Tanzania Traditional Energy Development and Environment Organisation (TaTEDO) Business plan

Transcription

1 Tanzania Traditional Energy Development and Environment Organisation (TaTEDO) 70 kw Micro hydroelectric Plant in Zege village Business plan TaTEDO P.O. Box Dar es Salaam Tanzania Tel: / Fax: Website: July 2007 Executive Summary 1

2 The Zege village Micro-Hydropower project is a new project to be constructed in Zege village, located in the Usambara Mountains, Tanga region. It is a decentralized electricity generation system that will use Kidabwa stream crossing Zege village. The overall objective of this project is to contribute to poverty reduction of the Zege villagers by introducing hydropower to the area for productive use of electricity and finally improving living standard and reducing poverty in rural areas through improved access to electricity from micro hydro power plants for small-scale enterprises and households in rural areas. Tanzania Traditional Energy Development and Environment Organization (TaTEDO) is the sole owner and main project developer, with room of other participating stakeholder to come in. The organization was established in 1990 as a non profit sharing organization for spearheading development of sustainable energy technologies and services while conserving the environment. The project core activities involve constructing a micro hydro power plant with power output capacity of 70 kw and installation of the local mini-grid and distribution lines to the targeted consumers (households, social services, institutions and small enterprises) and would charged on monthly basis. Billing will be according to the loads connected to the mini-grid, independent metering will be installed to each commercial customer so as to simplify monthly electricity revenue collection in accordance with electricity usage. The revenue accrued from customers will be used for maintenance of the plant and village development activities. This project activity also contemplates the production of clean power that will contribute to reduce dependence on imported kerosene and reduce greenhouse gases emission specifically CO 2, which would have occurred otherwise, in the absence of this project. The GHG emitted will be traded in Carbon Market and the revenue accrued will used in village development projects that are focusing on poverty reduction as well as contributing in maintenance and operation costs. TaTEDO will implement the project in partnership with Zege villagers This business plan has been prepared to the attention of potential investors that are willing to support TaTEDO financially. Total investments for the project is estimated to USD 208,320 which is an average of investment cost of 2,976 USD/Kw. Depending on availability of investment funding, the project will start in the year 2008 and construction work is planned to be completed in six months time. As already mentioned, specialized development funds (CER) will be tapped into from 2009 onwards. 2

3 1. Background Information The vast majority of Tanzanians, both rural and urban, do not have access to modern energy services. Barely two percent of rural Tanzanians are connected to the national grid 1. The National Energy Policy (2003) sets objectives to ensure availability of reliable and affordable energy supplies and to improve their use in a national and sustainable manner in order to support national development goals. To date, extensive rural electrification has not been a major priority for National Utility Company (TANESCO) due to the high cost implications and limited funding 1. The power demand of a typical rural areas served by TANESCO is between a few hundred kw and a few MW. The supply has been achieved either by an extension of the national grid or by installation of an isolated generation system. Rural electrification is being considered as an important prerequisite for gradually raising living standards and reducing poverty of the people in the project area. In this project, it is deemed important that rural electrification focuses on existing and potential productive income-generating activities in the fields of small-scale users. According to Tanzania Rural Electrification Study (2005) 2, the proposed technical solutions for the Electricity Supply of Rural Areas among others, is the decentralized local supply through village grid or individual home supply. 2. Project Description Micro hydropower stations are usually defined as ones with power output of less than 100kW. The Zege village Micro-Hydropower project is a new project to be constructed in Zege village, located in the Usambara Mountains, Tanga region. It will be a decentralized electricity generation system that will use Kidabwa stream crossing Zege village. The overall objective of this project is to contribute to poverty reduction of the Zege villagers by introducing hydropower to the area for productive use of electricity and finally improving living standard and reducing poverty in rural areas through improved access to electricity from micro hydro power plants for small-scale enterprises and households in rural areas. Feasibility study conducted by the project developer (TaTEDO) revealed that the stream has sufficient water flow throughout the year 1 Inception Report, Formulation of Rural Electrification, Sub Projects, Memo Tanzania Rural Electrification Study, Master Plan and Programme Report (Phase 1), June

4 and sufficient head to generate electricity estimated to 70kW for the run-of-river scheme. The proposed project will focus on provision of electricity for consumptive and productive uses in Zege village and the neighboring villages. Moreover, the project will also contribute to the country s programme on rural electrification coverage. The project core activities involve constructing a micro hydro power plant with power output capacity of 70 kw and installation of the local mini-grid and distribution lines to the targeted consumers (households, social services, institutions and small enterprises). Households will be billed according to the loads connected to the mini-grid, independent metering will be installed to each commercial customers so as to simplify monthly electricity revenue collection in accordance with electricity usage. The revenue accrued from customers will be used for maintenance of the plant and village development activities. This project activity also contemplates the production of clean power that will contribute to reduce dependence on imported kerosene and reduce greenhouse gases emission specifically CO 2, which would have occurred otherwise, in the absence of this project. 3. Project Site Profile Zege village is located around 30 km northeast of Korogwe township in Usambara Mountains, Korogwe District Tanga Region. Korogwe is one of the six districts of Tanga Region and is situated roughly to S and to E. The district has a total land area of about 3,500 sq.km. It bordered by Kilimanjaro Region to the northwest, Lushoto to the northeast and Muheza districts to the east respectively. The district is mountainous with meandering valleys and elevation that ranges from 500 to 1700 metres above the sea level. It has a mountain climate with a maximum temperature ranging between 20 0 C to 25 0 C and a minimum temperature range of 15 0 C to 21 0 C rainfall is extremely variable, ranging from 12mm to 1500mm per year. Mountaneous area of Korogwe is covered with forests and has a number of indigenous protected forests. It is administratively divided into 4 divisions, 21 wards and 230 villages census showed a population of 419,970 of whom 54.3% are women. The village has 3118 people, 607 households, 2 primary schools, 1 nursery school, 3 mosques and 3 churches. The main economic activity of this area is agricultural based, with various crops like spice, coffee, banana, maize, vegetables and fruits being cultivated. Nonagricultural enterprises include retail shops, food vending in small outlets, tailoring, and local beer brewing and grain milling. This milling enterprise is powered by hydro and it was constructed in 1994 by the Catholic Church. The energy solution for lighting for most of the villagers is kerosene, dry cell battery for radio and firewood for cooking. Other important 4

5 services like refrigeration and TV are not available due to lack of electricity. According to national rural electrification master plan there is no plan to extend the grid to the village in the near future. Figure 2: Map of Tanzania showing the location with mini hydropower potential 4. Project Ownership Tanzania Traditional Energy Development and Environment Organisation (TaTEDO) is the sole owner and main project developer, with room of other participating stakeholder to come in. TaTEDO is a sustainable energy development national non-governmental organisation based in Dar es Salaam, Tanzania with activities in several districts, and more than fifteen (15) years experience actively involved in sustainable energy development projects and programmes especially in rural areas. The organisation was established in 1990 as a non profit sharing organisation for spearheading development of sustainable energy technologies and services while conserving the environment. TaTEDO will implement the project in partnership with Zege villagers. TaTEDO will provide technical expertise, overall management and also monitor development and performance of the project during its lifetime. TaTEDO has strong experience and capability of micro hydropower designing and installation. In 2006, TaTEDO in collaboration by UNIDO did design, construct and undertake installation of micro hydro plant at KINKO village located within the same locality with the proposed project area (Zege village). The construction of a 10kW KINKO plant went in line with supplying electricity to 100 houses as initial installation. The contact person for TaTEDO is Mr. Estomih Sawe, who is also the TaTEDO Executive Director. (CV attached) 5

6 5. OPPORTUNITY Customer description The targeted customers are household, institutions, businesses and small medium enterprise that will be started as a result of this project. Based on interviews conducted with villagers, village leaders and other participating stakeholders during feasibility study it was revealed that 60% of households are willing and able to pay their monthly electricity bills at a cost of USD 3 per month and 40% of households are willing and able to pay USD 5 per month. Businesses and SMEs were willing and ready to pay for electricity services charges up to USD 8 per month. Other potential customers are earmarked to come for the six neighbouring villages of Manka, Mbaghai, Nkamai, Kwefingo, Msasa and Kwafunda. Successful implementation of this is intended to benefit more than 300 households. Presence of electricity to this village will result into income generating small enterprises like hair cutting and beauty salons; saw milling machines, etc, thus creating jobs and income to the villagers. The potential of agro-processing industries is high since the area is endowed with a lot of fruits. Consequently, the situation will create jobs for the villagers and for the near by villages nearby the site. Customer potential The village has 3118 residents, 607 households, 2 primary schools and 1 nursery school. It has 3 mosques and 2 churches. The villagers are also engaged in livestock keeping and crop cultivation including tea, spice, cassava, maize, banana and vegetables. The village is surounded by six villages which are expected to use the same power. As noted earlier about 60% of the households are will be able to pay their bills. This customer level plus those expected to come neighbouring villages is quite sufficient to support and sustain this project to profitability. Competition and Competitive advantage Currently there is no any other source of electrical power in the area, implying that all the village households, businesses; institutions are potential customers of the project. On the other hand the power utility company has no future plans of extending the grid to this project according to company rural electrification master plan. The costs of energy solutions currently in use are high when compared to cost of the service this project will be offering its customers. The survey conducted in the project area indicated the average amount spent for other energy substitutes per household per month as shown in the table: - 6

7 Energy source Use for households Unit price ( USD) Average expenditure per month (USD) Kerosene ¼ litre used for lighting per day 1.0 per litre 7.5 Batteries 8 batteries for radios, 4 batteries 0.3 per battery 3.6 for torches for lighting per month Firewood 2 small pieces for cooking and 0.3 per bundle 3.5 heating per day with two pieces of ~2kg Total expenditure per month per household in USD Technical Description The scheme will be located at the Kidabwa stream; it will consist of small diversion weir, canal headrace, penstock pipe and the powerhouse where the electromechanical equipment will be installed. The figure aside shows a map of the project area with the proposed layout of the project. The scheme is run-of-river, these is no reservoir that will be constructed for the purpose of electricity generation, part of water will be diverted to run the turbine and will come back to the original course after running the machine. The diversion and intake point will be located on top of the waterfalls located at an altitude of 1200 meters above see level. There is solid rock in the riverbed and therefore making it strong enough for the weir base. The best location for the water route was found to be on the eastern side of the stream. The terrain is steep in the direction of the stream. There is already an existing canal that can be used for this purpose at the entrance of the 7

8 water to the turbine, the PVC pipe will be used to run water at a pressure to the turbine. The power house will be constructed by the existing headrace canal to the water mill. The terrain is suitable, but there is soil in the surface. The power station will be constructed in bricks with a concrete foundation. The plan is to transmit the power with 400 volts from the hydropower station and directly to the different sub villages of Zege village. The nearest group of houses is located at 1km from the proposed powerhouse location, to enhance networking to the other parts of the village about 3km transmission line has to be built; for the first plan the project will be able to transmit power to the consumers without using transformer, for the short distances electrical losses are insignificant. The cross section area of the wires will vary with the load, but most probably 3 20 mm 2 will be used for most of the distance mm 2 and 3 25 mm 2 may also be used. Figure 1 gives a clue of the transmission line routing. The power will be distributed to the different houses in the village. It is expected that around 300 houses will be connected to the local grid out of more than 600 households present in the whole village. Hydrology Information The isohyetal map of the Pangani Basin shows that the precipitation is at around 1500 mm a year or 47 litres/sec/km 2. The evaporation however is difficult to detect. The average monthly rainfall in the western Usambaras is varying quite a lot. Especially the months June - October can be quite dry. Therefore the evaporation is probably lower than 1000 mm in this area. Assuming that the evaporation is 700 mm a year, the remaining runoff will be 800 mm a year or 25 litre/sec/km 2. The catchment s area is measured to 8 km 2. This makes the average water flow 8 25 = 200 l/s which is sufficient to run the planned plant. The stream is perennial which is known from statements by the village people and also from an onsite dry season observation as well as the fact that the installed hydro mill has been running for several years without stopping. A simplified measurement of the water flow was made. The water flow was estimated at a point some distance upstream from the intake to 60 8

9 l/s in the end of the dry season. According to the village members, we were observing the lowest flow. The flow of 60 l/s is 30 % of 200 l/s. This is a quite sufficient minimum flow, but similar measurements have been made in other streams and rivers in Tanzania. There is most probably some irrigation activities in the catchment s area, but they are limited because a large part of the area is forest. The high dry season water flow indicates that only a small portion of the water is consumed. There is no long time data recorded for the stream, nevertheless as noted earlier the presence of installed hydro mill in operation for more than ten years proves that there is sufficient flow throughout the year. 7. The existing structures and the proposed hydroelectric power project As indicated earlier, there is an existing hydro powered milling machine utilizing water from this project water stream. The hydro milling machine was constructed in 1994 by the aid of Catholic Church who sourced the donor, villagers provided workforce during construction period, and the project took almost one year from decision making to commissioning. The donor was collecting revenue for the first few years for recovering her costs; thereafter the donor handed over the machine to the villagers and the RC church who became the owners to the present. The hydro mill is using a mad canal with a total length of about 550m from the intake location to the forebay, the forebay is designed to store 30,000 litres. There is a 200mm PVC penstock pipe running through 150m taking water to the hydro mill. The head can be approximated to be 100m. The turbine used is a normal centrifuge pump used in reverse mode as a turbine (PAT), this is coupled to the grain milling machine. 9

10 The planned project will be installed upstream of the existing hydro mill so as to allow it to continue operating as usual. Another possible arrangement is to utilise the same forebay by putting another pipes in parallel with the existing one. The proposed hydropower station will therefore not interfere the operation of the hydro mill. 8. Project Returns Since this hydropower station will not be connected to the national grid the income will be limited by the economic ability of the people in the village. On the other hand the hydropower station will get the income from production, transmission/ distribution and sale of power generated. Based on the fact finding of economic ability of the targeted customers, it is projected that half the village households or 300 houses will be connected to the hydropower station and that they will be paying on an average of US$ 4 a month or US$ 48 a year. This will give an income for the hydropower station of US$ 14,400 a year. The consumption and income from industry is more difficult to project at this initial stage. However in Tanzania as a whole, the industries consume about 50 % of the electricity production. As this area consists of mainly agriculture it is assumed that the industry will consume 30 % of the total production. The income from small enterprises for the first few months may be assumed to bring at least US$ 200 per month or US$ 2,400 a year. This makes a total of US$ 16,800 a year. The analysis shows that in the beginning the obtained revenue from the generated power will be quite reasonable. GHG Emissions Other sources of returns are expected to come from greenhouse gas (GHG) emission reduction. This project belongs to Project type 1, RE under category IA - Electricity generation by the user. Emissions are calculated as: The annual electrical energy consumed by households multiplied by 4 to account for the emissions from a diesel system supporting incandescent bulbs and then multiplied by emission factor of diesel generator. The baseline scenario for GHG revenues (details are attached to this business plan) is as follows: CO2t/yr = Annual output x emission factor of diesel generator = 70kW*50%*24*365 * 4 = * 0.9 kg CO2/year =1103 tonnes CO2/year GHG emission from the project activity Calculated as fuel for transportation x total distance covered x fuel emission factor Found insignificant and thus bundling becomes important 10

11 Emission reduction due to the project Same as the baseline Project Activity Emissions The project scenario involves the installation of a micro-hydro plant as the source of energy for the lighting and other electrical energy services that previously did not exist. The emissions from the project activity is considered to be zero. The project scenario has two activities: (i)first inclusion of micro-hydro replacing and extending existing energy services, and (ii) The second is introduction and maintenance of fluorescent lamps which are 4 to 5 times more energy efficient than incandescent lamps. Each household will be supplied with two compact fluorescent lamps for lighting purposes (10W, 18W). The ex-ante assumption is made that the lamps will be operated on average for 7 hours per day (this will be subject to pre-project calibration and potentially monitoring). Energy efficient lamps are also installed in small business premises and public spaces. When the lamps expire they will be replaced, reducing the possibility for take back. Estimated emission through the use of the CFls Equipment type Number (A) Power rating of replaced equipment (KW)(B) Annual operate hours (C) Total power consumed (MWh)) (D=AxBxC/1000) CFLs Total power that would 54.9 have been consumed by replaced equipments, MWh (E) Technical losses (F) =0.1(=10%) Project activity Energy, 61 MWh (G=E/(1-F) Emission factors for 0.84tCO2/MWh displaced electricity (H) Project activity emission reduction (I=GxH) tco 2 /yr 11

12 Payment mode There are two ways/alternatives for paying the power According to consumption via prepaid meters whereby this is proper for large consumers. According to installed capacity in the house, this method is cheap and proper for households with known appliances. The first option could be sufficient for both loads, However, the cost of meter is $ 60 or $ for 300 houses which is not economical for such a small project. This is a considerable cost and a system of payment depending on the installed capacity. A system like that will probably give higher administration costs. The second option may be proper especially at the beginning of the project services, whereby the payments will be set according to the installed capacity to a particular house or say according to the appliances used by a particular house. Operational costs Considering the project plant power output, such a small hydropower station may likely have a fairly high operational cost per produced unit. However close assumption is that the project will have an estimated operational cost of 1 cent USD/kWh. This gives a total cost of $ 3,700 a year. (22% of the total income). Operational costs include salary for operational personnel, long time and short time maintenance and cleaning. (Details are in project financials) Load and Energy Demand Forecast Consumer loads Various types of potential consumer loads were determined through counting. Three categories customers were identified; domestic consumers, commercial consumers and small industries. Domestic consumers include residential houses of all sizes of houses as shown below: High load houses 5 rooms, kitchen, toilet and bath room Medium load houses 3 rooms, toilet and kitchen Low load houses 2 rooms and a toilet Average load 3 rooms, kitchen and toilet Commercial consumers include small shops, bars and restaurants. Small industries including milling machine and other merging activities like carpentry workshops. 12

13 Forecast estimates Load forecast has been estimated for the period of 20 years. Due to the economic situation it is anticipated that in the first few years the load served by the generated electricity will be much smaller than the generated power. Future annual peak demand was estimated using the historical growth of other similar electrified areas by the public electric power company. In the first four years after commissioning of the project, load is expected to grow by 25% annually to the initial full load. From the firth year onwards the load growth rate will grow differently with regards to the type of consumers as follows: Residential houses 4% Commercial 3% Small Industries 2% Public lighting 2% The forecast of power and energy demand for the twentieth year for the project area is kw and 509, KWh respectively as shown in table 1. A load factor of 0.5 was assumed for the studied project area. Onwards 4% 3% 2% 2% 1st 4 Yrs 25% 25% 25% 25% Year Residential (kw) Light Commercial (kw) small Industrial (kw) Public Lighting (kw) Total Demand (kw) Energy (kwh) , , , , , , , , , , , , , , , , , , , , Table 1. Load and Energy Demand forecast for Zege village 13

14 9. Project Institutional Architecture Project funding Enabling policies Technical Expertise In kind contribution Improved livelihood O & M costs Electricity supply CDM business 10. Project Risk Analysis Major risks to the successful implementation of the project and measures to manage risks No Risks Lack of technical and insufficient managerial capacities at local level village level Competition arising from other uses of water e.g. irrigation versus water for electricity generation 14 Mitigation measures TaTEDO experience will be used to mitigate this risk by undertaking local level capacity building on management, O&M of project Scheduling of water use to suite the situation will be agreed by both project management and village government authority. The villagers are used to this in the existing hydro mill

15 No Risks Level of poverty, may at initial stages affect smooth take off and sustainability of the project Most of the equipment are not available locally, this may increase the cost and delay of the project completion Increasing inflation rates may increase installation, operation and maintenance costs of the project This project construction work may impact the environment negatively Major economic activity is agriculture. Adverse climatic conditions may affect the economy and therefore consumers unable to pay their bills for operational and maintenance costs Perceived risk on the part of local investors / financiers can limit project funding opportunities Exchange rate risk Mitigation measures Villagers (targeted customers) will provided with entrepreneurial trainings to make productive use of the generated electricity for income generation The risk can be mitigated through by undertaken transactions process as early as possible to meet the project timeline. All necessary equipment for installation, operation and maintenance costs will be transacted using Euro to avoid loses. Goods will be bought immediately after securing funds There will be careful planning so as to avoid unnecessary practices that may affect the environment. Before construction permit will be obtained from the National Environment and Management Commission To overcome the risk, part of CERs funds will be used for operation and maintenance of the plant Villagers will be coached to start other economic activities using the generated electricity apart from agricultural based ones. Lessons from previous but similar project done by TaTEDO will be used to interest them Fiscal discipline plus a tight monetary policy are used to keep the inflation low. Consumer inflation in local currency has continued to decrease from 6.0% in 2000 to 4.4% in 2003 where as the real GDP growth remain 6.3% in 2003 and 6.6% in Specifying Euro for most of the financial transactions will mitigate exchange rate risk 15

16 11. Project Financial Requirements No Item: Construction Works Cost in USD A Civil works 35,000 B E & M works including turbine, generator, control system and cabling 50,000 C Transmission and distribution work 50,000 D Planning and administration 20,000 Sub Total ( A D) 155,000 E Establishment and other expenses (20% of works) 31,000 F Interest during construction (12% of total cost) 22,320 Total investment cost 208,320 Investment Cost, USD/kW 2,976 Unit No Item: Generation/Operational costs Cost in Unit USD A Annual expenditure I. Operational and maintenance cost 2,083 II. Annual depreciation Total annual expenditure 2,083 B Annual generation at 53% load factor taking 46% downtime 370,000 kwh and 0.5% auxiliary consumption D Cost of generation per year USD per KWh Sub Total ( A D) 155,000 E Estimated income By selling electricity 16,800 F Estimated income By selling CER s 16,545 Total investment cost 208,320 Investment Cost, USD/kW 2,976 16

17 12. Attachments Project Rating - (Annex A) CV s of the Project Technical Staff Project Financials Project implementation Schedule 17

18 Project Rating (Annex A) Sustainable Development Indicators Rate -2 to +2 Give explanation Local Environment and sustainability A.1. Water quality and quantity -1 Cause water turbidity A.2. Air quality +2 Reduced indoor air pollution A.3. Other pollutants 0 A.4. Soil Condition +1 Disturbance due to construction of the plant A.5. Contribution to biodiversity 0 Clearing of vegetations A Total (A.1+A.2+A.3+A.4+A.5)/5 0.4 Social Sustainability and development B.1. Quality of generated jobs B.2. Livelihoods of the poor * B.2.1. Income distribution B.2.2. Access to essential services (Housing, water, sewage treatment, health, education, welfare, etc) 18 (1+0)/2 = None Temporary job during plant, construction. Kerosene sellers will loose income -Loose of income to the kerosene sellers, +Productive uses of electricity, +Savings from kerosene B.3. Access to clean energy sources +2 Provision of electricity B.4. Human and Institutional capacity building B.4.1. Empowerment B.4.2. Gender equality (1+2)/2 = 1.5 B Total (B.1+B.2+B.3+B.4) Economic and Technological development C.1. Number of jobs created C.2. Sustainability of the balance of payment Temporary job during plant construction, enterprises Reduced workload to women (working distance) +Small scale enterprises, + casual labours- Wicked lamp sellers +Reduced kerosene importation, -Importation of equipments C.3. Replicability and contribution to +2 Extend project boundary to

19 technological self-reliance C Total (C.1+C.2+C.3)/3 1 Total (A+B+C)3 + 1 Feasibility Yes/No Comment D.1 Is there are chance of removing/or sufficiently reducing all the barriers? D.2 Do implementing institutions have the motivation and capacity to champion the project? D.3 Donors/Funders/Financiers are interested in supporting the project financially? D.4 Does the beneficiary community want the project and the project practitioner? Yes Yes Yes Yes include other projects under IA and IIC project type categories Institution has implemented the similar project at Kinko village which is located in the same region Similar projects are being funded, Consultation with UNDP was made; UNDP has shown interest to co-finance micro-hydro project. Pre-feasibility report 19