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ANNEX II - Small Scale Hydropower - IEA Implementing Agreement

Policy, Regulations & Planning

Planning, Developing and Operating Small Scale Hydropower

Planning small scale hydropower projects requires many stages of technical and financial study to determine if a site is technically and economically feasible. The viability of each potential project is very site specific. Power output depends on the flow of water and the height of the drop of available water. The amount of energy that can be generated depends on the quantity of water available and the variability of flow throughout the year. The economics of a site depends on the power (capacity) and energy a project can produce, if the power can be sold, and the price paid for the power sold. In a remote community the value of power generated for consumption is generally significantly more than for systems that are connected to a central grid. However, remote communities may not be able to use all the available energy from the small hydro plant or, may be unable to use the energy when it is available because of seasonal variations in water flow and energy consumption. Although most small-hydro projects are different, the following steps provide a good outline of the main stages in the development and operation of a project:

Reconnaissance surveys and hydraulic studies

This first phase of work frequently covers numerous sites and includes: map studies; delineation of the drainage basins; preliminary estimates of flow and floods; and a one day site visit to each site (by a design engineer and geologist or geotechnical engineer); preliminary layout; cost estimates (based on formulae or computer data); a final ranking of sites based on power potential; and an index of cost.

Pre-feasibility study

Work on the selected site or sites would include: site mapping and geological investigations (with drilling confined to areas where foundation uncertainty would have a major effect on costs); a reconnaissance for suitable borrow areas (e.g. for sand and gravel); a preliminary layout based on materials known to be available; preliminary selection of the main project characteristics (installed capacity, type of development, etc.); a cost estimate based on major quantities; the identification of possible environmental impacts; and production of a single volume report on each site.

Feasibility study

Work would continue on the selected site with a major foundation investigation program; delineation and testing of all borrow areas; estimation of diversion, design and probable maximum floods; determination of power potential for a range of dam heights and installed capacities for project optimisation; determination of the project design earthquake and the maximum credible earthquake; design of all structures in sufficient detail to obtain quantities for all items contributing more than about 10 per cent to the cost of individual structures; determination of the dewatering sequence and project schedule; optimisation of the project layout, water levels and components; production of a detailed cost estimate; and finally, an economic and financial evaluation of the project including an assessment of the impact on the existing electrical grid along with a multi-volume comprehensive feasibility report.

System planning and project engineering

This work would include studies and final design of the transmission system; integration of the transmission system; integration of the project into the power network to determine precise operating mode; production of tender drawings and specifications; analysis of bids and detailed design of the project; production of detailed construction drawings and review of manufacturer's equipment drawings. However, the scope of this phase would not include site supervision nor project management, since this work would form part of the project execution costs.

Financing

The process of arranging financing for small-hydro projects is often difficult. The developer has to complete two steps to realize their development plans. The first is to obtain a contract with a utility or organisation which will purchase the produced electricity. With this contract in place the next step is to negotiate a bank loan or other source of financing. However, many banks lack knowledge of small-hydro projects and have no experience with this type of loan. In recent years some banks have acquired the necessary experience and now routinely provide loans for small-hydro projects.

Ownership and Maintenance

Key factors for sucess include:

  1. Realistic assessment of project costs and benefits (good assessment methodologies are available)
  2. Solid partnership with good management skills
  3. Experience within partnership
  4. Personal and corporate financial strength
  5. Knowledgeable financial institution (documentation available for reference that addresses risk assessment)
  6. Design with special attention to operation and maintenance requirements
  7. Pro-active maintenance plan to minimise expense and downtime

Assessment Tools and Methodologies


The assessment of sites available for small-hydro development represents a relatively high proportion of overall project costs. A high level of experience and expertise is required to accurately complete the assessment. During the past few decades numerous methodologies and software assessment packages have been developed in an attempt to reduce the time and cost required for comprehensive assessments. During Phase I several of these assessment tools were examined by the Task Force and evaluated to define their strengths and weaknesses. We hope that the information we have collected will assist small-hydro developers choose methods or software suitable to their situation.

The assessment of sites available for small-hydro development represents a relatively high proportion of overall project costs. A high level of experience and expertise is required to accurately complete the assessment. During the past two decades numerous methodologies and software assessment packages have been developed in an attempt to reduce the time and cost required for comprehensive assessments. Over the past five years several of these assessment tools have been examined and evaluated to define their strengths and weaknesses. We hope that the information we have collected will assist small-hydro developers in choosing methods or software suitable to their situation.

In no way do assume that this is a comprehensive list of available assessment methodologies or software! If you have information on others that we have not looked at then please Contact Us with information. The following table summarizes the methodologies and software which has been evaluated. To view the full report prepared for this task, click on Small-Hydro Assessment Tools & Methodologies (PDF format). For information about the IMP Software, click on IMP Software.
If you wish to contribute by submitting information on new small hydro assessment software not covered in the document referred to above, please send us feedback by clicking on the link below.
Contact Us

Financing of Small Scale Hydropower


Click on Financing of Small Scale Hydropower for downloading the document. This report describes issues that should be considered during the financing stage of the project and offers suggestions and alternatives to aid in securing financing for your small scale hydropower project. Five main topics are covered:

  1. The general aspects of financing of small hydropower projects, including the key players in the financing process
  2. Alternative financing strategies for small hydropower projects which includes a discussion of the different routes of financing, and factors affecting the choice of strategy
  3. A brief discussion of financing conditions
  4. The key points in successful financing
  5. Possible improvements to the financing situation
 

Economic Risk and Sensitivity Analysis


The following resources were developed by the Small Scale Hydro Task Force to help developers, owners or investors in assessing, planning, or operating their small hydro projects: Economic Risk and Sensitivity Analysis for Small Hydro (PDF Format).
 
  1. This report is divided into ten major chapters:
  2. The first chapter gives an introduction and background.
  3. Chapters 2-4 describe the different components that influence the economics of a project (on the benefit- and cost-side) and the uncertainty each component is burdened with.
  4. Chapter 5 describes various methods for the calculation and evaluation of the risks associated with benefits and costs.
  5. Chapters 6-9 present the step-by-step principle; the structure, the calculations and the results.
  6. Chapter 10 gives an example. Two methods are used and presented. One of the methods includes a Monte Carlo simulation.



Other resources such as a bibliography of small scale hydropower literature are available in the Library & Resources section of this site. Proceedings from international workshops on small scale hydropower are available from the link Small Hydro Workshops.



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Thank you. We hope you find the new Small-Hydro Gateway useful and informative!


Kearon Bennett, P. Eng.,
Operating Agent and Secretary
Annex II, Small Hydro
IEA Hydropower Agreement