CHAPTER 3: SMALL URBAN AND RURAL HYDROPOWER UNDER THE REIPPPP
Table 5 Examples on SHP feasibility formwork and case study cost- benefit summary Basic requirements: • detailed revision of the pre-feasibility study findings and essential design parameter definition; • Environment Impact Assessment (EIA) study, including social aspects if “green field” development; • specific investigation outcomes such hydrological, geological, and socio-economic factors; • capital cost and other key financial parameters of the proposed project (e.g. MW installed, in-house demand, kWh sent-out, incremental sales, avoided costs, replaced un-served energy, etc.); • cash flow analysis determining income and cost streams for the term period; • internal rate of return and payback period; • project development programme and estimation of production costs; • risk analysis of major project parameters including both common (e.g. water availability, faulty design, performance risks, etc.) and interface risks (e.g. financial, commercial and legal, etc.); • status report on all permits and licenses required to develop and operate the proposed plant; • valuation of energy output if the proposed plant will be connected to the existing power network; • employment creation opportunities (temporary and permanent); • status of IPP’s negotiations with authorities/customers • including proof of PPA arrangements • compliance with regulations including the Broad-based Black Economic Empowerment Act (2003) Specific requirements: As per Table 3 and the requirements of REIPPP programme < www.ipp-renewables.co.za > Example of salient outcomes from the Feasibility Cost-Benefit Summary (2012 time basis) for the retrofit of hydropower (Phase 1: 5,7 MW) at the Hartbeespoort Dam in the North West Province (Ottermann and Barta, 2012): (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii)
EPC Cost = R98m for phase-1 (R17 220 per installed kW) Annual Operating Cost at NPV = R1,72m (R110/kWh) Life-time levelized Cost at NPV = R0,52/kWh (break-even tariff ) Annual Income at NPV = R16m per annum Payback period = 13 years Return on equity (ROE): Without draw-down of dam FSL: At 90c/kWh (the weighted average Rural Flex tariff ), the IRR = 16% At 103c/kWh (NERSA tariff cap for hydropower), the IRR = 20% With draw-down of dam FSL: At 90c/kWh (the weighted average Rural Flex tariff ), the IRR = 21% At 103c/kWh (NERSA tariff cap for hydropower), the IRR = 25%
NB: From the above Cost-Benefit Summary it is obvious that adding SHP to several suitable existing dams the water-energy nexus could be advanced in South Africa.
SUSTAINABLE ENERGY RESOURCE HANDBOOK
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