Introduction
development mechanism (CDM). This is due to the fact that these large-scale projects require massive amounts of upfront capital investments; their financial feasibility does not depend on clean development mechanism monies, a.k.a., the “additionality” test needed to obtain approval for this type of financing. Nonetheless, there are clear economic benefits to the displacement of fossil-fired power plants, which show considerable exposure to oil and gas price volatility. The question is whether this incentive points in the right direction: will electricity generators capture extraordinary profits from the production of costlier, fossil-fired plants? Or can governments provide strong enough regulatory incentives to increase efficiency and sustainability in the production and consumption of electricity, both in current plants and in the construction of future generation? Moreover, rapid-growing demand for cheap and reliable sources of electricity is a trend that favors large-scale energy projects that rely on readily available feedstocks. These market dynamics can have direct effects on the deployment of other, often costlier renewable energy technologies that are equally important to achieve emissions reductions in the long-run. Thus, the tendency to categorize hydro projects according to capacity size speaks not only to considerations of governance or impacts on communities and the environment, but also to the role large hydropower plays in energy systems. In South America, this type of plant typically (though not exclusively) supplies ‘baseload’ energy, i.e., the minimum electricity needs of a customer base, reliably and cheaply. Baseload plants have lower costs per unit of output, and are thus expressly built to operate constantly, at the maximum production possible. This introduces yet another dimension to ‘scalar’ questions: electricity portfolio considerations, such as cost minimization and security of supply, which shed a different light on large hydropower and its advantages relative to other sources of electricity. Scale and Reliability Key performance indicators for electricity generation include available energy—the power that can be extracted, regardless of cost or location—and the technical potential of a resource, or the amount of energy that can be extracted within the limits of current technology, regardless of cost. South America is water-rich and hydropower is a proven !
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