179.

PROFILE ON MINI-HYDRO POWER

PLANT FOR RURAL ELECTRIFICATION
 179-2

TABLE OF CONTENTS

PAGE

I. SUMMARY 179-3

II. PRODUCT DESCRIPTION & APPLICATION 179-3

III. MARKET STUDY AND PLANT CAPACITY 179-4

A. MARKET STUDY 179-4
B. POWER GENERATION CAPACITY & GENERATION 179-8
PROGRAMME

IV. MATERIALS AND INPUTS 179-9

A. CONSUMBALES 179-9
B. UTILITIES 179-10

V. TECHNOLOGY & ENGINEERING 179-10

A. TECHNOLOGY 179-10
B. ENGINEERING 179-11

VI. MANPOWER & TRAINING REQUIREMENT 179-15

A. MANPOWER REQUIREMENT 179-15
B. TRAINING REQUIREMENT 179-16

VII. FINANCIAL ANLYSIS 179-17

A. TOTAL INITIAL INVESTMENT COST 179-17
B. PRODUCTION COST 179-18
C. FINANCIAL EVALUATION 179-19
D. ECONOMIC BENEFITS 179-20
 179-3

I. SUMMARY

This profile envisages the establishment of a mini hydro power plant for rural
electrification with a capacity of 500 kW.

The present demand for the proposed product is estimated at 250 kW per annum. The
demand is expected to reach at 500 kW by the year 2022.

The plant will create employment opportunities for 17 persons.

The total investment requirement is estimated at Birr 6.37 million, out of which Birr
5.44 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 15 % and a net
present value (NPV) of Birr 1.48 million, discounted at 8.5%.

II. PRODUCT DESCRIPTION & APPLICATION

Mini-hydropower plant utilizes relatively small water falls to convert energy of water
falls (proportional to the head of the water fall) into electrical energy. Mini hydropower
plants produce electrical power in the order of 100-1000 kilo-Watt that can be utilized to
supply electricity to the rural population located far away from the inter connected
system (ICS) of the electricity corporation (Ethiopian Electric Power Corporation –
EEPCO).

The plants are simple in construction and easy for maintenance. Project implementation
normally takes shorter period and low investment cost. China, India, Indonesia, Pakistan,
Peru, Nepal and Papua New Gunea are developing countries that have benefited a lot
from harnessing the energy of water falls of rivers. The experience of these countries
indicates that the undertaking fearures are the unusually low cost of US 350 to 500 per
kW, including distribution. This low cost is attributable, primary, to three factors:
 179-4

a) non-conventional use of readily materials,

b) designs suited to local conditions, and
c) community involvement in the initiation, implementation, management,
operation and maintenance of the hydro power schemes.

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Power Supply and Present Demand

The Southern Nation Nationalities People’s Regional State is such a wide region and a
home for more than 45 nations, nationalities and peoples. It is difficult to reach some of
the special woredas and zones on surface transport. As a result, the power sector is not
matured and electricity supply is very limited. Among 104 towns in the Region only 41
are electrified and the details are shown in Table 3.1. Thus, electric access coverage
accounts for only 39% of the towns in the Region. Zones and special woreda without any
electricity supply by EEPCo include Dawro zone, Amaro, Basketo, Burji, Konso, Konta
and Yem special woredas.
 179-5

Table 3.1
ELECTRIC POWER ACCESS COVERAGE IN SNNPRS

Zone/ Special Total No. of Towns/Villages

Woreda
Electrified Not Total
Bench Maji 1 8 9
Dawuro 0 5 5
Gamo Gofa 5 8 13
Gedeo 2 2 4
Gurage 6 6 12
Hadiya 4 3 7
Kaffa 1 9 10
Kambata Tambaro 4 0 4
Shaka 1 2 3
Sidama 7 3 10
Silty 2 4 6
South Omo 1 5 6
Wolaita 5 2 7
Special Woredas
Alaba 1 0 1
Amaro 0 1 1
Basketo 0 1 1
Burji 0 1 1
Darashe 1 0 1
Konso 0 1 1
Konta 0 1 1
Yem 0 1 1
Total 41 63 104
Source: Rural Energy and Minerals Resources Development Agency, June 2004.
 179-6

Since the SNNPRS falls in the Omo-Gibe Basin, Baro-Akobo Basin, Rift Valley system
and the Awash Basin, it is known for its water resources. According to the resource
potential assessment, the hydropower potential in different parts of the region is
estimated to be more than 186,730 kW. There are numerous streams, canals and rivulets
with drops at many places in the Region. Therefore, it is possible to set up a large
number of micro (from 50 to 500 kW) and mini (below 50 kW) hydro plants that are
essential for rural electrification and establishment of small industries in remote area. At
present a 500 kW mini-hydro power plant could satisfy the demand for electricity of each
non-electrified town/village in the Region.

2. Projected Power Demand

The demand for electricity is influenced by economic growth and development in general
and industrialization, urbanization, population growth and the like in particular. As
population size increases, the demand for electricity also rises due to increased household
demand for lighting and powering various household appliances. Urbanization also
increases the demand for electricity due to increased demand for street lighting and the
expansion of offices, hotels, restaurants and other service rendering institutions.
Apparently, industrialization requires a huge supply of electric power. With the help of
mini-hydro power development, there is also possibility for rural electrification.
Therefore, many units of mini-hydro power plants would be required to satisfy the
increasing demand.

The 500 kilowatt mini-hydro power plant could thus initially start operation with 50%
capacity and then gradually move to 75%, 85% and 100% capacity utilization in
subsequent years. Based on this assumption, the projected demand is depicted in Table
3.2.
 179-7

Table 3.2
PEOJECTED DEMAND FOR ELECTRICITY

Year Projected
Demand (kW)
2007 250
2008 250
2009 375
2010 375
2011 425
2012 425
2013 500
2014 500
2015 500
2016 500
2017 500
2018 500
2019 500
2020 500
2021 500
2022 500

3. Pricing and Distribution

There are different categories of users of electricity. These include domestic, commercial,
street lighting and industrial users. The pricing of electricity generated by the power
plants under Ethiopian Electric Power Corporation (EEPCO) varies according to different
categories of users (Table 3.3).
 179-8

Table 3.3
ELECTRICITY SOLD AND REVENUE FROM SALES
Electricity Revenue Per Unit
Tariff Category Sold From Sales Tariff
('000 kWh) ('000 Birr) (Birr/KWH)
Domestic Tariff 725,829 249,235 0.34
Commercial Tariff 521,133 322,886 0.62
Street lighting Tariff 29,098 12,328 0.42
Industrial Tariff 793,209 369,584 0.47
Average 517,317 238,508 0.46

As can be seen from Table 3.2, the energy tariff or price of electricity ranges from Birr
0.34/kWh to Birr 0.62/kWh for commercial tariff. Taking the average tariff for the
different tariff categories, a flat rate of Birr 0.52 Birr/kWh is recommended as the price
for the envisaged plant could charge.

B. POWER GENERATION CAPACITY AND GENERATION

PROGRAMME

1. Power Generation Capacity

As shown in the market study, demand projection of electricity in the year 2007 is 250
kW, and this figure would grow to 500 kW by the year 2013 and thenafter. A mini-
hydropower plant of 500 kW is, therefore, the capacity of the envisaged plant.

According to the Resource Potential Assessment Study Conducted by IPS for the region,
sites suitable for mini-hydro power development are available at different locations.
Identified water falls in SNNPRS include Omo-Gibe basin, Baro-Akobo basin, rift valley
system and the Awash basin. The level of power generated depends on the quantity of
water available at the upper stream, the head of the waterfall, and the sustainability of
water flow over the dry seasons of the year. It would, therefore, be possible to generate
 179-9

from very low and to several kilowatts. The intention of this project is to utilize the
generated power in areas not far from the powerhouse for rural households.

If standard voltage of 240 V is to be transmitted, then it is rarely transmitted more than a

couple of kilometers. If power is transmitted farther, a transformer would be used to
increase the voltage. In this study, a generator of 240/415 V a-c is anticipated and power
will be transmitted to longer distances with the help of step-up transformers.

Inorder to determine the capacity (or output power) of a mini-hydropower plant, it would
be necessary to specify, further, the net head and flow of waterfall. This would inturn
determine the turbine specifications and the sizing of penstock pipes. The net head and
flow are usually specified by the site developer. Based on this, the equipment supplier
can state the actual value of the output power of the turbo-generator. The plant will
operate 10 hours a day, and for 365 days a year.

2. Generation Programme

Generation of electrical power can be effected fully once commissioning work is

complete. However, distribution of power to commercial and residential areas can take
time. It is believed that preliminary preparations will be carried out with regard to
electrification of towns and villages together with erection and commissioning. The
envisaged plant will start operation at 75% of its full capacity (i.e, 500 kW), in the first
year and increase to 85% and 100% capacity utilization in the second & third year,
respectively.

IV. MATERIALS AND INPUTS

A. CONSUMABLES

The consumables required for the smooth running of the power plant are lubricating oil
and grease. Annual expenditure of Birr 15,000 is estimated to cover for consumables.
 179-10

B. UTILITIES

Inputs like electricity and water can be accounted for the envisaged plant since the
envisaged plant uses these utilities for various reasons. A total of Birr 10 thousand can
be considered as annual consumption.

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Description Process

In the context of mini-hydropower plant generation, transmission, and distribution of

electrical energy can be carried out with the help of water intake structure, penstock,
turbine, powerhouse (generator), transformer and transmission and distribution systems.

Required quantity of water is diverted and allowed to pass into the penstock. At the end
of the penstock, the water with high kinetic energy runs the turbine at a specific speed,
which inturn rotates the turbo-generator at a speed designed to generate the required
electric power. The electric voltage generated is stepped-up by a transformer, from
where it is transmitted and distributed to end-users. Various switching, protective and
control devices are involved from the point of generation to consumption.

2. Source of Technology

The technology of electric power generation from water falls is well developed and
applied in many developing countries like Pakistan, China, India, and Nepal. The
different components of the hydropower plant, namely: the intake dam, the penstock, the
powerhouse, the turbine and governor, the turbo-generator, the transformer substation
 179-11

and switch gear, the protection and transmission are all highly developed, and can be
designed, manufactured, constructed, installed and easily maintained.

The technology of mini-hydropower plant can be obtained from the following countries
where it is well developed and applied such as India, China, Nepal, and Pakistan.
Address of the machinery supplier is given below.

ASEA BROWN BOVERI PVT. LTD

2nd Floor, Jason Trade Centre
39-A-1, Block 6, P.E.C. HS.
Shahrah-e-Faisal … 4548162
Karachi – 75400 …. 4537594, Pakistan.
Fax . 4548163

B. ENGINEERING

1. Machinery and Equipment

Machinery and equipment required for the mini-hydropower plant is shown in Table 5.1.
 179-12

Table 6.1
MACHINERY AND EQUIPMENT REQUIREMENT AND ESTIMATED COST

Sr Qty Cost, (‘000 Birr)

No. Description No. LC FC TC
1 Intake structure Set 7 - 7
2 Penstock (size of pipe depending As req 15 - 15
on quantity of water required)
3 Pelton turbin and related structure Set - 350 350
4 Governor Set - 150 150
5 Turbo – generator with excitation Set - 1,500 1,500
and battery supply
6 Transformer (s) – step up voltage, Set - 1,100 1,100
complete with switch gear
7 Overhead transmission line - 50 1,000 1,050
complete with all accessories and
step-down substation
8 Accessories As req - 35 35
9 Wooden pole 20,000 1,000 - 1,000
pcs
FOB price 1620 4,135 5,197
Freight, insurance, bank charges, 250 - 250
etc.
CIF Landed Cost 1,870 4,135 5,447

2. Land, Building and Civil Works

Land requirement for the plant consists of diversion site, intake and power conduit area,
and spillways, forebay, penstock, powerhouse, and tailrace.
 179-13

At some locations, the lay of the land and natural formations within the stream may direct
sufficient water into the intake without a weir. Simply placing a few stones across the
stream bed also could achieve the purpose. A weir is a dam across a river to raise the
level of water upstream.

Intake:- An intake permits a controlled flow of water from a river or stream into a
conduit which eventually conveys it to the turbine to generate power. The intake serves
as a transition area between a stream which can become a raging torrent and a flow of
water which must be controlled in both quality and quantity.

Power conduit: It signifies the component of a hydropower scheme used to convey

water to a relatively large distance from the stream to the inlet of the penstock, with
minimum loss of head and at minimum cost. It is a canal excavated in soil, because this
approach reduces cost. Other options are canals constructed with concrete or impervious
materials to reduce seepage of water, or an installation of low pressure pipe (conduit) to
convey water from the intake to the beginning of the penstock.

Forebay: It is a basin located just before the entrance to the penstock. Possible designs
range from a simple excavated area or pond to a structure of reinforced concrete.
Forebay serves as a storage in order to facilitate the supply of water to the turbine for
several hours each day. It can also serve as a settling basin where any waterborne debris
which either passed through the intake or swept into the canal can be removed before the
water passes onto the turbine.

Penstock: This is a pipe that conveys water, under pressure to the turbine. It is an
essential part of any mini-hydropower plant. A penstock can be installed wither above or
below ground. PVC pressure pipe can be used as penstocks usually buried underground.
For penstocks laid over ground steel pipes frequently required support piers, anchors, or
thrust blocks to resist forces which can displace the pipe.
 179-14

Powerhouse: The powerhouse protects the turbine, generator, and other electrical and
mechanical equipment. It also can include workshop, office and sanitary facilities. If
project size and cost are to be minimized, a powerhouse should be sized to house only the
turbo-generating equipment.

Tailrace: This is usually a short, open canal which leads the water from the powerhouse
back into a stream. A tailrace is usually very short and located near a stream. Often, it is
simply a ditch which is designed to ensure that erosion will not undermine the
powerhouse.

Land coverage refers to the intake area, the penstock, power house and tailrace. The size
of land, therefore, depends on the topography of plant site. It is, therefore, assumed that
a total land area of about 3000 m2 will be required for the project, of which only 120m2
area will be used for powerhouse.

It is proposed here, for the purpose of this study, and as a measure of encouragement for
developing rural electrification, that the regional state provide land for infrastructure
development free of charge. Therefore, no cost is assumed for acquiring the land which
would be utilized for the mini-hydropower plant.

The foundation of the powerhouse will be strongly constructed inorder to resist the
dynamic force created during rotation of the turbine- generator set. The roofing and the
walls can be covered by Ega-sheets.

Other civil works are construction activities associated with erection of substations and
installation of overhead transmission lines.

For the sake of simplicity, casts related to buildings, and other civil works can be
categorized as:-

a) Intake, power conduit, forebay and penstock,

 179-15

b) Power house, and

c) Substations and overhead transmission lines.

Investment costs associated with these categories are given Table 5.2.

Table 5.2
INVESTMENT COST OF CIVIL WORKS

Sr Description Cost (‘000

No. Birr)
1 Intake, power conduit, penstock, etc refer to -
machinery & equipment
2 Powerhouse (inc. accessories) 250
3 Substations and transmission lines 100
Total Cost 350

3. Proposed Location

As shown in the market study above, some of the locations of the establishment of the
mini-hydropower plants are identified as being those areas like Omo-Gibe basin, Baro-
Akobo basin, Rift Valley stretch and Awash basin.

It should be noted here that when selecting the site of the mini-hydro power plant, the
distance between the power house and the town to be electrified will be as short as
possible to minimize voltage drop, power loss, transmission line investment costs and
other related costs. This has to be seriously considered during plant site development.
 179-16

VI. MANPOWER AND TRAINING REQUIREMENT

A. MANPOWER REQUIREMENT

The total manpower required by the envisaged plant is 17 persons. The type of
manpower required included operators for the turbine room, powerhouse, and substation
technicians are also required for the workshop and powerhouse. The details of manpower
and annual labour cost are shown in Table 6.1.

Table 6.1
MANPOWER REQUIREMENT AND LABOUR COST

Sr Req Salary (Birr)

No. Description No. Monthly Annual
1 Plant manager 1 1800 21600
2 Secretary 1 600 7200
3 Clerk 1 400 4800
4 Operators 6 600 43200
5 Technicians 3 600 21600
6 Cashier 1 600 7200
7 General services 3 200 112800
Sub-total 17 28200
Employees benefit (25% BS) 141,000
Total

B. TRAINING REQUIREMENT

Operators and technicians will have to be supplied on-the-job training during

implementation of the project. The training programme will be executed for a period of
two weeks by EEPCO training staff. Training cost is estimated to be Birr 10,000.
 179-17

VII. FINANCIAL ANALYSIS

The financial analysis of the mini hydro power project is based on the data presented in
the previous chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity
70 % loan
Tax holidays 5 years
Bank interest 8%
Discount cash flow 8.5%
Accounts receivable 30 days
Raw material local 30days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr
6.37 million, of which 46 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.
 179-18

Table 7.1
INITIAL INVESTMENT COST

Sr. Total Cost

No. Cost Items (‘000 Birr)
1 Land lease value -
2 Building and Civil Work 350.0
3 Plant Machinery and Equipment 5,447.0
4 Office Furniture and Equipment 100.0
5 Pre-production Expenditure* 472.5
6 Working Capital 9.1
Total Investment Cost 6,378.5
Foreign Share 46

* N.B Pre-production expenditure includes interest during construction ( Birr 372.48 thousand ) training
(Birr 10 thousand ) and Birr 90 thousand costs of registration, licensing and formation of the company
including legal fees, commissioning expenses, etc.

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 898,190
(see Table 7.2). The material and utility cost accounts for 2.78 per cent, while repair
and maintenance take 19.48 per cent of the production cost.
 179-19

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Cost %
Raw Material and Inputs 15.00 1.67
Utilities 10 1.11
Maintenance and repair 175 19.48
Labour direct 93 10.35
Factory overheads 30.96 3.45
Administration Costs 48 5.34
Total Operating Costs 371.96 41.41
Depreciation 229.07 25.50
Cost of Finance 297.16 33.08
Total Production Cost 898.19 100

C. FINANCIAL EVALUATION

1. Profitability

According to the projected income statement, the project will start generating profit in the
first year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the life-time of the project.

The income statement and the other indicators of profitability show that the project is
viable.
 179-20

2. Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at
full capacity (year 3) is estimated by using income statement projection.

BE = Fixed Cost = 62 %
Sales – Variable Cost

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back
period. The project’s initial investment will be fully recovered within 6 years.

4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 15 % and the net
present value at 8.5% discount rate is Birr 1.48 million.

D. ECONOMIC BENEFITS

The project can create employment for 17 persons. In addition to supply of the domestic
needs, the project will generate Birr 1.71 million in terms of tax revenue.