Access to electricity is one of the keys to economic
development, as it provides light, heat, and power for
productive uses and communication. Today, around
1.7 billion people in developing countries do not have
access to electricity, most of them living in rural areas.
Despite worldwide rural electrification programmes this
number is increasing, largely because these schemes are not
sufficient to cope with unsustainable population growth.
Despite the fact that 80% of the world’s population lives in
developing countries, these countries consume only 20% of
global commercial energy.
According to the World Bank, the world’s poor people
spend more than 12% of their total income on energy, more
than four times what a middle-income family in the developed
world spends. Achieving the United Nations’ ‘Millennium
Development Goals’,will require significantly expanded access
to energy in developing countries.
Accepting that energy is necessary, renewable energies
must be used as a key tool in the contribution towards
sustainable development in the less developed regions of the
world. Small hydropower (SHP) is a renewable energy source
which is suitable for rural electrification in developing
countries. It is a proven technology that can be connected to
the main grid, used as a stand-alone option or combined with
irrigation systems. Thanks to its versatility it can significantly
contribute to the electricity needs of the developing world.
The substitution of conventional sources of energy
(traditional biomass for cooking, diesel generators, kerosene
lamps and biomass stoves) with renewable energies like SHP
can help decrease CO2 emissions and also contribute to
poverty alleviation and economic development by supplying
electricity needs for lighting, water pumping and operating
small workshops.
The emphasis of this article is on seeking sustainable
markets for SHP in developing countries, with the
implementation of schemes that consider sustainable
development of the communities concerned and tapping into
mechanisms that build a strong and long-term market for SHP
in key developing countries.We take China as a case study as it
is a country where there is currently a strong SHP market.
SHP IN THE DEVELOPING WORLD
Hydropower throughout the world currently provides 17% of
our electricity from an installed capacity of some 730 GW, with
another 100 GW currently under construction. This makes
hydropower by far the most important renewable energy for
electrical power production.In 2002 the contribution of SHP to
the worldwide electrical capacity was on a similar scale to the
other renewable energy sources (1%–2% of total capacity),
amounting to about 47 GW. 25 GW (53%) of this capacity was
in developing countries (Table 1).1
In the global SHP sector China is the major player, driven by
long-standing rural electrification programmes from the
government. 2005 figures, from the International Network on
Small Hydropower, show SHP capacity has grown to 31,200
MW in 43,000 stations,meaning that China alone has more than
half of the world’s small hydro capacity and represents the bulk
of installed capacity in developing countries. Growth in the
Chinese SHP sector remains strong at 9% per year and there are
plans to develop a further 10,000 MW in the next decade.
Other developing countries with significant SHP capacity are
India (1694 MW), Brazil (859 MW),Peru (215 MW), Malaysia and
Pakistan (both 107 MW),Bolivia (104 MW),Vietnam (70 MW),the
Flowing to the East
Small hydro in developing countries
China alone has more than half of the world’s
small hydro capacity and represents the bulk
of installed capacity in developing countries

January–February 2006 l RENEWABLE ENERGY WORLD l 127
Countries in Africa have made good use of small hydro, with around 228 MW, some of it here in Rwanda MHYLAB

DR Congo (65 MW), Sri Lanka (35 MW) and Papua New Guinea
(20 MW),while Russia and the Central Asian states also have large
amounts installed (totalling 639 MW)(2005 figures).
In the last 30 years China, Nepal,Vietnam and many South
American countries have seen the development of a large
number of micro- and pico-hydro projects which are providing
electrification to many thousands of households. Chinese
villages have developed the most micro-hydro, with 100,000
very small capacity units installed, amounting to 188.5 MW.2
Similarly, rural families in Vietnam have installed 130,000 picohydro
systems (usually 200 Watts) in the last 15 years on a
purely commercial basis.3Yet although the cumulative capacity
of such smaller hydro plants does not show up in the data,
these projects are providing essential services to large
numbers of populations in a wide range of countries and local
topographies and conditions.
But despite these enormous efforts to improve energy
services to rural populations through the extension of grids
and the use of renewables such as SHP in the past thirty to
forty years, the un-served population has not decreased
significantly in absolute numbers – about 1.7 billion have yet
to achieve any electrification. This amounts to roughly 400
million households,or 40% of the population of the developing
countries, who remain a substantial market.
HOW SMALL IS SMALL HYDRO?
Although there is still no internationally agreed definition of
‘small’ hydro – the upper limit is usually taken as 10 MW (SHP
definition supported by ESHA and the European Commission)
although this rises to 25 MW and 50 MW respectively in India
and China – in general SHP has minimal environmental impacts
through the use of ‘run of river’ schemes.Also within the range
of small hydro power, mini-hydro typically refers to schemes
below 1 MW, micro-hydro below 100 kW and pico-hydro
below 5 kW. Although all of these technologies could be
regarded as small hydro power, they have specific technical
characteristics that warrant their own definition. Generally
speaking, micro- and pico-hydro technologies are used in
developing countries to provide electricity to isolated
communities where the electricity grid is not available,
whereas mini-hydro tends to be grid connected. In most of the
cases, no dam or reservoir storage is involved in pico-, microand
mini-hydro schemes.
APPLICATIONS OF SHP IN DEVELOPING COUNTRIES
The World Energy Assessment estimates that between 1970
and 1990, rural electrification programmes reached about 800
million people. Most of the rural electrification programmes
were achieved by extending grid connection, but a significant
number of the projects in the developing world are provided
by renewable energy (Table 2).
Of the electrification schemes using renewables, the
majority involve SHP, largely because of its suitability for
powering minigrids and deployment in remote, and often
mountainous, areas. It has also been used widely for grid-based
power generation, and has been a mainstay of rural energy
development for many years.Village-scale minigrids can serve
hundreds of households in settings where there are sufficiently
clustered end-users. Most village-scale minigrids have been
developed in Asia on the basis of small hydro, particularly in
China,Nepal,India,Vietnam and Sri Lanka where they are often
also powering small industries that provide substantial local
income and jobs.4
BENEFITS OF SHP
Using small hydro power for electrification in rural areas has
many potential benefits.Apart from the environmental, health
and social burdens of traditional fuels which are avoided by
switching to electricity, direct economic benefits flow from the
use of electricity in economically productive applications, such
as irrigation, crop processing and food preservation.
Employment opportunities have increased as a result of the
encouragement of these productive applications and
electrification has given increased potential for the
development of business enterprises.For users who previously
depended on traditional energy sources, the greater efficiency
of electricity provides direct financial savings. At a national
128 l RENEWABLE ENERGY WORLD l January–February 2006
SMALL HYDRO Flowing to the East
TABLE 1. Installed SHP capacity by world region. Source: The
International Journal on Hydropower and Dams, 2004; US DOE, 2004
Region Installed SHP Capacity Percentage
Asia 32,641 68.0%
Africa 228 0.5%
South America 1280 2.7%
North & Central America 2929 6.1%
Europe 10,723 22.3%
Australasia-Oceania 198 0.4%
TOTAL 47,997 100%
In the past thirty to forty years, the un-served
population has not decreased significantly in
absolute numbers – about 1.7 billion have yet
to achieve any electrification
BELOW A 230 kW small hydro turbine ITPOWER FACING PAGE Chinese turbine
workshops ITPOWER

level, where electricity substitutes paraffin or diesel, it is also
possible that there will be foreign exchange savings on
imported fuel.
INVESTMENT PATTERNS
Renewable energy is currently undergoing a shift in
investment patterns – moving away from traditional
government and donor sources to greater reliance on private
firms – meaning that it is now more important to think about
markets for renewable energy rather than simply about the
technologies themselves. The old technology-oriented
paradigm focused on technology demonstrations and
economic viability is being replaced by a new focus on market
assessment, policy and institutional issues, and demonstrations
of sustainable business models. Ongoing power sector
restructuring in many developing countries is opening up
competitive wholesale power markets and even encouraging
self-generation by end-users using smaller-scale technologies.A
growing share of the power generation field is being handed to
private power developers and this is affecting the prospects
(both positively and negatively) for grid-connected renewable
energy, where SHP is or can be a major player.
These shifts are ones that new SHP developments have to
consider.As well as the shift in investment patterns, changes in
national policy are also important considerations for potential
developers. Countries such as India and Brazil have policies to
facilitate renewable power generation, such as ‘wheeling’
electricity to end-users via the utility’s transmission lines, from
which SHP is well placed to benefit.4 The SHP sector must also
tap into local-level capabilities (as has been demonstrated in
Nepal, the Philippines and Peru), involving the lower tiers of
government, rural electric utilities, people’s organizations,
NGOs, small IPPs and most importantly, local sources of
financing such as rural banks and credit co-operatives and even
local entrepreneurs.
SHP POLICY FRAMEWORKS – THE CHINESE EXAMPLE
The development of good policy frameworks – for example,
national policies for rural access to electricity including
institutional, legal and financial frames;planning of target areas;
capacity building for users and for local private sector;
communication of the benefits for SHP as a sustainable tool for
social and economic development – is key for the success of
rural electrification by renewable sources.The history of SHP
development in China is taken as an example of a number of
economic and policy dimensions that have encouraged the
rapid expansion of SHP technology, which could be emulated
in other countries.5 The following three factors were found to
be the major contributors.
Preferential government policies
The Chinese government has given numerous preferential
policies and measures to encourage SHP development.These
include tax reductions, soft loans and grants, the promotion of
private firms to invest in SHP stations, and policies to protect
supply areas and private property.
Indigenous manufacturing capability
Since the 1970s, when SHP in China saw huge growth rates of
20% per year and there was not enough manufacturing
capability to develop the required 200–300 MW total installed
capacity annually, the Chinese government mandated certain
counties and provinces to develop their own SHP equipment
and then continued to promote local manufacturing to reduce
overall costs.Local industry was eventually able to manufacture
equipment for a capacity addition of more than 3000 MW per
year and today China is able to satisfy its domestic needs and
exports hydro equipment to other countries.
Recognizing the advantages of small hydro power over large
hydropower
China has long realized that SHP has benefits that cannot be
achieved through large or mega hydro stations. For example
SHP construction results in fewer environmental impacts and
does not require the displacement of people. In addition, SHP
technology is not complex and can be easily understood and
transferred to a variety of communities. Since most SHP
stations have their own supply areas and local grids, they can
January–February 2006 l RENEWABLE ENERGY WORLD l 129
Flowing to the East SMALL HYDRO
TABLE 2. Renewable energy markets and typical installations in developing countries. Source: Martinot 2003
Application Installations in developing countries market
Rural residential and community lighting, TV, radio and telephony Over 50 million households served by small hydro village-scale minigrids
10 million households with lighting from biogas
Over 1.1 million households with solar PV home systems or solar lanterns
10,000 households served by solar-wind-diesel hybrid minigrids
Rural small industry, agriculture, and other productive uses Up to 1 million wind-driven water pumps and over 20,000 solar PV pumps
Up to 60,000 small enterprises served by small hydro village-scale minigrids
Thousands of communities with drinking water from solar PV-powered purifiers
and pumps
Grid-based power generation 48,000 MW installed capacity producing 130,000 GWh/year (mostly small hydro and
biomass, with some geothermal and wind)

supply electricity to local people as well as connect to larger
grids. This enables these stations to maximize profits by
purchasing electricity from the large grid in times of low
generation and sell it back when there is excess generation
capacity.
ROUND-UP OF THE SITUATION IN CHINA
China has 17% of the earth’s hydropower resource and has
installed over half of the world’s SHP capacity (31,200 MW).The
total economically viable SHP resource is estimated to exceed
70,000 MW. 90% of the number of stations and 30% of this total
capacity is in the mini-hydro and micro-hydro range (Table 3).
The use of small-scale hydropower to achieve rural
electrification is a major characteristic of renewable energy
development in China,and was begun in the 1950s with strong
central government lead. At present, there are over 600
counties (accounting for 30% of all of China’s counties) that
rely mainly on small-scale hydropower for electricity (serving
over 300 million people) and there is a programme for rolling
this out to 400 more counties.
Since 2000, the rate of commissioning of new small hydro
capacity has been increasing to an average of 2000 MW per
year and posting healthy annual average growth of over 7%.The
country has built up such an experience in SHP that it now has
a strategy of ‘going-out’ to other developing countries to help
develop projects (usually with Chinese technology).
Financing SHP
Each year, the Chinese Government invests Û30 million in the
development of small-scale hydropower, attracting additional
substantial investments from local governments, enterprises,
and individuals to the tune of a further Û10 billion. However
with declining government investment in the sector, other
sources are often required to bring targeted projects to
development, and the Clean Development Mechanism (CDM)
is one avenue that Chinese developers are now considering.
The financing of hydropower in China is currently stable.The
4 major Chinese (state) banks lend to hydro projects as they
are considered low risk and their loan terms are usually 3–5
years and financing negotiations take only 3 months. Some
companies already have credit ratings up to fixed amount of
capital which enables them to borrow up to this ceiling in one
month. Meanwhile small hydro power is attractive to
commercial Chinese banks,which are very active in the sector.
The Ministry for Water Resources also continues to provide
low interest loans for SHP development,worth about RMB300
million (Û29.9 million) per year.
New renewables policy
A new ‘Renewable Energy Promotion Law’was approved by
the National People’s Council in February 2005 which set
the target of 10% of the country’s electricity generation
being supplied by renewables by 2020. This is ambitious
given that China’s GDP may quadruple in the next 15 years,
perhaps requiring the total grid installed capacity to perhaps
have reached 1000 GW.Nevertheless, experts have suggested
that 60,000 MW of SHP capacity be developed from the yet
untapped small hydro resources and certainly, with the
coming into force of this law at the beginning of this year,
faster SHP development can be expected.
130 l RENEWABLE ENERGY WORLD l January–February 2006
SMALL HYDRO Flowing to the East
Yunnan province in the south-west of China provides an
example of an opportunity for foreign companies wanting to
enter the Chinese SHP market. The province has abundant
hydro power resources and an excellent track record of high
annual operating hours for existing plants. The installed hydro
capacity in Yunnan is currently 11,710 MW, of which
2250 MW is SHP (19%). The economically exploitable
hydropower resource is very large at 97.95 GW, however the
percentage of hydropower exploited is still low at 7.5%.
Yunnan’s hydropower targets are 18,800 MW by 2010 and
62,000 MW by 2020 (although admittedly much of this is
large hydro). This is in order to strengthen the grid in the
south of China and transmit power from the west to load
centres in Yunnan and for export to Guangdong, which has
suffered power shortages in recent years. There is only one
major manufacturer of SHP equipment in Yunnan, so
equipment is imported from other provinces. For SHP
projects less than 25 MW, approval is handled at prefecture
level, making the project process fairly straight-forward.
THE CASE OF YUNNAN PROVINCE
TABLE 3. China SHP stations by installed capacity (2001)
Type Micro Mini Small Total
Station number 18,944 19,609 4427 43,027
percentage 44.0% 45.6% 10.4% 100.0%
Installed capacity MW 687 7171 18,404 26,262
percentage 2.6% 27.3% 70.1% 100.0%
Annual output GWh 1860 20,245 65,036 87,141
percentage 2.1% 23.2% 74.6% 100.0%
BELOW A small hydro plant at Tangasa in India ITPOWER BELOW RIGHT Small hydro
plant at Sutiro in Rwanda MHYLAB

SHP industry
China has a wide range of domestic SHP turbine manufacturers
(about 80 in total), as well as construction companies that
specialize in SHP infrastructure, and these have been supported
since the early 1960s to deliver the technology to the sector.
However there is still scope for technology transfer to improve
performance and bring quality up to European standards, and to
introduce more advanced systems – particularly in the area of
automated control.
In April 2003, the Ministry of Water Resources (MWR)
released guidelines for the modernization of hydropower
systems in rural China, which provide further direction and
standards for small hydropower development. Its overall
objective is to modernize 50% rural hydropower plants by
2010, and modernize 100% of the rural hydro sector by 2015.
CONCLUSIONS
Small hydro power has already proved itself as a major
contributor to electrification in developing countries with
over 50 million households and 60,000 small enterprises
served by small hydro at the village-level, as well as by
projects feeding power into grid networks. More than
anywhere, China has integrated SHP into a large percentage
of the country (1000 out of 2300 ‘counties’) and hundreds of
millions rely on minigrids powered by small hydro plants.
India and Brazil have also been major players in SHP and
many Asian countries now have many megawatts of
plant installed.
Much of this activity has taken place with the
involvement of European companies already, as the EU has
long occupied a leading position in the world SHP market.
But with a stagnation of development within the EU, there is
a renewed emphasis for EU companies that offer SHP
products and services to aim at emerging opportunities in
new developing countries, and at a market that has shifted in
terms of investment patterns (away from donor sources to
greater reliance on private firms) and power sector
restructuring that is opening up competitive power markets.
The SHP sector players must also consider more local-level
stakeholders and local sources of financing, as a main
condition for success.
Overall, SHP can help in achieving the ‘Millennium
Development Goals’, but there are key conditions that are
needed in order to succeed in SHP electrification in
developing countries:
• a national institutional, legal and financial frameworks
for rural electrification,
• a willingness to identify target areas and define SHP
electrification programmes
• the strengthening of local technical capacities
• the establishment of a high level of expertise in the
local agencies of funding institutions,
• the expansion of support for local networking between
stakeholders (rural developers, bankers, institutional and
private sectors, etc.)
• the development of tools for local private sector
development.
Simon Taylor and Dr Drona Upadhyay are from engineering
consultancy ITpower.
tel: +44 1256 392700
email:simon.taylor@itpower.co.uk
web: http://www.itpower.co.uk
Maria Laguna is Project Manager at ESHA
tel: +32 2 546 1945
e-mail:maria.laguna@esha.be
web: www.esha.be
This article is based on a publication developed by Thematic
Network on Small Hydropower (TNSHP) Project.The Thematic
Network on Small Hydropower (TNSHP) is a European
Commission - DG TREN (Transport & Energy) and the Swiss
Government.- funded project in the framework of the EU’s FP5
(Fifth Framework Programme for Research, Technological
Development and Demonstration). For more information on the
publication and on the TNSHP please visit:www.esha.be.
REFERENCES
1. Richard Taylor - Hydropower Chapter in 2004 Survey of Energy Resources
(WEC), 2004
2. Chinese Rural Renewable Energy (CCRE), Centre for Science and Technology
Development, Ministry of Agriculture, China, 2003
3. O. Paish & J. Green – The Pico-hydro Market in Vietnam, 2002
4. Eric Martinot - Renewable energy in developing countries – Lessons for the
market, Renewable Energy World, July-Aug 2003
5. International Center on Small Hydropower (IC-SHP), Small Hydropower in China:
Policy and Market Overview, 2004
Other sources
International Network for SHP (IN-SHP), Hangzhou, China
Ministry of Water Resources - Instructions on the Technical Modernization of Rural
Hydro in China, 2003.
The International Journal on Hydropower & Dams, SHP data, 2004
US Department of Energy - Water energy resources of the United States with
emphasis on low power, DOE/ID-11111, April 2004
World Energy Assessment - United Nations Development Programme, United Nations
Department of Economic and Social Affairs, World Energy Council, 2002
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Pre-evaluation of a site in Togo, west Africa STUDIO FROSIO