Micro-Hydropower Plants - Estimation of Management Costs

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The feasibility analysis of a micro-hydro power plant (MHPP) requires the estimation of three categories of costs:

  1. Starting costs
  2. Construction and installation costs
  3. Operation phase costs

The third category encompasses management, operation and maintenance costs related to the operation phase of the power plant. An estimation of these costs is necessary in order to calculate the financial projections of the project.

Estimation Model

Download Estimation Model

In August 2010, the PSP Hydro team of GIZ in Rwanda completed the study ‘Privatisation of the Management of Existing Micro Hydro Power Plants: Feasibility analysis and strategy’. For this study, financial analyses of 18 publicly funded MHPPs had to be carried out. In order to do this, the PSP Hydro team created a model for the estimation of the operation phase costs for these plants, most of which were still under construction.

Initially, the PSP Hydro team planned to collect information of existing MHPPs in operation in Rwanda in order to create a benchmark database from which estimate the costs of the new ones. To do this, the PSP Hydro team carried out consultations with 5 companies that were responsible for 6 hydropower plants, between 50 kW and 2 MW, in 2010. Unfortunately, the companies could only provide very poor records of their operational expenditures. Therefore, PSP Hydro had to change its strategy. To compensate the lack of real data, PSP Hydro drew in its own expertise to develop the spreadsheet for the calculation of operation phase costs for MHPPs that is in attachment. The basic principal of the spreadsheet is that operational costs are directly related to the size as well as to the costs of categories 1 and 2. For example, the number of personnel will be bigger for bigger plants and the insurance cost will be directly related to the value (or cost) of the installed assets. The model is valid for MHPPs between 100 kW and 3 MW.


The required information is:

  • Generation capacity (kW)
  • Investment on civil works (RwF)
  • Investment on electromechanical system (RwF)
  • Investment on distribution system (RwF)
  • Investment on office equipment (RwF)
  • Cost of starting and other project costs (RwF)


The outputs (in RwF), for each of which an individual estimation is made, are:

  • Personnel
  • Maintenance contract for power plant
  • Insurance
  • Electricity and water bills
  • Office stationary
  • Consumables and spares (excluded office)
  • Communication and promotional actions
  • Transport
  • Office rent
  • Local taxes
  • Environmental management

Reliability of the Model

This is a simplified model but the obtained results are comparable to those presented in previous studies in Rwanda:

  • Fichtner (2009), ‘Actualisation Study of the Electricity Masterplan, Section 6, Economic & Financial Assessment’; DECON, December 2009. (See Tables 4-7, page 4-12)
  • MARGE (2010), ‘Elaboration d’un plan stratégique national de maintenance des équipements de production et de distribution de l’énergie renouvelable’, BTC, July 2010. (See presentation of Robert J. van der Plas on ‘Maintenance Strategy for RET in Rwanda’ delivered on July 7th 2010 within the framework of MARGE’s study)


The coincidence with Fichtner (2009) and MARGE (2010) suggests that the model developed by PSP Hydro provides adequate estimations, at least for the study on privatisation for which it was created. However, as soon as the MHPPs co-financed by PSP Hydro are operational and real data is available, the model should be improved. This is a useful tool for feasibility analysis of MHPPs in Rwanda and could easily be adapted to other developing countries.

Further Information