Report Small Hydro

Uttaranchal Renewable Energy Development Agency
CHAPTER 1
Introduction
Renewable energy can play an important role in resolving the energy crisis in rural and
urban areas to a great extent. Today, renewable energy is an established sector with a
variety of systems and devices available for meeting the energy demand of rural and
urban inhabitants. Attempts have been made to generate grid-quality power through
renewable sources. Today India has over 7000-megawatt installed capacity through
renewable such as wind, small hydro, and biomass contributing to address the shortage of
electricity in cities and villages.
The objective of Renewable Energy is to meet the minimum energy needs and providing
decentralized energy supply in agriculture, industry, commercial and household sectors in
rural and urban areas.
MNES supports the implementation of a large, broad spectrum of programmes covering
the entire range of New & Renewable Energy.
Efforts are being made to reduce the Capital Cost of projects based on Non-Conventional
& Renewable sources of Energy, reduce cost of energy by promoting competition within
such projects & a sustained growth of these sources. The share of Renewable sources is
4.5% of the total Capacity which contributes about 4800 MW. Wind power contributes
about 2483 MW, while share of Small Hydro Power is 1603 MW & Bio-Mass Power &
Co-Generation accounts for 613 MW.
The Electricity Act 2003 contains several provisions to promote the accelerated
development of power generation from Non-Conventional Sources. Different
mechanisms have been evolved to encourage renewable energy projects; these include:-
a) Giving Upfront Subsidies including Tax Rebates
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MBA (Power Management)
b) Giving Subsidies at the time of sale of Power

c) Forcing utilities to purchase share of their power from R.E. Projects also called
Renewable Energy Portfolio Standard.
Renewable Energy Sources are pre-requisite for Rural Electrification. Rural

Electrification is viewed as a prime mover for Agricultural & Agro-Industrial
Development, Employment Generation & improvement in the quality of life of people in
rural areas. Under the EA 2003, there is no requirement of license for Stand-alone
generation and Distribution of power in rural areas. For Stand-alone generation,
renewable energy sources are required. Interconnectivity is possible with main grid to
facilitate utilization of surplus power & availability during shortages, through Renewable
energy generation.
With only about 54% of household electrified in Uttaranchal, rapid electrification &
provision of universal access to electricity in all rural areas, is an over-arching priority in
Uttaranchal.
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CHAPTER 2
Uttaranchal Renewable Energy Development Agency (UREDA)
Uttaranchal is one of the leading states in using non-conventional energy sources, as this
state’s power generation is mainly dependent on hydro power.UREDA was established
for promotion of non-conventional energy sources.
UREDA was established in July, 2001 with the following mission:
1. Rural electrification through renewable energy sources like Solar, Mini/Micro hydro
& Bio-gas.
2. Establishment of Solar pumps for irrigation and drinking purposes.
3. Establishment of Mini/Micro Hydro projects for Rural Electrification & Grid feeding.
4. Distribution of Solar Lanterns & Equipments to villagers.
5. Appointment & Registration of Village Urja Samiti for Operation & Maintenance of
Renewable Energy Projects.
6. Distribution of Solar education Kits & Establishment of Solar Water Heater in
Schools, Hospitals, Govt. & Private Buildings.
Uttaranchal Renewable Energy Development Agency) with the financial support of

MNES (Ministry of Nonconventional Energy Sources), GoI (Government of India), has
established state- and district-level energy parks for the demonstration and awareness
creation of various possible applications of renewable energy at various places in the
state of Uttaranchal.
Total no. of villages that has been electrified through renewable energy sources by
UREDA is 761 out of which 215 has been electrified through Mini/Micro Hydro Projects
& 546 through Solar Energy.
The Installed capacity of Mini/Micro Hydro Projects is 4.2 MW and that of Solar-
Photovoltaic is 2.96 MW
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CHAPTER 3
Scope Of Small-Hydro Projects In Uttaranchal
A small-scale hydroelectric facility requires that a sizable flow of water and an adequate
head of water are available without building elaborate and expensive facilities. Small
hydroelectric plants can be developed at existing dams and have been constructed in
connection with water level control of rivers, lakes and irrigation schemes. By using
existing structures, only minor new civil engineering works are required, which reduces
the cost of this component of a development
Small-scale hydro stations are classified in the table below.
Size of Small
Hydroelectric Power Output
Facility
MICRO 100KW or less – typical supply for one to four villages
MINI 100KW to 1MW – typical supply for a small factory or isolated
community
SMALL 1MW to 30MW -typical NUG development and low end of range
for supply to a regional or provincial power grid
Uttaranchal is one of the select States in India that are rich in non-conventional energy
sources due to its abundant hydro generation potential. Small Hydro is an important
source of Renewable Energy. EA 2003 stipulates promotion of generation of electricity
from renewable sources of energy. However, the present level of exploitation of this
potential has been very disappointing. State’s estimated potential for generation of
electricity through small hydro units is estimated to be 1478.23 MW & against this
present installed capacity is only 62.19 MW being owned by UJVNL, UREDA and
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independent power producers which include micro hydel generating stations with a total
installed capacity of 7.89 MW. In Uttaranchal, plants having installed capacity less than
or equal to 1 MW are treated as micro hydel plants & plants having installed capacity
above 1 MW & upto 25 MW are treated as small hydro plants.
The ministry of Non-Conventional Energy Sources (MNES) is encouraging the setting up

of the commercial Small Hydro Projects in the private sector, joint sector, co-operative
sector etc. A number of financial institutions (FIs) are now coming forward to extend
term loans to the developers of SHP projects. With an objective to improve the economic
viability of SHP projects, MNES will provide subsidy for the commercial SHP projects
up to 25MW station capacity. The subsidy is intended for making repayment of the term
loan provided to the developer of an SHP project by the financial institution.
The subsidy will be released, after successful commissioning and commencement of
commercial generation from the project, to financial institution providing loan to set up
SHP project.
Uttaranchal state is declared as a special category state because of hilly areas, the subsidy
provided for projects up to 100 KW will be 45% of project cost limited to Rs. 60,000 per
KW( for private investors and joint ventures ).
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CHAPTER 4
Economic Analysis Of SHP Projects
The purpose of an economic analysis is to demonstrate that the proposed project achieves
optimum utilization of resources and is of sufficient economic merit to justify an
investment in it. The basic purpose of economic analysis is to provide a general estimate
of the potential power benefits and the costs of a project, and reasonable alternatives to
project power. The analysis helps to support an informed decision concerning what is in
the public interest with respect to a proposed license. The analytical processes described
deal with project economics, i.e. the determination of the economic merit of a specific
project or of a sequence of projects which fit into a comprehensive development plan.
The process focuses on a particular sector, say electricity, or on a sub-sector- generation,
transmission or distribution- as well as on particular elements within this sub-sector –a
hydro plant, a transmission line or a substation.
The economic evaluation of such elements is termed micro- economic analysis because
the scope of the investigation is limited to the establishment of the merit of a single
sectoral element only. The investigation does not consider the impact of the particular
development proposal on the local, regional or national economy as a whole nor on the
financial position of the developer and of the country. These matters require a macro-
economic and involve a much more wide ranging investigation, for example into the
economic and financial circumstances surrounding the developer.
It must be clearly understood at the outset why the economic appraisal is to be

undertaken and what it is to achieve, whether it is to be limited to project economics or
expanded into a macro –economic or financial investigation.
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MACRO-ECONOMY
Macro Macro
Economic HEALTH EDUCATION ENERGY INDUSTRY Level
Impacts
ENERGY SECTOR
Economic OIL RENEWABLES ELECTRICITY COAL Intermediate
Impacts
Level
ELECTRICITY SUB SECTOR
Micro SUPPLY DEMAND Micro

Economic Level
Impacts
LEVELS OF THE ECONOMY
Economic analysis is always comparative. What is different from case to case are the
technical characteristics, the costs, the composition and the lives of the assets involved,
i.e. the cash flow.
PARAMETERS FOR ANALYSIS
The parameters entering into the comparative analysis are described here. They comprise:
1) Costs and Benefits
2) Interest/Discount Rates
3) Asset lives and Cash flows
4) GRID interconnection
5) Socio Economic analysis
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INPUT CAPITAL EXP- ANNUAL EXP-

PARAMETERS ENDITURE ENDITURE
CASH FLOW
DECISION STARTING DISCOUNT PROJECT

PARAMETERS POINT RATE LIFE
OUTPUT
PARAMETERS
PRESENT VALUE
LOGIC DIAGRAM FOR ECONOMIC ANALYSIS
COST ESTIMATES
Cost estimates for hydro schemes are specific for each project and each site. The
elements making up the expenditure stream include:
1) Capital costs for the power scheme and associated transmission (up to the point of
supply or network interconnection).
2) Annual operating, maintenance, administrative and insurance expenses directly
attributable to the scheme.
3) Annual fuel costs if any.
Cost trends derived from general data show that:
-For small schemes, below about 5 MW, the electro-mechanical components is
responsible for the largest proportion of the costs but the civil works component becomes
more prominent for larger schemes.
-Isolated schemes are generally more expensive than more accessible projects located
near inter connected to Grid.
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-Specific costs of hydro (per KW installed) decreases with increasing capacity and
increasing head.
-The proportion of pre-investment expenditure to the total cost of the scheme falls with
increasing capacity.
-The most expensive item of the civil works is usually the headrace and the pressure
conduit system.
SPECIFIC
COST
(Rs./KW)
MORE LOCAL INPUT

SIMPLER TECHNOLOGY MORE UNITS PER STATION
GREATER REMOTENESS OF SITE
LOW HEAD
MEDIUM HEAD
HIGH HEAD
SIZE
COST/SIZE RELATIONSHIP
The construction period of a small hydro scheme with small storage capacity typically
extends over about 3 years, commercial operation starting at the end of the third year.
Expenditure in the first year is mainly on site preparation and access, in the second year
mainly on civil works and in the third year also on civil works and on the electro-
mechanical equipment. With the retention money at 5% of the capital expenditure,
atypical phasing might be as follows:
Year1: 10-15%; Year2: 25-35%; Year3: 45-60%; Year4: 5%
The shape of the cost characteristic of power plant of any type is that of a flat U-curve
with occasional discontinuous small peaks.
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Costs
Maintenance
Operation
Post-Commissioning
Capital Works
Part Replacement
Years of service
VARIATION OF OPERATION & MAINTENANCE COSTS OVER PLANT LIFE
BENEFITS
The economic choice of a given development rests on the benefits it can bring. Benefits
can be:-
-1
–“Developmental” benefits of a project which include power generation, water supply,
flood control, irrigation, and river navigation.
-“Non-developmental” benefits which include values of a waterway include fish and
wildlife resources, recreational opportunities, and other aspects of environmental quality.
ASSET-LIVES
Asset lives play an important role in economic analysis because a reason has to be found
for investing in one particular scheme over another has to be determined. Economic
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analysis considers the physical and not the financial life of an asset. The physical life is
the period of time for which a major component of a scheme – termed an asset – is
expected to perform the service for which it was originally designed with no more than
routine maintenance and occasional major overhaul.
Typical ranges for asset lives commonly used are:
Civil Works 40-60 years
Electro-Mechanical part
-turbo-alternators,valves,gates,control gear, services 25-35 years
Once an asset has become ‘time expired’ and has thus reached the end of its useful life, it
has no more than scrap value.
DISCOUNT RATES
To properly account for the fact that life-time of one investment may be different from
that of another; we have to account for the time value of money. Money in hand today, is
valued more than the same amount of money after say, one year. Hence, the perception of
how much more one values money today than in the future differs from person to person.
This perception is captured in a factor called discount rates. The choice of a discount rate
can significantly affect the present value of future costs and benefits. For example,
alternatives with net benefits that occur further into the future will be relatively more
attractive when a lower discount rate is applied.
CASH FLOW:
The first step in any economic evaluation is to project the cash flow. The cash flow of a
project is the difference between the money generated (revenue) and ongoing costs
(expenses) of the Project. The definition of cash flow is different from accounting profit.
The cash flow, for instance, ignores depreciation and the interest charges, since they are
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accounted for in other ways. The cash flow presents a sequence of monetary transactions
over a given period of time. Inputs to the cash flow are positive for benefits (or revenues)
or negative for costs (or expenditure).The analysis is always comparative and aims to
determine whether the project has been, or is likely to be, profitable, with benefits
exceeding costs over the timeframe of the analysis. The analysis can review the
performance of a project in the past and examine whether the project has met the
economic or financial targets originally set for it. Three separate timeframes thus enter
into the analysis and the cash flow extends over three distinct time phases:1. The pre-
investment phase during which the basic investigations into the project are
undertaken, its feasibility is studied and confirmed and its design is carried out. 2. The
investment phase, beginning with the start of construction, during which the project is
built and the bulk of the capital expenditure is incurred.3. The operating phase, beginning
with the commissioning of the scheme and extending up to the notional end of its life. All
operational benefits and costs will arise during this phase, and also scrap and residual
values.
Restoration or Scrap
Start of construction
Part replacement
Completion
Asset life
(E&M) Asset Life
(Civil)
Pre-investment Investment
expenditure (less sunk
costs) Operation Operation
(first cycle) (second cycle)
Project Life
KEY ELEMENTS OF CASH FLOWS
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GRID CONNECTION
Sales to the grid represent a special case of cash generating end-uses. Sales, when power
is in excess, could provide a better load and the potential for reliable cash flow. The
opportunities for selling to the grid are likely to be more feasible at the ‘mini’, however,
than the ‘micro’ hydro scale. It is worthwhile exploring the possibility of grid connection
of such micro hydro projects as an end-use where excess energy can be sold. A plant
close to the grid connection point will be always cheaper than one installed far from it. .
The plant will provide electricity to the rural areas where otherwise only expensive and
unreliable power from the grid would be available.
SOCIO ECONOMIC ANALYSIS
Socio-economic benefits
The most obvious social benefit of small hydroelectric developments is the supply of
reliable low-cost electric energy to provide the comforts of modern living. Small-scale
hydroelectric developments can provide a competitive source of reliable and inflation-
proof energy. Small-scale hydroelectric energy is an especially attractive alternative to
traditional high-cost diesel generation that currently provides electric energy in most
remote communities. Small-scale hydroelectric developments offer interesting
advantages such as:
 They use a local resource and therefore produce electricity at a stable price that is
not subject to the fluctuations of the international oil market
 They provide more economic benefits to the region by way of construction

employment and use of local services, 10% to 25% of capital cost.
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 They provides greater opportunities for local residents to learn and upgrade their
construction skills
 They improve the social activities like improvement of living standards,
enhancement of the quality of life through the provision an electricity supply.
 They provide an infrastructure development like, access, communications
transportation, utilities and services.
Some of the losses caused in socio economic conditions are:
 Effect on local amenity like visual, noise, recreation, amenity needs for new
residents.
 Soil deterioration caused by Hydro scheme like drainage, flooding and
changes in mineral content due to leaching or silting.
 Biological effects on flora and fauna as well as on cultivated areas.
Methodology To Measure The Economic Analysis of SHP
The three measures to analyze the project for small hydro projects are:
1. BENEFIT-COST RATIO (BCR) is the ratio between discounted total benefits and
costs. The cash flows to be analyzed are present valued at a fixed discount rate. Thus if
discounted total benefits are 120 and discounted total costs are 100 the benefit-cost ratio
is 1.2: 1.
The project is of economic merit if PV (benefits)/PV (costs) are more than unity. Benefits
are the direct benefits. Clearly, they must exceed the costs by an acceptable margin for
the project to be judged. The advantage of the method lies in its simplicity and directness.
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2. INETRNAL RATE OF RETURN (IRR) This method overcomes the disadvantage

of using relatively arbitrarily selected discount rates which may not be appropriate if
economic conditions should change. The internal rate of return or economic rate of return
(ERR) denotes the discount rate at which the present values of the two cash flows are
equal. This rate shows the return to be expected on the project which has the higher
initial investment costs. Internal rate of return is the most widely used technique for
evaluating investment projects. The IRR is the discount rate that equates the present value
of the project’s cash flows with the initial investment. Projects whose IRRs are greater
than the required rate of return should be accepted; IRRs below the required return should
be rejected.
INTERPRETATION OF RESULTS w.r.t. COST /BENEFIT AND IRR
In case of Indian electricity industry, electric supply is seen as an essential public service
which is not in marginal competition with other sectors. Measuring the merit of a new
scheme of a small hydro project against the opportunity cost may then be inappropriate
and a lower economic target may be acceptable. SHP intended for remote or rural
locations are often at an economic disadvantage; their appraisal may yield economic rate
of return in the range of 6-12%; well below prevailing opportunity costs of perhaps 14%.
The difference of 2-8% could be treated as a subsidy for encouragement of low pollution
and socio-economic development in the area concerned.
In addition to the directly assessable benefits, an electric supply brings also
intangible benefits which are generally not quantifiable.
Socio-economic analysis deals essentially with the study of intangible factors and
with their impact on the merit of a proposed scheme.
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3. SOCIO-ECONOMIC ANALYSIS (CONSIDERS INTANGIBLE FACTORS)

If socio-economic factors are to be used in support of the decision making process for or
against a hydro project proposal, it is important that they should be quantified as far as
possible. Some factors can be quantified fairly readily on the basis of local investigations
, for example:
- changes in land use which have direct commercial or financial consequences;
- housing or re-housing needs;
- creation of employment;
- changes in commercial,agricultural,industrial or agro-industry activity;
- changes in fiscal contributions resulting from increased, or reduced local activity.
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Two straightforward and convenient methods of quantification are the ‘Matrix’ and the
‘Scale’ method.
The Matrix approach is illustrated here:
(Estimated values in Rs’000./annum)

BENEFITS DISBENEFITS
300 200 100 100 200 300
Ground and parasitic

Pollution
Water abstraction
Soil improvement
Visual amenity
Environmental
disturbance
Flood control
Water storage
Occupational
disturbance
Electricity supply
Enhancements of
Indusrtry & comm.
Infrastructure
Development
Fiscal benefits
NET BENEFIT =Rs. 4, 99,000 per annum

SOCIO- ECONOMIC MATRIX
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CHAPTER 5
Financial Analysis
Financial analysis occupies the boundary between project development and accountancy.
The analysis is to confirm the merit of a new project in financial terms and ascertain its
impact on the financial position of the developer. It is also to satisfy the financing
agencies that he can accommodate the financial commitments which the project will
entail. The analysis therefore aims to identify the revenue requirements needed to cope
with additional outlay on the new project and to test in this way the financial viability of
the developer’s enterprise as a whole.
These procedures are no different in principle from those adopted by any lending—
governmental, public or private. They are to establish the credit-worthiness of the project
and of the potential borrower. Even where there is a substantial contribution from in-
house funds by way of self financing and little if any external borrowing, the test of
credit-worthiness needs to be gone through to ensure that development funds are properly
employed and yield acceptable benefits for the enterprise.
Having shown that a given solution is of adequate economic merit, it is usually necessary
to present an analysis of the financial implications of the proposed scheme and of its
impact on the financial position of the developer. The decision making authority and the
financing agencies likely to be involved in the progression of the proposal will want to be
assured that the scheme can be satisfactorily funded and the developer can accept the
financial burden imposed by the scheme.
Most financing bodies, or they the corporate management responsible for an element of
self financing or an external agency, will prescribe what information should be provided
in a particular case although, as in economic analysis, a somewhat standardized approach
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has developed. The required information range from the financial appraisal of the project
as such – a confirmation of its monetary requirements – to the submission of a financing
planning showing phased investment and borrowing requirements.
Ultimately, a comprehensive set of Performa accounts may have to be prepared, or at

least examined and probably modified, to bring out the effect of the proposed additional
investment and its consequential annual charges. A financial frame work may have to be
set up which shows how the anticipated cash flows are to be handled and absorbed; the
scope of this frame work will depend on the institutional arrangements under which the
new plant is to operate.
The step-wise procedure for the financial analysis can be summarized as follows:-
1. A cash flow established in monetary terms and the financial return from the new
scheme is computed. Monetary terms imply fixed market prices. DCF analysis of
alternative disbursement schedules spanning the construction and operating phase
permits determination of the financial rate of return(FRR), sometimes also called
the ‘financial internal rate of return’.
2. The anticipated additional revenues earned from the operation of the new plant
are set against the additional expenditure incurred, including long term
commitments on the redemption (i.e. payback) of loans and other borrowings. The
adequacy of the revenue coverage is then found.
3. Confirmation is produced that the expenditure resulting from building and

operating the new scheme can be fitted into the corporate financial structure
without endangering the soundness of the undertaking. This is primarily an
accountancy matter but can have an influence on the conception the size and
phasing of the new scheme.
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4. A financing plan is set out to identify the precise financial requirements, the
potential sources of funds, the implications of the financing arrangements on offer
and the optimum way of funding the new scheme within the financial constraints
of the developer and, where necessary, with the approval of his govt.
The activities need not be carried out in this order but they are all essential precursor to
the implementation of the project. In some circumstances, it can be advisable to prepare
at least a tentative financing plan early in the project planning cycle so that not to much
time is spent in developing a project that stands little chance of being financed. The plan
can then be firmed up when the credit-worthiness of both the project and the developer
has been established and the potential sources of funds have been determined.
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CHAPTER 6
Comparison between Power Projects
Access to adequate as well as affordable power services is a necessary condition for

socio-economic development of a society. In a country like India where the major
economic activity is agriculture, supply of power, particularly to rural areas, is of great
significance in accelerating growth. It is also needed to promote other economic activities
for growth and development. Besides, supply of electric power has remained uneven here
and the per capita availability of power in the least developed countries has remained
below 400 kWh compared to that of 900 kWh in developed countries. In this respect the
adoption of rural electrification in India has been regarded as an essential step towards
achievement of a high rate of growth. However, as the major source of energy is the
conventional grid power produced from coal and to some extent from oil, the setting up
of the long and costly transmission and distribution lines coupled with high transmission
and distribution loss, increasing price of fossil fuels and high cost of centralized
management system make the programme unattractive in many places, in some cases
impossible. Also, there are financial and technological constraints due to lack of funds for
investment to expand the capacity.
Hydro-power: Benefits
Hydro-power projects up to 25 MW capacities are eligible for substantial cash subsidy

from the Ministry of Non-Conventional Energy Sources. Project income is exempt from
tax for ten years. Hydro projects automatically qualify for carbon credits under the Clean
Development Mechanism supported by the Kyoto Protocol and similar Emission
Reduction Funds.
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These projects have a long concession period of about 40 years and provide a perennial
stream of revenue to the investors. The entry of the private sector into power trading
would push up the demand for hydel generation for its cost advantage and higher trading
spreads.
Underlying the claims of certain advantages of hydro projects is the logic that guides the
planning methodologies currently employed in the power sector. The conventional logic
for hydropower, in the case of India, is as follows:
Hydro Compared With Other Generation Options
In comparison with hydropower, thermal plants take less time to design, obtain approval,
build, and pay back. However, they have higher operating costs, typically shorter
operating lives (~25 years), are important sources of air, water and soil pollution and
greenhouse gases, and provide fewer opportunities for economic spin-offs.
Other renewable sources of power (wind, solar, etc) are valuable options in addition to
hydropower in specific contexts, but cannot produce large amounts of energy in the
coming decades, and need back-up supply from other sources.
Advantages of Hydroelectricity
 Water is a renewable resource.

 Hydroelectric generators are clean and non-polluting to operate. The water is not
destroyed, consumed or polluted by generating electricity.
 Flowing water is free and reliable. Seasonal changes in water supply are fairly
predictable. The water stored in the reservoir provides a continuous supply, even
during dry weather.
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 Once a dam is built, it costs very little to operate. Dams and generators require
little maintenance and are very reliable. The direct cost of hydroelectricity is very
low. Hydroelectricity is the least expensive source of electricity in large
quantities.
 Small-scale hydro is simple and inexpensive. Individual homes and small
communities can get electricity from local streams.
 Hydro reservoirs can also be used to control flooding, for irrigation and for
recreational activities such as boating and fishing.
 Large delays in hydropower have been due to problems related to the availability
of funds, geological surprises, inadequate R&R plans, environmental issues, etc.
In the eighth plan, despite proposed capacity addition of the same order, only 27%
could be realized.
 The reason for such anomaly is more closely related to the internal dynamics of
planning than the knowledge of planners.
 The sector is also important because the irrigation loads in the post-monsoon
period coincide with the annual peak period.
 The savings are estimated as 15% of the present installed capacity.
 These inputs are essential especially for the rural poor and the disadvantaged.
Disadvantages of Hydroelectricity
 Large dams are expensive and slow to build. It can take over ten years between
the decision to build one and the time the electricity flows.
 There are few sites for building large dams. In North America, most sites suitable
for large dams are already used. The sites that are left are mostly in the far north.
 Dams disrupt the natural flow of water and disrupt ecosystems upstream and
downstream. Creatures that live in the water and animals that live on land can be
seriously harmed by changes in the flow of the river.
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 Reservoirs flood people's homes, forests and farmland. The people who live in the
settlements and who use the forests and land may not want a reservoir there, even
if they want electricity.
Small Hydro versus Large Hydro Project:
The impacts of a single large hydro project must be compared with the cumulative
impacts of several small projects yielding the same power and level of service. Small
projects generally require a far greater total reservoir area than a single large project, to
provide the same stored water volume. It is concluded that the most fundamental
determinant of the nature and magnitude of impacts of hydropower projects are the
specific site conditions and not the scale of the project. It is also important to optimize
development with respect to the complete river system.
Large dams have long been promoted on the grounds that they provide 'cheap'
hydropower and their associated irrigation schemes profitably raise agricultural
productivity. Yes, it was sometimes admitted, there were damaging environmental and
social impacts, but these local sacrifices were worth paying given the indisputable overall
economic benefits of river impoundments.
Further blows to the dam industry's dreams of a private sector future have come from the
increasing attractiveness of natural gas plants to private investors. The combined impact
of the inherent drawbacks of large dams and the competitiveness of other forms of
electricity generation means that only a tiny fraction of the privately funded power plants
being developed around the world are dams. According to a recent World Bank-funded
study, only 2.5 percent of generating capacity under development by the private sector is
hydropower. This compares to the 20 percent of the world's existing generating capacity
which is provided by hydropower.
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Small hydroelectric projects have recently become comparatively more attractive to

utilities in Canada on account of slow growth in demand. From the environmental point
of view, they would be acceptable if the reservoirs are small and normal water levels do
not exceed the levels reached when the rivers are in spate. A hydel project, big or small,
should be preferred when the ratios of energy that could be generated per oustee and per
hectare flooded are comparatively high.
Estimates show that they could together replace a big project or two. In India,
considerable scope exists for small, mini and micro power projects and run of the river
schemes along rivers originating in the Himalayas and the Western Ghats. However, it is
true that small power projects alone would not suffice to meet increasing demand.
In India, the conventional alternatives to hydroelectric power are diesel, coal or natural
gas. Considering India's coal reserves and the fact that it imports petroleum, coal would
rank equally with diesel. Though thermal plants using coal used to be highly polluting,
modern technologies have helped to bring down pollution to very low levels. However,
coal is ranked below oil in the West as it produces a lot of carbon dioxide, a green house
gas.
The choice between a hydel project and a thermal project can be dictated by economic
factors if all the social and environmental costs are internalized. It is often assumed that
thermal power is necessarily costlier than hydel power. However, this assumption is not
always correct. Only a proper cash flow analysis would show which one is the most
economic.
Typically, a hydel project will require higher expenditures in the early years and the
thermal project in the later years. In a simplified way, the choice can be stated in terms of
whether higher investment costs of hydroelectricity in the early years are or are not
justified by its lower operating costs in the later years.
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Table 6.1 Pros and Cons of Electricity Sources
Source Advantages Disadvantages
Wind • Renewable • Intermittent

energy source energy source
• Very low • Limited to

greenhouse gas windy areas
emissions • Potentially high
• Very low air hazard to birds
pollution • Moderate land
emissions requirements
• Very low
water
requirements
• Very safe for

workers and
public
Solar • Renewable • Intermittent

energy source energy source
• Very low • High land

greenhouse gas requirements
emissions • Expensive
• Very low air • Manufacture
pollution involves some
emissions toxics
• Very low water
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requirements
• Modular, low-
profile, low-
maintenance
• Very safe for

workers and
public
Biomass • Renewable • Low energy

energy source return on
• Very low investment
greenhouse gas • High air

emissions pollution
• Can produce emissions
energy on- • Very high water

demand and land
• Energy is requirements
easily stored • High

occupational
hazards
Small • Renewable (if • Dependent on

Hydro silt removed in stream flow
reservoir) • Large numbers
• Relatively low of small dams
greenhouse gas can have
emissions significant
• Very low air effects on
pollution terrestrial and
emissions aquatic habitats,
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• Inexpensive to possibly as great

build and as a large dam
operate producing the
• Safe for same amount of
workers and electricity
public
Large • Very high • Non-renewable

Hydro return on energy (silt removal
investment unfeasible)
• Very low • Very high land

greenhouse gas requirements
emissions • Extremely high
• Very low air impacts to land
pollution and water habitat
emissions • Best sites are
• Inexpensive already
once dam is developed or off-
built limits
• Can produce • Disastrous

energy on- impacts in case
demand of dam failure
• Provide water
storage and
flood-control
Natural • Inexpensive • Non-renewable

Gas • Low land energy source
requirements • High
• Can produce greenhouse gas
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energy on- emissions

demand • Relatively
• Relatively safe moderate air
for workers and pollution
public emissions
• Danger of
explosion if
handled
improperly
Coal • Inexpensive • Non-renewable
• Abundant energy source
• Low land • Very high
requirements greenhouse gas

emissions
• Can produce
energy on- • Very high air
demand pollution
emissions
• High land/water
impacts from
acid rain, mine
drainage
• Highly
hazardous
occupation
Nuclear • Low • Non-renewable

greenhouse gas energy source
emissions • High water
• Low air requirements
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pollution • Relatively
emissions expensive
• Low land • Waste remains

requirements for dangerous for
power plants thousands of
(though not for years
waste storage) • Serious accident
• Can produce would be
energy on- disastrous
demand
Problems existed in the operation of SHP
For SHP development, the internal unfavorable factors of itself are: small scale
production, consistent increase of capital investment, contradiction of seasonal variation,
low level of technical equipment and operation and management, etc; in the meantime,
there are also external impact such as difficulties of selling electricity, unsmooth ness of
price mechanism, slow development of market, constraints of its public welfare character,
etc.
1. Small Scale Generation

Under present macro economic policy environment for energy, SHP mostly with
installed capacity less than tens of Mw would no doubt be in an inferior position in
competing with large conventional power plant with capacity of several hundreds Mw
and even several thousands MW.
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2. Difficulty of selling out

Due to different affiliation of SHP and national grid, the problem of integration of SHP
into the grid could not have been solved for long. It would be incapable of integration or
with very low electricity price in connecting to the grid, thus decrease the profit of SHP
and increase the risk of investment.
3. Contradiction of seasonal variation
During raining season, SHP would have large volume of spilling water due to surplus
power in the grid; while in dry season, shortage of electricity would occur in the grid.
This is also one of important causes for cost increase for SHP.
Benefits Of Small Hydro
The biggest advantage of SHP (small hydro power) is that it is the only ’clean’ and
renewable source of energy available round the clock. It is free from many issues and
controversies that continue to ’hound’ large hydro, like the submergence of forests,
siltation of reservoirs, rehabilitation and relocation, and seismological threats. Other
benefits of small hydro are user-friendliness, low cost, and short gestation period. In
addition to these obvious benefits, SHP contributes numerous economic benefits as well.
It has served to enhance economic development and living standards especially in remote
areas with limited or no electricity. In some cases, rural dwellers have been able to
manage the switch from firewood for cooking to electricity, thus limiting deforestation
and also cutting down on carbon emissions. On the macro level, rural communities have
been able to attract new industries – mostly related to agriculture – owing to their ability
to draw power from SHP stations.
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CHAPTER 7
Clean Development Mechanism
Overview of the Clean Development Mechanism
The CDM is a mechanism where Annex I countries with a specific obligation to reduce a
set amount of greenhouse gas (GHG) emissions by 2012 under the Kyoto Protocol assist
non-Annex I countries to implement project activities to reduce or absorb (sequester) at
least one of six GHGs. Non-Annex I countries are signatories and ratifiers to the Kyoto
Protocol; however, they do not adhere to reduction targets stipulated under the protocol.
The reduced amount of GHGs becomes credits called certified emission reductions
(CERs), which Annex I countries can use to help meet their emission reduction targets
under the protocol (UNFCCC 1997)
The six greenhouse gases addressed under the Kyoto Protocol
The six GHGs are not equal In terms of global warming potential (GWP), which
measures
the relative radiative effect of GHGs compared to CO2. For example, one tonne of
methane
has a GWP as potent as 21 tonnes of CO2.
Greenhouse gas Global warming potential
1. Carbon dioxide (CO2) 1
2. Methane (CH4) 21
3. Nitrous oxide (N2O) 310
4. Hydrofluorocarbons (HFCs) 140–11,700
5. Perfluorocarbons (PFCs) 6,500–9,200
6. Sulfur hexafluoride (SF6) 23,900
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Diagram of How the CDM functions
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Overview of the CDM Project Cycle:
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CDM Potential of Different Interventions in Power Sector in India
Small-scale CDM projects

Although the CDM is devised to foster the sustainable development of host countries,
developing small-scale CDM project activities, which are known to be eneficial to the
sustainable development of local communities, are often burdened with high costs for
low returns.
In order to leverage the development of small-scale CDM project activities, the UNFCCC
introduced fast-track modalities and procedures with some preferential treatment.
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A project activity can be qualified as small-scale CDM if it meets one of the three
following conditions (UNFCCC 2001b, paragraph 6[c], 21):
• Type I: renewable energy project activities with a maximum output capacity equivalent
to up to 15 megawatts (or an appropriate equivalent)
• Type II: energy-efficiency improvement project activities which reduce energy
consumption on the supply and/or demand side by up to the equivalent of 15 gigawatt-
hours per year
• Type III: other project activities that both reduce anthropogenic emissions by sources
and directly emit less than 15 kilotonnes of CO2 equivalent (CO2e) annually Small-scale
CDM project activities benefit from a number of privileges, which allows them to speed
up their registration process. The details of the special treatment given to small-scale
projects can be found in the overview of the CDM project cycle (section 3.7). One special
feature applicable only to small-scale CDM project activities is bundling and debundling.
Bundling is to cluster projects that are too small to be attractive for investment, even with
the additional CER revenues. By using the bundling scheme, small projects can become
cost-effective and thus become sufficiently attractive with CER revenues. Many
community-based projects (e.g., small hydropower), as well as projects for small- or
medium-size enterprises, with significant contribution to local sustainable development
often face difficulties in attracting sufficient interest for investment without a substantial
level of public support. These projects can use the bundling scheme to improve their
overall financial viability. Projects can be bundled into “sub-bundles” based on the small-
scale project types (type I, II, or III) and project characteristics, such as technology types,
emission reduction measures, location, and baseline methodologies. Furthermore,
bundling of one or more sub-bundles is possible and there is no limitation on the number
of projects that can be sub-bundled, as long as the total size of the each sub-bundle
cluster does not exceed the ceiling set for its small-scale project.
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While it is possible to bundle small projects together, however, large projects are not
allowed to be debundled to smaller project sizes well within the range of small-scale
CDM rules (box 3.2), in order to avoid anyone taking advantage of the CDM’s fast-track
and cost-effective scheme for small-scale CDM projects. While the bundling scheme may
appear to be an ideal solution for small projects beneficial to sustainable development,
there also exists a number of difficulties involved with the practice, for example, in
developing a plan for monitoring all bundled project activities.
The bundling requirement of small-scale CDM projects in the small-scale sector

The Indian Renewable Energy Development Agency (IREDA) of the central government
has been designated the bundling organization for bundling CDM projects in India to
bring down transaction costs.
Bundling organizations
Most of the CDM projects currently being developed in India belong to the small-scale
category of CDM projects. Many of these may have high sustainable development
benefits, but due to their smaller size they are not able to bear the high transaction costs
related to project development and other steps. Studies on transaction cost have indicated
that bundling small projects into one, or bundling project steps, may reduce the
transaction cost of such projects.
This creates the need for bundling organizations which can coordinate the preparation of
CDM-related documents, validation and registration of projects, and monitoring and
verification of emissions reduction on the one hand, and also act as a single contact point
for carbon buyers on the other. The consultants and energy service companies may be
well-placed to take on this task. Additionally, agencies such as the Small Industries
Development Bank of India (SIDBI) and National Bank for Agriculture and Rural
Development (NABARD) can also act as bundling organizations for rural and
community development-oriented projects. Such organizations may also serve as a
seller’s pool, thereby securing the interest of sellers.
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A few such examples are already available in the country. For instance, Women for
Sustainable Development, an NGO in Karnataka is coordinating the activities of small-
scale CDM project developers, providing them technical assistance, and assisting in the
sale of the emissions reduction credits from these projects.
Process of host country approval by NCA
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CHAPTER 8
Case Study
Ramgad micro hydel project is situated in Betalghat block of district Nainital, on Nainital
Almora Road in Uttaranchal.
The scheme has been commissioned on March 1989 and is running satisfactorily. Power
house building has been constructed to house two units of Turbine, Generator, Oil
Pressure Governor, B/F Valve, Control panel, Battery & Battery Charger unit. 50.0 meter
of water head and 382 litre water per second discharge has been utilized for generation of
100 KW of power.
The power has been generated at 415 volts and transmitted to the nearby villages at
11000 volts through a step-up transformer.
The voltage transmitted at 11000 Volts is again stepped down to 415 Volts through step-
down transformer erected at different village sub-stations.
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Some of the Salient Features of the RAMGAD micro hydel projects is:
1) POWER HOUSE: The size of the power house is 12.0M*6.0M. The type of the sub
structure is R.C.C. Pipers & Beam & that of the super structure is Stone
Masonary.The type of machine foundation.
2) TAIL RACE CHANNEL: The channel is of type R.R. Stone Masonary with the size
of 850mm*600mm. The length is 9000mm & that of Free Board is 150mm.The
outfall structure joins with the stream.
3) POWER CHANNEL: The Power Channel is made of R.C.C. with the size of
750*650(W*D). The length of the free board is 620M with the Bed Slope of the ratio
1:250.
4) PENSTOCK INTAKE: The trash rack of the intake is of fabricated steel & the
control arrangement is manually operated gate valve.
5) PENSTOCK: The Penstock is of Mild Steel. The length of the only Penstock is 280
Meter with the diameter 450.0mm.
6) 6) DESILTING TANK: The size of the tank 4.0M*2.4M*2.0M. The tank is of
R.C.C. The particle for the elimination is of 0.20 mm.
7) Diversion/Intake Structure: The diversion is of Stone masonary structure with
R.C.C. core wall. The dimension of the structure is Length*Bottom Width*Top
Width*Depth = 25M*2225M*1000M*2000M.
8) FEEDER CHANNEL: The channel is of R.C.C. with the size (cross-section)
1.0M*0.7M. The size of free board is 150mm and the length of the channel is 160 M.
The Design Discharge is of 0.57 cumec. The Bed Slope is 1 in 150.
9) HEAD: The Gross head and the Net head is 53.8 M and 50.0 M respectively.
10) TURBINE AND GENERATOR: The turbine is of type Turgo Impulse. The turbine
output is 80.0 KW. Total numbers of units are two. The Generator is of
synchronous type with the rating of 62.5 KVA, 415 volts, 0.8 p.f., 3 phase and 50 Hz
frequency.
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11) TRANSMISSION SYSTEM: The Transmission line is of 11KV,3 phase which is on

fabricated towers with ACSR Weasel conductor. The extension of the system is 8.0
km approximately.
12) DISTRIBUTION SYSTEM: The distribution system has two types: First is of type
3 phase, 415V, 4wire with the distance of 5.5 km.Second is of type 1 phase, 215V,2
wire with the distance covered 7.25 km.
13) TRANSFORMER SYSTEM: a) One step-up transformer of rating 160 KVA, 0.4/11
KV. b) Seven step-down transformer with rating 25 KVA, 11/0.4 KV and two step-
down transformer with rating 5 KVA, 11/0.2 KV.
Five numbers of villages that have been electrified are Kafulta, Bargal, Garjoli, Jakh and
Budhlagot.
Upto 24/11/2004 there was no grid connection. Some of the problems at that time were:
1) The villagers were misusing the power and did not care for it.
2) The capacity was not fully utilized, due to peak power reaching 60 to 70 kw, and
average power was 30 to 40 kw.
3) There was no supply of reliable and consistent power for e.g. during irrigation time.
4) The revenue generated was not covering even the operation and maintenance cost.
5) It was looking that this is not a profitable project.
On 24/11/2004 the project was connected to grid for feeding the unusable power and
taking it at peak hours. There was a PPA signed between UPCL & UREDA for selling or
taking the power at the rate of Rs. 1.64/unit. The revenue generated is being distributed in
the ratio of 75:25 in between UREDA: Urja Samiti.
Some of the growth and development that has been generated through grid
interconnection are-
1. Community participation: The grid is being operated and maintained by village Urja
Samiti; this makes a sense of equity participation and responsibility in them.
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2. Revenue Generation: The revenue generated was almost six lakhs rupees, within two
years only through grid connection
3. Sense of ownership: Before Grid connection, the villagers were misusing the power
supply, but due to grid connection & minimum charge tariff along with metered supply,
the villagers feel a sense of ownership and hence care for the electricity.
4. Bridging finance: While going for grid connection, each villager was to submit Rs.
1000 each. Now, they are financially attached to the utility. Bridging finance
5. Government support: UREDA supports the RAMGAD project for renovation and
modernization while required.
Some of the excerpts taken by interviewing some of the villagers are:-

Table 8.1
Name of the house Occupation Income Electrical instruments in house
owner (Annual)
Kishan Singh Mehra Farmer Rs. 10-12,000 T.V.,4*60 W bulbs, Tape
Recorder
Surendra Singh Pandey --do-- Rs. 6-7,000 4*60 W bulbs, Tape Recorder
Narpath Singh Clerk Rs. 24,000 T.V.,4*60 W bulbs
Rajendra Singh Farmer Rs. 12-14,000 2*60 W Bulb
Deep Singh Farmer Rs. 7-8,000 T.V.,4*60 W bulbs
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Table 8.4 QUANTIFICATION OF SOCIO-ECONOMIC ANALYSIS:
(Figures in Rs. ’0000)

BENEFITS DISBENEFITS
500 400 300 200 100 0 100 200 300 400 500 1000
Water supply and

irrigation
Flood control
Soil Improvement
Electric Supply
Employment
Infrastructure developments
Enhancements of
Industry & comm.
Improvement of living standards
learn and upgrade the construn.
skills of rurals
Ground & parasitic pollun.

Water abstraction
Environmental disturbance
Visual ammenity
Soil deterioration
changes in mineral content
Fiscal surplus/Deficits
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BENEFITS
Water supply and irrigation = Rs.10, 00, 000
Flood control = Rs. 12, 00,000
Soil Improvement =Rs. 4, 00,000
Electric Supply =Rs. 55, 00,000
Employment =Rs. 50, 00, 000
Infrastructure developments =Rs. 10, 00,000
Enhancements of Industry & comm. = Rs.3, 00,000

Improvement of living standards = Rs.3, 00,000
learn and upgrade the construn. Skills of rurals=Rs.4, 00,000
DISBENEFITS
Ground & parasitic pollun. =Rs. 4, 00,000
Water abstraction = Rs. 3, 00,000
Environmental disturbance =Rs.2, 00,000
Visual amenity =Rs. 5, 00,000
Soil deterioration =Rs. 4, 00,000
changes in mineral content = Rs. 5,00,000
Fiscal surplus/Deficits =Rs.1, 02, 33,019
So, NET BENEFITS= (Water supply and irrigation +Flood control+ Soil Improvement
+Electric Supply +Employment +Infrastructure developments +Enhancements of
Industry & comm. +learn and upgrade the construn. skills of rurals+Improvement of
living standards)-( Ground & parasitic pollun+Water abstraction +Environmental
disturbance +Visual amenity +Soil deterioration +changes in mineral content +Fiscal
surplus/Deficits) )
= Rs.1, 51, 00,000-Rs.1, 25, 33,019

=Rs.25, 66,981
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So, when we considered only the monetary terms the cash flow was negative. But, when
the Socio- economic impact is also concerned and evaluated and quantified in numerical
values, the resultant cash flow become positive. In conclusion we can say that the socio
economic impact plays an important role, which must be concerned and included while
calculating the mini/micro projects.Ramgad is a profitable project while considering the
whole scenario.
Financial analysis of Ramgad Project in view of Private Investors

The financial analysis of Ramgad micro hydro project is totally depending up on the
approach adopted by Alternate Hydro Energy Centre. Rotan micro hydro project has
taken as base for the calculations. Some relevant assumptions have also been taken due to
unavailability of some data. The financial analysis of the project is as follows;
Estimates of Cost & Phasing

The total Project cost is estimated as Rs. 52.21 Lacs comprising of Rs. 18.48 Lacs for
Civil Works, Rs. 19.38 Lacs for E&M works & Rs. 14.35 Lacs for T&D Works.
Generation cost:-
i. Cost of Generation per kWh of power depends on total annual generation &
annual working expenditure.
ii. The annual expenditure will consist of:-
a. Operation cost @ 1% of works cost
b. Maintenance cost @ 1% of cost of Civil Works + 2% of cost of E & M
works + 1% of cost of T & D works
c. Depreciation charges – considered life of civil works & E & M works as
per standard norm given in the Gazette of India Extraordinary part II
section; published by Ministry of Power & Non-Conventional Energy
Sources, with assumption 10% as scrap value
d. Interest @ 14% pa. on capital invested
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iii. Annually units generated are computed as 788400 units at 90% load factor &
525600 units at 60% load factor.
Table 8.5 Statement of Cost of Generation
SI. No. Items Cost (Rs. In Lacs)

1 Capital cost (basic) 52.21
2 Subsidy from MNES* 23.49
3 Project Cost without Subsidy
Project Cost 52.21
Interest during Construction (@ 14%) ** 5.61
Total Project Cost 57.82
4 Project Cost with Capital Subsidy
Project Cost 52.21
Capital Subsidy 23.49
Balance Cost 28.72
Interest during Construction 2.52
on balance cost @ 14%
Total Project Cost 31.24
5 Annual Working expenses as per table 8.6 3.13
6 Interest Charges (@ 14%)
(a) without subsidy 8.09
(b) with capital subsidy 4.37
7 Total Annual expenses
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8 Annual Generation at power house (units)

(i) at 90% load factor 0.7884
(ii) at 60% load factor 0.5256
9 Cost of generation per kWh (in Rs.)

(i) at 90% load factor
(b) with capital subsidy .95
(ii) at 60% load factor
* Subsidy of up to 45% of project cost limited to Rs. 60,000 per KW will be given to
private & joint sectors as per MNES guidelines.
** Calculation of interest during construction has been done as per the calculation
done by AHEC in Rotan M H Project.
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Table 8.6 Statements of Yearly Working Expenses
Sl. No. Items Cost(Rs In Lacs)
1. Operation cost 0.52

@ 1% of works cost
2. Maintenance cost of civil works 0.18
@ 1% of cost of c- works
3. Maintenance cost of E & M works 0.39
@ 2% of cost of E & M works
4. Maintenance cost of T & D works 0.29
@ 2% of cost of T & D works
5. Annual depreciation charges as per table 8.7 1.75
TOTAL 3.13
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Table 8.7 Annual Depreciation of Assets
Sl. Items Life in Cost(Rs.Lac) Rate of Depreciation(Rs.Lac)

No. years depreciation
in %
1. Civil works 50 18.48 1.95 0.36
2. E & M works 35 19.38 3.40 0.66
3. T & D works 25 14.35 5.06 0.73
TOTAL 1.75
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Table 8.8 Description Of Cash Flows

Sl. year Cash inflow Cash out flow
No.
1. 1990 --- Initial capital expenditure

2. 1991- Revenue generated Operating expenses
2015 by power selling
3. 2016 Revenue generated New T&D works

by power selling
5. 2026 Revenue generated New E&M works

by power selling
7. 2041 Revenue generated New T&D & civil works

by power selling
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Table 8.9 Calculation of NPV (without capital subsidy)
Sl. Year Cash Cash Net Cash Present

No. inflow(in Rs. outflow(in Rs. flow(in Rs. value(in
Lac) Lac) Lac) Rs. Lac)
1. 1990 0 57.82 -57.82 -57.82
2. 1991-2015 19.71 11.22 8.49 77.31
3. 2016 6.57 155.47 -148.9 -13.73
4. 2017-2015 19.71 11.22 8.49 3.94
5. 2026 6.57 544.62 -538.05 -19.14
6. 2027-2040 19.71 11.22 8.49 2.12
7. 2041 6.57 3853.93 3847.36 -32.76
8. 2042-2050 19.71 11.22 8.49 1.15
NET PRESENT VALUE -38.93
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Table 8.10 Calculation of NPV (with capital subsidy)
Sl. Year Cash Cash Net Cash Present

No. inflow(in Rs. outflow(in Rs. flow(in Rs. value(in
Lac) Lac) Lac) Rs. Lac)
1. 1990 0 31.80 -31.80 -31.80
2. 1991-2015 19.71 11.22 8.49 77.31
3. 2016 6.57 155.47 -148.9 -13.73
4. 2017-2015 19.71 11.22 8.49 3.94
5. 2026 6.57 544.62 -538.05 -19.14
6. 2027-2040 19.71 11.22 8.49 2.12
7. 2041 6.57 3853.93 3847.36 -32.76
8. 2042-2050 19.71 11.22 8.49 1.15
NET PRESENT VALUE -12.91
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Financial Analysis of Ramgad Micro Hydro Project:
The financial analysis of Ramgad micro hydro project is based on available data and the
methodology used is based on the approach adopted by Alternate Hydro Energy Centre,
IIT, and Roorkee. The DPR of Rotan micro hydro is taken as the base for all calculations.
Assumptions:--
 The project life is taken as 60 years.

 The PLF of the plant is taken as 90%.
 Discount rate is taken as 10% for all calculations.
 The electricity tariff is taken as Rs.2.50/unit throughout the life of project.
(Same as taken by AHEC in Rotan M h Project).
 Annual operating expenses are taken constant throughout the project life.
 It will take 8 months to complete each i.e. E&M works, T&D works and civil
works.
Results for Ramgad micro hydro project: -- According to the analysis done
above the NPV and pay back period of the Ramgad micro hydro project comes out to be:
1. NPV for the project:

a) With capital subsidy Rs.-12.91 Lac
b) Without subsidy Rs.-38.93 Lac
2. Payback period for the project:

a) with capital subsidy 3.74 years
b) without subsidy 6.81 years
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Interpretation of the result: -- The NPV of the project comes out to be negative in
both the cases i.e. with or without subsidy and the payback period is very small. The
payback period of the project is 3.74 years for the project with capital subsidy and 6.81
years for the project without subsidy. And the NPV for the project with capital subsidy is
Rs. -12.91 Lac and for the project without subsidy is Rs. -38.93. (Negative in both the
cases).
While the payback period is so small, the NPV has such a high negative value. The
possible reasons for negative NPV are as follows:-
I. There is no increase in electricity tariff through out the project life.(the tariff is
assumed to be fixed at Rs. 2.50/unit throughout the project life), hence there is no
increase in the cash inflow i.e. revenue generated is constant for every year.
II. The project life is assumed to be 60 years which is more than the average lives of
T&D, E&M and civil works. This will affect as follows:-
a) The life of T&D works is 25 years; hence the new T&D work has to be done
once after 25 years that will costs Rs 1554.47 Lac and then after 50 years,
which will costs around Rs.1684.55 Lac.
b) The life of E&M works is 35 years; hence the new E&M works has to be
done after 35 years that will costs Rs 544.62 Lac.
c) The life of civil works is 50 years; hence the new civil works has to be done
after 50 years that will costs Rs 2169.38 Lac.
The lives of all types of works are taken according to Alternate Hydro Energy Centre.
And the costs of all types of works have been calculated taking the discount rate of 10%.
The above given are the reasons behind the negative NPV of the project instead of the
fact that project has such less payback period. The main reason for this is long project
life. If we take project lives different the results will differ as follows.
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1. Taking project life as 25 years; the NPVs are

a) with capital subsidy Rs. 45.51 Lac
b) without capital subsidy Rs. 19.49 Lac

b) without capital subsidy Rs. 9.7 Lac

b) without capital subsidy Rs. -7.32 Lac
Actual Scenario of Ramgad Micro Hydro Project (According to data

available):--
The Ramgad micro hydro project is commissioned in 1989 and completed in 1990. it
started generation in 1991.since it an existing project, the data is available from year 1990
till year 2006.based on that data, we can easily calculate that the project is going in loss.
The actual financial results are totally different from what has been calculated for the
same project (based on approach adopted by AHEC). From table 8.11 we can easily see
that the net present value of the Ramgad project (considering only from1990 to 2006) is
Rs -63.29 Lac. The pay back period of Ramgad according to the calculation done, comes
out to be 3.74 year (for project with capital subsidy) and 6.81 year (for the project
without subsidy).
Table 5.12 shows that the most of the times the net cash flow is negative. The possible
reasons behind the negative cash flows are as follows:-
1. The repair and maintenance was not done regularly, hence it need huge amount
cash for the maintenance.
2. In year 2004, the plant started grid feeding and that required a huge investment,
due to which the cash outflow was increased.
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3. There was not the full utilization of hydro potential because a part of the water is
used for the irrigation.
4. Since, the project was established for the social benefits; hence the actual tariff
was less than the tariff used for calculations.
5. The dam for diversion was made with stone masonry structure with R.C.C. core
wall, that dam was damaged after every 2years on an average, which required
huge cash out flow.
6. In year 2002 & 2003, the enormous amount of investment was required for
modernization of the project.
7. 35% of meters there were defective, which affect the billing and collection
efficiency.
Ajay Yadav
PHOTO GALLERY
FOREBAY
POWER
HOUSE
FIG 1. POWER HOUSE OF RAMGADS MICRO HYDRO PROJECT
DAM BUILT OF
STONE
MASONARY
WITH RCC
CORE WALL
FIG 2. RAMGAD DIVERSION DAM

Ajay Yadav
FIG 4. PICTORIAL ILLUSTRATION OF RAMGAD PROJECT
FIG 5. GENERATING UNIT OF RAMGAD PROJECT

Ajay Yadav
FIG 5. VILLAGERS WHO ARE GETTING BENEFITTED OUT OF THE RAMGAD

PROJECT (SOCIAL CAUSE)
Ajay Yadav
CDM Issue For Bundled Micro Hydel Projects
The project activity consists of the construction of Bundled Microhydel Projects (3.115
MW) which has bundled 29 projects, the total installed capacity being 3.115 MW to
generate clean energy using the energy of the flowing stream. The project is a run of the
river type with minimum environmental impact and will provide and sell electricity to the
villages in and around the area reducing dependence on fossil fuels and reducing CO2
emissions.
The Microhydel projects will deliver electricity to 182 villages, through a mix of 11KV,
440V, 220V transmission line’s and will supply power to the residential and commercial
customers. As a consequence of the construction of the project, the electricity produced
will increase the life quality of the inhabitants.
The Microhydel projects are being developed by Uttaranchal Renewable Energy
Development Agency (UREDA) and being managed by User Energy Committees, which
are constituted for each project.
The Microhydel projects will produce an average annual generation of 7.58 GWH and
will contribute to reduce the emissions in the amount of 8527 tons of CO2eq. per year.
The Microhydel projects will contribute to the sustainable development by providing
several important environmental and social benefits.
Location of Project (Village/District/ State):
The Microhydel projects are situated in the state of Uttaranchal, India. The exact location
of all projects is given below:
Table 8.13 Location of Projects
S.No. District Name of Site Physical Location
1. Bageshwar Ratmoli Vill. -Ratmoli
Post -Bankot
Block -Bageshwar
2. Bageshwar Satteshwar Vill. -Satteshwar
Post -Bankot
Block -Bageshwar
Ajay Yadav
3. Bageshwar Kanolgad Vill. -Kanolgad

Post -Kanyalikot
Block -Kapkot
4. Bageshwar Karmi-ii Vill. -Karmi
Post -Karmi
Block -Kapkot
5. Bageshwar Dokhti Vill. -Dokhti
Post -Bagar
Block -Kapkot
6. Bageshwar Bhikuriyagad Vill. -Bhikuriya
Post -Seragad
Block -Munsiyari
7. Bageshwar Kunwari Vill. -Kunwari
Post -Badiyakot
Block -Kapkot
8. Bageshwar Jagthana Vill. -Jagthana
Post -Jagthana
Block -Kapkot
9. Bageshwar Lamabagar Vill. -Lamabagar
Post -Baisani
Block -Kapkot
10. Bageshwar Wacham Vill. -Wacham
Block -Kapkot
Block -Bageshwar
11. Bageshwar Gogina II Vill. -Gogina
Block -Kapkot
Block -Bageshwar
12. Bageshwar Karmi-iii Vill. -Karmi
Post -Karmi
Block -Kapkot
13. Bageshwar Liti-ii Vill. -Liti
Post -Liti
Block -Kapkot
14. Nainatal Ramgad Vill. - Ramgad
Post - Ratighat
Block - Betalghat
15. Pithoragarh Rotan Vill. -Rotan
Post -Raiyanghar
Block -Berinag
16. Chamoli Gangotri Gangotri Dham
Ajay Yadav
17. Chamoli Choting Vill. -Choting

Post -Milkhet
Block -Dewal.
18. Chamoli Bank Vill. -Bank
Post -Mundoli
Block -Dewal.
19. Chamoli Wan Vill. -Wan
Post -Wan
Block -Dewal.
20. Chamoli Ghes Vill. -Ghes
Post -Ghes
Block -Dewal.
21. Chamoli Sarma Vill. -Sarma
Post -Kanol
Block –Ghat
22. Chamoli Gamsali-Bampa Vill. -Gamsali-Bampa

Post-Gamsali
Block-Joshimath
23. Uttarkashi Istergad Vill. -Dhola

Post -Hadwadi
Block –Mori
24. Uttarakashi Lamchula Vill. -Dang
Post -Jakhera
Block –Garur
25. Uttarakashi Gangotri II Vill. -Gangotri
Post -Gangotri
Block Bhatwari
26. Uttarkashi Taluka Vill. -Taluka
Post -Dhatmirr
Block –Mori
27. Nainital Niti Vill. -Niti
Post –Niti
Block –Joshimath
28. Almora Tarula Vill. –Tarula
Post –Naini
Block -Bainsiyachhana.
Ajay Yadav
29. Tehri Jakhana Vill. –Jakhana

Post –Budhakedar
Block -Bhilangana.
The Complete CER holding will be to be with UREDA.

Construction for the first Microhydel project started in June 2003 and the project became
operational in Jan 2005.The Project completion date will be June 2007. The Project Life
time will be 30 years
Financing details of the Project:

The total project costs amount to Rs. 623.8 million (US$13.86 million), out of which
Rs.186.9 million (US$4.15 million) has been accrued as subsidy from Ministry of Non
Conventional Energy Resources, Govt. of India and the rest Rs. 436.9 million (US$9.71
million) through funding by Uttaranchal Renewable Energy Development Agency
(UREDA).
(Taking Exchange Rate, $1 = Rs. 45)
The total CDM contribution sought to be Rs.4, 609,440 (us $ 102,324) per year. The
Indicative CER price is US$12
IRR without CER Revenue will be -1%.
IRR with CER Revenue will be -0.1%. (As per calculation done).
The Subsidy element in the project & source is Ministry of Non Conventional Energy
Resources; Govt. of India gives a subsidy of Rs 60,000 per KW of installed Microhydel
capacity. The total subsidy element works out to be Rs. 186.9 million.
Emissions Reductions from the Project

The Microhydel project generates electrical power using hydro potential and supplies the
net generated power to the villages, which otherwise under normal circumstances would
have got power by diesel generation units.
Hence, the generation by the proposed project activity is non-GHG source and it is
expected that the entire fossil fuel generation (which would have happened in case the
project would not have been implemented) will be replaced by a renewable, non-GHG
emitting source of energy.
Ajay Yadav
FORMULAE USED TO ESTIMATE THE EMISSIONS FOR SMALL SCALE

CDM PROJECT ACTIVITIES:
The baseline for the project activity is kWh produced by the hydroelectric project
multiplied by an emission co-efficient calculated in a transparent and conservative
manner as the weighted average emissions (in kgCO2/kWh) of the diesel generation
units.
Paragraph 7 of the Appendix B of the simplified modalities and procedures for small
scale CDM project activities state’s that a default value of 0.985 kg CO2equ / KWH can
be used. 0.985 kg CO2equ / KWH translates into 985 tCO2equ / GWH.
Baseline emissions or emissions avoided by the project activity are estimated using the
following formula.
Baseline Emissions (tCO2) = Emission co-efficient (tCO2/GWH) x
Anticipated generation from project activity (GWH)
Using the above formula, baseline emissions or emissions avoided by the project activity
are estimated as 8,536 tCO2 per annum. This is based on an anticipated net generation of
7.58 GWH from the project.
CER (Revenue) flow year wise for the Ist crediting period at different PLF:
For 3.115 MW bundled micro hydel project
The resulting baseline emissions during the 1st crediting period are tabulated below
@ 27% PLF (without grid feeding)
Table 8.5
YEAR 2007 2008 2009
2010 2011 2012 2013
Baseline emissions 8527 8527 8527
8527 8527 8527 8527
(tCO2)
Anticipated Generation 7.58 7.58 7.58 7.58 7.58 7.58 7.58
(GWH)
Revenue generated 4.031 4.031 4.031 4.031 4.031 4.031 4.031
In Million Rs.
(1$=Rs45)
Ajay Yadav
Table 8.6
@ 70% PLF (with grid feeding)
YEAR 2007 2008 2009 2010 2011 2012 2013
Baseline emissions 21486 21486 21486 21486 21486 21486 21486
(tCO2)
Anticipated 19.1 19.1 19.1 19.1 19.1 19.1 19.1
Generation
(GWH)
In Million Rs.
(1$=Rs45)
By connecting the project to grid we can increase the PLF of the various micro hydel
projects to 70 %( approx.) From 27 %( approx), which on one side will supply
electricity to the grid and on the other side will make the project financially viable by
generating more revenues from generation as well as CDM. Here with the increase in the
PLF the surplus revenue generated by the sale of CER’s will be Rs 6.13 Million.
Specific global & local environmental benefits:

 The project will reduce estimated global CO2eq emissions by approximately
250,000tCO2eq during its operational lifetime.
 The project will contribute to supply electricity based on locally available hydro
resources instead of relying on GHG emitting fuels.
 The project would lead to utilisation of environmentally safe & sound
technologies in small scale hydroelectric power sector. Further the project
demonstrates harnessing hydro potential in small rivers and encourages setting up
of such new projects in future.
Ajay Yadav
Calculations Related To CDM for Ramgad Project

The resulting baseline emissions during the 1st crediting period are tabulated below
Table 8.7
@ 27% PLF (without grid feeding)
YEAR 2007 2008 2009 2010 2011 2012 2013

Baseline emissions 233.1 233.1 233.1 233.1 233.1 233.1 233.1
(tCO2)
Anticipated Generation .2365 .2365 .2365 .2365 .2365 .2365 .2365
(GWH)
In Million Rs.
(1$=Rs45)
Table 9.5
@ 70% PLF (with grid feeding)
YEAR 2007 2008 2009 2010 2011 2012 2013
Baseline emissions 604.3 604.3 604.3 604.3 604.3 604.3 604.3
(tCO2)
Anticipated Generation .6132 .6132 .6132 .6132 .6132 .6132 .6132
(GWH)
In Million Rs.
(1$=Rs45)
Here in the case of Ramgad micro hydel project, the PLF of the plant has increased with
connection to the grid . The plant which was running in loss at a PLF of 30% (approx)
has started earning profit by running at an average PLF of 70% (approx.).
As the generation has increased from 236520 units to 613200 units as calculated .this will
increase CER’s units. The surplus CDM revenue so generated will be Rs 200457.
This will help in making the project economically viable as an additional income of Rs
326326.6 will be generated.
Ajay Yadav
SWOT ANALYSIS
STRENGTH:
1. Grid feeding resulting to revenue collection.
2. Environmental benefit.
3. Employment to villagers for e.g. formation of URJA Samiti.
4. An ideal case for rural electrification.
WEAKNESS:
1. Defective meters, collection efficiency
2. Repair and maintenance not done on regular basis.
3. Hydro power potential is not being optimally utilized due to irrigation.
4. Dam gets damaged after every two years(on an average basis).
OPPORTUNITIES:
1. Additional 50 to 100 KW can be generated by setting up a new plant.
2. More power can be produced by optimally utilizing the resources (for
e.g. shifting diversion channel back side).
3. Extra revenue can be generated by selling CER units.
THREATS:
1. The villagers will start accessing power from grid, if grid reaches to
them due to difference in tariff
Ajay Yadav
CONCLUSION
In the present scenario of power sector it is not possible to provide electricity

to very poor people in remote locations and make a high return on capital.
Any project or financial investment is intended to make choices between two
extremes, viz profitability and social impact. But our project, which
comprises of the case of Ramgad micro hydro project, is a middle ground in
which social welfare is being achieved along with profitability. Ramgad
Micro-hydro project is serving around 300 low-income households in
addition to providing employment to the socially backward villagers. In
point of fact the cost of micro hydro is too high for marginalized people.
Hence in order to make the Ramgad project financially and economically
viable a participative approach has been employed which is done by
involving the community (village urja samiti ) in the process of project
development Investments made in the Ramgad project are primarily
intended to promote a social benefit to the villagers. But with the recent
growth and expansion it has been possible to connect the Ramgad unit to the
regional grid and the sales to the grid has become possible, which has after a
long wait made the Ramgad project financially viable.
.
Ajay Yadav
Summer Internship Report by:-
Ajay Yadav
B.Tech ( Electronics & Comm)
ajayupes@gmail.com
Ajay Yadav

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Uttaranchal Renewable Energy Development Agency

a) Giving Upfront Subsidies including Tax Rebates

b) Giving Subsidies at the time of sale of Power

Renewable Energy Sources are pre-requisite for Rural Electrification. Rural

UREDA was established in July, 2001 with the following mission:

Uttaranchal Renewable Energy Development Agency) with the financial support of

Small-scale hydro stations are classified in the table below.

The ministry of Non-Conventional Energy Sources (MNES) is encouraging the setting up

Economic Analysis Of SHP Projects

It must be clearly understood at the outset why the economic appraisal is to be

Micro SUPPLY DEMAND Micro

LEVELS OF THE ECONOMY

PARAMETERS FOR ANALYSIS

INPUT CAPITAL EXP- ANNUAL EXP-

DECISION STARTING DISCOUNT PROJECT

LOGIC DIAGRAM FOR ECONOMIC ANALYSIS

MORE LOCAL INPUT

VARIATION OF OPERATION & MAINTENANCE COSTS OVER PLANT LIFE

KEY ELEMENTS OF CASH FLOWS

SOCIO ECONOMIC ANALYSIS

 They provide more economic benefits to the region by way of construction

Some of the losses caused in socio economic conditions are:

Methodology To Measure The Economic Analysis of SHP

2. INETRNAL RATE OF RETURN (IRR) This method overcomes the disadvantage

INTERPRETATION OF RESULTS w.r.t. COST /BENEFIT AND IRR

3. SOCIO-ECONOMIC ANALYSIS (CONSIDERS INTANGIBLE FACTORS)

The Matrix approach is illustrated here:

(Estimated values in Rs’000./annum)

Ground and parasitic

NET BENEFIT =Rs. 4, 99,000 per annum

Ultimately, a comprehensive set of Performa accounts may have to be prepared, or at

3. Confirmation is produced that the expenditure resulting from building and

Access to adequate as well as affordable power services is a necessary condition for

Hydro-power projects up to 25 MW capacities are eligible for substantial cash subsidy

Hydro Compared With Other Generation Options

 Water is a renewable resource.

Small Hydro versus Large Hydro Project:

Small hydroelectric projects have recently become comparatively more attractive to

Table 6.1 Pros and Cons of Electricity Sources

Source Advantages Disadvantages

Wind • Renewable • Intermittent

• Very low • Limited to

• Very safe for

Solar • Renewable • Intermittent

• Very low • High land

• Very safe for

Biomass • Renewable • Low energy

• Very low investment

greenhouse gas • High air

• Can produce emissions

energy on- • Very high water

easily stored • High

Small • Renewable (if • Dependent on

• Very low air effects on

pollution terrestrial and

emissions aquatic habitats,

• Inexpensive to possibly as great

• Safe for same amount of

workers and electricity

Large • Very high • Non-renewable

• Very low • Very high land

• Can produce • Disastrous

Natural • Inexpensive • Non-renewable