In Our Image                                              Norway’s Role in the Global Hydropower IndustryForeningen for In...
FIVAS – The Association for International Water Studies – is a Norwegian voluntary organisation working to monitor    the ...
In Our ImageNorway’s Role in the Global Hydropower Industry                   August, 2012
Contents				Abbreviations				                                                                  5Introduction				          ...
AbbreviationsADB	     Asian Development BankAfDB	    African Development BankCDM	     Clean Development MechanismCIFI		   ...
IntroductionAfter a downturn during the 1990s, global investments in       programme and policy loans that aim to build bo...
Norway’s experience in developing its own hydropower           This report surveys Norway’s diverse forms of supportsector...
1	 The Importance of Watersheds and the	 Impact	of Dams on Freshwater SystemsClimate change presents multiple challenges t...
The Mekong River near the Xayaburi Dam site. Photo: International Rivers, Kirk Herbertsonhumans are shredding the safety n...
outside of the tropics, some dams can be significant          sources and other natural resources in the dammedsources of ...
1I	 Hydropower and Energy AccessMeanwhile, few large hydropower dams are built to meet           year.10 Other industrial ...
Commodity	 Electricity load 	                   Electricity	     Country	                          Average household  			 ...
Hydroelectric turbine. Photo: Florean FortescueCalculating Energy Demand: Industrial Versus Residential UsersTo calculate ...
1I1	Norway’s Global Role in	 Hydropower DevelopmentNorway’s support for global hydropower development                  the...
Statkraft’s Cakit Hydropower Plant, Turkey. Photo: Statkraftpower, it is unsurprising that the country’s know-how in      ...
Bilateral Sectoral SupportEnergy is one of the main interests of Norwegian bilateraldevelopment cooperation. The financial...
NVE around the world.What’s more, entrenched political and social conflicts can       NVE’s development assistance almost ...
Norwegian Involvement in Uganda                                  GIEK, has considered granting credit insurance to the    ...
The Controversial State ofHydropower in EthiopiaEthiopia has a hydropower sector marked by persistent        has been desi...
Human Rights Watch found that the communities had no          a planned capacity of 5250 MW, is projected for the Blueacce...
over a five-year period. In 2012, Norway entered into a            Bright futures, ideal intentionsnew cooperation with Et...
Corporate InvolvementThough Norwegian actors have a smaller share in overseas       whose portfolio includes three hydropo...
Theun Hinboun Dam in Laos. Photo: FIVASUltimately, the THXP has left thousands of people to cope    erated by the Nam Sim ...
Hydropower Plants Operated by SN Power  Panama:                                                  India:  Bajo Frio – 58 MW...
Government Pension Fund Investments27Norway supports global hydropower development by               Many of the companies ...
The Fund’s Top Equity Investments in Companies Active in the Hydropower Sector France (16,432,930,491 NOK): Alstom Electri...
Construction of the Belo Monte Dam, Altamira, Brazil. Photo: Minplanpacscores of controversial hydropower projects, includ...
List of members: (As of June 2012)                                                                  •		Developing countrie...
Principles of Energy +   •		 Developing country actions in the energy sector will be      •		Energy+ will employ a three-p...
Multilateral Policy DialoguesNorway also promotes the global hydropower sector              Bank. The Government of Norway...
Construction of Bakun Dam, 2009.                                                                 Photo: Cahaya Dalam Kegel...
In our Image
In our Image
In our Image
In our Image
In our Image
In our Image
In our Image
In our Image
In our Image
Upcoming SlideShare
Loading in …5

In our Image


Published on

Norway’s Role in the Global Hydropower Industry. Report by FIVAS and International Rivers

  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

In our Image

  1. 1. In Our Image Norway’s Role in the Global Hydropower IndustryForeningen for Internasjonale Vannstudier 1Association for International Water Studies
  2. 2. FIVAS – The Association for International Water Studies – is a Norwegian voluntary organisation working to monitor the consequences of water projects and developments in the South. FIVAS was funded in 1988 as an expansion of activism towards Norwegian involvement in the Sarawak Hydropower development. The organisation seeks to prevent any Norwegian participation in projects with major negative consequences for people and nature and works to promote fair and sustainable alternatives. Since 1985, International Rivers has been at the heart of the global struggle to protect rivers and the rights of communities that depend on them. International Rivers works with an international network of dam-affected people, grassroots organizations, environmentalists, human rights advocates and others who are committed to stopping destructive river projects and promoting better options. Based in five continents, their staff has expertise in dams, energy and water policy, climate change, and international financial institutions. They support partner organizations and dam-affected people by providing advice, training and technical assistance, and advocating on their behalf with governments, banks, companies and international agencies. The focus of their work is in Latin America, Asia and Africa. Authors: Jonas Ådnøy Holmqvist, FIVAS and Zachary Hurwitz, International Rivers Design: Cover photo: Construction at the Theun Hinboun hydropower station. FIVAS, Andrew Preston     Foreningen for Internasjonale Vannstudier Association for International Water Studies Solidaritetshuset 2150 Allston Way, Suite 300 Fredensborgveien 6 Berkeley CA 94704, 1378, USA N-0177 Oslo Tel: + 1 510 848 1155 Tlf: 22 98 93 25 Fax: + 1 510 848 1008 E-post: www.internationalrivers.org2
  3. 3. In Our ImageNorway’s Role in the Global Hydropower Industry August, 2012
  4. 4. Contents Abbreviations 5Introduction 6I The Importance of Watersheds and the Impacts of Dams on Freshwater Systems 8II Hydropower and Energy Access 11III Norway’s Global Role in Hydropower Development 14 Bilateral Sectoral Support 16 The Controversial State of Hydropower in Ethiopia 19 Corporate Involvement 22 Government Pension Fund Investments 25 The Energy+ Initiative 28 Multilateral Policy Dialogues 30IV Norway’s Support for Emerging Renewables Markets 32V Conclusions and Recommendations 34Endnotes 36Note on Currency:Exchange Rate: 1 USD = 5.939 Norwegian Kroner (NOK) as of August 13, 2012.
  5. 5. AbbreviationsADB Asian Development BankAfDB African Development BankCDM Clean Development MechanismCIFI Corporación Interamericana para el Financiamiento de InfraestructuraEEPCO Ethiopian Electric Power CorporationG-20 Group of 20GGGI Global Green Growth InstituteGIEK Norwegian Guarantee Institute for Export CreditsHSAF Hydropower Sustainability Assessment ForumHSAP Hydropower Sustainability Assessment ProtocolICH International Centre for HydropowerIEA International Energy AgencyIFC International Finance CooperationIHA International Hydropower AssociationILO International Labor OrganizationkWh Kilowatt-hoursMFA Norwegian Ministry of Foreign AffairsMW MegawattNBI Nile Basin InitiativeNBIM Norges Bank Investment ManagementNGO Non-governmental OrganizationNORAD Norwegian Agency for Development CooperationNVE Norwegian Water Resources and Energy DirectorateOECD Organization for Economic Cooperation and DevelopmentREDD+ Reducing Emissions from Deforestation and Forest Degradation Plus ProgrammeUNESCO United Nations Educational, Scientific and Cultural OrganizationUNFCCC United Nations Framework Convention on Climate ChangeUN-SEFA The United Nations Sustainable Energy for All InitiativetWh Terawatt-hoursWBG World Bank GroupWCD World Commission on DamsWWF World Wide Fund for Nature 5
  6. 6. IntroductionAfter a downturn during the 1990s, global investments in programme and policy loans that aim to build borrowers’hydropower infrastructure have begun to rise. Govern- regulatory capacities. In 2009, for example, developmentments and financiers have strongly pushed for hydro- policy operations made up over half of the World Bank’spower to play a central role in “green growth” strategies, public sector loans.2 Multilateral lenders have indicatedclaiming that large dams are the best option to achieve that they plan to return to financing large dams eithersustainable development’s triple bottom line of economic directly or by forming public-private partnerships withgrowth, social inclusion, and environmental protection. other lenders.3 However, these institutions may now beMulti-stakeholder fora such as the G-20 Summit and more sought after for their role as knowledge brokers,the UN Rio+20 Conference on Sustainable Develop- amassing, circulating, and leveraging large amounts ofment called in 2012 for a transition away from a fossil technical information and know-how, than they are forfuel-based economy, placing the large-scale hydropower their role as project back in fashion. The significance of knowledge brokers to developmentYet, the roles of hydropower financiers have changed. finance is not new. Indeed, technical, policy, and know-Today most new hydropower projects are financed by how lending has characterized bilateral lending for quitenational governments that have enough capital to build some time. Yet, the significance of knowledge-based loanstheir own dams as well as play a role in regional and over- to development finance often goes underestimated. In theseas markets. The world’s largest dam builder, Chinese hydropower sector, one country especially stands out forstate company Sinohydro, is responsible for 65% of all its unique history of financial, technical, and policy sup-domestic hydropower projects in China, and is also the port:’s largest overseas dam builder, responsible for 132hydropower projects across the world.1 Brazilian and In- Dating from the country’s period of late industrializationdian companies are also emerging as leading dam builders at the turn of the 20th century, hydroelectric power hasand financiers, playing a strong role in the construction of been one of Norway’s key assets. Today, approximatelydams in regional markets. 95% of Norway’s mainland electricity is produced from hydropower, and the relatively inexpensive electricity hasAs a result, the hydropower sector’s traditional lend- powered the growth of a large energy-intensive industryers – multilateral financial institutions such as the World that consumes approximately 54 tWh of electricity perBank, the International Finance Corporation (IFC), and year4. Norway’s population of 4,952,000 enjoys relativelythe Asian Development Bank (ADB) – have increasingly universal access to electricity, and consumes approxi-turned to another area of development finance: technical mately two thirds of the electricity the industry does.expertise, know-how, and other forms of knowledge-based The country’s services sector consumes approximately 20support. These types of support are often disbursed as tWh a year. Photo: FIVAS/Calias6
  7. 7. Norway’s experience in developing its own hydropower This report surveys Norway’s diverse forms of supportsector has taught the country many lessons that have been for the global hydropower sector, and examines someapplied abroad through financial, technical, and policy sup- of the surrounding controversies. In section one, weport with the public and private sector. Strong concession discuss why large dams are far from the golden bulletlaws and large state and public ownership in Norway have for sustainable development that their proponentsresulted in strong cooperation between the state and make them out to be, and remind the reader thatindustrial operators. After the Second World War, the free-flowing rivers play significant functions instate took a more active role in supplying elec- sustaining ecosystems and a healthy climate.tricity for energy-intensive industries, and from In section two, we briefly examine the general1945 to 2000 the proportion of installed capacity significance of industrial versus residentialowned by the state grew from 12 % to 56 %5. electricity demand as a rationale for hydro-Norway’s multitude of small rivers has allowed power sector support. In section three, wemany small municipalities to produce electri- discuss the diverse forms of Norwegiancal power, and high rates of access to electricity support for the global hydropower industry.have historically been achieved. Meanwhile, the These include: bilateral development coop-government has leveraged private concessions in eration (I); the participation of Norwegianorder to guarantee delivery of electricity at the state-owned companies in the hydropowerstate and municipal levels. market (II); equity and securities invest- ments of the Norwegian GovernmentYet, these lessons have not prevented Norwegian Pension Fund (III); Norway’s foundationalinvestors from becoming embroiled in con- role in the Energy+ Initiative, created introversial projects. The Norwegian public and 2011 (IV); and support for multilateralprivate sectors have supported corrupt gov- policy dialogues (V). In section four,ernments and highly damaging projects, from we briefly outline Norway’s current andEthiopia to Brazil. Norwegian contractors with potential support for emerging renew-support from the Norwegian government have able energy markets, and in section five,been involved in controversial dams such as in we present our conclusions and recom-Sarawak, Malaysia, the Bio-Bio Dam in Chile, mendations for Norway to improve theand the Bujagali Dam in Uganda. Norwegian social and environmental performance ofstate institutions have been active participants the hydropower sector, and to promote ain projects that impact areas of high biodiversity, greater transition to cleaner, less controver-such as the planned Xayaburi Dam and the Nam sial forms of support.Theun hydropower station in the Mekong basin. 7
  8. 8. 1 The Importance of Watersheds and the Impact of Dams on Freshwater SystemsClimate change presents multiple challenges to coun- someone else. Anything dumped on the ground in thetries’ diverse economies. While it is imperative to watershed can end up in its rivers, lakes or wetlands. Andchange the make-up of global infrastructure in order to anything released to the air can come down again, nearbyreduce greenhouse gas emissions, trading fossil fuels for or thousands of miles away. A watershed’s water may belarge hydropower may continue to do harm. Healthy made undrinkable by activities many kilometers away. Towatersheds and freshwater rivers play significant system understand the water quality of a stream, one must lookfunctions to sustaining life on Earth and the global at the entire area it drains.climate, and dams’ broad social and environmentalimpacts may outweigh perceived benefits. We are all connected through watersheds. Watersheds do not respect political boundaries, and in fact can encom- pass several cultural, national and economic boundaries.The Importance of Watersheds What happens in one country’s part of the watershed willLand and water are ecologically linked in a natural impact water quality, quantity, or people who depend onsystem called a catchment, drainage basin, or watershed. it in the countries downstream.From the smallest droplet to the mightiest river, waterworks to shape the land, taking with it sediment and dis-solved materials that drain to watercourses and, in most Rivers and Biodiversitycases, eventually to the sea. So, too, is the river a product River systems are the zone of Earth’s highest biologicalof the land it inhabits – the type of rock and soil, the diversity – and also of our most intense human activity.shape of the land, the amount of rainfall and type of Freshwater biodiversity is in a state of crisis, a conse-vegetation are some of the factors that determine the quence of decades of humans exploiting rivers with largeriver’s shape, size and flow. dams, water diversions and pollution.6 Freshwater spe- cies are even more endangered than those on land.We all belong to a watershed. A watershead is literallyan area of land that catches all the rain and directs it to Large dams harm biological diversity by flooding land,a stream, river or lake. A watershed also includes all the fragmenting habitat, isolating species, interrupting thehumans, plants and animals that live in it, and all the exchange of nutrients between ecosystems, and cuttingthings we have added to it such as buildings and roads. off migration routes. They reduce water and sedimentEverything we do affects our watershed – from washing flows to downstream habitat, and change the nature ofclothes and growing food to mining, commercial farm- a river’s estuary, where many of the world’s fish speciesing, and building roads or dams. The reverse is also true: spawn. The impacts from dams increase the vulnerabil-our watershed affects everything we do, by determining ity of entire ecosystems to other threats, such as climatewhat kinds of plants we can grow, the number and kinds change.of animals that live there, and how many people andlivestock can be sustainably supported by the land. The irretrievable loss of the Yangtze River baiji dolphin to the Three Gorges Dam or the extinction of a third ofOne important truth about watersheds is that we all all wild salmon runs on dammed rivers throughout thelive downstream from someone, and upstream from US West are just the most charismatic examples of how8
  9. 9. The Mekong River near the Xayaburi Dam site. Photo: International Rivers, Kirk Herbertsonhumans are shredding the safety net that supports our material in rich peat soils, which store carbon absorbedown existence and viability. through associated biomass. When dams significantly modify or altogether interrupt rivers’ natural inundationBiological richness and diversity nourish us, keep our cycles, rivers are no longer able to deposit organic mate-water clean, produce breathable air and fertile soil, and rial, reducing the ability of soils and biomass to captureultimately give our planet the capacity to re-generate. By carbon.harming river basins, we undermine the ability of life tocreate the conditions conducive to life. Dams may also emit greenhouse gases. As biological materials decompose in water they release carbon diox- ide and methane. Cold and oxygen poor water, frequentRivers and Climate Change in reservoirs increase the production of methane gasRivers are central to the deposition of soil that drives when biological materials decompose. In the tropics,natural systems of carbon sequestration. Floodplain dam reservoirs and spillways are a globally significantinundation cycles lead to the accumulation of organic source of one of the most potent gases, methane. Even 9
  10. 10. outside of the tropics, some dams can be significant sources and other natural resources in the dammedsources of methane. area. Millions have suffered from diseases exacerbated by dams and large irrigation projects in the tropics.What’s more, due to climate change, river flows have Those living downstream of dams have suffered frombecome increasingly unpredictable. Large dams have al- the hydrological changes dams bring to rivers and eco-ways been based on the assumption that future stream- systems.flow patterns will mirror those of the past, but this is nolonger true. Climate change has begun to significantlyand unpredictably change precipitation patterns. Onthe one hand, more frequent droughts will make manyhydropower projects uneconomic, while on the other,more extreme rainfall will increase siltation of dams(reducing their useful lifetimes) and increase the risk ofdam failures and catastrophic flood releases.The Social Impacts of Large DamsBy the end of the 20th century, the dam industry hadbuilt some 50,000 dams on more than half of the earth’smajor rivers. The social consequences have been devastat-ing. The world’s large dams have flooded huge amountsof productive wetlands, forests, farmlands, and fisher-ies, making it harder for people downstream to adapt toclimate change.Large dams have displaced some 40-80 million peoplefrom their lands in the past six decades, according to theWorld Commission on Dams. Indigenous, tribal, andpeasant communities have particularly felt the impacts.The lives of these displaced populations, n the major-ity of cases, have worsened economically, culturally andpsychologically.Those displaced by reservoirs are only the most visiblevictims of large dams. Millions more have lost land andhomes to the canals, irrigation schemes, roads, powerlines and industrial developments that accompanydams. Many more have lost access to clean water, food10
  11. 11. 1I Hydropower and Energy AccessMeanwhile, few large hydropower dams are built to meet year.10 Other industrial sectors also consume electricity.residential demand exclusively. Instead, demand from As a result, industrial users’ electricity load far outweighsindustrial users, who consume far more electricity and that of Norway’s residential sector.are usually willing to pay higher electricity tariffs, usuallyprovides the financial rationale. In general, the world’s electricity consumption fol- lows a similar pattern, and this economic fact lies atNorway’s electric grid developed in such a fashion. The the heart of Norway’s financial and political supportguaranteed demand of energy-intensive users provided for large hydropower abroad. Through its support forthe economic rationale for dam building, and residen- hydropower, Norway takes a position that countries cantial electricity demand was attended to secondarily. In and should develop through growth in extractive com-general, these industrial users tend to be energy-intensive modities, such as mineral smelters. Of all mineral com-modities, finished aluminum has the highest electricity By way of illustration, in Table 1, we present the relativeload: 15,000-18,000 kWh per metric ton (see box). energy intensities of the mineral commodities that most commonly consume hydropower. To produce one ton of any given mineral commodity usually requires a sepa- Norway’s Electric Grid rate load of electricity at each stage along the transfor- mation process. For example, the extraction of bauxite, As of 2010, Norway’s electric grid was constituted of the raw material of aluminum, requires 13 kWh/ton. 94.7% hydropower.7 The country consumes an average of 124 twh yearly8. Energy intensive industry consumes To transform bauxite into alumina, a sub-material of slightly over 50 TWh while residential use consume aluminum, requires 300 kWh/ton. Finally, to transform approximately 35 TWh and services around 25 TWh9. alumina into its final product, aluminum, requires Among its residential users, Norway’s population of around 14,800 kWh/ton. Aluminum is a particularly 4,952,000 enjoys a high rate of energy access at 99%. energy-intensive product; electricity represents 76% of Norway’s average household electricity demand is the the energy required to produce one ton. largest in the world, at 23,550 kWh per year. 60% of this electricity load goes to heating. Similarly, the production of one ton of steel also re- quires high amounts of electricity. Steel is produced in four stages: iron extraction (17 kWh/ton), ironIn particular, the aluminum sector consumes Norway’s sintering (30 kWh/ton), iron pelletization (41 kWh/highest quantities of electricity. In Norway, there are ton), and steel production (1700 kWh/ton). To produceseven smelters responsible for the large share of the iron alloys – a combination of iron with other metals –country’s aluminum production: Årdal, Høyanger, requires 7000 kWh/ton. The production of one ton ofHusnes, Karmøy, Lista, Mosjøen, and Sunndal. They steel has an energy intensity of 81%.are owned by Hydro Aluminum (43% owned by theNorwegian state), Sor-Norge Aluminum (Søral), AlcoaLista, and Alcoa Mosjøen. Together, Norway’s aluminumsmelters produce 800,000 metric tons of aluminum per 11
  12. 12. Commodity Electricity load Electricity Country Average household per ton as % of electricity load per year total energy required Norway 23,550 kWh Canada 15,471 kWh Aluminum 14,800 kWh 76% United States 12,914 kWh Ferro-Nickel 13,000 kWh N/A Japan 7,819 kWh Ferro-Silicon 13,000 kWh N/A France 7,468 kWh Silicon 12,000 kWh 67% Germany 6,779 kWh FerroAlloys 7200 kWh 48% United Kingdom 5,692 kWh Tin 5200 kWh 86% South Africa 4,532 kWh Zinc 3800 kWh N/A China 2,631 kWh Steel 1700 kWh 81% Brazil 2,206 kWh Copper ore extraction 1700 kWh 45% Cameroon 271 kWh Alumina 300 kWh 18% Democratic Republic of Congo 104 kWh Iron pellet 41 kWh 13% Ethiopia 46 kWh Iron sinter 30 kWh 6% Iron ore extraction 17 kWh N/A Table 2. Average Household Electricity Consumption per Country12 Bauxite ore extraction 13 kWh N/A Table 1. Comparative Mineral Electricity Consumption per Ton11The electricity demand of these energy-intensive min-eral sectors far outweighs most countries’ residentialdemand. In Table 2, we present a list comparing someof the world’s yearly residential electricity loads. Ofall countries, Norway has the highest average yearlyhousehold rate of electricity consumption at 23,550kWh per year, or roughly the amount of electricityneeded to produce one and a half tons of aluminum,4.5 tons of tin, or 14 tons of steel. In contrast, the aver-age household in the Democratic Republic of Congoconsumes only 104 kWh per year, or enough electricityto produce 0.007 tons of aluminum, 0.02 tons of tin, or0.06 tons of steel. Certainly, cases such as these highlightthe importance the mineral commodities sector plays toa country’s growing energy demand, and the potentialfor meeting residential demand by using alternativeoptions.12
  13. 13. Hydroelectric turbine. Photo: Florean FortescueCalculating Energy Demand: Industrial Versus Residential UsersTo calculate the quantity of hydroelectricity consumed by shaped by a number of factors. Socioeconomic factorsindustries versus homes for a specific dam, it is necessary to such as the number of homes with access to electricity, andcalculate the capacity factor of the dam, and the load factor the economic ability to purchase electro-domestic itemsof industrial versus residential consumers. A dam’s capac- such as televisions, washing machines, air conditioners, andity factor is the ratio between its average performance (av- music players, shape who consumes electricity. Geographi-erage generating capacity) and its rated capacity (installed cal factors such as urban-rural distributions of population,capacity, or potential generating capacity). Consumers’ load and climatic conditions that necessitate the use of air con-factor, meanwhile, is the ratio between average electricity ditioners or heaters, shape where electricity consumptionconsumption, or average load, and the peak consumption, or is highest. Temporal factors, such as time of use, shapepeak load, of a given sector. when electricity is being consumed. Residential electric- ity consumption is usually lower at night, while industrialIn general, the industrial sector always has a much higher aver- consumption often continues unabated during 24 hours.age load than the residential sector. This is because industries Finally, qualitative factors, such as what types of machineshave electro-intensive machines that require fixed amounts consume electricity, shape electricity consumption. Electro-of energy, generally include various refinery processes that intensive machines used by industry generally need manyeach add incremental electricity costs, are generally always times more energy than the electro-domestic machinesoperating at peak capacity, and can remain powered on 24 used by the residential sector. Due to a number of factors,hours a day, 7 days a week, 365 days out of the year. residential electricity load is always generally lower than industrial electricity load.In comparison, the amount of residential consumptionof electricity is much lower. Residential electricity load is 13
  14. 14. 1I1 Norway’s Global Role in Hydropower DevelopmentNorway’s support for global hydropower development the regulating authority for Norwegian hydropower. NVE iscomes in diverse forms, ranging from the more obvious, involved in several projects in developing countries.such as direct project finance, to the less obvious, such ashosting multilateral policy dialogues. Among the most Statkraft is a state-owned company and the largestsignificant we will present here are: bilateral sectoral producer of hydropower in Norway. Statkraft is also ac-support; corporate involvement; government pension tive in other energy sectors and has installations outsidefund investments; the Energy+ Initiative; and multilateral Norway in Europe and elsewhere.policy dialogues. Controversy, however, has not escapedNorwegian players, as we will see below. Statnett is a state-owned company responsible for transmission lines in Norway. Statnett is building trans- mission lines as acting agency for Norad.Who’s who?Norway’s international support for hydropower is mainly Norfund, The Norwegian Investment Fund for De-channeled through a handful of players. Mostly these agents veloping Countries, is a state-owned company with aare state institutions, but have different strategies and differ- mandate to invest in developing countries. They have aent relationships to the public sector. Most companies and focus on renewable energy and agriculture. Norfund isinstitutions will be presented within the following subchap- organized under the MFA.ters. However, we give a short summary introduction here. The Norwegian institute for Export credits,The Ministry of Foreign Affairs (MFA) is signifi- GIEK, is a Norwegian state-owned credit agency organ-cant on the international scene when it comes to hydro- ized under the Ministry of Trade and Industry.power. The Ministry and Embassies in recipient countrieshandle a significant part of Norwegian aid. Norad is also SN Power is a hydropower company owned by Nor-organized under the MFA. fund and Statkraft with a mandate to develop hydropower in developing countries. Agua Imara is a subsidiary of SNThe Norwegian Agency for Development Power with equity from other regional Norwegian hydro-Co-operation (Norad) is Norway’s directorate for power companies.development cooperation under the Ministry of ForeignAffairs. Norad handles significant parts of the bilateral aid TrønderEnergi is a regional Norwegian hydropowerand has different technical departments such as climate company owned by a group of municipalities (“kom-and energy, and economic development and governance. mune”). TrønderEnergi is one of the owners of Agua Imara and has recently expanded activities to Uganda.The Ministry of Petroleum and Energy is the ministry responsible for Norwegian hydropower and the Veidekke is one of Norway’s major entrepreneurialowner of Statkraft and Statnett. companies. Veidekke has been involved as a contractor in hydropower projects internationally.13NVE, The Norwegian Water Resources andEnergy Directorate, is a government directorate under As Norway is a country with a large array of different wa-the Norwegian Ministry of Petroleum and Energy. NVE is terways and watersheds, and has a long history of hydro-14
  15. 15. Statkraft’s Cakit Hydropower Plant, Turkey. Photo: Statkraftpower, it is unsurprising that the country’s know-how in also located in Trondheim, Norway. As petroleum was inhydrology and hydropower is strong. In this web of actors the last decade, hydropower is now a burgeoning industry.there is significant technical expertise, both for predicting Migration between the companies and the state, and inenergy production and assessing impacts on nature such between institutions, is also commonplace, while infor-as erosion and landslides. There is also a strong academic mal connections and shared knowledge are a central partmilieu around Norway’s technical university and other of the system. However, Norway’s technical expertise isinstitutions of higher education. The International Centre geographically and culturally situated, making the trans-for Hydropower, a research and training organization, is fer of knowledge to new contexts problematic. 15
  16. 16. Bilateral Sectoral SupportEnergy is one of the main interests of Norwegian bilateraldevelopment cooperation. The financial amounts in thisfield are not the most impressive, amounting to only ap-proximately US$ 116 million in annual bilateral and multi-lateral transfers (see box). However, the role of the ForeignMinistry and its mission as a facilitator and door openerfor other business interests should not be underestimated.Norway’s commitment to energy development cooperationis based upon a self-perception of a country with uniqueexperiences in developing and regulating hydroelectricproduction, and a strong domestic hydropower industry. Kangate, Ethiopia. The Nyangatom tribe letting theirNorwegian embassies and Norwegian regulatory institu- herd down to water at the Omo river.tions are important in channelling bilateral aid for energy. Photo: Carsten BrinkThe specialized regulatory directorates and sectoral minis-tries are often a party to implementation of programmes. is a broad scope of support for the power sector, such asThe embassies and Norad have a supervisory role. Their sectoral support for state regulatory bodies, market liber-perception of the societal effects of development in the en- alization through restructuring of state organisations andergy sector and implications for human rights are therefore construction of regional power pools, constructing trans-decisive. As technical aid has increased over the last decade, mission lines, and conducting feasibility studies. Thesethe staff at Norad and embassies have decreased. are all activities that are an integral part of expansion in energy production. As a result, these activities cannot be seen as disengaged from other developments in a country’sNorway’s Regulatory Regime hydropower sector. Yet, Norway’s shared responsibility forNorway has a thoroughly-built regulatory regime for hy- the cumulative social and environmental impacts of thedropower. With some 95 % of Norway’s electricity coming energy sector does not seem to be on the agenda of thefrom hydropower, Norwegian institutional know-how is Ministry of Foreign Affairs.significant. Nonetheless, development of Norwegian hydro-power has not been without controversy, and this com-plexity is seldom reflected in the narrative informing the Programs, Policies, and Knowledge SharingNorwegian international effort. Norwegian assistance to From a lender’s perspective, programmatic and policythe hydropower and energy sectors is mostly on a technical loans are beneficial, as hydropower project financiers of-level, which sidelines political controversies and dubious ten ignore or misread the varying degrees of regulatorysocietal effects as externalities. capacity in developing countries, especially in greenfield projects. International standards are intended to abateNorway’s development assistance follows strong technical this, but without external oversight mechanisms their ef-regulations like the IFC Performance Standards, and mostly ficiency can only be partial.avoids larger controversial hydropower projects. There16
  17. 17. NVE around the world.What’s more, entrenched political and social conflicts can NVE’s development assistance almost always focuses onseem unintelligible to a lender operating from within a energy and water, which “are fundamental factors in theconsolidated democracy. Meanwhile, dams and their as- struggle to combat poverty, improve health conditions, andsociated infrastructure are potentially huge interventions in increase prosperity in the developing world.”14the political, economic, cultural, social, and environmentalactivity of a country, and when national governments lack NVE carries out development projects in several countrieslegitimacy, or when planning is skewed to gain regional (See map), some examples are:15or other favors, dam-building can unexpectedly become acenterpiece for corruption, graft, and Machiavellian poli- Bhutan: NVE is developing pre-feasibility and feasibilitytics, rather than a golden bullet to achieve the triple bottom studies for hydropower projects on Bhutan’s glacier-fedline of sustainable development. rivers, as part of a cooperation programme funded by Norad. NVE’s studies have facilitated discussions betweenThe Norwegian Water Resources and Energy Directorate, SN Power and the Bhutanese government for developmentNVE, is responsible for management of Norway’s water of potential dam sites.16resources, energy markets and systems, and energy efficien-cy. It is the country’s premier institution of hydrological Ethiopia: NVE supported Ethiopia’s Ministry of Waterexpertise, and has begun to play a greater role in national and Energy and the Ethiopian Electric Power Corporationflood contingency planning, maintaining national power (EEPCO) in developing feasibility studies for the Mandayasupplies, and preventing damage caused by landslides. & Beko-Abo Multipurpose Dams.Abroad, the NVE is an active player in development as- Liberia: NVE has cooperated with the Ministry of Lands,sistance, and often participates in overseas projects through Mines and Energy towards strengthening Liberia’s waterthe Norwegian Ministry of Foreign Affairs and Norad. resources and power sectors 17
  18. 18. Norwegian Involvement in Uganda GIEK, has considered granting credit insurance to the mega-dam18. A far smaller project, the Bugoye powerand Ethiopia station built by TrønderEnergi is supported with equity from Norfund and direct fiscal support as aid through theNorway has had a significant impact in the energy sectors of Ministry of Foreign Affairs. TrønderEnergi sees BugoyeUganda and Ethiopia, two countries that serve as examples as a start for a broader expansion in Uganda and wants toof sectoral energy development assistance to controversial expand to as many as ten new hydropower sites.borrowers for controversial projects. Following is a briefpresentation of Norway’s involvement in Uganda, while Modernization of the electricity agencies in Uganda hasNorwegian involvement in Ethiopia is described below. made possible a concession of energy distribution to the privately-owned Umeme Ltd. A common energy marketIn Uganda, Norway has been instrumental in the reor- between Kenya, Ethiopia and possibly South Sudan is onganisation of the electricity sector. Norway has provided the drawing board, called the Eastern African Power Pool.19technical support for government agencies and contrib- Meanwhile, Uganda has constructed the highly controver-uted in the rewriting of Ugandan law to facilitate the sial Bujagali Dam on the White Nile, which received therestructuring of the sector. Uganda’s formerly monolithic support of the AfDB and the World Bank. The Governmentenergy utility is now split up into three bodies responsible of Uganda is also planning to build the Karuma Dam on afor production, transmission and distribution. Norway is previously untouched part of the Nile, situated inside onealso considering support for expansion of transmission of Uganda’s major national parks. Whilst Norwegian con-lines in Uganda – building a triangle covering the north tractors previously have been interested in the Karuma pro-and the Albert Lake area and a connection to Kenya are ject, it now seems too controversial for any OECD countryboth on the table. Simultaneously, Norwegian power com- to support. The Karuma Falls are situated in the middle ofpanies such as TrønderEnergi and Jakobsen Elektro are Murchison Falls National Park, the largest national park inoperating in Uganda, and Norwegian contractors such as Uganda. As a result, any construction would greatly inter-Veidekke have been bidding for large projects such as the fere with protected wildlife. However, it is not improbableBujagali dam. The Norwegian Institute for Export Credits, that Uganda would find other supporters for the project. Norwegian Development Assistance for Clean Energy: • In comparison, state-owned Norfund increased its equity Funds declared by Norad in Norwegian dam builder SN Power by US$ 171 million in fiscal year 2011, an investment matched by Statkraft, bringing • Of a total of 700 million NOK (US$ 116.7 million), 1/7th total equity to US$ 1.6 billion. goes to multilateral institutions, and the remaining US$ 100 million is passed through bilaterally (excluding Norfund). • Within Norwegian development cooperation for clean en- ergy, there are seven core countries and 28 non-core coun- • Only 5%, or US$ 5.8 million, goes to hydropower. The big- tries. Tanzania, Mozambique, Liberia, Uganda, Nepal, Ethiopia gest thematic areas are electrical transmission, power gen- and Timor L’este are the seven core countries, ranging in sup- eration (non-hydropower) and energy policy. port from over 100 million NOK to under 10 million NOK.1718
  19. 19. The Controversial State ofHydropower in EthiopiaEthiopia has a hydropower sector marked by persistent has been designated a UNESCO World Heritage Site, andintimidation, repression and human rights violations. 200,000 indigenous people rely on the water distributedThe country already has several existing hydropower by the Omo River to grow crops and to maintain grazingdams, and a garrison of new projects are planned. Faced areas for their cattle. The downstream impacts of the damwith criticism of environmental destruction and social will impact the ecological health and biodiversity of Lakeconsequences, the Ethiopian government regularly re- Turkana in Kenya, which another 300,000 people dependverts to post-colonial arguments about white Europeans on as their primary water source. Ethiopian developer EE-standing in the way of African development. Yet, a 2010 PCO has developed no cumulative impact assessment onreport from Human Rights Watch, “What Will Happen If the dam and its associated sugar plantation infrastructure.Hunger Comes?”20 documented how Ethiopian govern-ment security forces have used violence and intimida- Human Rights Watch conducted a research trip to thetion to force communities to relocate away from their Lower Omo Valley in 2011 and interviewed members oftraditional lands in the Lower Omo Valley, in disregard of affected communities about their displacement as a con-donor policies. sequence of the Gibe III Dam, and the associated develop- ment of an industrial sugar cane plantation and processingThe Gibe III and Grand plant that will be irrigated and powered by the dam. InRenaissance Dams the interviews, the communities testified that they were forcibly relocated without any consultation or compensa-The Gibe III Dam, currently under construction, is a clear tion, and that the area to which they were being relocatedcase in point. The Lower Omo Valley in southern Ethiopia was not adequate to maintain their current livelihoods. Construction of the Gibe 3 dam. Photo: FIVAS, Jarand Ullestad 19
  20. 20. Human Rights Watch found that the communities had no a planned capacity of 5250 MW, is projected for the Blueaccess to information, were never consulted, and had held Nile River close to the border of what today is South Su-no discussions with the developer. They had been beaten dan. Despite its inevitable consequences for downstreamfor asking questions or expressing dissent, and they had countries due to its location on the Blue Nile, the damreceived no compensation for the land taken. This pattern was not presented in the regional Nile Basin Initiativeof forced resettlement has been noted in other parts of (NBI), a partnership among the riparian countries onEthiopia. the Nile intended to increase cooperation over devel- opment of the river. The initiative is supported by 17With a potential capacity of 1870 MW, the Gibe III Dam donors, among them Norway and the other Scandinavianwould be four times larger than any existing hydro- countries.power plant in Ethiopia. EEPCO’s main contractor,Italian company Salini, started construction of the dam When plans for the Grand Renaissance Dam were an-in 2006, though it was awarded the contract for Gibe nounced in March 2011, it came as a surprise to donors,III without tender. Salini has constructed several other since the dam would flood the site of the planned Man-dams in Ethiopia, and will probably also be the builder daya Dam, the feasibility studies of which had alreadyof the gigantic Grand Renaissance Dam, currently been supported by Norway’s NVE. The NBI donors wereplanned. Construction of Gibe III has seen flagrant baffled over the unilateral move by Ethiopia, but did notviolation of domestic laws, and will affect the livelihoods make any statements on this in their annual meeting inof eight tribes whose rights to land are recognized by Spring 2011. Staff at the Norwegian Ministry of ForeignILO Convention 169. Still, meaningful consultations Affairs (MFA) commented that Ethiopia’s heavy-handedbetween EEPCO and the affected tribes did not take attitude was no surprise; Ethiopia has never notified theplace. Environmental and social impact studies were NBI of any of its intentions.only conducted after construction had started. The pro-ject, according to the Ethiopian government, is mainlyfinanced by Ethiopian institutions. Yet, the European Norwegian Institutional Co-Union financed pre-construction studies of the dam, operation with Ethiopiaand the World Bank and the African Development Bankare funding a transmission line that extends from Gibe Norway supports Ethiopian institutions in many ways.III to the Ethiopian electrical grid. Both the World Bank As well as supporting the Nile Basin Initiative, Norwayand African Development Bank previously declined to has an institutional cooperation with Ethiopia’s Minis-directly finance the Gibe III Dam, due to its projected try of Water and Energy. Norway is also supporting thehigh impacts. Ethiopian-based initiative for a regional energy market, the Eastern African Power Pool (of which Gibe III DamThe Grand Ethiopian Renaissance Dam, also known as is a central piece), as well as Ethiopian energy projectsthe Millennium Dam, is a project that exemplifies Ethio- through multilateral fund EnDev. Ethiopia also receivespia’s politically-driven mania for gigantic hydropower support from Norway under the Energy+ Initiative (seedams in violation of human rights and social and envi- subsequent section). Norway has pledged 500 millionronmental standards. The Grand Renaissance Dam, with NOK (US$ 83 million) to Ethiopia through the initiative20
  21. 21. over a five-year period. In 2012, Norway entered into a Bright futures, ideal intentionsnew cooperation with Ethiopia to strengthen Norwegianinvolvement, which, it is hoped, will leverage dialogue on and broken promiseshuman rights. The Norwegian Minister of InternationalDevelopment traveled to Ethiopia to sign the new agree- When Norway entered into its ongoing cooperation withment, but made no progress towards solving the crisis in Ethiopia in 2009, the Norwegian Ministry of ForeignNorway’s institutional cooperation. Affairs’ assessment of the Nile Basin Initiative was that the countries were “well on their way towards signingNorway’s institutional cooperation with Ethiopia’s Minis- a cooperation agreement that can eventually pave thetry of Water and Energy is managed by NVE. The coop- way to a Nile Commission.” Nonetheless, one year later,eration agreement, signed in 2009 for 135 million NOK, five riparian countries created a framework agreementconsists of Norwegian support for feasibility studies, excluding the downstream countries Egypt and Sudan.developing the EIAs of two hydropower dams on the Nile Commenting on this, Norwegian officials stated “our(Mandaya and Beko-Abo, mentioned above), and capaci- reading is that Egypt and Ethiopia cooperate closely andty-building for the Ministry of Energy. A mid-term review constructively at the technical level regarding develop-of NVE’s performance concludes that the cooperation has ment of investment projects on the Blue Nile.”22 Theshown few results21. statement shows a clear belief in the work of the Nile Basin Initiative, yet is starkly contrasted by Ethiopia’sThere has been very little progress in capacity building unilateral decision less than a year later to announce thteover the first two years within the Ethiopian Ministry. Grand Renaissance Dam. The two Norwegian-supportedStill the feasibility studies and environmental and social dams have been treated idealistically in the NBI; nowimpact assessments undertaken for the 2000 MW Man- that these projects are “flat-lined” it is due time to askdaya dam and 2100 MW Beko-Abo dam probably rep- whether dialogue is improving conditions in the Ethio-resent the biggest setbacks of the cooperation. As men- pian hydropower sector.tioned above it has been an aim for the Norwegian MFAto make the Mandaya project and the Beko-Abo project Despite the obvious problems caused by the Ethiopianbankable. It was therefore a blow to the Norwegian coop- government, Norway seems intent to stay on path due toeration when it was made clear that the proposed Grand their interest in introducing Norwegian hydropower op-Renaissance Dam would submerge the construction site erators in Ethiopia. Norway used a 2011 IHA conferenceof the Mandaya Dam. NVE was informed of this prior to in Addis Ababa to promote Norwegian “best practices” asthe publication of these plans in March 2011*, however illustrated by the Nordic Power Pool and SN Power’s ex-the roughshod treatment of Norwegian efforts are a testi- perience with hydropower. Significantly, however, none ofmony to the Ethiopian Government’s superficial interest SN Power’s existing projects are close to the size of damsin Norwegian participation. Following the announce- planned in Ethiopia. Meanwhile, SN Power has stated thatment of the Grand Renaissance Dam, NVE’s studies were they do not intend to divert their focus from Southernput on hold until further notice. Africa for the time being. NOTE: An earlier version of this report stated erroneously that NVE did not have information of this prior to the March publication.* 21
  22. 22. Corporate InvolvementThough Norwegian actors have a smaller share in overseas whose portfolio includes three hydropower projects,dam building compared to China’s Sinohydro, or Bra- including the Cetin Project with a planned capacity ofzil’s ­­­ Odebrecht, there are several Norwegian state-owned 517 MW.companies active in overseas hydropower. The two mainprotagonists are the investment fund Norfund and the Theun-Hinboun hydropower plantgovernment hydropower company Statkraft. SN Power, a In Laos, Statkraft has been a part-owner and operator ofsubsidiary of Norfund and Statkraft, is also a major opera- the Theun-Hinboun Hydropower Project since it was builttor. In recent years, regional hydropower companies such in the mid-1990s. The Theun-Hinboun project has hadas Trønderkraft have engaged in overseas dam building as serious impacts on the lives and livelihoods of approxi-well. The Norwegian state export credit agency, GIEK, is mately 30,000 people living downstream and upstream ofalso involved in lending to hydropower. Norwegian contrac- the dam who have lost fish, rice fields, vegetable gardenstors such as Veidekke and Kværner Energy have also been and drinking water as a result of the project. Yet instead ofinvolved in international hydropower. Veidekke downscaled ensuring that all these impacts had been mitigated and ad-their international ambitions after controversies surround- dressed, Statkraft and its partners began construction oning dam projects in Uganda and Kværner Energy ceased the Theun-Hinboun Expansion Project (THXP) in 2008.existing as a Norwegian company after a merger and divi- The THXP, consisting of a new dam and reservoir, willson of Kværner in the first decade of 2000. Below is a short compound the problems of the initial project, displacingdescription of the three major contributors – Statkraft, over 4800 people from the reservoir and affecting anotherNorfund and SN Power – and some examples of controver- 48,000 people living downstream, many of whom willsial projects in which they have participated.23 have to move as a result of project-induced flooding. The project has been criticized for breaching the IFCStatkraft Performance Standards on several counts, and henceStatkraft is a major European power company and a the Equator Principles, to which several of the project’sleader in renewable energy. Statkraft is active in wind, gas financiers adhere. For example, Statkraft refers to many ofand bio-thermal as well as its main activity, hydropower. the affected people as “relocated” rather than as “reset-Statkraft has an annual production of 51 tWh, and has tled,” and has refrained from giving them the full rightspower production in four European countries beside Nor- due to resettled people.24 The company is “relocating”way. Statkraft also operates power plants in Turkey and thousands of people downstream without releasing clearLaos. Through Statkraft’s equity in SN Power, it owns over plans regarding how many people will be moved, where20 hydropower plants overseas. In 2011, Statkraft invested they will be moved to and how they will be expected toUS$ 160 million in hydropower internationally. Statkraft cultivate rice in the future. Many of the affected villag-utilizes the IFC Performance Standards to manage their ers have expressed concern for their future. Some haveinternational operations, but this has not prevented the been unable to complete their new houses. Compoundingcompany from facing controversy. these problems is the fact that experimental livelihood options in which people are encouraged to invest moneyTurkey is a focus area of Statkraft’s international growth. and time, such as fish ponds, have been widely reportedStatkraft has bought the Turkish company Yesil Enerji, to be unsustainable or inappropriate over the long term.22
  23. 23. Theun Hinboun Dam in Laos. Photo: FIVASUltimately, the THXP has left thousands of people to cope erated by the Nam Sim Power Company Limited, throughwith greater livelihood insecurities and uncertainty about the Nordic Environment Finance Corporation (NEFCO).how to ever regain self-sufficiency. Norfund is also holding equity in or lending to several funds directed towards renewable energy and infrastruc- ture; two of these are the infrastructure investment fundNorfund CIFI and the clean energy entrepreneur fund E+CO.The Norwegian Investment Fund for Developing Coun-tries, Norfund, invested a total of US$ 366 million in Controversies2011.25 One of Norfund’s main investment areas is renew- Norfund adheres to the IFC Performance Standards andable energy. Norfund has also invested in and has pro- is primarily engaged in small hydropower. Yet, there hasvided loans for financial institutions with a development still been controversy around their investments, andmandate. Funds that lend to small and medium-sized they have been criticized for an unclear commitment toenterprises received US$ 28.6 million in investments from indigenous peoples’ rights. In spite of previous cautionsNorfund in 2011. Norfund’s major stake in hydropower from civil society and the violent history of hydropoweris its 40% ownership in SN Power. Norfund invested US$ in Guatemala, Norfund has invested in Hidro Santa Cruz171 million in new equity in the company in 2011, bring- in Barillas in Guatemala. The Santa Cruz hydropowering its total share in the company to US$ 656.6 million. project is planned according to the IFC PerformanceNorfund also owns energy subsidy Agua Imara together Standards and the developer has accordingly held consul-with SN Power and several others, and invested US$ 22.6 tations with the community and with indigenous groups.million in the company in 2011. Also in 2011, Norfund Yet, in spite of the consultations, there has been signifi-supported Guatemalan energy company Hidro Santa cant protest against the project during 2012. The parentCruz, Trønder Power’s Bugoye hydropower project in company has attempted to mediate the conflict, but theUganda, and three small-scale projects through Kenya’s severity increased when activists were assaulted and killedHydel Hydropower. Norfund is also channeling Norwe- by unknown perpetrators26. Following these incidents, agian aid to the Nam Sim hydropower project in Laos, op- military-enforced curfew was imposed in the area. 23
  24. 24. Hydropower Plants Operated by SN Power Panama: India: Bajo Frio – 58 MW commissioning 2014 (Agua Imara) Allain Duhangan 192 MW Malana hydropower plant, 109 MW Peru: Cheves hydropower plant – 168 MW, under construction. Sri Lanka: Arcata hydropower plant, 5 MW Assupiniella hydropower plant, 4 MW Cahua hydropower plant, 43 MW Belihuloya hydropower plant, 2 MW Gallito Ciego hydropower plant, 37 MW La Oroya hydropower plant, 9 MW Philippines: Malpasso hydropower plant, 54 MW Binga Power Plant – 100 MW, under upgrade to 120 MW. Pachachaca hydropower plant, 9 MW Ambuklao hydropower plant, 105 MW Pariac hydropower plant, 5 MW Magat hydropower and irrigation dam, 381 MW Yaupi hydropower plant, 108 MW Zambia: Chile: Lunsemfwa power station 18 MW La Confluencia hydropower project, 158 MW Mulungushi power station 28,5 MW La Higuera hydropower plant, 155 MW (Agua Imara owns 51 % of Lunsemfwa Hydropower Company, which operates the two plants) Nepal: Khimti I hydropower plant, 60 MWSN Power the Brazilian engineering company Engevix, has a port- folio of renewable energy assets of 162 MW in operation,SN Power is a commercially-driven state-owned company 176 MW under construction, as well as a large portfoliothat invests in hydropower in emerging markets. 60% of of projects under development of about 1,600 MW. TheSN Power is owned by Statkraft and 40% by Norfund. assets are mainly hydropower, but also include two windThe company has a total production capacity of 992 MW farms and a biomass plant under construction. The trans-and seeks to develop to 3000 MW by 2015. Like Norfund action also includes Desenvix’s 50 percent shareholdingand Statkraft, SN Power adheres to the IFC Performance in Enex, a company specializing in operation and mainte-Standards. SN Power and its subsidiary Agua Imara hold nance of small and medium sized hydroelectric plants.ownership in 20 overseas hydropower plants in eightcountries, and is currently constructing two plants, the In Zambia, SN Power ACA Holdings of Singapore hasBajo Frio in Panama and the Cheves in Peru. SN Power is been granted approval by Zambia to acquire 51 percentalso developing prospects in Brazil and Vietnam. equity in Lunsemfwa Hydropower Company. Wanda Gorge Investment, which owned 99 percent before theFormerly known as SN Power AfriCA, Agua Imara is a transaction, will retain a 49 percent stake.subsidiary of the SN Power Group. Agua Imara is ownedby SN Power, Norfund, and the regional hydropower SN Power withdraws after conflict in Chilecompanies BKK and TrønderEnergi. Agua Imara is estab- SN Power was under strong criticism for its plannedlishing in Zambia, Panama and Mozambique. investments in the 400 MW Maqueo Dam and three other dams in Southern Chile. The developers and the ChileanIn Vietnam, SN Power entered into an agreement with the state have been in conflict with Mapuche indigenousInternational Finance Corporation (IFC) to develop up to groups in the area. Mapuche groups maintain that the1GW of hydro power capacity over a ten-year period. project will violate their territory and communal rights, such as the right to water, and claim that the Chilean stateIn Brazil, SN Power also owns a 40.65 percent stake in does not respect their rights as protected by ILO Conven-Brazilian power company Desenvix, owned by the pen- tion 169. In 2011, after developing five years of projectsion fund of Brazilian public bank Caixa Econômica studies, SN Power sold its share of the dam to their Chil-Federal (Funcef). Desenvix, the power generation arm of ean partner Centinela.24
  25. 25. Government Pension Fund Investments27Norway supports global hydropower development by Many of the companies and institutions in which the Fundholding equity and securities in foreign companies and invests have been involved in controversial hydropowerfinancial institutions involved in the hydropower sector. projects. GDF Suez is the leading partner in the JirauHowever, many of these institutions have participated in Hydropower Plant on Brazil’s Madeira River, financedhighly controversial projects, including in Brazil, South- by Banco Nacional de Desenvolvimento Econômico eeast Asia, and elsewhere. Social, Banco do Brasil, and Banco Santander. In 2011, two separate labor strikes occurred after workers reportedThe Norwegian Government Pension Fund is an non-payment of wages and lack of medical attention. Theinvestment fund managed by Norges Bank Investment strikes resulted in the burning of plant equipment andManagement (NBIM) that regularly receives capital from trucks, delaying construction for a number of weeks, andNorway’s petroleum revenues. The Fund invests in global costing the consortium millions of dollars. Jirau Hydro-equity, securities, and real estate markets with a focus on power Plant has also led to increases in deforestation andlong-term growth and a tolerance for medium risk. The indirect impacts on nearby indigenous tribes.Fund exclusively invests abroad in order to protect pen-sions from fluctuations in oil prices that could destabilize Centrais Elétricas Brasileiras S.A. (Eletrobras) is thevalue, and to avoid domestic investments that might leading partner in the Belo Monte Dam, under construc-overheat the Norwegian economy. tion on Brazil’s Xingu River since 2011. The Belo Monte Dam is financed by Banco Nacional de DesenvolvimentoDespite its name, the Fund serves no function for pay- Econômico e Social, Brazilian pension funds, and others,ment of pensions to Norway’s aging population. Rather, and its developer consortium includes Vale, Light, Alstom,the Norwegian government utilizes the Fund as a savings Siemens, and Odebrecht, among others. The constructioninvestment account that could support future government sites have twice been occupied by hundreds of indigenouspension liabilities when they arise. people during 2012, as tribes demand a cancellation of the project on the grounds that indigenous people wereThe Fund invests heavily in the global hydropower sector. not properly consulted, and that the Norte Energia, S.A.As of 2012, the Fund’s largest equity holdings were in consortium has not implemented the requisite mitigationglobal dam builders and financiers in France, Germany, actions of the project’s environmental license. The XikrinBrazil, and Spain (see box). The Fund’s largest securities do Bacajá tribe, for example, have noted that Belo Monteholdings were in regional and international development will cause substantial downstream impacts on the Bacajábanks, such as the European Development Bank, and River, which the tribe depends on for water consump-then global dam builders and financiers in Canada, Spain, tion, transport, and trade. The dam currently faces over aBrazil, the Netherlands, and France. Altogether, these dozen were valued in 2012 at 60,589,634,195 NOK, orUS$ 10,014,309,678 in equity, and 67,700,739,978 NOK, The multilateral financial institutions in the Fund’sor US$ 11,189,639,397 in securities. Together, the Fund’s holdings have long invested both directly and indirectlyholdings in companies and institutions active in hydro- in large hydropower. The Asian Development Bank andpower development total more than 127 billion NOK, or the World Bank, for example, along with Electricité deover US$ 21 billion. France, supported the construction of the controversial 25
  26. 26. The Fund’s Top Equity Investments in Companies Active in the Hydropower Sector France (16,432,930,491 NOK): Alstom Electricité de France (EDF) GDF Suez Schneider Electric Suez Environnement Germany (16,144,881,581 NOK): E.On Siemens Brazil (11,698,194,839 NOK): Nam Theun 2 hydropower plant in Laos. The African Banco Bradesco SA Development Bank has supported the Bujagali Dam on Banco do Brasil SA Uganda’s Nile River. Banco Santander Camargo Corrêa Desenvolvimento Imobiliário Sa Kasikornbank, Siam Commercial Bank, Krungthai Bank, Centrais Eletricas Brasileiras SA and Bangkok Bank are banks that are instrumental to Cia Energética de Sao Paulo EDP - Energias do Brasil SA the financing of the Xayaburi dam in Laos. The Funds Gerdau SA hold equity in all of these banks. The Xayaburi dam is Itau Unibanco Holding SA planned as the first dam on the Mekong mainstream Itausa - Investimentos Itau SA and is expected to cause severe, widespread and irrevers- Light SA ible environmental damage with grave consequences Tractebel Energia SA to human life and health in Laos and the neighboring Vale SA countries.28 Spain (10,755,676,645 NOK): Banco Santander SA Ethical Management of the Fund Iberdrola SA Mapfre SA The Fund is bound by ethical guidelines, and the advi- sory Council on Ethics can recommend companies for exclusion or observation due to breach of the ethical guidelines. The recommendations are considered and ef- fectuated by the Ministry of Finance. The ethical guide- lines cover issues such as serious human rights breaches, gross environmental destruction and gross corruption. The Council have in 2011 had a specific focus on hy- dropower and are reportedly concerned about some of the companies in the industry. The profile has therefore reportedly been to avoid the worst in this sector. How- ever the assessments done by the Council is kept secret and the handling organization NBIM is not open about what companies are considered for investment. As we can see from the list beneath the Fund is still holding shares in a considerable amount of problematic projects and in some quite dubious companies. This seems contrary to a policy where avoiding bad players in the hydropower industry is a priority. Tribes occupy the Belo Monte work site. Alstom, S.A. is one of the world’s most prolific turbine Photo: Marcelo Salazar manufacturers and suppliers, and has participated in26
  27. 27. Construction of the Belo Monte Dam, Altamira, Brazil. Photo: Minplanpacscores of controversial hydropower projects, includingJirau Dam and Belo Monte Dam. Alstom is one of thecompanies that have received a recommendation fromthe Council, and it has now been under observation sinceDecember 2011, due to suspicion of gross corruption.The recommendation was given in 2010, but was onlyfirst acted upon in December 2011. This shows one of theweaknesses of the ethical work in the fund. Alstom is alsoalready convicted of corruption in Mexico and chargedwith corruption in four different European countries. Alengthy observation seems like an excuse rather than ac- Tribes free the Xingu river from an existing coffer dam.tion in this case. Photo: Atossa Soltani 27
  28. 28. List of members: (As of June 2012) • Developing countries: Kenya, Bhutan, Liberia, Ethiopia, Maldives, Senegal, Morocco, Tanzania, Nepal, Mali • Developed countries: United Kingdom, France,The Energy+ Initiative Denmark, Switzerland, The Netherlands, Republic of Korea, Iceland, Norway • International financial institutions: World Bank Group, Asian Development Bank, African Development Bank, Inter-American Development Bank • United Nations: United Nations Environment Programme (UNEP), United Nations Development Programme (UNDP), United Nations Industrial Development Organisation (UNIDO) • International organisations: International Energy AgencyThe process and Norway’s role (IEA), Organisation for Economic Co-operation and Development (OECD), Global Village Energy Partner-The Energy+ Initiative is a Norwegian side initiative to the (GVEP), ECOWAS Regional Centre for Renewable shipUN Sustainable Energy For All (UN-SEFA) initiative and Energy and Energy Efficiency (ECREEE), Latin Americanthe UNFCCC, and is to a large extent molded by the Nor- Energy Organization (OLADE), International Hydro-wegian Ministry of Foreign Affairs. Similar to REDD+, power Association (IHA)the initiative seeks to be developed independently of the • Business: World Business Council on SustainableUN. The Ministry is probably lending an ear to other Development (WBCSD) • Foundations: United Nations Foundation (UNF)donors in the partnership, such as the UK and France, • “Think-tanks”: Centre for Clean Air Policy (CCAP)but it seems that Norwegian funding of the project has • Civil society: World Wildlife Fund, Friends of the Earthdriven its launch in pilot countries. The initiative also has Norway, Practical Action UK, World Future Council,an international working group on indicators, with NGO Bellonaparticipation.The Rio+20 Summit was an important arena for the ini-tiative, where Norway made commitments of 500 millionNOK to Ethiopia, 250 million NOK to Kenya, and 100 “clean energy.” Whether these terms refer to climate-million NOK to Liberia over five years.29 friendly or renewable technologies, or both, remains un- clear. The “Princples of Energy +” released under the high level conference in Oslo October 2011 state that activitiesInstitutional arrangement will support “low carbon development strategies andand mode of support poverty reduction strategies”. Energy+ aims at leveraging private funds to release private investments several timesThe Energy+ partnership has so far been open to every- larger than public development assistance spent duringone (see box); developing countries, developed countries the initiative.and organizations are among the members. Energy+intends to build up a fund of donor money accessible todeveloped countries within the partnership. Developed Sectoral approach andcountries that enter as partners are expected to be do- results-based financingnors to the fund, and developing countries are expectedto show “strong political will” to achieve the partnership The initiative will consist of programmes on a sectoralgoals. The initiative is not a formal part of the SEFA or the level, and results-based funding is promoted as a centralUN umbrella, but seeks to inform the SEFA and UNFCCC instrument. This means that countries participatingprocesses. A connection to the Green Climate Fund and in Energy+ will likely be asked to develop a nationalleverage for financing through the CDM are possibilities. energy plan.Energy+ will support several forms of energy develop- Results-based finance will mean that funding is releasedment. The initiative uses the terms “modern energy” and after reaching specific targets. Indicators are an important28
  29. 29. Principles of Energy + • Developing country actions in the energy sector will be • Energy+ will employ a three-phased approach to supported through best-practice policy reforms, technical country engagement – see below support and at scale results-based financial investments to increase access to renewable energy and improve en- • The use of results-based approaches will necessitate the ergy efficiency, and avoid/reduce emissions of greenhouse development of robust indicators to measure outputs, gases relative to a business-as-usual baseline; outcomes and impact. In some cases this will neces- sitate the strengthening of country reporting systems, • Activities will be country driven and support low carbon coordination mechanisms at national and international development strategies and poverty reduction strategies levels, establishment of country-level tracking systems of developing country partners; (e.g. registry) for renewable energy and energy efficiency investments and international agreement on definitions • The private sector can help support energy develop- and methodologies; and ment, and can bring in much-needed finance, but only where there is a supportive policy and regulatory en- • Wherever possible, Energy+ Partners will work through vironment. Governments can use policy and regulatory existing programmes and institutions, thereby limiting tools to promote significant investments, allowing scarce transaction costs and speeding up progress. donor and domestic public resources to be dedicated to solving market failures, targeting the poor, and supporting innovation; • Recognizing the constraints on the availability of public funds and the need for private investment, Energy+ will adopt a results-based approach to both catalyzing action on the ground and the achievement of results at the national level;instrument to ensure the implementation of pro-poor available for the rural poor in off-grid areas in Energy+alignment and environmental risk management actions. countries.The development of a set of indicators for all programmesis under way, and was presented at the UN’s Rio+20 Sum-mit in 2012. It is unclear whether these will converge into Will Energy+ Financea short list of three indicators ensuring pro-poor energy Controversial Dams?access, electricity for industrial development and a high-renewable component, or a longer, more exhaustive list of Energy+ may not finance controversial large hydropowerindicators. projects. Norway announced at the Rio+20 Summit that the first pilot projects will include Ethiopia, Kenya, Liberia and India. As a result, it seems that small- to mid-sizedContradictory goals projects are preferred; but this is far from certain. It isEnergy+ aims at leveraging private funds, and its pro- entirely plausible that controversial hydropower projectsponents have been heard stating that “every dollar spent may find their way into the Energy+ project pipeline.should release seven dollars of private investment, orat least four.” How this informs programme design hasnot been discussed. Energy+ is intended to reach thepoor through development and application of specificpro-poor indicators. Yet, designing universal indica-tors for commercially-viable electricity distribution to adiverse range of poor populations is a large leap of faith.It remains to be seen what kind of modern energy will be 29
  30. 30. Multilateral Policy DialoguesNorway also promotes the global hydropower sector Bank. The Government of Norway took a position duringthrough multilateral policy dialogues. Such initiatives a 2010 consultation on the World Bank’s Energy Strat-include the Sustainable Development of Hydropower egy that “all forms and sizes of hydropower projects areInitiative of the Clean Energy Ministerial, the research of regarded as renewable energy, and the WBG is seen asthe International Energy Agency, the research of Norway’s having good safeguards for large hydro. Climate changeInternational Centre for Hydropower (ICH), Norway’s in- will change hydrology, perhaps making water storage andfluence at the World Bank and IFC, and Norway’s support flood control increasingly important in building dams.for the International Hydropower Association’s (IHA) Hy- Hydropower can also protect upstream rainforests. Nor-dropower Sustainability Assessment Protocol (HSAP). way referred to the Pangani dam in Tanzania, where there was less water available, not because of global warmingThe Government of Norway is one of five countries that but because change in land use on the hills of Kilimanjaroparticipate in the Sustainable Development of Hydro- (forestry) has reduced water flow and thereby power pro-power initiative of the Clean Energy Ministerial, together duction. Hydropower companies would have incentiveswith the International Energy Agency.30 The Clean Energy to protect rainforests upstream. Norway also pointed outMinisterial has met every year since 2010 to “advance that different types of hydropower projects (run-of-river,international collaboration to accelerate the adoption of storage) meet different needs and significant progress hasclean energy technologies worldwide. Energy ministers been made in the past years in the area of sustainability.”33from 23 participating governments come together to assess In 2010, Norad held a conference with the World Bank,progress and guide work under 11 concrete, transforma- titled “Modernizing Hydropower.”34tive clean energy initiatives. Ministerial meetings alsoprovide an opportunity for high-level engagement with Norway convenes and sponsors multiple conferencesprivate-sector stakeholders in a variety of formats, ranging around the world dedicated to discussing hydropower.from public panel sessions to roundtable dialogues, co- For example, in 2011, the Government of Norway hostedchaired by ministers and chief executive officers.”31 a high-level conference on “Energy Access and Finance.”35More broadly, Norway participates actively in the research Norwegian Support for the Hydropoweragenda of the IEA. As part of the IEA agenda for 2010- Sustainability Assessment Protocol2015, a Statkraft representative leads the IEA’s efforts to Norway is also a principal funder of the International“establish economic values for water and energy services Hydropower Association (IHA), a hydropower industryprovided by storage hydro beyond the production of special interest group that promotes global hydropowerelectricity.” development. Norway’s financial support to IHA helped create the Hydropower Sustainability Assessment ForumBased in Trondheim, Norway’s own research institute, the (HSAF), an initiative between the IHA and WWF, TheInternational Centre for Hydropower, conducts research Nature Conservancy, Transparency International, andand offers workshops and courses to sector professionals.32 Oxfam that between 2008-2010 created the Hydropower Sustainability Assessment Protocol (HSAP). The HSAP isNorway also plays a strong role in highlighting the an auditing framework for use by hydropower developersbenefits of hydropower in policy revisions at the World to voluntarily assess the social and environmental sustain-30
  31. 31. Construction of Bakun Dam, 2009. Photo: Cahaya Dalam Kegelapan A Voluntary Approach to Sustainability Reporting The HSAP takes a different approach to sustainability than the Recommendations of the World Commission on Dams (WCD), the leading sustainability guidelines for the hydropower sector. The WCD promotes a pre- cautionary approach of careful planning in the energy and water sectors, while the HSAP is a voluntary, non-ability criteria of their dam projects. Norway continues binding sustainability scoring system that only evaluatesto support IHA in the development of HSAP, including the performance of dam builders during project devel-through grants for assessment training programmes. opment, implementation, and operation. In contrast toIHA have also applied to Norway to fund national HSAP regulatory policies, the HSAP has no ability to penal-implementation pilots in developing countries. ize developers if they do not meet the requirements of national laws or international best standards. Instead, HSAP seeks to incentivize dam developers by reward-Norwegian dam builder Statkraft is one of eleven “Sus- ing them with high scores and potential public relationstainability Partners” that have committed to using HSAP benefits. However, the HSAP contains no mechanismto assess at least one of their dam projects. SN Power, also to guarantee the objectivity of project assessors nor theof Norway, has explored using the HSAP on its projects objectivity of an assessment’s evidence base, so conflictsas well. “Sustainability Partners” commit to utilizing the of interests may taint the objectivity of HSAP assess-HSAP to undertake one unofficial, and one official, HSAP ments. As a result, civil society and dam-affected peoplesassessment. Official HSAP assessments must be published are concerned that HSAP assessments will greenwashfor a 60-day public comment period at the website www. the impacts of particularly destructive HSAP Sustainability Partners:36 E.On (Germany)Despite their subscription to the HSAP’s “Sustainability Electricité de France (EDF)(France)Partners” programme, many of these hydropower devel- GDF Suez (France)opers have been noted for social and environmental rights Hydro Equipment Association (USA)violations in the sector. Sarawak Energy, for example, was HydroTasmania (Australia)responsible for forced displacement of tens of thousands Itaipú Binacional (Brazil)of indigenous people during the construction of the Ba- Landsvirkjun (Iceland)kun Dam between 1996 and 2011. Today, Sarawak Energy Manitoba Hydro (Canada)is planning on building twelve more dams in Sarawak, Odebrecht Energia (Brazil)including the Murum Dam, the Baram Dam, and the Sarawak Energy (Malaysia) Statkraft (Norway)Balleh Dam, which will similarly displace thousands ofindigenous people.Other companies that participate in this corporate occupied the project for two weeks, threatening to set itsustainability public relations campaign already receive on fire, as a result.other forms of support from Norway, as previouslynoted. Such is the case of E.On, EDF, GDF Suez, and All in all, many of the eleven companies that participateStatkraft, for example. Odebrecht, one of the world’s in the HSAP programme have a tainted sustainability re-largest construction firms, participated in the destructive cord. The voluntary, non-binding nature of HSAP audit-Dardanelos Dam in Brazil, where the firm’s subsidiary ing is unlikely to greatly improve these companies’ socialAguas de Pedra dynamited an indigenous tribe’s cem- and environmental practices, and it remains to be seenetery after failing to include the cemetery’s location in whether Norway’s support will improve these companies’the project’s environmental impact assessment. The tribe capacities to do so. 31