Development of Guidelines on the Multi-Purpose Evaluation ... · including the evaluation of the multi-purpose use of the schemes; Provide methods for these valuations to be internalized

Development of Guidelines on the Multi-Purpose

Evaluation of Hydropower Projects

Initiative for Sustainable Hydropower Project ISH02

ISH Forum on Sustainable Hydropower

MRC-OSV, Vientiane, Lao PDR

November 12, 2015

Dr. Bruce Aylward

On behalf of ISH02 Team

ECOSYSTEM ECONOMICS

Structure

Overview of Guidelines

Guidelines Process

Evaluation and Valuation

Hydropower Planning Support Tool

HPST Results - Multi-Criteria Analysis

Guidelines Overview

ECOSYSTEM ECONOMICS

ISH02/Guidelines Focus

Address the need to more explicitly integrate social and

environmental costs and benefits in hydropower

development planning.

Evaluate hydropower projects from a multi-purpose

perspective to increase overall economic benefits and

decrease adverse effects on other water uses

ECOSYSTEM ECONOMICS

ISH02/Guidelines Goals

Provide guidelines for valuation of the assessed socio-

economic and environmental costs and benefits of hydropower,

including the evaluation of the multi-purpose use of the

schemes;

Provide methods for these valuations to be internalized in the

economic or other analysis and integrated with the strategic

power planning approaches of the member countries;

Achieve the above goals in consultative and participatory way

with the responsible national authorities; and

Disseminate the guidelines and methods to national authorities

and other stakeholder in the lower Mekong Basin

ECOSYSTEM ECONOMICS

ISH02/Guidelines Goals

Develop a practical and replicable method

ECOSYSTEM ECONOMICS

Economics

Environ-ment

Social

Fully

comprehensive

planning

ECOSYSTEM ECONOMICS

ISH02/Guidelines Team

MRCS International

Consultants

National Consultants

Mr Voradeth Phonekeo

ISH Programme

Coordinator

Dr Armando Balloffet

Team Leader

Environmental Specialist

Mr Sok Bun Heng

Cambodia

Mr Simon Krohn

ISH International

Technical Officer

Dr James Taylor

Social Specialist

Mr Lamphone

Dimanivong

Lao PDR

Mr Piseth Chea

Riparian Professional

Dr Bruce Aylward

Economist

Dr Warapong

Tungittiplakorn

Thailand

Dr Sarah Kruse

Case Study Economist

Dr Tran Van Dat

Viet Nam

ECOSYSTEM ECONOMICS

Portfolio Planning Process

ECOSYSTEM ECONOMICS

Scope for Guidelines Application

all planned hydropower projects in a country

all planned hydropower projects in the Mekong

all planned hydropower projects in a sub-basin of the

Mekong or

a suite of alternatives for a single site or a single cascade

of dams on a river

ECOSYSTEM ECONOMICS

So, what have we accomplished?

Organized available information in a practical form for basin planning purposes

Developed a model that uses the information to value and consistently compare positive and negative economic impacts of several hydropower projects in a basin

Identified and included non-monetized environmental and social indicators in a multi-criteria analysis

Developed a mechanism for stakeholder involvement

Developed and tested guidelines for a 10-step process for Evaluation of Hydropower and Multi-Purpose Project Portfolios

ECOSYSTEM ECONOMICS

ISH02/Guidelines Products

ANNEX 2:

Practice Guide on Consultation, and

Social and Environmental Indicators

ANNEX 1:

Practice Guide on Economic

Evaluation and Valuation of

Hydropower and Multi-Purpose Dams

ANNEX 3:

User Manual for the Hydropower

Planning Support Tool

Sustainable

Hydropower

Planning

Support Tool

MAIN

REPORT:

Guidelines

Process

Guidelines Process

ECOSYSTEM ECONOMICS

Guidelines 10-Step Process

TEAM ESTABLISHMENT AND PROBLEM DEFINITION

Step 1: Appoint the Portfolio Planning Facilitator and Planning Team

Step 2: Identify the Scope of the Planning Effort Step 3: Identify and Recruit Stakeholder Group

Step 4: Inception Stakeholder Workshop to Finalize the Scope

DATA COLLECTION AND ANALYSIS

Step 5: Joint Fact Finding

Step 6a: Economic Valuation and Evaluation of the Costs and Benefits

Step 6b: Assessment of non- monetary social and environmental Indicators

Step 6c: Adapt/validate decision support tool

STAKEHOLDER CONSULTATION AND MULTI CRITERIA ANALYSIS

Step 7: Planning Workshop

REPORTING AND DECISION MAKING

Step 8: Reporting

Step 9: Decision-Making

PROCESS REVIEW AND LESSONS LEARNED

Step 10: Evaluate the process, methods and tools and modify the Guidelines as required.

ECOSYSTEM ECONOMICS

Guidelines Process

ECOSYSTEM ECONOMICS

Guidelines Process

ECOSYSTEM ECONOMICS

Guidelines Process

Evaluation and Valuation

ECOSYSTEM ECONOMICS

Financial Analysis

Perspective: project proponent

Costs to the proponent

Benefits to the proponent

Financial Projections

Financial Analysis

Discounted cash flows

Net present value (NPV) of project

ECOSYSTEM ECONOMICS

Economic Analysis

Perspective: national/regional economy

Costs to the economy

Benefits to the economy

Economic Adjustments

Cost-Benefit Analysis

Discounted costs and benefits

Net present value (NPV)

ECOSYSTEM ECONOMICS

Multi-Criteria Analysis

Social indicators

Environmental indicators

Stakeholder weighting

Normalised indicator scores

Economic NPV

Risk-weighted cost-benefit ratio

ECOSYSTEM ECONOMICS

Impact Framework

Direct Impacts

Costs and Benefits

Hydropower and Multi-purpose

External Impacts

Agriculture

Fisheries

Ecosystem Services

Human Population

Hydrologic Function

Land Use

ECOSYSTEM ECONOMICS

Impact Framework and HPST Monetized Values

Framework Location HPST

Economic Valuation

Direct Direct

Hydropower Project Site Hydropower

Multi-purpose Local Multi-purpose

External External

Agriculture

Local

Property

Fisheries Land

Ecosystem Services Livelihoods

Human Population

Hydrologic Services

Downstream

Flow Regime

Land Use Fish Migration

Sedimentation

Global Carbon

Hydropower Planning

Support Tool “HPST”

ECOSYSTEM ECONOMICS

Hydropower Planning Support Tool (HPST)

Content Flow

Analysis

Preferences

Data

Basin Workbook

Monetary

Financial

Economic

Non-Monetary

Inputs Data Workbook

Basin

Projects

Parameters

Financial Projections

Financial Value

Direct Costs & Benefits

Local Costs

Downstream Costs

Financial and Economic

Environmental

Social

Stakeholder Inputs

Criteria Weights

Results: MCA

Cleaned Project Data

Raw Data

Data Testing

HPST Overview

Other Information

Economic Data

Ecological Studies

Economic Valuation

ISH01 Data Carbon Benefits

HPST Results Multi-Criteria Analysis

ECOSYSTEM ECONOMICS

HPST Results

Normalisation of Non-monetized Indicators

Normalisation: scaling disparate scores or values to

values between 0 and 1

Setting maximum value in the data set of total indicator scores, D,

for all project scores to a value of 1

All other values are then set as proportions of the maximum value

The normalized score, N, of an indicators score for any

project, SP, is simply equal to the variables score Sp

divided by the maximum value in the data set:

ECOSYSTEM ECONOMICS

HPST Results

Risk-Weighted Cost-Benefit Ratio

Risk-weighted benefit-cost ration, BCRRW. This is simply

calculated for all projects, P, where NP is the normalized

indicator score

ECOSYSTEM ECONOMICS

HPST Results

Example

Project1 1 140 100 (40) 0.71 4 124 188 64 1.52 1

Project2 1 345 375 30 1.09 3 334 309 (25) 0.93 3

Project3 1 255 300 45 1.18 2 17 9 (8) 0.55 2

Project4 1 530 605 75 1.14 1 194 (50) (244) (0.26) 4

4

CapitalCosts

Operations

Total

Ben

efit-CostRatio

CapitalCosts

Operations

Total

Ben

efit-CostRatio

Rakning

FinancialIndicators(allPV) EconomicIndicators(allPV)

Rakning

Include(1=YES)

Project

Name

Project1 1

Project2 1

Project3 1

Project4 1

4

Include(1=YES)

Project

Name

LostLand/M

W

Displaced

Persons/MW

EthnicM

inorities

Affected

Cultural/Scared

Values

Impact-ESAs

Project-Peaking

Reservoir-

SurfaceArea

River-Affected

Downstream

River-Im

pounded

0.85 0.08 0.15 0.23 0.38 0.38 0.23 0.15 0.15

0.85 0.08 0.15 0.23 0.26 0.38 0.11 0.15 0.15 2.37 1.00 4

0.03 0.00 0.10 0.08 0.13 0.38 0.23 0.01 0.01 0.98 0.41 3

0.17 - 0.05 - 0.13 0.19 0.00 0.01 0.01 0.56 0.24 1

0.10 0.01 0.10 0.15 0.13 0.19 0.03 0.06 0.06 0.83 0.35 2

4.73TotalWScore:

Social&EnvironmentalIndicators

TotalW

eightedScore

TotalN

orm

alized

Score

Ranking

ECOSYSTEM ECONOMICS

HPST Results

Example

Project1 1

Project2 1

Project3 1

Project4 1

4

Include(1=YES)

Project

Name

1

3

2

4

Econo

Rakning

Social&

2.37 1.00 4 1.52 1.52 3

0.98 0.41 3 0.93 2.24 2

0.56 0.24 1 0.55 2.30 1

0.83 0.35 2 (0.26) (0.73) 4

4.73 1.33TotalWScore: MeanRW-BCR:

Social&

TotalW

eightedScore

TotalN

orm

alized

Score

Ranking

TripleBottomLine

Ben

efit-CostRatio

Risk-WeightedBCR

Ranking

ECOSYSTEM ECONOMICS

Thank you!

More Questions?

Contact

ISH02 Team Leader

Dr. Armando Balloffet

[email protected]

or

ISH02 Economist

Dr. Bruce Aylward

[email protected]