Talk Risk Management and Resolution Strategies for established and novel Technologies in the
low head, small Hydropower Market
Patrick Wiemann, 13/06/2008 Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Overview 1. Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Potential
Case Study Stadtwerke Munich: •
Flow 30 m3/s
•
Energy with Head of 1.06 m: 1,857,000 kWh
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Market development of small hydropower Installed power in MW
14500 White Paper Target =14,000 MW
Data 2004 and 2005 Current Trend
14000 13500 13000
12,786 MW
12500 12000
11,644 MW
11500 11,535 MW 11000 2003
2004
2005
2006
2007
2008
2009
2010
2011
Year
•
The market growth of small hydropower in Europe
was only 0.95% installed power from 2004 to 2005. •
The ambitious target of 14,000MW cannot be reached with current market growth.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Overview established technologies
•
Overview of established hydraulic machines regarding operating heads and flow rates.
•
Demand highlights where new technologies may emerge in the near future.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
0.12
Running hours per year = 5,250h (average)
0.11
Total investment cost
16000
Specific cost in € per installed kW power
Electrictyy production costs in €/kWh . .
Justification
0.10 0.09 0.08 0.07 0.06 0.05
Low head installations Medium head installations High head installations
14000 12000 10000 8000 6000 4000 2000 0
0.7
0.8
0.9
1
1.1
1.2
1.3
0
Parameter variation in %
200
400
600
800
1000
1200
Size
•
High sensitivity of low head hydropower projects.
•
Specific investment cost per installed kW power for low head is significantly higher than for high head.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Research problem and Motivation 1.
Raising
funds
and
gaining
investor
confidence are one of the main hurdle. 2.
The uncertainties involved in hydropower
are not well understood. 3.
There is little investment in research.
4.
There are technological challenges in exploiting the remaining hydropower potential, mainly of low-head sites.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Overview 1.
Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Process of the Risk-Management-Cycle Risk-Management-Cycle
Risk Assessment
Risk Identification
Risk Analysis
Risk Controlling
Risk Resolution
Physical inspection
Economic risk
Acceptance
Flow charts
Technical risk
Avoidance
Fault trees
Socio-economic risk
Protection
Hazard indices
Environmental risk
Reduction Transfer
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Risk Identification Types of risk
Quantitative
Economic risk
Technical risk
Qualitative
Socio-economic risk
Environmental risk
Cost overruns risk
Weather risk
Changes in law
Flood risk
Price risk
Breakdown risk
Changes in taxation
Noise risk
Inflation risk
Performance risk
Political Force majeure
Water quality
Damage to third party
Risk of innovation
Meeting obligations
Completion risk
Force majeure
Fish impact
Legend: No insurance or limited cover available, Insurance cover available
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Risk Analysis •
Intuitive approach: Add an item for
“unforeseen costs”. •
Sensitivity analysis (probably the most
common way of handling project risk). •
Statistical methods, for example
probabilistic risk analysis using the MonteCarlo Simulation (MCS) method.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Risk Resolution Strategies •
Risk transfer, which is a strategy to shift
the risk to another person or organization. •
Risk reduction through mitigation,
prevention, or anticipation. •
Risk research, e.g. dynamic performance risk can be mitigated by analyzing the present performance of previous projects.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Overview 1.
Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Case Study •
We focus on weather risk through variation of rainfall and the choice between alternative technologies.
•
The case study will consider two scenarios: 1. Under low flow volatility, which means relatively low weather risk, and 2. Under high flow volatility, which means relatively high weather risk.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Turbine
•
Crossflow- and Kaplan-turbines are appropriate for low heads and for a wide range of flow rates.
•
The maximum efficiency of Crossflow- and Kaplanturbines is between 80 and 93%.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Screw
•
The Screw can use water flows of 0.1-5m3/s and heads up to 10m, with power capacities up to 300kW.
•
The Screw reached an efficiency of 60% at 20% of max. flow and 70% for 60-100% of maximum flow.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Efficiency curves for Turbine and Screw Overall plant efficiency in % .
1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 0%
20%
40%
60%
80%
100%
Admission (Q/Qmax) in %
•
The Turbine efficiency curve is very tight around maximum efficiency value of 85%.
•
The Screw has a very flat efficiency curve with a maximum efficiency value of around 70%.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Cost curves for Turbine and Screw Case Studies: A 50kW
Specific investment cost in €/kW .
12000
B 350kW
Turbine
10000
Screw
8000 6000 4000 2000 0 1
10
100
1000
Installed power in kW (log)
•
Two cases: A for a 50kW and B for a 350kW engine.
•
The cases A and B will be considered under low flow volatility and under high flow volatility.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Flow duration curves 6
.1000
Low volatility = low weather risk High volatility = high weather risk
4 Probability
Flow in m 3 /s
5
3 2 1 0 0.0
0.2
0.4
0.6
0.8
1.0
.0000
60
63
65
68
70
73
75
78
80
83
85
88
90
93
95
98
100
103
105
108
110
113
115
118
Flow in m3/s
Probability
•
Key variable is the weather risk measured as variability around the mean value of the flow data.
•
The flow variation from available historical flow data by using the log-normal or the Gumbel distribution.
Risk Management in the low head, small Hydropower Market
13.06.2008
120
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Case Study Results Case A: Low Volatility and 50kW
Case B: High Volatility and 350kW installed
installed power
power
1.0
1.0
Turbine Screw
0.8
Probability
Probability
0.8
0.6
0.4
0.2
0.0 -1.5e+7
Turbine Screw
0.6
0.4
0.2
-2 -1.0e+7
-1 -5.0e+6
0 0.0
+1 5.0e+6
+2 1.0e+7
Expected Net Present Value
0.0
1.5e+7
-1.5e+7
-2 -1.0e+7
-1 -5.0e+6
0 0.0
+1 5.0e+6
+2 1.0e+7
1.5e+7
Expected Net Present Value
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Case Study Results Case A: Low Volatility and 50kW
Case B: High Volatility and 350kW installed
installed power
power
The efficiency advantage of the
The cost (and risk) advantage of the Screw
Turbine is less is less important than the important than the cost efficiency advantage of advantage of the the Turbine. Screw. Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Case Study Results •
The case study provides some interesting
insights into the importance of considering risk. •
Further research will aim for quantitative results under a combination of several uncertainties.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Overview 1.
Introduction • Potential • Market • Research problem and Motivation 2. Risk Management • Risk Identification • Risk Analysis • Risk Resolution 3. Case Study 4. Conclusions and Discussion
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Conclusions and Discussion •
The low head, small hydro power market is unexploited as a result of the lack of
understanding of risk, holding back technologies development and growth because of low investor confidence. •
The use of statistical simulation methods improve the quality of the decisions and increase confidence in the decision.
Risk Management in the low head, small Hydropower Market
13.06.2008
>>Introduction >>Risk Management >>Case study >>Conclusions and Discussion
Conclusions and Discussion •
The key to risk management is to be aware of all kinds of risk and to develop a
plan to eliminate or minimise them in a cost-effective manner. •
The major premise of risk analysis is that a customer can make better decisions when provided with a fuller understanding of
the implications of the investment decision.
Risk Management in the low head, small Hydropower Market
13.06.2008
Thank you very much for your attention! Questions? Contact: Patrick Wiemann Email: patrick.wiemann@soton.ac.uk Risk Management in the low head, small Hydropower Market
13.06.2008