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New Markets for Small-scale Hydro

by E A Maurer, Sulzer Hydro Ltd, Switzerland

INTRODUCTION

The market for small and medium sized hydro-electric power plant is more attractive than ever. The boom in Europe has increasingly spread to the emerging countries, and here too, small hydro plays an important ecological role. In addition to new plant, rehabilitation of 'historical' plant is now a major factor. The last few years have seen a market shift from single machine components to complete plant and systems, requiring a strategy re-think on the part of larger companies. Following the influx of private capital into the power industry, business conditions have also undergone a thorough transformation. In place of 'fast money', hydro power offers the prospect of earning longer-term, 'sustainable money'.

The term small-scale hydro-electric power (or simply 'small hydro') is used slightly differently depending on the country and market. Here, it is used to denote plant with turbines up to 10 MW.

In European countries, and particularly in Germany, Italy, Spain and Switzerland, utilities often employ small hydro equipment in addition to the main plant, either as stand-alone generating stations, or for supplying auxiliary equipment. In the past, this part of the business was regarded by all concerned (ie operators, consultants and equipment manufacturers alike) as a sideline; project procedures for small plant (including preliminary project, tendering and final contract) being modelled implicitly on those for large plant. Furthermore, the plant was often divided into three and more lots, so that small plant was seldom successful commercially.

For further reading on Hydro-electric Power please visit altenergy.org

ECONOMIC POTENTIAL

The global potential for small and medium-scale hydro is estimated at over 20,000 MW. However, a large part of this lies in developing countries, such as Nepal with its 20 million inhabitants. Nepal, at the foot of the Himalayas, with its abundant water resources, today has an installed generating capacity of 250 MW.

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These turbine-generator units each
produce 1 MW

It is clear that the construction of a hydro plant such as Chilime, with its 2 x 11 MW, represents a very significant increase in total generating capacity for Nepal.

To give an idea of what this means in relation to industrialised countries: if a quarter of all households in Germany were to install one additional 60 W bulb, additional generating capacity of 340 MW would be needed, while in Italy 170 MW and in Switzerland 30 MW would be required. India, on the other hand, would need 2,000 MW extra capacity! Thus it is not surprising that the Indian government has announced plans to increase generating  capacity by 6,000 MW per year, of which 600 MW is to be covered by small hydro. Stations below about 1 MW are generally less economic to build.

Quite apart from new plant, many stations are now at an age where maintenance and refurbishment are critical. Now, owing to rapid developments in computerised hydraulic design, it is possible not only to restore older plants but actually to improve their performance.

ECOLOGICAL POTENTIAL

As an example of the ecological importance of hydro power, a small river station with three 2.5 MW bevel gear bulb turbines produces 24 GWh/year enough to supply 5,000 households. Had this been generated using fossil fuels, an additional 24,000 tonnes of CO2 per year would be emitted to the atmosphere.

Environmental protection has now become an important theme in developing countries. In India, for example, the situation is dramatic, with forests vanishing at a greater rate than ever seen on the European continent. Not only is wood scarce, but fossil fuels incur a smog penalty, so renewable energy from hydro power has become critical for ecological and economic survival.

BARRIERS

Despite the advantages, there are those who would dispute the environmental advantages of hydro power, which is still often confused with large-scale plant. And, as financial resources are scarce, many emerging countries tend to favour short-term investments with a low cost-benefit ratio ($/kW). As a result, diesel plant is then installed in place of more ecologically-sound, small-scale, hydro stations.

In this respect, small and medium hydro manufacturers have a duty to inform the public of the issues at stake. A comparison of the yield factors of various types of energy plant suggests that hydro power remains the most valuable form of energy. (Yield factor is defined as the ratio of the quantity of energy produced by an installation during its lifetime and the energy required for manufacture, operation and disposal including secondary energy.)

MARKET OPPORTUNITIES

So, why are so few small hydro plants built? The answer to this question lies with money. In most parts of Europe, electricity supply is still largely in the hands of public utilities, whereas elsewhere there is a clear trend towards private investors. As Figure 1 shows, the whole market for hydro power is changing.

Plant

Yield Factor

Small hydro

80-100

Large hydro

100-200

Photovoltaics

3-5

Solar (thermal)

20-50

Wind power

10-30

The traditional division of responsibilities between turnkey enterprise, consortium member, or contractor, is declining. World-wide, very few small and medium plants are still engineered this way. Indeed, the turnkey concept is now finding increasing application to large-scale plant as well.

Manufacturers wishing to exploit this new market situation must understand that the timescales, the differentiation between producers and the decision mechanisms in awarding contracts have all changed.

Three key success factors have emerged:

  • short market reaction time;
  • high economic performance;
  • selling the system, not the product.

The need is for a total solution, (also known as 'water-to-wire') in which the turbine itself represents just another component (seeFigure 2). The new investors place
primary importance on rapid realisation and short payback times.

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Figure1: The changing hydro-power market

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Figure 2: The total solution for a compact hydro programme

Though these two factors would appear to mitigate against it, hydro power does in fact offer investors several unique advantages:

  • high security;
  • low operating costs;
  • negligible CO2 pollution;
  • sustained long-term performance.

This clearly illustrates that in the small hydro field today, it is not so much 'fast money' that is to be earned, but rather long-term, 'sustainable money'.

For more information contact the CADDET Swiss National Team in Aarau.

The CADDET Renewable Energy Newsletter is a quarterly magazine published by the CADDET Centre for Renewable Energy at ETSU, UK.

The articles published in the Newsletter reflect the opinions of the authors. They do not necessarily reflect the official view of CADDET.

Enquiries concerning the Newsletter should be addressed to
Pauline Toole, Editor, CADDET Centre for Renewable Energy, ETSU, Harwell, Oxfordshire OX11 0RA, United Kingdom. Tel: +44 1235 432968, Fax: +44 1235 433595.