Hydroelectric Power a Guide for Developers and Investors HYDROELECTRIC POWER Iii
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Hydroelectric Power A Guide for Developers and Investors HYDROELECTRIC POWER iii Contents Foreword .......................................................................................... 1 Acknowledgments ................................................................................. 3 1. Executive Summary. 5 2. Introduction .................................................................................... 9 3. Overview of Hydropower Development. 11 4. Design and Typical Layouts ...................................................................... 17 5. Project Development ........................................................................... 33 6. Site Selection .................................................................................. 39 7. Hydrology and Energy Calculations .............................................................. 43 8. Permits and Licensing .......................................................................... 53 9. Construction .................................................................................. 61 10. Commissioning ................................................................................ 65 11. Operation & Maintenance ....................................................................... 71 12. Environmental and Social Impact Mitigation ..................................................... 77 13. Capital and O&M Costs ......................................................................... 85 FICHTNER Sarweystrasse 3 14. Economics and Financial Analyses ............................................................... 93 70191 Stuttgart Germany Phone: +49 711 8995-0 15. Financing HPP Projects ........................................................................ 103 Fax: +49 711 8995-459 16. References ................................................................................... 108 www.fichtner.de 17. Annex ........................................................................................ 111 Disclaimer: This guide was prepared for the International Finance Corporation 18. Acronyms ..................................................................................... 115 by the consulting firm Fichtner Management Consulting AG to be used as a reference, primarily for hydropower developers and investors. The findings, interpretations, and conclusions expressed in this report are entirely those of the author(s) and should not be attributed in any manner to the World Bank Group including the International Finance Corporation, or any affiliated organizations, or to members of its board of executive directors for the countries they represent. The World Bank Group does not guarantee the accuracy of the data included in this publication, and accept no responsibility for any consequence of their use. It is not intended to be a compliance guide or substitute for IFC performance standards or World Bank safeguards. Cover Image: Large Photo–Bigstock/Danny Wilde, Small Photo–World Bank A Guide for Developers and Investors HYDROELECTRIC POWER iii Contents Foreword . 1 Acknowledgments . 3 1 . Executive Summary . 5 2 . Introduction . 9 3 . Overview of Hydropower Development . 11 4 . Design and Typical Layouts . 17 5 . Project Development . 33 6 . Site Selection . 39 7 . Hydrology and Energy Calculations . 43 8 . Permits and Licensing . 53 9 . Construction . 61 10 . Commissioning . 65 11 . Operation & Maintenance . 71 12 . Environmental and Social Impact Mitigation . 77 13 . Capital and O&M Costs . .. 85 14 . Economics and Financial Analyses .. 93 15 . Financing HPP Projects . 103 16 . References . 108 17 . Annex . 111 18 . Acronyms . 115 A Guide for Developers and Investors iv FOREWORD FOREWORD HYDROELECTRIC POWER 1 Foreword Hydropower has a well-established role in the energy sector and support for further development of this energy resource is very important, especially in developing countries . Hydropower is a vital renewable energy resource and for many countries it is the only renewable energy that has the potential to expand access to electricity to large populations . Yet it remains underdeveloped in many countries, especially in Africa, where less than 10 percent of hydropower potential has been tapped . The opportunities are great. But hydropower development This guide covers all aspects of hydropower project poses complex challenges and risks. While large storage development, emphasizing the importance of interactions hydro may offer the broadest benefits to society, it also among technical, commercial, permitting/licensing, tends to present the biggest risks. Creation of reservoirs environmental and social, and financing activities. The sometimes means resettlement of whole communities, the technical sections are more detailed and can be used as flooding of large areas of land, and significant changes to reference, while the permitting/licensing and financing river ecosystems. sections are intended more as a high-level review. As presented in the publication “Toward a sustainable We hope that the knowledge presented here helps to energy future for all: directions for the World Bank Group’s support the sustainable and well-executed development energy sector,” the World Bank Group is firmly committed of valuable hydropower resources to meet the increasing to the responsible development of hydropower projects of demand for clean, reliable, affordable energy. all sizes and types—run of the river, pumped storage, and reservoir—including off-grid projects meeting decentralized rural needs. The IFC has approved 42 hydropower projects totaling more than US$1.3 billion over the last decade. This guidebook is intended for use by IFC and World Bank clients and stakeholders planning and implementing Mary Porter Peschka hydro projects; it is not intended to replace official guidance Acting Director Cross-Cutting Advisory Solutions Department documents of the World Bank Group, but instead is an effort to capture the knowledge and experience gained through the extensive engagement of IFC staff and our clients in hydropower development. A Guide for Developers and Investors 2 ACKNOWLEDGEMENTS ACKNOWLEDGEMENTS HYDROELECTRIC POWER 3 Acknowledgments Fichtner Management Consulting AG developed the material of the hydro guide for the International Finance Corporation . Fichtner has drawn on many lessons learned from its recent engagement with IFC in the Balkan Renewable Energy Program (BREP). The guide’s development was managed by Stratos Tavoulareas (IFC), who also contributed extensively to the content. IFC would like to thank the governments of Ireland, Luxembourg, the Netherlands, Norway and Switzerland for their support in producing this report. The authors are grateful for the input and peer review of Dzenan Malovic, Hendrik Engelmann-Pilger, Nebojsa Arsenijevic, Katharina Gassner, Elena Merle-Beral, Giovanna Monti, Justin Pooley and Lauren Kiyoko Inouye. Jeremy Levin and John Kellenberg provided valuable guidance and management support. A Guide for Developers and Investors 4 EXECUTIVE SUMMARY 16% Worldwide, hydropower is a crucial power supply contributing about 16 percent of global electricity. EXECUTIVE SUMMARY HYDROELECTRIC POWER 5 Executive Summary 1 Worldwide, hydropower is a crucial power supply option for several reasons . First, it is a renewable energy resource that can contribute to sustainable development by generating local, typically inexpensive power . Second, hydropower reduces reliance on imported fuels that carry the risks of price volatility, supply uncertainty and foreign currency requirements . Third, hydro systems can offer multiple co-benefits including water storage for drinking and irrigation, drought-preparedness, flood control protection, aquaculture and recreational opportunities, among others . Finally, hydro can allow more renewables— especially wind and solar—to be added to the system by providing rapid-response power when intermittent sources are off-line, and pumped energy storage when such sources are generating excess power . Hydropower contributes about 16 percent of global electricity, Hydropower plants (HPPs) are unique compared to other a share that is expected to grow. Hydro’s technical potential is power supply options such as thermal. HPPs are always five times the current utilization rate, and huge potential exists custom-designed site-specific projects. HPPs require substantial in developing countries. According to U.S. Energy Information capital investment, but they offer extremely low operating costs Administration (EIA) projections, hydro can contribute up and long operating lifespans of 40–50 years that can often be to 16,400 TWh/yr, and by 2050 total installed hydropower extended to 100 years with some rehabilitation. The result is capacity will double (1,947 GW), generating an annual 7,100 extremely competitive production costs for electricity. TWh [EIA 2010]. Most mid-sized and large hydro resources in However, developing a hydro project is usually a challenge. developed countries have been exploited but opportunities for There are substantial uncertainties associated with hydrology additional rational utilization of small hydropower plants exist (which impacts power generation and revenues) and geology in all countries, especially in the developing world. Sub-Saharan (which may substantially increase construction costs). Site Africa, where the energy access deficit is largest, has over 400 licenses and permits could be difficult to obtain as many gigawatts of undeveloped hydro potential—enough to quadruple