Small studies in Ecuador

ECUADOR has a population of 13M, making it the smallest country in the Andean Region of Latin America. At the end of the 20th Century, the country experienced a huge economic crisis, resulting in the annual GIP per person dropping from US$2400 in 2000 to US$1276 in 2004. Consequences included growing unemployment, migration and a sharp reduction in the budget for social investments like health, education and security. It is estimated that nearly 3M Ecuadorians have emigrated during the last six years, mainly to the US and Europe.

Consequently, Ecuador needed to find new ways to generate wealth, employment and confidence. How to do this in the best way, using the natural resources available in the country, was analysed and discussed at length.

Finding a solution

In the search for solutions, the National Council for Modernisation of the State (CONAM), through its ‘Modernisation of the Electric, Telecommunications and Rural Services Sectors’ (PROMEC) project, commissioned engineering firm Caminosca – following a bidding process – to develop a State-funded pilot power generation study. The aim was to serve rural areas that were without an electricity service, or had an inefficient system. The study included identification of communities where developing self-sustaining hydroelectric projects was feasible.

The first stage of the study recommended that very small hydroelectric schemes (less than100kW) should be discarded as past experiences indicated they would have high construction and operation costs, and because it would be cheaper to connect to the National Interconnected System (SNI).

It is worth mentioning here that electricity reaches 91% of Ecuador’s urban population and 82% of the rural population, with a national average of 87%. Power consumption per inhabitant is 729kWh/yr, a figure that places Ecuador on the smaller end of the scale for Latin American countries – thus reflecting its low degree of industrialisation. In contrast, the hydroelectric potential of the country is 93GW, out of which barely 1.75GW has been developed.

With this in mind, and in agreement with PROMEC, a pilot hydroelectric project was implemented with the following characteristics and goals:

• In addition to generating power for consumption by local people, the project will produce a surplus that will be commercialised in the electric market.

• Income obtained from the sale of electricity will repay the loans utilised to develop the project, while net revenue will be assigned for socio-economic development of the area.

• An organisation will be developed to own the project and manage net revenues, in a way that will allow similar projects to be implemented in the future.

• To find out how the pilot could be replicated in other parts of the country.

• To take advantage of the hydro resources available in the country; generate clean energy; create work opportunities; increase investment in the electric sector and improve the competitive power generation market as intended in the Law of the Electric Sector.

Mira hydroelectric project

After technical and social studies all over the country, the Baboso river was selected for development. It is situated in the vicinity of Lita – a town with a population of 1500, located at the end of the electric distribution system owned by Emelnorte. Several towns such as Cristal, Alto Tambo, Bareque and Baboso, that have approximately 2500 inhabitants and no electricity at the moment, are located near the project and are set to directly benefit from its power generation.

Baboso river provided a good enough hydro resource for the development of the 1MW Mira hydroelectric project. Construction of this scheme was considered to be a straightforward task, estimated at a cost of US$1.9M. Development of the scheme would require the construction of a 2km access road, including two bridges, which would connect some isolated communities of the sector and impel an ambitious plan of ecological tourism in the zone.

Caminosca prepared both the feasibility studies and the designs for project bidding. Studies included hydrologic analysis of the area, detailed topographical surveys for the power station and the transmission line along with geologic and geotechnical investigations. Designs of civil works, and definitions of the characteristics and technical specifications of the mechanical, electric and control equipment, were also produced.

Caminosca also prepared bidding documents for construction of the civil works and for the acquisition and erection of equipment, as well as legal documents for the incorporation of Mira Hydroelectric Corporation (CHM) – the organisation to take charge of the project’s development.

Mira hydroelectric power plant will consist of the following: a run-of-river structure on Baboso river; a silt basin for sediment retention; a 1.3km long open channel; a pressure tank with a volume of 130m³; a 186m long penstock 900mm in diameter; and a surface power house equipped with a single Francis horizontal axis turbine of 1MW nominal power.

The design discharge of the turbine is to be 1.50m³/sec and the net head 77.60m.

CONAM and the Ministry of Energy and Mines expect to initiate the construction of the project in April or May 2006, at the end of the rainy season.

Project sustainability, as determined by Caminosca, is based on the technical feasibility of using an existing hydraulic resource; environmental, institutional and organisational feasibility; and economic feasibility that assures suitable economic and financial appraisal.

Technical feasibility

Average discharge at Baboso river for a 25 hydrological period was estimated as 5.2m³/sec, and the minimum discharge with a 90% guarantee as 1.2m³/sec. It is anticipated that 82% of the time the flow in the river will exceed the design discharge plus the ecological discharge. On average, the power station will operate with a 1.42m³/sec discharge.

The designs for each of the components in the project had to consider both functionality and operational ease, in order to divert the required flows, retain the solid materials that can wear away the turbine, and safely conduct the flow towards the power house.

Designs were greatly detailed, and the morphologic, geologic and geotechnical characteristics of the sites were carefully considered in order to optimise the designs, since it is imperative in power stations of low budget to reduce technical risks to the minimum. This will help avoid increasing costs during construction and during operation, an effect that could impact on the yield of the project and the fulfilment of the foreseen social objectives.

The design also specified the structure be built by small companies or by individual contractors, using simple technologies. It was decided that generation, ancillary systems and control equipment would be of standard manufacture, but with sufficient toughness, reliability and degree of automation as required for easy, continuous and trouble-free operation.

Earthquake risk was analysed due to high Ecuadorian seismic activity. Volcanic risk was accounted for, because of the presence of Chiles volcano approximately 55km east of the project zone, and Cotacachi volcano, 60km southeast. However, neither was found to represent a hazard for the development of the project.

Environmental feasibility

Flows diverted to generate electricity will be returned to the river some 1500m downstream from the diversion site; nevertheless, it has been anticipated that 18% of the time (a period during which natural river discharges are smaller than the design flow of the power plant) a discharge not lower than the established ecological discharge of 0.120m³/sec will be allowed to continue flowing through the river. This is in addition to natural contributions from the river basin in the intermediate reach between project intake and project tailrace, as an allowance for the conservation of plant species and animals relying on the river discharges to survive.

Potential environmental impacts during construction and operation of the project have been identified, and will be avoided, controlled and remedied by means of the activities indicated in Caminosca’s Environmental Management Plan and in the technical specifications prepared as part of the studies.

Institutional feasibility

The defined institutional framework of the project will benefit, either directly or indirectly, the population in Tobar Donoso, Jijón y Caamaño, Lita and Alto Tambo, and in the Awá community, considered to be a cultural community in danger of extinction, which lives in Baboso village only 1km away from the intake works.

The legal framework of the Ecuadorian Electric Market (MEM) will allow CHM to freely sell energy to the distribution companies or to major consumers, by means of power purchase agreements (PPA) or through the spot market.

Corporation feasibility

A corporation without the intention of profit, partially owned by representatives of the local governments of the zone, was an alternative analysed by the study. Due to its geographic location, the equity of the corporation may be shared by representatives of the four parochial boards of the zone, the Awá indigenous community and the Provincial Government of El Carchi.

In order to guarantee fair management of the economic resources, Caminosca recommended a trust be incorporated that will receive every fund paid out in favour of CHM and will make payments approved by the corporation for project construction, project operation and for investments of the power plant revenues in social projects designed to fight poverty.

This form of organisation was selected after studying applicable national legislation, considering the following advantages:

• The corporation can receive capital funds through national and international donations, and even through a partial allocation of funds from the national budget.

• The corporation, being an organisation without profit intention, will benefit from tax exemptions and facilitate its social work.

• Upon incorporating a corporation and linking it to a trust, the use of the economic resources will be prudently controlled. This is because such resources will be used in accordance with instructions clearly and specifically established in the public document of incorporation.

Functionality and operation of the project were based on the following criteria:

• The corporation will be the proprietor of the project and will carry out the contracting processes of the construction and operation of the power plant, as well as the contracting processes of the projects to be developed to benefit low-income communities.

• Every fund received by the corporation, including energy sales revenues, will be handled by means of a trust that will release funds directly to the beneficiary after receiving the order from the corporation.

Economic and financial feasibility

The studies determined the following power production:

• Annual average energy: 8.10GWh

• Installed capacity: 997kW

• Dependable capacity: 970kW

A price of US$58/MWh was used for the economic evaluation, adhering to the national regulatory framework. This price was established in a 12-year term to pay energy delivered to the spot market, usual for power plants with an installed capacity up to 5MW.

The project’s internal rate of return will be around 15%, an acceptable figure for a project with social aims. Ecuador is planning to raise equity for the project through non-reimbursable funds obtained through the UN or other organisations for social development, and to contribute the balance by means of allocations from the National or Regional Budget. CONAM and the Ministry of Energy and Mines have the task of driving the development of the Mira project; they have completely financed the studies and have committed themselves to support studies of similar projects that can be developed in the short term by organisations similar to CHM or by private investors.

Works for the socio-economic development of the region

The project revenues are to be invested towards the effort to combat poverty. Caminosca studies identified the needs of the people in Lita, Alto Tambo and the Awá Community, and defined the basic infrastructure works that are needed in order to improve health, education and environmental sanitation. The programme will finance investments in projects that will improve the standard of life for the population. Within a 10-year term, nearly US$2M is to be funded in this area; a significant figure that surpasses what has historically been invested in these communities.

The existence of generous water resources in areas where very low income populations in developing countries will allow project replication, since organisations will prefer to grant non-reimbursable funds for investments where revenues will be permanently funding programs to fight poverty.

Summary

Caminosca expects the construction of Mira hydroelectric plant to take 15 months. Upon its completion, commercial operation will begin after a one-month testing period.

It is anticipated that part of the economic benefits from this project will make up a fund to finance studies of similar hydroelectric projects that will impel the development of other Ecuadorian regions.

Inventories of Ecuador’s water resources and hydroelectric potential have identified small hydro projects between 1 and 5MW in several provinces that appear attractive from both technical and economic perspectives, and can be developed immediately. Under these circumstances, the creation of a governmental policy is recommended. Unfortunately, since Ecuador’s electric market was formed, little investment has occurred, and society, in general, needs to learn how to to better use its renewable resources.

The authors are Carlos Diego Jacome, Fernando Jara and Ricardo Buitron. For further information, email: caminosca@caminosca.co