The need for feasibility studies in small hydroelectric plant design

July 14th, 2016, Published in Articles: Energize

 

Africa continues to deploy small hydroelectric power facilities throughout the region to ensure reliable, affordable clean energy and utilise available water sources. Continued deployment will largely be dependent on bankable projects that begin at the feasibility stage of project development.

According to a 2012 report from the International Energy Agency (IEA), Africa has the largest proportion of untapped hydropower potential in the world. In January 2014, Hydro Review Wordwide reported that Africa holds about 12% of the world’s hydropower potential, with a technically feasible output of about 1800 TWh/year. Yet Africa produces only about 3% of the global hydropower and exploits less than 10% of its technical potential, the lowest proportion of any of the world’s regions. Table 1 lists the currently installed small hydropower MW values and potential for various regions of Africa. The information was produced by United Nations Industrial Development Organisation (UNIDO) and International Centre on Small Hydro Power (ICSHP).

Table 1. Small hydropower potential in Africa.
Africa region Installed small hydro (MW) Potential small hydro (MW) Utilisation
South 38 247 15%
Middle 75 328 23%
East 208 6261 3%
North 115 184 63%
West 82 742 11%
Totals 518 7762 <7%

Large hydropower facilities have experienced a warmer reception over the last few years. With Africa’s growing population and greater energy consumption, various countries have learned to work together to develop policies that have allowed for the growth of these large hydropower projects. These projects will serve the larger population and industrial locations. Small hydropower can continue to grow as it serves the more remote and less populated areas of the continent. In addition, small hydropower will be able to take advantage of the growing development of the electrical grid. This will allow for ease of connectivity and transmission of power. The following list provides some of the key advantages to developing small hydropower projects:

  • A vast untapped potential.
  • The resource is available, reliable, affordable and sustainable.
  • The projects can be multipurpose: power, water supply and flood control.
  • Can support a micro-grid in an off-grid location.
  • Easier to advance through the environmental and regulatory process.

This article will focus mainly on the technical elements of documenting a plan for developing a hydropower project. The details on project financing will be discussed at a high level. It should be understood that some level of project funding will be required for the initial concept development. Once the concept is clearly understood, financing options will become available based on the merits of the project. A well-organised approach from the onset of the project will result in the highest level of success. This article also presents four major decision points, or gates, to be considered in evaluation of the project (Fig. 1).

Fig. 1: Process flow.

Fig. 1: Process flow.

Project concept

The first step in developing a hydropower project is proper site selection. Determining where to site a hydropower plant can be complicated, time-consuming and can involve a great deal of research. Proper siting is critical for the success of the project. In developing countries, information related to site selection is not always readily available. In developed countries, there is a great deal of information readily available from government and private entities. Knowing the technical issues associated with a site only addresses part of the information that must be fully understood to allow the project to advance.

The technical elements contributing to the success of the project are related to the hydrological conditions and site topography. The water flow and head data associated with the chosen location, such as the site shown on Fig. 2, must be validated. Obtaining historical information related to hydrological data is critical to the sizing of the generation equipment. These data must show not only the historical averages but also the distribution of the flow over the course of the year. Average daily values over a period of at least 15 years can provide meaningful data to be used for equipment sizing. With a greater span of historical data, assurance can be given to the reliability of the information and the sizing of the power production equipment as well as confidence in future performance.

Fig. 2: Example of a site location.

Fig. 2: Example of a site location.

During this concept phase, another step involves gaining an initial understanding of the environmental and social aspects associated with the site. The site may be technically viable, yet the environmental or social aspects could present insurmountable hurdles. These elements do not need thorough examination at the concept phase, but the initial concerns must be understood.

The concept phase is focused on discovering fatal flaws with the project. At a very high level, a sizing calculation can be done to determine the generation that can be developed at the site. With this information, a general economic model can be developed. With the economic model and an understanding of the environmental and social conditions, the team can decide if further investment in the project is advisable. A site must not be forced to work. The available data should be studied and a decision made. It is typical to study several sites before discovering a site that is best for the development team.

With favourable responses to the key questions of Gate 1, the team will be ready to pass through the concept phase and proceed to the prefeasibility study.

Key questions to be addressed

Key questions to be asked for Gate 1 include the following:

  • Can reasonable access to the site be gained?
  • Is the possibility for power production in line with potential capital investment?
  • Does historical flow information exist? Can it be obtained?
  • How will the local community view the project?
  • Have any fatal flaws been identified that cannot be mitigated?

Prefeasibility study

Key questions in the prefeasibility study phase include the following:

  • Is the project financially attractive?
  • What technical approach should be utilised moving forward?

During the prefeasibility phase, the goal is to provide additional details and seek to validate the concept. The head and flow data available are further studied to evaluate the various technologies for the site conditions. Based on the technology chosen, a conceptual design can be developed for the site. This conceptual design should include the powerhouse, water conveyance structure(s) and dam requirements. The level of detail completed during the prefeasibility study is directly correlated to the available funds. In this phase of the project, the team is primarily seeking to develop a plan and path forward in the development of the hydropower plant. Investigation into the permitting and environmental requirements is an important part of this planning process.

Table 2: Project delivery execution methods characteristics.
Design-bid-build Construction management at risk Progressive Lump sum
Defined, proven process Design-build “lite” Improved schedule True single contract design-build models
Distinct milestones to ensure expected results Promotes early collaboration between designer and constructor Progressive estimates address owner’s challenges Offers owner a wide variety of evaluation options, ranging from almost all qualifications-focused to “best value” with a lump sum price
Managed to known challenges (unknowns: change orders) Allows selection of a contractor based on qualifications and fee (but not a full bid) Has some form of “price/cost-related” criteria included in selection
Traditional “cast” of participants Relies on separate contracts, resulting in a “forced marriage” Offers owner maximum flexibility/ opportunity to collaborate on permitting/design
Does not always meet owner’s needs for collaboration, innovation and accountability Owner has an “off-ramp” permitting issue or if guaranteed maximum price cannot be negotiated

Permits could focus on water and property rights, gaining access to the property, minimum flow requirements, water quality concerns and other environmental issues. Developing acceptance of the project from the local community should also be done during this phase of the project.

At the completion of the prefeasibility study, the project team should have gathered sufficient information to determine if further investment is warranted. The cost of the project should be refined in addition to the income and ancillary benefits that can be generated from the project. A high-level review should also allow the team to understand the general construction plan and how the site will be accessed. Based on the technical findings, the economic analysis and the permitting requirements, the team can assess if the project should move forward to a more detailed feasibility study.

Key deliverables

Key deliverables for Gate 2 include the following:

  • A detailed site survey including topographical data.
  • Ownership of the site.
  • Water rights that give sole access to generation or, at a minimum, a path to obtain the rights.
  • Accurate measurement of head and historical, accurate flow data.
  • An estimate of annual power generation and revenue gained from sale of generation.
  • A preliminary financial model with major cost inputs to evaluate the viability of proceeding to the next phase of the project.

Before the team can pass through Gate 2, the key deliverables should be obtained. Without these data, considerable time and financial capital could be wasted. With the facts in hand and following a thorough evaluation, the team will be able to determine if it is ready to proceed to the third gate.

Feasibility study

At this phase of the project, the major hurdles associated with the project should have been identified. The team will then need to determine if there are reasonable technical, political and financial solutions to overcome the hurdles. During the feasibility study phase, the technical requirements of the project will be clearly defined and the financial commitments more plainly understood. An initial study of the environmental and regulatory permitting process should be well documented. Key outcomes from the feasibility study will include a site plan, preliminary powerhouse layout, a clear understanding of the water conveyance scheme and a developed plan to fully investigate the social and environmental aspects of the project along with the other permitting and regulatory issues.

An engineering consulting company should be a vital part of the project team. The consulting company should meet with the team at the project site and gain first-hand knowledge of the site conditions. Ideally, the company should be able to address the technical as well as the environmental and permitting issues associated with the project. Because of regional and national laws, it is sometimes advisable to have a regional consulting company join the team to ensure that these areas are addressed from a local perspective.

Technical requirements

Design inputs for the technical requirement portion of the feasibility study include the following:

  • Site survey
  • Topography map
  • Stream flow data
  • Geotechnical data

A consulting company tasked with the technical aspects of the feasibility study should have the ability and experience to design hydropower plants in the size range of the project.

The consulting company should be tasked with analysing and reviewing the hydraulic studies to date. At a minimum, the company will need average monthly flow data to allow for preliminary turbine sizing. These data will allow for the construction of a flow duration curve. The more accurate the flow data, the more accurate the turbine can be sized.

Being able to provide the consulting company with daily flow data would allow for better turbine sizing and overall generation production predictions. As noted earlier in this article, 15 years of data would be a minimum. An accurate measurement of the head and flow will allow the consulting company to select the proper turbine technology (Pelton, Francis, Kaplan, or other).

Establishing the optimal locations for the powerhouse and the water intake structure is a critical engineering decision that should be well defined at this stage of the project. These two elements will drive generation production values and total project cost. Integral to this decision is the dam size and type and water conveyance structure (penstock, open channel). The cost associated with these civil features will define the financial success of the project.

The use of flyover light detection and ranging (LIDAR) technology in the development of highly accurate site topography maps will improve the accuracy of the study while helping to reduce cost and risk. LIDAR is an airborne, space-borne or ground-based laser ranging technology commonly used for acquiring high resolution topographic data.

Developing a site arrangement drawing will be critical to the project planning and permitting process. This should consider not only the daily operation of the plant but also the initial construction phase. The site plan will be critical input to the establishment of the geotechnical baseline study. The geotechnical investigation plan will confirm soil conditions and stability of the site for the proposed design.

In addition to the site plan, major electrical and mechanical equipment should be specified and used to develop the conceptual layout and plan for the new powerhouse. Determining how the power will be distributed is critical. Will the plan connect to the regional grid or will a micro-grid be established?

The team should not attempt to design the plant and project at this phase. The critical outcome is to identify a viable, “best” option that will advance the project to the next phase.

Environmental, social and economic requirements

Areas to consider in the environmental, social and economic portion of the feasibility study include the following:

  • Social issues
  • Downstream flow requirements
  • Erosion
  • Water quality
  • Local flora and endemic species
  • Land rights
  • Legal and regulatory

During the feasibility study phase, considerable effort should be placed on learning and documenting environmental and other permitting requirements for the project. In some regions of the world, this portion of the project can be complex and time-consuming, yet in other areas of the world this is not the case.

Before proceeding beyond the feasibility study phase, a complete understanding of the process, the time required to work through the process and the financial needs to address this area must be fully understood and accounted for in the project economics. Just as the technical area requires initial in-depth study, a complete plan to address the environmental, social and economic requirements must also be developed.

Feasibility phase deliverables

Deliverables for the Gate 3 feasibility phase include the following:

  • A technical conceptual design that presents a viable plan to advance the project to the detailed design phase. Important items in this report should include: dam requirements and site, turbine type and size, plant location, evaluation of grid connectivity issues and a proposed plan, means for water conveyance to the plant, site plan, and plant general arrangement.
  • A detailed cost estimate (±30%) for the project and a financial model that projects possible cash flow and rate of return (ROR).
  • An initial environmental study that seeks to develop the plan to complete the more detailed environmental assessment (EA). Major issues that could keep the project from moving forward should be identified. Possible mitigation means should be detailed.
  • A desktop geotechnical study of available information should be conducted.
  • An understanding of the impact on the local area from a social aspect should also be prepared. Meeting with the local stakeholders and gathering input and support from them may prove critical.
  • Preliminary project implementation plan.

At this point, the team has completed an incredible milestone. Reaching Gate 3 is a fantastic achievement. The team is now starting to evaluate real numbers and establish a clear design approach. A clear understanding of the environmental, social and permitting requirements has also been developed. Understanding the issues and developing a plan to address and mitigate all the technical and legal aspects of the project are the first part of Gate 3. The team must at the same time evaluate the project financials. If the design and plans are clearly defined and the project financials meet the team’s goals, it is time to move forward with the details of the project.

Project realisation

Environmental assessment/permitting process

If the team has advanced to this phase of the project, it is clear that it is on its way to having a bankable study. The technical areas and items are well proven. The financial metrics have been established and met. It is now time to fully execute the plan to address the EA requirements and complete the regulatory permitting process.

This phase of the project is site specific. The various nations, regions and states have developed processes and procedures that work best for them and address the unique concern of their part of the world. Gaining the services of a local, reputable and respected team member that can guide the team through this process is invaluable. Ideally, this would be the same team member who worked with the team in the feasibility phase to develop the EA plan.

Financial

It is hard to imagine the financial gate starting at this point. In reality, the project team has been considering the financial requirements from the initial conceptual phase of the project. Up to this point, the team has invested approximately 5 to 10% of the total project cost. For the project to be considered bankable, the feasibility study and the EA will need to have been completed and returned with favourable results.

It is at this point of the project that the finances will need to be fully in place before the team begins the detailed design and construction phase. Investors may have come on board prior to this step in the project, yet it is now that the financial commitments must be fully made. How the project is financed and the various complexities associated with it are beyond the scope of this paper. This would include getting the power to market via a power purchase agreement.

Implementation plan

With the feasibility study complete, the EA progressing, permits proceeding and the plan for financing in place, the team is now at a point to determine the best course of action for the design and ultimately the construction of the hydropower plant. There are various models in the industry for designing and constructing power plants. The traditional method relies on designing the project, purchasing the major equipment and then contracting with a construction provider to build the plant. The more accepted practice in the industry today relies on contracting with one entity that will engineer the plant, procure the equipment and construct the power plant (EPC).

Another option being seen in the industry today is the progressive design-build approach. This approach forms more of a partnership between the developer and the design-build team. Fig. 3 outlines some of the various project delivery models being utilised in the industry today and some advantages of each.

Fig. 3: Project delivery execution methods.

Fig. 3: Project delivery execution methods.

The preliminary implementation plan (IP) should be updated to reflect the current project team’s final path forward. At this point in the development cycle, the design for the project is less than 15 to 20% complete and there are many details that will need to be addressed. Establishing the project team design and construction approach is a clear priority and contributes greatly to the details for the IP. As the name implies, the final IP will move the development team from basic design engineering, through detailed design, engineered equipment purchase, civil site work, concrete and structural construction, electrical and mechanical construction, and finally to start-up and commissioning. Fig. 4 presents a general timeline for an IP for a small hydropower plant utilising the progressive design-build approach.

Fig. 4: Sample implementation plan.

Fig. 4: Sample implementation plan.

The team has now reached the point where multiple activities are progressing at the same time. The final three phases (environmental, financial and implementation) of the project are often running in parallel. Advancing these three phases concurrently works to reduce overall project development time while also strengthening the overall development process. There is a strong link between the EA, permitting and project design. These phases will also have a strong influence on the project cost and ultimately the project financial requirements. The final plan includes how the team decides to implement the final engineering and construction for the facility. Integrating these final phases into one gate allows for a more unified and succinct decision-making and project planning process.

Key deliverables

The key deliverables of Gate 4 will help to move the project forward, as follows:

  • EA should be complete and all required permits approved or well on their way in the approval process.
  • The project financial plan is known and fully funded.
  • Geotechnical study is complete and site soil conditions confirmed.
  • The project execution plan is complete and understood by the team. Key contractors and contracts (engineering, turbine and construction) should be on board and part of the decision-making team.

Conclusion

Undertaking the development of a hydropower plant is not a simple task. Even for a small hydropower project, considerable time, effort and financial means are required. There are well-defined gates where critical decisions must be made (Fig. 1).
Because of the amount of capital at stake, these decisions can assume considerable risk. To minimise and control the risk, the project team must follow a proven process for the advancement of a hydropower project. In this paper, major decision points, or gates, are presented on a high level for consideration.

The gates indicate a need for the team to conduct a detailed evaluation of all data gathered at a point in time and decide if the project should continue. The data and the risk associated with the information must be thoroughly analysed and understood. Assumptions should be clearly stated and documented. As the project advances, the assumptions must be verified.

As the team moves through the development process, greater detail is developed and added to the project plan. The ultimate goal of this entire process is to develop a hydropower plant; the team should not lose sight of that goal. From the site selection process to the details of the IP, the goal remains to develop a financially worthwhile project; if this goal becomes jeopardised while moving through the process, the team must seek to mitigate the problem area. If the problem area is not addressed to the satisfaction of the team, it may be time to evaluate the project goals or start a new process at another site.

Contact Prenisha Chiba, Black & Veatch, Tel 011 234-3339, chibap@bv.com

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