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close this book Local Experience With Micro-Hydro Technology
close this folder F. ECONOMIC CONSIDERATIONS
View the document 1. BASIC APPROACH a) Cost-Benefit-Approach for Socio-Economic Selection
View the document 2. MICRO-HYDROPOWER AND LARGER HYDROPOWER PLANTS
View the document 3. MICRO-HYDRO PLANTS AND OTHER ALTERNATIVES

3. MICRO-HYDRO PLANTS AND OTHER ALTERNATIVES

a) General Remarks

b) Oil Fuels

c) Wood an Dung

d) Biogas

e) Liquefied Biomass

f) Solar and Wind Power

 

a) General Remarks

The following sections compare alternative energies basically using again the criteria of the multilevel-cost-benefit approach. However, the application of this system will be more eclectical than in section F2. The evaluation will concentrate on costs of installed capacity and user-prices per kWh, surrounded by other tangibles and intangibles.

A fist rough impression of relative costs (cost-relation) among energy alternatives is given in fig. 79.


Fig. 79: Comparative Costs of Electricity Generation from various Fuels in 1980 $

Source: World Bank, Energy in the ..., p 43

* including costs of transmission and distribution

** intermittent energy sources requiring storage to make energy available on demand at all times; investment cost given include storage costs.

*** hydropower plants are assumed to operate at a load factor of 5'000 hours per year, coal-units on a base load of 7'000 hours per year.

The diesel-powered generator and the oil-fired steam engine both depend on increasing fuel-costs, thus falling out of competition in the long run. The coal-fired steam engine also will have to face price-increases; beside this, the attractive cost per kWh of only 5.2 US' stems from a load factor 40 % higher for coal (80 %) than for the hydropower station (57 %). Wood, wind and solar conversion seem to eliminate themselves for price reasons.

The following sections will deal very briefly with alternative energy-sources individually, in relation to hydro-power, in order to check the so far outlined relative cost situation.

b) Oil fuels

From a "model-calculation" for two 40 kW-plants, one hydro-electric and the other diesel-electric, the cost-functions as shown in fig. 80 have been derived.


Fig. 80: Total Operating Cost and Unit Cost against Power Generated Capacity/Utilisation for 40 kW Diesel and Hydro-Electric Installations

Source: Wright, Micro-Hydro Installations

The key characteristics of investment costs are: hydropower has twice as much costs as the diesel, especially because of much higher civil-work costs and transmission-costs since a diesel-set can be put right in the centre of a consuming point. As to the operation-costs: the diesel has much higher depreciation-costs because of a three-times shorter lifespan, higher maintenance costs, and above all high variable fuel costs. The main results of the comparison are: total operation costs are equal for the systems at about 10 % capacity utilisation, but at 40 % capacity utilisation, diesel is twice as expensive.

Another example from the Philippines is also instructive. The National Electrification Administration plans 239 hydropower stations with a total capacity of 305 MW until 1987,71) an average capacity thus of 1'276 kW. The total cost is supposed to be 4 billion pesos or $ 533 million. On average, 1 kW installed capacity amounts to $ 1'748. The total generating capacity to be installed is the equivalent of a medium sized thermal generating plant, which would consume about 2,3 million barrels of oil at a capacity use of 5000 hours per year. At costs fo $ 35.-per barrel of oil equivalent, yearly fuel costs would amount to 80.5 million $, or 5.3 ¢ US per kWh, in addition to 2,4 ¢ per kWh for capital interest and depreciation. Excluding maintenance and other costs in both cases, 7.7 ¢/kW for the thermal plant compares to 5.2 ¢/kWh for the hydropower plants.

The advantage of such a thermal power plant would be that the initial capital required is lower by 289 million $, when compared to the hydropower alternative. Future costs of fuel, amounting to 80.5 million $ per year, have to be discounted as explained in section F1 (p 114 f.), to get a true picture. Thus, assuming 10 % interest, fuel costs over 5 years will amount to 305 million $, expressed in today's-value of money. From the sixth year onwards, all money spent for fuel in the case of the thermal plant, is equal to a net-saving in the case of the hydropower plants envisaged. Not considering here possible increases of the fuel price, the shorter life of a thermal plant, and other factors, the total amount saved over the life period of 30 years of the hydropower plants, amounts to 470 million $ -expressed again in today's value of money -when compared to thermal plant operation over the same period.

It remains to be said that micro-hydro installations have many external and intangible benefits not inherent to diesel. It starts with the import costs of diesel-sets ranging from $ 600 to 850 per kW. Hydropower plants in contrast will provide a lot of local employment and improvement of human capital. By any criteria like environment, maintenance, lifespan etc. the hydropower plant is favourable, unless there is no water.

c) Wood and Dung

Cost comparisons between hydropower and wood/dung are difficult and do not make much sense. Difficulties arise because only a minority of people in developing countries really buy wood; for an Indian village, 4 % is an example.72) All others cut the wood at no private cost, at quantities of up to 0,6 tonnes/year per capita. Those who buy wood, get it at prices which are -despite the fuel-wood crisis -much lower than kWh-charges from hydroplants. For Nepal it is indicated that one can acquire 1 kWhth for less than 1 US ¢. No electric supply company can compete with this price. The comparison, on the other hand, does not make much sense because wood simply is no longer an alternative. The worldwide deforestation rate calls for an immediate campaign of conservation of wood and for a massive planting of fuelwood supplies. But as long as wood is free of cost to the user, and as long as controls over the cutting of wood are ineffective, there are few incentives to plant energy-forests.

A similar problem is posed with dung. Up to 1 billion people use it to fuel their cooking fires. The amount of dung now being burned annually, is believed to be equivalent to some 2 million tons of nitrogen and phosphorous. 73) The problem is that neither hydro-electric energy can compete economically with wood and dung - even if its price per kWh were a fraction of a US cent -nor does this mean that wood and dung are an economically better solution than hydroelectric power.

In the overall context, only processes in which the fertiliser-value of dung is preserved are feasible propositions and, in the case of power generation from wood, it appears that - in most regions of the world -only planned energy-forests could justify this. The latter, however, have long gestation periods, and there seems not to be any experience available that would permit a comparison with hydropower.

d) Biogas

Biogas will be evaluated in two steps: firstly, the economy of biogas as end-use energy-source is analysed, and secondly, the biogas conversion into electric-energy is compared to hydro-electric energy.

For the first consideration, a typical family size biogas plant in India is taken. Operating costs of such a plant are shown in fig. 81.

Fig. 81: Total Operating Costs of Family-Size Biogas Plant

Source: French, Renewable Energy ... with own adjustments 6 supplements

Item

Cost-Base

Annual operating cost

plant

375.- total investment

31,25 *

feeding/removing of plant

114.- annual labour cost

57. - **

Maintenance of plant

 

12,50

capital cost (15 %)

 

28,15

Total

 

128,90

* estimated lifeperiod: 12 years

** The plant needs daily 175 pounds of dung and water each; 350 pounds of slurry must be removed daily. It is assumed that after deducting the time formerly spent to collect other fuels, still new labour of 4 hours per day is needed to gather water, to feed and maintain the system, and to unload and distribute the slurry. Annual labour costs amount to $ 114.-- for the Indian case. Considering the fact that much of the labour will be provided by family members, half of the labour cost is taken into account.

The tangible internal benefits of the plant result from a daily production of 3 m³ of gas, enough to meet the daily basic energy needs of an Indian family of five to six people. 20 % will be used for home lighting, 80 % for cooking and heating. The gas production corresponds to 16'800 kcal per day or 19.5 kWh per day on a calorific basis. Assuming a capacity rate of the plant of 70 %

Formerly used energy sources (kerosene, coal) of a comparable calorific amount is said to cost $ 90.-, thus rendering the biogas uneconomical, not accounting here for the intangible benefits (anticipating future oil price increases, protection of forests etc.). One might argue that the biogas economy is quickly uplifted when family work is valued differently and the capacity rate is increased. The break-even point can thus be reached when labour costs in fig. 81 are further reduced by 30 % to $ 40.-per year and the plants' utilisation rate is increased from 70 % to approx. 85 %.

But there are more intangible costs to consider. Firstly: the plant needs daily dung from 3 -4 cows; less than 50 % of Indian cattle-owners have this many head of cattle. Secondly: the very substantial amount of labour required by the plant should be seen as opportunity costs of alternative activities, having a higher return than the operation of the biogas plant. This is one of the very important advantages of the low labour-intensive operation of hydropower plants. Thirdly: About 80 liters of water daily per plant, to be mixed with dung (no second use of the water is possible), is a severe constraint in dry regions.

The second step is to compare biogas converted into electric energy with micro-hydro electricity. Projected costs of electricity-generation from biogas are shown in fig. 82, taking the same family-size plant as a basis. A larger plant would benefit from pronounced economies of scale but has not been considered here because of very limited experience with large plants. Nevertheless, with unit costs of electricity, that are 4 to 8 times higher for a small biogas unit, compared to micro-hydro -it is possible to state that there is no economic feasibility of electric energy from biogas, when hydro-electric energy is an alternative. Even if the biogas plant produced at 100 % (7'120 kWh of biogas), the conversion rate were practically doubled (30 %, giving 2'136 kWh of electric power) and the annual cost of the conversion equipment were half ($ 97.50) the cost would still be close to US ¢ 11 per kWh of electric power.

The conclusion is that biogas must be used for those tasks which thermodynamically match the biogas properties. Biogas as a rule is more economical than electrical power for cooking, but it will already be difficult to compete with micro-hydro installations when it comes to mechanical power, because of the very high labour costs of the biogas plant operation. Finally, biogas is completely out of the acceptable cost-range when electric power supply is desired. The few biogas advantages still dwindle further when one applies a development concept oriented toward the majority of a village population, since only few people possess the necessary cattle. Community plants on the other hand will increase costs very much because of management, gas distribution networks, transportation of enormous quantities of water, skilled technicians to run a large plant etc.76) The overall outlook for biogas therefore, is rather bleak in rural electrification.

 

Fig. 82: Cost-Comparison of Electric Power from Biogas versus Micro-Hydropower

 

Total annual biogas production at a capacity rate of 70 %

 

5'000 kWhth

(256 days x 3 m³ x 6.5 kwh)

   
     

Conversion into electric power

 

800 kWhe

(16 % efficiency)

   
     

Annual costs of electric power from biogas:

   

-cost of biogas production

$ 128.90

 

-cost of conversion equipment*

$ 195.--

$ 324.--

     

Cost per kWh of electric power from biogas

 

US ¢ 40.--

     

Cost per kWh of electric power from micro-hydro

 

US ¢ 5-10

* annual operating cost:

Investment

Annual operation cost

 

Engine $ 200.--

$ 33 (lifespan 6 years)

 

Generator (1 kW)

 
 

$ 400.--

$ 67 (lifespan 6 years)

 

Maintenance

$ 50

 

Capital costs (15 % 7

$ 45

 

total

$ 195

e) Liquefied Biomass

The production of methanol is not considered here as potential substitute for micro-hydropower because the production basis is naphta, residual oil and natural-gas. The end-user price ranges from $ 25.-to 45.-per barrel of oil equivalent, depending on the price of the natural gas feedstock and the size of the production plant. Of more interest is the production of alcohol in the form of ethanol (ethyl-alcohol) from biomass.

Economically, experts agree that ethanol is nowadays a too costly substitute; though very large plants are designed (350 barrels oil equivalent a day), costs are in the range of $ 10 -20 million and require about 5'000 - 6'000 hectare of sugarcane annually. Today, the unit cost of ethanol is substantially higher than that of kerosene, with the decisive cost-factor being the price of sugarcane or other feedstock. It might at the most be a partial solution for Brasil (having large land reserves) or Kenya and Mali which have large surplus molasses from existing sugar production. For the majority of countries, however another problem than the unit-cost is relevant: ethanol from sugarcane plantations needs good agricultural land suitable for food grain production, in contrast to the fuel-wood forests which can grow on non-agricultural land.

f) Solar and Wind Power

Along with hydropower, the direct use of sun and wind power are two more truly renewable energy sources. The potentials are impressing, at least theoretically. The solar radiation can provide an energy flow up to 1.6 million kcal per m² annually. Thus, the 1970 total electricity generation of China -60 million MWh -is equal to the solar flux received annually by less than 40 km² of northern China.

Yet many technical obstacles of solar energy conversion into electricity make it very expensive. Irregular flow of radiation (seasonal and random fluctuations) and its diffusion before reaching the surface make a wide commercial application very unlikely within this century.

Electricity from photovoltaic cells, which convert solar energy directly into electricity, costs on the order of $ 2 per kWh. The widely published forecasts that the price will come down rather quickly, conceal the fact that complementary equipment - above all battery-systems -still remain a very important cost-factor. Solar power for low-lift, small farm-irrigation, for village water supply pumping and village electrification are simply out of the economic range compared to micro-hydropower; the advantage of hydro becomes greater, moreover' in proportion to the load factor of the hydro-plant. Nonetheless, in areas where there is no hydropotential, small photovoltaic pumping systems without storage batteries are likely to become a sound possibility. Other uses like water heating, desalination, and crop drying with simple solar equipment, are economically more viable.

Wind energy also has a marked seasonality in many cases. The economically very central problem of storage (batteries), arises again. However the economic feasibility of wind energy seems to be closer to hydropower than the solar option. With a cost of over $ 5'000 per kW installed capacity it is still indisputably more expensive than a micro-hydro installation.

It might be concluded from all these considerations, that micro-hydropower generation will not solve the energy problem of developing countries, but that it can play a very significant role in conjunction with de-centralised patterns of development, providing mechanical and electrical power at lower prices than other alternatives, inducing local employment and technical activities without prejudicing future energy-systems of a larger type, to which local distribution networks can be linked.