Counting the cost of water use in hydroelectric generation in Scotland

Increasing the proportion of renewable capacity in the national energy mix may give rise to a range of economic costs. This paper considers the nature of water use in hydroelectric generation in Scotland. Hydroelectric generation is currently the highest volumetric use of water in Scotland. After calculating this volume, the paper considers the nature of some of the non-priced costs associated with this use.The paper is set in the context of the transposed EU Water Framework Directive (WFD), which states that users of water should face the full costs. This article of the Directive has yet to be fully implemented, and may have consequences for hydroelectricity that have not yet been fully explored. For example, the low value of water use in hydro schemes compared to competing uses, implies an opportunity cost, which is a signal of potential resource misallocation that the WFD aims to address. In practice however, there are likely to be limited circumstances where economic misallocation can be practically redressed.