Khem Gyawali/506 Pitamber Paudel/509 Ramendra Kumar/514

Introduction
No any quick solution of fulfilling the increasing

energy requirement. Main reasons of Hindrance in development of livelihood of Far hilly regions is nothing other than unavailability of energy. Transmission is expensive in those region. MHP may be the Quick solution. Just installing of MHP is not enough.

 Potential users having Economic generating

activities required. Otherwise low plant load factor Training and other support programs should be provided to local people so that they are encouraged for small cottage industries and entrepreneurship Subsidies are required to disseminate any new energy technology So in this project we have studied the variation in economic performance due to variation in plant load factor and subsidy

Objectives
Main objective: To perform financial and economic analysis of a typical MHP taking plant factor of 0.4 in starting year and demand in increasing trend of 4% per annum Specific objectives are: To perform financial and economical analysis with and without subsidy To find unit cost with and without subsidy To study effect on financial and economic analysis

Methodology
Literature review of few Micro Hydro. Financial and economic analysis was done with

subsidy and without subsidy. Unit cost was also calculated. The results were compared. On basis of results conclusions were drawn.

Hypothetical Technical details Installed capacity : 24kW Design flow :82 lps Gross Head : 58.50m Turbine type : Pelton Major components of Micro Hydro Diversion weir Headrace canal Desilting basin Forebay Penstock pipe Powerhouse building Turbine Generator Transmission line

Criterion for Accepting and Rejecting a Project(Financially only)

Net Present Worth (NPW) Criterion:

The present worth of each net cash flow at the MARR. Add up these present worth figures, their sum is defined as the projects NPW. PW (i) = An/ (1+i) n Where PW (i) = NPW calculated at i An= Net cash flow at the end of period n i=MARR n= Project life A positive NPW means that the equivalent worth of the inflow is greater than the equivalent worth of the outflows. This means the project makes a profit. If PW (i)>0, accept the investment. If PW (i) =0, remain indifferent If PW (i) <0, reject the investment.

 Annual Equivalent Equal payments on an annual basis. Knowing that net present worth, annual equivalent can be calculated by multiplying amount by the capital recovery factor. If AE (i)>0, accept the investment. If AE (i) =0, remain indifferent If AE (i) <0, reject the investment.

Internal Rate of Return (IRR) Internal Rate of Return (IRR) is defined as the discount rate which makes the NPW of the project equal to zero If IRR>MARR, accept the project. If IRR=MARR, remain indifferent If IRR<MARR, reject the project

 Benefit Cost ratio

For a benefit cost profile, let B and C be present values of benefits and costs. B=bn (1+i)-n C=cn (1+i)-n B/C ratio= B/C If B/C (i)>1, accept the investment. If B/C (i) =1, remain indifferent If B/C (i) <1, reject the investment.

 Subsidy policy of AEPC in MHP

The subsidy for MHP projects/schemes is as follows: A subsidy amount of NPR 15,000 per household will be provided for new MHP project from above 5 kW to 500 kW. But the subsidy will not be more than NPR 125,000 per installed kW.

 Assumptions for economic and financial analysis The project life is taken for 15 years. Three staffs one manager and two operators are sufficient to

manage plant. The salary of manager is Rs 5000/month and increases Rs 250/month in a year. The operators salary is Rs 3500/month and increases Rs 200/month in every year. Initial office expense is about Rs 5000/year and miscellaneous cost is Rs 4000/year. These costs increase 4% in a year. Replacement cost for wooden poles occur each 5 years. The price increases by 5% in next period. Operation and maintenance cost remains constant which is 2% of the initial investment. Current energy demand is 40% of total capacity. Plant factor is 0.4. The demand goes on increasing 4% per annum on average. The selling price of electricity per unit is Rs 5. In economic benefit calculation only substitution of kerosene and dry cell batteries are taken. Their prices are assumed to be constant in fifteen years for simplicity.

RESULT

NPV of cash flows from year 1 to 10 NPV AE (10%) IRR

Rs1,909,346.02 (Rs1,726,953.98) (Rs227,049.16) 1.365%

NPV of cash flows from year 1 to 10 NPV AE (10%) IRR

Rs1,909,346.02 Rs523,046.02 Rs68766.84 15.392%

NPV of cash flows from year 1 to 15 ENPV AE (10%)

Rs8,275,634.57 Rs4,639,334.57 Rs609,950.84

EIRR
Total cost Total benefit B/C ratio

28.542%
Rs5713584 Rs10352919 1.81

NPV of cash flows from year 1 to 15: 8,275,634.57 ENPV : Rs 6,889,334.57 AE (10%):Rs905,766.84 EIRR: 75.241% Total cost: Rs3463584 Total benefit: Rs10352919 B/C ratio: 2.9

 Unit cost with subsidy Rs 4.34 Unit cost without subsidy Rs7.17

Simulations

Conclusions
By doing this project we got knowledge about financial

analysis of any project in general .Especially in case of MHP just installing is not enough but its load factor must be adequate .In many situation local people have to be provided training on small entrepreneurship and skill development so that income generating activities increase resulting increase in energy consumption and thus load factor. Finally while thinking of any energy projects such points must be reckoned in mind. Subsidies plays major role in development and dissemination of any new energy technology.

 Recommendations
End use applications in micro hydro increase revenues

but total cost remains same. It also reduces cost of electricity per unit. While approaching to MHP in any locality economic generating activity should (small entrepreneurship consuming electricity) also be encouraged so that adequate plant load factor is obtained.