Assessmet Feasibility of Costructio a Small Hydropower Plat Filip Stojkovski a), Prof.d-r Zvoimir Kostic b), Prof.d-r Valetio Stojkovski b) a) Post graduated studet at Uiversity St Kiril i Metodij, Faculty of Mechaical Egieerig, Skopje, R.Macedoia, filip.stojkovski@outlook.com b) Uiversity St Kiril i Metodij, Faculty of Mechaical Egieerig, Skopje, R.Macedoia, Abstract: Tred utilizatio of reewable eergy sources (potetial water resources) becomes more ad more actual i the developmet of eergy systems. The ivestmet of private sector i small hydro power plats is a challege that allows mii-strategic developmet of the eergy sector. The iterest ad ivestmet i this sector is quite iterestig, o the oe had, however, the educatio of potetial ivestors ad their kowledge of the beefits ad opportuities are very poor. The mai objective of which is discussed i this paper is to systematically performaces ifluece of techological ad ecoomic factors i decisio-makig for ivestmet i this sector. The work covers all stages of the prelimiary-project ad ecoomicivestmet developmet of this issue, with a critical review of the defiitio of the relevat factors ad itesity o global stage of ivestmets. The aalysis icludes the followig crucial factors: - Ivestmet model - Techical solutio - A legitimate regulatios - The heavy coditios Coclusios preseted i the paper are qualitatively ad quatitatively represeted as diagrams from which are derived coefficiets of ifluece (poders) o ivestmets. Keywords: Feasibility, Ivestmet, Techical poders, SHPP, Correspodig author: Prof.d-r Zvoimir Kostic, zvoimir.kostikj@mf.edu.mk
. Itroductio Ivestig i small hydropower plats meas from oe side, to put yourself ito cost ad to achieve ecoomic beefit from the other side, after fiishig the object i to exploitatio period of the plat. The costs that are ivolved i the whole cocessio period of usig the small hydropower plat, ca be divided i two categories: Costs i the buildig phase, which are cotaied from all of the capital ivestmets, certai taxes, isuraces etc. Costs i the exploitig phase of the object, which are cotaied from maiteace costs, work of the turbie aggregate, salaries, state taxes etc. Evaluatio of the ivestmet for small hydropower plat is made from the base ecoomic criteria which are represeted from the ecoomic idicators for the proposed ivestmet. So, the kow procedures for evaluatio are: - Compariso of the small hydropower project with aother similar object: this shows oly a geeral view for the value of the plaed ivestmet, where it is used a statistic criteria which shows that the power of the turbie aggregate should be This relatio does ot describe detailed data for which the ivestor is iterested to kow about, so the data obtaied from this relatio are used oly for rough predictio of the ivestmet. Every potetial locatio suitable for buildig a small hydropower plat is characterized by specific poits tighteed with the ifrastructure questios, coectig to the electrical grid, the way of exploitig the water resources etc. - By applyig the ecoomic strategy time value of moey, i which two parameters are ivolved i the ecoomic aalysis, which are the time ad the moey. Project ivestmets are cotaied from cost ad beefit which i the phase of buildig the object ad its exploitig period, they participate i differet time periods. This ecoomic criteria of time value of moey is defied by the followig terms: Preset value PV, which shows the value of moey that eed to be staked, so that i time period of years, their value would be as the plaed, while the iterest rate r is icluded ito accout, so the relatio is give as where PV r PV r represets factor of the preset value (PVF). With this cocept of preset value of moey, the ivestor ca calculate the value for sellig the built hydropower plat. Rate (auity) of preset value PVA, for a time period of years with the value of the rate C (processes at the ed of the year) it will be the product of the rate C with the factor a which is equal to the sum of the factors from the preset values (PVF): a r r r r r where the preset value of the rate (auity) ca be described with the relatio for PVA: PVA C t t r
The criteria for ecoomic evaluatio of the feasibility for buildig a small hydropower plat ca be static ad dyamic. Static methods i base are showig criterios which gives geeral time of some evet, while the dyamic methods provide aalysis for the whole lifetime of the hydropower plat. The static criteria is cotaied from methods that evaluate the time period of returig the ivestmet (Payback) ad retur of ivestmet itself. With applyig the Payback method, the time is determied (umber of years) for which the ivested moey is goig to equalise with the appropriate beefit. The relatio is The payback time period of a ivestmet for small hydropower projects should ot exceed 7 years so that the ivestmet ca be cosidered as profitable. With applyig the method of Retur of Ivestmet (ROI), it is made a calculatio of the average aual beefit, pure aual costs (amortizatio, issurace etc.) related with the ivestmet costs, show as The ROI method provide fast predictio of et profit of the bject, which gives base for comparig our object with aother. The dyamic models for ecoomic evaluatio are takig ito accout the overall costs ad beefits for the whole time period of ivestig ad time determiacy of the cash flow. NPV et preset value (pure preset value) is the value which shows the flow of the pure beefit, i.e. diferece betwee the cost ad the beefit, both terms decreased by a fixed iterval of iterest rate. The formula for calculatig the NPV, with assumptio that the cash flow is happeig i equal itervals ad that the first cash flow appears after the ed of the first year, ad the cash flow appears at the ed of the iterval, so that ca be writte as: NPV R I i i i i O M where I i is the ivestmet i period i ; R i is the beefit i period i ; O i represets the operatig costs i time period i ; M i is the maiteace costs i time period i ; V r is the remai value of the ivestmet for the exploitig time period; r is the period of the iterest rate ad is the umber of time periods i the exploitig period of the object. Projects that have NPV egative valued are assumed as oprofitable. The project that has higher value of NPV is assumed thaht is better. The deficiecy of the NPV method is that over the obtaied values for this criteria, it is impossible to determie the value of the ivestmet costs, because it ca show same value for the NPV (same profit), ad at the other side the ivestmet costs to be with drastic differece. So, for applyig the dyamics aalysis for a project, as a criteria it is icluded a relatio betwee the cost ad the beefit (B/C beefit cost ratio). Projects that have a ratio smaller tha umber are assumed as oprofitable projects ad are rejected. The equatio for this criteria is: B / C I r i i R r r M O i V r 3
The criteria obtaied with the Iteral Rate of Retur IRR, allows to take ito accout the time value of the moey ad defies the retur of the moey for a time period of oe year, based o the ivestmet costs ad takig ito accout all costs ad beefits over the give time period. If the vlue of IRR is smaller tha the costs for borrowed moey, tha the ivestmet is assumed as oprofitable. The IRR method ca help to determie the iterest rate which is suitable for the ivestor of the project.. Model.. Model Techical Parameters The model which is used for aalyisis ad determiatio of the critera is represeted by a small diversio hydropower plat with the followig techical parameters: Type of HPP Ru of river Itake level 4, m Surge tak level 398, m Tailrace level, m Total water head 48, m Net water head 4 m Istalled flow l/s Nomial power od the plat.96 kw Aual productio 8.496 MWh The flow duratio curve of the river is give i the followig chart:. Q (m 3 /s)....67 3 4 6 7 8 9 TRAJANJE PROTOKA (%) Pic. Flow duratio curve (FDC) of the selected locatio The selectio of the turbie type is made o basis of the project parameters - Project Net water head: H=4 [m] - Project Desig Flow: Q= [l/s] 4
Pic. Chart for selectio of turbie type The adopted turbie type is jet horizotal Pelto turbie, where the efficiecy of the turbie is give i the chart o picture 3. 9 9 8 h (%) 8 7 7 6 Q m-op=,38 m 3 /s jeda mlazik (M) Q m=,47 m 3 /s Q m-op=,76 m 3 /s dva mlazika (M) Q R =, m 3 /s Q max=,6 m 3 /s 6 Q mi=, m 3 /s.. Ecoomic parameters of the model...3.4..6.7.8.9.. Q (m 3 /s) H =4 m Pic.3 Efficiecy curves for jet Pelto turbie The fiacig model is give uder the followig ecoomic coditios: 3% participatio i ow ivestmet 7% credit debt 8,9% iterest rate for credit debt 8 years repaymet of loas years grace period (period predicted for buildig the object) 9,% compoud iterest for the grace time period % aual iflatio years cocessio time period % aual equipmet essurace costs
% aual operatig ad maiteace costs % ret for cocessio of water from the the overall sold electiral eergy The purchase price for produced electric eergy is determied accordig to the preferetial tariff give i the table below. The method for calculatio the redemptio price is cumulative o basis of delivered eergy. Tabel: Prefertial price for produced ed delivered eergy Block Aual quatity of delivered electrical eergy (kwh) Preferetial tariff ( cets/kwh) I -.., II.. -.4. 8, III.4. - 4.. 6, IV 4.. - 8.4., V preko 8.4. 4, Project Ivestmet Costs Turbie type Istalled power of the plat Aual productio Average aual price of electrical eergy Aaul icomes of sold electrical eergy jet horizotal Pelto Turbie.96 kw 8.496 MWh 6,449 cets/kwh 47.94 EUR Ivestmet costs Exploratio works 7 Preparatio of techical documetatio 43 Supervisio over the buildig process 38 Electro Mechaical Equipmet 763 Powerhouse with the tailrace 67 Itake 79 Chael 674 Surge tak 663 Pestock Trasformer 86 Power lie 6 Access road 374 Total:.9.3 Exploitig costs Ret for cocessio of water 98 Equipmet maiteace 4386 6
Equipmet isurace 93 Total: 74.37.3. Alaysis of the feasibility of the project O base of the previously give techical data for the project, the model of ivestmet ad project ivestmet costs, the feasibility is determied for the project ad it depeds from: the way of credit loa repaymet of loas whereby it ca be cocluded the ifluece of these two paramteres o the project feasibility. These two parameters are chose from the aalysis becase the ivestor is always iterested how much the credit loa should be for the project ad for what time period that should realizes. The ifluece of the credit loas o the ecoomic criteria coefficiets of feasibility (IRR, NPV, B/C ad Year-of positive cash flow) are give o the charts o picture 4. From the results, it ca be cocluded the followig: Credit loa from -7% (it is assumed ow participatio of -3%) does ot affect sigificatly of the project feasibility Takig ito accout that the values of IRR, NPV ad B/C are higher the project is more feasible, that meas if the loa percet is higher (uder this give model data), the feasibility of the project rises O first view of the obtaied results, they have vice versa market logic, but havig ito accout that the small hydropower plat is productive (profitable) object, it looks like the hydrpower plat is payig out itself the ivested moey, so the ow participatio i the project does ot affect o the feasibility Repaymet of loas ifluece o the ecoomic criteria coefficiets of feasibility (IRR, NPV, B/C ad Year of positive cash flow) are give i the charts o picture. The aalyzed model cotais 7% of credit loa with the rest commercial coditios give i the model. O basis of the obtaied results it ca be cocluded the followig: The loger period for credit loa paymet has better ifluece over the feasibility of the project The data for the begiig of positive work of the turbie are drastically reduced after 8 years of loa paymet, ad loger period for repaymet ifluece is egligible for the feasibility of the project Techical solutio for this type of small hydropower plats oly depeds of the desiged flow, because the water head remais costat ad the hydraulic losses are assumed to be 3% of the total water head, which are resultig with chagig of the dimesios of the hydrotechical objects ad the pestock. Uder these coditios, the ivestmet value for the object is chagig, because of the istalled power of the turbie directly affects o the coefficiets for ecoomic feasibility evaluatio. With usig of the flow duratio curve, the techical parameters of the turbie aggregate ad the ecoomic model of fiacig, it is made a evaluatio of the ifluece of the desiged flow o the coefficiets for ecoomic evaluatio (IRR, NPV, B/C ad Year of positive cash flow). The ifluece of the desiged flow o the ecoomic criteria coefficiets of feasibility (IRR, NPV, B/C ad Yeat of positive cash flow) are give o the charts o picture 6. From the obtaied results, it ca be cocluded the followig: 7
Highest value of the criteria (IRR, B/C ad Year-of positive cash flow) is obtaied for desiged flow od 8 [l/s], ad the NPV criteria has highest value for desgied flow of [l/s]. The obtaied results show that the project is feasible i the whole area of potetial desiged flows, takig ito accout that the average aual flow if 67 [l/s]. Usually ad from experiece is to determie the desiged flow of the hydropower plat depeds o the flow duratio curve of the river, somewhere aroud, ad,7 from the average aual flow. 8
IRR (%) 7 6 4 3 3 4 6 7 8 9 kredito zadulzeje (%) NPV (ilja. EUR) 9 8 7 6 4 3 3 4 6 7 8 9 kredito zadulzeje (%) B/C 6 4 3 Year - positive cash flow 4, 4 3, 3,,, 3 4 6 7 8 9 kredito zadulzeje (%) 3 4 6 7 8 9 kredito zaduzeje (%) Pic.4. Ifluece of the credit loa o the criteria of feasibility 9
IRR (%) 4 4 3 3 4 6 8 4 6 rok otplate kredita (god) NPV (iljadu EUR) 8 6 4 4 6 8 4 6 rok otplate kredita (god) B/C,8,6,4,,8,6,4, Year-positive cash flow 6 4 3 4 6 8 4 6 rok otplate kredita (god) 4 6 8 4 6 rok otplate kredita (god) Pic.. Ifluece of the loa paymet period o the criteria of feasibility
IRR (%) 4 3 3 4 6 8 4 6 Q (l/s) NPV (ilja. EUR) 9 8 7 6 4 3 4 6 8 4 6 Q (l/s),6 7,4 6 B/C,,8,6,4, 4 6 8 4 6 Q (l/s) Year-positive cash flow 4 3 4 6 8 4 6 Q (l/s) Pic.6. Ifluece from the desiged flow o the criteria of feasibility
A crucial questio ca be asked i this case. Which of the these flows should be the desiged flow of the project. Havig ito accout that the aalyzed ifluece of the desiged flow is oly for the selected project ecoomic model, it ca be critically looked over what is domiat for the ivestor ad which are the expectatios of buildig up small hydrpower plats. Coclusio I this paper are show ecoomic criterios for evaluatio feasibility of a project for bluidlig small hydropower plat (IRR, NPV, B/C ad Year-of positive cash flow), with a overview of the ifluece o the ivestmet model, aalyzed with the ifluece of credit loas ad loa repaymet period. The obtaied results shows that higher credit loas ad loa repaymet period i this case have favourable ifluece o the criteria for evaluatig the feasibility. The techical parameters of the hydro system, for small hydropower plats the mai ukow parameter is determiig the desiged flow. I this paper it is show how the desiged flow affects o the criteria for evaluatig the feasibility of the project, which gives oe more dimesio helpful for determiatio ad coclusio which of the criterios should be domiat whe decidig. The desiged flow depeds o the ivestor of the small hydropower plat, which meas that the project feasibility has to be fulfilled uder all circumstaces, ad the ivestmet costs, the model of ivestig ad the domiat criterio for ecoomic evaluatio should be i accordace with the possibilities. From techical poit of view, the evaluatio of the desiged flow should be made from the NPV criteria, because for the small hydropower plats from this Ru of River type, the river flow depeds of the period of the year, ad from other side it should have abilities for usig the possible flood waters for electricity productio. The proposed model (uder the Legislatios i Republic of Macedoia) for purchase of the produced electrical eergy allows maximum flexibility ad feasibility for buildig small hydropower plats. Model with a costat price of purchasig produced eergy makes coditios for the selectio of model of fiacig for the give project, which certai projects became o feasible. The preseted results ad coclusios about the criteria for evaluatio the feasibility of the project allows the future ivestor to shave structural view of the iflueces of differet parameters, so as guides for determiig the capital ivestmets for small hydropower plat. Refereces. Celso Peucho, How to develop a small hydro site, ESHA, 998. Guide how to develop a small hydro power plat, ESHA, 4 3. Guidebook o the RES power geeratio techologies, Leoardo da Vici, Programe El/99///PI/II..b/FPI, 999 4. Wladislaw Bobrovicz, Small hydro power Ivestor guide, 6