The cost of hydropower

As with many renewable sources of energy, most of the costs associated with a hydropower plant are up-front costs required for its construction. Under most circumstances the actual source of energy, the water, will cost nothing.

In the case of hydropower the up-front costs can be high. This can make hydropower plants difficult to fund using standard lending arrangements. Project financing in particular, where a loan is made in the expectation of payback being covered by revenue from the power plant, has proved particularly difficult in recent years. The interest payments required force the cost of electricity too high for it to be economical.

And yet, costed realistically, hydropower is certainly competitive. Some would argue that it is the cheapest sources of electricity available. The problem for hydropower is that while commercial loans for power plants are generally over 10-20 years, a hydropower plant will continue to generate power for perhaps 50 years; with relatively small further investment to rehabilitate the powerhouse, this can be extended to 100 years or longer. There are some dams still functioning in Spain that were built by the Romans - though not to generate power.

The cost of hydropower varies from country to country and project to project. Table 8.3 lists some plants built in the last two decades (the Fiji plant was actually completed in 1982). As the table shows, the cost of construction of a project can range from $700/kW to $3500/kW.

The Chinese government has invested heavily in hydropower over the last decade. Experience there indicates that medium- and large-scale projects can be built for an average cost of around $740/kW. In general smaller projects are relatively more costly, as Table 8.3 indicates. Remote sites such as those in Nepal are also more costly to develop than easily accessible sites. Project costs will also depend on the type of hydropower plant being

Table 8.3 Typical hydropower project costs

Capacity

Cost

Unit cost

(MW)

(US$ millions)

(US$/kW)

Upper Bhote Koshi (Nepal)

36

98

2722

Manasavu-Wailoa (Fiji)

40

114

2850

Kimti (Nepal)

60

140*

2333*

Bakun (Philippines)

70

147

2100

Mtera (Tanzania)

80

139

1738

Casecnan (Philippines)

140

495

3536

Theun Hinboun (Laos)

210

317

1510

San Roque (Philippines)

345

580

1681

Birecik (Turkey)

672

1236

1839

Ita (Brazil)

1450

1070

738

Karakaya (Turkey)

1800

1496

831

Three Gorges (China)

18,200

15,000*

Source: World Bank, Statkraft, Modern power systems, The International Journal on Hydropower and Dams, Montgomery Watson Harza.7

'Estimated costs.

Source: World Bank, Statkraft, Modern power systems, The International Journal on Hydropower and Dams, Montgomery Watson Harza.7

built. Turbines for low-head power plants tend to be more expensive than those for high-head projects. Bulb turbines, of any size, are inherently costly.

The cost of electricity from a hydropower plant will depend on the cost of building and financing the project and on the amount of electricity it generates when operating. For recent hydropower projects built by the private sector with loans repaid over 10-20 years, initial generation costs have been in the range $0.04-0.08/kWh.8 However once the loan has been repaid the costs drop dramatically. The typical range of generation costs is $0.01/kWh-$0.04/kW but may easily fall below 0.01/kWh. This is cheaper than any other source of electricity.

Small hydro projects can range from $800/kW to over $6000/kW depending on the site and the size of the scheme. According to the Indian Renewable Energy Development Agency, the capital cost of small hydro in India is between $800/kW and $1300/kW and the generation cost is $0.03-0.05/kWh. Similar figures from the Energy Technology Support Unit for a typical UK project put the capital cost at around $1500/kW.

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Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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