Hydropower Royalties: A Comparative Analysis of Major Producing Countries (China, Brazil, Canada and the United States)

Abstract

Abstract:Hydropower is the leading renewable source of electricity generation and a low emission energy source. In order to be developed sustainably, it is important that its costs and benefits are adequately set and distributed. Different mechanisms, such as royalties, can be used for this purpose. Governments have usually kept hydropower royalty rates low, without internalizing negative externalities. This strategy is inefficient because it leads to larger electricity production and consumption, and hence exacerbates environmental impacts. This paper reviews the criteria proposed and used to set hydropower royalties. It also compares practices of the four main hydropower producers in the world: China, Brazil, Canada and the United States. Results show that royalty rates and distribution policies are determined in an arbitrary and unsystematic manner, but also that water use is usually undervalued. In order to encourage the development of this key renewable resource, in a sustainable and responsible way, national and international efforts should be made to rationalize and harmonize hydropower royalty rates.

The Corporate Social Responsibility of Hydropower Companies in Alpine Regions—Theory and Policy Recommendations

“…Those are issues concerning the license to operate and the sharing of resource rents. Regarding HP, this is at the heart of the current discussion about HP concessions and water fees/royalties [10,14,18,54,72,[78][79][80] that must also be addressed when it comes to the implementation of CSR strategies by HP companies and their respective reporting. The latter requires a comprehensive assessment of the firm's activity and its impacts upon the social, economic and environmental systems.…”

U.S. Hydropower Market Report (January 2021 edition)

“…States can apply additional fees due to their authority in water resource management. Washington, Oregon, California, and New York all apply additional fees to hydropower owners (Pineau et al 2017).…”

“…In return for the right to develop and operate the facility, the concessionaire pays back a royalty to the public agency. The royalty is most often set as a function of electricity generation but might, alternatively, be a function of installed capacity (e.g., some Chinese provinces), the unit of water used (e.g., California), or sale revenue (e.g., Brazil) (Pineau et al 2017). In India, the royalty is typically the free delivery of a percentage of the power generated by the plant to the state in which it is located.…”

Water Economics and Policy

“…Pineau et al [18] analyze hydropower water use in major producing countries and review the different economic instruments (royalties and others) used to appropriately distribute the costs and benefits of hydropower to society as a whole. A water pricing scheme for irrigation water in conditions of unmetered water use is the measure that Lika et al [19] evaluate with a principal-agent model.…”