The challenge of small or mini hydros

THE experts say one will need to cough up more than one million in US dollars to erect a small hydro electric generation facility that is able to produce one megawatt of electric power. In fact, some say the cost is conservative since it can go even higher – from $2.5 to $3 million – for a decent and technically sound power plant that can produce the same level of capacity.

This cost has been a stumbling block for distribution utilities that are itching to engage in power generation. Good for those whose vaults are fine as the sunshine, they can always spare a lot for the weirs and the penstock. But not for other entities, like electric cooperatives (ECs), whose desire to produce even a small portion of their total demand for power is held hostage by a cash flow just enough for daily services.

Look, the law allows ECs to engage in power generation so that they could at least produce a part, if not all, of their power demand and significantly reduce the generation charge which is the biggest component of the unbundled bill. There’s no debating the fact that the generation cost eats up almost 80 % of our electric bill. At a cost of P9 per kilowatt hour (kWh), the customer pays around P6 to P7 for generation charge alone. This is because the distribution utility buys its power from a supplier whose selling price the utility can’t haggle for. The generation charge is one of the so-called “pass through" charges.

Now, if the ECs are given the opportunity to generate their own power, imagine the cut or savings the move can bring. It’s just that the initial cost of putting up the mini plant is really staggering. By the way, hydro-electric power plants, dams for short, are classified according to the capacity they can generate -- pico hydro (less than 5 KW), micro hydro (5 KW to 100 KW), mini hydro (100 KW to 1 MW), small hydro (1 to 10 MW) and large hydro (10 MW or more).

The key is for the ECs to display their juice and wizardry to come up with a financial map that can create the desired result of reduced generation cost after several years. Here, the credit worthiness of an EC which it can use to court banks will be a big plus. That’s what several ECs have done in the country. With a growing captive market amid a regime of privatization that has not produced new big power plants, the ECs must start to mind their backyard and seriously consider busying their hands with power generation.

The skeptics will surely disagree. They will surely unload a lot of mouthful that going into generation will mean burdening the customers with another round of amortization. But that is not the end of it. After 10 or 15 years, when all debts have been settled, the generation cost will dip. A P2 per kWh is not that all impossible. That’s what the other ECs in the country had in mind when they went ahead to put up their mini-hydro plants. That will be better than paying a generation cost based on the price of a power supplier whose business is inspired by a return of investment.

Prof. Rowaldo “Wally” del Mundo, a well sought lecturer and key figure of the UP National Engineering Center, says if the ECs will play their cards well, they can be the key to the significant reduction of power rates in this country. “The ECs must engage in power generation in those areas where water resources are abundant. Benguet is blessed,” declared del Mundo during his EPIRA 101 lecture before the Multi-Sectoral Electrification Advisory Council (MSEAC) at BSU on Monday.

Del Mundo says the World Bank has come up with a kitty of $135 million to finance the mini-hydro efforts of ECs in the country. Right now, he says, the institution is finalizing the terms of a non-cash equity pact with the Development Bank of the Phil. to enable the ECs to smoothly access to the fund.

The ECs can avail of the fund once they submit their feasibility study and detailed engineering design.

Man-asok here we come.