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THE STUDY OF THAILAND INFRASTRUCTURE
DEVELOPMENT FEASIBILITY ANALYSIS:
SMALL SCALE HYDROPOWER
PLANT CASE STUDY
Krit Kongcharoen
A Dissertation Submitted in Partial
Fulfillment of the Requirements for the Degree of
Doctor of Public Administration
School of Public Administration
National Institute of Development Administration
2018
iii
ABSTRACT
Title of Dissertation The Study of Thailand Infrastructure Development
Feasibility Analysis: Small Scale Hydropower Plant
Case Study
Author Mr. Krit Kongcharoen
Degree Doctor of Public Administration
Year 2018
This study’s main objectives are 1) to study a small scale hydropower plant
feasibility analysis framework; 2) to study the standards and guideline compliance of
this small scale hydropower plant feasibility analysis; 3) to study the difficulties and
limitations of a small scale hydropower plant feasibility analysis; and 4) to improve
the small scale hydropower plant feasibility analysis framework. This study considers
analysis methodology and process by employing mixed-methods research to analyze
data from Thailand’s small scale hydropower plant feasibility studies conducted from
1987 to 2016, amounting to 48 studies covering 648 projects. It also involves other
related reports, academic papers, operations manuals, and in-depth interview data
from small scale hydropower plant feasibility analysis-related personnel.
The study shows that, overall, small scale hydropower plant feasibility
analysis methodology follows an economic analysis framework by employing a cost-
benefit analysis framework (CBA), which complies with the standards and guidelines
outlined by related organizations. Some of the details, however, do not comply with
the said standards and guidelines, including discount rate determination, cost and
benefit analysis methodology, and risk analysis methodology. Furthermore, there are
significant differences between the study and actual performance, notably in terms of
benefit short fall. In terms of future electricity generated, the studies tended to
overestimate the electricity by 53.9% compared to the actual result. Differences also
resulted from study difficulties and limitations, for instance, data limitations and
iv
Differences in methodology among the studies, Conversion Factor (CF) used to
transform market price to shadow price which could be inconsistent with current
economic conditions, risk analysis which does not reflect reality and the probability of
various risk factors.
Regarding the process study results, the small scale hydropower plant
feasibility analysis process, which involves consultant hiring, study methodology,
feasibility analysis, and project approval, complies with laws and guidelines for
public management efficiency. However, there are difficulties and limitations that
could influence the study, which are the lack of an economic standard or provisional
license, lack of project study scope, differing opinions on study methodology between
the analyst and approval board, and a lack of quality and validity control from
external agencies. These difficulties and limitations in methodology and process could
influence the study’s accuracy and credibility, which could lead to wrong judgment
from the agencies related to project development. These issues could create negative
impacts on natural resources and the environment, as well as national budget
inefficiencies.
Recommendations for small scale hydropower plant feasibility analysis
methodology improvements to solve these difficulties and limitations include: 1)
setting up the study methodology in clear detail in the form of a manual and
standardized case studies so as to get rid of differing methodologies; 2) applying
reference class forecasting and Monte Carlo Simulations, which analyze feasibility by
calculating project costs and benefits as well as probability of risk factors by using the
results from past or present project results to get rid of inconsistencies in the
feasibility analysis. The feasibility and risk indicators to consider are (1) Risk
Acceptable Net Present Value (R-NPV) and (2) Degree of Risk. In terms of feasibility
analysis process development, this study proposes the setup of a provisional standard
for economic professions regarding public project feasibility analysis, a study
accuracy and transparency monitoring process development, a project result
monitoring database development, and private-public joint investment promotion.
These recommendations would lead to public management efficiency as well as
balanced and sustainable national development in the long run.
v
ACKNOWLEDGEMENTS
The completion of this doctoral dissertation “The Study of Thailand
Infrastructure Development Feasibility Analysis: Small Scale Hydropower Plant Case
Study” is possible with the support of the major Advisor Associate, Professor Dr.
Montree Socatiyanurak. I would like to express my sincere gratitude for his
consultation, encouragement and guidance in making this dissertation successful.
I would also like to thank the committee Chairperson, Associate Professor
Dr. Wiwatchai Atthakor, and other Committees, Assistant Professor Dr. Visit
Limsombunchai and Assistant Professor Dr. Apirada Chinprateep for their valuable
advice.
Finally, I would like to give special thanks to my family and friends who have
always been supportive through this entire process.
Krit Kongcharoen
October 2018
vi
TABLE OF CONTENTS
Page
ABSTRACT iii
ACKNOWLEDGEMENTS v
TABLE OF CONTENTS vii
LIST OF TABLES viii
LIST OF FIGURES xii
CHAPTER 1 INTRODUCTION 1
1.1 Statement and Significance of Study 1
1.2 Research Questions 8
1.3 Objectives 8
1.4 Scope of the Study 8
1.5 Definition 9
1.6 Expected Benefit 9
CHAPTER 2 CONCEPT, THEORY AND LITERATURE REVIEW 10
2.1 Concept and Theory Review 10
2.2 Literature Review 32
2.3 Conceptual Framework 42
CHAPTER 3 RESEARCH METHODOLOGY 44
3.1 Research Design 44
3.2 Data and Data Collection 44
3.3 Analysis Tools and Techniques 45
3.4 Study Process 49
vii
CHAPTER 4 ANALYSIS RESULT 50
4.1 Feasibility Analysis Framework Study 50
4.2 Feasibility Analysis Standard and Guideline 90
Compatibility Study
4.3 Cost Overrun and Benefit Shortfall Study 111
4.4 Feasibility Analysis Problem and Limitation Study 119
4.5 Feasibility Analysis Framework Development 126
CHAPTER 5 SMALL SCALE HYDROPOWER FEASIBILITY 139
ANALYIS
5.1 Assumption Selection 139
5.2 Project Cost Analysis 140
5.3 Project Benefit Analysis 141
5.4 Investment Feasibility Analysis using Reference 143
Class Forecasting and Monte Carlo Simulation
5.5 Feasibility Analysis Result Summary 156
CHAPTER 6 SUMMARY, DISCUSSION, AND RECOMMENDATION 159
6.1 Summary 168
6.2 Discussion 178
6.3 Recommendation 180
BIBLIOGRAPHY 180
APPENDICES 189
Appendix A Small Scale Hydropower Project 190
Appendix B List of Feasibility Study Report 198
Appendix C The World Bank’s Conversion Factor 209
BIOGRAPHY 211
viii
LIST OF TABLE
Table Page
1.1 Alternative Energy Development Plan (AEDP 2015) Target 4
2.1 Difference between project Economic and Financial Analyses 17
2.2 Study Framework, Content and Related Concept and Theory 31
2.3 Weaknesses of Cost-Benefit Analysis 33
2.4 Problems of Transparency in Study Process and Limitation 36
in Study Mythology
3.1 Feasibility Analysis Framework Study Topics 46
4.1 Detail and Numbers of Studied Reports and Projects 51
4.2 Number of Reports Classified by Project Owner 52
4.3 Percentage of Reports Classified by Project Owner 53
4.4 Number of Reports Classified by Study Agencies 54
4.5 Percentage of Reports Classified by Study Agencies 54
4.6 Number of Reports Classified by Study Year 55
4.7 Percentage of Reports Classified by Study Year 56
4.8 Number of Reports Classified by Type of Analysis 57
4.9 Percentage of Reports Classified by Type of Analysis 57
4.10 Number of Reports Classified by Project Duration 58
4.11 Number of Reports Classified by Discount Rate 59
4.12 Number of Reports Classified by Discount Rate 60
Selection Principle
4.13 Percentage of Reports Classified by Discount Rate Selection 60
Principle
4.14 Discount Rate Selection (Average) from 1963 - 1997 61
4.15 Discount Rate Selection (Average) from 2000 - 2009 62
4.16 Discount Rate Selection (Average) from 2010 - 2016 62
4.17 Number of Reports Classified by Number of Cost Items 63
ix
4.18 Percentage of Reports Classified by Number of Cost Items 64
4.19 Number of Reports Classified by Cost Evaluation Method 65
4.20 Percentage of Reports Classified by Cost Evaluation Method 65
4.21 Number of Reports Classified by Conversion Factor Source 66
4.22 Percentage of Reports Classified by Conversion Factor Source 67
4.23 Number of Reports Classified by Annual Expense Evaluation 68
Method
4.24 Percentage of Reports Classified by Annual Expense 69
Evaluation Method
4.25 Number of Reports Classified by Number of Benefit Items 69
4.26 Percentage of Reports Classified by Number of Benefit Items 70
4.27 Number of Reports Classified by Electricity Benefit 71
Evaluation Method
4.28 Percentage of Reports Classified by Electricity Benefit 72
Evaluation Method
4.29 Number of Reports Classified by Comparison with Cost of 73
Electricity Generation using Other Methods
4.30 Percentage of Reports Classified by Comparison with Cost of 74
Electricity Generation using Other Methods
4.31 Number and Percentage of Reports with Benefit Evaluation 74
from Greenhouse Gas Emissions Reduction
4.32 Number and Percentage of Reports Classified by Method on 75
Benefit Evaluation from Greenhouse Gas Emissions Reduction
4.33 Number of Reports Classified by Number of Feasibility 76
Indices
4.34 Percentage of Reports Classified by Number of Feasibility 77
Indices
4.35 Number of Reports Classified by Feasibility Index 77
4.36 Percentage of Reports Classified by Feasibility Index 78
4.37 Number of Reports Classified by Feasibility Analysis Result 79
x
4.38 Percentage of Reports Classified by Feasibility 79
Analysis Result
4.39 Number of Reports Classified by Risk Analysis Method 80
4.40 Percentage of Reports Classified by Risk Analysis Method 81
4.41 Summary of Thai Small Scale Hydropower Project Feasibility 81
Analysis Methodology Framework
4.42 Academic Qualification for Economic Consultant 84
4.43 Objective of Economic Study in Feasibility Analysis 87
4.44 Document Used for Methodology Standard and Guideline 91
Compatibility Analysis
4.45 Project Duration Selection Compatibility Analysis 93
4.46 Discount Rate Selection Compatibility Analysis 94
4.47 Cost Item Selection Compatibility Analysis 95
4.48 Cost Analysis Method Compatibility Analysis 97
4.49 Annual Cost Evaluation Compatibility Analysis 98
4.50 Benefit Item Selection Compatibility Analysis 100
4.51 Benefit Evaluation Method Compatibility Analysis 101
4.52 Feasibility Index Selection Compatibility Selection Analysis 102
4.53 Risk Analysis Compatibility Analysis 104
4.54 Methodology Compatibility Analysis Result 105
4.55 Document Used for Process Standard and Guideline 107
Compatibility Analysis
4.56 Consultant Hiring Process Compatibility Analysis 108
4.57 Study Process Compatibility Analysis 109
4.58 Feasibility Consideration and Approval Processes 110
Compatibility Analysis
4.59 Process Compatibility Analysis Result 111
4.60 Studied Small Scale Hydropower Projects 112
4.61 Small Scale hydropower Project Cost Overrun 113
4.62 Descriptive Statistics of Cost Overrun Analysis 115
4.63 Descriptive Statistics of Benefit Shortfall Analysis 117
xi
4.64 Small Scale Hydropower Project Feasibility Analysis 123
Methodology’s Problems and Limitations
4.65 Small Scale Hydropower Project Feasibility Analysis Process 125
Problemss and Limitations
4.66 Summary of Development Guidelines to Solve Problems and 134
Reduce Limitations of Small Scale Hydropower Project
Feasibility Analysis Methodology
4.67 Summary of Development Guidelines to Solve Problems and 137
Reduce Limitations of Small Scale Hydropower Project
Feasibility Analysis Process
5.1 Project Financial and Economic Cost 141
5.2 Small Scale Hydropower Project Cost and Benefit Analysis 145
Table for Case 1
5.3 Small Scale Hydropower Project Cost and Benefit Analysis 146
Table for Case 2
5.4 Small Scale Hydropower Project Cost and Benefit Analysis 147
Table for Case 3
5.5 Analysis Result of Net Present Value (NPV) 148
5.6 Feasibility Analysis Result using Reference Class Forecasting 156
and Monte Carlo Simulation
5.7 Feasibility Analysis Result Summary for Case 1 157
5.8 Feasibility Analysis Result Summary for Case 2 158
5.9 Feasibility Analysis Result Summary for Case 3 158
12
LIST OF FIGURES
Figures Page
1.1 Annual Budget Allocations for Fiscal Year 2017 by Expense 2
1.2 Small Scale Hydropower Project Locations 6
1.3 Framework for The Study of Thailand Infrastructure 7
Development Feasibility Analysis: Small Scale Hydropower
Plant Case Study
2.1 Discrete and Continuous Distribution 25
2.2 Types of Event Probability Distribution 26
2.3 Project Feasibility Analysis using Monte Carlo Simulation 29
2.4 Risk Assessment Matrix 30
2.5 Analysis Conceptual Framework using Reference Class 38
Forecasting
2.6 Adjustment of Acceptable Chance of Cost Overrun 39
2.7 Analysis of Project’s Benefit Estimation Inaccuracy 40
2.8 Analysis of Project’s Cost Estimation Inaccuracy 41
2.9 Result of Feasibility Analysis using UNITE-DSS Model 41
Program
2.10 Conceptual Framework 43
3.1 Small Scale Hydropower Plant Feasibility Analysis 46
Framework Study Conceptual Framework
3.2 Small Scale Hydropower Plant Feasibility Analysis Standard 47
and Guideline Compatibility Analysis Conceptual Framework
3.3 Small Scale Hydropower Plant Feasibility Analysis 48
Inaccuracy, Problems, and Limitations Analysis Conceptual
Framework
3.4 Small Scale Hydropower Plant Feasibility Analysis 48
Framework Development Analysis Conceptual Framework
xiii
3.5 The Study of Thailand Infrastructure Development Feasibility 49
Analysis: Small Scale Hydropower Plant Case Study Process
4.1 Thai Small Scale Hydropower Plant Project Discount Rate 61
From 1963 - 2016
4.2 Consultant Selection Process 86
4.3 Investment Feasibility Analysis Process 88
4.4 Project Feasibility Consideration and Approval Processes 90
4.5 Frequency Distribution of Cost Overrun 116
4.6 Frequency Distribution of Benefit Shortfall Analysis 117
4.7 Relationship between Benefit Shortfall and Project Study 118
Period
4.8 Relationship between Benefit Shortfall and Project’s Value 119
4.9 Risk Likelihood 131
4.10 Risk Impact 132
4.11 Risk Assessment Matrix 132
4.12 Meaning for Degree of Risk 133
5.1 Net Present Value (NPV) Analysis Result Histogram 148
for Case 1
5.2 Net Present Value (NPV) Analysis Result Histogram 149
for Case 2
5.3 Net Present Value (NPV) Analysis Result Histogram 149
for Case 3
5.4 Relational Graph between Net Present Value (NPV) 151
and Probability for Case 1
5.5 Relational Graph between Net Present Value (NPV) 151
and Probability for Case 2
5.6 Relational Graph between Net Present Value (NPV) 152
and Probability for Case 3
5.7 Criteria for Level of Risk Likelihood 152
5.8 Criteria for Level of Risk Impact 153
5.9 Meaning for Degree of Risk 153
5.10 Evaluation of Degree of Risk for Case 1 154
xiv
5.11 Evaluation of Degree of Risk for Case 2 154
5.12 Evaluation of Degree of Risk for Case 3 155
1
CHAPTER 1
INTRODUCTION
1.1 Statement and Significance of Study
National development is the public sector’s main responsibility, which
requires setting up a direction and execution for improving overall national socio-
economic conditions. This socio-economic change will affect the citizen both directly
and indirectly, for instance regarding income, well-being and life stability, creating an
impact toward that citizen’s happiness, which is the ultimate outcome of development
administration (Pairote Pathranarakul, 2551, p. 267) and from 4 government economic
functions, namely, 1) a resource allocation function, 2) an income and wealth
distribution function, 3) an economic stabilization function, and 4) an economic
growth and development function (Musgrave, Stiglitz, as cited in Ponlapat Buracom,
2554, p. 4). Therefore, the government’s crucial role is to perform national
development in various dimensions in order to achieve its development goals
according to the mentioned economic functions.
Presently, government has allocated a significant budget for national
development. In 2017, Thailand set a budget up to 2.73 trillion THB, which comprises
personnel 23.1% (0.63 trillion THB), general operations 8.8% (0.24 trillion THB),
investment 16.3% (0.44 trillion THB), subsidies 28.5% (0.78 trillion THB) and others
23.3% (0.63 trillion THB) (Bureau of the Budget, 2017, p. 34) as shown in figure 1.1.
2
Figure 1.1 Annual Budget Allocations for Fiscal Year 2017 by Expense
Source: Bureau of the Budget (2017, p. 34).
As for the investment budget, or investment expenses such as durable goods,
lands, installation and related expenses, this is the budget for infrastructure
development, for instance, roads, power plants, irrigation systems, airports and dams,
aimed at developing infrastructure in support of long-term national economic and
social development. This will create both direct and indirect benefits toward socio-
economic conditions, such as increased employment and population spending
stimulation, as well as enhancing future national competitiveness. In the present, the
agencies responsible for development budget determination must conduct a project
feasibility study to consider the project’s development engineering possibility,
environmental impact, social impact, management, marketing, law, and economic and
financial analyses to be used as a basis in making decisions regarding the project’s
development as well as project prioritization and budget planning according to each
agency’s role and responsibility in the future.
Project Feasibility Analysis or Cost-Benefit Analysis (CBA) are tools for
quantitative analysis on public service projects or economic welfare systems which
aim to raise citizen well-being (The Public Debt Management Office, 2015, p. iii) by
comparing the costs and benefits which are expected to result from the project’s
Unit: Million THB
3
development. The analysis’ main aim is to assess any impact toward the nation as a
whole, which will differ in each project according to the CBA methodology, resulting
from differences in each project’s distinct features, distinct regulations set by related
agencies, as well as analysis methodology according to the researcher’s opinion and
experience.
At present, due to increasing diversity and volume of projects, a large amount
of public investment feasibility analysis is outsourced to consulting companies. This
approach is beneficial in terms of public management efficiency and study credibility,
which is studied by academics with expertise who can choose the appropriate
methodology for each type of project. However, current feasibility analyses are still
faced with obstacles and weaknesses, which affect study results, accuracy and
credibility. This results from methodology constraints, for instance, selecting
inappropriate analysis tools, data limitations, cost and benefit analysis error,
inconclusive risk factor analysis, incomparable study results from different investment
feasibility analysis techniques, and lack of project understanding among the analysts.
There are also difficulties in the process which result from public sector limitations,
such as lacking academic standard quality controls as well as interference from
interest groups.
These mentioned limitations could cause errors in the investment feasibility
analysis, for instance, under evaluated project costs or over evaluated future benefits,
which could lead to indecision made by the public sector in investment budget
allocations and might result in a loss in actual operations. These problems have been
occurring in large infrastructure projects around the world resulting in both economic
and welfare losses.
Energy infrastructure development is also one of these crucial factors
necessary for economic development and population welfare improvement. Presently,
the ministry of energy has designated the Thailand Integrated Energy Blueprint
(TIEB) with a focus on 3 principles, namely, Security, Economy, and Ecology
(Department of Alternative Energy Development and Efficiency (DEDE), 2015, p. 1).
One of the ministry’s missions for satisfying these 3 principles is renewable and
alternative energy development. To fulfill the mission, DEDE has created the
Alternative Energy Development Plan (AEDP 2015) which prioritizes the promotion
4
of renewable energy in the nation to its maximum capacity for communities’ social
and environmental benefit (Department of Alternative Energy Development and
Efficiency, 2015, p. 1).
The Alternative Energy Development Plan (AEDP 2015) has set a target share
of renewable energy in gross final energy consumption at 30% by 2036, or 39,388.67
ktoe (kilo-tons of oil equivalent) which increases from 9,025 MW (megawatts) in
2014. Under this target, the target of renewable energy generation is 5,588.24 ktoe, or
equivalent to 19,684.40 MW, which would be an increase from 4,494.03 MW in
2014, resulting in numerous forms of renewable energy development support, for
instance, solar energy, wind energy, biomass energy and small scale hydropower
energy, with the target of 376.00 MW in 2036 (Department of Alternative Energy
Development and Efficiency, 2015, pp. 9-15) from 172.28 MW in 2014 (Department
of Alternative Energy Development and Efficiency, 2017, p. 33) or as much as 118%
growth compared to 2014 energy generation capacity, as shown in Table 1.1
Table 1.1 Alternative Energy Development Plan (AEDP 2015) Target
Item 2014
Status
2036
Target
Changes
Growth Rate
(%)
Renewable Energy Consumption
(ktoe) 9,025 39,388.67 30,363.67 336%
Electricity Generated from
Renewable Energy (MW) 4,494.03 19,684.40 15,190.37 338%
Electricity Generated from Small
Scale Hydropower (MW) 172.28 376.00 203.72 118%
Source: Department of Alternative Energy Development and Efficiency (2015).
5
A small scale hydropower project is the development of a small dam or check
dam to transport water toward a power plant for energy generation (summarized as
small scale hydropower project features in Appendix A) which is considered
environmental friendly since it uses renewable energy that generates low
environmental impact compared to large dam development, for instance in the
reduction of greenhouse gas emission, increase of energy stability for electricity
generation, and the generation and supply of electricity for households outside of the
Provincial Electricity Authority (PEA) service area. These benefits have led to
numerous investments in small scale hydropower projects in various countries,
including Thailand. From 1964 to 2017, DEDE has already developed 25 projects. 3
projects had already been transferred to be operated under the Electricity Generating
Authority of Thailand (EGAT), resulting in 22 projects still under DEDE
responsibility accounting for 49,514 kilowatts (KW) generating 122,413 million
kilowatt-hours annually on average (Department of Alternative Energy Development
and Efficiency, 2017, p. 110). The locations and names of the 22 small scale
hydropower projects under DEDE responsibility are shown in Figure 1.2.
6
Figure 1.2 Small Scale Hydropower Project Locations
Source: Department of Alternative Energy Development and Efficiency (2017, p. 11).
The current situation in the public small scale hydropower development
framework has shown the significance and future trend for small scale hydropower
development project investment, leading to small scale hydropower development
projects to meet the Alternative Energy Development Plan’s (AEDP 2015) goal in
7
2036. From past to present, DEDE and related agencies have performed a large
amount of feasibility studies for small scale hydropower development projects
covering more than 600 projects. One of the study’s key components is an economic
feasibility analysis for investment decision consideration among related agencies. By
studying the data from these studies, we could reflect on the project feasibility
analysis framework of related agencies, which leads to an analysis of the study’s
limitations or weaknesses, as well as recommendations for further improving the
study framework.
Therefore, this study aims to conduct an in-depth study of small scale
hydropower plant case studies regarding a feasibility analysis framework which is
comprised of the methodology and process for analyzing difficulties and
recommending a small scale hydropower plant feasibility analysis approach which is
academically accurate, with compliance to internationally accepted standards leading
to public management efficiency and national sustainable development. The study’s
approach can be seen in Figure 1.3.
Figure 1.3 Framework for The Study of Thailand Infrastructure Development
Feasibility Analysis: Small Scale Hydropower Plant Case Study
8
1.2 Research Questions
1.2.1 Primary Research Question
What is the small scale hydropower plant feasibility analysis framework and
how could it be improved?
1.2.2 Secondary Research Questions
1) What are the small scale hydropower plant feasibility analysis
framework’s specific and general features?
2) Do small scale hydropower plant feasibility analyses comply to
standards and guidelines?
3) Do small scale hydropower plant feasibility analyses have
inaccuracies or face difficulties or limitations?
4) How should a small scale hydropower plant feasibility analysis
framework be developed in the future?
1.3 Objectives
1) To study a small scale hydropower plant feasibility analysis framework.
2) To study the standard and guideline compliance of small scale hydropower
plant feasibility analyses.
3) To study any inaccuracy, difficulty and limitation of small scale
hydropower plant feasibility analyses.
4) To improve the small scale hydropower plant feasibility analysis
framework.
1.4 Scope of the Study
1) To study the feasibility analysis framework of small scale hydropower
plants with a capacity less than 12,000 kilowatts, which covers both small scale
hydropower plants and Pico hydropower plants due to their similar features, including
9
projects which generate electricity from other renewable energy sources from the
studies performed from 1987 to 2016.
2) To study the inaccuracies, difficulties and limitations of small scale
hydropower plant feasibility analysis under Department of Alternative Energy
Development and Efficiency responsibility.
1.5 Definitions
1) Feasibility analysis framework means the components of methodology and
processes from related agencies in performing a small scale hydropower plant
feasibility analysis.
2) Feasibility analysis methodology means the principles, thoughts, and
academic theory employed in the study comprised of assumption setting, cost
analysis, benefit analysis, feasibility indicator and risk analysis.
3) Feasibility analysis process means a consultant hiring process format, a
study process format, and small scale hydropower plant project feasibility
consideration and approval format.
1.6 Expected Benefit
Knowledge of the small scale hydropower plant project feasibility analysis
framework, which reflects quality, accuracy, problems and obstacles of study
methodology and public investment considerations in the process leading up to
recommendations for improving Thailand’s small scale hydropower plants and other
infrastructure development projects in order to comply with academic principles and
internationally accepted standards. This will result in public management efficiency
and national sustainable development.
10
CHAPTER 2
CONCEPT, THEORY AND LITERATURE REVIEW
The study of Thailand Infrastructure Development Feasibility Analysis: Small
Scale Hydropower Plant Case Study has reviewed the concept, theory and literature to
design a conceptual framework and research methodology, as well as a results
analysis and discussion, as follows:
2.1 Concept and Theory Review
Concept and theory review in this study review is comprised of concepts and
theory from 2 fields of study, namely, public administration, and economics concept
and theory, as follows:
2.1.1 Public Administration Concept and Theory
Public Administration concept and theory is the major concept regarding
organization management which could be applied to public management in terms of
principles, goals and process. The review of public management concept and theory
focuses on concepts and theory related to public management principles and goals,
which is comprised of 1) Governance, 2) New Public Management, and 3)
Sustainable Development to use as a main conceptual framework for the study and
further setting up of the process improvement guidelines of feasibility analysis for
public infrastructure investment. This study’s public administration concept and
theory review can be shown as follows.
2.1.1.1 Governance
Governance is a major concept which influences the development style
of both public and private organizations in the present. Governance could be
considered as both principles and guidelines for operations (Pathan Suwanmongkol,
11
2013, p. 5) in public management that are aimed at citizens’ and the nation’s
maximum benefit by adhering to logic and justice as well as prioritizing public
management efficiency. This could be done by improving the operational process
speed, which could save both time and resources (Pathan Suwanmongkol, 2013, p.
28). Public governance can be separated into 3 levels, namely, institutional
governance, organizational and managerial governance, and technical governance
(Kowit Kangsanan, 2009, p. 19), with the following details:
1) Institutional governance is the governance among major
public institutions related to constitutional principles, acting principles and regulations
which are responsible for the structure, decision process and behavior of management
agencies, including public and government justifications. This especially concerns
legislative choices in pushing regulations, management process controls, conflicts and
tension between the executive and legislative branches, dispute and tension resolution
in allocating and controlling resource spending, as well as the relationship between
citizen and public choices in legislative and management policies (Kowit Kangsanan,
2009, pp. 10-12). To recapitulate, institutional governance is that governance
consideration involving the balance of major political institutions responsible for
public management under a democratic system, namely, executive, legislative and
judiciary power.
2) Organizational and managerial governance is the
governance in government executive structures with a focus on the regulation and
control of power usage, the public management process, public management, public
policy, public organizational culture, and management capability of public agencies
(Kowit Kangsanan, 2009, pp. 12-13). In other words, organizational and managerial
governance is the governance consideration involving government or executive
branch work system management, which is comprised of department or division level
agencies as well as other agencies under government control.
3) Technical governance involves the technical core, core
competencies, or primary work concepts of public agencies and organizations. This
relates to operational level staff who follow regulations and apply his/her own
discretion in delivering services to meet citizen and public demand, including
regulations from the executive at various levels to facilitate the service effectively and
12
efficiently (Kowit Kangsanan, 2009, p. 13). To summarize, technical governance is
the governance consideration involving the operational process of agencies or
personnel responsible for various missions in satisfying government goals.
Presently, Thailand has concretely adopted governance
principles in public management. The Office of the Public Sector Development
Commission (OPDC) has published a manual for good governance rating among
public agencies which has defined 10 public management governance components
(Office of the Public Sector Development Commission, 2009, pp. 8-9). One of these
key components under the governance principle which is used in public policy
decision making is efficiency, which means public management under good
governance with a designed operational process, adopting appropriate management
techniques and tools for the organization to utilize capital, labor and time for the
utmost benefit in enhancing public operational capacity and satisfying citizen and
stakeholder needs (Office of the Public Sector Development Commission, 2009, p. 8).
2.1.1.2 New Public Management
New Public Management means public management adjustment by
applying private guidelines or management while considering efficiency,
effectiveness and feasibility to grant the private opportunity to deliver public services,
as well as servicing citizens while also prioritizing quality (Boonyakiat Karavekphan
et al., 2017 1st paragraph). New public management’s purpose is to solve the decline
in public systems and lack of governance.
As for Thailand, in 2012 the government agreed on a new public
management principle which is one of the major principles of good governance and
comprising 3 minor principles, namely, 1) Efficiency, 2) Effectiveness, and 3)
Responsiveness. Efficiency under the new public management principle has been
defined as the requirement of public operations to resources efficiently with
productivity, to ensure it’s worth the investment and maximize benefit toward the
majority (Pathan Suwanmongkol, 2013, p. 63).
2.1.1.3 Sustainable Development
Sustainable development is development that meets the needs of the
present without compromising the ability of future generations to meet their own
needs, as defined by the World Commission on Environment and Development.
13
Furthermore, its meaning also includes consideration of the impact on future
generations, limited resource allocation, as well as poverty and inequality issues
(Montree Sokatiyanurak, 2017a, p. 372). The major principle of sustainable
development is the establishment of balance among 3 development dimensions, which
are 1) Sustainable economic development dimension, 2) Sustainable social
development dimension, and 3) Sustainable environmental development dimension
(Office of The Permanent Secretary for Ministry of Natural Resources and
Environment, 2013, pp. 10-12).
This is in order to prevent problems of natural resource and
environmental degradation from development and infrastructure projects which lack
an effective monitoring mechanism from limited appropriate environmental impact
assessment (Office of the National Economic and Social Development Board, 2003,
p. 6), Thailand has moved forward on sustainable development by applying a
sufficiency economy principle in the 9th
National Economic and Social Development
Plan and onward, with the purpose of creating a pleasant society with continuous and
sustainable development and growth (Office of The Permanent Secretary for Ministry
of Natural Resources and Environment, 2013, p. 45). There has been a proposal for
adjusting the public decision process to consider positive and negative, both short and
long term, deliberate impacts toward society while discretely maintaining a balance
among economic and environmental dimensions involving social and natural
resources (Office of the National Economic and Social Development Board, 2003, p.
81).
The mentioned Sustainable development principles and guidelines have
led to law, regulation and academic development to use as regulation tools to prevent
negative impacts from various development projects toward natural resources and the
environment, for instance, a requirement for an Environmental Impact Assessment
(EIA) and Environmental Economic Assessment, which will be used as public
decision criteria to make development projects adhere to sustainable development
goals.
2.1.1.4 Public Operation Efficiency and Feasibility
Efficiency means allocating resources efficiently or with maximum
benefit, as can be measured by the ratio between output and input (Tippawan
14
Lorsuwannarat, 2013, pp. 159-160) which relates to feasibility, meaning efficient
limited resource allocation for maximum benefit (King Prajadhipok’s Institute 2004,
as cited in Niyom Ratammarit, 2017, pp. 17-18). Public operations efficiency is one
of the major principles of governance and a new public management principle. In
2003, Thailand declared the Royal Decree on Criteria and Procedures for Good
Governance, B.E. 2546 (2003), which details public management feasibility in section
22, as follows:
Section 22
The Office of National Economic and Social Development Board
andthe Budget Bureau shall jointly evaluate the value of money for missions
carried out by a government agency and report the evaluation to the Council of
Ministers for consideration, within the period as specified thereby, whether
which mission should be carried out or dissolved. This report shall be a
guideline for the making of a request for budget of the government agency
next year.
The category and condition of each mission, feasibility of the mission
or project, benefit to the State and public at large, and expenditure before and
after an implementation of mission shall be taken into consideration for an
evaluation under paragraph one.
Value for money in this Section means social advantage or
disadvantage and other advantages or disadvantages which could not be
calculated in terms of money.
As for goals related to efficiency and feasibility in the public mission,
the Office of the Public Sector Development Commission (OPDC) has stated that
management must compare the resulting input and outcome by performing a cost
benefit analysis to analyze the possibility and feasibility of various plans or projects
and compare the potential received benefit (Office of the Public Sector Development
Commission, 2003, p. 17). Furthermore, it also states that the feasibility analysis must
not only consider monetary benefit or expense, but also any potential benefit that
society could possibly gain from that mission, as well as benefits that cannot be
15
converted to monetary value. Since the public mission is not to seek maximum profit,
but to maximize citizens’ benefit, a one-dimensional measurement will not cover all
public missions. Although some projects might not be monetarily feasible, it is also in
the public duty to maintain social wellness, which must be continuous. Feasibility
analysis, then, is the information for a policy and operational plan setting (Office of
the Public Sector Development Commission, 2003, pp. 51-52).
A public organization efficiency regulation conceptual framework
shows the connection between efficiency and law, regulations and guideline settings,
at various levels. It considers efficient public organization management and feasible
public operations, especially in capital expenditure, which is the budget allocation for
both small and large investment in national development (Montree Sokatiyanurak,
2017b, p. 95). It dictates that the feasibility analysis is needed in order to
acknowledge specific project efficiencies before its initiation. Therefore, it can be
concluded that project efficiency and feasibility are both crucial goals and guidelines
in the consideration of various project investments.
2.1.2 Economic Concept and Theory. Project feasibility analysis is an
economic tool for data analysis in decision making under the premise of utilizing
limited resources for maximum return. This premise is closely related to the concept
of scarcity and choice. The feasibility or cost benefit analysis is the application of
welfare economics (Kieatviboon Chomkhair & Manisri Puntularp, 1983, p. 1), in
other words, positive and negative impact toward a certain entity, either single or
multiple persons, is not the same as impact toward the whole economic system. Cost-
Benefit Analysis is concerned more with the overall economic system, which is the
welfare of that certain society, not only certain parts of society (Kieatviboon
Chomkhair & Manisri Puntularp, 1983, p. 7). This shows the connection between
feasibility analysis on an individual level, especially the investor’s financial analysis,
and feasibility analysis on the economy level, which is known as economic feasibility
analysis.
Economic feasibility analysis is a crucial tool for the public sector in making
decisions regarding a national economic development budget, according to the
Maximum Social Gain Theory, which states that with any goods or services,
16
government should choose only the ones that create more social benefit than cost
(Ponlapat Buracom, 2011, p. 24). In other words, government must conduct a
feasibility analysis in order to choose and prioritize each project. Furthermore,
economic feasibility analysis also relates to Market failure theory, especially
regarding externalities which result from either direct or indirect impacts from a
project toward the economy, society and/or environment, both positive and negative.
This leads to the development of a concept for evaluating the economic value of
goods outside of the market by applying economic methods to analyze the
environmental impact and includes the certain impact in the project’s benefit or cost
(Adis Israngkura na Ayudhya, 2010, p. 11) to ensure that feasibility analysis covers
every impact toward the economy, society and environmental which could lead to the
public sector’s justified decision to invest in development projects.
According to the mentioned economic concept and theory, we could
summarize the study guideline regarding feasibility analysis which consists of Cost-
Benefit Analysis (CBA), Natural Resource and Environmental Economics, and Risk
analysis as follows:
2.1.2.1 Cost-Benefit Analysis (CBA)
Cost-Benefit Analysis (CBA) has 5 major components, which are
1) Project economic and financial analysis 2) Assumption 3) Project cost analysis
4) Project benefit analysis and 5) Project feasibility index, with the following details.
1) Project economic and financial analysis. Cost-Benefit
Analysis (CBA) in public projects mostly consists of Economic analysis and Financial
analysis, with the following details:
(1) Project economic analysis is used for deciding whether
the project is worth allocating the operational budget (Adis Israngkura na Ayudhya,
2010, p. 11) or whether the project invested creates benefit toward the whole society
more than its own expense or national opportunity cost for making the decision to
utilize a limited resource for maximum benefit toward society. The project will be
considered economically sound or profitable if the benefit generated is higher than the
cost, and economically unwise or unprofitable if the benefit is lower, which will
influence the decision of agencies related to project development.
17
(2) Project financial analysis is used mostly for analyzing
private investment since its goal is to find financial return or project profitability as
well as appropriate financial planning, which leads to other financial analyses, for
instance, a profit and loss statement, cash flow statement, balance sheet, budget
planning, private joint venture format as well as foreign financial institution
borrowing. The analysis’s main drawback is that it does not include the project’s
social and economic cost and benefit.
To summarize, the differences between economic and
financial analysis are shown in Table 2.1:
Table 2.1 Differences between Project Economic and Financial Analyses
Topics Economic Analysis Financial Analysis
1. Objective To allocate limited resources for
maximum benefit while considering
value that does not exist in the
market as well
To allocate limited resources for
maximum benefit to generate
maximum investment, accounting
for return while considering only
value that exists in the market
2. Resource value used
in analysis
2.1 Tax and subsidy Use price excluding tax and subsidy Use national market price
2.2 Opportunity cost Considers
resource opportunity cost
Does not consider
resource opportunity cost
2.3 Externality Considers project externalities,
both positive and negative
Does not consider
project externalities,
either positive or negative
3. Discount rate Uses social discount rate Uses private discount rate
Source: Sukhothai Thammathirat Open University (2017).
18
2) Project assumption. Feasibility analysis sets 2 major
assumptions, which are discount rate and project duration, as follows:
(1) Discount rate is the rate for adjusting a project’s future
cost or benefit to value in the previous year (Yuavares Tubpun, 2008, p. 48). In other
words, project feasibility analysis will use the discount rate for adjusting future
money to its present value. In choosing the discount rate for economic analysis,
opportunity cost of capital or social will be considered. Furthermore, the public
project discount rate could be set according to an expected period for receiving
benefit, source of funds or constant price/current price (Adis Israngkura na Ayudhya,
2009, p. 53-54), while project financial analysis will consider a certain organization’s
weighted average cost of capital (WACC).
(2) Project duration is the duration that the project will
generate benefit according to its objective. The duration chosen could be based on 1)
Technical age of any asset which requires a large amount of reinvestment, 2) Market
price of output (Haruthai Meenaphan, 2001, pp. 20-21). However, most projects will
choose its duration according to usage life of major capital assets based on the
engineering life of the project’s major structures.
3) Project cost analysis or expense means the opportunity cost
of a resource or factor of production used in the project, while financial expense
means the monetary value that actually occurs. Project cost can be separated into 3
categories, as follows:
(1) Primary cost is a resource or factor of production usage
value for the project’s investment, operation and maintenance, which considers its
project direct cost to comprise of:
a) Investment cost is the value of the resources used to
create a project’s components or for engineered structures, as well as completing
other components for operation and generating benefit according to the project’s
objective. This cost usually occurs at the beginning of a project’s duration.
b) Operating and maintenance cost is the value of
resources used for operating and maintaining the project in order to function as
normal. This cost usually occurs annually throughout project’s duration.
19
(2) Secondary cost is another cost that results from the
project’s existence other than the primary cost. This cost might result from negative
externalities forcing the project to have costs for prevention, restoration or recovery
from various impacts back to its normal situation.
(3) Intangible cost is an abstract cost that occurs in an
economy, society or environment as a result of the project, for instance, impacts on
aesthetics, mentality, life, or even unemployment.
Cost analysis can be separated into economic costs and
financial costs, as follows:
(1) Economic cost analysis is the analysis of resources or
factors of production in the opportunity cost which covers every cost that has
occurred from the project’s development, both monetary and non-monetary. An
Economic cost analysis of certain types of resources could be evaluated by comparing
the market price and adjusting to the shadow price by using a conversion factor, as
well as evaluating resource value based on the environmental economic concept in
evaluating the out-of market resource cost.
(2) Financial cost analysis is an analysis of the monetary
cost actually paid by the project, which is comprised of investment cost, operating and
maintenance cost, and prevention, restoration or recovery of the project’s impact. The
financial cost analysis will mainly be based on market price.
4) Project benefit analysis: Project benefit or return means the
value of the project’s benefit, covering both output and positive outcome, which can
be separated into 3 types, as follows:
(1) Direct benefit or primary benefit is the output which is
the project’s main target or based on the primary objective.
(2) Indirect benefit or secondary benefit is an output which
results from the project, but is not the primary object, or external project benefits
toward the economy, society, and/or environment as a result of project development.
(3) Intangible benefit is an abstract benefit that occurs to
the economy, society and/or environment as a result of the project, for instance,
impacts toward aesthetics, or citizens’ feelings.
20
Benefit analysis can be separated into economic benefits
and financial benefits as follows:
(1) Economic benefit analysis is the analysis of benefit
value, both according to the project’s objective and benefit from the project’s external
positive impact. The evaluation will use the same concept as economic cost analysis,
for instance, evaluation by comparing the market price or evaluation using the
environmental economic concept.
(2) Financial benefit analysis is the analysis of monetary
return or benefit, which is also known as direct benefit or primary benefit. The
financial benefit analysis will mainly be based on market price.
5) Project feasibility index is the result or value of index
received from comparing the project’s cost and benefit according to assumptions
which will reflect on project feasibility. The major indexes are as follows:
(1) Net Present Value (NPV) shows the net benefit
received throughout a project’s duration which could have positive, negative or zero
value. It is calculated based on present value of the total benefit (PVB) deducted by
present value of the total cost (PVC). The project will be considered feasible if its
NPV is positive. The calculating formula is as follows:
where
t = year
m = project’s duration
r = interest rate or discount rate
Bt = project’s benefit in year t
Ct = project’s cost in year t
k
tt
tm
tt
t
r
C
r
BNPV
11 11
21
The Net Present Value (NPV) analysis advantage is the
consideration of changing the money’s time value in the form of cash flow and being
able to show the investment’s effectiveness in the form of maximum benefit that’s
expected to be received. Its limitation is its complicated methodology and inability to
show efficiency and the time when the project will pay back its cost.
(2) Benefit Cost Ratio (BCR) is the ratio of benefit toward
cost or net present value of total benefit over net present value of total cost. The
project will be considered feasible if its BCR is more than or equal to 1. The
calculating formula is as follows:
where
t = year
r = project’s duration
Bt = project’s benefit in year t
Ct = project’s cost in year t
The advantage of Benefit Cost Ratio (BCR) analysis is the
consideration of changing the money’s time value in the form of cash flow and being
able to show project efficiency. Its limitations are its complicated method and being
unable to show project effectiveness and the time when the project will pay back its
cost.
(3) Internal Rate of Return (IRR) is the percentage return
of the project, which is equivalent to the discount rate that could make its NPV equal
0. The project will be considered feasible if its IRR is higher than the discount rate.
The calculating formula is as follows:
n
tt
t
n
tt
t
r
C
r
B
BCR
1
1
1
1
22
where
t = year
r = project’s duration
Bt = project’s benefit in year t
Ct = project’s cost in year t
The advantage of Internal Rate of Return (IRR) analysis is the
consideration of changing the money’s time value in the form of cash flow and being
able to show project efficiency in percentage terms. Its limitations are its complicated
method and inability to show project effectiveness and the time when the project will
pay back its cost.
(4) Payback period or Break-even period is the index used
to consider the duration required for the net accumulated benefit to equate to the
project’s cost, or the time when the project’s accumulated net cash flow becomes
positive, which will show the timing when the project can pay back its investment or
reach the break-even point. The concept is that a project with a shorter payback period
is better than a longer one.
The advantage of payback period analysis is the simple
calculation method. Its limitations are its inability to show both project efficiency and
effectiveness, no consideration of changing the money’s time value, as well as no
definite criteria in judging project feasibility.
2.1.2.2 Natural Resource and Environmental Economics
The socio-economic development of infrastructure development
projects is related to natural resources and the environment, both as a factor of
production and the impact to recipients, both direct and indirect, caused by the
project. The consideration of project impact can be separated into 2 categories, which
are 1) External cost, the negative impact, and 2) External benefit, the positive impact
(Thanwa Jitsanguan, n.d., p. 271). On the other hand, natural resources and the
0
11
n
tt
tt
r
CB
23
environment are considered public goods or social goods, which have the distinct
features of non-excludability and no rival consumption (Ponlapat Buracom, 2011, pp.
107-113) which can’t be perfectly allocated by market mechanisms, leading to
allocation inefficiency and natural resource and environmental degradation.
1) Natural resource and environment allocation. The
sustainable and efficient allocation of natural resources and environment is an
important goal in social management. This could be done by applying economic
principles for resource allocation via the public sector, for instance, the collection of
taxes, fees or penalties for pollution, or a subsidy or tax exemption to encourage
restoration and recovery of natural resources and environment (Somporn Isvilanonda,
1995, p. 66).
The mentioned approaches have already been applied as related
guidelines, law and policy, as well as a feasibility study of projects that requires an
Environmental Impact Assessment (EIA), which is the feasibility analysis of the
project investment with consideration of the project’s advantages and disadvantages.
It is one of the tools that can lead to project decisions based on principles of efficient
and sustainable natural resource allocation and the environment.
2) Environmental economic assessment. Project
environmental economic assessment is one project feasibility step acquired by
combining economic concept and theory with a study of the project’s impact toward
natural resources and the environment. Project environmental economic assessment
focuses on evaluating a project’s impact toward the environment, both external costs
and benefits. In economic valuation of natural resources and environment,
the value can be separated into 3 types, as follows:
(1) Use Value is the benefit from concretely using natural
resources and the environment, which are 1) Direct use value, the direct benefits
gained by society from the use of natural resources and environment, and 2) Indirect
use value, the indirect benefits gained from natural resources and the environment,
which is a natural function of certain natural resources and environments.
(2) Nonuse value is the benefit gained by citizens from
natural resources and the environment in the form of good will when notified that the
environment is in good condition. This includes 1) Existence value, the benefit gained
24
when notified that the environment is in good condition, and 2) Bequest value, the
satisfaction that society wants to maintain for future generations’ benefit.
(3) Option value is the benefit that a citizen does not gain
from natural resources and environment, neither in the form of Use Value or Non-use
value in the present, but there is an opportunity for utilizing the mentioned natural
resource and environment in the future.
The valuation of a project’s impact toward resources and
the environment for information of economic cost or benefit in economic feasibility
analysis consists of 6 methods, as follows:
(1) Market Valuation Method: MVM is the valuation of
change in the consumer’s expenses when the environment has changed, since a
changing environment will mostly affect by changing a consumer’s expenses.
(2) Contingent Valuation Method: CVM uses the data
from direct interviews with citizens. The question is designed to reveal environmental
value, which could assess every kind of economic value depending on the interview
questions to the citizen affected by a changing environment.
(3) Travel Cost Method: TCM is an environmental
valuation based on travel cost or measuring usage value, but it cannot measure non-
use value.
(4) Hedonic Pricing Method: HPM is used to value both
the direct use and indirect use value of the environment by assessing an implicit price
of the physical features that contribute to the overall price of differentiated products in
assessing environmental value.
(5) Environment as Factor Input Method: FIM is a
valuation method specific to the case where the environment is one of the factors of
production by assessing environmental indirect use. This could be performed via a
production and cost function.
(6) Benefit Transfer Method: BTM is a method to transfer
value from the environment from a site that had already been evaluated (study site) to
project site (policy site).
25
2.1.2.3 Risk analysis
Risk analysis is the analysis of likely situations in an uncertain future,
but the probability or expected value can be estimated (Haruthai Meenaphan, 2011,
p. 461). Risk is different from uncertainty (Haruthai Meenaphan, 2011, p. 104) since
risk of a certain event can be shown as a distribution by reflecting the likelihood of an
event ranging from 0 to 1, with 0 meaning no probability of the event and 1 meaning
certainty of the event. The measurement of event probability index could be either in
the form of a discrete or continuous distribution (Haruthai Meenaphan, 2011, p.
462), as shown in Figure 2.1.
Figure 2.1 Discrete and Continuous Distributions
Source: Haruthai Meenaphan (2011, p. 462).
Certain event probability distributions can be used to analyze event risk
based on statistics and past events with the following distribution (Haruthai
Meenaphan, 2011, p. 465):
1) Normal distribution has the shape of a bell curve. The
fluctuation of certain events is equal, which could be more or less than the expected
value (E (x)), mode (M (x)) is equal to E (x). Mode is the index which shows an
event’s maximum probability.
2) Negative exponential distribution has the shape of a convex
curve. M (x) = 0 and M (x) < E (x). Certain event probability equals 0.
3) Gamma distribution has the shape of a concave cure, but is
different from a normal distribution. High probability of an event, but less than
Continuous Distribution
Discrete Distribution
Event Probability
Event Probability
Event Event
26
expected value (M (x) < E (x)) is called skewed to the right in statistics, while (M (x)
< E (x)) is called skewed to the left.
4) Triangular distribution is a distribution in which event
probability consists of two linear functions. Distribution can be either skewed to the
right (M (x) < E (x)) or skewed to the left (M (x) > E (x)).
5) Rectangular distribution shows equal probability of each
event. The distribution is balanced with E (x) in the middle and no value of M (x).
Each probability distribution is shown in Figure 2.2.
Figure 2.2 Types of Event Probability Distribution
Source: Haruthai Meenaphan (2001, p. 464).
The consideration of investment benefit under risk can be
calculated from the probability of receiving benefit (P) and benefit level (%)(r), which
is shown in the following equation (Haruthai Meenaphan, 2011, p. 463):
irP = Probability to receive returns ri
where P is probability to receive return
r is return rate (%)
(4) triangular (5) rectangular
(1) normal (2) negative exponential (3) gamma
27
With the following properties
0rP
and
N
i
irP1
1
With N as Number of returns resulting from the project
1) Project risk analysis. Feasibility analysis of future projects
is the study of projects under dynamic conditions as a result of uncertainty and risk.
Various factors will affect the analysis of cost and benefit, especially those that are
related to future price, both as a factor of production and output price. Project risk
analysis will help reduce probable mistakes (Adis Israngkura na Ayudhya, 2010,
p. 15). The popular approaches of project risk analysis employed in project feasibility
analysis are as follows:
(1) Sensitivity Analysis is the project analysis in a case
study that differs from the base case under situations that are expected to result from
uncertainty in various factors, which could affect future project costs and benefits.
The setting of sensitivity and rate of change in cost and benefit must comply to the
likely uncertain event with a clear origin of assumption.
(2) Scenario analysis is a form of sensitivity analysis
focusing on a certain event that might happen in the future. The analysis steps consist
of 1) Choosing a factor that is crucial to the project’s success to formulate a likely
event that results from change in said factors, 2) Study the value of factors in the
feasibility analysis, which could be separated into 3 cases, namely, Pessimistic or
worst case, Optimistic or improved or best case, and Expected or base case or remain
unchanged case, 3) Calculate the feasibility index under each case, and 4) Decide
whether to invest based on the analysis result calculated from every event, rather than
only the base case (Haruthai Meenaphan, 2001, pp. 476-484).
(3) Simulation will consider the probability of each
various factor that changes simultaneously. The most popular technique is Monte
Carlo simulation, which is a technique for choosing various factor values based on the
probably rule (Haruthai Meenaphan, 2001, pp. 484-489).
28
(4) Switching value analysis is an analysis of testing the
maximum percentage increase in cost, or decrease in benefit, of the project that could
still make the project feasible or worth the investment. The analysis also includes
testing the simultaneous change in both cost and benefit.
2) Monte Carlo Simulation is the mathematical computation
for a desired output by creating a simulation under uncertainty of various factors that
affect the output. The said simulation will draw random numbers of input based on
the law of probability, in other words, the model will draw random numbers of
independent variables based on its probability distribution, which affects the output in
each changing simulation and will be repeated until the output is at an appropriate and
acceptable confidence level. The result can be analyzed via various methods, for
instance, mean, standard deviation, data distribution, probability, cumulative
probability, range that covers 85% confidence level, or any other statistical analysis
based on the study’s objective.
Feasibility analysis using Monte Carlo Simulation is the
application of Monte Carlo Simulation with Cost-Benefit Analysis (CBA) to analyze
project feasibility under risk or probability of the independent variable, which is the
variable that affects the value of the cost and benefit, which will ultimately affect the
project’s feasibility index, for instance, Net Present Value (NPV), Benefit Cost Ratio
(BCR), Internal Rate of Return (IRR) as dependent variables. A feasibility analysis
using Monte Carlo Simulation is shown in Figure 2.3.
29
Figure 2.3 Project Feasibility Analysis using Monte Carlo Simulation
3) Value at risk (VaR) is an analysis for assessing the level of
maximum loss that complies to probability, in other words, an analysis on maximum
value of loss or damage that could occur from investment. Investors might face loss
higher than the risk, but with low probability, which could be used as information for
decision making and setting the limit to contain maximum damage from the
investment (Anya Khanthavit, 2547, p. 100).
VaR calculation has various means, including Monte
Carlo Simulation by creating simulation based on past information to designate the
probability distribution of an event that could affect potential return, and which could
also be used for analyzing project investment VaR. The consideration of VaR is based
on analysis of the lowest Net Present Value (NPV) received from the project
feasibility analysis according to a random number, in other words, analysis result of
VaR of various investments using Monte Carlo simulation will show the value of
potential maximum loss based on a probability of changing factors that affect project
cost and benefit.
Randomized Independent Variable
Result of Dependent Variable Analysis
CBA Based pn number of random
Cost Variable Distribution
Benefit Variable Distribution
Cost-Benefit Analysis
(CBA) Feasibility Index
Distribution
30
2.1.2.4 Risk Assessment
Risk assessment is an analysis of the degree of risk based on 2 topics
from the risk analysis:
1) Risk Likelihood, which could be separated into 5 levels,
namely, 1) Very low or very unlikely, 2) Low or unlikely, 3) Medium or possible, 4)
High or likely, and 5) Very high or very likely.
2) Risk Impact, or the level of damage, which can also be
separated to 5 levels, namely, 1) Very low or insignificant, 2) Low, 3) Medium, 4)
High or significant, and 5) Very high or critical.
The evaluation result of probability and level of impact will be
used in a risk assessment matrix to show the relationship between risk likelihood and
risk impact, as shown in Figure 2.4.
Very
High Medium High
Very
High
Very
High
Very
High
High Low Medium High High Very
High
Medium Very
Low Low Medium High
Very
High
Low Very
Low Low Low Medium High
Very
Low
Very
Low
Very
Low
Very
Low Low Medium
Very
Low Low Medium High
Very
High
Figure 2.4 Risk Assessment Matrix
Risk Impact
31
This concept and theory review has shown that public administration concept
and theory is significant for setting principles and goals for public management. The
governance and new public management concepts set the goals and guidelines for
management, prioritizing on the efficiency and feasibility of public operations, while
the sustainable development principle focuses on public decision making concerning
the impact toward natural resources and the environment. Economic concept and
theory influences the means and tools for public decision-making, prioritizing
Cost-Benefit Analysis (CBA) leading to accurate decisions in following policy or
projects and reaching public management goals.
The connection of public management and economic concept and theory in
this study’s framework can be seen in Table 2.2.
Table 2.2 Study Framework, Content and Related Concept and Theory
Concept and Theory Content Study Framework
Public Administration Concept and Theory
Governance - Principle of efficiency under governance
in public management
Major framework
as goal in developing
feasibility framework format
New Public
Management
- Concept of efficiency and feasibility in
public operations
Sustainable
development
- Public project development under
sustainable development concept
Public efficiency and
feasibility
- Principles and guidelines of public
agencies in operating with efficiency
and feasibility
Economics Concept and Theory
Cost-Benefit Analysis
(CBA)
- Economic/Financial analysis
- Assumption
- Cost analysis
- Benefit analysis
- Project feasibility index
Conceptual framework in
analyzing problems,
limitations and feasibility
analysis framework
development
32
Table 2.2 (Continued)
Concept and Theory Content Study Framework
Natural Resource and
Environmental
Economics
- Natural resource and environment
allocation
- Environmental economic feasibility
analysis
Conceptual framework in
analyzing problems,
limitations and cost and
benefit analysis development
Risk analysis - Project risk analysis
- Monte Carlo Simulation
- Value at Risk analysis
- Risk assessment
Conceptual framework in
solving feasibility analysis
inaccuracy
2.2 Literature Review
The review on literature will focus on the problems, constraints, and
development of Cost-Benefit Analysis (CBA) in terms of both process and
methodology. The review result will be presented on 2 topics, which are literature
related to problems and constraints of CBA, and literature related to development of
CBA, with the following details:
2.2.1 Problems and Constraints of Cost-Benefit Analysis
The literature review has shown that there are mentions of problems and
constraints of feasibility analysis using Cost-Benefit Analysis (CBA) tools in various
dimensions, for instance, a study by Jones, Moura, and Domingos (2014), which
studied weaknesses and the present development guideline of CBA in transportation
projects. It summarized weakness in various topics, for instance, inaccurate
estimations of benefit and cost, lack of consideration in choosing the discount rate, the
project’s appropriate duration, and calculation of project salvage value, as shown in
Table 2.3.
33
Table 2.3 Weaknesses of Cost-Benefit Analysis
Components Weaknesses / Constraints
1. Traffic Forecast - Overestimate from reality by 20% – 60%
2. Cost Estimation - Underestimate from reality by 50% – 100%
3. Discount Rate Selection - Unable to select/forecast suitable discount rate for
long-term project
- High discount rate affect investment in project with
small size or short-term benefit
4. Value of Life Estimation - Unable to clearly estimate
- No conclusion on appropriate estimation method
5. Safety Issue Estimation - Various opinions on estimation methodology
- Difficult to estimate for a developing country
6. Time Value Adjustment - Complicated methodology
7. Regional Impact Assessment - Lack of consideration on network and impact toward
lack of capital in economy
8. Area Impact Assessment - Lack of interaction of land usage
9. Equality Issue Analysis - Lack of consideration on equality
10. Environmental Impact Assessment - Unable to clearly estimate and high uncertainty
11. Salvage Value Estimation - No clear study guideline
Source: Jones, Moura, and Domingos (2014, p. 402-403).
The mentioned study has shown weaknesses in feasibility analysis
methodology coinciding with a study from Beukers, Bertolini, and Te Brömmelstroet
(2012) which stated that Cost-Benefit Analysis (CBA) is a tool with many limitations,
for instance, it can be unambiguous (Black box), difficult to understand, gives low
consideration to risk, and never gives the whole picture. This also coincides with a
recommendation by Salling, (2008) who stated that the weakness of CBA is single
value representation, consideration unambiguity, problem in assessing impact out of a
market system, weakness on analysis transparency which is difficult to understand for
the average citizen, and investment risk resulting from analysis inaccuracy.
34
Furthermore, a study from Shen, Tam, Tam, and Ji (2010) showed framework
of feasibility analysis from various projects in China with up to 87 projects where
there was a higher emphasis on economic issues compared to social and
environmental issues. Also, among various economic topics, the public sector gave a
low priority on the feasibility issue.
The significant problems of Cost-Benefit Analysis (CBA) have negatively
affected present public project management, especially concerning study inaccuracy,
which occurs in large scale infrastructure development feasibility analyses around the
world. In planning and performing a feasibility analysis, analysts tend to
underestimate the cost of construction while overestimating the project’s benefits. A
study by Flyvbjerg, Skamris Holm, and Buhl, (2005, p. 131), compiled by analyzing
210 transportation projects in 14 countries, showed that 9 out of 10 rail transportation
projects had overestimated the passenger numbers up to 106%, while road
transportation projects had inaccurately estimated road usage by more than 20%.
In 2009, there was more reporting from Flyvbjerg (2009), showing that 258
projects in 20 countries around the world, comprising 90% of studied projects, were
faced with cost underestimations by 44.7% of actual cost, while 208 projects from 14
countries, also comprising 90% of studied projects, were faced with benefit
overestimations by 50% - 84% of actual benefit. The study from Flyvbjerg, Holm, and
Buhl (2002) also showed that inaccuracy in project cost underestimation has been a
persistent problem throughout a 70 year period with no solution or decrease, and
further pointed out that in 2005 the estimation accuracy had not declined, even
considering the period for 30 years prior (Flyvbjerg, Holm, & Buhl, 2005, p. 131),
which indicates that study technique development in estimations is not the significant
factor affecting study inaccuracy.
The inaccuracy of project cost and benefit estimation is a factor affecting risk
in public large-scale development projects (Priemus, 2010 & Flyvbjerg, 2006, p. 1)
along with inefficient social resource management (Flyvbjerg, Skamris Holm, &
Buhl, 2005, pp. 131). These problems result from various factors, both
methodological and procedural, for instance, cost estimation inaccuracy from
discontinuous policies, market dynamics, and changes in the project’s scope (Priemus,
2010) and framework (Polat, Okay, & Eray, 2014).
35
The study from Flyvbjerg, (2009) had indicated 3 causes of CBA inaccuracy,
namely, 1) Academic error in analysis, 2) Limitations in analyzing the data, and 3)
Bias of the researcher or analyst. The cause due to analyst bias toward study
inaccuracy is such a crucial one that there are also academics who study the
framework, impacts and solution guidelines for the problem. For instance, Kilkon
(2006) has stated that Korean infrastructure development policy analysts used
personal bias in judging and assigning weight for analyzing factors, leading to
differing analysis results according to the types of project as well as ownership and
responsible parties, which coincides with the study of Flyvbjerg (2006), who had
mentioned that researcher bias resulting from overconfidence in the analysis result
and attempts to fulfill responsible development goals were leading to an inaccurate
CBA on projects.
A review of literature regarding CBA inaccuracy in Thailand has shown that
there are ongoing questions on public large-scale infrastructure development projects,
for instance, the development of the Airport Rail Link by State Railway of Thailand,
which is faced with revenues less than the estimation in a previously conducted study,
leading to significant loss. There are also notices in a study’s credibility in other
project studies, which relates to interference from management or political sections to
push project developments with large budgets without considering damage (Pawin
Siriprapanukul & Yos Vajragupta, 2013). Furthermore, Adis Israngkura na Ayudhya
(2010) stated problems and limitations in Thai feasibility analysis, with the major
findings in Table 2.4.
36
Table 2.4 Problems of Transparency in the Study Process and Limitations in Study
Methodology
Problem /
Limitation Details
Study Process - Some of the mistakes in feasibility analysis do not result from lack of
understanding in feasibility analysis theory, but other causes, for instance,
lack of honesty.
- In certain cases, the analysis lacks prudence and systematic study, leading to
inaccurate results.
- Discount rate selection is one of the tools used in distorting project
feasibility analysis results.
Study Methodology - Feasibility analysis could only be used for project ranking when the projects
are in the same category.
- Feasibility analysis is only one tool, which must be used along with other
tools to make the decision as to whether certain projects should be allowed
to operate.
- Negligence in environmental analysis is the excuse in neglecting a project’s
negative impacts, leading to an overestimated return rate.
Source: Adis Israngkura na Ayudhya (2010).
Meanwhile, the literature review on project risk analysis has
Piyatrapoomi, Kumar, and Setunge (2004) stating that the feasibility analysis under
various risk factors that is popular in various countries, for instance, England, France,
Germany, and Australia, is scenario analysis. However, the study also states the
limitations of scenario analysis, which can only show the analysis result under certain
events, but lacks the probability of each event.
37
2.2.2 Cost-Benefit Analysis Framework Development
The literature review on development of Cost-Benefit Analysis (CBA) (CBA)
is separated to 2 approaches, which are 1) Process development, and 2) Methodology
development, with the following details:
1) Process development approach. The literature review shows that
the major approach is that responsible parties must prioritize on transparency and
accountability for analysts (Flyvbjerg, Skamris Holm, & Buhl, 2005, p. 131).
Furthermore, there are recommendations of reward for analysts with accurate
analyses, and punishment for mistakes, in order to reduce problems from the
researchers’ personal bias and mistakes, which are considered a challenging issue
toward governance development in future public missions. Adis Israngkura na
Ayudhya (2010) has stressed the importance of creating understanding for researchers
in troubling issues, for instance, prioritizing impact assessment rather than output
(Adis Israngkura na Ayudhya, 2010, p. 62) and resulting impacts, to evaluate whether
the said project gives a worthwhile return as a whole (Adis Israngkura na Ayudhya,
2010, p. 27).
In recommending solutions to problems regarding the process, there is
mention of bringing in a process of Public Private Partnership (PPPs) for performing
various infrastructure investments (Priemus, 2010), which could reduce the burden on
the public budget, increase management efficiency, increase private review, and
diversify risk from the public to the private sector (Nutavoot Pongsiri, 2013, p. 2), this
would include utilizing risk insurance via an insurance company, which could reduce
risk from an inaccurate project construction cost estimation (Priemus, 2010). As for
Thailand, Pawin Siriprapanukul and Yos Vajragupta (2556, para. 9) proposed the
solution of establishing a budget analysis agency which would operate independently
from management to review the accuracy and credibility of the feasibility analysis in
various public projects. This approach has been adopted in numerous countries, for
instance, Canada has established a monitoring agency under parliament named the
Parliamentary Budget Officer, the Bureau for economic policy analysis (CPB) in the
Netherlands, and the Congressional Budget Officer (CBO) in the United States.
2) Methodology development approach. The literature review shows
that the most important approaches are the development of methodology in
38
forecasting future information (Flyvbjerg, Skamris Holm, & Buhl, 2005, p. 131), and
prioritizing social and environmental issues to consider them as equal to economic
issues for sustainable development (Shen, Tam, Tam, & Ji, 2010, p. 258). To solve
the analysis inaccuracy issue, the study from Flyvbjerg, (2009) mentioned a solution
for cost overruns from researcher bias called “Insider view” by using a method called
“Outside view”, which is an external review, or using “Reference class forecasting”,
which was developed from concepts and theories of decision making under certainty
by Daniel Kahneman, a 2002 Nobel memorial prize laureate in Economics. This
approach utilizes data analysis of other projects’ chances of cost overruns in term of a
relational graph between cost overrun and probability on various levels, which is used
to compare and adjust for an acceptable chance of cost overrun (Flyvbjerg, 2006), as
shown in the conceptual framework using Reference class forecasting in Figure 2.5,
and shown as an example figure of adjustment of acceptable chance of cost overrun in
Figure 2.6.
Figure 2.5 Analysis Conceptual Framework using Reference class forecasting
Source: Salling (2008).
39
Figure 2.6 Adjustment of Acceptable Chance of Cost Overrun
Source: Flyvbjerg (2006).
Presently, feasibility analysis has been given more importance to
project risk analysis, especially risk analysis based on probability using a Monte Carlo
Simulation. For example, the study of “Applying a Cost-Benefit Analysis Model to
the Three Gorges project in China” by Morimoto and Hope (2004) performed a
feasibility analysis of the Three Gorges Dam in China using a Monte Carlo
Simulation for 10,000 simulations based on various factors affecting uncertainty in
the project’s cost and benefit estimations, including the project’s economic, social and
environmental impacts. The study “An Extended CBA Model of Hydro Projects in Sri
Lanka” by Morimoto, and Hope (1999) analyzed a feasibility analysis in a Sri Lankan
hydropower project using a Monte Carlo Simulation for 10,000 simulations as well.
As for studies in Thailand, there has been usage of Monte Carlo
Simulation in feasibility analysis there as well, for instance, the study “Cost
Estimation of Tunnel and Underground Duct Bank Works Using Monte Carlo
Simulation Technique” (Nirun Lawskool, 2002), which analyzed the project’s cost
using cost estimations from other construction projects, and analyzed probability of
the project’s cost using a Monte Carlo Simulation, the study “An Analysis of Return
on Investment in Cassava Chip Production Business Using Monte Carlo Simulation
Technique” (Navarat Thitinunpong, 2555) performed an analysis on cost and benefit
in setting up tapioca dry fields to choose the most commercially appropriate area for
business, as well as the study “Economics Value Analysis of Project Investment Case
40
Study: PTT Phenol Train II Project of PTT Phenol Company Limited” (Nantapong
Pantaweesak, 2015), which analyzed the project’s feasibility using a Monte Carlo
Simulation in the base case, worst case, and best case, based on 10,000 simulations.
Presently, there have been some academics proposing the tools
needed to reduce analysis inaccuracy. Salling, and Leleur (2006) proposed a
feasibility analysis program in telecommunication projects named CBA-DK. The said
program was developed using a Monte Carlo Simulation for performing a feasibility
analysis under various risk factors. Later, Salling (2013) developed a new approach to
solve study inaccuracy in transportation projects using a program called UNITE
(UNITE DSS Model) which used a Monte Carlo Simulation in feasibility analysis
based on various risk factors which utilized the development of an inaccuracy
database based on the findings of past telecommunication projects in order to create a
probability distribution on the project’s cost and benefit (Figures 2.7 and 2.8). It used
the random process in Monte Carlo Simulation and analyzed the Benefit Cost Ratio
(BCR) by representing it in a relational graph between BCR and probability, the result
is shown below (Figure 2.9).
Figure 2.7 Analysis of Project’s Benefit Estimation Inaccuracy
Source: Salling (2013, p. 473).
41
Figure 2.8 Analysis of Project’s Cost Estimation Inaccuracy
Source: Salling (2013, p. 474).
Figure 2.9 Result of Feasibility Analysis using UNITE-DSS Model program
Source: Salling (2013, p. 475).
42
From the literature review, the conclusion is that Cost-Benefit Analysis
(CBA) for investment decisions might be one of the factors affecting inaccurate
decisions of various development projects and negatively affecting the goal of
efficient public management and sustainable development coming from 2 crucial
problems, namely, 1) The lack of consideration for every related impact and 2) The
inaccuracy of project CBA which might result from analysis limitation, both in terms
of process and methodology, for instance, lack of clear scope of the study, lack of
analyzing data, and technical limitations of the study, including analyst bias.
The development guideline for solving Cost-Benefit Analysis (CBA)
problems or weaknesses could be separated to 2 approaches, which are 1) a Process
development, approach which would focus on setting more accurate and clearer study
to the scope and approach, developing a study review mechanism with focus on
governance and transparency, as well as utilizing other management styles in
analyzing and making decisions on the project, and 2) a Methodology development
approach, which would focus on developing a methodology under the risk which
results from inaccurate study results, especially using Monte Carlo Simulation in the
feasibility analysis.
2.3 Conceptual Framework
Based on the concept, theory and literature review for the framework of
Thailand infrastructure development feasibility analysis: small scale hydropower plant
project case study, a conceptual framework could be set as follows:
1) The crucial principles and concepts on public management are governance,
new public management, and sustainable development which leads to public
management goals and guidelines that focus on efficiency, feasibility and resource
sustainability.
2) Feasibility analysis on various public development projects is the crucial
decision-making tool for the public sector in maximizing national resource usage to
achieve the goal of efficient, feasible and sustainable public management.
43
The conceptual framework in this study is shown in Figure 2.10.
Figure 2.10 Conceptual Framework
Based on this conceptual framework, this study’s guideline can be separated
into 4 major components, which are 1) The study of feasibility analysis, 2) The study
of standards and guidelines of feasibility analysis, 3) The study of inaccuracies,
problems, and limitations of feasibility analysis, and 4) The development of a
feasibility analysis framework for the case study of Thailand small scale hydropower
plant projects. This study aims to propose a framework and guidelines for developing
a feasibility analysis process to be used as public tools for managing small scale
hydropower plants in an efficient, feasible, and sustainable manner.
Public Management
Process / Tool
Feasibility Analysis
Public Management
Goal and Guideline
- Efficiency and Feasibility
- Resource Sustainability
44
CHAPTER 3
RESEARCH METHODOLOGY
This study has designed a research methodology which is comprised of the
research design, data and data collection, analysis tools and techniques, and study
method, with details as follows:
3.1 Research Design
This study employed a mixed research method by utilizing qualitative research
in this small scale hydropower plant framework study by using descriptive
explanations along with statistical data and comparative analysis to illustrate common
features, distinct features, problems, and limitations of Thai feasibility analysis, while
quantitative analysis was utilized in the risk analysis of feasibility analysis.
3.2 Data and Data Collection
Based on the study framework and guidelines designed in chapter 2, the data
and data collection employed in this study could be summarized as follows:
1) Document collection by collecting documents related to the study of small
scale hydropower plants with a capacity less than 12,000 kilowatts performed
between 1987 and 2016, evaluation of small scale hydropower plants, renewable
energy generation projects, academic papers and manuals of feasibility analysis
conducted by various agencies, both domestics and foreign, as well as feasibility
analysis methodology and process development.
45
2) Interview data collection by conducting in-depth interviews on academics
or consulting company personnel with experience in small scale hydropower plants
and other related projects. The major topics interviewed were feasibility analysis
guidelines, problems and limitations faced during the study, and recommendations for
developing a small scale hydropower plant framework.
3.3 Analysis Tools and Techniques
This study has employed both qualitative and quantitative research tools to
appropriately analyze study data in each topic according to study objectives. The
details are shown as follows:
3.3.1 Tools and Techniques for Analyzing Small Scale Hydropower Plant
Feasibility Analysis
The study of small scale hydropower plant feasibility analysis framework
employed the methodology of content analysis and analytic induction by separate and
group, and compared the data characteristics in each group as well as presented data
using descriptive statistics, for instance, the mean, mode and median, to illustrate
characteristic descriptions of the feasibility analysis framework to reach knowledge
on common and distinct features of small scale hydropower plant feasibility analysis
frameworks on various topics. The conceptual framework for small scale hydropower
plant feasibility analysis framework study is shown in Figure 3.1, with study topics of
feasibility analysis framework in Table 3.1.
46
Figure 3.1 Small Scale Hydropower Plant Feasibility Analysis Framework Study
Conceptual Framework
Table 3.1 Feasibility Analysis Framework Study Topics
Main Topics Subtopics
1) Basic Information - Owner agency
- Study agency or personnel
- Year of study
2) Assumption - Project duration
- Project duration selection principle
- Discount rate
- Project discount rate selection principle
3) Cost Analysis - Cost item
- Cost evaluation method
4) Benefit Analysis - Benefit item
- Benefit evaluation method
5) Feasibility Index - Project feasibility index selection
6) Risk Analysis - Risk analysis method
Small scale hydropower plant
feasibility analysis document
study
Related agencies’ study,
monitor and decision process
Small scale hydropower plant
feasibility analysis research
methodology
In-depth interview / law and
regulation and guideline
study
• Analytic induction
• Statistical data
recording
47
3.3.2 Tools and Techniques for Analyzing Small Scale Hydropower Plant
Feasibility Analysis Standards and Guideline Compatibility
The study of small scale hydropower plant feasibility analysis standards and
guideline compatibility was performed by conducting content analysis on the
conclusion of feasibility analysis features comparative to various agencies’ standards,
for instance, Thai regulatory agencies and international organization standards. The
conceptual framework for small scale hydropower plant feasibility analysis standards
and guideline compatibility is shown in Figure 3.2.
Figure 3.2 Small Scale Hydropower Plant Feasibility Analysis Standard and
Guideline Compatibility Analysis Conceptual Framework
3.3.3 Tools and Techniques for Analyzing Small Scale Hydropower Plant
Feasibility Analysis Inaccuracies, Problems, and Limitations
The study of inaccuracies, problems, limitations of methodology and process
of cost and benefit analysis was performed by collecting related data and comparing it
between the study results before operation and the results of project evaluation after
operation, in order to analyze the inaccuracy level of the study results, as well as
problems and limitations occurring in the feasibility analysis, including methodology,
processes and impacts resulting from various problems using content analysis, as well
as descriptive statistics.
The conceptual framework for small scale hydropower plant feasibility
analysis inaccuracies, problems, and limitations analysis is shown in Figure 3.3
Methodology standard
and guideline
compatibility
Study process standard
and guideline
compatibility
Comparative study with
standard and guideline of
domestic and international
agencies
Related agencies’
study, monitor and
decision process
Feasibility analysis
research methodology
48
Figure 3.3 Small Scale Hydropower Plant Feasibility Analysis of Inaccuracies,
Problems, and Limitations Analysis Conceptual Framework
3.3.4 Tools and Techniques for Analyzing Small Scale Hydropower Plant
Feasibility Analysis Framework Development
The recommendations for small scale hydropower plant feasibility analysis
framework development could be applied to feasibility analysis in other types of
projects by using reference class forecasting and Monte Carlo Simulation as well as
recommendations for development of analysis process management and public sector
feasibility analysis. The framework for small scale hydropower plant feasibility
analysis framework development analysis is shown in Figure 3.4.
Figure 3.4 Small Scale Hydropower Plant Feasibility Analysis Framework
Development Analysis Conceptual Framework
Methodology problems and
limitations
Process problems and
limitations
Small scale hydropower
plant report and operation
study
Inaccuracy level data
Public management
development guideline
Risk reduction /
analysis technique
Various agencies
academic principles /
standard
Study and actual
result comparison
Analytic induction
Related personnel interview
Process development
recommendation
Methodology development
recommendation
• Index development and
inaccuracy / risk reduction
technique
• Study, monitor and decision
process adjustment /
development for project
investment
49
3.4 Study Process
The study process can be separated into 2 major parts, namely, 1) Related data
collection, and 2) Analysis according to 4 study objectives. The results from each step
could be used as data for study in the later step. The study process of the Study of
Thailand Infrastructure Development Feasibility Analysis: Small Scale Hydropower
Plant Case Study can be seen in Figure 3.5.
Figure 3.5 The Study of Thailand Infrastructure Development Feasibility Analysis:
Small Scale Hydropower Plant Case Study Process
Small scale hydropower
plant feasibility analysis
document and study review
Statistical data analysis and
small scale hydropower plant feasibility framework
summary
Small scale hydropower plant feasibility analysis
framework development Inaccuracy/risk reduction
technique, and study, monitoring, and investment
decision process development
Small scale hydropower plant feasibility analysis
standard compatibility and guideline analysis
Related analysts and
academics
in-depth interview
Economic theory
review
Public management
concept and theory review
Various agencies study
documents, manual /
standard
Small scale hydropower plant feasibility analysis
inaccuracy, problems, and limitations analysis
Small scale hydropower plant feasibility analysis
Inaccuracy, problems, and limitations analysis
CHAPTER 4
ANALYSIS RESULTS
Analysis results are comprised of 1) Feasibility analysis framework study
2) Feasibility analysis standards and guideline compatibility study 3) Cost overrun
and benefit shortfall study 4) Feasibility analysis problems and limitations study, and
5) Feasibility analysis framework development study, with details as follows:
4.1 Feasibility Analysis Framework Study
The results of the small scale hydropower plant feasibility analysis
framework study is comprised of 1) Feasibility analysis methodology framework and
2) Feasibility analysis process framework, with details as follows:
4.1.1 Feasibility Analysis Methodology Framework
The study of the methodology framework was performed on 48 small and mini
scale hydropower plant feasibility analysis reports covering 648 projects which could
be separated into 2 groups, namely, 43 small scale hydropower plant feasibility
analysis reports covering 57 projects, and 5 small scale hydropower plant master
plans covering 591 projects.
Furthermore, there was additional study on feasibility analysis documents and
reports in other projects related or similar to small scale hydropower plants, this
included 4 foreign small scale hydropower plant reports and 12 reports on other types
of hydropower plants. There was also further study on 35 documents and reports on
feasibility analysis of renewable energy projects which could be separated into 3
groups, namely, 20 reports on biomass energy and waste-to-energy, 13 reports on
wind energy, and 2 reports on solar energy. In conclusion, there is data analysis from
99 reports covering 766 projects, the report names are shown in Appendix B, while
detail of the studied reports and projects are shown in Table 4.1.
51
Table 4.1 Detail and Numbers of Studied Reports and Projects
Types of
Reports/Projects Detail Report Project
1. Thai small scale hydropower projects 48 648
1.1 Small scale
hydropower project Engineering, environmental
and investment budget feasibility analysis report
43 57
1.2 Small scale
hydropower master
plan
Numerous feasibility analysis reports
to consider potential, priority,
and designate overall plan and budget
5 591
2. Foreign small scale
hydropower projects
Feasibility analysis report of projects
in Cambodia and Laos PDR
with engineering and investment budget details
4 9
3. Other hydropower
projects
Feasibility analysis report of hydropower project
larger than 12,000 kilowatts
with environmental and feasibility analysis details
12 22
4. Other renewable energy projects 35 87
4.1 Biomass energy and
waste-to-energy
project Engineering, environmental,
and investment feasibility analysis reports
20 39
4.2 Wind energy project 13 35
4.3 Solar energy project 2 13
Total 99 766
From the study of all mentioned project study reports, the findings could
be summarized into 6 major topics, which are 1) Basic information, 2) Discount rate
selection, 3) Cost analysis, 4) Benefit analysis, 5) Feasibility index, and 6) Risk
analysis, with the following details:
4.1.1.1 Basic Information
The study of basic information on projects is comprised of 1) Project
owner, 2) Agency performing the study, 3) Study year, and 4) Type of analysis, with
the following details:
52
1) Project Owner. From 48 reports of small scale hydropower
plants studied, the project owners could be classified into 3 groups, namely, public
agencies, state enterprises, and private agencies. 98% of the projects are owned by
public agencies while the other 2% are owned by state enterprises. The public agency
who is the major project owner is the Department of Alternative Energy Development
and Efficiency, Ministry of Energy (DEDE) which has direct responsibility for
developing Thailand’s renewable energy, while the major state enterprise owner is
Provincial Electricity Authority (PEA), which is responsible for securing and
providing electricity for the regional population.
As for the 51 study reports on other related projects, foreign
small scale hydropower plants are owned 50% by public agencies and 50% by private
agencies. The private agencies are companies operating on electricity generation from
small scale hydropower projects in Cambodia and Laos PDR. Other small-scale hydro
power projects are owned 42% by public agencies, 42% by private agencies and 17%
by state enterprises, while other renewable energy projects are wholly owned by
public agencies. as can be seen in number and percentage form in the report classified
by project owners in Table 4.2 and Table 4.3.
Table 4.2 Number of Reports Classified by Project Owner
Types of Report/Project
Project Owner
Public State
Enterprise Private Total
1 Thai small scale hydropower projects 47 1 0 48
1.1 Small scale hydropower projects 42 1 0 43
1.2 Small scale hydropower project master plan 5 0 0 5
2. Foreign small scale hydropower projects 2 0 2 4
3. Other hydropower projects 5 2 5 12
4. Other renewable energy projects 36 0 0 35
4.1 Biomass energy and waste-to-energy
projects 20 0 0 20
4.2 Wind energy projects 14 0 0 13
4.3 Solar energy projects 2 0 0 2
Total 90 3 7 99
53
Table 4.3 Percentage of Reports Classified by Project Owner
Types of Report/Project
Project Owner
Public State
Enterprise Private Total
1. Thai small scale hydropower projects 98% 2% 0% 100%
1.1 Small scale hydropower projects 98% 2% 0% 100%
1.2 Small scale hydropower project master
plans 100% 0% 0% 100%
2. Foreign small scale hydropower projects 50% 0% 50% 100%
3. Other hydropower projects 42% 17% 42% 100%
4. Other renewable energy projects 100% 0% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 100% 0% 0% 100%
4.2 Wind energy projects 100% 0% 0% 100%
4.3 Solar energy projects 100% 0% 0% 100%
Total 91% 3% 7% 100%
2) Study Agency. Based on data analysis, the agency
performing feasibility analysis could be classified into 4 groups, namely, consulting
firms, educational institutions, independent agencies or foundations, and public
agencies. 83% of Thai small scale hydropower plant study reports were performed by
external consulting firms, 13% by educational institutions, and 2% by public agencies.
As for foreign small scale hydropower plants, 100% were
performed by external consulting firms. 83% of other hydropower projects were
performed by external consulting firms. 63% of other renewable project were
performed by educational institutions with 20% performed by consulting firms. The
number and percentage of reports classified by study of agency can be seen in Table
4.4 and Table 4.5.
54
Table 4.4 Number of Reports Classified by Study of Agency
Types of Reports/Projects Consulting
Firm
Education
Institution
Independent
Agency /
Foundation
Public Not
Available Total
1. Thai small scale hydropower projects 40 6 0 1 1 48
1.1 Small scale hydropower projects 36 5 0 1 1 43
1.2 Small scale hydropower project master
plans 4 1 0 0 0 5
2. Foreign small scale hydropower projects 4 0 0 0 0 4
3. Other hydropower projects 10 0 0 1 1 12
4. Other renewable energy projects 7 22 2 4 0 35
4.1 Biomass energy and waste-to-energy
projects 6 8 2 4 0 20
4.2 Wind energy projects 1 12 0 0 0 13
4.3 Solar energy projects 0 2 0 0 0 2
Total 61 28 2 6 2 99
Table 4.5 Percentage of Reports Classified by Study of Agencies
Types of Reports/Projects Consulting
Firm
Education
Institution
Independent
Agencies
/ Foundation
Public Not
Available Total
1. Thai small scale hydropower projects 83% 13% 0% 2% 2% 100%
1.1 Small scale hydropower projects 84% 12% 0% 2% 2% 100%
1.2 Small scale hydropower project master
plans 80% 20% 0% 0% 0% 100%
2. Foreign small scale hydropower projects 100% 0% 0% 0% 0% 100%
3. Other hydropower projects 83% 0% 0% 8% 8% 100%
4. Other renewable energy projects 20% 63% 6% 11% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 30% 40% 10% 20% 0% 100%
4.2 Wind energy projects 8% 92% 0% 0% 0% 100%
4.3 Solar energy projects 0% 100% 0% 0% 0% 100%
Total 62% 28% 2% 6% 2% 100%
55
3) Study Year The data analysis has shown that Thai small
scale hydropower plant study reports had the earliest study year of 1987 and latest
year of 2016 with the majority, 69%, studied during 2008 – 2017, and 23% studied
during 1998 – 2007.
As for foreign small scale hydropower plants, the earliest study
year was 2004 and latest year was 2006, which were wholly studied during the period
of 1998 - 2007. Other hydropower plants had the earliest study year of 1963 and latest
year of 2013, with the majority, 50%, studied during 2008 – 2017, and 25% studied
during 1998 – 2007. Other renewable energy projects had the earliest study year of
1987 and the latest year of 2016 with the majority, 83%, studied during 2008 – 2017.
The number and percentage of reports classified by study year can be seen in Table
4.6 and Table 4.7.
Table 4.6 Number of Reports Classified by Study Year
Types of Reports/Projects
Study Year
Min Max 1957–
1987
1988–
1997
1998–
2007
2008–
2017 Total
1. Thai small scale hydropower projects 1987 2016 1 3 11 33 48
1.1 Small scale hydropower projects 1987 2016 1 2 10 30 43
1.2 Small scale hydropower projects
master plans 1993 2016 0 1 1 3
5
2. Foreign small scale hydropower projects 2004 2006 0 0 4 0 4
3. Other hydropower projects 1963 2013 2 1 3 6 12
4. Other renewable energy projects 1987 2016 1 0 5 29 35
4.1 Biomass energy and waste-to-
energy projects 1987 2016 1 0 5 14
20
4.2 Wind energy projects 2008 2016 0 0 0 13 13
4.3 Solar energy projects 2013 2015 0 0 0 2 2
Total 1963 2016 4 4 23 68 99
56
Table 4.7 Percentage of Reports Classified by Study Year
Types of Reports/Projects
Study Year
1957–
1987
1988–
1997
1998–
2007
2008–
2017 Total
1. Thai small scale hydropower projects 2% 6% 23% 69% 100%
1.1 Small scale hydropower projects 2% 5% 23% 70% 100%
1.2 Small scale hydropower project master
plans 0% 20% 20% 60% 100%
2. Foreign small scale hydropower projects 0% 0% 100% 0% 100%
3. Other hydropower projects 17% 8% 25% 50% 100%
4. Other renewable energy projects 3% 0% 14% 83% 100%
4.1 Biomass energy and waste-to-energy
projects 5% 0% 25% 70% 100%
4.2 Wind energy projects 0% 0% 0% 100% 100%
4.3 Solar energy projects 0% 0% 0% 100% 100%
Total 4% 4% 23% 69% 100%
4) Type of Analysis. Based on data analysis, the type of
analysis was classified into 3 groups, namely, economic study, financial study and
economic and financial study. 48 reports, or 100% of Thai small scale hydropower
plant study reports, had performed feasibility analysis using economic methodology,
with 79% using both methodologies. However, the small scale hydropower plant
master plan only used economic methodology.
As for foreign small scale hydropower plants, 100% had used
financial methodology. 50% of other hydropower projects used economic study, 75%
used financial study, and 25% used both. As for other renewable energy projects, 50%
had economic study, 100% had financial study, and 40% had both economic and
financial study. The number and percentage of reports classified by type of analysis is
shown in Table 4.8 and Table 4.9.
57
Table 4.8 Number of Reports Classified by Type of Analysis
Types of Reports/Projects Total
Projects
Type of Analysis
Economic Financial
Economic
and
Financial
1. Thai small scale hydropower projects 48 48 38 38
1.1 Small scale hydropower project s 43 43 38 38
1.2 Small scale hydropower project master
plans 5 5 0 0
2. Foreign small scale hydropower projects 4 2 4 2
3. Other hydropower projects 12 6 9 3
4. Other renewable energy projects 35 14 35 14
4.1 Biomass energy and waste-to-energy
projects 20 10 20 10
4.2 Wind energy projects 13 3 13 3
4.3 Solar energy projects 2 1 2 1
Total 99 70 86 57
Table 4.9 Percentage of Reports Classified by Type of Analysis
Types of Reports/Projects
Type of Analysis
Economic Financial Economic and
Financial
1. Thai small scale hydropower projects 100% 79% 79%
1.1 Small scale hydropower projects 100% 88% 88%
1.2 Small scale hydropower project master
plans 100% 0% 0%
2. Foreign small scale hydropower projects 50% 100% 50%
3. Other hydropower projects 50% 75% 25%
4. Other renewable energy projects 40% 100% 40%
4.1 Biomass energy and waste-to-energy
projects 50% 100% 50%
4.2 Wind energy projects 23% 100% 23%
4.3 Solar energy projects 50% 100% 50%
Total 71% 87% 58%
58
4.1.1.2 Assumption Selection
The study of feasibility analysis assumption selection framework is
comprised of 1) Project duration selection and 2) Discount rate selection, with details
as follows:
1) Project Duration Selection. The data analysis shows that
Thai small scale hydropower plants had selected the lowest project duration at 30
years, and highest at 50 years. Most of the study, up to 77%, had selected a project
duration of 30 years. The principle in selecting project duration behind most projects
was based on the useful life of the project’s major components.
As for foreign small scale hydropower plant projects, the
lowest project duration selected was 27 years, and the highest was 50 years. The
lowest duration for other hydropower projects was 25 years while the highest was 50
years. Other renewable energy projects had selected the lowest duration of 10 years
and the highest was 30 years. The number and percentage of reports classified by
project duration is shown in Table 4.10.
Table 4.10 Number of Reports Classified by Project Duration
Types of Reports/Projects
Project Duration
Min Max Mode Num. of
mode
Percent
of mode
1. Thai small scale hydropower projects 30 50 30 37 77%
1.1 Small scale hydropower projects 30 50 30 32 74%
1.2 Small scale hydropower project master
plans 30 30 30 5 100%
2. Foreign small scale hydropower projects 27 50 27 2 50%
3. Other hydropower projects 25 50 30 6 50%
4. Other renewable energy projects 10 30 20 25 71%
4.1 Biomass energy and waste-to-energy
projects 10 30 20 12 60%
4.2 Wind energy projects 20 25 20 12 92%
4.3 Solar energy projects 20 25 20 1 50%
Total 10 50 30 46 46%
59
2) Discount Rate Selections. The data analysis has shown that
Thai small scale hydropower projects had selected the lowest discount rate of 6.0%
and highest rate of 12.0%s with a majority 56% selecting the rate of 8.0% with mean
of 8.8%. A majority 62% of reports had stated that the discount rate was selected
based on principles set by the Office of the National Economic and Social
Development Board (NESDB) which had the range of 9 – 12%. However, some
reports also considered this principle with the government bond interest rate of 8%,
which was lower than NESDB guideline.
As for foreign small hydropower plants, the lowest discount
rate was 6.0% and the highest rate was 10.0%. A majority 50% of reports used an
8.0% rate, with a rate mean of 8.0%. Other hydropower projects used the lowest rate
of 7.3% and highest rate of 12.0%, with a majority 50% of reports using a 10.0% rate
with a rate mean of 9.5%. Other renewable energy projects used the lowest rate of
5.0% and highest rate of 12.0% with a majority 34% of reports using an 8.0% and
10.0% rate with a rate mean of 8.3%, as shown from Tables 4.11 to 4.13.
Table 4.11 Number of Reports Classified by Discount Rate
Types of Reports/Projects
Discount Rate
max min Avg. Mode Num. of
mode
Percent
of mode
1. Thai small scale hydropower projects 12.0% 6.0% 8.8% 8.0% 27 56%
1.1 Small scale hydropower projects 12.0% 6.0% 8.8% 8.0% 24 56%
1.2 Small scale hydropower projects
master plans
10.0% 8.0% 8.8% 8.0% 3 60%
2. Foreign small scale hydropower projects 10.0% 6.0% 8.0% 8.0% 2 50%
3. Other hydropower projects 12.0% 7.3% 9.5% 10.0% 6 50%
4. Other renewable energy projects 12.0% 5.0% 8.3% 8.0%, 10.0% 12 34%
4.1 Biomass energy and waste-to-energy
projects
11.0% 5.0% 8.6% 10.0% 6 30%
4.2 Wind energy projects 12.0% 5.0% 8.1% 7.0%, 2 15%
4.3 Solar energy projects 7.1% 7.1% 7.1% 7.08%, 7.10% 2 100%
Total 12.0% 5.0% 8.7% 8.00% 37 37%
60
Table 4.12 Number of Reports Classified by Discount Rate Selection Principle
Types of Reports/Projects
Discount Rate Selection Principle
NESDB
Borrowing
interest
rate
Bond WACC Expected
rate
Not
Available Total
1. Thai small scale hydropower projects 31 0 0 1 0 16 48
1.1 Small scale hydropower project s 29 0 0 1 0 13 43
1.2 Small scale hydropower project master
plans 2 0 0 0 0 3 5
2. Foreign small scale hydropower projects 0 0 0 0 0 4 4
3. Other hydropower projects 3 0 0 0 0 9 12
4. Other renewable energy projects 5 7 1 0 1 21 35
4.1 Biomass energy and waste-to-energy
projects 4 1 1 0 0 14 20
4.2 Wind energy projects 1 4 0 0 1 7 13
4.3 Solar energy projects 0 2 0 0 0 0 2
Total 38 7 1 1 1 51 99
Table 4.13 Percentage of Reports Classified by Discount Rate Selection Principle
Types of Reports/Projects
Discount Rate Selection Principle
NESDB Borrowing
interest rate Bond WACC
Expected
rate
Not
Available Total
1. Thai small scale hydropower projects 65% 0% 0% 2% 0% 33% 100%
1.1 Small scale hydropower projects 67% 0% 0% 2% 0% 30% 100%
1.2 Small scale hydropower project master
plans 40% 0% 0% 0% 0% 60% 100%
2. Foreign small scale hydropower projects 0% 0% 0% 0% 0% 100% 100%
3. Other hydropower projects 25% 0% 0% 0% 0% 75% 100%
4. Other renewable energy projects 14% 20% 3% 0% 3% 60% 100%
4.1 Biomass energy and waste-to-energy
projects 20% 5% 5% 0% 0% 70% 100%
4.2 Wind energy projects 8% 31% 0% 0% 8% 54% 100%
4.3 Solar energy projects 0% 100% 0% 0% 0% 0% 100%
Total 39% 7% 1% 1% 1% 51% 100%
61
After the consideration of the data on Thai small scale
hydropower plant projects from 1963 - 2016, the mean of the discount rate had a
negative trend, as can be seen in Figure 4.1 and from Tables 4.14 to 4.16.
Figure 4.1 Thai Small Scale Hydropower Plant Project Discount Rate From
1963 – 2016
Table 4.14 Discount Rate Selection (Average) from 1963 - 1997
Types of Reports/Projects Year
1963 1972 1987 1989 1993 1995 1997
1. Thai small scale hydropower projects - - 10.00% 12.00% 10.00% NA -
1.1 Small scale hydropower projects - - 10.00% 12.00% - NA -
1.2 Small scale hydropower project master
plans - - - - 10.00% - -
2. Foreign small scale hydropower projects - - - - - - -
3. Other hydropower projects NA NA - - - - 10.00%
4. Other renewable energy projects - - NA - - - -
4.1 Biomass energy and waste-to-energy
projects - - NA - - - -
4.2 Wind energy projects - - - - - - -
4.3 Solar energy projects - - - - - - -
Total NA NA 10.00% 12.00% 10.00% NA 10.00%
62
Table 4.15 Discount Rate Selection (Average) From 2000 - 2009
Types of Reports/Projects Year
2000 2004 2005 2006 2007 2008 2009
1. Thai small scale hydropower projects 12.00% 7.67% - 10.00% - 7.50% 8.75%
1.1 Small scale hydropower projects 12.00% 7.60% - 10.00% - 7.50% 8.64%
1.2 Small scale hydropower project master
plans - 8.00% - - - 10.00%
2. Foreign small scale hydropower projects - 8.00% - 8.00% - - -
3. Other hydropower projects - 8.00% 11.00% - - 10.00% -
4. Other renewable energy projects - - 10.50% 9.50% 5.00% 7.97% 8.40%
4.1 Biomass energy and waste-to-energy
projects - - 10.50% 9.50% 5.00% 8.00% 9.08%
4.2 Wind energy projects - - - - - 7.95% 7.73%
4.3 Solar energy projects - - - - - - -
Total 12.00% 7.78% 10.75% 9.38% 5.00% 8.16% 8.63%
Table 4.16 Discount Rate Selection (Average) From 2010 – 2016
Types of Reports/Projects
Year
2010 2011 2012 2013 2015 2016 Total
1963-2016
1. Thai small scale hydropower projects 8.00% 9.11% 8.00% 8.00% - 8.00% 8.78%
1.1 Small scale hydropower projects 8.00% 9.11% 8.00% 8.00% - 8.00% 8.77%
1.2 Small scale hydropower project master
plans - - - - - 8.00% 8.80%
2. Foreign small scale hydropower projects - - - - - - 8.00%
3. Other hydropower projects 10.00% - 7.63% 10.00% - - 9.53%
4. Other renewable energy projects - 7.52% 10.00% 7.25% 7.08% 9.00% 8.30%
4.1 Biomass energy and waste-to-energy
projects - 6.77% 9.00% 7.45% ไม่ระบุ 9.00% 8.58%
4.2 Wind energy projects - 7.77% 12.00% 7.00% - - 8.11%
4.3 Solar energy projects - - - 7.10% 7.08% - 7.09%
Total 8.67% 8.62% 8.75% 7.86% 7.08% 8.40% 8.66%
63
4.1.1.3 Cost Analysis
The study of project cost analysis framework comprises 1) Cost item 2)
Cost evaluation method and 3) Annual expense evaluation, with the following details:
1) Cost Item. The data analysis has shown that Thai small
scale hydropower projects had the lowest number of 1 cost item and the highest of 3
items (excluding annual operating expense). A majority 94% of projects considered 1
cost item, which was the project construction cost, with other considered costs
including environmental cost, deforestation cost, and compensation cost.
As for foreign small scale hydropower projects, all chose 1 item
cost, project construction cost. Other hydropower projects had the lowest number of 1
cost item and the highest of 3 items, while other renewable energy projects all chose 1
item of cost, which was project construction cost. This can be seen in the details in
Table 4.17 and Table 4.18.
Table 4.17 Number of Reports Classified by Number of Cost Items
Types of Reports/Projects Number of cost items
1 2 3 5 Total
1. Thai small scale hydropower projects 45 2 1 0 48
1.1 Small scale hydropower projects 40 2 1 0 43
1.2 Small scale hydropower project master
plans 5 0 0 0 5
2. Foreign small scale hydropower projects 4 0 0 0 4
3. Other hydropower projects 11 0 0 1 12
4. Other renewable energy projects 35 0 0 0 35
4.1 Biomass energy and waste-to-energy
projects 20 0 0 0 20
4.2 Wind energy projects 13 0 0 0 13
4.3 Solar energy projects 2 0 0 0 2
Total 95 2 1 1 99
64
Table 4.18 Percentage of Reports Classified by Number of Cost Items
Types of Reports/Projects Number of cost items
1 2 3 5 รวม
1. Thai small scale hydropower projects 94% 4% 2% 0% 100%
1.1 Small scale hydropower projects 93% 5% 2% 0% 100%
1.2 Small scale hydropower project master
plans 100% 0% 0% 0% 100%
2. Foreign small scale hydropower projects 100% 0% 0% 0% 100%
3. Other hydropower projects 92% 0% 0% 8% 100%
4. Other renewable energy projects 100% 0% 0% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 100% 0% 0% 0% 100%
4.2 Wind energy projects 100% 0% 0% 0% 100%
4.3 Solar energy projects 100% 0% 0% 0% 100%
Total 96% 2% 1% 1% 100%
2) Cost Evaluation Method. The data analysis separated the
cost evaluation method into 3 groups, those being 1) Construction Cost (CSC), which
was calculated with a Conversion factor (CF) to convert market price into shadow
price (CSC x CF). 2) The usage of project construction cost, by deducting tax from
the market price to reflect the shadow price (CSC – tax), and 3) Direct evaluation
from project construction cost (CSC). The findings show that 85% of Thai small scale
hydropower plant study reports evaluated cost using the project construction cost
adjusted by a Conversion factor (CSC x CF), while 10% used adjustment by directly
deducting tax from the project construction cost (CSC).
As for foreign small scale hydropower projects, a majority 50%
of projects evaluated project construction cost using data of project construction cost
and adjusted by a Conversion factor (CSC x CF). 50% of other hydropower projects
evaluated project construction cost directly (CSC), while 80% of other renewable
energy projects directly evaluated project construction cost (CSC), as can be seen in
the details from Table 4.19 and Table 4.20.
65
Table 4.19 Number of Reports Classified by Cost Evaluation Method
Types of Reports/Projects Cost Evaluation Method
CSC x CF CSC -tax CSC NA Total
1. Thai small scale hydropower projects 41 5 1 1 48
1.1 Small scale hydropower projects 36 5 1 1 43
1.2 Small scale hydropower project master
plans 5 0 0 0 5
2. Foreign small scale hydropower projects 2 0 1 1 4
3. Other hydropower projects 4 0 6 2 12
4. Other renewable energy projects 7 0 28 0 35
4.1 Biomass energy and waste-to-energy
projects 6 0 14 0 20
4.2 Wind energy projects 1 0 12 0 13
4.3 Solar energy projects 0 0 2 0 2
Total 54 5 36 4 99
Note: CSC x CF is the use of construction cost (CSC) combined with conversion factor (CF)
CSC -tax is the use of construction cost (CSC) deducted by tax items out of market price
CSC is the direct evaluation of project construction cost
Table 4.20 Percentage of Reports Classified by Cost Evaluation Method
Types of Reports/Projects Cost Evaluation Method
CSC x CF CSC -tax CSC NA Total
1. Thai small scale hydropower projects 85% 10% 2% 2% 100%
1.1 Small scale hydropower projects 84% 12% 2% 2% 100%
1.2 Small scale hydropower project master
plans 100% 0% 0% 0% 100%
2. Foreign small scale hydropower projects 50% 0% 25% 25% 100%
3. Other hydropower projects 33% 0% 50% 17% 100%
4. Other renewable energy projects 20% 0% 80% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 30% 0% 70% 0% 100%
4.2 Wind energy projects 8% 0% 92% 0% 100%
4.3 Solar energy projects 0% 0% 100% 0% 100%
Total 55% 5% 36% 4% 100%
Note: CSC x CF is the use of construction cost (CSC) combined with conversion factor (CF)
CSC –tax is the use of construction cost (CSC) deducted by tax items out of market price
CSC is the direct evaluation of project construction cost
66
After considering the source of the Conversion factor used for
converting market price to shadow price, the source could be organized into 3 groups:
1) Conversion factor set by the World Bank, with reference to “Ahmed, Sadig.
Shadow Prices for Economic Appraisal of Projects : An Application to Thailand.
World Bank Staff Working Paper, No. 609.,1983.”, 2) Conversion factor set by Japan
International Cooperation Agency (JICA), and 3) Conversion factor by the Industrial
Finance Corporation of Thailand (IFCT). The majority, 60% of Thai hydropower
plant projects, used the conversion factor set by World Bank (the detail of the
conversion factor value set by the World Bank is shown in Appendix C) as shown in
Table 4.21 and Table 4.22.
Table 4.21 Number of Reports Classified by Conversion Factor Source
Types of Reports/Projects Conversion Factor Source
World bank JICA IFCT NA Total
1. Thai small scale hydropower projects 29 0 0 19 48
1.1 Small scale hydropower projects 26 0 0 17 43
1.2 Small scale hydropower project master
plans 3 0 0 2 5
2. Foreign small scale hydropower projects 0 1 0 3 4
3. Other hydropower projects 2 1 0 9 12
4. Other renewable energy projects 5 0 1 29 35
4.1 Biomass energy and waste-to-energy
projects 4 0 1 15 20
4.2 Wind energy projects 1 0 0 12 13
4.3 Solar energy projects 0 0 0 2 2
Total 36 2 1 60 99
67
Table 4.22 Percentage of Reports Classified by Conversion Factor Source
Types of Reports/Projects Conversion Factor Source
World bank JICA IFCT NA Total
1. Thai small scale hydropower projects 60% 0% 0% 40% 100%
1.1 Small scale hydropower projects 60% 0% 0% 40% 100%
1.2 Small scale hydropower project master
plans 60% 0% 0% 40% 100%
2. Foreign small scale hydropower projects 0% 25% 0% 75% 100%
3. Other hydropower projects 17% 8% 0% 75% 100%
4. Other renewable energy projects 14% 0% 3% 83% 100%
4.1 Biomass energy and waste-to-energy
projects 20% 0% 5% 75% 100%
4.2 Wind energy projects 8% 0% 0% 92% 100%
4.3 Solar energy projects 0% 0% 0% 100% 100%
Total 36% 2% 1% 61% 100%
3) Annual Cost Evaluation Method. The data analysis
organized the annual cost evaluation method into 2 groups, which are 1) Evaluation
using percentage estimation from total expense, and 2) Evaluation using estimation
on expected activities. The majority 81% of Thai small scale hydropower project
study reports evaluated annual expense by using the percentage estimation from total
expense.
As for foreign small scale hydropower projects, all used a
percentage estimation from total expense. 75% of other hydropower projects used a
percentage estimation from total expense, while the other renewable energy projects
used a percentage estimation from total expense and estimation by expected activities
equally at 37%, as shown in Table 4.23 and Table 4.24.
68
Table 4.23 Number of Reports Classified by Annual Expense Evaluation Method
Types of Reports/Projects
Annual Expense Evaluation Method
Percentage
from total
expense
Estimation
from actual
activities
NA Total
1. Thai small scale hydropower projects 39 0 9 48
1.1 Small scale hydropower projects 34 0 9 43
1.2 Small scale hydropower project master
plans 5 0 0 5
2. Foreign small scale hydropower projects 4 0 0 4
3. Other hydropower projects 9 1 2 12
4. Other renewable energy projects 13 13 9 35
4.1 Biomass energy and waste-to-energy
projects 5 12 3 20
4.2 Wind energy projects 8 0 5 13
4.3 Solar energy projects 0 1 1 2
Total 65 14 20 99
Table 4.24 Percentage of Reports Classified by Annual Expense Evaluation Method
Types of Reports/Projects
Annual Expense Evaluation Method
Percentage
from total
expense
Estimation
from actual
activities
NA Total
1. Thai small scale hydropower projects 81% 0% 19% 100%
1.1 Small scale hydropower projects 79% 0% 21% 100%
1.2 Small scale hydropower project master
plans 100% 0% 0% 100%
2. Foreign small scale hydropower projects 100% 0% 0% 100%
3. Other hydropower projects 75% 8% 17% 100%
4. Other renewable energy projects 37% 37% 26% 100%
4.1 Biomass energy and waste-to-energy
projects 25% 60% 15% 100%
4.2 Wind energy projects 62% 0% 38% 100%
4.3 Solar energy projects 0% 50% 50% 100%
Total 66% 14% 20% 100%
69
4.1.1.4 Benefit Analysis
The study of benefit analysis comprises the 1) Benefit item, and 2)
Benefit evaluation method, with the following details:
1) Benefit Item. The data analysis shows that Thai small scale
hydropower project study reports had set the lowest number of benefit items at 1 item,
and the highest at 4 items. The majority 75% of reports had considered 2 benefit
items, electricity benefit and greenhouse gas emission reduction benefit. Other
considered benefits included a fishery benefit, tourism benefit, and agricultural
benefit, which occurred according to each project’s distinct features.
Every foreign small scale hydropower project used 1 benefit
item, the electricity benefit. Other hydropower projects had the lowest number at 1
benefit item and the highest at 5 items, while other renewable energy projects had the
lowest number at 1 item and the highest at 4 items, as shown in Table 4.25 and Table
4.26.
Table 4.25 Number of Reports Classified by Number of Benefit Items
Types of Reports/Projects Number of Benefit Item
1 2 3 4 5 Total
1. Thai small scale hydropower projects 11 35 1 1 0 48
1.1 Small scale hydropower projects 9 32 1 1 0 43
1.2 Small scale hydropower project master
plans 2 3 0 0 0 5
2. Foreign small scale hydropower projects 4 0 0 0 0 4
3. Other hydropower projects 7 3 0 1 1 12
4. Other renewable energy projects 18 11 5 1 0 35
4.1 Biomass energy and waste-to-energy
projects 6 8 5 1 0 20
4.2 Wind energy projects 11 2 0 0 0 13
4.3 Solar energy projects 1 1 0 0 0 2
Total 40 49 6 3 1 99
70
Table 4.26 Percentage of Reports Classified by Number of Benefit Items
Types of Reports/Projects Number of Benefit Items
1 2 3 4 5 Total
1. Thai small scale hydropower projects 23% 73% 2% 2% 0% 100%
1.1 Small scale hydropower projects 21% 74% 2% 2% 0% 100%
1.2 Small scale hydropower project master
plans 40% 60% 0% 0% 0% 100%
2. Foreign small scale hydropower projects 100% 0% 0% 0% 0% 100%
3. Other hydropower projects 58% 25% 0% 8% 8% 100%
4. Other renewable energy projects 51% 31% 14% 3% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 30% 40% 25% 5% 0% 100%
4.2 Wind energy projects 85% 15% 0% 0% 0% 100%
4.3 Solar energy projects 50% 50% 0% 0% 0% 100%
Total 40% 49% 6% 3% 1% 100%
2) Benefit Evaluation Method. The data analysis separates the
evaluation of electricity benefit, which is the project’s main benefit, into 5 methods:
1) Comparison with cost of electricity generation using other methods, 2) Comparison
with market price, 3) Evaluation from revenue from electricity sales, 4) Comparison
with electricity willingness to pay, and 5) Comparison with market price and adjusted
using a conversion factor (CF).
The majority, 96% of Thai small scale hydropower project
study reports, evaluated electricity benefit using a comparison with the cost of
electricity generation using other methods, while 50% of foreign small scale
hydropower projects evaluated their revenue from electricity sales. The percentage of
other hydropower projects who evaluated benefit using a comparison with the cost of
electricity generation using other methods and revenue from electricity sales were
equally 42%, while 74% of other renewable energy projects were evaluated from a
comparison with market price, as shown in the details in Table 4.27 and Table 4.28.
71
Table 4.27 Number of Reports Classified by Electricity Benefit Evaluation Method
Types of Reports/Projects Electricity Benefit Evaluation Method*
1 2 3 4 5 6 Total
1. Thai small scale hydropower projects 46 1 0 0 0 1 48
1.1 Small scale hydropower projects 42 0 0 0 0 1 43
1.2 Small scale hydropower project
master plans 4 1 0 0 0 0 5
2. Foreign small scale hydropower projects 1 0 2 1 0 0 4
3. Other hydropower projects 5 2 5 0 0 0 12
4. Other renewable energy projects 5 26 0 0 1 3 35
4.1 Biomass energy and waste-to-energy
projects 3 16 0 0 1 0 20
4.2 Wind energy projects 2 8 0 0 0 3 13
4.3 Solar energy projects 0 2 0 0 0 0 2
Total 57 29 7 1 1 4 99
Note: 1) Comparison with cost of electricity generation using other methods
2) Comparison with market price
3) Revenue from electricity sales
4) Comparison with electricity willingness to pay
5) Comparison with market price and adjusted using a conversion factor
6) Not available
72
Table 4.28 Percentage of Reports Classified by Electricity Benefit Evaluation Method
Types of Reports/Projects Electricity Benefit Evaluation Method*
1 2 3 4 5 6 รวม
1. Thai small scale hydropower projects 96% 2% 0% 0% 0% 2% 100%
1.1 Small scale hydropower projects 98% 0% 0% 0% 0% 2% 100%
1.2 Small scale hydropower project
master plans 80% 20% 0% 0% 0% 0% 100%
2. Foreign small scale hydropower projects 25% 0% 50% 25% 0% 0% 100%
3. Other hydropower projects 42% 17% 42% 0% 0% 0% 100%
4. Other renewable energy projects 14% 74% 0% 0% 3% 9% 100%
4.1 Biomass energy and waste-to-energy
projects 15% 80% 0% 0% 5% 0% 100%
4.2 Wind energy projects 15% 62% 0% 0% 0% 23% 100%
4.3 Solar energy projects 0% 100% 0% 0% 0% 0% 100%
Total 58% 29% 7% 1% 1% 4% 100%
Note: 1) Comparison with cost of electricity generation using other methods
2) Comparison with market price
3) Revenue from electricity sales
4) Comparison with electricity willingness to pay
5) Comparison with market price and adjusted using a conversion factor
6) Not available
After considering the data of electricity benefit evaluations
using a comparison with the cost of electricity generation using other methods, the
compared energy was separated into 6 types, 1) Diesel, 2) Natural gas, 3) Crude oil,
4) Renewable energy, 5) Fuel oils, and 6) Steam power. The majority, 87% of Thai
small scale hydropower projects, used a comparison with diesel, while 13% compared
with natural gas, as shown in Table 4.29 and Table 4.30.
Furthermore, 87% of Thai small scale hydropower projects
evaluated benefit from greenhouse gas emissions reduction. Among these projects,
84% evaluated benefit using a comparison with the carbon credit price under a project
named Clean Development Mechanism (CDM) by the United Nations Framework
Convention on Climate Change (UNFCCC), while another 16% used a comparison
73
with forestation expense for absorbing greenhouse gas from the global atmosphere, as
shown in Table 4.31 and Table 4.32.
Table 4.29 Number of Reports Classified by Comparison with Cost of Electricity
Generation using Other Methods
Types of Reports/Projects
Method of Comparison with
Cost of Electricity Generation using Other Methods*
Diesel Natural
Gas
Crude
Oils
Renewable
Energy
Fuel
Oils
Steam
power
Total
1. Thai small scale hydropower projects 40 6 0 0 0 0 46
1.1 Small scale hydropower projects 36 6 0 0 0 0 42
1.2 Small scale hydropower project
master plans 4 0 0 0 0 0 4
2. Foreign small scale hydropower projects 0 0 0 1 0 0 1
3. Other hydropower projects 1 2 0 1 0 1 5
4. Other renewable energy projects 2 0 2 0 1 0 5
4.1 Biomass energy and waste-to-energy
projects 1 0 1 0 1 0 3
4.2 Wind energy projects 1 0 1 0 0 0 2
4.3 Solar energy projects 0 0 0 0 0 0 0
Total 43 8 2 2 1 1 57
74
Table 4.30 Percentage of Reports Classified by Comparison with Cost of Electricity
Generation using Other Methods
Types of Reports/Projects
Method of Comparison with
Cost of Electricity Generation using Other Methods*
Diesel Natural
Gas
Crude
Oils
Renewable
Energy
Fuel
Oils
Steam
power
Total
1. Thai small scale hydropower projects 87% 13% 0% 0% 0% 0% 100%
1.1 Small scale hydropower projects 86% 14% 0% 0% 0% 0% 100%
1.2 Small scale hydropower project
master plans 100% 0% 0% 0% 0% 0% 100%
2. Foreign small scale hydropower project 0% 0% 0% 100% 0% 0% 100%
3. Other hydropower projects 20% 40% 0% 20% 0% 20% 100%
4. Other renewable energy projects 40% 0% 40% 0% 20% 0% 100%
4.1 Biomass energy and waste-to-energy
projects 33% 0% 33% 0% 33% 0% 100%
4.2 Wind energy projects 50% 0% 50% 0% 0% 0% 100%
4.3 Solar energy projects 0% 0% 0% 0% 0% 0% 0%
Total 75% 14% 4% 4% 2% 2% 100%
Table 4.31 Number and Percentage of Reports with Benefit Evaluation from
Greenhouse Gas Emissions Reduction
Types of Reports/Projects
Benefit Evaluation
from Greenhouse Gas Emissions Reduction
Number Percentage
1. Thai small scale hydropower projects 32 67%
1.1 Small scale hydropower projects 29 67%
1.2 Small scale hydropower project master
plans 3 60%
2. Foreign small scale hydropower projects 0 0%
3. Other hydropower projects 2 17%
4. Other renewable energy projects 8 23%
4.1 Biomass energy and waste-to-energy projects 5 25%
4.2 Wind energy projects 2 15%
4.3 Solar energy projects 1 50%
Total 42 42%
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Table 4.32 Number and Percentage of Reports Classified by Method on Benefit
Evaluation from Greenhouse Gas Emissions Reduction
Types of Reports/Projects
Method on Benefit Evaluation from
Greenhouse Gas Emissions Reduction
Carbon credit price Forestation expense
Number Percentage Number Percentage
1. Thai small scale hydropower projects 27 84% 5 16%
1.1 Small scale hydropower projects 24 83% 5 17%
1.2 Small scale hydropower project master plans 3 100% 0 0%
2. Foreign small scale hydropower projects 0 0% 0 0%
3. Other hydropower projects 2 100% 0 0%
4. Other renewable energy projects 8 100% 0 0%
4.1 Biomass energy and waste-to-energy projects 5 100% 0 0%
4.2 Wind energy projects 2 100% 0 0%
4.3 Solar energy projects 1 100% 0 0%
Total 37 88% 5 12%
4.1.1.5 Feasibility Index
The study of project feasibility index selection framework is comprised
of 1) Project feasibility index selection, and 2) Project feasibility analysis result, with
the following details:
1) Project Feasibility Index Selection. The data analysis
shows that Thai small scale hydropower projects had selected the lowest number of
feasibility indexes at 2 indexes and the highest at 5 indexes. There are usually 5
project feasibility indexes used in the study, which are 1) Economic Internal Rate of
Return (EIRR), 2) Net Present Value (NPV), 3) Benefit-Cost Ratio (B/C Ratio), 4)
Average Incremental Cost (AIC), and 5) Payback period.
The majority 77% of reports had selected 4 feasibility indexes,
with the most used index being Benefit-Cost Ratio (B/C Ratio) and then Net Present
Value (NPV), Economic Internal Rate of Return (EIRR), Average Incremental Cost
(AIC), and Payback period, respectively.
The foreign small scale hydropower projects had selected the
lowest number of feasibility index at 2 indexes, and the highest at 4 indexes. Other
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hydropower projects had selected the lowest number of feasibility index at 2 indexes
and the highest at 5 indexes, while other renewable energy projects had selected the
lowest number of feasibility index at 1 index and the highest at 4 indexes. The least
used feasibility index was the Payback period, as can be seen in the details in Table
4.33 and Table 4.36.
Table 4.33 Number of Reports Classified by the Number of Feasibility Indexes
Types of Reports/Projects Number of Feasibility Indexes
1 2 3 4 5 Total
1. Thai small scale hydropower projects 0 4 5 37 2 48
1.1 Small scale hydropower projects 0 2 5 34 2 43
1.2 Small scale hydropower project master
plans 0 2 0 3 0 5
2. Foreign small scale hydropower projects 0 1 1 2 0 4
3. Other hydropower projects 0 3 2 6 1 12
4. Other renewable energy projects 4 6 13 8 4 35
4.1 Biomass energy and waste-to-energy
projects 3 2 10 5 0 20
4.2 Wind energy projects 1 4 2 3 3 13
4.3 Solar energy projects 0 0 1 0 1 2
Total 4 14 21 53 7 99
77
Table 4.34 Percentage of Reports Classified by the Number of Feasibility Indexes
Types of Reports/Projects Number of Feasibility Indexes
1 2 3 4 5 Total
1. Thai small scale hydropower projects 0% 8% 10% 77% 4% 100%
1.1 Small scale hydropower projects 0% 5% 12% 79% 5% 100%
1.2 Small scale hydropower project master
plans 0% 40% 0% 60% 0% 100%
2. Foreign small scale hydropower projects 0% 25% 25% 50% 0% 100%
3. Other hydropower projects 0% 25% 17% 50% 8% 100%
4. Other renewable energy projects 11% 17% 37% 23% 11% 100%
4.1 Biomass energy and waste-to-energy
projects 15% 10% 50% 25% 0% 100%
4.2 Wind energy projects 8% 31% 15% 23% 23% 100%
4.3 Solar energy projects 0% 0% 50% 0% 50% 100%
Total 4% 14% 21% 54% 7% 100%
Table 4.35 Number of Reports Classified by Feasibility Index
Types of Reports/Projects
Feasibility Index
IRR NPV B/C
Ratio AIC
Payback
period
1. Thai small scale hydropower projects 46 44 48 39 4
1.1 Small scale hydropower projects 41 41 43 36 4
1.2 Small scale hydropower project master
plans 5 3 5 3 0
2. Foreign small scale hydropower projects 4 3 3 2 1
3. Other hydropower projects 11 12 10 7 1
4. Other renewable energy projects 31 25 18 10 23
4.1 Biomass energy and waste-to-energy
projects 19 16 10 2 10
4.2 Wind energy projects 10 7 7 7 11
4.3 Solar energy projects 2 2 1 1 2
Total 92 84 79 58 29
78
Table 4.36 Percentage of Reports Classified by Feasibility Index
Types of Reports/Projects
Feasibility Index
IRR NPV B/C
Ratio AIC
Payback
period
1. Thai small scale hydropower projects 96% 92% 100% 81% 8%
1.1 Small scale hydropower projects 95% 95% 100% 84% 9%
1.2 Small scale hydropower project master
plans 100% 60% 100% 60% 0%
2. Foreign small scale hydropower projects 100% 75% 75% 50% 25%
3. Other hydropower projects 92% 100% 83% 58% 8%
4. Other renewable energy projects 89% 71% 51% 29% 66%
4.1 Biomass energy and waste-to-energy
projects 95% 80% 50% 10% 50%
4.2 Wind energy projects 77% 54% 54% 54% 85%
4.3 Solar energy projects 100% 100% 50% 50% 100%
Total 93% 85% 80% 59% 29%
2) Feasibility Analysis Results. The data analysis shows that
the majority, 73% of Thai small scale hydropower project study reports, stated that
their projects were feasible. The same could be said for 100% of foreign small scale
hydropower projects, 92% of other hydropower projects, and 40% of other renewable
energy projects, as shown in the details from Table 4.37 and Table 4.38.
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Table 4.37 Number of Reports Classified by Feasibility Analysis Result
Types of Reports/Projects
Feasibility Analysis Result
Feasible Not
Feasible NA Total
1. Thai small scale hydropower projects 35 7 6 48
1.1 Small scale hydropower projects 35 7 1 43
1.2 Small scale hydropower project master
plans 0 0 5 5
2. Foreign small scale hydropower projects 4 0 0 4
3. Other hydropower projects 11 0 1 12
4. Other renewable energy projects 14 2 19 35
4.1 Biomass energy and waste-to-energy
projects 9 1 10 20
4.2 Wind energy projects 3 1 9 13
4.3 Solar energy projects 2 0 0 2
Total 64 9 26 99
Table 4.38 Percentage of Reports Classified by Feasibility Analysis Result
Types of Reports/Projects Feasibility Analysis Result
Feasible Not Feasible NA Total
1. Thai small scale hydropower projects 73% 15% 13% 100%
1.1 Small scale hydropower projects 81% 16% 2% 100%
1.2 Small scale hydropower project master
plans 0% 0% 100% 100%
2. Foreign small scale hydropower projects 100% 0% 0% 100%
3. Other hydropower projects 92% 0% 8% 100%
4. Other renewable energy projects 40% 6% 54% 100%
4.1 Biomass energy and waste-to-energy
projects 45% 5% 50% 100%
4.2 Wind energy projects 23% 8% 69% 100%
4.3 Solar energy projects 100% 0% 0% 100%
Total 65% 9% 26% 100%
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4.1.1.6 Risk Analysis
The data analysis separated the risk analysis method into 4 groups, 1)
Sensitivity analysis, 2) Switching value analysis, 3) Scenario analysis, and 4) No
analysis. The majority, 44% of Thai small scale hydropower projects, used sensitivity
analysis, 32% used switching value analysis, and 24% had no analysis. Furthermore,
most of the sensitivity analyses were performed by increasing project construction
costs and decreasing project benefits on an incremental level from 5 -15% of cost and
benefit from the base case. There was also consideration of other risk factors that
could affect project benefit, for instance, water runoff, and the electricity buying price
mechanism according to the financial support schemes by public agencies.
The majority, 60% of foreign small scale hydropower projects, used
sensitivity analysis, with 20% using switching value analysis, and another 20% did
not do an analysis. 50% of the other hydropower projects used sensitivity analysis,
with the other 50% doing no risk analysis. As for the other renewable energy projects,
21% used sensitivity analysis, 13% used scenario analysis, 8% used switching value
analysis, and 24% used no analysis, as shown in Table 4.39 and Table 4.40.
Table 4.39 Number of Reports Classified by Risk Analysis Method
Types of Reports/Projects
Risk Analysis Method
Sensitivity
analysis
Switching
value analysis
Scenario
analysis
No
analysis
1. Thai small scale hydropower projects 31 23 0 17
1.1 Small scale hydropower projects 31 23 0 12
1.2 Small scale hydropower project master plan 0 0 0 5
2. Foreign small scale hydropower projects 3 1 0 1
3. Other hydropower projects 6 0 0 6
4. Other renewable energy projects 8 3 5 22
4.1 Biomass energy and waste-to-energy
projects 7 3 3 10
4.2 Wind energy projects 0 0 2 11
4.3 Solar energy projects 1 0 0 1
Total 48 27 5 46
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Table 4.40 Percentage of Reports Classified by Risk Analysis Method
Types of Reports/Projects
Risk Analysis Method
Sensitivity
analysis
Switching
value analysis
Scenario
analysis
No
analysis
1. Thai small scale hydropower projects 44% 32% 0% 24%
1.1 Small scale hydropower projects 47% 35% 0% 18%
1.2 Small scale hydropower project master
plans 0% 0% 0% 100%
2. Foreign small scale hydropower projects 60% 20% 0% 20%
3. Other hydropower projects 50% 0% 0% 50%
4. Other renewable energy projects 21% 8% 13% 58%
4.1 Biomass energy and waste-to-energy
projects 30% 13% 13% 43%
4.2 Wind energy projects 0% 0% 15% 85%
4.3 Solar energy projects 50% 0% 0% 50%
Total 38% 21% 4% 37%
From these data analyses, the methodology framework for Thai small
scale hydropower project feasibility analysis in various topics can be summarized in
Table 4.41.
Table 4.41 Summary of Thai Small Scale Hydropower Project Feasibility Analysis
Methodology Framework
Topic Detail
1) General Information
- Project Owner - 98% of projects were owned by the public agency, the Department of
Alternative Energy Development and Efficiency, Ministry of Energy
(DEDE).
- Study Agency - 83% of projects were performed by consulting firms.
- Study Year - The earliest year was 1957 while the latest year was 2016.
- 69% of reports were studied during the period 2008 – 2017.
- Type of Analysis - 100% of reports used economic methodology.
- 79% of reports used economic and financial methodology.
- The master plan study report only used economic methodology.
82
Table 4.41 (Continued)
Topic Detail
2) Assumption Selection
- Project Duration
Selection
- The shortest duration was 30 years while the longest duration was 50 years.
- The majority 77% of projects had selected the project duration of 30 years
- Most of the reports had selected a project duration according to the project’s
major components.
- Discount Rate
Selection
- The lowest rate was 6.0% while the highest rate was 12.0%.
- The majority, 56%, selected a discount rate of 8.0%.
- The mean of discount rate was 8.8%.
- A majority 62% of reports stated that the discount rate was selected based.
on principles set by the Office of the National Economic and Social
Development Board (NESDB).
- Some reports selected a discount rate of 8.0% and stated that the rate was the
result of consideration of NESDB principles and the government bond
interest rate.
- There was a declining trend of discount rate from 1987 to 2016.
3) Cost Analysis
- Cost Item - The majority, 94% of reports, considered 1 cost item: project construction
cost.
- Others considered the cost items of environmental cost, forest degradation
cost, and compensation cost.
- Cost Analysis
Method
- The majority, 85% of reports analyzed, projected construction cost by
adjusting construction cost (CSC) by conversion factor (CF).
- The majority, 60% of reports, used the value of a conversion factor set by
the World Bank.
- Annual Expense
Evaluation Method
- The majority, 81% of reports, evaluated annual expense by using a
percentage estimation from total expense.
4) Benefit Analysis
- Benefit Item - The majority 75% of reports considered 2 benefit items, electricity benefit
and greenhouse gas emissions reduction benefit.
- Others considered the benefit items of fishery benefits, tourism benefits, and
agricultural benefits.
83
Table 4.41 (Continued)
Topic Detail
- Benefit Analysis
Method
- The majority of 96% of reports evaluated electricity benefit using a
comparison with the cost of electricity generation using other methods. Out
of which, the majority of 87% compared with the cost of electricity
generation using diesel.
- The majority of 87% evaluated greenhouse gas emissions reduction benefit
using a comparison with the carbon credit market price.
5) Feasibility Index
- Feasibility Index
Selection
- The considered indexes were comprised of 1) Economic Internal Rate of
Return (EIRR) 2) Net Present Value (NPV) 3) Benefit-Cost Ratio (B/C
Ratio) 4) Average Incremental Cost (AIC) 5) Payback period.
- 77% of reports selected 4 feasibility indexes.
- The most popular index was the Benefit-Cost Ratio (B/C Ratio), while the
second most popular index was Net Present Value (NPV).
- Analysis Result - 73% of reports stated that the project was feasible for investment.
6) Risk Analysis
- Risk Analysis
Method
- The majority 44% of reports had performed risk analysis using sensitivity
analysis, while 32% used switching value analysis.
- 24% of reports had not performed any risk analysis.
- Sensitivity analysis adjusted the cost increment and benefit decrement at 5 –
15%.
4.1.2 Feasibility Analysis Process Framework
From the review of documents, laws and regulations, related guidelines, and
in-depth interviews with personnel with related experiences, the findings were
summarized into 3 parts: 1) Consultant hiring process framework, 2) Study process
framework, and 3) Project feasibility consideration and approval processes
framework, with the following details:
4.1.2.1 Consultant Hiring Process Framework
The review has shown that 83% of Thai small scale hydropower project
study reports had hired a consulting firm to perform the study, so this study will focus
on the conclusions of the consultant hiring process of the responsible agency in the
84
development of Thai small scale hydropower projects, namely, the Department of
Alternative Energy Development and Efficiency, Ministry of Energy (DEDE). From
the study of regulations and requirements on consultant hiring, the hiring process
could be separated into 3 parts, namely, 1) Consultant qualification specification, 2)
Scope of work and deliverable, and 3) Consultant selection, with details as follows:
1) Consultant Qualification Specification. The regulations and
requirements in consultant hiring indicate the consultant qualifications for certain
positions, for instance, project planning engineer, water resource/hydrology specialist,
structural engineering specialist, cost estimation specialist, environmental specialist,
as well as economic specialist. The requirement for economic specialist is stated as
shown in Table 4.42.
Table 4.42 Academic Qualification for Economic Consultant
Item Detail
Position Economic Specialist
Education Master’s degree on Economics
Experience 15 years experience after graduation with bachelor’s degree
At least 5 years experience in performing economic and financial
feasibility analysis on projects with similar features
Role Study benefits generated from project
Perform project’s economic and financial feasibility analysis
Create budget plan for project development
Study investment framework and organizational structure for investment
Source: Department of Alternative Energy Development and Efficiency (2016).
As for specifications on the consulting organization, it was
stated that the organization has to be registered as a legal entity according to Thai law
with the Consultant Database Center, Public Debt Management Office. This legal
entity term also covers organizations of ordinary or limited partnership, limited or
public companies, public universities and other legal entities established according to
Thai law having experience in studying similar projects.
85
2) Scope of Work and Deliverables. The term of reference on
consultant hiring states the project’s objective and related scope of work. In terms of
overall scope of work, the main works in the study include engineering study, for
instance, hydrology study, project size and component study, project engineering,
detailed structural design, and other works such as environment and public relations.
As for economic work, the work scope tends to be broad, for example, project
investment feasibility analysis. As an example, the term of reference in hiring a
consultant for Master Plan for Small Scale Hydropower Projects in Southern
provinces on the Andaman Coastline and the Gulf of Thailand (Department of
Alternative Energy Development and Efficiency, 2016) states the scope of work for
economic analysis as follows:
Propose project with potential for development of small scale
hydropower project by performing study on various topics as follows: …
Perform project economic analysis … Select potential project with
engineering and economic feasible while considering project’s advantages and
disadvantages … Prioritize feasibility of minor projects based on the study of
potential for various minor small scale hydropower projects while considering
feasibility on engineering, economics, land use readiness, and community
acceptance to prioritize the minor projects’ feasibility
For deliverables, there is a statement on deliverables in various
forms, both reports and computer information of various analyses based on the phase
of study, for instance, inception reports, progress reports, final draft reports, and final
reports. The whole study process was performed in 1 year.
3) Consultant selection. The regulation on selecting a
consultant states that the consultant enrolled in the selection process must submit a
proposal to the agency separated into 3 parts, which are 1) A document stating the
consultant’s specifications, comprised of certificate of status, copy of commercial
registration, and letter of authority, 2) Technical proposal comprised of personal name
and profile, consulting agency work and experience, conception detail, methodology
86
on each part of work, and implementation plan, and 3) Cost proposal comprised of
details on personal and other expenses.
In the selection process, the hiring agency will first consider the
consulting organization’s qualifications and only qualified organizations will be
considered in terms of technical proposals in the next step. The consideration of
technical proposals can be separated into various topics, for instance, personal
education, skills and experience, consultant work and experience, concept and
methodology, and implementation plan. The technical consideration sets the scoring
criteria for each topic by giving the highest weight on personal education, skills and
experience, then concept and methodology, and setting the minimum score for
proposal to pass the technical criteria. Then the proposal which passes the technical
criteria will get to be considered in the cost proposal.
In the cost proposal consideration, the hiring agency will start
by considering the consultant with the highest technical score and negotiate to a
suitable cost, but not more than the budget received. If the negotiation is not
successful, there will be consideration of cancelling the negotiation and starting
negotiations with the consultant with the second highest technical score with the same
process as the first one until reaching a conclusion with the consultant with
appropriate cost and within the budget, as shown in Figure 4.2.
Figure 4.2 Consultant Selection Process
Consider technical proposal score
Negotiate to suitable cost
Hire consultant
Consultant with the highest score on technical proposal
Arrive at suitable cost according to budget
Does not get the suitable cost
Consultant with the next below score on technical proposal
87
4.1.2.2 Study Process Framework
The study of the study process framework can be separated into 2 parts,
which are 1) the Study process, and 2) Study report acceptance, with details as
follows:
1) Study process. The study of investment feasibility analysis
framework is part of the feasibility analysis or overall feasibility study of small scale
hydropower projects. The study report is comprised of the study on engineering,
environment, socio-economics, public relations and public participation as well as
economics and finance. The study process will start from the study of engineering as
the core study while having other studies in parallel to comply with engineering study.
The role of economic study will be related to the study in
various steps. The process related to economic study is separated into 1) Economic
analysis in the project design and assignment process, and 2) Economic analysis in the
investment feasibility analysis process. The objective of analysis in each process is
shown in Table 4.43.
Table 4.43 Objective of Economic Study in Feasibility Analysis
Economic Analysis
in Each Process Objective
1) Project design and assignment of
details process
Project site selection
Project component specification
Project prioritization
2) Investment feasibility analysis
process
Economic investment feasibility analysis
Financial investment feasibility analysis
Project investment framework specification
Budget plan set up
88
The different roles and objectives of economic study have led to
different study results in each process. The economic study involves a project’s cost
and benefit evaluation based on project construction costs and electricity generation
estimation which results from the engineering study. It could be said that the
economic study must always consider data for cost and benefit evaluation that
complies with the engineering study. Furthermore, it also must consider
environmental and social impact study results to evaluate the project’s indirect costs
and benefit in order to perform investment feasibility analysis completely and
correctly according to academic principles.
The study in each process will always consider investment
feasibility analysis along with the engineering study, especially in cases where the
project is investment infeasible. The consultant team will jointly discuss the related
study results which led to the adjustment of the project’s framework or components to
reach the best study result, as shown in Figure 4.3.
Figure 4.3 Investment Feasibility Analysis Process
Other studies, e.g., environment, and social
Economic study
Review study result and revise engineering
and related works results
Engineering study
Project’s cost and benefits data
Project is investment feasible
Project is investment infeasible
89
2) Study Report Acceptance. The study report acceptance
framework will accept it according to the order of reports delivered ,which was stated
to be delivered in each part of the work. The project owner will set up a study
acceptance and monitoring committee which is comprised of 5 to 7 persons to
evaluate the completeness of work according to the specified scope of work as well as
academic correctness of study in each field.
The committee’s consideration process will consider the report
delivered by the consultant before inviting the consultant to do the present details and
answer to the inquiry. As for economic work, the committee will focus on the study’s
assumption selection, project’s generated electricity evaluation using a comparison
with cost of electricity generation using other means in order to obtain appropriate
compared price, as well as the investment feasibility analysis results. The committee
responsible for economic analysis will consider both the analysis results in the study
report and correctness of the study data in the computer program delivered by the
consultant.
4.1.2.3 Project Feasibility Consideration and Approval Processes
Framework
The study of project feasibility consideration and approval processes
framework by the Department of Alternative Energy Development and Efficiency,
Ministry of Energy, occurs after the committee has accepted the study report, which
involves coordination with other related agencies, for instance, the agency responsible
for environmental impact consideration, which will consider the environmental
impact study, environmental impact mitigation plan set up, as well as checking the
environmental economic study results. In the case of small scale hydropower plant
projects, the related law does not require an environmental impact assessment except
for projects located in forest conservation areas. As for a land owning agency, there
will be consideration for construction approval according to the law. Projects passing
law considerations will be put in the annual plan to be asked for budget approval in
hiring a contractor for project construction in the later process, as shown in Figure 4.4.
90
Figure 4.4 Project Feasibility Consideration and Approval Processes
The project feasibility consideration and approval process by the
Department of Alternative Energy Development and Efficiency has a low tendency of
reviewing or checking feasibility analysis results since small scale hydropower plant
projects have a low investment budget. The consideration was mostly performed
within the agency without repeated checks from other external agencies.
4.2 Feasibility Analysis Standard and Guideline Compatibility Study
The analysis results on the compatibility of feasibility analysis on small scale
hydropower projects with standards and guidelines specified by various agencies is
comprised of 1) Methodology standard and guideline compatibility, and 2) Process
standard and guideline methodology, with details as follows:
Study report accepted by committee
Ask for construction approval according to
related law Put project in department’s plan
to be asked for annual budget approval
Hire contractor for project construction
91
4.2.1 Methodology Standard and Guideline Compatibility
The document used for analysis of small scale hydropower project feasibility
analysis methodology standard and guideline compatibility of other agencies, both
national and international, are shown in Table 4.44.
Table 4.44 Document Used for Methodology Standard and Guideline Compatibility
Analysis
Document Agency Year
- Guidelines for Economic Analysis of Power Sector
Projects: Renewable Energy Projects.
World Bank. 2015
- Guidelines for the Economic Analysis of Projects Asian Development Bank
(ADB)
2017
- Cost-Benefit Analysis for Development: A Practical
Guide
Asian Development Bank
(ADB)
2013
- Introductory Course on Economic Analysis of
Investment Projects (Session 2.4: Sensitivity and
Risk Analysis)
Asian Development Bank
(ADB)
2010
- Guide to Cost-Benefit Analysis of Investment
Projects Economic appraisal tool for Cohesion
Policy 2014-2020
European Commission 2014
- Economic Risk and Sensitivity Analysis for Small-
scale Hydropower Projects
The International Energy
Agency (IEA)
2000
- Revised Manual and Criteria for Feasibility
Analysis, 2012
Office of the National
Economic and Social
Development Board
(NESDB)
2012
- Project Feasibility Analysis for Sufficiency National Institute of
Development Administration
(Adis Israngkura na Ayudhya)
2010
- Guideline on study and analysis of Public-Private
Partnership (PPP)
State Enterprise Policy Office
(SEPO)
2017
92
Table 4.44 (Continued)
Document Agency Year
- Manual for Planning and Feasibility Analysis of
Small and Mini Scale Hydropower Project
Department of Alternative
Energy Development and
Efficiency (DEDE)
2015
The methodology standard and guideline compatibility analysis on small scale
hydropower plant project feasibility analysis is separated into topics according to the
methodology, which is comprised of 1) Assumption selection, 2) Cost analysis, 3)
Benefit analysis, 4) Feasibility index, and 6) Risk analysis as followed:
4.2.1.1 Assumption Selection Compatibility
The analysis of compatibility on small scale hydropower assumption
selection with other guidelines is comprised of 1) Project duration selection, and 2)
Discount rate selection with the following details:
1) Project Duration Selection.
The study result has shown that most of the report had selected
a project duration of 30 years with consideration based on the project’s major
component useful life. A comparison with various documents shows that this
complies with the guideline stated in Guidelines for the Economic Analysis of
Projects (2017) by the Asian Development Bank (ADB) and Manual for Planning and
Feasibility Analysis of Small and Mini Scale Hydropower Project by Department of
Alternative Energy Development and Efficiency (DEDE) which set the project
duration between 30 to 50 years. However, other manuals have not stated the criteria
for selecting a project’s duration. The compatibility analysis is summarized in Table
4.45.
93
Table 4.45 Project Duration Selection Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for the Economic
Analysis of Projects
(ADB, 2017)
Select based on technical life of project
or
number of years which project could
still generate benefits
Compatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Projects
by Department of Alternative
Energy Development and
Efficiency (DEDE, 2015)
Set the project duration
30 – 50 years
Compatible
2) Discount Rate Selection. The study results show that most
of the study reports had selected a discount rate of 8.0% with consideration based on
criteria set by the Office of the National Economic and Social Development Board as
well as the government’s bond interest rate. A comparison with various documents
has shown that the discount rate had no compatibility with compared manuals since
most of the documents had selected the discount rate at 9% - 12%. The compatibility
analysis is shown in Table 4.46.
94
Table 4.46 Discount Rate Selection Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic
Analysis of Power Sector
Projects: Renewable Energy
Projects. (World Bank, 2015)
Economic opportunity cost of capital Incompatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
Minimum of 9% for standard projects
and 6% for social and environmental
development projects
Incompatible
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
Opportunity cost of capital
(12% in ADB projects),
Incompatible
- Guide to Cost-Benefit Analysis
of Investment Projects
(European Commission, 2014)
Social discount rate of 5%
(European country)
Incompatible
- 2012 Revised Manual and
Criteria for Feasibility Analysis
(NESDB, 2012)
9% – 12% Incompatible
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
Expectation of benefit claiming period,
source of funds and calculation basis
(Constant/Current price)
Incompatible
- Guideline on study and analysis
of Public-Private Partnership
(SEPO, 2017)
9% – 12% Incompatible
- Manual for Planning and
Feasibility Analysis of Small
and Mini Scale Hydropower
Project (DEDE, 2015)
10% Incompatible
95
4.2.1.2 Cost Analysis Compatibility
The analysis of compatibility on small scale hydropower cost analysis
with other guidelines is comprised of 1) Cost item selection, 2) Cost evaluation
method, and 3) Annual cost evaluation, with the following details:
1) Cost Item Selection. The study results show that the
majority of study reports had considered 1 cost item, which was construction cost.
The other costs, for instance, environmental cost, was considered in some of the
reports. A comparison with other documents has shown that the selection of direct
cost, construction cost, was compatible with guidelines stated in every manual.
However, the indirect cost was not analyzed by most of the reports. The compatibility
analysis result is shown in Table 4.47.
Table 4.47 Cost Item Selection Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic Analysis
of Power Sector Projects:
Renewable Energy Projects.
(World Bank, 2015)
Construction cost
and externality cost
Partially
compatible
- Guidelines for the Economic
Analysis of Projects (ADB, 2017)
Select direct and indirect cost Partially
compatible
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
Select direct and indirect cost Partially
compatible
- Guide to Cost-Benefit Analysis of
Investment Projects (European
Commission, 2014)
Select direct and indirect cost Partially
compatible
96
Table 4.47 (Continued)
Document Standard and Guideline
Stated
Analysis
Result
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects (IEA, 2000)
Select construction cost item
and annual operating cost
Partially
compatible
- 2012 Revised Manual and Criteria
for Feasibility Analysis (NESDB,
2012)
Select direct and indirect cost Partially
compatible
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
Use “With and Without” principle,
environmental cost, and sunk cost
Partially
compatible
- Guideline on study and analysis of
Public-Private Partnership (SEPO,
2017)
Select direct and indirect cost Partially
compatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Project
(DEDE, 2015)
Select based on construction cost and
environmental cost
Partially
compatible
2) Cost Analysis Method. The study results show that the
majority of reports had estimated construction cost by adjusting the project’s
construction cost with a conversion factor, which is compatible with various manuals
that state the usage of a conversion factor in converting market price to shadow price.
However, the manuals do not state clearly the source of the conversion factor
calculation. As for indirect cost or environmental cost evaluation, the manuals state
the evaluation using the statistical method to appropriately evaluate environmental
impact value, which is compatible with some of the reports which use the
environmental economic technique to assess resulted impact, for instance, forest
degradation cost compared to a tree’s market price or environmental impact
mitigation cost. The compatibility analysis result is shown in Table 4.48.
97
Table 4.48 Cost Analysis Method Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic Analysis
of Power Sector Projects :
Renewable Energy Projects. (World
Bank, 2015)
Evaluate shadow price based on
commodity types and use
Standard correction factor (SCF),
Shadow exchange rate (SER)
Partially
compatible
- Guidelines for the Economic
Analysis of Projects (ADB, 2017)
Evaluate shadow price based on
resource opportunity cost which is
calculated by
Conversion factors (CFs),
Shadow exchange rate factor
(SERF)
Partially
compatible
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
Evaluate shadow price using
Conversion factors (CFs),
Shadow exchange rate factor
(SERF)
Partially
compatible
- Guide to Cost-Benefit Analysis of
Investment Projects (European
Commission, 2014)
Compare with
various past projects
Incompatible
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects (IEA, 2000)
Directly evaluate using
construction cost
Incompatible
- 2012 Revised Manual and Criteria
for Feasibility Analysis (NESDB,
2012)
Calculate shadow price
using conversion factor
or deduct tax from market price
Compatible
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
Use statistical method for
appropriate environmental impact
evaluation
Compatible
- Guideline on study and analysis of
Public-Private Partnership (SEPO,
2017)
Calculate shadow price
using conversion factor
or deduct tax from market price
Compatible
98
Table 4.48 (Continued)
Document Standard and Guideline
Stated
Analysis
Result
- Manual for Planning and Feasibility
Analysis of Small and Mini Scale
Hydropower Project (DEDE, 2015)
Deduct tax from market price and
use environment valuation method
Partially
compatible
3) Annual Cost Evaluation. The study results show that the
majority of reports had evaluated annual cost by selecting a proportion from the
construction cost and adjusting with a conversion factor. However, a comparison with
various documents has shown that many manuals recommend the method of
comparison with actual cost of present or past projects, with only one manual
recommending selecting a proportion from construction cost, which is compatible
with the Thai small scale hydropower project study report. The compatibility analysis
is shown in Table 4.49.
Table 4.49 Annual Cost Evaluation Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guide to Cost-Benefit Analysis
of Investment Projects (European
Commission, 2014)
Compare with
other past projects
Incompatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
Estimate cost in each item
based on project features
Incompatible
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects (IEA,
2000)
Estimate cost in each item
based on project features
Incompatible
- 2012 Revised Manual and
Criteria for Feasibility Analysis
(NESDB, 2012)
Compare with actual cost
of present projects
Incompatible
99
Table 4.49 (Continued)
Document Standard and Guideline
Stated
Analysis
Result
- Guideline on study and analysis
of Public-Private Partnership
(SEPO, 2017)
Compare with actual cost
of present projects
Incompatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Project
(DEDE, 2015)
Calculate as a proportion from
construction cost
Compatible
4.2.1.3 Benefit Analysis Compatibility
The analysis of compatibility on small scale hydropower benefit analysis
with other guidelines is comprised of 1) Benefit item selection, and 2) Benefit
evaluation method, with the following details:
1) Benefit Item Selection. The study results show that the
majority of reports considered 2 benefit items, which were electricity benefit and
greenhouse gas emission reduction benefit. Other considered benefits were fishery
benefit, tourism benefit, and agricultural benefit, which occurred according to each
project’s distinct features. A comparison with various documents has shown that the
majority of reports were compatible with manuals in selecting energy benefits which
were of direct benefit, with greenhouse gas emission reduction benefit being the
indirect benefit. However, on other topics, for instance, macro level impact evaluation
or energy security benefit evaluation, it seems that Thai small scale hydropower
projects still did not have an analysis which covers these mentioned topics. The
compatibility analysis result is shown in Table 4.50.
100
Table 4.50 Benefit Item Selection Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic
Analysis of Power Sector
Projects : Renewable Energy
Projects. (World Bank, 2015)
Electricity benefit and environmental benefit,
e.g., greenhouse gas emission reduction
Compatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
Energy benefit and other benefits,
e.g., greenhouse gas emission reduction
Compatible
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
Incremental Benefits,
Non-incremental Benefits
Partially
compatible
- Guide to Cost-Benefit Analysis
of Investment Projects (European
Commission, 2014)
Energy benefit and other benefits,
e.g., greenhouse gas emission reduction,
energy security
Partially
compatible
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects (IEA,
2000)
Electricity benefit Compatible
- 2012 Revised Manual and
Criteria for Feasibility Analysis
(NESDB, 2012)
Selecting direct benefit and indirect benefit
Macroeconomic impact evaluation
Partially
compatible
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
Use the “With and Without” principle and
consider benefit at outcome or impact level
Compatible
- Guideline on study and analysis
of Public-Private Partnership
(SEPO, 2017)
Selecting direct benefit and indirect benefit
Macroeconomic impact evaluation
Partially
compatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Project
(DEDE, 2015)
Selecting electricity benefit and
environmental benefit,
e.g., greenhouse gas emission reduction
Compatible
101
2) Benefit Evaluation Method
The study results show that the majority of study reports had
evaluated electricity benefit using a comparison with cost of electricity generation
using other methods, and also evaluated benefit from greenhouse gas emissions
reduction using a comparison with the carbon credit price. A comparison with other
documents has shown that the majority of reports were compatible with the manuals
in comparing energy benefit with cost of electricity generation using other methods.
However, there were differences in their selections of comparing energy. Each
manual recommended different energy types, for instance, comparison with fossil
energy or renewable energy. As for indirect benefit, many manuals state that the
environmental valuation method is mandatory which complies with the Thai small
scale hydropower project study report. The compatibility analysis is shown in Table
4.51.
Table 4.51 Benefit Evaluation Method Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic
Analysis of Power Sector
Projects : Renewable Energy
Projects. (World Bank, 2015)
Evaluate the generated electricity value
based on cost of electricity generation using fossil
energy and evaluate external impact
using environment valuation techniques
Compatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
Evaluate the generated electricity value
based on reduced cost and environmental impact
value
Compatible
- Cost-benefit analysis for
development: A practical
guide. (ADB, 2013)
Evaluate the generated electricity value
based on electricity selling price
Incompatible
- Guide to Cost-Benefit
Analysis of Investment
Projects (European
Commission, 2014)
Evaluate external impact
using environment valuation techniques
Compatible
102
Table 4.51 (Continued)
Document Standard and Guideline
Stated
Analysis
Result
- Economic Risk and
Sensitivity Analysis for
Small-scale Hydropower
Projects (IEA, 2000)
Evaluate the generated electricity value
based on electricity selling price
Incompatible
- Manual for Planning and
Feasibility Analysis of Small
and Mini Scale Hydropower
Project (DEDE, 2015)
Evaluate the generated electricity value
based on cost of electricity generation
using renewable energy
and evaluate environmental value
using environment valuation techniques
Partially
compatible
4.2.1.4 Feasibility Index Compatibility
The study results show that the majority of reports had selected among 4
feasibility indexes, namely, Benefit-Cost Ratio (B/C Ratio), Net Present Value
(NPV), Economic Internal Rate of Return (EIRR), and Average Incremental Cost
(AIC). A comparison with other documents has shown that the Thai small scale
hydropower plant project study report feasibility index selection complied with the
majority of compared manuals. The compatibility analysis is shown in Table 4.52.
Table 4.52 Feasibility Index Selection Compatibility Selection Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Guidelines for Economic
Analysis of Power Sector
Projects : Renewable Energy
Projects. (World Bank, 2015)
NPV, EIRR Compatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
ENPV, EIRR,
BCR, CER
Partially
compatible
103
Table 4.52 (Continued)
Document Standard and Guideline
Stated
Analysis
Result
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
NPV, EIRR Compatible
- Introductory Course on
Economic Analysis of
Investment (ADB, 2010)
NPV, EIRR Compatible
- Guide to Cost-Benefit Analysis
of Investment Projects (European
Commission, 2014)
NPV, EIRR ,B/C Compatible
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects (IEA,
2000)
NPV Compatible
- 2012 Revised Manual and
Criteria for Feasibility Analysis
(NESDB, 2012)
NPV, EIRR , B/C Compatible
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
NPV Compatible
- Guideline on study and analysis
of Public-Private Partnership
(SEPO, 2017)
NPV, EIRR, B/C Compatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Project
(DEDE, 2015)
NPV, EIRR, B/C Compatible
4.2.1.5 Risk Analysis Compatibility
The study result shows that the majority of study reports had performed
risk analysis using sensitivity analysis and switching value analysis, while 24% of the
reports did no risk analysis. A comparison with various documents has shown that
104
every study manual required risk analysis with the method recommended by most of
the manuals being sensitivity analysis, which complies with the Thai small scale
hydropower project study report. However, there were some manuals stating that the
risk analysis must use Monte Carlo Simulation, Probability analysis, and Real option,
which was not found in the Thai small scale hydropower project risk analysis. The
compatibility analysis is shown in Table 4.53.
Table 4.53 Risk Analysis Compatibility Analysis
Document Standard and Guideline
Stated Result
- Guidelines for Economic
Analysis of Power Sector
Projects : Renewable Energy
Projects. (World Bank, 2015)
Sensitivity analysis, Real option,
Scenario analysis
Partially
compatible
- Guidelines for the Economic
Analysis of Projects (ADB,
2017)
Sensitivity analysis, Switching
value, Monte Carlo Simulation
Partially
compatible
- Cost-benefit analysis for
development: A practical guide.
(ADB, 2013)
Sensitivity analysis, Switching
value, Probability analysis
Partially
compatible
- Introductory Course on
Economic Analysis of
Investment (ADB, 2010)
Sensitivity analysis, Switching
value, Probability analysis
Partially
compatible
- Guide to Cost-Benefit Analysis
of Investment Projects (European
Commission, 2014)
Sensitivity analysis, Switching
value, Qualitative risk analysis,
Probability analysis (Monte Carlo
Simulation)
Partially
compatible
- Economic Risk and Sensitivity
Analysis for Small-scale
Hydropower Projects
- (IEA, 2000)
Monte Carlo Simulation,
Probability analysis
Incompatible
- 2012 Revised Manual and
Criteria for Feasibility Analysis
(NESDB, 2012)
Sensitivity analysis
Cost &benefit + 5 -20 %
Compatible
105
Table 4.53 (Continued)
Document Standard and Guideline
Stated Result
- Project Feasibility Analysis for
Sufficiency (Adis, 2010)
Sensitivity analysis, Switching
value, Probability analysis
Compatible
- Guideline on study and analysis
of Public-Private Partnership
(SEPO, 2017)
Sensitivity analysis
Cost &benefit + 5 -20 %,
Compatible
- Manual for Planning and
Feasibility Analysis of Small and
Mini Scale Hydropower Project
(DEDE, 2015)
Sensitivity analysis Compatible
The analysis result of methodology standard and guideline compatibility
for small scale hydropower project feasibility analysis is summarized in Table 4.54.
Table 4.54 Methodology Compatibility Analysis Result
Item Analysis Result
1. Assumption Selection
- Project Duration
Selection
- Compatible with Manual for Planning and Feasibility Analysis of Small and
Mini Scale Hydropower Project (DEDE, 2015)
- Discount Rate
Selection
- Discount rate did not comply with guideline stated in various manuals
2. Cost Analysis
- Cost Item
Selection
- Compatible with direct cost item selection guideline (construction cost)
- The majority of reports did not perform indirect cost analysis as stated in the
manuals.
106
Table 4.54 (Continued)
Item Analysis Result
- Cost Analysis
Method
- Compatible with the majority of reports stating the use of a Conversion factor
(CF) in adjusting market price to shadow price
- Compatible with manual stating the use of environmental economic methods in
evaluating resulting impact
- Annual cost
evaluation
- Incompatible with a number of manuals stating the method of comparison with
actual cost of other past or present projects
3. Benefit Analysis
- Benefit Item
Selection
- The majority of reports were compatible with manuals in selecting energy and
greenhouse emission reduction benefits
- Lacked macro-impact and energy security benefit analyses
- Benefit
Evaluation
- The majority of reports were compatible with manuals in comparing energy
benefit with cost of electricity generation using other energy
- Compatible with a number of manuals requiring an indirect benefit evaluation
using environmental evaluation techniques
4. Feasibility Index
Selection
- Compatible with the majority of compared study manuals
5. Risk Analysis - Compatible with the majority of manuals recommending sensitivity analysis
- There was no risk analysis using Monte Carlo Simulation, Probability analysis,
and Real option as recommended by some manuals
4.2.2 Process Standard and Guideline Compatibility
The documents used for the analysis of small scale hydropower project
feasibility analysis process, standard and guideline compatibility of other agencies,
both national and international, are shown in Table 4.55.
107
Table 4.55 Documents Used for Process, Standard and Guideline Compatibility
Analysis
Document Agency Published
Year
- 2012 Revised Manual and Criteria for Feasibility
Analysis
Office of the National Economic
and Social Development Board
(NESDB)
2012
- Government Procurement and Supplies
Management Act B.E. 2560
Government Gazette 2017
- Private Investment in State Undertaking Act B.E.
2556
Government Gazette 2013
- Manuals, descriptions and guidelines for the
royal Decree on Criteria and Procedures for
Good Governance, B.E.2546 (2003)
Office of the Public Sector
Development Commission
(OPDC)
2003
- Good Governance Rating Manual Office of the Public Sector
Development Commission
(OPDC)
2009
The process, standard and guideline compatibility analysis on small scale
hydropower plant project feasibility analysis is comprised of a 1) Consultant hiring
process, 2) Study process, and 3) Feasibility consideration and approval processes, as
follows:
4.2.2.1 Consultant Hiring Process
The comparison analysis between the study of consultant qualification,
scope of work, deliverables, and consultant selection within the overall consultant
hiring process has shown compatibility with the guidelines stated in various laws and
manuals, which include the Government Procurement and Supplies Management Act
B.E. 2560, manuals, descriptions and guidelines for the royal Decree on Criteria and
Procedures for Good Governance, B.E.2546 (2003), and the Good Governance Rating
Manual, which prioritizes transparency in operation and consideration of criteria
selection. The compatibility analysis is shown in Table 4.56.
108
Table 4.56 Consultant Hiring Process Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Government Procurement
and Supplies Management
Act B.E. 2560
Consider quality criteria which comprises of
work and experience, management and operation plan,
number of personnel, type of consultant, and cost
proposal by selecting among the ones passing the
quality criteria to choose the one with
the highest aggregate score of quality and price.
Compatible
- Manuals, descriptions and
guidelines for the royal
Decree on Criteria and
Procedures for Good
Governance, B.E.2546
(2003)
The procurement must be operated with openness
and fairness with consideration of social benefits and
cost,
citizens’ burden, quality, objective in the price used,
and public sector long-term benefits,
which does not have to only be the lowest price
Compatible
- Good Governance Rating
Manual (OPDC, 2009)
Based on transparency
and operation efficiency principles
Compatible
4.2.2.2 Study Process
A comparison analysis between the Thai small scale hydropower project
study process with other documents has shown that the study process was compatible
with guidelines stated in various laws and manuals, which include manuals,
descriptions and guidelines for the royal Decree on Criteria and Procedures for Good
Governance, B.E.2546 (2003), as well as the Good Governance Rating Manual, which
prioritizes transparency in operations and is a comparison between input factors and
results from Thai small scale hydropower project investment showing that the study
process is compatible. The compatibility analysis is shown in Table 4.57.
109
Table 4.57 Study Process Compatibility Analysis
Document Standard and Guideline
Stated
Analysis
Result
- Manuals, descriptions and guidelines
for the royal Decree on Criteria and
Procedures for Good Governance,
B.E.2546 (2003)
Comparative consideration
between input factors and resulting
outcome
Compatible
- Good Governance Rating Manual
(OPDC, 2009)
Consider transparency in operations Compatible
4.2.2.3 Feasibility Consideration and Approval Processes
The comparison analysis between Thai small scale hydropower project
feasibility consideration and approval processes with other documents has shown that
the feasibility consideration and approval processes were compatible with guidelines
stated in various laws and manuals in terms of comparison consideration among input
factors, resulting outcomes and operation efficiency. However, in terms of mandatory
requirements by the Office of the National Economic and Social Development Board
(NESDB), Bureau of the Budget, as well as the State Enterprise Policy Office
(SEPO), the review has shown that small scale hydropower projects were not listed in
the projects required to operate according to the mentioned requirements. The
compatibility analysis is shown in Table 4.58.
110
Table 4.58 Feasibility Consideration and Approval Processes Compatibility
Analysis
Document Standard and Guideline
Stated
Analysis
Result
- 2012 Revised Manual and
Criteria for Feasibility
Analysis (NESDB, 2012)
Projects which required approval of
Office of the National Economic and
Social Development Board (NESDB)
were state enterprise investment projects
as well as financial leasing contracts,
public investment which lead to foreign
loans, and public projects with allowed
private investment
Incompatible since
small scale hydropower
projects do not require
Office of the National
Economic and Social
Development Board
(NESDB) approval
- Private Investment in State
Undertaking Act B.E. 2556
Study result was required to be presented
to State Enterprise Policy Office (SEPO)
and Office of the National Economic and
Social Development Board (NESDB) to
consider before asking for approval from
the cabinet.
Incompatible since
small scale hydropower
project was not required
to follow Private
Investment in State
Undertaking Act B.E.
2556
- Manuals, descriptions and
guidelines for the royal
Decree on Criteria and
Procedures for Good
Governance, B.E.2546
(2003)
Had considered comparison between
input factors and resulting outcome. The
responsibility to gather data and analysis
feasibility fell to the Office of the National
Economic and Social Development Board
(NESDB) and Bureau of Budget
Partially compatible
since small scale
hydropower project was
not required to follow
Office of the National
Economic and Social
Development Board
(NESDB) criteria
- Good Governance Rating
Manual (OPDC, 2009)
Consider transparency and efficiency
in operations
Partially compatible
The analysis result of process, standard and guideline compatibility for
small scale hydropower project feasibility analysis is summarized in Table 4.59.
111
Table 4.59 Process Compatibility Analysis Result
Item Analysis Result
1. Consultant
Hiring Process
- The overall consultant hiring process was compatible with guidelines stated
in laws and manuals which prioritize transparency in operations and
consideration criteria selection principles
2. Study Process - Study process was compatible with guidelines stated in laws and manuals
which prioritize transparency in study result considerations and comparison
between input factors and outcome resulting from investment
3. Feasibility
Consideration
and Approval
Processes
- Feasibility consideration and approval processes were compatible with
guidelines stated in laws and manuals in terms of comparison between input
factors and resulting outcome as well as efficiency in operations
- Small scale hydropower project was not on the list of projects requiring
approval by the Office of the National Economic and Social Development
Board (NESDB) and State Enterprise Policy Office (SEPO)
4.3 Cost Overrun and Benefit Shortfall Study
The study of cost overrun and benefit shortfall was performed by comparing
the results of project feasibility analysis with the actual result according to data from
the Study Report on master plan for the Improvement of Production Performance of
Small Hydropower Projects, and 2 detailed design projects studied by the Department
of Alternative Energy Development and Efficiency in 2015 (Department of
Alternative Energy Development and Efficiency, 2015), including other related
documents covering 21 projects from 22 projects under the Department of Alternative
Energy Development and Efficiency. Responsibility compared actual construction
cost with cost proposed in the report to analyze cost overrun as well as compare actual
electricity generated and electricity proposed in the report to analyze benefit shortfall.
The project’s detail and comparison result is shown in Table 4.60 and Table 4.61.
112
Table 4.60 Studied Small Scale Hydropower Projects
Small Scale Hydropower Project Location
Installed
Capacity
(kilowatt)
Useful
Lives
(Year)
1 Mae Kuem Luang small scale
hydropower project
A.Mae Ai, Chiang Mai 3,200 35
2 Huai Mae Phong small scale
hydropower project
A.Dok Khamtai, Phayao 860 32
3 Ai Ka Po small scale hydropower
project
A.Sukhirin, Narathiwat 200 31
4 Mae Sariang small scale
hydropower project
A.Mae Sariang, Mae Hong Son 1,250 31
5 Khereethan small scale
hydropower project
A.Makham, Chanthaburi 12,200 30
6 Mae Sap small scale hydropower
project
A.Samoeng, Chiang Mai 1,360 28
7 Bo Kaeo small scale hydropower
project
A.Samoeng, Chiang Mai 200 28
8 Mae Mao small scale hydropower
project
A.Fang, Chiang Mai 4,330 16
9 Khlong Lam Plok small scale
hydropower project
A.Yan Ta Khao, Trang 1,182 27
10 Nam Kamuen small scale
hydropower project
A.Nakhon Thai, Phitsanulok 1,030 27
11 Huai Mae Sot small scale
hydropower project
A.Mae Sot, Tak 660 27
12 Mae Had small scale hydropower
project
A.Wiang Haeng, Chiang Mai 818 27
13 Khlong Du Son small scale
hydropower project
A. Khuan Kalong, Satun 680 25
14 Huai Pa Tow small scale
hydropower project
A. Kaeng Khro, Chaiyaphum 4,500 24
15 Kiew Lom small scale hydropower
project
A.Mueang Lampang, Lampang 350 22
113
Table 4.60 (Continued)
Small Scale Hydropower Project Location
Installed
Capacity
(kilowatt)
Useful
Lives
(Year)
16 Huai Lam Sin small scale
hydropower project
A.Kong Ra, Phatthalung 958 20
17 Lam Phra Phloeng small scale
hydropower project
A. Pak Thong Chai,
Nakhon Ratchasima
850 18
18 Huai Nam Khun small scale
hydropower project
A.Mae Suai, Chiang Rai 1,700 13
19 Huai Ya Mo small scale
hydropower project
A.Umphang, Tak 1,746 12
20 Mae Hong Son small scale
hydropower project
A.Mueang Mae Hong Son,
Mae Hong Son
850 44
21 Mae Tuen small scale hydropower
project
A.Omkoi, Chiang Mai 250 25
Toal 39,174
Table 4.61 Small Scale hydropower Project Cost Overrun and Benefit Shortfall
Project
Feasibility
Analysis Actual Operation
Inaccuracy
Cost Overrun Benefit Shortfall
Investment
(THB)
Electricity
(kWh/year)
Investment
(THB)
Sold
Electricity
(kWh/yr)
Investment
(THB)
% Electricity
(kWh/yr)
%
1 Mae Kuem Luang small scale
hydropower project
169.92 15.62 169.62 9.76 - 0.30 -0.17% - 5.86 -37.53%
2 Huai Mae Phong small scale
hydropower project
153.07 4.70 153.07 2.24 0 0.00% - 2.46 -52.42%
3 Ai Ka Po small scale
hydropower project
7.02 0.73 6.99 0.13 - 0.03 -0.44% - 0.60 -82.60%
4 Mae Sariang small scale
hydropower project
110.16 5.62 110.16 2.03 0 0.00% - 3.59 -63.84%
5 Khereethan small scale
hydropower project
515.85 27.00 515.85 27.21 0 0.00% 0.21 0.78%
114
Table 4.61 (Continued)
Project
Feasibility
Analysis Actual Operation
Inaccuracy
Cost Overrun Benefit Shortfall
Investment
(THB)
Electricity
(kWh/year)
Investment
(THB)
Sold
Electricity
(kWh/yr)
Investment
(THB)
% Electricity
(kWh/yr)
%
6 Mae Sap small scale
hydropower project
102.15 4.80 102.15 1.76 0 0.00% - 3.04 -63.42%
7 Bo Kaeo small scale
hydropower project
9.19 1.47 9.19 0.32 0 0.00% - 1.15 -78.32%
8 Mae Mao small scale
hydropower project
407.91 9.18 407.91 6.35 0 0.00% - 2.83 -30.81%
9 Khlong Lam Plok small scale
hydropower project
48.63 5.11 48.63 3.28 0 0.00% - 1.83 -35.80%
10 Nam Kamuen small scale
hydropower project
60.49 5.04 60.49 3.33 0 0.00% - 1.71 -34.00%
11 Huai Mae Sot small scale
hydropower project
67.22 3.12 57.72 1.23 - 9.50 -14.13% - 1.89 -60.46%
12 Mae Had small scale
hydropower project
46.17 6.80 46.17 2.18 0 0.00% - 4.62 -67.91%
13 Khlong Du Son small scale
hydropower project
54.94 4.71 44.75 1.65 - 10.19 -18.55% - 3.06 -64.89%
14 Huai Pa Tow small scale
hydropower project
23.50 18.41 23.50 13.33 0 0.00% - 5.08 -27.57%
15 Kiew Lom small scale
hydropower project
21.28 1.70 21.28 0.64 0 0.00% - 1.06 -62.19%
16 Huai Lam Sin small scale
hydropower project
34.69 7.54 34.69 0.90 0 0.00% - 6.64 -88.10%
17 Lam Phra Phloeng small scale
hydropower project
36.05 3.19 36.05 0.95 0 0.00% - 2.24 -70.28%
18 Huai Nam Khun small scale
hydropower project
132.82 8.99 132.82 6.87 0 0.00% - 2.12 -23.58%
19 Huai Ya Mo small scale
hydropower project
74.73 4.53 74.73 2.19 0 0.00% - 2.34 -51.60%
20 Mae Hong Son small scale
hydropower project
20.20 6.90 20.20 - 0 0.00% - -
115
Table 4.61 (Continued)
Project
Feasibility
Analysis Actual Operation
Inaccuracy
Cost Overrun Benefit Shortfall
Investment
(THB)
Electricity
(kWh/year)
Investment
(THB)
Sold
Electricity
(kWh/yr)
Investment
(THB)
% Electricity
(kWh/yr)
%
21 Mae Tuen small scale
hydropower project
40.95 1.90 40.95 0.31 0 0.00% - 1.59 -83.54%
Total 2,137 147.1 2,117 86.7 - 20.0
- 53.5
Average 101.76 7.00 100.81 4.33 - 0.91 -1.59% - 2.67 -53.90%
The analysis of small scale hydropower projects could be separated into 2
major topics: 1) Cost overrun, and 2) Benefit shortfall, as follows:
4.3.1 Cost Overrun
The analysis of cost overrun has shown that public small scale hydropower
projects had overestimated construction cost compared to actual cost by 1.59%, with
the project with the highest inaccuracy being Khlong Du Son small scale hydropower
project with -18.55% inaccuracy. The conclusion derived is that small scale
hydropower projects have little cost overrun problems due to the overestimation of
cost estimation compared to actual cost, as shown in the descriptive statistics and
frequency distribution in Table 4.62 and Figure 4.5, respectively.
Table 4.62 Descriptive Statistics of Cost Overrun Analysis
Descriptive Statistics
Mean -1.59%
Standard Deviation 5.0%
Range 18.55%
Minimum -18.55%
Maximum 0.00%
Count 21
116
Figure 4.5 Frequency Distribution of Cost Overrun
Most of the small scale hydropower projects did not have cost overrun
problems since the Department of Alternative Energy Development and Efficiency
uses a bidding / turn-key contract based on a standard price obtained from feasibility
analysis, therefore the cost proposed by the contractor will be equal to or lower than
the designated standard price. Hence, the conclusion is that Thai small scale
hydropower projects do not have cost overrun problems.
4.3.2 Benefit Shortfall
The result of benefit shortfall analysis was obtained from considering
electricity generated, since electricity data is the major factor in evaluating a project’s
benefits. The analysis shows that electricity generated was higher than electricity sold
with a 53.9% difference, with the project with the highest inaccuracy being Huai Lam
Sin small scale hydropower project, with -88.87% inaccuracy. The conclusion derived
is that small scale hydropower projects have significant benefit shortfall problems
since forecasted electricity is higher than the electricity produced that generates real
benefit. The descriptive statistics and frequency distribution is shown in Table 4.63
and Figure 4.6, respectively.
0 1 1
0
19
0 0 0
2
4
6
8
10
12
14
16
18
20
-20% -15% -10% -5% 0% 5% More
Fre
qu
en
cy
117
Table 4.63 Descriptive Statistics of Benefit Shortfall Analysis
Descriptive Statistics
Mean -53.9%
Standard Deviation 23.5%
Range 88.87%
Minimum -88.10%
Maximum 0.78%
Count 20
Figure 4.6 Frequency Distribution of Benefit Shortfall Analysis
The in-depth interviews and research on related documents pointed out 2
major causes of benefit shortfall, which were:
1) Problems During Study Process, which include 1) Limitation of data
used in calculating electricity generated, especially data related to water level at the
project sites, which was a major factor affecting electricity generation capacity, and 2)
Problems in calculating electricity, which is the project’s main benefit and was
calculated based on electricity directly generated from a generator without
considering the difference between electricity generated and electricity sold. Some of
the differences resulted from the usage of electricity generated in other activities
within the project or the model of selling electricity into the system. This created a
1
5
7
6
1
0
1
2
3
4
5
6
7
8
-88% -66% -44% -21% More0.78%
118
difference between electricity generated and electricity that actually generated benefit
according to the project’s objective.
2) Problems During Project Operation. In small scale hydropower
plants’ operational phase, after construction was finished, there were a number of
problems and obstacles which made the project unable to generate electricity
according to the designed production plan, for instance, project technical problems,
lack of personnel in the project’s maintenance and reparation, as well as production
halts to reduce social impact.
Furthermore, the analysis of a project’s benefit shortfall and other factors
has shown that the benefit shortfall level had no significant relationship with the
project’s duration, with a correlation value of -0.06 between these 2 factors, showing
that the benefit shortfall problem did not change according to the project’s study
period. However, the benefit shortfall level did significantly relate to the project’s
value, with a correlation value of 0.758 between both factors, showing that low-value
projects tend to have higher benefit shortfall problems than high-value projects. The
relational graph between the projects’ benefit shortfall with the projects’ study period
and value is shown in Figure 4.7 and Figure 4.8.
Figure 4.7 Relationships between Benefit Shortfall and Project Study Period
-38%
-52%
-83%
-64%
1%
-63%
-78%
-31% -36% -34%
-60% -68% -65%
-28%
-62%
-88%
-70%
-24%
-52%
-84%
35
32 31 31 30 28 28
16
27 27 27 27 25 24
22 20
18
13 12
25
0
5
10
15
20
25
30
35
40
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Benefit Shortfall Project Study Period
119
Figure 4.8 Relationship between Benefit Shortfall and Project’s Value
4.4 Feasibility Analysis Problem and Limitation Study
Based on the study of small scale hydropower project feasibility analysis
framework, related agency standards and guideline compatibility study results, cost
overrun and benefit shortfall study results, as well as in-depth interviews related to the
academic paper review, the small scale hydropower project feasibility analysis’
problems and limitations can be separated into 2 parts, which are 1) Methodology’s
problems and limitations, and 2) Process’ problems and limitations, with the
following details:
4.4.1 Methodology’s Problems and Limitations
The analysis result of small scale hydropower project feasibility analysis
methodology’s problems and limitations is as follows:
1) Data Limitation. Small scale hydropower project feasibility study
process must be performed with other study aspects, especially engineering and
environmental aspects. The study from various study aspects will be considered to
evaluate a project’s cost and benefit. However, the overall limitation of the study has
led to incomplete or inaccurate engineering and environmental study data which has
-38%
-52%
-83%
-64%
1%
-63%
-78%
-31% -36% -34%
-60% -68% -65%
-28%
-62%
-88%
-70%
-24%
-52%
-84%
3,200
860 200
1,250
12,200
1,360
200
4,330
1,182 1,030 660 818 680
4,500
350 958 850
1,700 1,746
250 -
2,000
4,000
6,000
8,000
10,000
12,000
14,000
-100%
-90%
-80%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Benefit Shortfall Project’s Value
120
led to an inaccurate feasibility analysis as well. The crucial data that could create
problems or limitations in the feasibility analysis are:
(1) Water Runoff Data for Electricity Generated Estimation. The
inaccuracy of this data led to an inaccurate benefit evaluation throughout the project’s
life time. Presently, this problem is considered significant occurring in Thai small
scale hydropower project investment.
(2) Annual Operation Cost Data. Since the cost evaluation method
is still calculated based on proportional value of total cost without considering the
detail of actual cost that is about to occur, there is a high tendency that this data is
inaccurate and will lead to inaccurate estimated annual cost with respect to reality as
well as budget allocation in the project’s operation in the long run.
(3) Data of Environmental and Social Impact from Project’s
Operation. Since the environmental and socio-economic study aims to evaluate issues
and the level of resulting impacts in case the estimation cannot be clearly shown, this
can result in both positive and negative project impact evaluation by not covering
both the project’s cost and benefit. This limitation in evaluating external impact has
led to mistakes in decision making regarding natural resources and environmental
utilization and an inability to sustainably manage natural resources and the
environment.
2) Methodology Differences. A review of the study report has shown
that each report had selected assumptions, evaluated the project’s cost and benefit,
and analyzed the project’s risk differently. This makes the study unable to be
compared among other study reports for prioritizing or choosing projects directly.
3) Discount Rate Selection. The study has shown that most of the
reports had selected a discount rate differently from the 2012 Revised Manual and
Criteria for Feasibility Analysis set by the Office of the National Economic and Social
Development Board, this affected the study’s credibility and investment decisions by
not complying with standards set by the central agency and could lead to mistakes in
national budget allocation. Furthermore, the findings also show a trend in consistently
selecting a lower discount rate, which could lead to the utilization of natural resources
and environment more than necessary.
121
4) Cost Evaluation Method The cost evaluation method problem is
comprised of 2 major parts, which are 1) Conversion factor selection to convert
market price to shadow price, and 2) Project cost evaluation method, with the
following details:
(1) Conversion Factor Selection (CF) for Converting Market Price
to Shadow Price. Since most of the reports had selected a conversion factor according
to the World Bank, with reference to “Ahmed, Sadig. Shadow Prices for Economic
Appraisal of Projects : An Application to Thailand. World Bank Staff Working Paper,
No. 609.,1983.”, which has been studied ever since for 30 years. This makes the
shadow price analysis not reflect current economic conditions and true opportunity
cost of resources utilized in the operation.
(2) Project Cost Evaluation Method, The difference and variety of a
project’s negative impacts toward natural resources and the environment, as well as
limitations on data completeness and a lack of clear methods or standards stated in the
manuals has led to differences among the methods employed for environmental
evaluations in each report, which affects credibility, correctness and transparency in
performing a feasibility analysis.
5) Benefit Evaluation Method. Problems and limitations in benefit
evaluation methods can be separated into 2 issues, which are 1) Direct benefit
evaluation methods, and 2) Indirect benefit evaluation methods, with the following
details:
(1) Direct Benefit Evaluation Method. The evaluation of direct
benefit or electricity main principle employed in most of the reports and manuals are
to evaluate with a comparison to cost of electricity generation using other methods.
However, in practice, there is still ambiguity in selecting comparable energy types, for
example, most of the study reports selected gas turbine power plants using diesel fuel
by stating that this was the electricity generation method that was closest to
hydropower which was used for electricity in the peaking plant. Moreover, some
study reports had selected extra case studies by comparing with the overall national
cost of electricity generation.
On the contrary, the Manual for Planning and Feasibility Analysis of
Small and Mini Scale Hydropower Project by Department of Alternative Energy
122
Development and Efficiency created by the Department of Alternative Energy
Development and Efficiency (2015) has recommended evaluating electricity benefit
by comparing with the cost of electricity generation using other renewable energy.
The different approach leads to different study results and might pose problems in
comparing the study results among projects, including principal problems in
evaluating actual electricity generated.
(2) Indirect Benefit Evaluation Method. The data limitation and
lack of a clear method or standard has led to differences in environmental benefit
selection among the reports, which could affect credibility, correctness, and
transparency in the feasibility analysis, as well as a lack of evaluation on other
benefits, for instance, energy security benefit, and macro-economic benefit.
6) Risk Analysis. Problems and limitations on project risk analysis are
comprised of 2 topics, which are 1) Lack of risk analysis, and 2) Risk analysis method
selection, with the following details:
(1) Lack of Risk Analysis. 24% of reports did not perform a risk
analysis, which could imply that their analysis results were incomplete and could lead
to wrong decisions.
(2) Risk Analysis Method Selection. Most of the reports performed
risk analysis using sensitivity analysis by adjusting cost and benefit change from 5%
to 15% from their base case. This method has its own limitations, which include a
lack of consideration on risk probability and a cost and benefit adjustment level that
does not reflect reality, which could affect real investment by leading to wrong
decisions.
Small scale hydropower project feasibility analysis methodology’s
problems and limitations can be seen in Table 4.64.
123
Table 4.64 Small Scale Hydropower Project Feasibility Analysis Methodology’s
Problems and Limitations
Topic Problem and Limitation
Details Impact
1) Data
Limitation
- Water runoff data for evaluating electricity
generated
- Annual operating cost data
- Data of environmental and social impact
from project implementation
- Cost overrun and benefit shortfall
- Wrong decision in natural resource
and environment utilization and
unsustainable
2) Methodology
Differences
- Difference in assumption selection, cost
and benefit evaluation method as well as
risk analysis
- Unable to compare study result
among projects
3) Discount
Rate
Selection
- Discount rate selection doesn’t comply
with manual, guideline, and criteria set by
Office of the National Economic and
Social Development Board
- Discount rate has a declining trend
- Affects study result credibility and
mistakes in budget allocation
- Over-investment and over-
utilization of natural resources
4) Cost
Evaluation
Method
- Conversion factor selected doesn’t reflect
current economic status
- Variety and lack of standard in cost
evaluation method
- Doesn’t reflect true opportunity
cost of the resource
- Affects credibility, correctness,
and transparency in feasibility
analysis
5) Benefit
Evaluation
Method
- Ambiguity in selecting energy to be
compared for electricity evaluation
- Variety and lack of standard in indirect
benefit evaluation method
- Lack of energy security benefit and macro-
economic impact
- Unable to compare study result
among projects
- Affects credibility, correctness,
and transparency in feasibility
analysis
- Doesn’t reflect every project
benefit
6) Risk
Analysis
- 24% of reports did not perform risk
analysis
- Lack of consideration on risk probability
- Level of change in cost and benefit did not
reflect reality
- Affects risk in real investment
- Leads to wrong decisions
124
4.4.2 Process Problems and Limitations
The analysis of small scale hydropower project feasibility analysis process’
problems and limitations has the following details:
1) Consultant Qualification Set. The consultant hiring process has set
the qualification of economist responsible for feasibility analysis, but there is no
standard or professional license for this qualification, which is different from an
engineering consultant, which requires the consideration of a license for professional
practice which indicates professional engineering qualifications and capability on
various levels. This could be considered a problem for the whole country, not just
small-scale hydro power project studies, since, presently, Thailand does not require
the economic profession to be a controlled professional occupation or monitored from
a public agency or professional organization.
2) Scope of Work Selection. The scope of work for hiring a consultant
does not clearly indicate the scope of economic work, which could lead to an
analyst’s interpretation that is different from the employer’s intention, as well as lead
to a study result which doesn’t comply with the objective and general analysis
guideline.
3) Study Report Acceptance. In the small scale hydropower project
study report acceptance process, there could be a problem regarding differences
between economic analysis methodology by an analyst and the acceptance
committee’s understanding or opinion, since some processes of study might employ
complicated methodology or a variety of assumption selections. Without attempting
to reach a resolution based on academic correctness, this problem could affect the
study framework and lead to inaccuracies in the study results.
4) Feasibility Analysis Consideration and Approval Process. Currently,
small scale hydropower project feasibility analysis consideration and approval still
lacks control on quality and correctness of the feasibility analysis from an external
agency or neutral organization with no stake in investment decisions, which could
affect investment risk and implementation transparency.
Small scale hydropower project feasibility analysis process’ problems
and limitations are shown in Table 4.65.
125
Table 4.65 Small Scale Hydropower Project Feasibility Analysis Process’ Problems
and Limitations
Topic Problem and Limitation
Details Impact
- Consultant
Qualification Set
- Lack of standard or economic
provisional license
- Affects quality and credibility
of study result
- Scope of Work
Selection
- Lack of clear detail on scope of work - Study result might not
comply with objective and
general analysis guideline
- Study Report
Acceptance
- Difference in opinion regarding
methodology between analyst and
acceptance committee
- Affects methodology
selection and correctness of
study result
- Feasibility Analysis
Consideration and
Approval Process
- Lack of quality and correctness control
from external agency
- Affects investment risk and
implementation transparency
The study result of small scale hydropower project feasibility analysis
problems and limitations, both the methodology and process, has shown that small
scale hydropower project feasibility analysis based on Cost-Benefit Analysis (CBA)
still can’t be truly used as a decision tool for policy or investment decisions due to
various limitations, for instance, the evaluation’s inability to completely reflect
impacts, both positive and negative, toward the economy, society, and natural
resources and environment, lack of a clear standard or guideline in selecting
assumptions which can be used as mutual standards in Cost-Benefit Analysis (CBA),
both at the organizational level and project level, as well as analysis inaccuracy from
technical limitations, analyst bias, and lack of study quality control mechanisms.
126
4.5 Feasibility Analysis Framework Development
The results of small scale hydropower plant feasibility analysis framework
development analysis can be separated into 2 parts, which are 1) Feasibility analysis
methodology development, and 2) Feasibility analysis process development, with the
following details:
4.5.1 Feasibility Analysis Methodology Development
The problems and limitations study, as well as related study data, could lead to
methodology development guidelines for Thai small scale hydropower project
feasibility analysis, as follows:
1) Development Guideline for Data Limitation Problems are proposed
in 2 parts as follows:
(1) Impact from data limitation, which affects the analysis on
project cost and benefit but could be mitigated via a risk analysis by considering
related risk factors, for instance, electricity generated and annual operating cost.
These risk factors should be used in comparison with projects with similar features,
either in the past or present, by considering compatibility of the project’s scale,
technology and geography. Later on, there should be an analysis on probability for
each level of risk using a Monte Carlo Simulation.
(2) Impact from data limitation which affects economic impact
evaluation could be mitigated by clearly selecting guidelines or standards to evaluate
the impact in each topic which covers real impact that occurs in order to be able to
utilize the data for evaluation and analysis of investment feasibility that reflects reality
as much as possible.
2) Development Guideline for Methodology Difference Solution.
There should be clear guidelines or standards in selecting a methodology in each topic
or base case which every project must analyze in order to be able to compare
feasibility analysis results among projects.
3) Development Guide Line for Discount Rate Selection Problem. The
discount rate selection for small scale hydropower projects should be selected based
on a single standard which selects the minimum amount set by the Office of the
127
National Economic and Social Development Board at 9% – 12% for the benefit of
being able to compare with other projects, either among the department, ministry, and
overall government, in order to make decisions to utilize the national budget in project
development with transparency and fairness, as well as allocating national resource
with efficiency and are suitable in a development context for each period.
4) Development Guideline for Cost Evaluation Method Problems can
be proposed in 2 parts, as follows:
(1) There should be consideration on the method for converting
construction cost from market price to shadow price, which is more accurate and
current than using the conversion factor set by the World Bank in 1983. The proposed
method is to adjust by directly deducting tax from the construction cost, which makes
the resulting project’s construction cost able to reflect resource opportunity cost more
accurately and up to date than using the mentioned conversion factor.
(2) There should be clear guidelines or standards for the cost
analysis method, both the cost item selection and evaluation method themselves,
which covers environmental and social impacts resulting from project development,
for instance, forest degradation, environmental change from storing water, change in
residents’ occupations and lifestyle, as well as development of an evaluation method
suitable for cost items which result from impact on natural resources and
environmentalal change. The selection of an environmental impact evaluation method
should be considered based on academic accuracy and any inaccuracy resulting from
limitations on the data used in the study.
5) Methodology for Benefit Evaluation Method Problems are proposed
in 2 parts as follows:
(1) Project’s Direct Benefit Evaluation.
The evaluation of a project’s direct benefit or electricity by
comparing to the cost of electricity generation using other methods should consider
academic accuracy by analyzing opportunity cost or the true value of electricity of the
base case that the project is replacing. This can be compared in 3 cases, as follows:
a) Case 1: Comparison with overall national cost of electricity
generation with the base assumption that electricity generated by the small scale
hydropower project would be sent into the national electricity grid, therefore it should
128
be compared with the average cost of electricity generation from every other energy,
for instance, natural gas, coal, renewable energy or hydropower, including electricity
purchased from neighboring countries.
b) Case 2: Comparison with the cost of electricity generation in
peak load times, with the base assumption that hydropower generation was operated
in the same manner as electricity generated using a gas turbine power plant which
uses diesel fuel, therefore the comparison could be done by comparing it with the cost
of electricity generation using diesel as the comparative price, which will result in
higher electricity value per unit than a comparison with the overall national cost of
electricity generation.
c) Case 3: Comparison with the cost of electricity generated
using other renewable energy with the base assumption that the government has
already selected a policy to generate electricity by renewable energy as mandatory for
national electricity generation, therefore the comparison could be done by comparing
with the cost of electricity generation using other renewable energy, for instance, solar
power.
However, after consideration based on the “with and without”
principle, or a comparison of outcomes between cases had the project occurred or not
occurred, the small scale hydropower project’s direct benefit should be evaluated like
case 1, which is a comparison with the overall national cost of electricity generation
since electricity generated by a small scale hydropower project would be sent into the
national electricity grid and increase or decrease the average cost of electricity
generation depending on the project’s cost of electricity generation.
(2) Project’s Indirect Benefit Evaluation. The indirect benefit, or
benefit toward the economy, society, and environmental evaluation of the
methodology’s guidelines or standards, should be clearly selected, especially in terms
of benefit toward energy security and electricity stability resulting from dependency
on domestic electricity and reduction of risk from power drops or power outages. This
benefit evaluation must be performed in accordance with an engineering study in
order to figure out the quantitative data of risk in lower energy or macro-economic
benefits, which is an indirect benefit of small scale hydropower projects.
129
6) Development Guidelines for Risk Analysis Problems should focus
on the development of the process and new indexes which cover risk factors that
could affect analysis inaccuracy by developing a risk analysis method using a data
base of inaccuracies from analyses in past projects, which is the application of
Reference class forecasting and Monte Carlo Simulation in feasibility analysis. The
analysis result on types of indexes can be separated into 2 groups, as follows:
(1) Investment Decision Indexes are indexes that can be clearly
used as criteria for investment decisions, since there already exists decision criteria
which is internationally accepted or set by a central agency. These indexes are:
a) Average Net Present Value (A-NPV), which is the average
of Net Present Value obtained by a number of randomized analyses using Monte
Carlo Simulation. This analysis has already considered the risk factor and probability
of risk. The preferred feasibility project is the one with an analysis result higher than
0. Furthermore, this approach could also be used with other indicators, for instance,
the Average Internal Rate of Return (A-IRR), Average Benefit Cost Ratio
(A-BCR).
b) Risk Acceptable Net Present Value (R-NPV) is the
consideration of Net Present Value (NPV) with acceptable probability, for instance, a
selected probability at the 95% level and considered NPV at this certain level,
meaning that there is a 95% chance to receive a net income higher than the calculated
level, or there is a 5% chance to receive a net income lower than the calculated level.
The Guidelines for the Economic Analysis of Projects (2017) by the Asian
Development Bank (ADB) states that probability lower than 5% resulting in NPV
lower than 0 is considered very low risk and is an acceptable risk. This analysis could
also be used with other indexes, for instance, Risk Acceptable Internal Rate of Return
(R-IRR) or Risk Acceptable Benefit Cost Ratio (R-BCR).
(2) Decision Support Indexes are indexes that cannot be clearly
used as decision criteria since the decision criteria is still selected based on the
opinion or risk acceptance capability of the investor. These indexes will indicate the
risk data of an investment, which leads to a decision of whether to invest or not by
selecting decision criteria that is suitable to each investor. These indexes are as
follows:
130
a) Probability in which Net Present Value (NPV) equals 0 is
the consideration of probability at the statistical confidence level in which NPV
equals 0, that is, the break-even point for the project or the level where the project
has a present value of benefit equal to that of the cost.
b) Present Value of Value at Risk (VaR) is the consideration
of present value of the highest loss that could occur using the analysis based on Monte
Carlo Simulation, which considers risk that could reduce benefit or increase cost at
the maximum level.
c) Probability of Profit is the consideration of probability or
statistical confidence level which NPV is more than 0 or probability in which project
is investment feasible.
d) Probability of Loss is the consideration of probability or
statistical confidence level in which NPV is lower than 0 or the probability that the
project is not investment feasible.
e) Profit-Loss Probability Ratio (Profit Loss Ratio: PLR) is
the ratio which shows the Risk Likelihood by comparing the ratio of Probability of
Profit and Probability of Loss. The analysis result will be based on the obtained ratio.
PLR equals 1 means that the project has a probability to face loss that equals the
probability to face profit, PLR less than 1 means that the project has a high risk to
face loss since its probability to face loss is higher than its probability to face profit.
On the other hand, PLR higher than 1 means that the project has a low risk to face
loss since the probability to face loss is less than the probability to face profit. The
equation can be shown as follows:
f) Present Value of Average Loss and Present Value of Cost
Ratio (Loss Cost Ratio: LCR) is the ratio showing the impact from a risk event toward
the investor (Risk Impact) by comparing the ratio between present value of average
=
Profit-Lost Probability Ratio (PLR) Probability of Profit
Probability of Lost
131
loss, that is the average of net present value with value exclusively lower than 0,
which is the average of loss which might occur with present value of average cost,
which includes construction cost, cost from the project’s impact, and annual projected
cost throughout the project’s duration. If LCR is higher than 1, the project has loss
equal to cost, meaning the investor will lose all investment to the project’s operation.
Furthermore, a higher LCR shows higher risk impact toward the project compared
with lower LCR. The equation can be shown as follows:
g) Degree of Risk is the risk assessment of the project in the
form of a risk assessment matrix which shows the relationship between the probability
of risk event (Risk Likelihood) and the level of impact from the risk event (Risk
Impact). The risk likelihood can be calculated from the Profit Loss Ratio (PLR), while
risk impact can be calculated from the Loss Cost Ratio (LCR). An example of the
calculation and level of separation of risk likelihood and risk impact are shown in
Figure 4.9 and Figure 4.10.
Figure 4.9 Risk Likelihood
=
Present Value of Average Loss
And Present Value of Cost Ratio
(Loss Cost Ratio: LCR)
Present value of average loss
Present value of cost
132
Figure 4.10 Risk Impact
The evaluation of risk likelihood and risk impact will lead to
analysis in the form of a risk assessment matrix which can indicate the degree of risk
that could occur on 5 levels, each of which can be given meaning in Figures 4.11 and
4.12.
Very
High Medium High
Very
High
Very
High
Very
High
High Low Medium High High Very
High
Medium Very
Low Low Medium High
Very
High
Low Very
Low Low Low Medium High
Very
Low
Very
Low
Very
Low
Very
Low Low Medium
Very
Low Low Medium High
Very
High
Figure 4.11 Risk Assessment Matrix
Risk Impact
Risk Likelihood
133
Degree of
Risk Meaning
Very High Not investable since there is very high probability for impact
High Not investable since there is high probability for impact
Medium Not investable The data analysis should be reviewed and further risk
management framework is needed
Low Investable by selecting a higher risk management framework
Very Low Investable
Figure 4.12 Meanings for Degree of Risk
From these 2 groups of indexes, there are 2 crucial indexes that
could be selected and used as criteria for investment decisions, these are 1) Risk
Acceptable Net Present Value (R-NPV), and 2) Degree of Risk. The project that is
feasible for investment should have a study result which passes the criteria of both 2
mentioned indexes, meaning that the project is feasible for investment by having a
risk of loss or impact of loss at the low or very low level. However, decision criteria
for indexes related to the project’s risk could be adjusted to be suitable for project
features, investment policy, or each organization’s risk management.
The development guideline to solve problems and reduce
limitations of small scale hydropower project feasibility analysis methodology can be
seen in Table 4.66.
134
Table 4.66 Summary of Development Guidelines to Solve Problems and Reduce
Limitations of Small Scale Hydropower Project Feasibility Analysis
Methodology
Problem
Topic
Details
of Problems and Limitations Development Guideline
1) Data
Limitation
- Water runoff data for evaluating
electricity generated
- Annual operating cost data
- Data of environmental and social
impact from project implementation
- Analyze cost overruns and benefit
shortfalls
- Select guidelines or standards in
evaluating impacts in each topic clearly
and covering real impact
2) Methodology
Differences
- Differences in assumption selection,
cost and benefit evaluation methods,
as well as risk analysis
- Clearly select study guidelines or
standards in evaluating impact in each
topic clearly
3) Discount
Rate
Selection
- Discount rate selection did not
comply with manual, guideline, or
criteria set by Office of the National
Economic and Social Development
Board
- Discount rate had declining trend
- The selected discount rate should be
within the criteria set by the Office of
the National Economic and Social
Development Board, which is between
9% - 12%
4) Cost
Evaluation
Method
- Conversion factor selected did not
reflect current economic status
- Variety and lack of standard in cost
evaluation method
- The adjustment should be done by
directly deducting tax from the
construction cost
- Clearly select guideline or standard in
evaluation which covers real impact
5) Benefit
Evaluation
Method
- Ambiguity in selecting energy to be
compared for electricity evaluation
- Variety and lack of standard in
indirect benefit evaluation method
- Lack of energy security benefit and
macro-economic impact
- Clearly select guideline or standard in
evaluation which covers real benefit
135
Table 4.66 (Continued)
Problem
Topic
Details
of Problems and Limitations Development Guideline
6) Benefit
Evaluation
Method
- Ambiguity in selecting energy to be
compared for electricity evaluation
- Variety and lack of standard in
indirect benefit evaluation method
- Lack of energy security benefit and
macro-economic impact
- Clearly select guideline or standard in
evaluation which covers real benefit
7) Risk
Analysis
- Some reports did not perform risk
analysis
- Lack of consideration on risk
probability
- Sensitivity analysis used level of
change in cost and benefit which did
not reflect reality
- Clearly select guideline or standard in
risk analysis
- Apply Reference class forecasting and
Monte Carlo Simulation in feasibility
analysis by further considering risk
index
4.5.2 Feasibility Analysis Process Development
The small scale hydropower project feasibility analysis process development
focuses on developing accuracy and transparency in public agency operations, as well
as support for development related to solution guidelines and reduces feasibility
analysis methodology limitations, with the following details:
1) Development Guideline for Consultant Qualification Problem and
Limitation. Based on the problem of lacking a standard or economic professional
license, there should be assurance of a professional standard for economic academics
in order to control and maintain the quality and standard of the study result. The
standard of qualification for academics should be suitable for the type of studied
project, pass an academic capability test, and determine ethical standard selection as
well as punishment when mistakes or lack of academic standards or ethics is found.
2) Development Guideline for Scope of Work Limitation Problems.
Based on the problem of a lack of clear detail on the scope of work, the details on the
methodology should be clearly stated by considering the study objective and other
136
aspects of the study, for instance, the project’s components, site selection, selection of
cost and benefit items that cover all actual positive and negative impacts. In doing so,
there should be the development of a standard manual with details specific to small
scale hydropower projects. By requiring that the study must include the base case
according to the manual, and performing further study in other cases if required, this
will be beneficial in comparing study results among projects.
3) Development Guideline for Report Acceptance Limitation Problem.
Based on the problem of differences in opinion regarding methodology between the
analyst and acceptance committee, as well as a variety of methodology selections,
there should be development of a standard in feasibility analysis which complies with
a present project development context. Since the small scale hydropower project
feasibility analysis framework selected in the present still lacks a clear method on
many topics, for instance, cost and benefit item selection, and cost and benefit
evaluation method, which affects the problem such that the analysis is different
according to the analyst’s and the acceptance committee’s opinions, there should be
the selection of an academically accurate standard, as well as modern and clear
methods in the guidelines to make the study results credible and beneficial for
decisions.
4) Development Guideline for Feasibility Consideration and Approval
Process Problem.
Based on the problem of lacking quality and accuracy assurance
from an external agency, there are 3 proposals of development.
(1) Development of Mechanism for Checking Accuracy and
Transparency of Study Result.
Since the present small scale hydropower project feasibility analysis
is checked only at the acceptance level, it poses a weakness toward problems
regarding risk in actual operations or operation transparency. There should be extra
external agencies or committees participating in the feasibility analysis acceptance
process before approving an investment budget. This checking process should not
only be performed on the report acceptance process, but should be a whole other
feasibility analysis in order to compare study results.
137
(2) Development of Database for Tracking Operating Result.
Related personnel and agencies should consistently track the operation of the project
already invested in by selecting a list of items with the same standard in every project
by considering the benefit of analyzing, planning, and adjusting implementation of
other projects in the future. The example of recommended items that should be
collected for a base of analysis according to the Reference class forecasting method
includes electricity generated, contractor construction costs, annual operating cost,
data for environmental impact assessment during the construction and operational
phases, and the usage life of project components.
(3) Promotion of Joint Venture between Public and Private Sector.
At present, the Private Investment in State Undertaking Act B.E. 2556, has allowed
the private sector to jointly invest with the public sector, which is one of the
mechanisms to check study result accuracy, since the private sector is more focused
on results of feasibility analysis and risk analysis. Furthermore, joint ventures
between the public and private sectors generate benefit by reducing the burden on
government budgets and increasing efficiency in project management in the long-run.
The development guideline to solve problems and reduce limitations of
the small scale hydropower project feasibility analysis process can be seen in Table
4.67.
Table 4.67 Summary of Development Guidelines to Solve Problems and Reduce
Limitations of the Small Scale Hydropower Project Feasibility Analysis
Process
Problem
Topic
Details
of Problem and Limitation Development Guideline
- Consultant
Qualification Set
- Lack of standard or economic
provisional license
- Assurance of professional
standard for economic academics
- Scope of Work
Selection
- Lack of clear detail on scope of
work
- Clear statement of details on
methodology in the form of
manual and base case study
138
Table 4.67 (Continued)
Problem
Topic
Details
of Problem and Limitation Development Guideline
- Study Report
Acceptance
- Difference in opinion regarding
methodology between analyst
and acceptance committee
- Quality selection for feasibility
analysis
- Feasibility Analysis
Consideration and
Approval Process
- Lack of quality and correctness
control from external agency
- Development of mechanism for
checking accuracy and
transparency of study result
- Development of database for
tracking operating result
- Promotion of joint venture
between public and private sector
139
CHAPTER 5
SMALL SCALE HYDROPOWER FEASIBILITY ANALYIS
From the recommendations for small scale hydro-project feasibility analysis
framework development, the example of feasibility analysis according to the
recommended framework using Reference Class Forecasting and Monte Carlo
Simulation to consider a feasibility analysis index can be illusatrated with 3 case
studies, which are
1) Case 1: Project with very high risk
2) Case 2: Project with medium risk
3) Case 3: Project with low risk
In the analysis example for each case, the selected cost and benefit data will
have different values by adjustment based on data of the project from past study
reports, with the following details:
5.1 Assumption Selection
5.1.1 Project Duration Selection
The project duration selected is 30 years (excluding the construction phase of
2 years) based on the usage life of components in small scale hydropower as follows:
1) Civil work 30 years
2) Electronic equipment and machine 25 years
3) Hydrology equipment 20 years
4) Electrical Cable 30 years
140
5.1.2 Discount Rate Selection
The discount rate selected is 10% with consideration of criteria set by the
Office of the National Economic and Social Development Board which has stated its
rate of 9% - 12%.
5.2 Project Cost Analysis
5.2.1 Project Cost Item Selection
Small scale hydropower project cost items can be separated into 4 parts, which
are 1) Investment cost 2) Operating and maintenance cost 3) Replacement cost, and 4)
Impact toward forest degradation, with the following details:
1) Investment Cost, which includes site preparation cost, impact
monitoring cost, water diversion cost, hydrology equipment cost, electronic equipment
and machine cost, electric cable cost, consulting and control engineer cost, and
contingency cost.
2) Operating and Maintenance Cost is the cost occurring in the
operational phase which starts in the third year of the project and is the period after
the construction is finished and it’s ready to generate electricity.
3) Replacement Cost is comprised of installation cost for equipment,
which reaches its useful life before the end of the project operation period and
includes hydrology equipment replacement cost, and electronic machine replacement
cost.
4) Impact toward Forest Degradation. The engineering study on site
selection and environmental impact study has shown that project development requires
forest clearing which also incurs indirect costs for the project.
5.2.2 Project Cost Evaluation
From the mentioned hydropower project cost items, the cost evaluation
method could be separated into 2 parts as follows:
1) Direct Cost Evaluation comprises investment cost, operating and
maintenance cost, and replacement cost by deducting value added tax of 7% from
141
each item, and customs duty of 5% for imported electronic equipment and machines,
to convert price to economic price.
2) Indirect Cost Evaluation evaluates the impact from forest
degradation by comparing with the cost of reforestation to replace lost forest area,
which the Royal Forest Department has stated costs 2,875 Baht/rai (Royal Forest
Department, 2016), and comparing that with the carbon and forest nutrition storing
value at 301 Baht/rai (Somchai Nongnuang, Ampai Pornleesangsuwan, Saroj
Wattanasuksakul, Pongsak Chattecha, & Worapoj Khambai, 2017, p. 1).
The direct and indirect cost evaluation leading to the project’s financial
and economic cost in 3 cases is shown in Table 5.1
Table 5.1 Project Financial and Economic Cost
Unit: million baht
Item
Case 1 Case 2 Case 3
Finance Economic Finance Economic Finance Economic
1. Investment Cost 404.40 374.81 444.84 412.29 283.08 262.37
2. Annual operating and maintenance
cost 3.30 3.06 3.63 3.36 2.31 2.14
3. Machine and Equipment
Replacement Cost 206.49 189.85 227.14 208.83 144.54 132.89
4. Value of deforest Degradation in
Project Site - 0.76 - 0.83 - 0.53
5.3 Project Benefit Analysis
5.3.1 Project Benefit Item Selection
The small scale hydropower project benefit item selection can be separated
into 2 parts, which are:
5.3.1.1 Direct Benefit is the electricity generated, which is the
resulting benefit according to the project’s main objective. The detail in each case is
as follows:
142
1) Case 1. Project has the installed capacity of 2,952.00
kilowatts and is able to generate annual electricity of 14.30 million units (kilowatt-
hours).
2) Case 2. Project has the installed capacity of 9,594.00
kilowatts and is able to generate annual electricity of 46.48 million units (kilowatt-
hours).
3) Case 3. Project has the installed capacity of 11,955.60
kilowatts and is able to generate annual electricity of 57.92 million units (kilowatt-
hours).
5.3.1.2 Indirect Benefit is the greenhouse gas emission reduction,
since electricity generation from a small scale hydropower project does not release
greenhouse gasses that affects global warming, unlike electricity generated from fossil
fuel. Therefore, it could be said that electricity generated by a small scale hydropower
project could replace electricity generated by fossil fuel by reducing greenhouse gas
emissions.
5.3.2 Benefit Evaluation
5.3.2.1 Direct Benefit Evaluation. Electricity evaluation can be
performed by comparison with the overall national cost of electricity generation,
which is calculated using the wholesale price of electricity that the Electricity
Generating Authority of Thailand has sold to the Provincial Electricity Authority and
Metropolitan Electricity Authority. The average price in 2016 was 2.60 Baht per unit
(Metropolitan Electricity Authority, 2017) and, after adjusting to the economic price
using a distortion adjustment factor (0.9918) stated by the Department of Alternative
Energy Development and Efficiency (2017), results in an electricity benefit of 2.58
Baht per unit.
5.3.2.2 Indirect Benefit Evaluation. Evaluation of benefit from the
reduction in greenhouse gas emissions of small scale hydropower projects with a
comparison to other methods of electricity generation uses a comparison with the
carbon credit price traded under the Clean Development Mechanism (CDM) by the
United Nations Framework Convention on Climate Change (UNFCCC). The carbon
credit during 3rd
July to 7th
July 2017 was 0.2 Euros per ton of carbon (Euro exchange
143
rate at 39,98 THB/EUR on 13th
September 2016, Bank of Thailand, 2017).
Furthermore, a summary report of the greenhouse gas emission coefficient in 2010
(Thailand Greenhouse Gas Management Organization, 2011) stated that 1 unit of
electricity generated (average from every type) by the Electricity Generating
Authority of Thailand woild create 0.5113 kilograms of carbon dioxide (CO2). The
computation with Baht value per ton of carbon has shown that 1 unit of electricity
generated by a small scale hydropower project has a benefit value from greenhouse
gas emission reduction of 0.004 Baht, compared with the overall national cost of
electricity generated.
Small scale hydropower project economic benefit evaluation will be
performed with data on the probability of inaccuracy in past analyses of electricity
generated, which is part of using the Reference Class Forecasting and Monte Carlo
Simulation in feasibility analysis.
5.4 Investment Feasibility Analysis using Reference Class Forecasting
and Monte Carlo Simulation
The analysis of feasibility index using Reference Class forecasting and Monte
Carlo Simulation will use data of inaccuracy of past feasibility analyses and analyze
feasibility by randomizing related factors according to a probability distribution over
the selected duration of time. The study of past analysis inaccuracy has shown that
small scale hydropower projects have a high benefit shortfall while having low cost
overrun, which is insignificant in risk analysis. Therefore, this study has chosen to
perform a risk analysis only in the part of the benefit shortfall.
This study’s benefit analysis will calculate project benefit, which is electricity
generated with a random value of benefit shortfall, calculated 10,000 times under a
normal distribution with the mean of shortfall being -53.9% and standard deviation of
23.5%. The generated electricity calculated from each randomization will be used to
calculate the electricity benefit and environmental benefit, which will be used in the
Cost-Benefit Analysis (CBA), 10,000 times. The major considered indexes are as
follows:
144
5.4.1 Investment Decision Indexes were comprised of 1) Average Net
Present Value (A-NPV), and 2) Risk Acceptable Net Present Value (R-NPV) at 95%
probability according to guidelines stated in the Guidelines for the Economic Analysis
of Projects (2017) by the Asian Development Bank (ADB). However, this study also
selected an extra acceptable risk level at 80% probability to clearly illustrate the
example of analysis.
5.4.2 Decision Support Indexes are comprised of 1) Probability of Net
Present Value (NPV) equals to 0, 2) Present value of value at risk (VaR), 3)
Probability of Profit, 4) Probability of Loss, 5) Profit-Loss Probability Ratio or Profit
Loss Ratio (PLR), 6) Present value of average loss and present value of cost ratio, or
Loss Cost Ratio (LCR), and 7) Degree of Risk.
Selecting a table for small scale hydropower project Cost-Benefit Analysis
(CBA) shows the results from Table 5.2 to Table 5.4.
145
Table 5.2 Small Scale Hydropower Project Cost and Benefit Analysis Table for Case 1
Installed Capacity 2,952.00 kilowatt Project Economic Cost benefit 20 ขาย
Electricity 14.30 mil. unit / year Construction Cost 374.81 mTHB
Project Duration 30 years Operating and Maintenance Cost 3.06 mTHB/year
Construction Period 2 years Forest Degradation 0.76 mTHB
Project Benefit Economic Analysis Result
National Cost of Electricity Generation 2.58 THB/kWh Discount Rate 10% 11% 12%
Electricity Generation Benefit 36.88 mTHB/year EIRR 6.60% 6.60% 6.60%
Environmental Benefit 0.004 THB/kWh NPV (mTHB) -86.24 -103.60 -118.40
Environmental Benefit Value 0.06 mTHB/year B/C Ratio 0.77 0.72 0.67
ต้นทนุพลงังานไฟฟ้า : (บาท/หน่วย) 3.36 3.61 3.87
mTHB
Year Investment Operation& Forest Total Cost Total Net
Maintenance Degradation Electricity Environment Benefit Benefit
1 254.87 - 0.76 255.63 - - - 255.63-
2 119.94 - - 119.94 - - - 119.94-
3 - 3.06 - 3.06 36.88 0.06 36.94 33.88
4 - 3.06 - 3.06 36.88 0.06 36.94 33.88
5 - 3.06 - 3.06 36.88 0.06 36.94 33.88
6 - 3.06 - 3.06 36.88 0.06 36.94 33.88
7 - 3.06 - 3.06 36.88 0.06 36.94 33.88
8 - 3.06 - 3.06 36.88 0.06 36.94 33.88
9 - 3.06 - 3.06 36.88 0.06 36.94 33.88
10 - 3.06 - 3.06 36.88 0.06 36.94 33.88
11 - 3.06 - 3.06 36.88 0.06 36.94 33.88
12 - 3.06 - 3.06 36.88 0.06 36.94 33.88
13 - 3.06 - 3.06 36.88 0.06 36.94 33.88
14 - 3.06 - 3.06 36.88 0.06 36.94 33.88
15 - 3.06 - 3.06 36.88 0.06 36.94 33.88
16 - 3.06 - 3.06 36.88 0.06 36.94 33.88
17 - 3.06 - 3.06 36.88 0.06 36.94 33.88
18 - 3.06 - 3.06 36.88 0.06 36.94 33.88
19 - 3.06 - 3.06 36.88 0.06 36.94 33.88
20 - 3.06 - 3.06 36.88 0.06 36.94 33.88
21 - 3.06 - 3.06 36.88 0.06 36.94 33.88
22 - 3.06 - 3.06 36.88 0.06 36.94 33.88
23 130.30 3.06 - 133.36 36.88 0.06 36.94 96.42-
24 - 3.06 - 3.06 36.88 0.06 36.94 33.88
25 - 3.06 - 3.06 36.88 0.06 36.94 33.88
26 - 3.06 - 3.06 36.88 0.06 36.94 33.88
27 - 3.06 - 3.06 36.88 0.06 36.94 33.88
28 59.55 3.06 - 62.60 36.88 0.06 36.94 25.67-
29 - 3.06 - 3.06 36.88 0.06 36.94 33.88
30 - 3.06 - 3.06 36.88 0.06 36.94 33.88
31 - 3.06 - 3.06 36.88 0.06 36.94 33.88
32 - 3.06 - 3.06 36.88 0.06 36.94 33.88
SUM 564.66 91.68 0.76 657.09 1106.34 1.75 1108.10 451.00
NPV(10%) 349.50 23.81 0.69 374.00 287.31 0.46 287.77 -86.24
NPV(11%) 341.98 21.56 0.68 364.23 260.22 0.41 260.63 -103.60
NPV(12%) 335.29 19.62 0.68 355.59 236.81 0.38 237.19 -118.40
Benefit
146
Table 5.3 Small Scale Hydropower Project Cost and Benefit Analysis Table for Case 2
Installed Capacity 9,594.00 kilowatt Project Economic Cost benefit 20 ขาย
Electricity 46.48 mil. unit / year Construction Cost 412.29 mTHB
Project Duration 30 years Operating and Maintenance Cost 3.36 mTHB/year
Construction Period 2 years Forest Degradation 0.83 mTHB
Project Benefit Economic Analysis Result
National Cost of Electricity Generation 2.58 THB/kWh Discount Rate 10% 11% 12%
Electricity Generation Benefit 119.85 mTHB/year EIRR 24.13% 24.13% 24.13%
Environmental Benefit 0.004 THB/kWh NPV (mTHB) 523.84 446.39 379.72
Environmental Benefit Value 0.19 mTHB/year B/C Ratio 2.27 2.11 1.97
ต้นทนุพลงังานไฟฟ้า : (บาท/หน่วย) 1.14 1.22 1.31
mTHB
Year Investment Operation& Forest Total Cost Total Net
Maintenance Degradation Electricity Environment Benefit Benefit
1 280.36 - 0.83 281.19 - - - 281.19-
2 131.93 - - 131.93 - - - 131.93-
3 - 3.36 - 3.36 119.85 0.19 120.04 116.68
4 - 3.36 - 3.36 119.85 0.19 120.04 116.68
5 - 3.36 - 3.36 119.85 0.19 120.04 116.68
6 - 3.36 - 3.36 119.85 0.19 120.04 116.68
7 - 3.36 - 3.36 119.85 0.19 120.04 116.68
8 - 3.36 - 3.36 119.85 0.19 120.04 116.68
9 - 3.36 - 3.36 119.85 0.19 120.04 116.68
10 - 3.36 - 3.36 119.85 0.19 120.04 116.68
11 - 3.36 - 3.36 119.85 0.19 120.04 116.68
12 - 3.36 - 3.36 119.85 0.19 120.04 116.68
13 - 3.36 - 3.36 119.85 0.19 120.04 116.68
14 - 3.36 - 3.36 119.85 0.19 120.04 116.68
15 - 3.36 - 3.36 119.85 0.19 120.04 116.68
16 - 3.36 - 3.36 119.85 0.19 120.04 116.68
17 - 3.36 - 3.36 119.85 0.19 120.04 116.68
18 - 3.36 - 3.36 119.85 0.19 120.04 116.68
19 - 3.36 - 3.36 119.85 0.19 120.04 116.68
20 - 3.36 - 3.36 119.85 0.19 120.04 116.68
21 - 3.36 - 3.36 119.85 0.19 120.04 116.68
22 - 3.36 - 3.36 119.85 0.19 120.04 116.68
23 143.33 3.36 - 146.69 119.85 0.19 120.04 26.65-
24 - 3.36 - 3.36 119.85 0.19 120.04 116.68
25 - 3.36 - 3.36 119.85 0.19 120.04 116.68
26 - 3.36 - 3.36 119.85 0.19 120.04 116.68
27 - 3.36 - 3.36 119.85 0.19 120.04 116.68
28 65.50 3.36 - 68.86 119.85 0.19 120.04 51.18
29 - 3.36 - 3.36 119.85 0.19 120.04 116.68
30 - 3.36 - 3.36 119.85 0.19 120.04 116.68
31 - 3.36 - 3.36 119.85 0.19 120.04 116.68
32 - 3.36 - 3.36 119.85 0.19 120.04 116.68
SUM 621.12 100.85 0.83 722.80 3595.62 5.70 3601.32 2878.52
NPV(10%) 384.46 26.19 0.76 411.40 933.76 1.48 935.24 523.84
NPV(11%) 376.18 23.72 0.75 400.65 845.70 1.34 847.04 446.39
NPV(12%) 368.81 21.59 0.75 391.15 769.65 1.22 770.87 379.72
Benefit
147
Table 5.4 Small Scale Hydropower Project Cost and Benefit Analysis Table for Case 3
Installed Capacity 11,955.60 kilowatt Project Economic Cost benefit 20 ขาย
Electricity 57.92 mil. unit / year Construction Cost 262.37 mTHB
Project Duration 30 years Operating and Maintenance Cost 2.14 mTHB/year
Construction Period 2 years Forest Degradation 0.53 mTHB
Project Benefit Economic Analysis Result
National Cost of Electricity Generation 2.58 THB/kWh Discount Rate 10% 11% 12%
Electricity Generation Benefit 149.36 mTHB/year EIRR 43.31% 43.31% 43.31%
Environmental Benefit 0.004 THB/kWh NPV (mTHB) 903.66 800.58 711.71
Environmental Benefit Value 0.24 mTHB/year B/C Ratio 4.45 4.14 3.86
ต้นทนุพลงังานไฟฟ้า : (บาท/หน่วย) 0.58 0.62 0.67
mTHB
Year Investment Operation& Forest Total Cost Total Net
Maintenance Degradation Electricity Environment Benefit Benefit
1 178.41 - 0.53 178.94 - - - 178.94-
2 83.96 - - 83.96 - - - 83.96-
3 - 2.14 - 2.14 149.36 0.24 149.59 147.45
4 - 2.14 - 2.14 149.36 0.24 149.59 147.45
5 - 2.14 - 2.14 149.36 0.24 149.59 147.45
6 - 2.14 - 2.14 149.36 0.24 149.59 147.45
7 - 2.14 - 2.14 149.36 0.24 149.59 147.45
8 - 2.14 - 2.14 149.36 0.24 149.59 147.45
9 - 2.14 - 2.14 149.36 0.24 149.59 147.45
10 - 2.14 - 2.14 149.36 0.24 149.59 147.45
11 - 2.14 - 2.14 149.36 0.24 149.59 147.45
12 - 2.14 - 2.14 149.36 0.24 149.59 147.45
13 - 2.14 - 2.14 149.36 0.24 149.59 147.45
14 - 2.14 - 2.14 149.36 0.24 149.59 147.45
15 - 2.14 - 2.14 149.36 0.24 149.59 147.45
16 - 2.14 - 2.14 149.36 0.24 149.59 147.45
17 - 2.14 - 2.14 149.36 0.24 149.59 147.45
18 - 2.14 - 2.14 149.36 0.24 149.59 147.45
19 - 2.14 - 2.14 149.36 0.24 149.59 147.45
20 - 2.14 - 2.14 149.36 0.24 149.59 147.45
21 - 2.14 - 2.14 149.36 0.24 149.59 147.45
22 - 2.14 - 2.14 149.36 0.24 149.59 147.45
23 91.21 2.14 - 93.35 149.36 0.24 149.59 56.24
24 - 2.14 - 2.14 149.36 0.24 149.59 147.45
25 - 2.14 - 2.14 149.36 0.24 149.59 147.45
26 - 2.14 - 2.14 149.36 0.24 149.59 147.45
27 - 2.14 - 2.14 149.36 0.24 149.59 147.45
28 41.68 2.14 - 43.82 149.36 0.24 149.59 105.77
29 - 2.14 - 2.14 149.36 0.24 149.59 147.45
30 - 2.14 - 2.14 149.36 0.24 149.59 147.45
31 - 2.14 - 2.14 149.36 0.24 149.59 147.45
32 - 2.14 - 2.14 149.36 0.24 149.59 147.45
SUM 395.26 64.17 0.53 459.97 4480.70 7.11 4487.80 4027.84
NPV(10%) 244.65 16.67 0.48 261.80 1163.61 1.85 1165.46 903.66
NPV(11%) 239.39 15.09 0.48 254.96 1053.87 1.67 1055.54 800.58
NPV(12%) 234.70 13.74 0.47 248.91 959.10 1.52 960.62 711.71
Benefit
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From the randomized benefit shortfall of small scale hydropower projects and
Cost-Benefit Analysis (CBA) performed 10,000 times, the statistical value of Net
Present Value (NPV) can be seen in Table 5.5 and a histogram for showing the
distribution of NPV in the 3 cases can be seen from Figures 5.1 to 5.3.
Table 5.5 Analysis Result of Net Present Value (NPV)
Net Present Value (NPV) Case 1 Case 2 Case 3
Mean (million THB) - 242.02 20.02 269.34
Median (million THB) - 241.33 23.37 267.96
Standard Deviation 68.07 223.35 275.68
Minimum (million THB) -518.43 - 845.68 - 825.69
Maximum (million THB) 53.87 922.27 1,265.65
Number of Analysis 10,000 10,000 10,000
Figure 5.1 Net Present Value (NPV) Analysis Result Histogram for Case 1
NPV (mTHB)
Average Net Present Value (A-NPV) - 242.02 mTHB
Present value of value at risk (VaR) 518.43 mTHB
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Figure 5.2 Net Present Value (NPV) Analysis Result Histogram for Case 2
Figure 5.3 Net Present Value (NPV) Analysis Result Histogram for Case 3
NPV (mTHB)
NPV (mTHB)
Average Net Present Value (A-NPV) 20.02 mTHB
Present value of value at risk (VaR) 845.68 mTHB
Average Net Present Value (A-NPV) 269.34 mTHB
Present value of value at risk (VaR) 825.69 mTHB
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Based on the analysis result of statistical value of Net Present Value (NPV)
from 10,000 times of Cost-Benefit Analysis (CBA), the lowest value of Average Net
Present Value (A-NPV) and Present value of value at risk (VaR), or Net Present
Value (NPV), for each case is as follows:
1) Case 1 had Average Net Present Value (A-NPV) of -242.02 million
Baht, equivalent to an Internal Rate of Return (IRR) of -4.21% and Present value of
value at risk (VaR) of -518.43 million Baht.
2) Case 2 had Average Net Present Value (A-NPV) of 20.02 million
Baht equivalent to an Internal Rate of Return (IRR) of 10.65% and Present value of
value at risk (VaR) of -845.68 million Baht.
3) Case 3 had Average Net Present Value (A-NPV) of 269.34 million
Baht equivalent to an Internal Rate of Return (IRR) of 21.70% and Present value of
value at risk (VaR) of -825.69 million Baht.
This data could also be used for analyzing accumulated probability of
Net Present Value (NPV) at each level and shown in a relational graph between NPV
and the probability to actually occur, according to study results and analysis results in
the indexes from Figure 5.3 to Figure 5.6.
The criteria for levels of risk likelihood and risk impact are shown in
Figure 5.7 and Figure 5.8. The meaning for degree of risk and its analysis method
using a risk assessment matrix are also shown, from Figure 5.9 to Figure 5.12.
The result of feasibility index analysis and risk analysis in the 3 cases is
shown in Table 5.6.
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Figure 5.4 Relational Graph between Net Present Value (NPV) and Probability for Case 1
Figure 5.5 Relational Graph between Net Present Value (NPV) and Probability for Case 2
NPV mTHB
Probability
-349.34
95.00%
0.00 0.02%
99.98%
0.02%
NPV
mTHB
Probability
-330.18
95.00%
56.65%
43.35%
0.00
56.65%
80.00%
-293.72
-150.6
80.00%
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Figure 5.6 Relational Graph between Net Present Value (NPV) and Probability for Case 3
Figure 5.7 Criteria for Level of Risk Likelihood
NPV mTHB
Probability
-156.46
95.00%
0.00
80.00%
59.11
85.61% 14.39%
85.61%
53.84%
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Figure 5.8 Criteria for Level of Risk Impact
Degree of
Risk Meaning
Very High Not investable since there is very high probability for impact
High Not investable since there is high probability for impact
Medium Not investable The data analysis should be reviewed and further risk
management framework is needed
Low Investable by selecting a higher risk management framework
Very Low Investable
Figure 5.9 Meanings for Degree of Risk
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Figure 5.10 Evaluation of Degree of Risk for Case 1
Figure 5.11 Evaluation of Degree of Risk for Case 2
155
Figure 5.12 Evaluation of Degree of Risk for Case 3
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Table 5.6 Feasibility Analysis Results using Reference Class Forecasting and Monte
Carlo Simulation
Index Analysis Result
Case 1 Case 2 Case 3
1) Investment Decision Index
1.1) Average Net Present Value (A-NPV) (mTHB) - 242.02 20.02 269.34
1.2) Risk Acceptable Net Present Value (R-NPV)
- Net Present Value at 95% Probability (mTHB) - 349.34 - 330.18 -156.46
- Net Present Value at 80% Probability (mTHB) - 293.72 - 150.60 59.11
2) Decision Support Index
2.1) Probability of Net Present Valiue (NPV)
equals or more than 0 (Break-Even Point)
0.02% 56.65% 85.61%
2.2) Present value of value at risk(VaR) (mTHB) - 518.43 -845.68 - 825.69
2.3) Probability of Profit 0.02% 56.65% 85.61%
2.4) Probability of Loss 99.98% 43.35% 14.39%
2.5) Profit Loss Ratio (PLR) 0.00 1.31 5.95
- Level of Profit Loss Ratio (PLR) Very High Medium Very Low
2.6) Loss Cost Ratio (LCR)
- Present value of average loss (mTHB) 242.05 172.02 145.99
- Present value of cost (mTHB) 374.00 411.40 261.80
- Loss Cost Ratio (LCR) 0.65 0.42 0.56
- Level of Loss Cost Ratio (LCR) High Medium Medium
2.7) Degree of Risk Very High Medium Very Low
5.5 Feasibility Analysis Result Summary
From the analysis result using Reference Class Forecasting and Monte Carlo
Simulation done before, the summary of analyses on the major feasibility index
analysis of each case is as follows:
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5.5.1 Summary of Feasibility Analysis for Case 1
The Risk Acceptable Net Present Value (R-NPV) is less than 0, which does
not pass the feasibility criteria for investment at both 95% and 80% probability. As
for the risk analysis result, the project has very high risk, which means it should not
be invested in since there is very high probability of loss and impact toward the
investor. The analysis result is shown in Table 5.7.
Table 5.7 Feasibility Analysis Result Summary for Case 1
Index Analysis
Result Meaning
1) Risk Acceptable Net Present Value (R-NPV)
Does not pass feasibility
criteria (NPV < 0)
- Net Present Value at 95% Probability (mTHB) - 349.34
- Net Present Value at 80% Probability (mTHB) - 293.72
2) Degree of Risk Very high
risk
Should not be invested in
since the probability to
create impact is very high
5.5.2 Summary of Feasibility Analysis for Case 2
The Risk Acceptable Net Present Value (R-NPV) is less than 0 which does not
pass the feasibility criteria for investment at both 95% and 80% probability. As for the
risk analysis result, the project has medium risk, which means it should not be
invested in yet, but there should be a review in the analysis data, especially in the
issues that affect the project’s risk, for instance, electricity expected to generate, then
the feasibility analysis should be performed and reconsidered before making a
decision. The analysis result is shown in Table 5.8.
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Table 5.8 Feasibility Analysis Result Summary for Case 2
Index Analysis
Result Meaning
1) Risk Acceptable Net Present Value (R-NPV)
Does not pass feasibility
criteria (NPV < 0)
- Net Present Value at 95% Probability (mTHB) - 330.18
- Net Present Value at 80% Probability (mTHB) - 150.60
2) Degree of Risk Medium
risk
Should not be invested in
yet.
Further analysis data review
and risk management
framework are needed
5.5.3 Summary of Feasibility Analysis for Case 3
The Risk Acceptable Net Present Value (R-NPV) is less than 0 which does not
pass the feasibility criteria for investment at 95% probability, but passes the criteria at
80% probability. As for the risk analysis result, the project has low risk, which means
it is feasible for investment and has low risk. However, since the project does not pass
the Risk Acceptable Net Present Value at 95% and only passes at 80%, it is the
investor’s role to decide whether this level of risk is acceptable. The analysis result is
shown in Table 5.9.
Table 5.9 Feasibility Analysis Result Summary for Case 3
Index Analysis
Result Meaning
1) Risk Acceptable Net Present Value (R-NPV)
Pass feasibility criteria
(NPV < 0)
At 80% probability
- Net Present Value at 95% Probability (mTHB) -156.46
- Net Present Value at 80% Probability (mTHB) 59.11
2) Degree of Risk Low
Risk
Investable
CHAPTER 6
SUMMARY, DISCUSSION, AND RECOMMENDATIONS
From the data analysis on The Study of Thailand Infrastructure Development
Feasibility Analysis: Small Scale Hydropower Plant Case Study, the research result,
discussion and recommendations can be summarized as follows:
6.1 Summary
The research summary is separated into 4 topics according to the study
objectives with the details on each topic as follows:
6.1.1 Feasibility Analysis Framework Summary
Based on study objective #1) To study a smalls scale hydropower project
feasibility analysis framework, the study result can be summarized into 2 parts,
namely, the 1) Methodology framework, and 2) Process framework, with the
following details:
6.1.1.1 Methodology Framework Study Result Summary
The study result of methodology framework for Thailand small scale
hydropower project feasibility analysis can be summarized as follows:
1) General Information has shown that most of the small
scale hydropower projects were owned by a public agency, the Department of
Alternative Energy Development and Efficiency, Ministry of Energy, Ministry of
Energy (DEDE), who hired a consulting firm to perform the study with every report
conforming to the study according to economic methodology.
2) Assumption Selection shows that the duration selected
was between 30 and 50 years, with 77% of the projects having selected a project
duration of 30 years according to the project’s major components. The discount rates
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selected were between 6.0% and 12.0% with the majority selecting 8.0%, there was
also a declining trend of discount rate from 1987 to 2016.
3) Cost Analysis shows that the majority of reports selected
1 cost item, which was the project construction cost. However, some reports also
considered other cost items, for instance, environmental cost, forest degradation cost,
and compensation cost. Furthermore, in terms of the economic evaluation method of
construction cost, most of the reports employed the adjustment conversion factor set
by the World Bank and evaluated annual expense by using a percentage estimation
from total expense.
4) Benefit Analysis has shown that the majority of reports
selected 2 benefit items, electricity benefit and greenhouse gas emissions reduction
benefit. In other reports, there was also evaluation on other benefit items, for instance,
fishery benefit, tourism benefit, or agricultural benefit. In terms of evaluation method,
most of the reports evaluated electricity benefit using a comparison with the cost of
electricity generation using diesel fuel and evaluated greenhouse gas emissions
reduction benefit using a comparison with the carbon credit market price.
5) Feasibility Index has shown that the majority of reports
considered 4 feasibility indexes, the Economic Internal Rate of Return (EIRR), Net
Present Value (NPV), Benefit-Cost Ratio (B/C Ratio), and Average Incremental Cost
(AIC).
6) Risk Analysis has shown that the majority of reports had
performed risk analysis using sensitivity analysis, with switching value analysis being
the second-most popular method, 24% of reports had not performed any risk analysis.
6.1.1.2 Process Framework Study Result Summary
The study result of process framework for Thailand small scale
hydropower project feasibility analysis can be summarized as follows:
1) Consultant Hiring Process Framework. The study result
on the consultant hiring process framework is comprised of 3 major parts, as follows:
(1) Consultant Qualification Specification shows that
there was a required qualification for academics performing feasibility analysis to be
economic specialists with a master’s degree on Economics and 15 years of experience
after graduation from their bachelor’s degree, with at least 5 years’ experience in
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performing economic and financial feasibility analysis on projects with similar
features. As for the organization, it stated that the organization had to be registered
with the Consultant Database Center, Public Debt Management Office and Ministry
of Finance.
(2) Scope of Work and Deliverable Selection shows that
the economic work scope tended to be broad, which was to perform feasibility
analysis. As for deliverables, there was a mention of both report and computer
information delivery.
(3) Consultant Selection shows that consultants enrolling
in the selection process must submit a proposal for the agency which is comprised of
documents stating the consultant’s qualifications, technical proposal, conception
detail, methodology, implementation plan, and cost proposal. The committee will then
consider the consultant’s qualifications, skills and experience, concept and
methodology, and implementation plan. A consultant passing the technical criteria
will then be considered in terms of the cost proposal and negotiated with to reach an
appropriate cost.
2) Study Process Framework The study result on the small
scale hydropower project feasibility analysis process comprises 2 parts, which are as
follows:
(1) Study Process shows that the study of investment
feasibility analysis framework is part of the feasibility analysis with the engineering
study as the core study. The economic study has its role in design of an alternative
analysis, selecting the project’s detail, and investment feasibility analysis. Moreover,
economic study will comply with engineering, environmental and social studies, and
in the case that the project is investment infeasible, there will be joint revision in
every part of the study to reach the best study result.
(2) Study Report Acceptance shows that the study report
acceptance framework will be operated according to the order of reports delivered.
The committee will consider the completeness of work as well as academic
correctness of the study in each field. As for economic work, the focus will be on the
assumption selection, electricity benefit evaluation and investment feasibility analysis
result.
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3) Project Feasibility Consideration and Approval Process
Framework shows that after the committee has accepted the study, the project will be
put in an annual plan to ask for budget approval in hiring a contractor for project’s
construction as the next process. Mostly, this process will be performed within the
agency without further inspection from other external agencies.
6.1.2 Feasibility Analysis Standard and Guideline Compatibility Study
Summary
Based on study objective #2) to study the standards and guideline
compatibility of small scale hydropower plant feasibility analysis, the study result is
summarized into 2 parts, namely, 1) Methodology standard and guideline
compatibility, and 2) Process standard and guideline compatibility, with the following
details:
6.1.2.1 Methodology Standard and Guideline Compatibility
The study result of feasibility analysis methodology standard and
guideline compatibility can be summarized as follows:
1) Assumption Selection shows that the project durations
selected were compatible with the manual by the Department of Alternative Energy
Development and Efficiency (DEDE). However, the discount rates selected were not
compatible with the manual by the Office of the National Economic and Social
Development Board.
2) Cost Analysis has shown that cost item selection was
compatible with guidelines set by the manuals. For direct cost or construction cost,
the economic cost had been evaluated using a conversion factor, while external
impact evaluation had been evaluated using environmental economics techniques.
However, the annual cost evaluation was not compatible with many manuals, which
had stated analyses using methods of comparison with actual cost of present or past
projects.
3) Benefit Analysis has shown that most of the reports were
compatible with manuals in evaluating electricity benefit by using a comparison with
the cost of electricity generation by other methods and indirect benefit, for instance,
greenhouse gas emissions reduction using environmental evaluation techniques.
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However, there was still a lack of macro-economic and energy security benefit
evaluations as recommended by many manuals.
4) Feasibility Index has shown that Thailand’s small scale
hydropower projects had performed feasibility index analyses compatible with every
manual compared.
5) Risk Analysis has shown that the majority of Thailand’s
small scale hydropower projects had performed a risk analysis compatible with most
manuals recommending the use of sensitivity analysis. However, the risk analysis
using Monte Carlo Simulation, Probability analysis and Real option recommended by
some manuals could not be found.
6.1.2.2 Process Standard and Guideline Compatibility
The study result of process standard and guideline compatibility
analysis on Thailand’s small scale hydropower project feasibility analyses can be
summarized as follows:
1) Consultant Hiring Process has shown that the overall
process was compatible with guidelines stated in laws and manuals which prioritize
operation transparency and consideration criteria selection.
2) Study Process has shown that the study process was
compatible with guidelines stated in various laws and manuals which prioritize
operation transparency in study result consideration and comparison between input
factors and results from investment.
3) Feasibility Consideration and Approval Process has
shown that the processes were compatible with guidelines stated in various laws and
manuals in terms of comparison consideration among input factors, resulting
outcomes and operation efficiency. However, there was no further study result
inspection from external agencies since the projects were not listed among the
projects required for approval from the Office of the National Economic and Social
Development Board, Bureau of the Budget, as well as the State Enterprise Policy
Office.
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6.1.3 Inaccuracy, Difficulty and Limitations Summary
Based on study objective #3) to study inaccuracy, difficulty and limitations of
small scale hydropower plant feasibility analysis, the study result can be summarized
into 3 parts, namely, 1) Cost overrun and benefit shortfall study, 2) Methodology’s
problems and limitations, and 3) Process’ problems and limitations, with the
following details:
6.1.3.1 Cost Overrun and Benefit Shortfall Study
The study result of cost overrun and benefit shortfall is comprised of 2
parts as follows:
1) Cost Overrun Analysis Result has shown that small scale
hydropower project cost was overestimated more than actual cost by 1.59% on
average. The conclusion is that the small scale hydropower project study did not have
a problem of cost overrun since during the project development phase, the agency had
the process of the bidding / turn-key contract, in which the contractor proposed cost
based on a standard price designated from the feasibility analysis result.
2) Benefit Shortfall Analysis Result has shown that the
generated electricity evaluated was overestimated more than actual electricity
generated by 53.9% on average. The conclusion is that the small scale hydropower
project had significant benefit shortfall problems. The main cause of the problem was
the limitation of data used in estimating electricity generated, project technical
problems, lack of personnel in the project’s maintenance and reparation, as well as
production halts to reduce social impact. Furthermore, the study also showed that
projects with low investment value tended to have higher benefit shortfall problems
than ones with high investment value.
6.1.3.2 Methodology’s Problems and Limitations
The study result of methodology’s problems and limitations can be
summarized as follows:
1) Data Limitation comprises water runoff data for
electricity generated, annual operation cost data, and data of environmental and social
impact from the project’s operation, which affects cost overrun and benefit shortfall,
which could lead to wrong decisions in utilizing natural resources and the
environment.
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2) Methodology Difference comprises differences in
assumption selection, cost and benefit evaluation method, and risk analysis method.
This makes the study unable to be compared with results among other study reports.
3) Discount Rate Selection shows that most of the reports
had selected a discount rate incompatible with the manual by the Office of the
National Economic and Social Development Board, with a consistent downward trend
which affects the study’s credibility and investment decisions, mistakes in national
budget allocation, and overutilization of natural resources.
4) Cost Evaluation Method has shown that most of the
reports had selected a conversion factor calculated in 1983, which did not reflect
current economic conditions or true opportunity cost of resources. Furthermore, there
were also differences and variety in the project cost evaluation methods which
affected credibility, correctness and transparency in performing the feasibility
analysis.
5) Benefit Evaluation Method has shown that each report
had selected an energy type for the electricity value comparison and indirect benefit
evaluation method differently and without a standard. This posed problems in
comparing study results among projects, affecting accuracy and transparency of the
feasibility analysis. Furthermore, many reports also lacked an evaluation on energy
security benefits and macro-economic benefits, making the analysis unable to reflect
every benefit generated by the project.
6) Risk Analysis shows that 24% of the reports did not
perform a risk analysis. Also, the risk analysis, presently, has issues in selecting an
adjusting level of cost and benefit, not reflecting reality and lacking in consideration
of risk probability, which could affect real investment leading to wrong decisions.
6.1.3.3 Process Problems and Limitations
The study result of the process’ problems and limitations can be
summarized as follows:
1) Consultant Qualification Selection. Presently, Thailand
still lacks a standard or economic provisional license to assure professional work
quality, both academically and ethically, which could affect quality and credibility of
study results.
166
2) Scope of Work Selection. There is no clear detail on the
scope of work for economic study, which could make for noncompliance with
objective and general analysis guidelines.
3) Study Report Acceptance has shown that, in certain
cases, there could be problems regarding differences between economic analysis
methodology by the analyst and the acceptance committee, which could affect study
framework selection and lead to inaccuracy of study results.
4) Feasibility Analysis Consideration and Approval Process
has shown that, currently, small scale hydropower project feasibility analysis
consideration and approval still lacks inspection on quality and correctness from an
external agency, which could affect investment risk and implementation
transparency.
6.1.4 Feasibility Analysis Framework Development
Based on study objective #4) To develop small scale hydropower plant
feasibility analysis framework, the study result could be summarized into 2 parts,
namely, 1) Feasibility analysis methodology development, and 2) Feasibility analysis
process development, with the following details:
6.1.4.1 Feasibility Analysis Methodology Development
The study result of development framework to solve problems and
reduce limitations in small scale hydropower project feasibility analysis methodology
can be summarized as follows:
1) Development Guideline for Data Limitation Problem is
risk analysis using a comparison with projects with similar features, either in the past
or present, and analysis on probability for each level of risk using Reference class
forecasting and Monte Carlo Simulation, as well as clearly selecting guidelines or
standards to evaluate real impact occurred.
2) Development Guideline for Methodology Difference
Problem. There should be clear guidelines or standards in selecting methodology on
each topic or base case, which every project must analyze to be able to compare
feasibility analysis results among projects.
167
3) Development Guideline for Discount Rate Selection
Problem. The discount rate selected should be selected based on a single standard
which complies with the standard set by the Office of the National Economic and
Social Development Board.
4) Development Guideline for Cost Evaluation Method
Problem. The proposed method is adjustment by directly deducting tax from the
construction cost to make resource opportunity cost more accurate and up to date.
There should also be a clear guideline or standard for the cost analysis method.
5) Development Guideline for Benefit Evaluation Method
Problem. There should be consideration of academic accuracy in evaluating energy
benefit by comparing with the overall national cost of electricity generation.
Furthermore, there should be clear selection of a standard in selecting the
methodology for evaluation of indirect benefits or resulting benefits toward the
economy, society and environment.
6) Development Guideline for Risk Analysis Problem. There
should be application using Reference class forecasting and Monte Carlo Simulation
with important indexes being 1) Risk Acceptable Net Present Value (R-NPV), and 2)
Degree of Risk.
6.1.4.2 Feasibility Analysis Process Development
The study result of development guidelines to solve problems and
reduce limitations on small scale hydropower project feasibility analysis is as follows:
1) Development Guideline for Consultant Qualification
Problems and Limitations. There should be assurance of a professional standard
suitable for the type of project, academic capability, ethical standards, as well as
punishment.
2) Development Guideline for Scope of Work Limitation
Problem. There should be clear methodology as well as a standard manual with detail
specific to small scale hydropower projects.
3) Development Guideline for Report Acceptance Limitation
Problem. There should be the selection of academically accurate standards which
comply to the present project development context.
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4) Development Guideline for Feasibility Consideration and
Approval Process Problem. There should be an extra external agency or committee
participating in the feasibility analysis acceptance process before approving the
investment budget and consistent tracking of the operation of projects already
invested in.
5) Promotion of Joint Venture between Public and Private
Sector is to be used as a mechanism to check study result accuracy and reduce the
burden on the government budget while increasing efficiency in project management
in the long-run.
6.2 Discussion
The discussion of study results of The Study of Thailand Infrastructure
Development Feasibility Analysis: Small Scale Hydropower Plant Case Study is
comprised of a 1) Discussion on target selection and public management framework,
2) Discussion on methodology and public management tools, and 3) Discussion on
Thailand’s renewable energy development, with the details as follows:
6.2.1 Discussion on Target Selection and Public Administration
Framework
Based on a conceptual framework on efficiency, feasibility, and resource
sustainability, which is one of the crucial targets and guides for public administration
under the principle and concept of governance, new public management, and
sustainable development, the summary from comparison analysis between the target
and this framework of public administration is as follows:
1) Thailand Public Administration Efficiency. Thailand’s small scale
hydropower feasibility analysis is one of the implantation processes geared toward
efficiency in public administration. Related agencies have performed according to the
necessary laws, namely, the Royal Decree on Criteria and Procedures for Good
Governance, B.E.2546 (2003), which states that the agency must perform a feasibility
analysis in public operations as well as require the feasibility analysis to comply with
169
the 2012 Revised Manual and Criteria for Feasibility Analysis by the Office of the
National Economic and Social Development Board. Furthermore, the agency also
prioritizes feasibility analysis for small scale hydropower by creating the Manual for
Planning and Feasibility Analysis of Small and Mini Scale Hydropower Project,
which states the criteria and methodology for economic feasibility analysis for
operation of the agency and consultant, which complies with the concept of efficiency
under good governance in new public management.
However, Thailand’s small scale hydropower project feasibility
analysis still has some weaknesses or limitations affecting the fulfillment of targets on
efficiency and feasibility in public operations, which is an ambiguity of the Cost-
Benefit Analysis (CBA) methodology, since each project could choose a different
methodology according to the analyst’s or acceptance committee’s opinion.
Furthermore, the investment approval process still lacks an inspection mechanism
from an external agency, which could affect correctness in the methodology selection
or result in inaccuracy, as seen in benefit shortfalls of small scale hydropower project
studies, since the actual electricity generated was only 53.9% of the electricity stated
in the study reports, affecting feasibility in real investment which could cause
problems achieving the target of feasibility and efficiency in their budget utilization.
2) Natural Resource and Environmental Sustainability. From the
principle and guideline of sustainability development, there is a requirement for
public investment to thoroughly consider advantages and disadvantages toward the
economy, society, and environment. Thailand’s small scale hydropower project
feasibility analysis has the study process complying with this guideline, which is to
select an economic analysis method to consider the value of cost and benefit, both
direct and indirect, resulting from the project’s development for feasibility analysis.
However, in practicality detail, there is still a number of impacts not evaluated, or
evaluated with a variety of methods, which could be resulting from limitations on data
or methodology, which complies with a study results from Jones, Moura, and
Domingos (2014, pp. 402-403), which described a weakness of Cost-Benefit Analysis
in the environmental impact assessment issue such that it could not be clearly
evaluated, and thus possessed high uncertainty. Furthermore, this problem could
result from negligence in evaluation by the analyst, which complies with the opinion
170
of Adis Israngkura na Ayudhya (2010, p. 26), who stated that negligence of
environmental impact assessment was an excuse for neglecting a negative impact
calculation, leading to a return rate higher than reality, which could cause the project
analysis to be based on data not reflecting true opportunity cost or benefit, leading to
unsustainable development.
Small scale hydropower project framework development guidelines, to
fulfill a target with efficiency, feasibility in public operations, and sustainable
development, is to select a clear study guideline or pattern and enforce every project
to be studied in the same pattern as the base case for the benefit of comparison among
projects and reduce the use of judgment or personal opinion from analysts or
committees in selecting the methodology, strict regulations or measures in checking a
consultants’ qualifications, and punishment or responsible action for study results in
case of mistake. These guidelines comply with a proposal by Flyvbjerg (2009), which
states that there should be punishment selected for an analysis with mistakes, to
reduce the problem of analyst bias and mistakes, as well as mandatory study result
inspections from other external agencies, which also complies with a proposal by
Pawin Siriprapanukul and Yos Vajragupta (2013, para. 9) proposing the establishment
of a budget analysis agency, independent from management, to inspect for correctness
and credibility of the study results from feasibility analysis in public investment.
6.2.2 Discussion on Methodology and Public Management Tools
Based on the conceptual framework on public method and management
tools using Cost-Benefit Analysis (CBA), Thailand small scale hydropower project
feasibility analysis has, overall, selected methodology in compliance with Cost-
Benefit Analysis following the economic analysis framework which is appropriated
with public decision making in developing projects requiring consideration on impact,
both positive and negative, toward economic, social, and environmental contexts.
However, in terms of methodology details, there are still issues that create trouble or
limitation affecting public decisions in project investment as follows:
1) Discount Rate Selection. Discount rate selection in Thailand small
scale hydropower projects has the problem of differences among projects, as well as
rates that do not comply to criteria set by the Office of the National Economic and
171
Social Development Board. Furthermore, the findings also show that analysis in each
report had a tendency to consistently select a lower discount rate, which could result
from changes in financial opportunity cost in an economy which had declined over
time, or could also be one of the tools to distort the feasibility analysis result (Adis
Israngkura na Ayudhya, 2010, p. 25).
However, the principle in selecting an appropriate discount rate is still
a topic for debate in the academic sector, for instance, consideration of financial
opportunity cost used in investment, consideration of the discount rate according to a
project’s expected period to receive benefit (Adis Israngkura na Ayudhya, 2010,
p. 25), as well as selection of a social discount rate. Furthermore, after considering
this study result, the most used discount rates were 8% while the rate stated by the
Office of the National Economic and Social Development Board was 9 – 12%, which,
with comparison with commercial bank lending interest rates, was higher, for
instance, Bangkok Bank’s MLR, at 19th
January 2018, was 6.25% (Bank of Thailand,
2018).
Since the selected discount rate affects the feasibility analysis result, a
project analysis with a lower discount rate will have higher feasibility than an analysis
with a lower rate, there is a need to have appropriate discount rate selection. A
concrete solution is to clearly select a discount rate specific to each project’s type,
with consideration for the present economic context, enforced as a base case in every
project.
2) Project Cost and Benefit Analysis. Thailand’s small scale
hydropower projects have considered projects’ costs and benefits, both direct and
indirect, by applying environmental economic principle and theory in the evaluation,
which complies with a proposal by Adis Israngkura na Ayudhya (2010, p. 62) stating
that feasibility analysis should measure project impact rather than output. However,
there is a notice that public feasibility analysis tends to focus on evaluating benefits
outside the market system to justify investments which are hard to inspect, this cost
and benefit evaluation also has problems and limitations affecting the fulfillment of a
target on efficiency, feasibility in public operation, and sustainable development,
which, with differences in evaluation techniques used, was an issue on the
completeness of the cost and benefit items evaluated. As well, conversion of the
172
market price to shadow price using a Conversion Factor (CF) did not reflect the
present economic context since the study result shows that most of the reports used
the Conversion Factor by the World Bank, arrived at in 1983, with reference to a
document named Shadow prices for economic appraisal of projects: an application to
Thailand (English). Staff working paper; no. SWP 609. Washington, D.C.: The World
Bank. (S.; EM1; AHMED, S.*EM1., 1983.), as shown in Appendix C, which has been
used for 35 years now without reviewing whether this conversion factor is still
relevant in the present economic context.
The crucial problem found in this study is that small scale hydropower
project studies had a benefit shortfall, since electricity actually generated was only
53.9% of electricity stated in the study report, which complies with the study result
of Flyvbjerg (2009), stating that 208 projects from 14 countries around the world, or
90% of the studied projects, faced the problem of over-evaluating benefit by 50 –
84% of actual benefit. Furthermore, this study also finds that low-value projects tend
to have a benefit shortfall problem more than high-value ones, which reflects a
pattern of public administration that prioritizes the size of the budget, in other words,
projects with large budgets have better management and oversight mechanisms. This
benefit shortfall problem results from various causes, for instance, limitations from
selecting assumptions or data in evaluating project benefit, risk of an event affecting
the project’s actual operation to not be able to generate electricity as planned, or the
analyst’s attempt to increase the project’s productivity or benefit, which could be
either intentional or unintentional. However, this cost overrun problem is not found in
small scale hydropower projects due to the contractor hiring process, since standard
price is the mechanism to transfer risk on the project’s cost to the contractor.
3) Risk Analysis. Regarding the problem of benefit shortfall and
findings on lacking of consideration probability in changing risk factors in the risk
analysis methodology, this study proposes the application of Reference class
forecasting and Monte Carlo Simulation, which complies with a proposal by Salling
(2013) recommending feasibility analysis under various risk factors use Monte Carlo
Simulation. Furthermore, this study also proposes risk analysis under a number of
indexes obtained by considering feasibility probability under risk, which are Risk
Acceptable Net Present Value (R-NPV) and Degree of Risk. These analysis methods
173
and indexes could be applied to investments in every type of project, especially
infrastructure development with similar risk factors and study inaccuracies, this
complies with the feasibility analysis manuals of crucial agencies, for instance, the
World Bank (2015), Asian Development Bank (2017), and European Commission
(2014).
The development of feasibility analysis tools and measurements, as
well as risk analysis, is a crucial topic in achieving the target of public administration
efficiency. Future development guidelines should focus on accuracy and ability to
support the investor’s decisions in the future, especially decisions under the principle
of High risk –High return, in order to prioritize making decisions with a Low risk –
High return feature. Furthermore, there should be the application of risk analysis tools
in other forms to support investment decisions, for instance, Real option analysis
techniques for making decisions on development of projects with step-wise features,
or analyzing investment choices which comply with proposals by the World Bank
(2015) in risk analysis. However, the development of tools or measurements should
consider the tools’ limitations resulting from cost in an analysis employing
complicated methods or large scales of data, making the tools not suitable in actual
operation. The appropriate approach is to develop analysis tools in the form of a
packaged program for the analyst to utilize easily and be able to use on other projects
with similar features.
As for the proposal in using joint-ventures between the public and
private sector for small scale hydropower project development to reduce public risk,
the proposal complies with Priemus (2010), who proposed the use of Public Private
Partnership (PPPs) mechanisms for investment in infrastructure projects, and is
recommended.
6.2.3 Discussion on Thailand Renewable Energy Development
The discussion on Thailand renewable energy development is comprised of 1)
Discussion on policy development, and 2) Discussion on implementation
development to create movement on Thailand renewable energy development that
complies with a framework on public administration, with governance and efficiency,
leading to sustainable development, with the following details:
174
1) Discussion on Policy Development. Policy development for
Thailand’s renewable energy is in need of having a clear strategic goal, especially the
consideration of significant renewable energy development in pushing economic
development as an important factor of production. Significant to commercial
competitive competency in various dimensions are effects toward the cost of
production and transportation. As well, in the renewable energy industry, there is
creating economic added value from products or equipment for producing renewable
energy in response to domestic and international demand. Moreover, renewable
energy is also significant for social and environmental development in terms of
improving citizens’ quality of life in accessing infrastructure for living, development
distribution, work creation, as well as environmentally friendly development.
International factors are also crucial for selecting a Thailand
development framework, for instance, the global direction in developing renewable
energy development which will affect global renewable energy development as a
whole. Renewable energy investment from a country with high economic influence,
for example, development of the solar cell industry in China, has led to a reduction of
solar panel prices on the global market. The direction of change in the global oil
production industry affects fuel price, the major competitor of the renewable energy
sector. Renewable energy development support from international agencies or
organizations provide criteria selection for project investment financial support by
international organizations, for instance, the World Bank or Asian Development Bank
(ADB), as well as environmental conservation trends related to trade-restrictive
measures and selection of mechanisms or measures related to greenhouse gas
emission reduction. Therefore, the selection of a direction and development
framework for Thailand’s renewable energy development framework must consider
compatibility with national strategic goals in every aspect by having a policy selection
system performed under a checks and balances mechanism in public administration
using democratic processes with a focus on public participation and a parliamentary
inspection mechanism to check policy appropriateness in terms of target, process and
budget in order to reach governance in public administration on energy.
The policy selection by public sector to support Thailand renewable
energy development in order to achieve these strategic goals requires a clear selection
175
of support measures, especially consideration of the public sector’s role in selecting
the objective to develop citizen social welfare, especially support for economic
expansion, development distribution, economic equality, energy security, as well as
fair competition promotion in the energy sector. In terms of renewable energy
investment promotion, the public sector could use various tools, for instance,
knowledge support, technology transfer, investment promotion, or a premium in
electricity purchase price.
This study on feasibility analysis framework is specific to economic
feasibility analysis, which is the consideration as to whether the project invested in
will generate benefit for the country more than the cost utilized, and lead to a public
decision as to whether or not to invest in the project. However, besides economic
analysis, there should also be financial feasibility analysis, which is analysis from the
private sector perspective prioritizing profit generated from revenue from electricity
sold, and use the study result from both aspects to select a framework to support
project development according to the analysis result in each case, as follows:
Case 1: Project is feasible both economically and financially, meaning
that the project is beneficial for national development and could be developed under a
commercial competition mechanism in a normal market system. The public sector
action is to encourage the private sector in this investment by reducing the investment
limitations, both legally and by promotion of fair competition.
Case 2: The project is feasible economically, but not financially,
meaning that the project is beneficial for national development, but could not be
developed under commercial competition mechanisms in a normal market system.
The public sector action is to encourage the private sector in this investment using
investment from the public sector or support from the private sector to have
investment feasibility, for instance, investment budget support, or selection of Feed-in
Tariff (FiT) from renewable energy.
Case 3: The project is infeasible, both economically and financially,
meaning that the project is not beneficial for national development and could not be
developed under commercial competition mechanisms in a normal market system.
The public sector action is to support technological development to reduce the cost of
176
production or increase energy generation efficiency to make the project investment
feasible in the future.
Case 4: The project is infeasible economically, but feasible financially,
meaning that the project is not beneficial for national development, but could be
developed under commercial competition mechanisms in a normal market system.
The public sector action is to regulate the business and reduce negative impact toward
the nation by using various measures, for instance, increase of tax, creation of law to
enforce entrepreneurs to have preventive measures for the impact.
2) Discussion on Implementation Development. The crucial issue in
Thailand renewable energy development in terms of implementation is integration
among the implementing agencies since, presently, renewable energy development
has the scope covering energy that could be renewed continuously from nature, such
as solar energy, wind energy, hydropower, with the objective to replace fossil fuel
energy utilization, which is non-renewable energy and creates a negative impact
toward the environment. Therefore, public sector action in renewable energy
development tends to be broad to cover a variety of energy types and production
technologies leading to differences among support and development action
frameworks.
The consideration of a Thailand renewable energy supply chain has
shown a number of relationships with public agencies. The main responsible agency
for renewable energy promotion and development in terms of knowledge
development, promotion and transfer, as well as investment in renewable energy, is
the Department of Alternative Energy Development and Efficiency (DEDE), while
private sector investment promotion measures and the regulation of energy activity
related to electricity producers is performed by the Energy Regulatory Commission
(ERC) who is responsible for regulating 3 groups of electricity producers, 1)
Independent Power Producers (IPP) with generating capacity more than 90 MW 2)
Small Power Producers (SPP) with generating capacity more than 1 MW, but not
more than 90 MW, and 3) Very Small Power Producers (VSPP) with generating
capacity not more than 1 MW. Most renewable energy producers are Small Power
Producers (SPP) and Very Small Power Producers (VSPP) (Energy Regulatory
Commission, 2018).
177
As for renewable energy purchase, this is related to Thailand’s
electricity agencies, which are the Provincial Electricity Authority and the
Metropolitan Electricity Authority as electricity purchasers, while the Thailand
Greenhouse Gas Management Organization is responsible for overseeing the sale of
carbon credits according to the Clean Development Mechanism (CDM) of the United
Nations Framework Convention on Climate Change (UNFCCC). The control and
prevention of a renewable energy plant’s impact is related to the Office of Natural
Resources and Environmental Policy and Planning, if the energy plant has production
capacity higher than 10 MW or falls into the criteria required to perform an
Environmental Impact Assessment (EIA), for example if it’s located in a Forest
Conservation Area.
It can be seen that renewable energy development involves large
numbers of agencies, therefore there is a need for integration of action among these
agencies, as well as using public participation mechanisms to make promotion,
support and development of impact mitigation measures suitable and consistent on
every level. The crucial issues needed to be considered for operation, ordered by their
level of significance, are as follows:
(1) The selection of a feasibility analysis framework suitable for
the project type leading to correct and accurate decision making, for instance,
selection of a cost and benefit evaluation method suitable for projects with different
features, selection of assumptions which comply in a policy, economic and social
context in each period, as well as risk analysis for every project about to be invested
in by considering the study’s inaccuracies and change in other related factors, for
instance, change in economic situation, and technological development.
(2) The selection of a Feed-in Tariff (FiT) must consider support
mechanisms suitable for the type of renewable energy in each period, since each type
of energy has different costs and impacts from technological change, as well as
consideration of the level of support suitable to a degree of risk in investment from
various factors, for instance, risk from the power plant’s location, or risk from change
in natural resources used as a factor of production.
(3) The development of personnel with expertise to have
appropriate qualifications and quantity with national renewable energy development
178
in the future, both in public sector operations and private sector renewable energy
development.
(4) The selection of criteria and framework for creating an
Environmental Impact Assessment (EIA) with speed, transparency, and operation via
public participation of the project’s site residents, as well as inspection and
monitoring to act according to the impact mitigation plan, seriously and continuously.
(5) The solution for problems and limitations related to the
complicated process of selling carbon credit due to long periods of document
preparation, information review and approval, as well as risk from fluctuation of the
carbon credit price in the market, which might affect an entrepreneur’s investment
decision.
6.3 Recommendations
From the results and academic findings in this study, there are recommended
topics of study that should be performed in the next agenda for further knowledge
enhancement leading to the development of an infrastructure development feasibility
analysis framework, as follows:
1) The in-depth study for feasibility analysis methodology development.
This study result has shown that feasibility analysis methodology still has weaknesses
or ambiguous academic issues which lead to loopholes in choosing different
methodologies, therefore there should be a study to solve the problems and limitations
of various issues based on priority, as follows:
(1) A study of the Conversion factor (CF) for Thailand’s feasibility
analysis to be up-to-date and reflect the current economic situation.
(2) A study of the discount rate suitable with Thailand’s economic, social
and environmental development context, and the selection of a discount rate specific
to each type of project.
(3) The development of each project’s impact evaluation in various form,
both goods and resources out of the market system, as well as evaluation of energy
security benefits, and both positive and negative impacts toward macro-economics.
179
(4) The development of a risk analysis technique, especially the selection
of a level of risk acceptable and suitable to projects with differences in energy type,
project location, and project scale.
(5) A study of statistical data on the actual operation of a number of
projects to develop a database classified by energy type, project location, and project
scale for risk analysis.
2) The policy and public administration study for public investment
feasibility analysis process development. Since the goal of public administration is
efficiency and transparency, the first-priority agenda of feasibility analysis study
process development is the study of a checks and balances mechanism in considering
the budget for infrastructure development investment. The next priority is a study of
the approach in selecting suitable punishment in the case of mistakes or non-
transparent operation creating negative impact toward national economic, social
and/or environmental conditions.
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APPENDICES
190
APPENDIX A
Small Scale Hydropower Project
191
Appendix A
A Small Scale Hydropower Project
From a study of the planning and feasibility of small and mini scale
hydropower project manual by the Department of Alternative Energy Development
and Efficiency (2015), and small scale hydropower project data by the Bureau of
Alternative Energy Development, Department of Alternative Energy Development
and Efficiency (2017), the following distinct features of small scale hydropower
projects can be summarized:
Small scale hydropower projects are a development in response to electricity
needs in a rural area to create stability for the distribution system and distribute
electricity to the population in the area not accessible by the distribution system.
Small scale hydropower projects have a generating capacity between 200 and 12,000
kilowatts, and can be seen in Figure 1.
192
Small Scale Hydropower Project (Mae Kum Luang Project), Mae Ai District, Chiang Mai Province
Figure 1 Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
A small scale hydropower project will construct a weir or small dam to block a
stream and divert water from a weir or small dam using penstock to a power plant.
Water pressure coming along the tubes will rotate a turbine connected to the generator
generating isolate/off grid or parallel/on grid electricity. A small-scale hydropower
project has the development framework and major components as follows:
1) Project’s Location and Potential. The selection of a suitable location for a
small scale hydropower project must consider various components, for instance,
geologic conditions, environmental impacts, and distance between the power plant
and electricity users. The potential in electricity generation or installed generating
capacity will depend on the difference between the height of water head or Net Head
(H) which will be different according to the location’s geographic condition.
2) Weir or Small Dam. A small reservoir will facilitate the continuous use of
stored water for generating electricity. The structure of a weir or small dam is
193
reinforced concrete with a suitable design to block the stream for diverting water or
controlling the water level passing to the end area of intake, which is designed to
safely contain the flow of water in the rainy season. Any overflowed water will be
diverted to an overflow spillway and further flow into the same stream at the tailrace.
The weir or small dam of a small scale hydropower project is shown in Figure 2
Weir (Mae Hong Son Hydropower Project) Reservoir (Sa-Nga Hydropower Project)
Figure 2 Weir and Small Dam of Small Scale Hydropower Projects
Source: Department of Alternative Energy Development and Efficiency (2017).
3) Intake. The intake is a concrete structured building for receiving water from
the stream in front of the check dam or dam toward the headrace or penstock.
Normally, the intake will be located perpendicular to the water flow direction to
control the amount of water flow to be utilized by installing a gate system using a
trash rack to prevent trash flowing with the water and a sand sluice gate which blocks
sand from flowing with the water and prevents it from getting into the headrace. The
intake could be constructed near the check dam or dam, or separately depending on
geographic conditions. The intake of a small scale hydropower project is shown in
Figure 3.
194
Intake (Huai Nam Khun Hydropower Project)
Figure 3 Intake of a Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
4) Headrace and Penstock. Water from the intake will be transferred to the
power plant. The headrace could be a canal or a low pressure penstock which has a
low slope. The length of the headrace will depend on the need for height of the water
head in generating electricity, which also depends on geographic conditions.
Furthermore, the headrace will have a sand trap to prevent remaining sand from
getting into the canal or penstock. The sand trap will be constructed between the
intake and the headrace. At the end of the headrace will be a water level control
system by construction of a head tank or fore bay before transferring water to the
penstock. The head tank is selected to be the regulating pond.
195
As for the penstock, it is a system of iron penstock receiving water from the
headrace into a turbine in the power house. Pictures of the headrace and penstock of a
small scale hydropower project are shown in Figure 4.
Headrace
(Huai Nam Khun Hydropower
Project)
Penstock
(Mae Hong Son Hydropower Project)
Figure 4 Headrace and Penstock of a Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
5) Power House. This is the building installing a turbine and generator with
equipment. The power house building will be located at an appropriate level to
prevent flooding in the rainy season. After the water has passed through the turbine
for electricity generation, it will be released back to the previous stream via a tailrace.
6) Turbine. The water contained in front of the check dam or dam will
accumulate energy in the form of potential energy and, when flowing via the penstock
toward the power house, will be converted to kinetic energy. The turbine is
responsible for converting kinetic energy to mechanical energy to rotate the generator.
The selection of turbine type will depend of the height of the water head. A picture of
a turbine at a small scale hydropower project is shown in Figure 5.
196
Francis Turbine and Generator Kaplan Turbine and Generator
Figure 5 Turbines of a Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
7) Generator and Equipment. The generator of a hydropower plant has features
similar to other power plants, but the equipment, for example the Controller
equipment, is different since it automatically controls water used for electricity
generation according to the demand of electricity via the controlling equipment.
Equipment of the generator also includes electric transformers, controller and
switchyard. The picture of a generator and its equipment in a small scale hydropower
project is shown in Figure 6.
197
Turbine and Generator with equipment
(Huai Nam Khun Hydropower Project, Chiang Rai Province)
Figure 6 Generator and equipment of a Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
The major components of small scale hydropower project are shown in
Figure 7.
Figure 7 Major Components of a Small Scale Hydropower Project
Source: Department of Alternative Energy Development and Efficiency (2017).
198
Appendix B
List of Feasibility Study Report
199
Appendix B
List of Feasibility Study Report
Report Year Number of
projects Project Owner
Thai small scale hydropower project
1 Study of the development plan. Small and very small
hydropower projects in the national park. (In the north and
Thong Pha Phum National Park).
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
2 Study of the development plan. Small and very small
hydropower projects in the national park. (In the north and
Thong Pha Phum National Park) Thong Pha Phum
National Park
2011 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
3 Study report on development master plan. Small and very
small hydropower projects in the national park. (In the
north and Thong Pha Phum National Park) Mae Surin
Waterfall National Park
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
4 Study report on development master plan, small and very
small hydropower projects in the national park. (In the
north and Thong Pha Phum National Park) Mae Yom
National Park
2011 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
5 Study report on development master plan, small and very
small hydropower projects in the national park. (In the
northern area and Thong Pha Phum National Park), Tat
Mok National Park
2011 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
6 Feasibility study on very small hydropower construction
projects
2009 10 Provincial Electricity
Authority
7 Feasibility study and environmental impact,
small hydropower project at Huai Mae Pa Pai
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
8 Design and installation of small hydroelectric at Nam Oun
Dam
2004 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
200
Report Year Number of
projects Project Owner
9 Design and installation of small hydroelectric at Lam Ta
Khong Dam
2004 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
10 Design and installation of small hydroelectric at Pra Sae
Dam
2004 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
11 Feasibility study of hydroelectric power project
Ranong District, Ranong Province
2013 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
12 Hydroelectric power project, Thung Plue Canal, Makham
District, Chantaburi province
1995 1 Department of Energy
Development and Promotion
13 Detailed design of small hydropower project at the 4 dams
and irrigation area: Summary of project detailed design on
small hydropower at Mae Suai Dam
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
14 Detailed design of small hydropower project at the 4 dams
and irrigation area: Summary of project detailed design on
small hydropower at Nong Pla Lai Dam
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
15 Detailed design of small hydropower project at the 4 dams
and irrigation area: Summary of project detailed design on
small hydropower at Huai Lang Dam
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
16 Detailed design of small hydropower project at the 4 dams
and irrigation area: Summary of project detailed design on
small hydropower at Huai Sa Tor Dam
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
17 Preliminary study on feasibility and environmental impact
on small hydroelectric power project at Chom Thong
District
Chiangmai Province
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
18 Feasibility study and formulation of proposals for joint
ventures in 4 Small Hydropower Projects, Klong Ae Small
hydropower projects, Surat Thani
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
201
Report Year Number of
projects Project Owner
19 Preliminary environmental impact study on small
hydropower project at Huay Dan Mee, Palian District,
Palian District, Trang Province
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
20 Feasibility study and preliminary environmental impact
study on small hydropower project (Huay Sa Duang Yai)
2008 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
21 Feasibility study on Chawang canal small hydropower
project
2000 1 Department of Energy
Development and Promotion
22 Survey report and feasibility study Thung Plue Canal
hydroelectric power plant, Makham District, Chanthaburi
Province
1989 1 National Energy
Administration
23 Preliminary environmental impact study on small
hydropower project, Ae Canal Project, Surat Thani
Province
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
24 Feasibility study and formulation of proposals for joint
ventures in 4 small hydropower projects, Kwai Noi Small
hydropower projects, Phitsanulok Province
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
25 Study and design to improve the efficiency of electricity
production, small hydropower project. Detailed design on
Mae Thun Hydropower Project, Chiangmai Province
2012 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
26 Study and design to improve the efficiency of electricity
production, small hydropower project. Details design on
Mae Hong Son Hydropower Project, Mae Hong Son
Province
2012 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
27 Feasibility study and formulation of proposals for joint
ventures in 4 Small Hydropower Projects, Huai Klity
small hydropower project, Kanchanaburi Province
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
28 Feasibility study and formulation of proposals for joint
ventures in 4 small hydropower projects, Huai Dan Mee
Small hydropower project, Trang Province
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
202
Report Year Number of
projects Project Owner
29 Feasibility study and environmental impact on
Nam Mea Ngea small hydropower project
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
30 Study of improvement plan for 2 hydropower plants
2004 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
31 Environmental impact on Kwai Noi hydropower project,
Nakorn Thai District, Phitsanulok Province
2004 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
32 Feasibility study and preliminary environmental impact
study on Mae Obe small hydropower project, Chom
Thong District,Chiangmai Province
2009 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
33 Prefeasibility study on Li Pa Yai canal project Koh
Samui District, Surat Thani Province
1987 1 National Energy
Administration
34 Detailed design of hydropower project at the irrigation
dam in north eastern area. Summary report of the detailed
design on the Mun Bon dam project, Nakhon Ratchasima
Province
2010 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
35 Summary report of the project detailed design. (Detailed
design and tender documents, small hydropower plant,
Mae Pa Pai, Hod District, Chiang Mai Province
2013 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
36 Summary report of the project detailed design on Mae
Mok Dam, Lampang Province. (Detailed design of
hydropower project at the irrigation dam)
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
37 Summary report of the project detailed design on Lan Ta
Pen Dam, Kanchanaburi Province. (Detailed design
hydropower project at the irrigation dam)
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
38 Detailed design of hydropower project at the irrigation
dam in north eastern area. Summary report of the detailed
design on the Lum Nang Long dam project, Buri Ram
Province
2010 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
203
Report Year Number of
projects Project Owner
39 Detailed design of hydropower project at the irrigation
dam in north eastern area. Summary report of the detailed
design on the Lum Prai Mas dam project, Nakhon
Ratchasima Province
2010 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
40 Summary report of the project detailed design on Huai Ta
Pea dam, Sukhothai Province. (Detailed design of
hydropower project at the irrigation dam)
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
41 Detailed design of hydropower project at the irrigation
dam in north eastern area. Summary report of the detailed
design on the Huai Loung dam project, Udon Thani
Province
2010 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
42 Summary report of the project detailed design on Huai
Khun Keaw Dam, Uthai Thani Province (Detailed design
of hydropower project at the irrigation dam)
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
43 Feasibility study, initial environmental examination (IEE)
and detailed design on Pua small hydropower project
2016 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
Thai small scale hydropower projects (master plan)
44 Study report on village hydropower development master
plan
1993 96 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
45 Master plan report of small hydropower project
development
2004 103 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
46 Study report on village hydropower development master
plan
2009 338 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
47 Study of small hydropower project development master
plan in upper northern region
2016 39 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
204
Report Year Number of
projects Project Owner
48 Study of small hydropower project development master
plan in upper northern provinces
2016 15 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
Foreign small scale hydropower projects
49 Preliminary Study on O Sla Mini Hydropower Project 2004 1 Samart Corporation Plc.
50 Preliminary Study on Stung Sva Slap Mini Hydropower
Project
2004 1 Samart Corporation Plc.
51 Alternative and conservation energy cooperation between
Thailand and Neighboring Countries project
(Feasibility study and detailed design of small hydropower
projects in the Lao People's Democratic Republic)
2006 4 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
52 Feasibility study and detailed design of small hydropower
projects in Cambodia
2006 3 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
Other hydropower projects
53 Environmental impact assessment of Ban Chan Day
hydropower project, Karnchanaburi Province
2013 1 Electricity Generating
Authority of Thailand
54 Feasibility study and environmental impact assessment.
Feasibility study report of the hydropower project, pump
from Srinakarin dam reservoir.
1997 2 Department of Energy
Development and Promotion
55 Kwae Yai Project, Karnchanaburi Province 1972 1 Electricity Generating
Authority of Thailand
56 Pattani River Development Report, Yala Province 1963 1 National Energy Authority
57 Study on potential of step hydropower on Mekong River 2005 10 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
58 Preliminary feasibility study and initial environmental
examination study on 2 step weir Mekong river small
hydropower projects, Preliminary feasibility study on Pak
Chom weir and Ban Kum weir hydropower
2008 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
59 Preliminary feasibility study on Yat Hee dam hydropower
and Bhumibol dam adding water
2005 1 ITALIAN-THAI
DEVELOPMENT PCL
60 Preliminary Study on Stung Mnam 2 Hydropower Project 2004 1 The royal government of
Cambodia
205
Report Year Number of
projects Project Owner
61 Evaluation of Feasibility Report Nam ham 2 Hydropower
Project
2010 1 PEA ENCOM International
Co. ,Ltd
62 Feasibility Study for Nam Ngao Hydropower Project
Bokeo Province, Lao PRD
2012 1 PEA ENCOM International
Co. ,Ltd
63 Feasibility Study for Nam Ngeum Hydropower Project
Xayabury Province, Lao PRD
2012 1 SILVER SAND GROUP
CO.,LTD
64 Feasibility Study on Nam Phoun Hydropower Project
Xayabury Province, Lao PRD
2010 1 S & KX International
Co. ,Ltd
Biomass energy and waste-to-energy projects
65 Design on biomass power plants for demonstrate
2005 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
66 A study on guidelines for the promotion of integrated
biomass power plants
2012 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
67 Promotion of thermal energy from biomass for the
production in industrial sector
2008 12 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
68 Feasibility study on Distributed-Green-Generation: DGG
(Feasibility study on 15 community biomass power plants)
Community biomass power station, Lahan Sub District,
Chaturus District, Chaiyaphum Province
2013 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
69 Feasibility study on Distributed-Green-Generation: DGG
(Feasibility study on community biomass power plants,
Mae Fah Luang District, Chiang Rai Province)
2013 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
70 Study and preparing information for renewable energy and
energy conservation investment project
2016 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
71 Research, Demonstration and Project Supporting on
Three stages gasifier biomass power generation system
project
2011 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
206
Report Year Number of
projects Project Owner
72 Feasibility study of electricity generation with rice husk
gas from rice mill and sold to the transmission system
1987 1 National Energy
Administration
73 Economic analysis of 100 kw gasifier biomass power plant 2011 1 Thaksin University
74 A study of the economic costs of small biomass power
plants for the community
2008 1 National Research Council
of Thailand, Suranaree
University of Technology
75 Design of demonstration power plant from cassava
rhizome
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
76 Study on the development of biomass gasification system
for power generation in internal combustion engines
2006 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
77 Study and demonstration of electric power generation/
heat power from community waste
2005 4 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
78 Feasibility study of electric power generation using waste
incineration technology. Study and preparing investment
information on renewable energy and energy conservation
2015 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
79 Analysis of waste management approach for electric
power generation in Bangkok and vicinity
2009 1 King Mongkut's University
of Technology Thonburi
80 Analysis of waste management approach for electric
power generation at Sub District level
2009 1 Naresuan University
81 Analysis of waste management approach for electric
power generation at District level
2009 1 Chiang Mai University
82 Feasibility study on utilization of community waste for
electricity generation
2007 1 Development of
Environment and Energy
Foundation
83 Study and preparing information for renewable energy and
energy conservation investment
2016 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
207
Report Year Number of
projects Project Owner
84 Study of potential energy production from industrial waste
2012 8 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
Wind energy projects
85 Feasibility study on wind turbine power plants along the
southern coast of Thailand.
2008 1 Thaksin University, Prince
of Songkla University,
Walailak University,
Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy Provincial
Electricity Authority
86 Research on wind power potential for electricity
generating in the central region of Thailand
2013 3 National Research Council
of Thailand
87 Research on wind power potential for electricity
generating in upper northern region, Phase 2
2009 1 Energy research center
Maejo University
88 Research on wind power potential for electricity
generating in upper northern region
2009 7 Energy research center
Maejo University
89 Research on wind power potential in specific areas
2008 4 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
90 Initial environmental examination study (IEE) on
demonstration project of large-scale wind turbine, Pattani
Province
2009 3 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
91 Feasibility study and initial environmental examination
(IEE) on development of offshore wind turbine
2011 3 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
92 Feasibility study on 2 wind turbine power plants 2011 4 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
93 Research on wind power potential along the southern coast
of Thailand
2008 17 Thaksin University, Prince
of Songkla University,
Walailak University
208
Report Year Number of
projects Project Owner
94 Research on wind power potential for electricity
generation on east coast of Gulf of Thailand to Trat
Province
2008 2 King Mongkut’s University
of Technology North
Bangkok, Burapha
University
95 Feasibility study and initial environmental examination
(IEE) on wind power plant in potential area
2012 2 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
96 Research, development and demonstration prototype of
low wind speed turbine technology
2008 1 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
97 Detail design of wind turbine in the electricity scarcity
area
2011 5 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
Solar energy projects
98 Assessment of technical and economic potential of solar
roof systems in Chulalongkorn University.
2015 10 Chulalongkorn University
99 Feasibility study on Distributed-Green-Generation: DGG
(Feasibility study on renewable energy power plant, Ja-na
District, Songkhla Province)
2013 3 Department of Alternative
Energy Development and
Efficiency, Ministry of
Energy
209
Appendix C
The World Bank’s Conversion Factor
210
Appendix C
The World Bank’s Conversion Factor
Type Factor
Standard Conversion factor (SCF) 0.92
Consumption Goods Conversion Factor (CGCF) 0.95
Intermediate Goods Conversion Factor (IGCF) 0.94
Capital Goods Conversion factor (KGCF) 0.84
Construction Conversion Factor (CCF) 0.88
Electricity Conversion Factor (ECF) 0.90
Transportation Conversion Factor (TCF) 0.87
Labor Conversion Factor (LCF) 0.92
Marginal Productivity of Capital (q) 0.16
Rice Conversion factor (RCF) 1.11
Source: AHMED, S.; EM1; AHMED, S.*EM1 (1983).
211
BIOGRAPHY
NAME Mr. Krit Kongcharoen
ACADEMIC BACKGROUND Bachelor’s Degree with major in Agriculture
Education from Faculty of Education, Kasetsart
University, Bangkok, Thailand in 2002.
Master’s Degree with major in Resource
Management from Graduate School, Kasetsart
University, Bangkok, Thailand in 2005.
PRESENT POSITION Senior planning and analysis officer, Thailand
Institute of Scientific and Technological
Research
EXPERIENCE 2006-2018
Manager, Economic Department,
Panya Consultants Co., Ltd.