1. INTRODUCTION

Electricity is an important source of energy required for a competitive socio-economic development of a country. As far as Nepal is concerned energy generated from hydropower resource is the most prominent and feasible energy resource. However, the financial resources, human resources, the prevailing geo-political situation, and topographical and seismic conditions required for the exploitation are simply not in favor of launching large hydropower projects for the generation and distribution of electricity. As a result, there is hardly any chance of reaching electricity to remote hilly areas in the near future [1]. On the other hand, with high hills, scattered settlements and more than 6,000 rivers criss-crossing the country], a substantial share of electricity demand at a domestic and community level can be met from the micro-hydropower projects, for which most of the resources are already available in the country and hence can be promoted independently and in a local level [2]. In view of these facts, such projects are being launched in Nepal for last four decades. As a result the total installed capacity of micro-hydropower in Nepal has reached approximately 16 MW [3].

The current data show that only 32 percent of the micro-hydro potential (including electrification and mechanical power) has been harnessed so far in the 43 years history of micro-hydropower (MHP) installation [3]. Thus there is still a great potential of harnessing this resource for the development of the country.

It has been found that the rural people are highly benefited from the electricity generated through Peltric set projects. These benefits include the rise in literacy rate, increase in social activities and awareness development, declining adverse effects of polluting energy sources on health, sanitation, environment etc. These benefits are, however, of intangible nature. Rural people need tangible benefits. However due to several problems being encountered at present they are still deprived of them. Some of the problems are of techno social nature such as water rights reluctance in payment of energy, conflicts among the consumers as well as consumers and entrepreneurs, low salary to the operators, poor management, low maintenance , poor system efficiency, frequent power interruption, etc. Because of this majority of Peltric set projects are suffering of economic problems. These problems, however, have not yet been studied thoroughly and hence need immediate attention to make the Peltric set projects sustainable in the long run.

Realizing this fact a study was carried out which first reviewed the problems being faced by the projects and analyzed their economic sustainability by taking one of the representative projects as a sample. The analysis was based on certain assumptions and has taken various economic scenarios into account. A sensitivity analysis of the project was also carried out.

2. PELTRIC SYSTEM AND ITS APPLICATIONS

One of the smallest and simplest micro-hydropower devices being widely used for the purpose of generating electricity is a PELTRIC set. The name Peltric (Pelton + Electric) was coined in Nepal for small, self contained; electricity generating units [4].The technology available for this purpose is called Peltric set technology. It is a small vertical shaft Pelton turbine that has a generator co-axially coupled with it (Fig.1). It generates electric power from a small quantity of water, falling from a high head.

The Peltric systems were started since 1991[1]. It can be used to provide electricity to five to ten houses in rural and remote areas especially in the mountainous regions. The smallest unit available provides 60 Watts. Being a simple and small unit, it is easy to install, operate, and maintain. The transmission and distribution cost of electricity produced is low as the generating set can be located near user's houses. An individual or a small group of interested households can easily afford it.

Figure 1. Vertical shaft Pico power pack [5]

A Peltric set can be used to generate electricity for lighting households (1kW of electric power can light 10 -12 rural households), charging batteries (electricity can be stored in the battery in the daytime), operating radios, televisions, and VCRs, extracting cream from milk and milk processing, heating water, and cooking in low-watt cookers. It has positive environmental implications as its installation, operation and end uses create no pollution at any point [6]. In Nepal, Peltric system is primarily used for lights, radios and TVs. A study has shown that it can also be used for mechanical purposes such as grinding of maize, wheat, millet etc.

3. ECONOMIC ANALYSIS AND THEIR RESULTS

The economic analysis of the Peltric system was performed for one of the project sites at Khahare Khola as a sample. It is located at Birta Deurali VDC-9, Kavre, Central Nepal. This site was selected, as it represents an average case for Nepal and it could make all required information available.

The salient features of the project are given below:

Gross Head 35 m

Net Head 34 m

Discharge 18 lps

Voltage 220 V

Frequency 50?5%

Rated Power Output 3 kW

Pitch Circle Diameter 207 mm

Speed 1075 rpm

Overall Efficiency 50%

Bucket Material Bronze

Number of Jets 2

Jet Diameter 21.4 mm

Penstock Length 67 m

Penstock Pipe HDPE (140 mm OD)

Nozzle Diameter 26.8 mm ID

Number of Buckets 19

Bucket Width 71 mm

The Total Project Cost, Running Expenses and Sources of Project Finance are shown in Table 1.

Table 1. Project Cost, Operating Expenses and Project Finance

a) Project Cost

S.N.	Cost Details	Cost in NRs
1	Electro-Mechanical (Except Distribution)	180,889.5
2	Distribution	170,896.7
3	Civil Works	46,896.2
4	Transportation	5,586.84
5	Installation	24,200.0
6	Tools and Spare Inventory	2,750.0
7	Contingencies	0
Total		431,219.24

b) Operating Expenses

S.N.	Source	NRs
1	Salary	12,000
2	Maintenance	8,000
3	Miscellaneous	5,000
Total		25,000

c) Project Finance

S.N.	Source	NRs
1	Equity( Community/Entrepreneur)	266,219.0
	Cash Non-Cash	214,973.42 51,245.58
2	Bank Loan	0
3	Subsidy	165,000.0
4	Other Support	0
Total		431,219

(Source; AG Power Company) [7]

3.1 Economic Analysis without Subsidy

Economic analysis without subsidy is carried out based on the following data.

? The project work has been completed at the estimated cost. The tariff is Rs. 2 per watt per month: 45 households were committed to consume 65 W and pay for the generated power: The consumption is for 8 hours per day and 30 days for a month.

? The results are depicted in Table 2. It shows that the internal Rate of Return (IRR) is 8 percent meaning that the project is in loss in this case. However, in practice, all mentioned annual expenses were not made so much so that the end-users do not bother to pay the regular tariff, as they had already invested a huge amount in the initial phase. The huge amount was collected and paid as investment and they were not tensed for the regular tariff.

? Furthermore the normal trend for the tariff collection is Rs. 1 per watt per month and not Rs. 2. At the is tariff IRR is negative meaning that the project in this condition is not sustainable. Still the projects are running anyway as the running expenses are hardly made such as salaries, repair and maintenance costs etc.

? In Practice, however, the users have been paying based on their local needs and conditions. In some sites, the users were not paying at all. In other sites, they were paying in the range of Rs. 20 to Rs. 81 and the power consumption ranges from 75 watts to 150 watts. This calculation is based on the average energy tariff amounting Rs. 40 per month per 81 watts. In such cases IRR is negative. This figure shows very serious problem and the hopelessness for further investment and puts question marks on the projects in operation. In fact almost all Peltric set projects are in loss. The return is only intangible terms.

3.2 Economic Analysis after the Performance Improvement and Without Subsidy

Economic analysis after the Performance Improvement and without subsidy is carried out based on the following data:

? The Peltric set in operation, has improved turbine efficiency of 80 percent, generating additional power. It is assumed that the performance improvement was made by improving the workman in the improvement and this resulted into reducing the operating cost by Rs.5,000.00. In addition, the surplus power generated after improvements were may be consumed by additional 5 households. The amount collected thereby is the extra revenue for the project. IRR in this case is 13 percent and hence the project, in this case is sustainable.

? Assuming Rs. 1 per watt per month as the tariff for the revenue collection after the performance improvement, IRR has come to -3 percent. The negative value of IRR shows that the tariff needs reformation. Even improvement has no any positive impact in this case.

? After the performance improvement, the calculation has been done with the tariff in practice i.e. Rs 0.5 per watt/month. In this case IRR is negative and this shows that the project is in loss to large extent.

3.3 Economic Analysis with Subsidy

? When the subsidy is considered and the tariff is Rs. 2 per watt per month, then, IRR 18 percent. This shows that the project is sustainable and the return is high.

? When the tariff was set at Rs. 1 per watt per month, IRR has been found to be -5 percent

? The reduction in the tariff makes the project unsustainable even though the subsidy is considered.

? In practice, the consumers are paying very low tariff as compared to the one quoted in the project report. Hence the calculated value of IRR is negative, indicating that the project is in loss. The loss cannot be compensated by the improvements of the technical aspects of turbine.

3.4 Economic Analysis after Performance Improvement and With Subsidy

? After the improvement of turbine and its performance, tariff set at Rs. 2 per watt per month, IRR has found to be 25 percent making the project most attractive. However, the project becomes non attractive when the tariff is set at Rs. 1 per watt per month. This is true even after the performance of the turbine has been improved. IRR is -3 percent in this case.

? The tariff practice i.e. 0.5 per watt per month does not make the project sustainable at all which is clearly shown by its negative IRR.

4. SENSITIVITY ANALYSIS

A sensitivity analysis was carried out to determine the exact tariff that makes the Khahare Khola Peltric Set project sustainable. The result is depicted in Table 3.

From the sensitivity analysis (Table 3), it is found that the project can sustain if the tariff is increased to Rs. 2.32 per watt per month, however, it is not affordable. Excluding subsidy, the project can sustain if the tariff is Rs. 1.68 per watt per month. The existing subsidy rate (40 percent) can be increased to52 percent if the tariff is Rs. 1.5 per watt per month. Increasing subsidy in tariff Rs. 1 per watt per month has no meaning at all.

4. VARIATION IN COSTS OF PELTRIC SYSTEM AND ITS TARIFF

The upper ceiling cost of a total Peltric system as declared by the government is Rs. 170,000 per kilowatt [9]. However, it was found from the study that there are dissimilarities in the prices of the components of different manufacturers. The same capacity of the component was priced differently by different manufacturers. It was also found that the same manufacturers charged different rates for the component of equal capacity in the same year even though there is no any specific reason to differentiate. The per kW cost of Peltric sets varied from Rs. 56,604 to 131,000. The results of the comparison of the prices of some manufacturers are given in figures 2 and 3.

5. CONCLUSIONS AND RECOMMENDATIONS

Based on the results obtained from the study following conclusions are drawn:

? The existing tariff of the Peltric system in operation is not sufficient to sustain the project. The tariff quoted by the project installers is Rs. 2 per watt per month, but this tariff is not practically applicable. In practice, the users are paying in an average Rs. 0.50 per watt per month only. This little amount they pay can not sustain the project. The NPV of the project is negative in all cases except the condition when the performance of the system is improved and the tariff is Rs. 2 per watt per month. With subsidy, it will be positive if the efficiency is improved and the

Table 3. Sensitivity Analysis

Parameter	NPV (NRs.)					Recommended
Tariff	0.5 (Base)	1(100% increase)	1.5 (150% increase)	2(200% increase)	2.5(250% increase)	Tariff= 2.32
	-443,531.17	-322,179.63	-200,828.09	-79476.55	41874.99
Excluding Subsidy
	-286724.27	-165372.72	-44021.18	77330.36	198681.9	Tariff =1.68
Subsidy
Tariff =1	40%(Base)	50%(25% increase)	60%(50% increase)	80%(100% increase)	90%(125% increase)
Tariff =1	-273,984.54	-17566.49	-86969.27	-8565.82	30635.9
Tariff =1.5	-44021.18	-4819.46	34382.27			Subsidy increase = 52%
Tariff =2	31,281.46	116532.09

Figure 2. Cost comparisons for 1 kW and 1.5 kW Peltric sets.

Figure 3. Cost comparisons for 2 kW and 3 kW Peltric sets.

tariff is high. The project will be sustainable if the tariff will be Rs. 2.32 per watt per month. The project may sustain when the tariff is limited to Rs. 1.5 per watt per month provided that the subsidy is increased to 52 percent. Without subsidy, the projects may not sustain.

? The price charged by different manufacturers is different for the same capacity turbine and there is no uniformity in the pricing system of Peltric set in Nepal.

It is to be suggested that the tariff of the electricity produced by the subsidized Peltric sets should not be increased up to Rs.2.32 per Watt per month as it is not affordable by the users and hence, in order to make the project sustainable, the subsidy rate be increased to 52 percent land the tariff to Rs. 1.5 per Watt per month. The cost of equipment and the components, to some extent, be controlled by the concerned authority, as there is no standard and uniform price rate for them. The manufacturers and the suppliers be made responsible for the vast differences in prices of their products

REFERENCES

[1] AEPC/ESAP, 2002, ?Micro-hydro Data of Nepal, 1962-Mid-July 2001", Alternative Energy Promotion Center/Energy Sector Assistance Program, Lalitpur, Nepal.

[2] Shrestha, H.M, 2003, ?Barhoun Pani Satsangako Sarsankshep?, Nepal Water Conservation Foundation, Kathmandu, Nepal.

[3] AEPC/ESAP, 2005, "Micro-hydro Yearbook of Nepal", Alternative Energy Promotion Center/Energy Sector Assistance Program, Lalitpur, Nepal.

[4] Thake, J., 2000, ?The Micro-Hydro Pelton Turbine Manual?, Design, Manufacture and Installation for Small-scale Hydropower, ITDG Publishing.

[5]htpp://www.icimod.org/sus_options/bestprac3.html.

[6] AEPC/ESAP, 2004, ?Peltric Set Sanchalan tatha Vevasthapan Talim Prashikshan Sahayogi Samagri?,Alternative Energy Promotion Center/Energy Sector Assistance Program,Lalitpur, Nepal.

[7] AGPC, 2003, "Report on Khahare Khola Peltric Set (3 kW), Birta Deurali-9, Kavre", Submitted by AG Power Company Private Limited.

[8] Bajgain, S. & Shakya, I., 2005, "Biogas as a Best Practiced Technology for Developing Countries", Published by SNV, Nepal.

[9] AEPC, 2000, ?Renewable Energy Subsidy Policy?, Alternative Energy Promotion Center, HMG, Nepal?