Hydropower is the most mature and cost-effective renewable generation technology, and is set to play a major role in the energy transition. The European and North American market was shaped by a small number of large national players, public monopolies or private operators under concession, whose local position looked durable: most concessions were granted for 70 to 90 years, or with no time limit at all.
Three developments changed that. European liberalisation intensified competition and ended near-monopoly positions. Many concessions will expire in Europe over the next ten to thirty years, opening the way to significant redistribution against competitors that may be international. And the persistent decline in market prices coincides with a need for heavy refurbishment investment in ageing plant.
A benchmark of six leaders
Our study rests on a comparison exercise conducted with six hydropower producers, five in Europe and one in North America. All are leaders in their home markets, with capacity between 3 and 50 GW, output between 5 and 200 TWh and workforces of between 100 and 1,400.
The work was carried out with executive boards and asset management teams, analysing internal and external environments, organisation charts, processes and strategic direction. Notably, four of the six companies were then engaged in a reorganisation.
Two clearly distinct organisational strategies
Asset management discipline and global economic optimisation. This route is characterised by a focus on cost reduction and asset optimisation, a centralised organisation and highly standardised processes. Two companies in the panel follow it decisively.
Regional autonomy and local anchorage. This second route prioritises local economic and political anchorage, with a decentralised organisation granting substantial autonomy to regional entities. Three companies lean this way to varying degrees, with a fourth as its most emblematic example.
Each player’s position is largely explained by the level of pressure it faces, whether competitive, shareholder-driven or financial.
Neither strategy wins outright
This is the benchmark’s most useful conclusion, and it is deliberately non-prescriptive. Given market conditions and observed performance, both strategies are legitimate. Each delivers significant benefits, and each carries major drawbacks that must be addressed.
The reorganisation under way at four of the six players cuts both ways: some are reinforcing their strategy, others are moderating it towards a middle position.
Our analysis suggests a third way is possible, combining the best of both: staying local while securing strong performance on asset optimisation. That path remains to be designed, and it is probably where the opportunity lies for players facing concession renewal and cost pressure at the same time.
To go further, download our full analysis below or contact our experts.
