Quebec hydroelectric firm rides Balkan ‘dam tsunami’ in showcase of Canadian expertise
19 August 2016, Financial Post
MONTREAL — Quebec has had an international reputation for hydroelectric engineering since the nationalization of Hydro-Québec in the 1960s. The construction of the James Bay Project — one of the largest hydroelectric systems in the world — helped launch the province as a leader in the field and that expertise is getting notice around the world.
A team of Canadian engineers is now building hydroelectric dams in Albania as part of a controversial boom across the Balkans that brings the potential for greater access to electricity to southeastern Europe as well as profits for those who build the systems. Opponents say this “dam tsunami” is mired in corruption, and is happening without local consultation and with lax environmental standards that could destroy the last pristine rivers in Europe.
Hydro Investment, a small Montreal-based company that has recently completed a dam in Albania, says its project at least is environmentally sound and showcases Canadian expertise in one of the few places in the world new hydroelectric installations are still being built.
President Georges Dick created Hydro Investment in 2010 with former employees of Montreal-based engineering firm RSW Inc. after it was acquired by the multinational AECOM. Dick has 35 years of industry experience and his father was also a hydroelectric engineer, one who moved to Canada from the U.K. to work with Hydro-Québec.
“It’s a bit in our genes,” he said. “In Quebec, there are a lot of resources in that field, so we always thought that we could tackle the project easily from a technical point of view.”
In Albania, after decades of isolation from much of the international community under the Socialist Republic party, free-market reforms have opened the country to foreign investment, especially in developing transportation and energy infrastructure for its almost three million citizens.
“Ten to 20 years ago, it was a difficult market to invest in, but it’s gotten more and more stable,” Dick said.
As nearly all the electricity in Albania is generated by aging hydroelectric power plants, he said the country currently has to import about a third of its energy. And, since the country is an official candidate to join the European Union, Albania is looking for development projects to help its economic case for joining the bloc.
Deutsche Bank researcher Josef Auer said southeastern Europe uses less than half of its hydropower potential, meaning the majority of economically viable projects are still waiting for investors.
“Because the region’s electricity supply largely relied on centrally planned large-scale structures for more than half a century means that there are now lots of interesting project opportunities that elsewhere in Europe can only be found in isolated cases,” Auer said in a 2010 report.
Dick said he was first approached by an Albanian engineer living in Canada who was looking for a company that specialized in hydroelectricity to take advantage of some opportunities as investors and partners on projects in his home country. Because some former RSW employees didn’t want to work for AECOM but signed non-compete agreements that could restrict them from joining competitors in Quebec, finding contracts outside the province made even more sense.
After three years of construction in partnership with AECOM engineers, Hydro Investment’s Ternoves plant in northeastern Albania began generating electricity late March 2016.
The 8.3-megawatt project is small, but still provides reliable power for more than 15,000 people. Hydro Investment co-owns the company, so unless it sells its half, it will have the plant forever, along with responsibilities for refinancing and maintenance.
The total cost of the project was about $30 million, with $12 million coming from Hydro Investment and the remainder funded by French multinational banking and finance company Société Générale SA as well as the European Bank of Reconstruction and Development and SGA Albanian, a private joint stock company.
In addition to generating power, Hydro Investment also plans to make money by selling carbon credits, which Dick said should increase income by between 10 and 20 per cent.
Although this project is small, there are plenty of others in the area.
Christiane Zarfl, a professor at the Leibniz-Institute of Freshwater Ecology and Inland Fisheries in Berlin who has compiled a global database on hydropower dams, said there are 611 future projects in the Balkan region that would add a total capacity of about 18 gigawatts.
She said 24 dams of at least one megawatt are already under construction, though this number doesn’t include the countless number of small projects under construction or planned.
Other reports indicate that the Albanian government alone awarded concessions for at least 435 hydropower projects from 2007 to 2013.
Zarfl said hydropower in general is an energy source that is well-established, flexible and, most of all, renewable. Unlike Europe and North America, where the hydropower potential of rivers is almost exhausted, there are still several river stretches in the Balkan region that could be dammed for electricity.
This, she said, makes a strong argument for such projects as non-renewable energy sources deplete and the fight to mitigate climate change picks up.
But the problem, Zarfl said, is that dams are not necessarily as green as they seem. For one thing, there is a risk that diverting rivers can block species migrations, disrupt sediment flow and affect ecosystems downstream.
“By focusing on mitigating climate change, we forget about the immense value of free-flowing rivers that provide habitat to many and even endemic freshwater species and deliver ecosystem services for humans such as drinking water supply and recreational, educational and aesthetic values,” she said.
Ulrich Eichelmann, Vienna-based director of the NGO RiverWatch, said the dams are threatening some of the few remaining pristine waterways in Europe and that the unique ecosystems in southeastern Europe could soon be gone, along with endangered species such as the Balkan lynx and the huchen — also called the Danube Salmon — if the planned projects go ahead.
“The Balkans is like a gold rush: wherever you want, you can build a dam and that’s without any respect to nature, to biodiversity and to people,” he said.
Eichelmann said about 800 million euros has flowed into Balkan hydropower development from the World Bank, European Development Bank and European Investment Bank, involving almost 1,000 companies.
Many of the companies are from Austria because of its geographic proximity and the country’s history of dam construction, with others coming from Germany, Italy and Norway.
“These companies are doing things in the Balkans in the 21st century that they’re not allowed to do in their own backyard,” said Eichelmann, adding that he believes that although these companies are obeying local laws, there should be a moral obligation to better protect ecosystems.
Eichelmann acknowledges Albania’s need for more reliable electricity, but said it should be done using a more diversified strategy that uses solar and wind energy in addition to hydro.
Though the majority of hydroelectric companies in the Balkans are European, Hydro Investment is not the only Canadian company in the region.
Vancouver-based Reservoir Capital Corp.’s principal business is financing the 59.1-megawatt hydroelectric project in development at Brodarevo on the River Lim in southern Serbia.
Although the European banks require environmental impact assessments, Eichelmann said he has seen those delivered in two-page reports written by someone who has never been to the dam site, yet still claim no damage will be done.
Many of Eichelmann’s concerns don’t apply to the Hydro Investment’s Ternoves project.
Ternoves is not built on a river, but is instead powered by water from a source on top of a mountain that feeds into the Zalli Bulqizes River, meaning it is not putting the huchen or any other fish at risk.
Dick said that as part of the loans from the European banks, the project had to meet European environmental impact assessment standards. For example, he said, the trees that were cut to construct the road leading to the dam needed to be replanted.
However, according to banking watchdog Bankwatch, before the project began, four villages in the Municipality of Zerqan held repeated protests against Ternoves, claiming that the water being taken for the plant would deprive them of irrigation and drinking water resources.
“Maybe they came out loudly and so it was taken as a protest, but all the measures have been implemented at the beginning of the project and there were no complaints afterwards,” Dick said.
Overall, Zarfl said it is hard to judge what sort of damage hydroelectric dams do when weighed against their benefits. She said she hopes her database will provide scientifically sound knowledge to increase transparency and raise discussions about where to build hydropower dams in the most sustainable way.
Hydro Investment has another project in northeastern Albania under development with construction scheduled to start in 2017 and potentially a third within the same concession.
Dick said he is looking for other Canadian partners to work with, now that the company has demonstrated that it is feasible to do these kinds of projects in Albania and the region.
“It’s a small country, but it’s part of the European family of countries and they are very open to international business,” Dick said. “When you do this kind of investment we look at it from a long term perspective… We hope that the future will agree with us.”