Spotlight |
Water, wires, and the new “flex”
After years in the wings, hydropower stepped into the spotlight in 2025. Large dams came online, pumped storage returned to center stage, and policymakers began to value the grid-balancing power only water can offer.
HYDROPOWER SPENT THE LAST decade keeping the lights on quietly while wind and solar grabbed headlines. In 2025, that changed. The sector put up tangible milestones – from large scale inaugurations in Africa to long-awaited pumped storage plants entering service in Europe – while regulators and financiers finally began to price hydropower’s unique ability to balance renewable grids. It wasn’t an unqualified boom: climate volatility pressed river basins from the Amazon to the Alps, and uncomfortable debates flared over river protections, dam safety, and who pays for long-duration storage. But the year’s arc was unmistakable: hydro is moving from “legacy baseload” to “flex centerpiece,” and policy is starting, at last, to catch up. The tone for 2025 was set mid-year when the
International Hydropower Association (IHA) published its flagship World Hydropower Outlook. The report put hard numbers to what system operators already felt in their bones: hydro remains the world’s largest source of renewable electricity and is increasingly the glue holding variable renewables together. The 2025 Outlook highlighted global momentum, particularly the sharp rise of pumped storage hydropower (PSH), even as it warned that investment and regulatory models must evolve to recognise hydro’s multi-service benefits.
GERD switches from symbol to
system asset A headline event of 2025 was Ethiopia’s formal inauguration of the 5150MW Grand Ethiopian Renaissance Dam (GERD) on September 9. Built by Webuild in collaboration with Ethiopian partners, the project represents one of the most ambitious hydropower undertakings in Africa’s modern history. Its vast infrastructure includes a 1800m long and 1170m high main dam, extensive spillways, and a powerhouse complex housing 13 turbines to harness the full potential of the Blue Nile. After 14 years of construction, the continent’s largest hydropower project crossed its ceremonial finish line and immediately reshaped conversations about East African power trade. Government dignitaries, regional leaders, and millions of Ethiopians marked the moment while grid planners focused on the practicalities: how fast the new capacity can be integrated, and how much of it will flow into neighbouring countries. If the inauguration was celebratory at home, it
remained sensitive abroad. Egypt’s longstanding concerns over Nile flows did not vanish with the ribbon-cutting; water diplomacy will continue to track reservoir operations, seasonal releases, and drought protocols. But the inauguration consolidated GERD’s role as a regional anchor.
10 | December 2025 |
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Europe’s “water battery” moment If 2025 gave Africa a new baseload giant, Europe
flexed its storage muscle. Austria’s 480MW Limberg III pumped storage plant – tucked above Kaprun in the Hohe Tauern – entered service in September after a demanding high-alpine build and a 9m raise of the Wasserfallboden dam. The project was officially inaugurated on September 12 and immediately became a case study in modern PSH: compact, fast- ramping, and integrated into a complex of existing reservoirs to deliver system flexibility at scale. This was more than a local triumph. Across
interconnected European markets, short-term price volatility is rising with the shift to 15-minute bidding intervals and denser cross-border flows. Storage that can respond in seconds is increasingly valuable, and PSH’s technical strengths are starting to be reflected in market reforms. Analysts noted that Central- Nordic market design changes and ongoing grid reinforcements will amplify the need for flexible assets; Limberg III arrived right on cue. The UK, long an outlier on PSH investment, showed policy movement of its own. In capacity market and revenue-stabilisation steps that would have been unthinkable just a few years ago, authorities moved to underpin existing pumped storage and hydro portfolios, while laying groundwork for a “cap-and- floor” style approach for new long-duration storage. In parallel, Cruachan and other legacy assets secured fresh contracts, and public debate sharpened around SSE’s proposed 1.5GW Coire Glas scheme in the Highlands. The latter scored a world-first: Gold certification under the Hydropower Sustainability Standard (HSS), a notable proof that large-scale pumped storage can meet stringent social and environmental benchmarks at the planning stage. Recognition wasn’t only from standards bodies. At the sector’s own World Hydropower Congress awards, Coire Glas shared the limelight as a project that could unlock a step change in the UK’s system adequacy – if revenue frameworks line up. That “if” is shrinking: political consensus is forming that long-duration flexibility is a grid necessity, not a luxury. Also in September 2025, IHA and Eurelectric
launched the Paris Pledge – a collective commitment from the European hydropower value chain to scale up PSH capacity and urge both EU-level and national policymakers to restructure markets, incentives and permitting frameworks accordingly. The Pledge states that PSH remains the “most important, scalable and cost-effective long-duration electricity storage solution” and notes that the European pipeline exceeds 32GW of PSH projects
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