Power - Hydro turbine - 220 kW / Canada

Case study assignment

You own a farm near Ottawa, Ontario, Canada. A creek flows through your property that appears to have the potential to generate electricity. The government of Ontario is offering $0.11 per kWh for energy generated by new renewable energy projects connected to the provincial electricity distribution grid. You believe that there is possibility of developing a qualifying mini-hydro project on your property and you wish to determine if it makes sense to seriously investigate the project.

Site information

The creek on your property drops approximately 13 m over a distance of about a kilometre. The creek is fed by a lake upstream that is controlled by a small dam with manually operated stop logs. Regulation of the lake provides some dampening of high and low flows. No hydrology data is available; however you have been told by local authorities that the drainage area upstream of the dam is 182 square kilometres.

Some water will have to be left in the creek for environmental reasons (residual flow). You have been advised to assume a value approximately equal to the flow in the creek that is equalled or exceeded 95% of the time. Determining the residual flow will be a key aspect of the environmental assessment.

A local small hydro turbine manufacturer offers standardised water-to-wire packages (turbine, generator and controls). One model is available that may be suitable for your site, a 220 kW unit assuming an available net head of 12 m (i.e., allowing about 1 m for hydraulic losses).

Financial information

The 220 kW package would cost $380,000, exclusive of civil works. The budget price includes delivery to your site, installation and commissioning. The price provided can be considered accurate to within plus or minus 15%.

Discussions with the Ministry of Natural Resources have informed you about the steps required to get approval for development of a waterpower project on privately owned property. You have been advised that the process could take several years to complete and will involve some level of environmental assessment. A local consultant specializing in small waterpower projects has advised you that the cost of a feasibility study would be approximately $20,000 and the cost of project development, including the environmental assessment and approvals, could vary between $20,000 and $100,000 depending on the issues identified and field work required. If the project is approved, engineering costs (final design and construction supervision) would cost between 5% and 10% of the total project cost.

To develop the project you will need to divert water from the creek into a canal (or pipeline). A penstock (likely steel) and a building to house generating equipment will also be required. The consultant also mentioned that the overall cost for a mini-hydro project of the size being considered could be up to $4,000 per kW to build and install. You have available equipment and manpower on the farm to undertake the civil works for the project and, therefore, you are confident that you will be able to build the project and realise considerably savings.

You own all the land required for the project including the river bed and associated water rights and, as such, there will be no annual water rental charges. Annual costs will be limited to insurance and spare parts. For initial budgetary purposes you have been advised to estimate annual costs as 1% of the total initial costs.

Your accountant has advised you that a benefit-cost ratio of 1.0 or higher, using a discount rate of at least 15% over a 25 year project life, is a good financial threshold on which to evaluate the project. The annual inflation rate is assumed to be 2%.

Financing is available to you at 7% with repayment terms up to 15 years on 80% of the total project costs.

The contract offered by the Ontario government includes Consumer Price Index escalation on 20% of the $0.11 paid per kWh.

Prepare a RETScreen study, documenting any assumptions that you are required to make, and report on the significant conclusions from this analysis.

Solution

The worked-out solution is the data file selected from within the RETScreen Project Database. The user automatically downloads the Project Database file while downloading the RETScreen software.

Teacher's notes

• The analysis of the project involves determining the maximum allowable total project cost based on the owner's established financial thresholds agreed to with the consultant.
• Hydrology for the site is determined using the specific run-off method. The site is near Ottawa, which lies within the green coloured specific run-off zone (see Canadian Specific Run-Off Map) but close to the yellow zone. A specific run-off value in the middle of the two ranges (0.016) can be used to get an approximate flow-duration curve.
• Goal seek can be used to determine the approximate design flow for the proposed project assuming reasonable values for losses. Run a goal seek of 220 kW on the value of the cell "Power capacity" of the Energy Model worksheet by changing the value of the cell "Design flow".
• Initial costs for the Feasibility study, Development, and Engineering can be estimated based on the available information. For engineering costs estimate, the total project cost can be assumed to be $4,000 per kW. Note the formula in this cell for cost per kW on the Cost Analysis worksheet.
• Goal seek can then be used to determine the maximum allowable cost of all other components by setting a single "User-defined" cell in the Cost Analysis worksheet to represent all other project costs. In Goal seek the value of the cell "Benefit-Cost ratio" of the Financial Analysis worksheet is set to 1.0 by changing the user-defined unit cost value of the cell "Initial cost - Other" of the Cost Analysis worksheet. Note that the quantity value for the user-defined cost "Initial cost - Other" must be set to 1.
• The result of the above calculations suggests that the owner could spend up to about $5,000 per installed kW, which is more than the $4,000 per kW estimated benchmark cost.
• The financial viability of the project is extremely sensitive to variation in annual costs, which would indicate that more study into annual costs would be an important aspect of a feasibility study. Similarly, changes in residual flow have a significant effect on energy production and project viability.

Real project

Results

A 215 kW mini-hydro project was constructed in 1990 by the Stewart family on their farm property near Waba, Ontario, Canada. The project was built to supply electricity to the Ontario electricity grid under contract with the provincial utility (Ontario Hydro at the time). Incentive non-utility generation (NUG) contracts were being offered to encourage private-sector construction of renewable energy projects.

The project was studied by Ottawa Engineering Limited and found to be technically feasible but marginally attractive financially at standard construction costs.

It was possible for the project civil works to be constructed by the Stewart family primarily using their own manpower and equipment. As such, the estimated construction cost savings were sufficient to make the project financially attractive.

Construction for the project began in the fall of 1986 and was completed in June 1990. The company Misty Rapids Power was created to own and operate the project. Power is sold to the Ontario provincial electricity grid under a 20-year NUG contract.

System description

The Misty Rapids Power mini-hydro project comprises the following components:

• Timber crib dam to divert water to an open channel;
• Open channel 800 m long;
• Penstock intake with trash rack;
• 42 inch diameter steel penstock (used), 68 m long;
• Powerhouse with single 630 mm Kaplan turbine directly coupled to an induction generator;
• Tailrace returning the water to Waba Creek; and
• Connection to the provincial grid involving 1,200 m of 12.48 kV 3-phase transmission line.

Lessons learned

• Considerable cost savings can be achieved as a result of owner "sweat equity." A small hydro project involves civil, mechanical and electrical components and, as such, offers opportunities for owner involvement at many levels.
• Because small hydro projects involve many different components they pose significant coordination challenges. Careful attention to project management is essential to avoid costly delays and associated cost overruns.
• Small hydro projects are relatively expensive and will normally require significant project financing. Financial viability requires a secure power purchase agreement with a well established counter party in order to secure project financing.

The big picture

Construction of small hydro projects involves skills and resources that are typically available within the farming community. Where a suitable hydraulic resource exists, development of a small hydro project can prove to be a very attractive investment for farming enterprises that are capable of carrying out much of the construction work "in-house."

Photo

Farm - Small hydro, Ontario, Canada

References

• Bennett, Kearon, "Personal Communication," Ottawa Engineering Ltd., 2007.
• Ottawa Engineering Limited, Pre-feasibility study - Stewart Small Hydro Project, Waba Creek, Ontario, 1987.
• Stewart, Lyle, "Personal Communication," Misty Rapids Power, 2007.