hydrological risk” – changes in

rainfall patterns due to
 High initial investment needs
global warming
 Long lead times for project
 Possible environmental impacts
realization
 Political issues hindering
 Needs considerable public support
the projects
 High rate of cost and time overruns
 Load factor might be restricted by
weather characteristics
Acronyms
BALTSO – Baltic Transmission System Operators
BiH – Bosnia and Herzegovina
CAPEX – CAPital EXpenditure
CCS – Carbon Capture and Storage
CEE – Central and Eastern Europe
CER – Certified Emission Reduction
CDM – Clean Development Mechanism
DSO – Distribution System Operator
EBRD – European Bank for Reconstruction and Development
EC – European Commission
EIU – Economist Intelligence Unit
ENTSO-E – European Network of Transmission System Operators for Electricity
ERU – Emission Reduction Unit
ET – Emission Trading
EU – European Union
EU ETS – European Union Emission Trading System
GHG – GreenHouse Gas
GW – GigaWatt
GWh – GigaWatt hour
GDP – Gross Domestic Product
HPP – Hydro Power Plant
JI – Joint Implementation
kW – kiloWatt
kWh – kiloWatt hour
MW – MegaWatt
MWh – MegaWatt hour
NARUC – National Association of Regulatory Utility Commissioners
NPP – Nuclear Power Plant
OPEX – OPerational EXpenditure
O&M – Operation and Maintenance
PR – Public Relations
PS – Pumped Storage
PSPP (or PSP) – Pumped Storage Power Plant
S – Storage type HPP
RES – Renewable Energy Sources
RES-E – Electricity from Renewable Energy Sources
RoR – Run-of-River
SHPP – Small HPP
SWOT – Strengths, Weaknesses, Opportunities, Threats
TPES – Total Primary Energy Supply
TSO – Transmission System Operator
TW – TeraWatt
TWh – TeraWatt hour
UCTE – Union for the Co-ordination of Transmission of Electricity
UNFCCC – United Nations Framework Convention on Climate Change
USAID – U.S. Agency for International Development
What can KPMG Firms Offer

to the Hydro Power Sector?
KPMG is a global network of professional firms providing audit, tax and

advisory services. We operate in 146 countries and have more than 140,000
professionals working in member firms around the world.
KPMG’s Power & Utilities practice has one clear vision: to be the leading
provider of professional services to the power and utilities sector. This means
more than just having a strong client base. KPMG member firms provide
services to numerous global power and utilities businesses, state-owned
providers, national businesses and service companies across many regions.
Power & Utilities Centres of Excellence in key locations around the world
Essen Moscow
Calgary London
Budapest
Paris
Tokyo
Dallas
Hong Kong
Sao Paulo
Johannesburg
Melbourne
KPMG member firms offer global connectivity. We have 12 dedicated Power &
Utilities Centres of Excellence in key locations around the world, working as one
global network. They are a direct response to the rapidly evolving power and
utilities sector and the specific challenges that this is placing on industry players.
Located in Budapest, Calgary, Dallas, Essen, Hong Kong, Johannesburg,

London, Melbourne, Moscow, Paris, Sao Paulo, and Tokyo, the centres support
companies in the upstream, downstream and service industries around the
world, helping them to anticipate and meet their business challenges.
KPMG practices in the Central In each centre, there are professionals with practical, in-depth power and
and Eastern European region utilities experience. They draw on our wider global network of power and
utilities practitioners to provide our clients with immediate access to the latest
EE industry knowledge, skills, resources and technical developments.
LV
Our Centres of Excellence also enable us to transfer knowledge and
information globally, quickly and openly. With regular calls and effective
LT
communications tools, we share observations and insights, debate new
emerging issues and discuss what is on our clients’ management agendas.
The Centres also produce regular surveys and commentary on issues affecting
the sector, business trends, changes in regulations and the commercial, risk
PL and financial challenges of doing business.
Building on the resources and knowledge base of the KPMG global network of
CZ
member firms, our regional industry practice has access to market information
SK
both on a global and regional basis. This allows us to offer strategies to our
clients on both domestic and international assignments based on international
HU
SI
experience and detailed knowledge of the local market.
HR RO
RS
BA
ME KO
KPMG’s Advisory services to the Power & Utilities sector
BG
MK We provide complex advisory services to all of the links in the value chain, as
AL
illustrated by the following references:
Strategy
 Market analysis and forecasting within the Central and Eastern European
energy sector
 Overview of European regulatory regimes and industry models
 Impact assessment of regulations
 Regulated price setting methodology
 Detailed industry benchmarking studies
 Assistance with national energy policy creation
 Customer segmentation, competitive product development, sales channel

development
 Unbundling strategies
 Financial modelling
Operational
 Development of detailed domestic operational models and regulatory

regimes
 Tariff structure and calculation modelling
 Finance function and key performance indicators development
 Energy trading function development
 Maintenance function development
 Organization development and cost optimization
 Support of regulatory cost reviews
 Strategy for financial management of assets’ maintenance and renewal
 Strategy for the monitoring, management and motivation of work crews in

the terrain
 Predicting weather dependent time series in the energy sector
Transactions
 Initial feasibility study
 Financial and commercial forecasts
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KPMG CEE Hydro Power Oulook

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ENERGY AND NATURAL RESOURCES

KPMG in Central and Eastern Europe’s

It is my pleasure to introduce the Central and Eastern European Hydro Power

Executive Summary 7 6.8. Kosovo 72

3. Regulations 29 8. Public Acceptance of Hydro Power 105

Hydroelectric generation is not new to Central and Eastern Europe (CEE).

Furthermore, the growing emphasis on clean energy, as mandated by the

Similarly in Bosnia-Hercegovina, the utilization rate of the technical hydro

This is just 3% of Hungary’s technical potential, where hydro capacity could

Hungary’s failure to harness its water resources to provide more electricity

Known as the Gabickovo-Nagymaros Hydro Power Project, the scheme was

However, in Hungary the project was soon criticized by environmentalist

However, the creation of such dams often yields a number of secondary

As our study stresses, Austria’s ability to so successfully exploit hydro power

1. Defining CEE Energy

Figure 1: The CEE Region in European Context

Many of the CEE countries have shown remarkable economic development

As international firms in the region affected by the economic downturn tried to

Economic and Population Data – Central and

Non EU member states

Reservoir Figure 2: Schematic Cross Section of a Hydroelectric Dam

Turbine 2.1. Hydroelectricity

2.2. Types of Hydroelectric Power Plants

Figure 3: Schematic Cross Section of a Run-of-River Hydroelectric Dam

Storage Hydroelectric Power Plants

Figure 4: Schematic Cross Section of a Storage Hydroelectric Dam

Head race Surge tank

Pumped Storage Power Plants

Figure 5: Schematic Cross Section of a Pumped Storage Hydroelectric Dam

Upper basin Barrage intake structure

2. To increase revenue by selling more electricity during periods of peak

3. To balance out the demand volatility of the power grid as an immediate

4. To balance out the production volatility of some renewable generation

Depending on the characteristics of a HPP, different types of water turbines are

Source: Alstom Most common types are:

Figure 7: Kaplan turbine Francis

Figure 8: Pelton turbine Impulse (or Action) Turbines

The most common type is:

Turbines Utilized in Pumped Storage Plants

The efficiency of a pumped storage power plant constitutes of two parts:

 The efficiency of the pumping mode

 The efficiency of the turbine mode

This results in a lower overall efficiency than in case of other HPPs.

2.4. System Balancing Capabilities of Storage and

Why is balancing becoming increasingly important?

It can be attributed to several factors:

1. Total demand is growing, which results in more required balancing capacity

3. Nuclear power is undergoing a renaissance which could result in an

4. Fossil fuelled plants usually have a narrow optimal performance level,

5. CHP plants without heat storage capabilities supplying heat at off-peak

 positive deviation of demand from the schedule by increasing production

 negative deviation of demand from the schedule by decreasing production.

2.5. Possible other Roles of HPPs, their Dams and

In several cases the primary purpose of building dams for reservoir

Agriculture is often exposed to seasonal weather changes. This risk can be

The enhanced water surface created by a dam is usually favourable for

Source: Andritz Hydro

Dams create interconnection between riverbanks, terminating the natural

2.6. Environmental Impacts

These guidelines introduce several environmental issues that must be

3 International Hydropower Association – Sustainability Guidelines, 2004

Sediment transport and erosion

The creation of a reservoir changes the hydraulic and sediment transport

Downstream hydrology and environmental flows