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Analysis of financing models for small hydropower plants on the basis of case studies in Ethiopia
Analysis of financing models for small hydropower plants on the basis of case studies in Ethiopia
Project No. UC/RAF/05/019
There is a clear commitment from the Government of Ethiopia to expand electricity coverage in rural areas. Furthermore, the country has abundant, cheap, and environmentally friendly hydro resources, whose potential has been estimated at more than 30,000 MW. To help finance the expansion of the power sector, the government is encouraging the private investors to develop and operate hydropower projects. However, the interest of the private sector in making substantial investments in power generation has not yet materialized.
The Clean Development Mechanism (CDM), as defined in the Kyoto Protocol, can play a major role in promoting renewable energy generation in developing countries. Under the CDM, non-Annex I Parties (developing countries) can obtain Certified Emission Reductions (CERs) from emission reducing projects. The CERs can be sold on the carbon market, thus contributing additional revenues to the project. For renewable energy projects the main source of emission reductions results from replacing CO2- - intensive generated electricity by non-CO2 sources.
Can CDM make a difference for the uptake of hydropower projects in Ethiopia? The study conducted by UNIDO in cooperation with Pöyry Energy GmbH looks at the CDM component of for small hydropower projects and the affect the CDM benefits have on the project economics. Two small hydropower plants in Ethiopia were chosen for the detailed assessment: the Bonora project (1,04 MW installed power, 6.180 MWh annual generation) and the Awetu project (0,275 MW installed power, 1,828 MWh annual generation) were chosen for detailed assessments. Feasibility studies for these two projects, which were financed by the Austrian Development Cooperation in 2002, were available. The assessments were undertaken considering the replacement of diesel generators through the hydropower plants.