CBA of environmental projects within hydropower

University essay from KTH/Energiteknik; KTH/Energiteknik

Author: Sarah Hagman; Julia Lindberg; [2018]

Keywords: ;

Abstract: Hydropower is a fundamental pillar in the Swedish energy system and accounts for a large part of the Swedish electricity production. The regulation power is also essential for balancing the grid load.  Fortum is one of the leading energy companies within hydropower and Klarälven is a river with high importance, where Fortum owns and operates nine powerplants. These power plants constitute a barrier for the wild salmonids in Klarälven, which need to migrate upstream to reach their spawning area. Since the 1930s, the spawning salmonids have been trapped and transported upstream by lorry. After the spawning period, the smolts and kelts, i.e. the juvenile and spawned salmonids, have to migrate downstream. Due to the lack of fishways, they are forced to pass the eight remaining power plants. This, together with predation, entails a high mortality rate. Two independently performed studies indicates on survival rates of 16 % and 30 %. To stabilize the wild salmonid population, the downstream survival must increase, and a proposed solution is to implement a downstream trap-and-transport solution. This trap implementation could be a step towards the environmental adaptation of hydropower and a part of the action plan proposed in June 2016, during the Agreement on Swedish energy policy. To find the most cost-beneficial environmental measure, a socio-economic assessment method can be used. A Cost-Benefit Analysis (CBA) is a commonly used socio-economic method, which evaluates the benefits and costs during the entire project lifetime. Energiforsk has, within the project FRAM-KLIV, developed a CBA tool that aims to simplify the socio-economic evaluation. The purpose of this thesis was to investigate whether the CBA tool can be used in future permit processes to prioritize between different project proposals to find the most beneficial environmental improvements. In order to evaluate the tool, it was to be applied on the trap-and-transport project in Edsforsen to evaluate the possibility of a socio-economic profitability. Also, the concepts and theory behind CBA was to be analysed and the suitability of translating environmental consequences into monetary values was to be evaluated. In the analysis of Edsforsen, 13 scenarios were developed. The first scenario served as a basis for the other scenarios, which were created as a sensitivity analysis. The result of the CBA showed a large socio-economic benefit and the most important parameter was identified as people’s willingness to pay for an increase of the wild salmonid stock in Klarälven. In the CBA, this parameter had a high uncertainty, as it was based on a survey performed for another project in another part of Sweden. It was found that in order for the socio-economic result to be positive, all households in Sweden must be willing to pay at least 35 SEK. As a complement to the CBA result, an evaluation regarding the marginal cost per fish was performed and an interval of 50-580 SEK per smolt was obtained. However, the calculations were based on several uncertainties and the interval should therefore be interpreted as a guideline rather than a precise result. It was concluded that in situations when a socio-economic analysis is required, and when it is possible to express consequences in monetary values, the method of CBA is appropriate. It is also a suitable methodology for evaluations of large projects, as it provides a comprehensible overview of the costs and the benefits. Despite the criticism directed towards CBA regarding uncertainties and its anthropogenic perspective, it could be concluded that using CBA as a socio-economic assessment method provides a perspicuous and quantitative result. Thus, the usage of CBA in prioritization processes of different environmental measures can be highly useful. Energiforsk’s CBA tool provides a framework with guidelines that can be highly useful and accelerate the analysis process. However, the performance of the tool version used in this thesis was not fully satisfactory due to a few malfunctions. The tool is still under development and it is likely that these errors will be adjusted in future versions. If the malfunctions in the tool would be adjusted, it could become useful for authorities, companies and other actors that wants to evaluate hydropower related environmental measures or when prioritizing between different project proposals to find the most beneficial environmental improvements in future permit processes.

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