Economic feasibility analysis of small hydro power projects
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REVIEW
Economic feasibility analysis of small hydro power projects L. S. Monteiro1 · K. A. Costa1 · E. da S. Christo1 · W. K. Freitas1 Received: 4 April 2020 / Revised: 4 August 2020 / Accepted: 4 September 2020 © Islamic Azad University (IAU) 2020
Abstract The clean development mechanism (CDM) was created with two main goals: help developed countries achieve the greenhouse gas emissions reduction targets set out in the Kyoto Protocol and provide sustainable development to developing countries who host the projects. Sustainable project management shares the same goals as the CDM project, which could be a valuable asset in the development of new projects. Much has been discussed about the effectiveness of the program in achieving those goals and even more in the post-2012 period when the CDM has experienced fewer new projects and lower certified emissions reduction (CER) prices compared to previous years. Based on Brazilian CDM project data, this works aims to analyze the economic aspect of sustainable management by observing the influence of the obtained CERs on the internal rates of return (IRRs) of a small hydro plant (SHP) according to the current CDM scenario, marked by CER prices reaching their lowest historical values. For this study, a spreadsheet was developed to simulate a project’s cash flows and thus determine its IRRs. The results show that using the current CER prices, carbon credits do not significantly affect SHP projects’ IRRs, with increases of less than 0.2% compared to a scenario with no credits. CDM projects may benefit more from optimizing the investment costs or increasing energy production. These results highlight a need to emphasize the sustainable benefits of the CDM program rather than only focusing on the economic return perspective. Keywords Clean development mechanism · Sustainable project management · Small hydro plants · Multivariate linear regression · Internal rate of return Abbreviations CDM Clean development mechanism CER Certified emissions reduction COFINS Contribuição para o Financiamento da Seguridade Social GHG Greenhouse gas IRR Internal rate of return NPV Net present value O&M Operation and maintenance PIS/PASEP Programa de Integração Social/Programa de Formação do Patrimônio do Servidor Público SHP Small hydro plant tCO2e Ton of carbon dioxide equivalent
Editorial responsibility: Samareh Mirkia. * E. da S. Christo [email protected] 1
Postgraduate Program in Production Engineering, Fluminense Federal University, Volta Redonda 27255‑125, Brazil
TFSEE Taxa de Fiscalização de Serviços de Energia Elétrica TUSD Tarifa de Uso dos Sistemas Elétricos de Distribuição UNFCCC United Nations Framework Convention on Climate Change
Introduction Climate change is central to national and global environmental discussions. One of the most complex topics on this subject is the impact of GHG emissions on the planet. Thus, new research and technologies are constantly being developed to replace the dependence on fossil fuels, which are responsible for a high share
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