Comments on the Epupa Hydropower Project Feasibility Study

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Contrary to assertions in the Feasibility Study, the Epupa hydropower scheme is not the "least cost" power alternative for Namibia. The cost of electricity produced by a combined-cycle gas-fired power plant would be 40% less than Epupa electricity. The consultant inappropriately uses assumptions in the analysis that underestimate the viability of alternative energy sources. Some assumptions are unnecessarily pessimistic, while in other cases the consultant ignored or misapplied relevant information from other continents. For example, using conventional assumptions about Solar Electric Generating Systems (SEGS) would result in 50 percent lower estimated costs than what the Feasibility Study indicates. Global experience with wind power demonstrates that the consultant’s assumption that developing wind power would require 20 years is greatly exaggerated. Wind power could make a substantial contribution to Namibia’s energy portfolio by the year 2005. The pessimistic prognosis on energy efficiency is unwarranted. Contrary to the consultant’s analysis, energy efficiency programs around the world demonstrate that all sectors of energy consumers can easily achieve modest efficiency improvements and that such improvements can improve economic performance of industry, not stifle it. Using more realistic and fact-based assumptions, the evaluation would demonstrate the competitiveness of alternative energy when compared to conventional sources and the Epupa hydropower scheme.

Detailed Comments

Section 8.2
The expected growth path for Namibian grid electricity demand from the 1994-95 figure of 1,639 GWh with 277 MW peak to 7000 GWh with 1,300MW at peak in 2025. This assumption may be reasonable given that a large segment of future growth will be in the area of rural electrification, with some 70% of the population currently without electricity. If it is assumed that the grid will only be able to reach a small portion of this population, then this 5% per annum growth will be expected to be consumed by urban households and industries increasing their consumption as incomes rise, as well as some demand increase due to the growth of the urban areas. Major efficiency improvements and revised electricity tariffs could reduce peak urban demand significantly.

Environmental factors are not included in cost estimates in this section. Assuming Namibia and South Africa make binding commitments to reducing greenhouse gas emissions after 2010 or 2020, the cost of imported or locally produced electricity from coal and natural gas would increase in those countries. The cost of power from hydropower, solar, and wind generating systems would not be expected to increase.

Section 8.3.5
The analysis for the gas-solar thermal plant includes numerous assumptions which, when combined, dramatically raise the cost of power. Because renewable energy systems tend to have very high capital costs and very low operating costs, it is desirable to maximize the amount of time the systems produce power. The consultant uses extremely conservative estimates of system availability in this example. Changing the assumptions as described in the following points would reduce the cost of power from a 160 MW Solar Electric Generating System (SEGS) by about 50%, to just under 4 cents/kWh. This would make the cost of power generation using the SEGS nearly the same as using a combined-cycle gas turbine, with significantly less fewer emissions of CO2 and other pollutants.

Inclusion of the solar- only analysis is unrealistic and superfluous, as such a facility could only produce power during daylight hours and would therefore not be cost-competitive against 24-hour alternatives. No such solar trough system has ever been built.

The rated lifetime for SEGS facilities in the United States is 30 years, not the 20 years indicated in the FS for a new SEGS in Namibia. Changing this factor lowers the cost of generation 50% by increasing the amount of time over which the system’s capital costs can be amortized, from 7 cents/kWh to approximately 6.0 cents/kWh.

The consultant’s assumed 25% operating time of the solar component of the gas-solar plant is abnormally low, implying only six hours of solar power production per day. Page 5-11 states that Namibia receives an average of 3300 hours of sunshine per year, which is equal to approximately 8 hours each day. Yet the FS assumes only 2250 hours (or 6 hours a day) will be available for operation. In the US SEGS, the gas turbine is limited to 25% of operating time, while the solar system operates at least 50% on average. If the solar operating time assumption for the Namibia project is increased to 50%, the amount of "subsidy" required from the gas generator decreases and the per kilowatt-hour capital cost of the system drops by one-third or more.

Rated capacity factor for the newest 80 MW gas-solar SEGS in California routinely exceeds 100% on days where solar insolation exceeds design assumptions. Solar insolation in Namibia is higher than that in most places on earth, so higher power output would be expected using similar technology. Raising the total capacity factor of the Namibia SEGS from 80% to 90% would lower the total cost to 6.2 cents/kWh, even if all other assumptions are taken at face value. Recalculating the cost of the SEGS option using the more appropriate assumptions described above yields the much more competitive price of $0.06/kWh.

The newest 80 MW SEGS in California had levelized costs of approximately $0.07/kWh, and the 1993 feasibility study for a new 80 MW SEGS in Nevada put costs at $0.06/kWh to $0.07/kWh, even though the new facility would rely on a very high cost gas source for backup power 25% of the time and included habitat remediation for the endangered Desert Tortoise. If the 160 MW system proposed for Namibia exploits economies of scale and uses cheap Kudu gas for backup power, costs would be expected to be considerably lower than the $0.07/kWh described by the consultant.
The consultant describes the area covered by the 80 MW Mojave Desert SEGS installation as "huge" at 46 hectares; however, Epupa is expected to inundate 16,000 hectares at the low-water level and 38,000 hectares at high-water level.

Section 8.3.6
The economic analysis of a hypothetical wind installation in Namibia is somewhat conservative, but reasonable. However, the assumption of a twenty-year lead time for substantial investment in wind power is unrealistic. Wind can make a substantial contribution to Namibia’s energy portfolio by the year 2005.

The 112.5 MW wind project being constructed in Buena Vista County, Iowa by Zond Corporation and MidAmerican Utilities will produce power at about $0.05/kWh by 1999. A 60MW project in Brazil is producing power at $0.045/kWh, but received very low cost financing and used some locally produced equipment.

It is unrealistic to study a 5 MW pilot Namibian wind farm for a decade before making an investment decision, only to wait another decade before bringing wind power online. This assumption assumes that NAMPOWER would not rely on past experience with coastal wind generation around the world, and would not have investment partners in this venture. The Zond project in the United States has gone from resource assessment to regulatory approval in only five years. Northern States Power Co. of Minnesota has added 25 MW of wind power to its grid in the last five years, and will install another 129.9 MW by the end of 1998.

Section 8.3.7
The summary table in this section should give a range of conventional generation costs from $0.02/kWh to $0.0355/kWh, as described in sections 8.3.2 and 8.3.3 of the FS. If no solar thermal station would be built without gas backup, then the cost of power for such a stand-alone station should not be listed. Instead the cost should be $0.07/kWh using the consultant’s assumptions, or approximately $0.035/kWh using the revised assumptions indicated above. If environmental costs (e.g., from a carbon tax) are taken into consideration, both solar thermal and wind generation would become cost competitive with conventional sources of power.

Section 8.3.8
The pessimistic prognosis on energy efficiency is unwarranted. The consultant makes a jump from the observation that per capita energy use is low to the conclusion that there are no opportunities to save energy. In fact, energy efficiency measures can limit the growth of per capita and total energy consumption without stifling new economic activity. The consultant assumes that Namibia’s population growth rate will remain constant at 3.1% per annum (population doubling every 23 years!) through the year 2025. This conclusion comes even though birth rates are falling throughout Africa, and are falling worldwide faster than at any time in history. New energy efficient homes in South Africa have reduced heating costs by 90%. These homes are low-cost, with construction expenses of about USD1,500. If, as the consultant maintains, the residential sector is a primary consumer of electricity in Namibia, energy efficiency measures will dramatic reduce the need for new power generation. These gains will accrue in both high income and low income urban households.

About the Author
Mr. Gore received his Master’s degree from the Energy and Resources Group at the University of California at Berkeley, with an emphasis on alternative energy in rural development. He has served as Africa Project Committee Representative with the International Development Exchange, and worked with International Rivers to evaluate and promote village-scale hydropower projects in Nepal. Mr. Gore has also worked with the U.S. Environmental Protection Agency’s Climate Change Division on energy efficiency and renewable energy programs, and with a number of environmental and social justice organizations. Mr. Gore is currently the director of a nonprofit renewable energy organization in Washington, DC. The opinions expressed herein are those of the author, and not of Renewable Energy for African Development.

Comments on the Epupa Hydropower Project Feasibility Study:
Chapter 8, "Alternative Energy Evaluation" Mr. Gore is the director of a nonprofit renewable energy organization in Washington, DC.

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