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Micro-Hydro Feasibility in Kenya. Erdem Ovacik, Mike Morgan, Jamie Dean, Adam Nyugen Bridging the Divide, UC Berkeley December 6 th , 2006. Costs/economic feasibility Action potential. AGENDA. - PowerPoint PPT Presentation
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Micro-Hydro Feasibility in Kenya
Erdem Ovacik, Mike Morgan, Jamie Dean, Adam Nyugen
Bridging the Divide, UC Berkeley
December 6th, 2006
2
Costs/economic feasibility
Action potential
AGENDA
3
GENERATION COSTS LOWER THAN ALTERNATIVES: UTILIZATION IS KEY FOR COMPETITIVENESS
Micro-hydro generation is very cost competitive:
Baseline assumptions:• 20 kW plant• 60% capacity utilization• Depreciated over lifetime of equipment (>20 yrs)• Cost of capital including risk premium at 20%• Considers only generation costs – transmission or distribution not included
Size: How big is the plant?
Utilization: What portion of the generated power is used?
Term of commitment: How long does the business consider to operate?
15.38.55.1
Sensitivity analysis (US¢/kWh)
US cents/kWh
8.510.0
46
Diesel* Micro-hydro
100% 60% 33%
12.28.57.7
50 kW 20kW 5kW
12.89.68.5
20+ yrs 10 yrs 5 yrs
*Assumes for price for diesel = $ 1.1 per liter at the site of generation **Grid price depends on geography, level of consumption, etc. The US¢ gives a representative figure for a large business. Does not include cost of back-up diesel generators in the case of power cuts
1- Micro-hydro is cheaper than diesel in any case
2- Micro-hydro could be competitive vs. grid
3- Capacity utilization makes biggest difference
Grid**
4
PROFITABLE OPPORTUNITIES TO SELL EXCESS POWER
I. Sell power to communities
• Would increase capacity utilization to 15-25%
• Need access to communities– Distribution costs estimated at $ 220 /
household (HH)• HHs already paying high energy bills, replacing
the energy bill would bring significant revenues at 25-40 US¢/ kWh
• Overall profitable if communities are near by, densely populated and incur high energy expenditures
II. Sell power to grid
• Would increase capacity utilization to 100%
• Need access to grid; transmission costs estimated at $1,400 / km
• KPLC pays only 3-4 US¢/kWh – Finlay’s experience is 3.15 US¢/kWh – KTDA negotiates 4.8 US¢/kWh
• Grid already relies highly on hydro sources and power shortages are likely to coincide – resulting in penalties, etc
• Profitable overall - however uncertain because of KPLC’s unclear policy
While one option does not exclude the other, selling back to the community has high profit potential
5
Baseline assumptions:•HHs within 5 km of generation•Average mini-grid extension per HH: 60m (density indicator)•Average capital for connection per HH: $205 (appropriate tech)•Average connection size: 90 W•Access during 6pm-12am•Current energy expenditures average $5 per HH per month (replaced) •HHs effectively pay ~40 US¢/kWh •HHs only utilize excess capacity – no extra generation related costs
The Business Perspective
$/year per household
1149
60
Revenues Costs Profit
NPV=$84ROI=5.4% 9.3
3.2
Grid Community
US¢/kWh earned
•Only extra cost to power HHs is transmission and distribution investment•This business brings:
• 11$/yr more profits for every new customer
• 5.4% return on investment-assuming business makes all distribution investment
•The alternative is to sell power to the grid•Even after discounting large investment costs, profits from sales to community are much larger than sales to the grid
SELLING EXCESS POWER TO THE COMMUNITY COULD BE HIGHLY PROFITABLE (1/2)
6
SELLING EXCESS POWER TO THE COMMUNITY COULD BE HIGHLY PROFITABLE (2/2)
Baseline assumptions:•HHs within 5 km of generation•Average mini-grid extension per HH: 60m (density indicator)•Average capital for connection per HH: $205 (appropriate tech)•Average connection size: 90 W•Access during 6pm-12am•Current energy expenditures average $5 per HH per month (replaced) •HHs effectively pay ~40 US¢/kWh •HHs only utilize excess capacity – no extra generation related costs
The Community Perspective
$/installation
205
480
Grid Micro-hydro
914
US¢/kWh
Grid Micro-hydro
5.05.0
Current expenditures
Micro-hydro
$ per month
•HHs would be able pay $5 a month to access electricity because this is what they currently spend•Micro-hydro will improve service quality and duration while replacing current expenditure
•Effectively, the $5 a month translates to access installation charge at $205 and electricity at US¢9/kWh •Both installation and per kWh charges are much lower than the grid offer•The affordability is even higher compared to grid offer since business assumes all or some of the upfront capital investment
7
CO-FINANCING DISTRIBUTION AS EFFECTIVE WAY TO REDUCE RISKS
2727
390
638
194
Generation Business Community Distribution Total
30% 5% 5% 60% 100%
Transmission
US$, thousandOverall capital requirementsCapital requirements for
a scheme including generation and sale to community:
• 125 kW generation micro-hydro plant
• 3km generation-business transmission
• 3km generation-community transmission
• Distribution network to 2000 HHs/centers
• Essentially, generation and distribution should be treated as two separate businesses• Distribution capital requirement is much larger than generation putting undesirably high
risk on the power generating business with relatively low ROI (~5%)• Therefore, distribution business could be separated from independent generator and
co-owned and co-financed by the community to decrease risks that micro-hydro implementing business is facing (ie Kenya Tea Development Authority)
Percentage of total costs
8
Costs/economic feasibility
Action potential
AGENDA
9
KEYS FOR SUCCESS IN DEMONSTRATION PROJECT ARE CLEAR INCENTIVE FOR BUSINESS AND STRONG MANAGEMENT CAPABILITY
• Main difference from an ITDG project is ownership and drive of the process by a business
• Main goal is to show that given financial incentive, the project can take place without donor help
• Important to work with a reliable management team and currently successful business
• Working with a business co-owned or fully owned by the community (such as cooperatives) would increase opportunities for collaboration
A. Demonstrate on existing business site
B. Demonstrate in a new location
Pro’s
Con’s May be hard to locate a micro-hydro site near the business of desire
Existing business-community relationship and successful operational business model
A better example to motivate other new investors to invest in micro-hydro and community electrification
May be hard to find business ready to invest in production in new location given support only for micro-hydro
10
DIESEL RUNNER BUSINESSES WITHOUT ACCESS TO GRID ARE MOST LIKELY TO IMPLEMENT MICRO-HYDRO ON THEIR OWN
Install at existing businesses:
• Identify full-time diesel runner businesses
• Communicate large and clear savings against diesel even without selling excess power
• Check if peak demand > 10kW and average daily consumption > 30kWh
• Identify hydro-sources and characteristics within 5 km
• Identify other businesses and households within 5 km
• Compare financial viability with / without micro-hydro using the excel business model provided
• Continue with businesses with access to the grid
Establish business near abundant source:
• Identify or watch out for businesses with growth / investment plans
• Communicate expected energy costs in potential sites for investment
• Compare financial viability with / without micro-hydro and other business investment using the excel business model provided
The conference will start the process for both engagements:
11
INSTALLATION NEAR EXISTING BUSINESS: MKULIMA COOPERATIVE DAIRY COOLING WITHOUT GRID ACCESS
205
480
Assumptions:
• Dairy business cooling milk prior to micro-hydro with diesel power generation at 41 US¢/ /kWh
•Produces 25k liters of milk/day
•Cools 5 hrs/day using 50kW cooling pump
•Has access to micro-hydro flow 2km away, which can support 50kW generation year-round
•Has access to capital at a rate of 20% interest
•There exists densely populated community of 800 HHs and centers with average spending of $5/month on energy
25.65.4
37.0
11.4
20.2
41.15.447.7 6.6
35.7
Annualized, US$ thousand
Generation
Cost savings with micro-hydro (at 21% CU*)
Transmission Diesel Saving
Profits from sales of excess power to HHs (25% CU*)
Distribution Transmission Total Costs
Revenues Profit
Annualized, US$ thousand
• Switching to micro-hydro and selling to community are both profitable• Co-financing and co-ownership of distribution network is recommended where community
would finance significant part of capital costs – making it a higher ROI business
ROI= 3.8%
ROI= 11%
Total MH
*CU: Capacity Utilization
12
205
480
Assumptions:
• Dairy business cooling milk prior to micro-hydro with grid power backed with diesel at 14 US¢/ /kWh
•Produces 25k liters of milk/day
•Cools 5 hrs/day using 50kW cooling pump
•Has access to micro-hydro flow 2km away, which can support 50kW generation year-round
•Has access to capital at a rate of 20% interest
•There exists densely populated community of 800 HHs and centers with average spending of $5/month on energy
25.65.4 17.3 -8.320.2
41.15.447.7 6.6
35.7
Annualized, US$ thousand
Cost savings with micro-hydro (at 21% CU*)
Grid
Profits from sales of excess power to HHs (25% CU*)
Distribution Transmission Total Costs
Revenues Profit
Annualized, US$ thousand
• Switching from grid to micro-hydro is not feasible unless CU is increased further• New businesses or selling excess power back to grid could make the scheme profitable
ROI= 3.8%
ROI= -8%
Total MH
SavingGeneration Transmission
INSTALLATION NEAR EXISTING BUSINESS: MKULIMA COOPERATIVE DAIRY COOLING WITH GRID ACCESS
*CU: Capacity Utilization
13
BACK-UP
14
LIST OF LOCAL AND INTERNATIONAL SUPPLIERS
Materials:Metal works:
• Penstocks, piping :o African Steel Pipes (ASP)o H. Youngo Zakhem
• Iron carpentry, gates, others :o Tealand Engineering – (Kericho)o Duplex Engineering (Kericho)o Bridge Motors (Kericho)o K K Engineeringo Marshall Fowlero J F McCloyo CMC Engineeringo Specialised Engineering
•Turbines:o Numerical Machining Complex Limited (Nairobi)
Electric components• Cables
o East African cableso Kenwestfal
• Electric switchboards and componentso Doshi Electricalo Switchgear and Controlso Power Controlso Electric Linko A Baumanno Sitima Enterprises
• Transformerso Imported – local dealers
• Controllerso Sintronics Ltd (Nairobi)
Contractors:General contractors :• A contractors will be needed for intakes, desilters, surge tanks – forebays, power houses and tailraces• B or C contractors will be OK for canals (headrace), roads, bridges and basement of penstocks
• International :o Strabago Sogeao Put Sarajevoo China Road and Bridgeso SIETCO
• National :o H Young – Currently subcontractor to the Sondu Miriu Hydro Project 60MWo Mugoya Construction – Was a sub-contractor to the Turkwell hydro project106MWo Kirinyaga - General civil workso SS Metha - General civil workso Kundan Singjh - General civil workso Issaco - General civil workso TM-AM - Group General civil workso Victory - General civil workso Associated - General civil works
Electric contractors:•National :o Power Technicso Specialised Power Systemo Power Engineeringo M J Vejariao Metha Electricals• International :o ABB,o Siemenso Schneider Electric
15
LIST OF KEY LOCAL STAKEHOLDERS IN MICRO-HYDRO DEVELOPMENT
Name Organization Position E-mail TelephoneChris Ballard EPK General Manager [email protected] 020 4440399Hugo Douglas Finlay Group Engineer [email protected] Alfred Cheruiyot Finlay Senior Engineer [email protected] Zabron Mugo Williamson Group Engineer [email protected] 020 2710740/1Fredrick Wanjohi Koisagat Manager [email protected] 020 242024/318451
Kip-Utich KaptichUnilever General Manager,
Technical and Dev [email protected] 052 20146-9
Charles AkaliKTDA Assist Mger, Mng
Accounts [email protected] 020 3227000/22144-4
Ali AbdirizackKTDA Group Development
Engineer [email protected] 020 3227000/22144-4Dr. P.A. Mgimba Kagera Tea Company Executive Director [email protected] 007 28 2221600Kungu Gatabaki Actis Energy Fund [email protected] Paul Kavuma Actis Energy Fund [email protected] 254 20 3872122Michael Turner Actis Energy Fund [email protected] 254 20 273 0280
Bikash Raj Pandey
Winrock Nepal Micro-hydro expert, country representative [email protected] (977-1) 4467087, 4476101
Ashington Ngigi Integral Advisory Limited Director [email protected] 254 20 4452595Denis Rambaud Measson
Innovative Energie Developpment
Managing [email protected] +33.4.72.59.13.20
Alan Dale GonzalesEC - ASEAN COGEN Programme
Cogeneration Expert [email protected] 66 2 524 5398
Nigel SandysWilliamson Tea Kenya Ltd
Managing [email protected] 0733 895015
Ndiga Nyiaga Green Power Project manager 721 447452
Robert MunzersGreen Power Founder and
Director 720 863000Daniel Theuri ITDG (Practical Action) Country Director [email protected]
