In the examples examined in the five countries, the capital cost13 of micro hydro plants, limited to shaft power, ranged from US$714 (Nepal, Zimbabwe) to US$1,233 (Mozambique). The average cost is US$965 per installed kW which is in line with the figures quoted in some studies. The installed costs for electricity generation schemes are much higher.
The installed cost per kW ranged from US$1,136 (Pucará, Peru) to US$5,630 (Pedro Ruiz, Peru) with an average installed cost of US$3,085. The data for the complete sample and detailed summary of the financial analyses of the 16 sample projects is provided in the annex to this report.
The Cost Per Kilowatt Installed
An important observation is that the cost per installed kilowatt is higher than the figures usually cited in the literature. This is partly due to the difficulty analysts have in establishing full costs on a genuinely comparative basis. A significant part of micro hydro costs can be met with difficult to value labour provided by the local community as ‘sweat equity’.
Meaningful dollar values for local costs are difficult to establish when they are inflating and rapidly depreciating relative to hard currencies. In addition, there is little consistency in the definition of boundaries of the systems being compared, for instance, how much of the distribution cost, or house wiring, is included, how much of the cost of the civil works contribute to water management and irrigation, and so forth.
As with any de-centralised energy supply system, the comparison of actual costs at the ‘micro’ level of individual plants can also be misleading. Successful programmes require investments in the systems necessary for training, repair, and marketing. The critical issue is that these tasks exhibit substantial economies of scale in that the cost per micro hydro plant installed falls as the number of plants increases. Comparisons based on average costs will therefore be strongly influenced by the number of plants built.
Estimates of these ‘macro’ costs associated with developing and supporting a programme – sometimes referred to as “system overhead costs”14 are also difficult to establish, particularly as many of the costs associated with Research and Development and the training of engineering workshops are ‘sunk costs’ which took place over many years.