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The importance of clean development mechanism for small hydro power plants

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  • Martins, Douglas Eduardo Costa
  • Seiffert, Mari Elizabete Bernardini
  • Dziedzic, Maurício

Abstract

The present study sought to examine the importance of CDM for the implementation of small hydro in Brazil, assessing its advantages, disadvantages and limitations. An analysis of official documents of all SHPs in activity, under construction, and approved in Brazil was performed, including all existing CDM projects for small hydro in the country. A sensitivity analysis was performed to determine the point of zero net loss for CDM SHP projects, considering: minimum, maximum, and average Certified Emission Reduction (CER) values; minimum, maximum, and average costs of CDM project development, both for small and large scale activity; and variations in the internal rate of return (IRR). The main conclusion was that CDM for SHP in Brazil cannot be considered a subsidy for implementation of these projects, but may increase their revenue. It was found that, among the 431 SHPs which became active in the country since 2001, 339 did not implement CDM projects, suggesting that the importance of this mechanism as an incentive was uncertain. It was also found, under the investigated conditions, that investment in a CDM project requires a minimum installed capacity of approximately 11 MW to minimize the risks related to economic return. The variation in the value of the CER is more important than the variation of the Weighted Average Cost of Capital (WACC), as verified through sensitivity analysis. It was also found that CDM projects of large-scale activity, as well as small hydro projects in isolated systems, have a lower risk compared to small-scale projects which belong to the NIS (National Interconnected System).

Suggested Citation

  • Martins, Douglas Eduardo Costa & Seiffert, Mari Elizabete Bernardini & Dziedzic, Maurício, 2013. "The importance of clean development mechanism for small hydro power plants," Renewable Energy, Elsevier, vol. 60(C), pages 643-647.
    • Handle: RePEc:eee:renene:v:60:y:2013:i:c:p:643-647
    DOI: 10.1016/j.renene.2013.06.021
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    References listed on IDEAS

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    1. Tanwar, Nitin, 2007. "Clean development mechanism and off-grid small-scale hydropower projects: Evaluation of additionality," Energy Policy, Elsevier, vol. 35(1), pages 714-721, January.
    2. Abbasi, Tasneem & Abbasi, S.A., 2011. "Small hydro and the environmental implications of its extensive utilization," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(4), pages 2134-2143, May.
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    3. Cheng, Chuntian & Liu, Benxi & Chau, Kwok-Wing & Li, Gang & Liao, Shengli, 2015. "China׳s small hydropower and its dispatching management," Renewable and Sustainable Energy Reviews, Elsevier, vol. 42(C), pages 43-55.
    4. Kelly-Richards, Sarah & Silber-Coats, Noah & Crootof, Arica & Tecklin, David & Bauer, Carl, 2017. "Governing the transition to renewable energy: A review of impacts and policy issues in the small hydropower boom," Energy Policy, Elsevier, vol. 101(C), pages 251-264.
    5. Kumar, Deepak & Katoch, S.S., 2015. "Sustainability suspense of small hydropower projects: A study from western Himalayan region of India," Renewable Energy, Elsevier, vol. 76(C), pages 220-233.
    6. Kumar, Deepak & Katoch, S.S., 2014. "Harnessing ‘water tower’ into ‘power tower’: A small hydropower development study from an Indian prefecture in western Himalayas," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 87-101.
    7. Feng Lan & Wang Haisen & Yan Yan, 2022. "Spatial–Temporal Variations of Water Quality in Urban Rivers after Small Sluices Construction: A Case in Typical Regions of the Taihu Lake Basin," IJERPH, MDPI, vol. 19(19), pages 1-12, September.
    8. Weiwei Yao & Yuansheng Chen & Guoan Yu & Mingzhong Xiao & Xiaoyi Ma & Fakai Lei, 2018. "Developing a Model to Assess the Potential Impact of TUM Hydropower Turbines on Small River Ecology," Sustainability, MDPI, vol. 10(5), pages 1-16, May.
    9. Aquila, Giancarlo & Pamplona, Edson de Oliveira & Queiroz, Anderson Rodrigo de & Rotela Junior, Paulo & Fonseca, Marcelo Nunes, 2017. "An overview of incentive policies for the expansion of renewable energy generation in electricity power systems and the Brazilian experience," Renewable and Sustainable Energy Reviews, Elsevier, vol. 70(C), pages 1090-1098.
    10. Aquila, Giancarlo & Rotela Junior, Paulo & de Oliveira Pamplona, Edson & de Queiroz, Anderson Rodrigo, 2017. "Wind power feasibility analysis under uncertainty in the Brazilian electricity market," Energy Economics, Elsevier, vol. 65(C), pages 127-136.

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