PNNL

Abstract

Hydropower accounts for approximately 60% of the electricity generation in Canada, and growth is expected in the coming decades as part of renewable energy transitions; however, prevalent cost overruns threaten the viability of this growth. Using the integrated assessment model GCAM, we develop an endogenous representation of hydropower for Canada that accounts for market dynamics, thus permitting analysis of the competition of hydropower with other electricity generation technologies, both with and without cost overruns. Results show that modelling hydropower resources endogenously increases further deployment of hydropower relative to an assumption of fixed hydropower production, from 417 to 495 TWh of annual generation in Canada by 2050. In model scenarios that apply cost overruns historically observed amongst electricity generation projects, hydropower loses market share to more easily scalable technologies like wind power. When including high cost overrun assumptions, the model determines that, by 2050, hydropower falls from about 73% of Canadian electricity generation to 65%, while wind power increases from about 8% to 11%. Countries may be better able to achieve electrification and renewable energy targets at lower cost by avoiding large-scale hydropower and nuclear generation projects due to high cost overruns. Model results support that cost overruns are important considerations for policy decisions related to electricity sector development in Canada and elsewhere.