Abstract
The feasibility of hydroelectric plants depends on a variety of factors: water resource regime, geographical, geological and environmental context, available technology, construction cost, and economic value of the energy produced. Choices for the building or renewal of hydroelectric plants should be based on a forecast of the future trend of these factors at least during the projected lifespan of the system. In focusing on the economic value of the energy produced, this paper examines its influence on the feasibility of hydroelectric plants. This analysis, referred to as the Italian case, is based on three different phases: (i) the economic sustainability of small-scale hydroelectric plants under a minimum price guaranteed to the hydroelectric operator; (ii) an estimate of the incentives for reaching the thresholds of “acceptability” and “bankability” of the investment; (iii) an analysis of the results obtained in the previous phases using a model of the evolution of the electricity price over the 2014–2100 period. With reference to the Italian case, the analysis suggests that, to maintain the attractiveness of the sector, it is necessary to safeguard the access to a minimum guaranteed price. With the current tariff plan, complete sustainability is only achieved for plants with p ≤ 100 kW. For the remaining sizes, investments under current conditions would not be profitable. The extension of minimum guaranteed prices could make new medium-large plants (500–1000 kW) more attractive. The current incentive policy is not effective for the development of plants larger than 250 kW, as systems with lower capital expenditures are preferred. Uncertainty about the evolution of the price of energy over time is a concern for the sector; the use of evolutionary models of technical economic analysis tried to reduce these criticalities, and it was shown that they can be transformed into opportunities. It was also found that profitability due to the growing trend expected for the price of energy cannot be highlighted by a traditional analysis.
Highlights
Materials and MethodsThe study is divided into three phases. The first is an analysis of the economic sustainability of hydroelectric plants with power concession up to 1000 kW in the absence of incentives for the first 1,500,000 kWh produced
The feasibility of hydroelectric plants depends on a variety of factors: water resource regime, geographical, geological and environmental context, available technology, construction cost, and economic value of the energy produced
One of the main concerns regarding the economic sustainability of hydroelectric plants in Italy is that while the average energy price is constantly decreasing, the sum of the water concession fees/surcharges continues to rise; in some regions there was an increase in taxes related to the use of water resources by local authorities by almost 160% [23]
Summary
The study is divided into three phases. The first is an analysis of the economic sustainability of hydroelectric plants with power concession up to 1000 kW in the absence of incentives for the first 1,500,000 kWh produced. Economic feasibility: This is determined by the profitability rate, that is, the internal rate of return (IRR), between 7% and 9% This represents a profitability range typically considered acceptable by the entity that promotes the investment. The simplest is to compare the relationship between the total investment and the installed power or the ratio between total investment and annual energy yield These criteria do not identify the value for money of the systems since the revenues are not considered; they can only be used to obtain general indications on the investment. The net present value (NPV) methodology was used This makes it possible to obtain a faithful estimate of the profitability of the project by estimating the IRR.
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