Issuu on Google+

Talk Risk Management and Resolution Strategies for established and novel Technologies in the

low head, small Hydropower Market

Patrick Wiemann, 13/06/2008 Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Overview 1. Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Potential

Case Study Stadtwerke Munich: •

Flow 30 m3/s

•

Energy with Head of 1.06 m: 1,857,000 kWh

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Market development of small hydropower Installed power in MW

14500 White Paper Target =14,000 MW

Data 2004 and 2005 Current Trend

14000 13500 13000

12,786 MW

12500 12000

11,644 MW

11500 11,535 MW 11000 2003

2004

2005

2006

2007

2008

2009

2010

2011

Year

•

The market growth of small hydropower in Europe

was only 0.95% installed power from 2004 to 2005. •

The ambitious target of 14,000MW cannot be reached with current market growth.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Overview established technologies

•

Overview of established hydraulic machines regarding operating heads and flow rates.

•

Demand highlights where new technologies may emerge in the near future.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

0.12

Running hours per year = 5,250h (average)

0.11

Total investment cost

16000

Specific cost in € per installed kW power

Electrictyy production costs in €/kWh . .

Justification

0.10 0.09 0.08 0.07 0.06 0.05

Low head installations Medium head installations High head installations

14000 12000 10000 8000 6000 4000 2000 0

0.7

0.8

0.9

1

1.1

1.2

1.3

0

Parameter variation in %

200

400

600

800

1000

1200

Size

High sensitivity of low head hydropower projects.

Specific investment cost per installed kW power for low head is significantly higher than for high head.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Research problem and Motivation 1.

Raising

funds

and

gaining

investor

confidence are one of the main hurdle. 2.

The uncertainties involved in hydropower

are not well understood. 3.

There is little investment in research.

4.

There are technological challenges in exploiting the remaining hydropower potential, mainly of low-head sites.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Overview 1.

Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Process of the Risk-Management-Cycle Risk-Management-Cycle

Risk Assessment

Risk Identification

Risk Analysis

Risk Controlling

Risk Resolution

Physical inspection

Economic risk

Acceptance

Flow charts

Technical risk

Avoidance

Fault trees

Socio-economic risk

Protection

Hazard indices

Environmental risk

Reduction Transfer

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Risk Identification Types of risk

Quantitative

Economic risk

Technical risk

Qualitative

Socio-economic risk

Environmental risk

Cost overruns risk

Weather risk

Changes in law

Flood risk

Price risk

Breakdown risk

Changes in taxation

Noise risk

Inflation risk

Performance risk

Political Force majeure

Water quality

Damage to third party

Risk of innovation

Meeting obligations

Completion risk

Force majeure

Fish impact

Legend: No insurance or limited cover available, Insurance cover available

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Risk Analysis •

Intuitive approach: Add an item for

“unforeseen costs”. •

Sensitivity analysis (probably the most

common way of handling project risk). •

Statistical methods, for example

probabilistic risk analysis using the MonteCarlo Simulation (MCS) method.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Risk Resolution Strategies •

Risk transfer, which is a strategy to shift

the risk to another person or organization. •

Risk reduction through mitigation,

prevention, or anticipation. •

Risk research, e.g. dynamic performance risk can be mitigated by analyzing the present performance of previous projects.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Overview 1.

Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Case Study •

We focus on weather risk through variation of rainfall and the choice between alternative technologies.

•

The case study will consider two scenarios: 1. Under low flow volatility, which means relatively low weather risk, and 2. Under high flow volatility, which means relatively high weather risk.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Turbine

•

Crossflow- and Kaplan-turbines are appropriate for low heads and for a wide range of flow rates.

•

The maximum efficiency of Crossflow- and Kaplanturbines is between 80 and 93%.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Screw

The Screw can use water flows of 0.1-5m3/s and heads up to 10m, with power capacities up to 300kW.

The Screw reached an efficiency of 60% at 20% of max. flow and 70% for 60-100% of maximum flow.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Efficiency curves for Turbine and Screw Overall plant efficiency in % .

1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0%

20%

40%

60%

80%

100%

Admission (Q/Qmax) in %

•

The Turbine efficiency curve is very tight around maximum efficiency value of 85%.

•

The Screw has a very flat efficiency curve with a maximum efficiency value of around 70%.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Cost curves for Turbine and Screw Case Studies: A 50kW

Specific investment cost in €/kW .

12000

B 350kW

Turbine

10000

Screw

8000 6000 4000 2000 0 1

10

100

1000

Installed power in kW (log)

Two cases: A for a 50kW and B for a 350kW engine.

The cases A and B will be considered under low flow volatility and under high flow volatility.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Flow duration curves 6

.1000

Low volatility = low weather risk High volatility = high weather risk

4 Probability

Flow in m 3 /s

5

3 2 1 0 0.0

0.2

0.4

0.6

0.8

1.0

.0000

60

63

65

68

70

73

75

78

80

83

85

88

90

93

95

98

100

103

105

108

110

113

115

118

Flow in m3/s

Probability

•

Key variable is the weather risk measured as variability around the mean value of the flow data.

•

The flow variation from available historical flow data by using the log-normal or the Gumbel distribution.

Risk Management in the low head, small Hydropower Market

13.06.2008

120


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Case Study Results Case A: Low Volatility and 50kW

Case B: High Volatility and 350kW installed

installed power

power

1.0

1.0

Turbine Screw

0.8

Probability

Probability

0.8

0.6

0.4

0.2

0.0 -1.5e+7

Turbine Screw

0.6

0.4

0.2

-2 -1.0e+7

-1 -5.0e+6

0 0.0

+1 5.0e+6

+2 1.0e+7

Expected Net Present Value

0.0

1.5e+7

-1.5e+7

-2 -1.0e+7

-1 -5.0e+6

0 0.0

+1 5.0e+6

+2 1.0e+7

1.5e+7

Expected Net Present Value

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Case Study Results Case A: Low Volatility and 50kW

Case B: High Volatility and 350kW installed

installed power

power

The efficiency advantage of the

The cost (and risk) advantage of the Screw

Turbine is less is less important than the important than the cost efficiency advantage of advantage of the the Turbine. Screw. Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Case Study Results •

The case study provides some interesting

insights into the importance of considering risk. •

Further research will aim for quantitative results under a combination of several uncertainties.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Overview 1.

Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Conclusions and Discussion •

The low head, small hydro power market is unexploited as a result of the lack of

understanding of risk, holding back technologies development and growth because of low investor confidence. •

The use of statistical simulation methods improve the quality of the decisions and increase confidence in the decision.

Risk Management in the low head, small Hydropower Market

13.06.2008


>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion

Conclusions and Discussion •

The key to risk management is to be aware of all kinds of risk and to develop a

plan to eliminate or minimise them in a cost-effective manner. •

The major premise of risk analysis is that a customer can make better decisions when provided with a fuller understanding of

the implications of the investment decision.

Risk Management in the low head, small Hydropower Market

13.06.2008


Thank you very much for your attention! Questions? Contact: Patrick Wiemann Email: patrick.wiemann@soton.ac.uk Risk Management in the low head, small Hydropower Market

13.06.2008


/day