Document Type : Original Article
Authors
1 Admiralty University of Nigeria
2 Mechanical Engineering Department, University of Alberta, Edmonton, Alberta. Canada.
3 Department of Industrial Mathematics, Faculty of Science, Admiralty University of Nigeria, Delta State, Nigeria.
Abstract
A largely overlooked approach to expanding electricity access in rural regions while minimizing environmental harm involves retrofitting existing dams. Although upgrading these structures presents a promising alternative for power generation with reduced ecological consequences, the economic viability of various financing models for such hydropower retrofits remains poorly understood. This study addresses that gap by modifying the Hydropower Environmental Costs Analysis Model (HECAM) to evaluate the long-term economic feasibility of dam retrofits, considering the interplay between environmental, economic, and social factors. A cost-benefit analysis of upgrading Kiri Dam for hydroelectric power generation evaluated three potential financing and ownership models: a 20 MW public-private partnership (PPP) over 20 years, a 30 MW PPP over 20 years, and a 30 MW PPP over 30 years. Among these, the 30 MW 20-year PPP option yielded the highest annual revenue from electricity sales when compared to the 20 MW 20-year and 30 MW 30-year alternatives. However, the 30 MW 30-year PPP model generated greater total annual revenue from additional reservoir services than the other two options. Sensitivity analysis suggests that, at this early phase of project development, it makes sense to explore multiple equity tranches with different payment structures. The results highlight that factors like contract duration, water flow, capacity factor, capital expenses, debt term, interest rates, and other variables should all be weighed when evaluating the costs and benefits of retrofitting existing dams. Given that hydropower projects can have long operational lifespans under favorable conditions, project developers and equity investors should prioritize longer-term contracts.
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