Hydro power plants in Europe can be more cost effective, says PÖyry study
Hydro News, Published 16 December 2014, Source - Hydro Energy Business
Approximately 30 percent of Europe’s hydro power plants can cut costs by five to ten percent on average, PÖyry Management Consulting experts have found out.
As part of a hydro power benchmarking study, so far more than 250 plants of major European hydro power plant operators have been analysed for their cost efficiency. The study reveals that the most efficient hydro power plants are the more modern ones which are permanently invested in, particularly storage power plants and power plants with Francis turbines.
PÖyry adopted a customised approach, which is the first to take structural and technical differences of hydro power plants into account, systematically including hydro power specific cost drivers. Economic and structural data of every single power plant is collected. Part of the economic data is operation & maintenance expenses (O&M), which provides the basis for the cost performance comparison. As regards structural data, all potential cost drivers and non-modifiable features of the power plant are collected, including information on geographical situation, turbine type, installed capacity, net production as well as length of dams and weirs. The benchmarking study allows for a complete overview on the O&M cost structure, on the basis of which differences to other power plants and potential areas of improvement can be identified.
Dr. Christoph MÜser, Managing Director at PÖyry Management Consulting, says: "Cost efficiency plays a significant role particularly for European hydro power plant operators." They are facing great challenges in the current market environment created by the liberalised single market. Sinking market prices and an increasing number of regulatory requirements result in a decrease in revenue. Sustainable growth opportunities to generate new sources of income are currently very rare for the capital-intensive hydro power sector since investments in new generation capacities require long-term security of investment and a stable political environment. Currently, however, this is in contrast to additional public burdens, administrative barriers and uncertain market developments. "Therefore, hydro power plant operators cannot rely on growth options in order to retain their competitiveness but depend on the constant improvement of their efficiency, which can primarily be achieved by cost optimisation," Mr MÜser continues to say.
PÖyry has more than 100 years of expertise in the hydropower sector and has installed hydropower plants with a total capacity exceeding 100,000 MW (1/8 of total global capacity). Engineering requires to take into account the economic efficiency of the plants. PÖyry, thus, invites interested hydro power plant operators to discuss and refine methods in order to further promote 'Best-Practices-Sharing' and performance improvements in the hydro power sector.