Report Small Hydro

8/6/2019 Report Small Hydro

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Uttaranchal Renewable Energy Development Agency

Ajay Yadav

MBA (Power Management)

CHAPTER 1

Introduction

Renewable energy can play an important role in resolving the energy crisis in rural and

urban areas to a great extent. Today, renewable energy is an established sector with a

variety of systems and devices available for meeting the energy demand of rural and

urban inhabitants. Attempts have been made to generate grid-quality power through

renewable sources. Today India has over 7000-megawatt installed capacity through

renewable such as wind, small hydro, and biomass contributing to address the shortage of

electricity in cities and villages.

The objective of Renewable Energy is to meet the minimum energy needs and providing

decentralized energy supply in agriculture, industry, commercial and household sectors in

rural and urban areas.

MNES supports the implementation of a large, broad spectrum of programmes covering

the entire range of New & Renewable Energy.

Efforts are being made to reduce the Capital Cost of projects based on Non-Conventional

& Renewable sources of Energy, reduce cost of energy by promoting competition within

such projects & a sustained growth of these sources. The share of Renewable sources is

4.5% of the total Capacity which contributes about 4800 MW. Wind power contributes

about 2483 MW, while share of Small Hydro Power is 1603 MW & Bio-Mass Power &

Co-Generation accounts for 613 MW.

The Electricity Act 2003 contains several provisions to promote the accelerateddevelopment of power generation from Non-Conventional Sources. Different

mechanisms have been evolved to encourage renewable energy projects; these include:-

a) Giving Upfront Subsidies including Tax Rebates


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b) Giving Subsidies at the time of sale of Power

c) Forcing utilities to purchase share of their power from R.E. Projects also called

Renewable Energy Portfolio Standard.

Renewable Energy Sources are pre-requisite for Rural Electrification. Rural

Electrification is viewed as a prime mover for Agricultural & Agro-Industrial

Development, Employment Generation & improvement in the quality of life of people in

rural areas. Under the EA 2003, there is no requirement of license for Stand-alone

generation and Distribution of power in rural areas. For Stand-alone generation,

renewable energy sources are required. Interconnectivity is possible with main grid to

facilitate utilization of surplus power & availability during shortages, through Renewable

energy generation.

With only about 54% of household electrified in Uttaranchal, rapid electrification &

provision of universal access to electricity in all rural areas, is an over-arching priority in

Uttaranchal.


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CHAPTER 2

Uttaranchal Renewable Energy Development Agency (UREDA)

Uttaranchal is one of the leading states in using non-conventional energy sources, as this

states power generation is mainly dependent on hydro power.UREDA was established

for promotion of non-conventional energy sources.

UREDA was established in July, 2001 with the following mission:

1. Rural electrification through renewable energy sources like Solar, Mini/Micro hydro

& Bio-gas.

2. Establishment of Solar pumps for irrigation and drinking purposes.

3. Establishment of Mini/Micro Hydro projects for Rural Electrification & Grid feeding.

4. Distribution of Solar Lanterns & Equipments to villagers.

5. Appointment & Registration of Village Urja Samiti for Operation & Maintenance of

Renewable Energy Projects.

6. Distribution of Solar education Kits & Establishment of Solar Water Heater in

Schools, Hospitals, Govt. & Private Buildings.

Uttaranchal Renewable Energy Development Agency) with the financial support of

MNES (Ministry of Nonconventional Energy Sources), GoI (Government of India), has

established state- and district-level energy parks for the demonstration and awareness

creation of various possible applications of renewable energy at various places in the

state of Uttaranchal.

Total no. of villages that has been electrified through renewable energy sources by

UREDA is 761 out of which 215 has been electrified through Mini/Micro Hydro Projects

& 546 through Solar Energy.

The Installed capacity of Mini/Micro Hydro Projects is 4.2 MW and that of Solar-

Photovoltaic is 2.96 MW


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CHAPTER 3

Scope Of Small-Hydro Projects In Uttaranchal

A small-scale hydroelectric facility requires that a sizable flow of water and an adequate

head of water are available without building elaborate and expensive facilities. Small

hydroelectric plants can be developed at existing dams and have been constructed in

connection with water level control of rivers, lakes and irrigation schemes. By using

existing structures, only minor new civil engineering works are required, which reduces

the cost of this component of a development

Small-scale hydro stations are classified in the table below.

Size of Small

Hydroelectric

Facility

Power Output

MICRO 100KW or less typical supply for one to four villages

MINI 100KW to 1MW typical supply for a small factory or isolated

community

SMALL 1MW to 30MW-typical NUG development and low end of range

for supply to a regional or provincial power grid

Uttaranchal is one of the select States in India that are rich in non-conventional energy

sources due to its abundant hydro generation potential. Small Hydro is an important

source of Renewable Energy. EA 2003 stipulates promotion of generation of electricity

from renewable sources of energy. However, the present level of exploitation of thispotential has been very disappointing. States estimated potential for generation of

electricity through small hydro units is estimated to be 1478.23 MW & against this

present installed capacity is only 62.19 MW being owned by UJVNL, UREDA and


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independent power producers which include micro hydel generating stations with a total

installed capacity of 7.89 MW. In Uttaranchal, plants having installed capacity less than

or equal to 1 MW are treated as micro hydel plants & plants having installed capacity

above 1 MW & upto 25 MW are treated as small hydro plants.

The ministry of Non-Conventional Energy Sources (MNES) is encouraging the setting up

of the commercial Small Hydro Projects in the private sector, joint sector, co-operative

sector etc. A number of financial institutions (FIs) are now coming forward to extend

term loans to the developers of SHP projects. With an objective to improve the economic

viability of SHP projects, MNES will provide subsidy for the commercial SHP projects

up to 25MW station capacity. The subsidy is intended for making repayment of the term

loan provided to the developer of an SHP project by the financial institution.

The subsidy will be released, after successful commissioning and commencement of

commercial generation from the project, to financial institution providing loan to set up

SHP project.

Uttaranchal state is declared as a special category state because of hilly areas, the subsidy

provided for projects up to 100 KW will be 45% of project cost limited to Rs. 60,000 per

KW( for private investors and joint ventures ).


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CHAPTER 4

Economic Analysis Of SHP Projects

The purpose of an economic analysis is to demonstrate that the proposed project achieves

optimum utilization of resources and is of sufficient economic merit to justify an

investment in it. The basic purpose of economic analysis is to provide a general estimate

of the potential power benefits and the costs of a project, and reasonable alternatives to

project power. The analysis helps to support an informed decision concerning what is in

the public interest with respect to a proposed license. The analytical processes described

deal with project economics, i.e. the determination of the economic merit of a specific

project or of a sequence of projects which fit into a comprehensive development plan.

The process focuses on a particular sector, say electricity, or on a sub-sector- generation,

transmission or distribution- as well as on particular elements within this sub-sector a

hydro plant, a transmission line or a substation.

The economic evaluation of such elements is termed micro- economic analysis because

the scope of the investigation is limited to the establishment of the merit of a single

sectoral element only. The investigation does not consider the impact of the particular

development proposal on the local, regional or national economy as a whole nor on the

financial position of the developer and of the country. These matters require a macro-

economic and involve a much more wide ranging investigation, for example into the

economic and financial circumstances surrounding the developer.

It must be clearly understood at the outset why the economic appraisal is to be

undertaken and what it is to achieve, whether it is to be limited to project economics or

expanded into a macro economic or financial investigation.


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HEALTH EDUCATION ENERGY INDUSTRY

RENEWABLESOIL ELECTRICITY COAL

SUPPLY DEMAND

MACRO-ECONOMYMacroEconomicImpacts

MacroLevel

EconomicImpacts

IntermediateLevel

MicroEconomicImpacts

MicroLevel

ENERGY SECTOR

ELECTRICITY SUB SECTOR

LEVELS OF THE ECONOMY

Economic analysis is always comparative. What is different from case to case are the

technical characteristics, the costs, the composition and the lives of the assets involved,

i.e. the cash flow.

PARAMETERS FOR ANALYSIS

The parameters entering into the comparative analysis are described here. They comprise:

1) Costs and Benefits

2) Interest/Discount Rates

3) Asset lives and Cash flows

4) GRID interconnection5) Socio Economic analysis


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CAPITAL EXP-ENDITURE

ANNUAL EXP-ENDITURE

CASH FLOW

STARTINGPOINT

DISCOUNTRATE

PROJECTLIFE

INPUT

PARAMETERS

DECISIONPARAMETERS

PRESENT VALUEOUTPUTPARAMETERS

LOGIC DIAGRAM FOR ECONOMIC ANALYSIS

COST ESTIMATES

Cost estimates for hydro schemes are specific for each project and each site. The

elements making up the expenditure stream include:

1) Capital costs for the power scheme and associated transmission (up to the point of

supply or network interconnection).

2) Annual operating, maintenance, administrative and insurance expenses directly

attributable to the scheme.

3) Annual fuel costs if any.

Cost trends derived from general data show that:

-For small schemes, below about 5 MW, the electro-mechanical components is

responsible for the largest proportion of the costs but the civil works component becomesmore prominent for larger schemes.

-Isolated schemes are generally more expensive than more accessible projects located

near inter connected to Grid.


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-Specific costs of hydro (per KW installed) decreases with increasing capacity and

increasing head.

-The proportion of pre-investment expenditure to the total cost of the scheme falls with

increasing capacity.

-The most expensive item of the civil works is usually the headrace and the pressure

conduit system.

COST/SIZE RELATIONSHIP

HIGH HEAD

MEDIUM HEADLOW HEAD

MORE LOCAL INPUTSIMPLER TECHNOLOGY MORE UNITS PER STATION

GREATER REMOTENESS O

SPECIFIC

COST

(Rs./KW)

SIZE

The construction period of a small hydro scheme with small storage capacity typically

extends over about 3 years, commercial operation starting at the end of the third year.

Expenditure in the first year is mainly on site preparation and access, in the second year

mainly on civil works and in the third year also on civil works and on the electro-

mechanical equipment. With the retention money at 5% of the capital expenditure,

atypical phasing might be as follows:Year1: 10-15%; Year2: 25-35%; Year3: 45-60%; Year4: 5%

The shape of the cost characteristic of power plant of any type is that of a flat U-curve

with occasional discontinuous small peaks.


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BENEFITS

The economic choice of a given development rests on the benefits it can bring. Benefits

can be:--1

Developmental benefits of a project which include power generation, water supply,

flood control, irrigation, and river navigation.

-Non-developmental benefits which include values of a waterway include fish and

wildlife resources, recreational opportunities, and other aspects of environmental quality.

ASSET-LIVES

Asset lives play an important role in economic analysis because a reason has to be found

for investing in one particular scheme over another has to be determined. Economic

Costs

Years of service

Maintenance

Operation

Post-CommissioningCapital Works

Part Replacement

VARIATION OF OPERATION & MAINTENANCE COSTS OVER PLANT LIFE


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analysis considers the physical and not the financial life of an asset. The physical life is

the period of time for which a major component of a scheme termed an asset is

expected to perform the service for which it was originally designed with no more than

routine maintenance and occasional major overhaul.

Typical ranges for asset lives commonly used are:

Civil Works 40-60 years

Electro-Mechanical part

-turbo-alternators,valves,gates,control gear, services 25-35 years

Once an asset has become time expired and has thus reached the end of its useful life, it

has no more than scrap value.

DISCOUNT RATES

To properly account for the fact that life-time of one investment may be different from

that of another; we have to account for the time value of money. Money in hand today, is

valued more than the same amount of money after say, one year. Hence, the perception of

how much more one values money today than in the future differs from person to person.

This perception is captured in a factor called discount rates. The choice of a discount rate

can significantly affect the present value of future costs and benefits. For example,alternatives with net benefits that occur further into the future will be relatively more

attractive when a lower discount rate is applied.

CASH FLOW:

The first step in any economic evaluation is to project the cash flow. The cash flow of a

project is the difference between the money generated (revenue) and ongoing costs

(expenses) of the Project. The definition of cash flow is different from accounting profit.

The cash flow, for instance, ignores depreciation and the interest charges, since they are


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GRID CONNECTION

Sales to the grid represent a special case of cash generating end-uses. Sales, when power

is in excess, could provide a better load and the potential for reliable cash flow. Theopportunities for selling to the grid are likely to be more feasible at the mini, however,

than the micro hydro scale. It is worthwhile exploring the possibility of grid connection

of such micro hydro projects as an end-use where excess energy can be sold. A plant

close to the grid connection point will be always cheaper than one installed far from it. .

The plant will provide electricity to the rural areas where otherwise only expensive and

unreliable power from the grid would be available.

SOCIO ECONOMIC ANALYSIS

Socio-economic benefits

The most obvious social benefit of small hydroelectric developments is the supply of

reliable low-cost electric energy to provide the comforts of modern living. Small-scale

hydroelectric developments can provide a competitive source of reliable and inflation-proof energy. Small-scale hydroelectric energy is an especially attractive alternative to

traditional high-cost diesel generation that currently provides electric energy in most

remote communities. Small-scale hydroelectric developments offer interesting

advantages such as:

They use a local resource and therefore produce electricity at a stable price that is

not subject to the fluctuations of the international oil market

They provide more economic benefits to the region by way of construction

employment and use of local services, 10% to 25% of capital cost.


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They provides greater opportunities for local residents to learn and upgrade their

construction skills

They improve the social activities like improvement of living standards,

enhancement of the quality of life through the provision an electricity supply.

They provide an infrastructure development like, access, communications

transportation, utilities and services.

Some of the losses caused in socio economic conditions are:

Effect on local amenity like visual, noise, recreation, amenity needs for new

residents.

Soil deterioration caused by Hydro scheme like drainage, flooding and

changes in mineral content due to leaching or silting.

Biological effects on flora and fauna as well as on cultivated areas.

Methodology To Measure The Economic Analysis of SHP

The three measures to analyze the project for small hydro projects are:

1. BENEFIT-COST RATIO (BCR) is the ratio between discounted total benefits and

costs. The cash flows to be analyzed are present valued at a fixed discount rate. Thus if

discounted total benefits are 120 and discounted total costs are 100 the benefit-cost ratio

is 1.2: 1.

The project is of economic merit if PV (benefits)/PV (costs) are more than unity. Benefits

are the direct benefits. Clearly, they must exceed the costs by an acceptable margin for

the project to be judged. The advantage of the method lies in its simplicity and directness.


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2. INETRNAL RATE OF RETURN (IRR) This method overcomes the disadvantage

of using relatively arbitrarily selected discount rates which may not be appropriate if

economic conditions should change. The internal rate of return or economic rate of return

(ERR) denotes the discount rate at which the present values of the two cash flows are

equal. This rate shows the return to be expected on the project which has the higher

initial investment costs. Internal rate of return is the most widely used technique for

evaluating investment projects. The IRR is the discount rate that equates the present value

of the projects cash flows with the initial investment. Projects whose IRRs are greater

than the required rate of return should be accepted; IRRs below the required return should

be rejected.

INTERPRETATION OF RESULTS w.r.t. COST /BENEFIT AND IRR

In case of Indian electricity industry, electric supply is seen as an essential public service

which is not in marginal competition with other sectors. Measuring the merit of a new

scheme of a small hydro project against the opportunity cost may then be inappropriate

and a lower economic target may be acceptable. SHP intended for remote or rural

locations are often at an economic disadvantage; their appraisal may yield economic rateof return in the range of 6-12%; well below prevailing opportunity costs of perhaps 14%.

The difference of 2-8% could be treated as a subsidy for encouragement of low pollution

and socio-economic development in the area concerned.

In addition to the directly assessable benefits, an electric supply brings also

intangible benefits which are generally not quantifiable.

Socio-economic analysis deals essentially with the study of intangible factors and

with their impact on the merit of a proposed scheme.


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3. SOCIO-ECONOMIC ANALYSIS (CONSIDERS INTANGIBLE FACTORS)

If socio-economic factors are to be used in support of the decision making process for or

against a hydro project proposal, it is important that they should be quantified as far as

possible. Some factors can be quantified fairly readily on the basis of local investigations, for example:

- changes in land use which have direct commercial or financial consequences;

- housing or re-housing needs;

- creation of employment;

- changes in commercial,agricultural,industrial or agro-industry activity;

- changes in fiscal contributions resulting from increased, or reduced local activity.


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Two straightforward and convenient methods of quantification are the Matrix and the

Scale method.

The Matrix approach is illustrated here:

(Estimated values in Rs000./annum)

BENEFITS DISBENEFITS

NET BENEFIT =Rs. 4, 99,000 per annum

SOCIO- ECONOMIC MATRIX

Ground and parasiticPollution

Water abstraction

Soil improvement

Visual amenity

Environmentaldisturbance

Flood control

Water storage

Occupationaldisturbance

Electricity supply

Enhancements ofIndusrtry & comm.

InfrastructureDevelopment

Fiscal benefits

100100 200300

200300


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CHAPTER 5

Financial Analysis

Financial analysis occupies the boundary between project development and accountancy.

The analysis is to confirm the merit of a new project in financial terms and ascertain its

impact on the financial position of the developer. It is also to satisfy the financing

agencies that he can accommodate the financial commitments which the project will

entail. The analysis therefore aims to identify the revenue requirements needed to cope

with additional outlay on the new project and to test in this way the financial viability of

the developers enterprise as a whole.

These procedures are no different in principle from those adopted by any lending

governmental, public or private. They are to establish the credit-worthiness of the project

and of the potential borrower. Even where there is a substantial contribution from in-

house funds by way of self financing and little if any external borrowing, the test of

credit-worthiness needs to be gone through to ensure that development funds are properly

employed and yield acceptable benefits for the enterprise.

Having shown that a given solution is of adequate economic merit, it is usually necessary

to present an analysis of the financial implications of the proposed scheme and of its

impact on the financial position of the developer. The decision making authority and the

financing agencies likely to be involved in the progression of the proposal will want to be

assured that the scheme can be satisfactorily funded and the developer can accept the

financial burden imposed by the scheme.

Most financing bodies, or they the corporate management responsible for an element of

self financing or an external agency, will prescribe what information should be provided

in a particular case although, as in economic analysis, a somewhat standardized approach


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has developed. The required information range from the financial appraisal of the project

as such a confirmation of its monetary requirements to the submission of a financing

planning showing phased investment and borrowing requirements.

Ultimately, a comprehensive set of Performa accounts may have to be prepared, or at

least examined and probably modified, to bring out the effect of the proposed additional

investment and its consequential annual charges. A financial frame work may have to be

set up which shows how the anticipated cash flows are to be handled and absorbed; the

scope of this frame work will depend on the institutional arrangements under which the

new plant is to operate.

The step-wise procedure for the financial analysis can be summarized as follows:-

1. A cash flow established in monetary terms and the financial return from the new

scheme is computed. Monetary terms imply fixed market prices. DCF analysis of

alternative disbursement schedules spanning the construction and operating phase

permits determination of the financial rate of return(FRR), sometimes also called

the financial internal rate of return.

2. The anticipated additional revenues earned from the operation of the new plant

are set against the additional expenditure incurred, including long term

commitments on the redemption (i.e. payback) of loans and other borrowings. The

adequacy of the revenue coverage is then found.

3. Confirmation is produced that the expenditure resulting from building and

operating the new scheme can be fitted into the corporate financial structure

without endangering the soundness of the undertaking. This is primarily an

accountancy matter but can have an influence on the conception the size and

phasing of the new scheme.


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4. A financing plan is set out to identify the precise financial requirements, the

potential sources of funds, the implications of the financing arrangements on offer

and the optimum way of funding the new scheme within the financial constraints

of the developer and, where necessary, with the approval of his govt.

The activities need not be carried out in this order but they are all essential precursor to

the implementation of the project. In some circumstances, it can be advisable to prepare

at least a tentative financing plan early in the project planning cycle so that not to much

time is spent in developing a project that stands little chance of being financed. The plan

can then be firmed up when the credit-worthiness of both the project and the developer

has been established and the potential sources of funds have been determined.


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CHAPTER 6

Comparison between Power Projects

Access to adequate as well as affordable power services is a necessary condition for

socio-economic development of a society. In a country like India where the major

economic activity is agriculture, supply of power, particularly to rural areas, is of great

significance in accelerating growth. It is also needed to promote other economic activities

for growth and development. Besides, supply of electric power has remained uneven here

and the per capita availability of power in the least developed countries has remained

below 400 kWh compared to that of 900 kWh in developed countries. In this respect the

adoption of rural electrification in India has been regarded as an essential step towards

achievement of a high rate of growth. However, as the major source of energy is the

conventional grid power produced from coal and to some extent from oil, the setting up

of the long and costly transmission and distribution lines coupled with high transmission

and distribution loss, increasing price of fossil fuels and high cost of centralized

management system make the programme unattractive in many places, in some cases

impossible. Also, there are financial and technological constraints due to lack of funds for

investment to expand the capacity.

Hydro-power: Benefits

Hydro-power projects up to 25 MW capacities are eligible for substantial cash subsidy

from the Ministry of Non-Conventional Energy Sources. Project income is exempt from

tax for ten years. Hydro projects automatically qualify for carbon credits under the Clean

Development Mechanism supported by the Kyoto Protocol and similar Emission

Reduction Funds.


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These projects have a long concession period of about 40 years and provide a perennial

stream of revenue to the investors. The entry of the private sector into power trading

would push up the demand for hydel generation for its cost advantage and higher trading

spreads.

Underlying the claims of certain advantages of hydro projects is the logic that guides the

planning methodologies currently employed in the power sector. The conventional logic

for hydropower, in the case of India, is as follows:

Hydro Compared With Other Generation Options

In comparison with hydropower, thermal plants take less time to design, obtain approval,build, and pay back. However, they have higher operating costs, typically shorter

operating lives (~25 years), are important sources of air, water and soil pollution and

greenhouse gases, and provide fewer opportunities for economic spin-offs.

Other renewable sources of power (wind, solar, etc) are valuable options in addition to

hydropower in specific contexts, but cannot produce large amounts of energy in the

coming decades, and need back-up supply from other sources.

Advantages of Hydroelectricity

Water is a renewable resource.

Hydroelectric generators are clean and non-polluting to operate. The water is not

destroyed, consumed or polluted by generating electricity.

Flowing water is free and reliable. Seasonal changes in water supply are fairly

predictable. The water stored in the reservoir provides a continuous supply, even

during dry weather.


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Once a dam is built, it costs very little to operate. Dams and generators require

little maintenance and are very reliable. The direct cost of hydroelectricity is very

low. Hydroelectricity is the least expensive source of electricity in large

quantities.

Small-scale hydro is simple and inexpensive. Individual homes and small

communities can get electricity from local streams.

Hydro reservoirs can also be used to control flooding, for irrigation and for

recreational activities such as boating and fishing.

Large delays in hydropower have been due to problems related to the availability

of funds, geological surprises, inadequate R&R plans, environmental issues, etc.

In the eighth plan, despite proposed capacity addition of the same order, only 27%could be realized.

The reason for such anomaly is more closely related to the internal dynamics of

planning than the knowledge of planners.

The sector is also important because the irrigation loads in the post-monsoon

period coincide with the annual peak period.

The savings are estimated as 15% of the present installed capacity.

These inputs are essential especially for the rural poor and the disadvantaged.

Disadvantages of Hydroelectricity

Large dams are expensive and slow to build. It can take over ten years between

the decision to build one and the time the electricity flows.

There are few sites for building large dams. In North America, most sites suitable

for large dams are already used. The sites that are left are mostly in the far north.

Dams disrupt the natural flow of water and disrupt ecosystems upstream and

downstream. Creatures that live in the water and animals that live on land can be

seriously harmed by changes in the flow of the river.


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Reservoirs flood people's homes, forests and farmland. The people who live in the

settlements and who use the forests and land may not want a reservoir there, even

if they want electricity.

Small Hydro versus Large Hydro Project:

The impacts of a single large hydro project must be compared with the cumulative

impacts of several small projects yielding the same power and level of service. Small

projects generally require a far greater total reservoir area than a single large project, to

provide the same stored water volume. It is concluded that the most fundamental

determinant of the nature and magnitude of impacts of hydropower projects are the

specific site conditions and not the scale of the project. It is also important to optimize

development with respect to the complete river system.

Large dams have long been promoted on the grounds that they provide 'cheap'

hydropower and their associated irrigation schemes profitably raise agricultural

productivity. Yes, it was sometimes admitted, there were damaging environmental and

social impacts, but these local sacrifices were worth paying given the indisputable overall

economic benefits of river impoundments.

Further blows to the dam industry's dreams of a private sector future have come from the

increasing attractiveness of natural gas plants to private investors. The combined impact

of the inherent drawbacks of large dams and the competitiveness of other forms of

electricity generation means that only a tiny fraction of the privately funded power plants

being developed around the world are dams. According to a recent World Bank-funded

study, only 2.5 percent of generating capacity under development by the private sector is

hydropower. This compares to the 20 percent of the world's existing generating capacity

which is provided by hydropower.


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Small hydroelectric projects have recently become comparatively more attractive to

utilities in Canada on account of slow growth in demand. From the environmental point

of view, they would be acceptable if the reservoirs are small and normal water levels do

not exceed the levels reached when the rivers are in spate. A hydel project, big or small,

should be preferred when the ratios of energy that could be generated per oustee and per

hectare flooded are comparatively high.

Estimates show that they could together replace a big project or two. In India,

considerable scope exists for small, mini and micro power projects and run of the river

schemes along rivers originating in the Himalayas and the Western Ghats. However, it is

true that small power projects alone would not suffice to meet increasing demand.

In India, the conventional alternatives to hydroelectric power are diesel, coal or natural

gas. Considering India's coal reserves and the fact that it imports petroleum, coal would

rank equally with diesel. Though thermal plants using coal used to be highly polluting,

modern technologies have helped to bring down pollution to very low levels. However,

coal is ranked below oil in the West as it produces a lot of carbon dioxide, a green house

gas.

The choice between a hydel project and a thermal project can be dictated by economic

factors if all the social and environmental costs are internalized. It is often assumed that

thermal power is necessarily costlier than hydel power. However, this assumption is not

always correct. Only a proper cash flow analysis would show which one is the most

economic.

Typically, a hydel project will require higher expenditures in the early years and the

thermal project in the later years. In a simplified way, the choice can be stated in terms ofwhether higher investment costs of hydroelectricity in the early years are or are not

justified by its lower operating costs in the later years.


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Table 6.1Pros and Cons of Electricity Sources

Source Advantages Disadvantages

Wind Renewable

energy source

Very low

greenhouse gas

emissions

Very low air

pollution

emissions

Very low

water

requirements

Very safe for

workers and

public

Intermittent

energy source

Limited to

windy areas

Potentially high

hazard to birds

Moderate land

requirements

Solar Renewable

energy source

Very low

greenhouse gas

emissions

Very low airpollution

emissions

Very low water

Intermittent

energy source

High land

requirements

Expensive

Manufacture

involves some

toxics


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requirements

Modular, low-

profile, low-

maintenance

Very safe for

workers and

public

Biomass Renewable

energy source

Very low

greenhouse gas

emissions

Can produce

energy on-

demand

Energy is

easily stored

Low energy

return on

investment

High air

pollution

emissions

Very high water

and land

requirements

High

occupationalhazards

Small

Hydro

Renewable (if

silt removed in

reservoir)

Relatively low

greenhouse gas

emissions

Very low air

pollution

emissions

Dependent on

stream flow

Large numbers

of small dams

can have

significant

effects on

terrestrial and

aquatic habitats,


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Inexpensive to

build and

operate

Safe for

workers and

public

possibly as great

as a large dam

producing the

same amount of

electricity

Large

Hydro

Very high

return on energy

investment

Very low

greenhouse gas

emissions

Very low air

pollution

emissions

Inexpensive

once dam is

built

Can produce

energy on-

demand

Provide water

storage and

flood-control

Non-renewable

(silt removal

unfeasible)

Very high land

requirements

Extremely high

impacts to land

and water habitat

Best sites are

already

developed or off-

limits

Disastrous

impacts in case

of dam failure

Natural

Gas

Inexpensive

Low land

requirements

Can produce

Non-renewable

energy source

High

greenhouse gas


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energy on-

demand

Relatively safe

for workers and

public

emissions

Relatively

moderate air

pollution

emissions

Danger of

explosion if

handled

improperly

Coal Inexpensive

Abundant

Low land

requirements

Can produce

energy on-

demand

Non-renewable

energy source

Very high

greenhouse gas

emissions

Very high air

pollution

emissions

High land/waterimpacts from

acid rain, mine

drainage

Highly

hazardous

occupation

Nuclear Low

greenhouse gas

emissions

Low air

Non-renewable

energy source

High water

requirements


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pollution

emissions

Low land

requirements for

power plants

(though not for

waste storage)

Can produce

energy on-

demand

Relatively

expensive

Waste remains

dangerous for

thousands of

years

Serious accident

would be

disastrous

.

Problems existed in the operation of SHP

For SHP development, the internal unfavorable factors of itself are: small scale

production, consistent increase of capital investment, contradiction of seasonal variation,

low level of technical equipment and operation and management, etc; in the meantime,

there are also external impact such as difficulties of selling electricity, unsmooth ness of

price mechanism, slow development of market, constraints of its public welfare character,

etc.

1. Small Scale Generation

Under present macro economic policy environment for energy, SHP mostly with

installed capacity less than tens of Mw would no doubt be in an inferior position in

competing with large conventional power plant with capacity of several hundreds Mw

and even several thousands MW.


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2. Difficulty of selling out

Due to different affiliation of SHP and national grid, the problem of integration of SHP

into the grid could not have been solved for long. It would be incapable of integration or

with very low electricity price in connecting to the grid, thus decrease the profit of SHP

and increase the risk of investment.

3. Contradiction of seasonal variation

During raining season, SHP would have large volume of spilling water due to surplus

power in the grid; while in dry season, shortage of electricity would occur in the grid.

This is also one of important causes for cost increase for SHP.

Benefits Of Small Hydro

The biggest advantage of SHP (small hydro power) is that it is the only clean and

renewable source of energy available round the clock. It is free from many issues and

controversies that continue to hound large hydro, like the submergence of forests,

siltation of reservoirs, rehabilitation and relocation, and seismological threats. Other

benefits of small hydro are user-friendliness, low cost, and short gestation period. In

addition to these obvious benefits, SHP contributes numerous economic benefits as well.

It has served to enhance economic development and living standards especially in remote

areas with limited or no electricity. In some cases, rural dwellers have been able to

manage the switch from firewood for cooking to electricity, thus limiting deforestation

and also cutting down on carbon emissions. On the macro level, rural communities have

been able to attract new industries mostly related to agriculture owing to their ability

to draw power from SHP stations.


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CHAPTER 7

Clean Development Mechanism

Overview of the Clean Development Mechanism

The CDM is a mechanism where Annex I countries with a specific obligation to reduce a

set amount of greenhouse gas (GHG) emissions by 2012 under the Kyoto Protocol assist

non-Annex I countries to implement project activities to reduce or absorb (sequester) at

least one of six GHGs. Non-Annex I countries are signatories and ratifiers to the Kyoto

Protocol; however, they do not adhere to reduction targets stipulated under the protocol.

The reduced amount of GHGs becomes credits called certified emission reductions

(CERs), which Annex I countries can use to help meet their emission reduction targets

under the protocol (UNFCCC 1997)

The six greenhouse gases addressed under the Kyoto Protocol

The six GHGs are not equal In terms of global warming potential (GWP), which

measuresthe relative radiative effect of GHGs compared to CO2. For example, one tonne ofmethanehas a GWP as potent as 21 tonnes of CO2.Greenhouse gas Global warming potential1. Carbon dioxide (CO2) 12. Methane (CH4) 213. Nitrous oxide (N2O) 3104. Hydrofluorocarbons (HFCs) 14011,7005. Perfluorocarbons (PFCs) 6,5009,2006. Sulfur hexafluoride (SF6) 23,900


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Diagram of How the CDM functions


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Overview of the CDM Project Cycle:


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CDM Potential of Different Interventions in Power Sector in India

Small-scale CDM projects

Although the CDM is devised to foster the sustainable development of host countries,

developing small-scale CDM project activities, which are known to be eneficial to the

sustainable development of local communities, are often burdened with high costs for

low returns.

In order to leverage the development of small-scale CDM project activities, the UNFCCC

introduced fast-track modalities and procedures with some preferential treatment.


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A project activity can be qualified as small-scale CDM if it meets one of the three

following conditions (UNFCCC 2001b, paragraph 6[c], 21):

Type I: renewable energy project activities with a maximum output capacity equivalent

to up to 15 megawatts (or an appropriate equivalent)

Type II: energy-efficiency improvement project activities which reduce energy

consumption on the supply and/or demand side by up to the equivalent of 15 gigawatt-

hours per year

Type III: other project activities that both reduce anthropogenic emissions by sources

and directly emit less than 15 kilotonnes of CO2 equivalent (CO2e) annually Small-scale

CDM project activities benefit from a number of privileges, which allows them to speed

up their registration process. The details of the special treatment given to small-scale

projects can be found in the overview of the CDM project cycle (section 3.7). One special

feature applicable only to small-scale CDM project activities is bundling and debundling.

Bundling is to cluster projects that are too small to be attractive for investment, even with

the additional CER revenues. By using the bundling scheme, small projects can become

cost-effective and thus become sufficiently attractive with CER revenues. Many

community-based projects (e.g., small hydropower), as well as projects for small- or

medium-size enterprises, with significant contribution to local sustainable development

often face difficulties in attracting sufficient interest for investment without a substantiallevel of public support. These projects can use the bundling scheme to improve their

overall financial viability. Projects can be bundled into sub-bundles based on the small-

scale project types (type I, II, or III) and project characteristics, such as technology types,

emission reduction measures, location, and baseline methodologies. Furthermore,

bundling of one or more sub-bundles is possible and there is no limitation on the number

of projects that can be sub-bundled, as long as the total size of the each sub-bundle

cluster does not exceed the ceiling set for its small-scale project.


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While it is possible to bundle small projects together, however, large projects are not

allowed to be debundled to smaller project sizes well within the range of small-scale

CDM rules (box 3.2), in order to avoid anyone taking advantage of the CDMs fast-track

and cost-effective scheme for small-scale CDM projects. While the bundling scheme may

appear to be an ideal solution for small projects beneficial to sustainable development,

there also exists a number of difficulties involved with the practice, for example, in

developing a plan for monitoring all bundled project activities.

The bundling requirement of small-scale CDM projects in the small-scale sector

The Indian Renewable Energy Development Agency (IREDA) of the central government

has been designated the bundling organization for bundling CDM projects in India to

bring down transaction costs.

Bundling organizations

Most of the CDM projects currently being developed in India belong to the small-scale

category of CDM projects. Many of these may have high sustainable development

benefits, but due to their smaller size they are not able to bear the high transaction costs

related to project development and other steps. Studies on transaction cost have indicated

that bundling small projects into one, or bundling project steps, may reduce the

transaction cost of such projects.

This creates the need for bundling organizations which can coordinate the preparation of

CDM-related documents, validation and registration of projects, and monitoring and

verification of emissions reduction on the one hand, and also act as a single contact point

for carbon buyers on the other. The consultants and energy service companies may be

well-placed to take on this task. Additionally, agencies such as the Small Industries

Development Bank of India (SIDBI) and National Bank for Agriculture and Rural

Development (NABARD) can also act as bundling organizations for rural and

community development-oriented projects. Such organizations may also serve as a

sellers pool, thereby securing the interest of sellers.


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A few such examples are already available in the country. For instance, Women for

Sustainable Development, an NGO in Karnataka is coordinating the activities of small-

scale CDM project developers, providing them technical assistance, and assisting in the

sale of the emissions reduction credits from these projects.

Process of host country approval by NCA


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CHAPTER 8

Case Study

Ramgad micro hydel project is situated in Betalghat block of district Nainital, on Nainital

Almora Road in Uttaranchal.

The scheme has been commissioned on March 1989 and is running satisfactorily. Power

house building has been constructed to house two units of Turbine, Generator, Oil

Pressure Governor, B/F Valve, Control panel, Battery & Battery Charger unit. 50.0 meter

of water head and 382 litre water per second discharge has been utilized for generation of

100 KW of power.

The power has been generated at 415 volts and transmitted to the nearby villages at

11000 volts through a step-up transformer.

The voltage transmitted at 11000 Volts is again stepped down to 415 Volts through step-

down transformer erected at different village sub-stations.


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Some of the Salient Features of the RAMGAD micro hydel projects is:

1) POWER HOUSE: The size of the power house is 12.0M*6.0M. The type of the sub

structure is R.C.C. Pipers & Beam & that of the super structure is Stone

Masonary.The type of machine foundation.

2) TAIL RACE CHANNEL: The channel is of type R.R. Stone Masonary with the size

of 850mm*600mm. The length is 9000mm & that of Free Board is 150mm.The

outfall structure joins with the stream.

3) POWER CHANNEL: The Power Channel is made of R.C.C. with the size of

750*650(W*D). The length of the free board is 620M with the Bed Slope of the ratio

1:250.

4) PENSTOCK INTAKE: The trash rack of the intake is of fabricated steel & the

control arrangement is manually operated gate valve.

5) PENSTOCK: The Penstock is of Mild Steel. The length of the only Penstock is 280

Meter with the diameter 450.0mm.

6) 6) DESILTING TANK: The size of the tank 4.0M*2.4M*2.0M. The tank is of

R.C.C. The particle for the elimination is of 0.20 mm.

7) Diversion/Intake Structure: The diversion is of Stone masonary structure with

R.C.C. core wall. The dimension of the structure is Length*Bottom Width*TopWidth*Depth = 25M*2225M*1000M*2000M.

8) FEEDER CHANNEL: The channel is of R.C.C. with the size (cross-section)

1.0M*0.7M. The size of free board is 150mm and the length of the channel is 160 M.

The Design Discharge is of 0.57 cumec. The Bed Slope is 1 in 150.

9) HEAD: The Gross head and the Net head is 53.8 M and 50.0 M respectively.

10)TURBINE AND GENERATOR: The turbine is of type Turgo Impulse. The turbine

output is 80.0 KW. Total numbers of units are two. The Generator is of

synchronous type with the rating of 62.5 KVA, 415 volts, 0.8 p.f., 3 phase and 50 Hz

frequency.


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11)TRANSMISSION SYSTEM: The Transmission line is of 11KV,3 phase which is on

fabricated towers with ACSR Weasel conductor. The extension of the system is 8.0

km approximately.

12)DISTRIBUTION SYSTEM: The distribution system has two types: First is of type

3 phase, 415V, 4wire with the distance of 5.5 km.Second is of type 1 phase, 215V,2

wire with the distance covered 7.25 km.

13)TRANSFORMER SYSTEM: a) One step-up transformer of rating 160 KVA, 0.4/11

KV. b) Seven step-down transformer with rating 25 KVA, 11/0.4 KV and two step-

down transformer with rating 5 KVA, 11/0.2 KV.

Five numbers of villages that have been electrified are Kafulta, Bargal, Garjoli, Jakh and

Budhlagot.

Upto 24/11/2004 there was no grid connection. Some of the problems at that time were:

1) The villagers were misusing the power and did not care for it.

2) The capacity was not fully utilized, due to peak power reaching 60 to 70 kw, and

average power was 30 to 40 kw.

3) There was no supply of reliable and consistent power for e.g. during irrigation time.

4) The revenue generated was not covering even the operation and maintenance cost.5) It was looking that this is not a profitable project.

On 24/11/2004 the project was connected to grid for feeding the unusable power and

taking it at peak hours. There was a PPA signed between UPCL & UREDA for selling or

taking the power at the rate of Rs. 1.64/unit. The revenue generated is being distributed in

the ratio of 75:25 in between UREDA: Urja Samiti.

Some of the growth and development that has been generated through grid

interconnection are-

1. Community participation: The grid is being operated and maintained by village Urja

Samiti; this makes a sense of equity participation and responsibility in them.


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2. Revenue Generation: The revenue generated was almost six lakhs rupees, within two

years only through grid connection

3. Sense of ownership: Before Grid connection, the villagers were misusing the power

supply, but due to grid connection & minimum charge tariff along with metered supply,

the villagers feel a sense of ownership and hence care for the electricity.

4. Bridging finance: While going for grid connection, each villager was to submit Rs.

1000 each. Now, they are financially attached to the utility. Bridging finance

5. Government support: UREDA supports the RAMGAD project for renovation and

modernization while required.

Some of the excerpts taken by interviewing some of the villagers are:-

Table 8.1

Name of the house

owner

Occupation Income

(Annual)

Electrical instruments in house

Kishan Singh Mehra Farmer Rs. 10-12,000 T.V.,4*60 W bulbs, Tape

RecorderSurendra Singh Pandey --do-- Rs. 6-7,000 4*60 W bulbs, Tape Recorder

Narpath Singh Clerk Rs. 24,000 T.V.,4*60 W bulbs

Rajendra Singh Farmer Rs. 12-14,000 2*60 W Bulb

Deep Singh Farmer Rs. 7-8,000 T.V.,4*60 W bulbs


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Table 8.4 QUANTIFICATION OF SOCIO-ECONOMIC ANALYSIS:

(Figures in Rs. 0000)

BENEFITS DISBENEFITS

500 400 300 200 100 0 100 200 300 400 500 1000

Water supply and

irrigation

Flood control

Soil Improvement

Electric Supply

Employment

Infrastructure development

Enhancements of

Industry & comm.

Improvement of living stan

learn and upgrade the

skills of rurals

Ground & parasitic pollun.

Water abstraction

Environmental disturbance

Visual ammenity

Soil deterioration

changes in mineral contentFiscal surplus/Deficits


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BENEFITS

Water supply and irrigation = Rs.10, 00, 000

Flood control = Rs. 12, 00,000

Soil Improvement =Rs. 4, 00,000

Electric Supply =Rs. 55, 00,000

Employment =Rs. 50, 00, 000

Infrastructure developments =Rs. 10, 00,000

Enhancements of Industry & comm. = Rs.3, 00,000

Improvement of living standards = Rs.3, 00,000

learn and upgrade the construn. Skills of rurals=Rs.4, 00,000

DISBENEFITS

Ground & parasitic pollun. =Rs. 4, 00,000

Water abstraction = Rs. 3, 00,000

Environmental disturbance =Rs.2, 00,000

Visual amenity =Rs. 5, 00,000

Soil deterioration =Rs. 4, 00,000

changes in mineral content = Rs. 5,00,000

Fiscal surplus/Deficits =Rs.1, 02, 33,019

So, NET BENEFITS= (Water supply and irrigation +Flood control+ Soil Improvement+Electric Supply +Employment +Infrastructure developments +Enhancements ofIndustry & comm. +learn and upgrade the construn. skills of rurals+Improvement of

living standards)-( Ground & parasitic pollun+Water abstraction +Environmentaldisturbance +Visual amenity +Soil deterioration +changes in mineral content +Fiscalsurplus/Deficits) )

= Rs.1, 51, 00,000-Rs.1, 25, 33,019

=Rs.25, 66,981


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So, when we considered only the monetary terms the cash flow was negative. But, when

the Socio- economic impact is also concerned and evaluated and quantified in numerical

values, the resultant cash flow become positive. In conclusion we can say that the socio

economic impact plays an important role, which must be concerned and included while

calculating the mini/micro projects.Ramgad is a profitable project while considering the

whole scenario.

Financial analysis of Ramgad Project in view of Private Investors

The financial analysis of Ramgad micro hydro project is totally depending up on the

approach adopted by Alternate Hydro Energy Centre. Rotan micro hydro project has

taken as base for the calculations. Some relevant assumptions have also been taken due to

unavailability of some data. The financial analysis of the project is as follows;

Estimates of Cost & Phasing

The total Project cost is estimated as Rs. 52.21 Lacs comprising of Rs. 18.48 Lacs for

Civil Works, Rs. 19.38 Lacs for E&M works & Rs. 14.35 Lacs for T&D Works.

Generation cost:-

i. Cost of Generation per kWh of power depends on total annual generation &

annual working expenditure.

ii. The annual expenditure will consist of:-

a. Operation cost @ 1% of works cost

b. Maintenance cost @ 1% of cost of Civil Works + 2% of cost of E & M

works + 1% of cost of T & D works

c. Depreciation charges considered life of civil works & E & M works as

per standard norm given in the Gazette of India Extraordinary part IIsection; published by Ministry of Power & Non-Conventional Energy

Sources, with assumption 10% as scrap value

d. Interest @ 14% pa. on capital invested


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iii. Annually units generated are computed as 788400 units at 90% load factor &

525600 units at 60% load factor.

Table 8.5 Statement of Cost of Generation

SI. No. Items Cost (Rs. In Lacs)

1 Capital cost (basic) 52.21

2 Subsidy from MNES* 23.49

3 Project Cost without Subsidy

Project Cost 52.21Interest during Construction (@ 14%) ** 5.61

Total Project Cost 57.82

4 Project Cost with Capital Subsidy

Project Cost 52.21

Capital Subsidy 23.49

Balance Cost 28.72

Interest during Construction

on balance cost @ 14%

2.52

Total Project Cost 31.24

5 Annual Working expenses as per table 8.6 3.13

6 Interest Charges (@ 14%)

(a) without subsidy 8.09

(b) with capital subsidy 4.37

7 Total Annual expenses




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8 Annual Generation at power house (units)

(i) at 90% load factor 0.7884

(ii) at 60% load factor 0.5256

9 Cost of generation per kWh (in Rs.)

(i) at 90% load factor


(b) with capital subsidy .95

(ii) at 60% load factor



* Subsidy of up to 45% of project cost limited to Rs. 60,000 per KW will be given to

private & joint sectors as per MNES guidelines.

** Calculation of interest during construction has been done as per the calculation

done by AHEC in Rotan M H Project.


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Table 8.6 Statements of Yearly Working Expenses

Sl. No. Items Cost(Rs In Lacs)

1. Operation cost 0.52

@ 1% of works cost

2. Maintenance cost of civil works 0.18

@ 1% of cost of c- works

3. Maintenance cost of E & M works 0.39

@ 2% of cost of E & M works

4. Maintenance cost of T & D works 0.29

@ 2% of cost of T & D works

5. Annual depreciation charges as per table 8.7 1.75

TOTAL 3.13


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Table 8.7 Annual Depreciation of Assets

Sl.

No.

Items Life in

years

Cost(Rs.Lac) Rate of

depreciation

in %

Depreciation(Rs.Lac)

1. Civil works 50 18.48 1.95 0.36

2. E & M works 35 19.38 3.40 0.66

3. T & D works 25 14.35 5.06 0.73

TOTAL 1.75


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Table 8.8 Description Of Cash Flows

Sl.

No.

year Cash inflow Cash out flow

1.

2.

3.

4.

5.

6.

7.

8.

1990

1991-

2015

2016

2017-

2015

2026

2027-

2040

2041

2042-

2050

---

Revenue generated

by power selling

Revenue generated

by power selling

Revenue generated

by power selling

Revenue generatedby power selling

Revenue generated

by power selling

Revenue generated

by power selling

Revenue generated

by power selling

Initial capital expenditure

Operating expenses

New T&D works

Operating expenses

New E&M works

Operating expenses

New T&D & civil works

Operating expenses


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Table 8.9 Calculation of NPV (without capital subsidy)

Sl.

No.

Year Cash

inflow(in Rs.Lac)

Cash

outflow(in Rs.Lac)

Net Cash

flow(in Rs.Lac)

Present

value(inRs. Lac)

1.

2.

3.

4.

5.

6.

7.

8.

1990

1991-2015

2016

2017-2015

2026

2027-2040

2041

2042-2050

0

19.71

6.57

19.71

6.57

19.71

6.57

19.71

57.82

11.22

155.47

11.22

544.62

11.22

3853.93

11.22

-57.82

8.49

-148.9

8.49

-538.05

8.49

3847.36

8.49

-57.82

77.31

-13.73

3.94

-19.14

2.12

-32.76

1.15

NET PRESENT VALUE -38.93


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Table 8.10 Calculation of NPV (with capital subsidy)

Sl.

No.

Year Cash

inflow(in Rs.Lac)

Cash

outflow(in Rs.Lac)

Net Cash

flow(in Rs.Lac)

Present

value(inRs. Lac)

1.

2.

3.

4.

5.

6.

7.

8.

1990

1991-2015

2016

2017-2015

2026

2027-2040

2041

2042-2050

0

19.71

6.57

19.71

6.57

19.71

6.57

19.71

31.80

11.22

155.47

11.22

544.62

11.22

3853.93

11.22

-31.80

8.49

-148.9

8.49

-538.05

8.49

3847.36

8.49

-31.80

77.31

-13.73

3.94

-19.14

2.12

-32.76

1.15

NET PRESENT VALUE -12.91

]


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Financial Analysis of Ramgad Micro Hydro Project:

The financial analysis of Ramgad micro hydro project is based on available data and the

methodology used is based on the approach adopted by Alternate Hydro Energy Centre,

IIT, and Roorkee. The DPR of Rotan micro hydro is taken as the base for all calculations.

Assumptions:--

The project life is taken as 60 years.

The PLF of the plant is taken as 90%.

Discount rate is taken as 10% for all calculations.

The electricity tariff is taken as Rs.2.50/unit throughout the life of project.

(Same as taken by AHEC in Rotan M h Project).

Annual operating expenses are taken constant throughout the project life.

It will take 8 months to complete each i.e. E&M works, T&D works and civil

works.

Results for Ramgad micro hydro project: -- According to the analysis doneabove the NPV and pay back period of the Ramgad micro hydro project comes out to be:

1. NPV for the project:

a) With capital subsidy Rs.-12.91 Lac

b) Without subsidy Rs.-38.93 Lac

2. Payback period for the project:

a) with capital subsidy 3.74 years

b) without subsidy 6.81 years


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Interpretation of the result: -- The NPV of the project comes out to be negative in

both the cases i.e. with or without subsidy and the payback period is very small. The

payback period of the project is 3.74 years for the project with capital subsidy and 6.81

years for the project without subsidy. And the NPV for the project with capital subsidy isRs. -12.91 Lac and for the project without subsidy is Rs. -38.93. (Negative in both the

cases).

While the payback period is so small, the NPV has such a high negative value. The

possible reasons for negative NPV are as follows:-

I. There is no increase in electricity tariff through out the project life.(the tariff is

assumed to be fixed at Rs. 2.50/unit throughout the project life), hence there is no

increase in the cash inflow i.e. revenue generated is constant for every year.

II. The project life is assumed to be 60 years which is more than the average lives of

T&D, E&M and civil works. This will affect as follows:-

a) The life of T&D works is 25 years; hence the new T&D work has to be done

once after 25 years that will costs Rs 1554.47 Lac and then after 50 years,

which will costs around Rs.1684.55 Lac.

b) The life of E&M works is 35 years; hence the new E&M works has to be

done after 35 years that will costs Rs 544.62 Lac.

c) The life of civil works is 50 years; hence the new civil works has to be done

after 50 years that will costs Rs 2169.38 Lac.

The lives of all types of works are taken according to Alternate Hydro Energy Centre.

And the costs of all types of works have been calculated taking the discount rate of 10%.

The above given are the reasons behind the negative NPV of the project instead of the

fact that project has such less payback period. The main reason for this is long project

life. If we take project lives different the results will differ as follows.


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1. Taking project life as 25 years; the NPVs are

a) with capital subsidy Rs. 45.51 Lac

b) without capital subsidy Rs. 19.49 Lac



b) without capital subsidy Rs. 9.7 Lac



b) without capital subsidy Rs. -7.32 Lac

Actual Scenario of Ramgad Micro Hydro Project (According to data

available):--

The Ramgad micro hydro project is commissioned in 1989 and completed in 1990. it

started generation in 1991.since it an existing project, the data is available from year 1990

till year 2006.based on that data, we can easily calculate that the project is going in loss.

The actual financial results are totally different from what has been calculated for the

same project (based on approach adopted by AHEC). From table 8.11 we can easily see

that the net present value of the Ramgad project (considering only from1990 to 2006) is

Rs -63.29 Lac. The pay back period of Ramgad according to the calculation done, comes

out to be 3.74 year (for project with capital subsidy) and 6.81 year (for the project

without subsidy).

Table 5.12 shows that the most of the times the net cash flow is negative. The possible

reasons behind the negative cash flows are as follows:-

1. The repair and maintenance was not done regularly, hence it need huge amount

cash for the maintenance.

2. In year 2004, the plant started grid feeding and that required a huge investment,

due to which the cash outflow was increased.


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3. There was not the full utilization of hydro potential because a part of the water is

used for the irrigation.

4. Since, the project was established for the social benefits; hence the actual tariff

was less than the tariff used for calculations.

5. The dam for diversion was made with stone masonry structure with R.C.C. core

wall, that dam was damaged after every 2years on an average, which required

huge cash out flow.

6. In year 2002 & 2003, the enormous amount of investment was required for

modernization of the project.

7. 35% of meters there were defective, which affect the billing and collection

efficiency.


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PHOTO GALLERY

FIG 1. POWER HOUSE OF RAMGADS MICRO HYDRO PROJECT

FIG 2. RAMGAD DIVERSION DAM

FOREBAY

POWER

HOUSE

DAM BUILT OF

STONE

MASONARY

WITH RCC

CORE WALL


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FIG 4. PICTORIAL ILLUSTRATION OF RAMGAD PROJECT

FIG 5. GENERATING UNIT OF RAMGAD PROJECT


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FIG 5. VILLAGERS WHO ARE GETTING BENEFITTED OUT OF THE RAMGADPROJECT (SOCIAL CAUSE)


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CDM Issue For Bundled Micro Hydel Projects

The project activity consists of the construction of Bundled Microhydel Projects (3.115

MW) which has bundled 29 projects, the total installed capacity being 3.115 MW to

generate clean energy using the energy of the flowing stream. The project is a run of the

river type with minimum environmental impact and will provide and sell electricity to the

villages in and around the area reducing dependence on fossil fuels and reducing CO2

emissions.

The Microhydel projects will deliver electricity to 182 villages, through a mix of 11KV,

440V, 220V transmission lines and will supply power to the residential and commercial

customers. As a consequence of the construction of the project, the electricity produced

will increase the life quality of the inhabitants.The Microhydel projects are being developed by Uttaranchal Renewable Energy

Development Agency (UREDA) and being managed by User Energy Committees, which

are constituted for each project.

The Microhydel projects will produce an average annual generation of 7.58 GWH and

will contribute to reduce the emissions in the amount of 8527 tons of CO2eq. per year.

The Microhydel projects will contribute to the sustainable development by providing

several important environmental and social benefits.

Location of Project (Village/District/ State):

The Microhydel projects are situated in the state of Uttaranchal, India. The exact location

of all projects is given below:

Table 8.13 Location of Projects

S.No. District Name of Site Physical Location

1. Bageshwar Ratmoli Vill. -RatmoliPost -BankotBlock -Bageshwar

2. Bageshwar Satteshwar Vill. -SatteshwarPost -Bankot

Block -Bageshwar


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3. Bageshwar Kanolgad Vill. -KanolgadPost -KanyalikotBlock -Kapkot

4. Bageshwar Karmi-ii Vill. -KarmiPost -Karmi

Block -Kapkot

5. Bageshwar Dokhti Vill. -DokhtiPost -Bagar

Block -Kapkot

6. Bageshwar Bhikuriyagad Vill. -BhikuriyaPost -Seragad

Block -Munsiyari

7. Bageshwar Kunwari Vill. -KunwariPost -BadiyakotBlock -Kapkot

8. Bageshwar Jagthana Vill. -JagthanaPost -JagthanaBlock -Kapkot

9. Bageshwar Lamabagar Vill. -LamabagarPost -Baisani

Block -Kapkot

10. Bageshwar Wacham Vill. -WachamBlock -Kapkot

Block -Bageshwar

11. Bageshwar Gogina II Vill. -GoginaBlock -KapkotBlock -Bageshwar

12. Bageshwar Karmi-iii Vill. -KarmiPost -Karmi

Block -Kapkot

13. Bageshwar Liti-ii Vill. -LitiPost -Liti

Block -Kapkot

14. Nainatal Ramgad Vill. - Ramgad

Post - RatighatBlock - Betalghat

15. Pithoragarh Rotan Vill. -RotanPost -RaiyangharBlock -Berinag

16. Chamoli Gangotri Gangotri Dham


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17. Chamoli Choting Vill. -ChotingPost -MilkhetBlock -Dewal.

18. Chamoli Bank Vill. -BankPost -MundoliBlock -Dewal.

19. Chamoli Wan Vill. -WanPost -Wan

Block -Dewal.

20. Chamoli Ghes Vill. -GhesPost -Ghes

Block -Dewal.

21. Chamoli Sarma Vill. -SarmaPost -KanolBlock Ghat

22. Chamoli Gamsali-Bampa Vill. -Gamsali-BampaPost-Gamsali

Block-Joshimath

23. Uttarkashi Istergad Vill. -DholaPost -HadwadiBlock Mori

24. Uttarakashi Lamchula Vill. -DangPost -JakheraBlock Garur

25. Uttarakashi Gangotri II Vill. -GangotriPost -GangotriBlock Bhatwari

26. Uttarkashi Taluka Vill. -TalukaPost -DhatmirrBlock Mori

27. Nainital Niti Vill. -NitiPost Niti

Block Joshimath28. Almora Tarula Vill. Tarula

Post NainiBlock -Bainsiyachhana.


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29. Tehri Jakhana Vill. JakhanaPost BudhakedarBlock -Bhilangana.

TheComplete CER holding will be to be with UREDA.

Construction for the first Microhydel project started in June 2003 and the project became

operational in Jan 2005.The Project completion date will be June 2007. The Project Life

time will be 30 years

Financing details of the Project:The total project costs amount to Rs. 623.8 million (US$13.86 million), out of which

Rs.186.9 million (US$4.15 million) has been accrued as subsidy from Ministry of Non

Conventional Energy Resources, Govt. of India and the rest Rs. 436.9 million (US$9.71

million) through funding by Uttaranchal Renewable Energy Development Agency

(UREDA).

(Taking Exchange Rate, $1 = Rs. 45)

The total CDM contribution sought to be Rs.4, 609,440 (us $ 102,324) per year. The

Indicative CER price is US$12

IRR without CER Revenue will be -1%.

IRR with CER Revenue will be -0.1%. (As per calculation done).

The Subsidy element in the project & source is Ministry of Non Conventional EnergyResources; Govt. of India gives a subsidy of Rs 60,000 per KW of installed Microhydel

capacity. The total subsidy element works out to be Rs. 186.9 million.

Emissions Reductions from the Project

The Microhydel project generates electrical power using hydro potential and supplies the

net generated power to the villages, which otherwise under normal circumstances would

have got power by diesel generation units.

Hence, the generation by the proposed project activity is non-GHG source and it is

expected that the entire fossil fuel generation (which would have happened in case the

project would not have been implemented) will be replaced by a renewable, non-GHG

emitting source of energy.


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Table 8.6

@ 70% PLF (with grid feeding)

YEAR 2007 2008 2009 2010 2011 2012 2013

Baseline emissions

(tCO2)

21486 21486 21486 21486 21486 21486 21486

AnticipatedGeneration

(GWH)

19.1 19.1 19.1 19.1 19.1 19.1 19.1

Revenue generatedIn Million Rs.

(1$=Rs45)

10.16 10.16 10.16 10.16 10.16 10.16 10.16

By connecting the project to grid we can increase the PLF of the various micro hydel

projects to 70 %( approx.) From 27 %( approx), which on one side will supply

electricity to the grid and on the other side will make the project financially viable by

generating more revenues from generation as well as CDM. Here with the increase in the

PLF the surplus revenue generated by the sale of CERs will be Rs 6.13 Million.

Specific global & local environmental benefits:

The project will reduce estimated global CO2eq emissions by approximately

250,000tCO2eq during its operational lifetime.

The project will contribute to supply electricity based on locally available hydro

resources instead of relying on GHG emitting fuels.

The project would lead to utilisation of environmentally safe & sound

technologies in small scale hydroelectric power sector. Further the project

demonstrates harnessing hydro potential in small rivers and encourages setting up

of such new projects in future.


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Calculations Related To CDM for Ramgad ProjectThe resulting baseline emissions during the 1st crediting period are tabulated below

Table 8.7

@ 27% PLF (without grid feeding)

YEAR 2007 2008 2009 2010 2011 2012 2013

Baseline emissions(tCO2)

233.1 233.1 233.1 233.1 233.1 233.1 233.1

Anticipated Generation(GWH)

.2365 .2365 .2365 .2365 .2365 .2365 .2365

Revenue generatedIn Million Rs.

(1$=Rs45)

125.8 125.8 125.8 125.8 125.8 125.8 125.8

Table 9.5

@ 70% PLF (with grid feeding)

YEAR 2007 2008 2009 2010 2011 2012 2013

Baseline emissions(tCO2)

604.3 604.3 604.3 604.3 604.3 604.3 604.3

Anticipated Generation(GWH)

.6132 .6132 .6132 .6132 .6132 .6132 .6132

Revenue generatedIn Million Rs.(1$=Rs45)

326.3 326.3 326.3 326.3 326.3 326.3 326.3

Here in the case of Ramgad micro hydel project, the PLF of the plant has increased with

connection to the grid . The plant which was running in loss at a PLF of 30% (approx)

has started earning profit by running at an average PLF of 70% (approx.).

As the generation has increased from 236520 units to 613200 units as calculated .this will

increase CERs units. The surplus CDM revenue so generated will be Rs 200457.

This will help in making the project economically viable as an additional income of Rs

326326.6 will be generated.


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SWOT ANALYSIS

STRENGTH:

1. Grid feeding resulting to revenue collection.

2. Environmental benefit.

3. Employment to villagers for e.g. formation of URJA Samiti.

4. An ideal case for rural electrification.

WEAKNESS:

1. Defective meters, collection efficiency

2. Repair and maintenance not done on regular basis.

3. Hydro power potential is not being optimally utilized due to irrigation.

4. Dam gets damaged after every two years(on an average basis).

OPPORTUNITIES:

1. Additional 50 to 100 KW can be generated by setting up a new plant.

2. More power can be produced by optimally utilizing the resources (fore.g. shifting diversion channel back side).

3. Extra revenue can be generated by selling CER units.

THREATS:

1. The villagers will start accessing power from grid, if grid reaches to

them due to difference in tariff


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CONCLUSION

In the present scenario of power sector it is not possible to provide electricity

to very poor people in remote locations and make a high return on capital.

Any project or financial investment is intended to make choices between two

extremes, viz profitability and social impact. But our project, which

comprises of the case of Ramgad

Documents

Report Small Hydro