Climate Impacts on Latin American Hydropower

In Latin America, hydropower is the main source for electricity generation in most countries, accounting for 45% of the total electricity supply from the region. By 2040, it is likely to remain significant or potentially increase, supporting the achievement of Sustainable Development Goals and carbon emissions reduction in the energy sector.

However, climate change poses an increasing challenge to Latin American hydropower with rising temperatures, fluctuating rainfall patterns, melting glaciers, and increasing occurrence of extreme weather events. These changes consequently affect hydropower generation by increasing variability in streamflow, shifting seasonal flows, and augmenting evaporation losses from reservoirs. Given that hydropower plants, which usually operate for multiple decades, are likely to be affected by climate change during their lifespan, a comprehensive assessment of climate impacts is needed.

This report assessed climate impacts on over 86% of the hydropower installed capacity of Latin America, focusing on 13 countries with the largest hydropower installed capacity. The assessment is based on three different scenarios: Below 2°C, Below 3°C and Above 4°C. Each of these scenarios represent a different level of greenhouse gas (GHG) concentration and its global average temperature outcome by 2100. The assessment shows changes in annual and monthly capacity factors from each country between 2020 and 2099, comparing the projected results against the values of the baseline period from 1970 to 2000.

The assessment shows that, from now until the end of the century, the regional mean hydropower capacity factor is projected to decrease due to changing climate conditions. The regional mean capacity factor over the period from 2020 to 2059 is likely to decrease by around 8% on average (from 7.5% in the Below 2°C scenario to 9.6% in the Above 4°C scenario), compared to the baseline level of 1970-2000. Between 2060 and 2099, the regional mean hydropower capacity factor is projected to be lower than the baseline by over 11% on average (from 7.5% in the Below 2°C scenario to 17.4% in the Above 4°C scenario).

Comparison of the results from three different GHG concentration scenarios demonstrates that a higher GHG concentration will have stronger negative impacts on hydropower generation in Latin America. In the Above 4°C scenario, which assumes a continuous increase in GHG emissions, there could be a starker decrease in the regional mean hydropower capacity factor for the rest of 21st century than the other scenarios. In addition, a higher GHG concentration is likely to exacerbate the inter-annual variability in hydropower capacity factors in some sub-regions such as Central America and Mexico, and Southern South America.

Although all three scenarios estimate a decline in the regional mean hydropower capacity factor by 2100, this does not mean that climate change will have an equal impact on every hydropower plant. Rather, the impacts of climate change are likely to be spread unevenly across Latin America, exposing some plants to climate change more than others.

The climate projections included in this analysis show that two sub-regions, Central America and Mexico (Mexico, Costa Rica, Panama and Guatemala) and Southern South America (Argentina and Chile), would see a consistent decrease in mean hydropower capacity factors due to the decline in mean precipitation and runoff. However, the Andean region along the northwest coast of South America (Colombia, Ecuador and Peru) is projected to see a slight increase in hydropower capacity factor with increasing precipitation and runoff volume on average. For the rest of South America (Brazil, Venezuela, Paraguay and Uruguay), a comparatively mild decrease in hydropower capacity factor is expected, although further studies are needed given the lack of agreement among climate models for future conditions in this sub-region.  

To anticipate, absorb, accommodate and recover from adverse climate impacts, Latin American hydropower needs to enhance its climate resilience. Climate-resilient hydropower systems can bring multiple benefits not only to clean energy transition but also to sustainable water management. Hydropower can support the shift to low-carbon electricity technology in Latin America, providing power system flexibility for further deployment of variable renewable energy sources, such as wind and solar. In addition, climate-resilient hydropower with a multipurpose water storage capacity can bring benefits to water management, acting as a storage buffer against increasing water variability due to climate change, and providing reliable water supply for irrigation and drinking.

To minimise the adverse impacts of climate change on Latin American hydropower, governments and utilities need to scale up their efforts to address potential climate risks and impacts and identify effective measures to enhance resilience to climate change.

The following policy recommendations show how governments can contribute to enhancing the climate resilience of Latin American hydropower:

Mainstream climate resilience as a core element of energy and climate policies

Governments can send a strong signal to service providers and developers by mainstreaming climate resilience in their national policies and adopting supportive regulations. Although significant progress has been made in incorporating the climate resilience of hydropower in some countries, this varies considerably across Latin America. Among the selected 13 countries, only 6 countries have included climate impacts on hydropower and suggested actions in their national adaptation plans. Countries that are relying heavily on hydropower are recommended to consider climate impacts on hydropower and include concrete actions to enhance the climate resilience of hydropower in their national adaptation policies.

Mobilise investment in modernisation of ageing hydropower plants

Over 50% of the installed capacity in Latin America is over 30 years old. Ageing hydropower plants are expected to require modernisation to cope with the projected increase in extreme precipitation events, in addition to general rehabilitation. However, access to financing for modernisation of hydropower plants is often considered a substantial barrier. Public investment and the provision of financial risk coverage instruments by public financing institutions can catalyse private financing.

Build and strengthen climate risk insurance

Although utilities have a direct interest in insuring their assets against the adverse effects of climate change, they may be reluctant to pay a high cost for insurance. Moreover, their insurance could be limited to cover the damage to physical assets and lost revenue, rather than cover the broader damage to society and economy. An accessible and affordable climate risk insurance for hydropower infrastructure supported by governments or public institutions will significantly improve preparedness against climate hazards while helping to avoid excessive financial burdens on utilities. 

Support scientific research to increase the accuracy of climate projections

Comprehensive and scientific projections of climate risks and the impacts on hydropower generation are essential to identifying the most effective set of resilience measures for hydropower plants. However, climate models often present a low agreement about future precipitation and runoff in certain parts of Latin America. To minimise these disparities and improve the accuracy of climate projections, governments are encouraged to support scientific research on future climate patterns and their impacts, increase access to national climate data sources, consistently update information systems, develop guidelines and provide financial support for climate research.