Rehabilitation of HPP in the WBs a market of over 600 mln/€

Rehabilitation of HPP in the WBs a market of over 600 mln/€

Annalise by Dr Lorenc Gordani

Legal Adviser in Albania Energy Market

market of over 600 mln/€ 600 mln/€ by dr lorenc mln/€ by dr lorenc gordani dr lorenc gordani hpp in the wbs

Western Balkans (WBs) in terms of greenfield hydropower (HPP) projects, has significant capacity in generation to be added to the existing HPP generation system. The overall identified potential for installation of additional capacities is estimated in total at 9,868 MW (without the small HPPs, nor HPP projects currently in construction). The above include 3,859 MW of candidate reversible projects.

However, an recent study of European Commission put in spot that in the WB6 are now getting into, or already are in, the age for rehabilitation at least 4,500 MWs of HPPs. In regard, it has to be consider the majority of installed hydropower capacity in the region are putted online in the sixties and in the seventies of the previous century. Then, the main driver of rehabilitation is the extension of plant operational lifetime and increasing of reliability, with an additional potential to reduce operational costs.

The industry standard considered an appropriate operational lifetime approximately 40-50 years before major rehabilitation of HPPs requirement. Then, taking into account either the stated plans of the plant operators or the required rehabilitations due to a nominal 40-year expected service lifetime, the rehabilitation and not the generation increases projects must be now the primary motivation of the state own companies.

In regard, the same above study refers, that in the next 5-year period (2017-2022), a total of 3,962 MW of HPPs are due for rehabilitation works of varying scopes. To a certain degree in Serbia and particularly in Albania there is significant HPP capacity where rehabilitation projects seem to be overdue or may become overdue in the coming years unless planning is undertaken immediately.

In specific, taking some examples, the power utility Elektroprivreda Crne Gore (EPCG) plans to invest EUR 40 million in the revitalization of two hydropower plants (HPP), Piva and Perućica in the next five years (till 2022). HPP “Perućica” is the oldest large hydropower plant in Montenegro, with installed capacity at 307 MW and will get new capacity 58.5 MW, which will extend their life expectancy, as referred by organiser of the 2nd International Summit and exhibition “Hydropower Balkans 2018”. Further, both HPPs will be fully capable of providing auxiliary and system services for Montenegro’s electricity system, such as secondary and tertiary regulation.

Related to Albania, from years the World Bank is running and monitoring the implementation of a Dam Safety Project (Fifth APL). This includes a number of interventions in the main hydropower plants of the Drin cascade, the largest in the country. The project is divided into two components investment in physical infrastructure $ 42 million and technical assistance $ 9.23 million. While the Council of Ministers recently approved a loan between Albania and the International Bank for Reconstruction and Development for the second supplement of € 12 million.

Their estimated potential for new total increase in generation and capacity by the rehabilitation are up to approximately 190 MW and 600-700 GWh, respectively. Then the capacity and generation increase in rehabilitation performed on projects shows it is relatively modest at 5-6%.

On above, unit investment, expressed in Euro per added MWh of generation is on average 1,137 €/MWh (however varying widely from case to case, depending on the scope of the rehabilitation). Compared to the data on average investment cost per new GWh from greenfield projects of about 700-800 €/MWh, it can be clearly state that energy from generation increases from rehabilitations is generally more expensive than energy from new greenfield projects.

Summarized investment cost of rehabilitation projects with available data is over 600 mln €. However, consider that the cost information is not available for significant number of projects, the total cost of coming rehabilitation projects will be significantly higher. Then, it is obvious this will represent an enormous task and financial burden for the operators/owners of these HPPs.

On the other side, this refurbishment backlog represents a considerable portfolio of investment projects with high probability of implementation, and as such, these represent an opportunity for strengthened cooperation with IFIs that traditionally support such measures. However, this is also an indication that the current operators are likely to be unable to act as investors in greenfield HPPs in the forthcoming decades during which time they are expected to have significant debt repayment obligations in respect of the refurbishment activities which will naturally be their topmost priority, conclude the above study in regional hydro strategy.

Disclaimer: The ownership and the opinion expressed pertain to the author. While all the effort are made to ensure the accuracy of this publication, it is not intended to provide legal advices as individual situations may differ and should be discussed with an expert. For any specific technical or legal advice on the information provided and related topics, contact us through “lorenc_gordani@albaniaenergy.org”.

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