Local Production: Conditions and Success Factors

Under construction (Florian Ziegler)<o:p></o:p>

Key factors for successful local production<o:p></o:p>

1)     Relevant market: The demand of the relevant market should match the minimum size of one production unit. Important: <o:p></o:p>

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Example: Mini & Micro Hydro Power Turbine Production<o:p></o:p>

Seen in retrospect from those manufacturers’ point of view which made significant progress and today successfully produce good quality T14/15 turbines, the following aspects must be taken into account:<o:p></o:p>

·      Manufacturers rather rely on “traditional” products on which they already have sufficient experience, than trying a new technology. This is a mental problem that has to be overcome by showing successful applications of the new technology.<o:p></o:p>

·      Besides know-how transfer, technology improvement needs often investment in new manufacturing equipment and machinery. <o:p></o:p>

·      Stock keeping of turbine parts also requires pre-financing.<o:p></o:p>

Since access to investment capital to buy new manufacturing equipment (e.g. drilling and milling machine, lathe etc.) is limited, turbine manufacturers temporarily had to subcontract part of their production process to other specialised local workshops. Some parts like e.g. laser-cut side disks for the runner even had to be imported to ensure proper quality. Since 2003, the same quality of side disks is produced in <st1:place w:st="on"><st1:country-region w:st="on">Indonesia</st1:country-region></st1:place>. Subcontracting of certain parts to other local workshops was also necessary in order to keep delivery periods. Once sales of improved turbines allowed for sufficient additional profit, the risk of investing in new modern machines and even engaging additional staff was taken, in order to optimise the production process. As shown in Table 2 the turbine price of the T14 was only slightly higher (compared to T12 and T13) and compared to the total investment for an <st1:stockticker w:st="on">MHP</st1:stockticker> project was not decisive. Therefore, the manufacturer who was the first to start production of higher quality turbines could easily promote his standard and consequently increase his sales because the customers were ready to pay slightly higher prices for significantly higher quality.<o:p></o:p>

Standardisation of turbine parts combined with quality control is a crucial precondition for stock production, cost reduction and spare part delivery. In earlier times, in <st1:place w:st="on"><st1:country-region w:st="on">Indonesia</st1:country-region></st1:place>, almost all turbine parts were lathed, whereas today due to standardisation many parts can be cast (e.g. side flanges) because the design is kept unchanged.<o:p></o:p>

Requests from abroad even motivated one of the manufacturers to introduce sand blasting and pressure tests of his equipment which again illustrates how manufacturers react on market requests. The difference is that in <st1:place w:st="on"><st1:country-region w:st="on">Indonesia</st1:country-region></st1:place> the standards first had to be introduced to create a market for high quality turbines whereas these standards (and also stronger competition) already exist on the international market[1]. Summarising it can be stated that even with the limitation of simple production methods it is possible to build very reliable and long lasting T14/T15 crossflow turbines with competitive high efficiency. Annex 5 gives an overview on the three mostly used types of turbines and their specific features as well as the comparative advantages of the T14/T15.<o:p></o:p>

The following table clearly illustrates the significant cost savings of locally produced electro-mechanical equipment (example <st1:stockticker w:st="on">MHP</st1:stockticker> Dewata, 2001):<o:p></o:p>

[[|]][[|Table ]]3: Cost comparison for <st1:stockticker w:st="on">MHP</st1:stockticker> equipment: local production and import<o:p></o:p>

<o:p> </o:p>	Imported<o:p></o:p>	made in <st1:country-region w:st="on"><st1:place w:st="on">Indonesia</st1:place></st1:country-region><o:p></o:p>	<o:p> </o:p>
Turbine <o:p></o:p>	Pelton turbine (<st1:country-region w:st="on"><st1:place w:st="on">Austria</st1:place></st1:country-region>): 570 USD/kW<o:p></o:p>	T14 cross flow turbine: 30 USD/kW<o:p></o:p>	à less than 10 %<o:p></o:p>
Complete electro-mech. equipment<o:p></o:p>	Turgo turbine (<st1:country-region w:st="on"><st1:place w:st="on">Germany</st1:place></st1:country-region>): 1,000 USD/kW<o:p></o:p>	T14 and local know how used: 407 USD/kW<o:p></o:p>	à around 40 %<o:p></o:p>

From the experience of the MHPP project it can be concluded that technology transfer mainly has to be based on continuous and long term training measures. A singular training session without feed back cycles is less efficient and especially less sustainable. In MHPP, hardware support was very limited[2]. Summarising, the key factors for success of turbine technology transfer are:<o:p></o:p>

·      continuous training and continuous feedback (if and where required)<o:p></o:p>

·      parallel development and support regarding manufacturing workshop management (equipment, tools, machinery, raw material etc.) and management of stock keeping<o:p></o:p>

·      number of manufacturers must fit to the demand at the market<o:p></o:p>

Further local technology development is only possible if the market provides for sufficient orders which can be fostered by high opportunity costs for energy (hydropower must be competitive), a favourable national policy and regulatory framework, access to financing etc. Although the MHPP placed some smaller orders to the turbine manufacturers most of the major orders came from government, private organisations or private individuals.<o:p></o:p>

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[1]     Nowadays, for all government-financed projects the quality standard of the T14 is required although it is not formally fixed in any regulation.<o:p></o:p>

[2]    For example a set of measuring equipment as an instrument to implement quality control was provided to a turbine manufacturer who was the most interested to make quality checks.