6.1              Investment Costs

Small hydro costs can be split into four segments :

1. Machinery
This group includes the turbine, gearbox or drive belts, generator and the water inlet control valve.

Generally speaking, machinery costs for high head schemes are lower than for low head schemes of similar power.  High head machines have to pass less water than low head machines for the same power output and are therefore smaller. They also run faster and thus can be connected directly to the generator without the complication of gearbox or belts.

2. Civil Works
This includes the intake, forebay tank and screen, the pipeline or channel to carry the water to the turbine, the turbine house and machinery foundations, and the tailrace channel to return the water to the river.

The Civil Works are largely site-specific. On high head sites the major cost will be the pipeline; on low head sites probably the water intake, screens and channel.

3. Electrical Works
The electrical system will involve the control panel and control system, the wiring within the turbine house, and a transformer if required, plus the cost of connection to the electricity.  These costs are largely dependent on the maximum power output of the installation. The connection cost is set by the local electricity distribution company..

4. External Costs
This could encompass the engineering services of a professional to design and manage the installation, plus the costs of obtaining a the licences, planning permission, etc.

 
For a 100kW small hydro installation, the costs could range as follows:-

Generally, the cost per kilowatt of new schemes increases as size reduces, due to economy of scale and the fact that any scheme has a certain fixed cost element which does not greatly change with size of scheme. 

6.2              Running Costs

6.2.1             Leasing

If part of the land is leased, then there will be an annual rent to pay.  It can be beneficial to tie this rent into the revenue from the scheme, so that the landlord also has an incentive for the turbines to be operating.  Schemes which lease all the land should expect to pay no more than 4% of annual revenue as rent, and the lower you can negotiate the better!

6.2.2             Metering

Larger schemes currently require half-hourly metering to be installed, which has to be monitored by an independent meter-reading company, although this requirement may change in the future.  There is an annual charge to pay for this service, currently in the range £350 - £1000 / year.

6.2.3             Rates

Hydroelectric schemes are subject to business rates unless they are seen as being part of a domestic property.  The rateable value is constantly under review, and the correct value for 2004 is £9 per kW installed which, when multiplied by the Unified Business Rate (0.46 in 2004), gives the annual sum to be paid.

6.2.4             Maintenance and Servicing

Modern, automated equipment requires very little maintenance.  The cost of routine inspections and an annual service should come to no more than 1-2% of the capital cost of the scheme.  As the machine ages, there will eventually be extra costs associated with replacing seals and bearings, a new generator, refurbished sluice gates, etc., but these should not occur for at least 10 years.

6.2.5             Insurance

Although hydro plant is generally very reliable, the following insurances are recommended (and may be required by financiers): 

• Material damage insurance against the cost of repairing damage to the works caused by fire and ‘special perils’ such as explosions, storms, flooding, impact and malicious damage
•  Business interruption insurance against profit loss caused by fire or special perils damage
• Public and employer’s liability insurances, which are required by law;  a minimum indemnity of £5 million is recommended.