Key Takeaways from the British Hydropower Association Annual Conference

At the end of 2025, the British Hydropower Association’s Annual Conference brought together industry leaders, policymakers, engineers and developers to discuss the future of hydropower and pumped storage hydro ("PSH") in the UK. Having worked on a number of PSH projects, we were keen to get a feel for market sentiment and to get a picture of how it will develop in terms of regulation, financing, supply chain and innovation. My colleague, Amy McPherson attended the conference and has set out the key takeaways below.

Several clear messages emerged: the system is changing rapidly; PSH is central to achieving a resilient, flexible, decarbonised grid; and the sector must adopt modern contracting, digitalisation and risk‑management practices to successfully deliver the next generation of assets.

Below are the key themes and insights, distilled from two days of presentations.

1. Policy & regulatory momentum is building – but gaps remain

The policy landscape is undergoing rapid transformation.

Key messages:

• Major national initiatives (Clean Power 2030, LDES Cap & Floor, SSEP / RESP, Great British Energy) are beginning to align around flexibility and long‑duration storage.
• PSH is still considered to be undervalued by the market despite providing winter resilience, multi‑hour flexibility and stable system inertia.
• The first Cap & Floor application window saw five PSH schemes advance to detailed assessment, the most consequential progress in decades.
• Business rates remain a critical barrier for small hydro, with continued legal challenges around the rateability of penstocks and significant financial impact on operators.
• Grid reform (Gate 1 / Gate 2) and the removal of “zombie projects” offers meaningful acceleration for new storage and generation applicants.

2. Financing tools are evolving to unlock PSH at scale

A major theme was the growing role of public risk capital and structured finance mechanisms to support capital‑intensive PSH projects:

• Funds, such as the National Wealth Fund can provide novel structures – such as the NWF's credit enhancement guarantees, guaranteeing up to 20% of project costs, paying out within 10 days to cover unforeseen construction and/or operational cost shocks. Guarantee structures have already been proven on significant civil infrastructure (e.g., the Haweswater Aqueduct Resilience Programme), improving credit profiles and unlocking lower‑cost debt.
• Such tools are expected to be key to enabling financial investment decisions for PSH alongside the LDES Cap & Floor revenue stabilisation mechanism.

This direction points to PSH becoming a distinct national infrastructure class, supported by bespoke risk‑mitigation mechanisms and standardised contracting expectations.

3. Construction & Delivery: ground risk and materials 

Contracting and delivery insights directly relevant to PSH procurement included:

• The Tâmega complex demonstrates the scale, interfaces and multi‑year sequencing inherent in new large hydro developments. This is Portugal’s largest hydropower development - the 1.1 GW complex, spanning 16 years from concession to commissioning.
• The UK is at a 75‑year low in cement production, meaning supply chain and logistics planning is now critical for PSH megaprojects which will have to compete with a raft of other major energy and infrastructure developments.
• Ground investigations must be phased and matched to design maturity; mismatches are a leading cause of disputes and overruns.
• BIM and digital twins now support clash detection, programme integration, cost tracking and full lifecycle performance planning – key considerations for any PSH contracting strategy.

These lessons reinforce the importance of robust FEED, disciplined risk allocation and early geotechnical clarity.

4. Community Value 

The conference underscored a shift from pure generation assets to community‑integrated infrastructure:

• Community benefit requirements for renewable energy projects are undergoing significant policy development across the UK. Both the UK and Scottish Governments are consulting on mandatory community benefits, with Scotland actively exploring the extension of its Good Practice Principles to hydropower and pumped storage projects.
• Three core forms of community benefit are emerging as standard:
• Financial payments (typically annual payments per MW installed),
• Benefits in kind (such as local infrastructure upgrades, skills programmes or apprenticeships), and
• Shared ownership models (providing communities with equity stakes in projects).
• Developers and advisers are calling for greater flexibility, particularly for small hydro schemes that may struggle with prescriptive obligations. There is also a strong push for simpler governance structures that reduce administrative burdens and allow communities to determine their own priorities, rather than fitting into rigid frameworks. Importantly, expectations around community capacity to participate in shared ownership need to be more realistic.
• Early engagement, transparency and trust‑building are becoming central to successful project development, and future regulation is likely to embed these principles more deeply into the consenting and delivery process.
• AI “assistants” and “agents” are increasingly used for dispatch optimisation, permit support and knowledge retention as expertise retires.
• Hydrological forecasting is becoming more sophisticated, combining runoff modelling, ensemble weather forecasts and real‑time data to manage climate‑driven volatility.
• Remote expert systems, cloud‑based asset management, and full digital twins are now frequently deployed, supporting safer, leaner and more predictable operations.
• Modernisation projects demonstrated that digital tools can increase generation, reduce downtime, and provide essential planning intelligence.

5. Digitalisation, forecasting & AI are reshaping hydropower operations

Across multiple sessions, digital transformation emerged as essential for both existing assets and new developments:

• AI “assistants” and “agents” are increasingly used for dispatch optimisation, permit support and knowledge retention as expertise retires.
• Hydrological forecasting is becoming more sophisticated, combining runoff modelling, ensemble weather forecasts and real‑time data to manage climate‑driven volatility.
• Remote expert systems, cloud‑based asset management, and full digital twins are now frequently deployed, supporting safer, leaner and more predictable operations.
• Modernisation projects demonstrated that digital tools can increase generation, reduce downtime, and provide essential planning intelligence.

Overall, the conference highlighted a sector on the cusp of major expansion – but also the need to navigate regulatory and delivery risk challenges. PSH is increasingly viewed, not just as an enabler of net‑zero, but as national resilience infrastructure that will rely on innovative financing, modernised contracting, and community integration. As policy momentum accelerates, successful projects will be those that prioritise early risk clarity, robust commercial structures and long‑term stakeholder value.

Content drafted by Amy McPherson.