the study of thailand infrastructure development

1

THE STUDY OF THAILAND INFRASTRUCTURE

DEVELOPMENT FEASIBILITY ANALYSIS:

SMALL SCALE HYDROPOWER

PLANT CASE STUDY

Krit Kongcharoen

A Dissertation Submitted in Partial

Fulfillment of the Requirements for the Degree of

Doctor of Public Administration

School of Public Administration

National Institute of Development Administration

2018

iii

ABSTRACT

Title of Dissertation The Study of Thailand Infrastructure Development

Feasibility Analysis: Small Scale Hydropower Plant

Case Study

Author Mr. Krit Kongcharoen

Degree Doctor of Public Administration

Year 2018

This study’s main objectives are 1) to study a small scale hydropower plant

feasibility analysis framework; 2) to study the standards and guideline compliance of

this small scale hydropower plant feasibility analysis; 3) to study the difficulties and

limitations of a small scale hydropower plant feasibility analysis; and 4) to improve

the small scale hydropower plant feasibility analysis framework. This study considers

analysis methodology and process by employing mixed-methods research to analyze

data from Thailand’s small scale hydropower plant feasibility studies conducted from

1987 to 2016, amounting to 48 studies covering 648 projects. It also involves other

related reports, academic papers, operations manuals, and in-depth interview data

from small scale hydropower plant feasibility analysis-related personnel.

The study shows that, overall, small scale hydropower plant feasibility

analysis methodology follows an economic analysis framework by employing a cost-

benefit analysis framework (CBA), which complies with the standards and guidelines

outlined by related organizations. Some of the details, however, do not comply with

the said standards and guidelines, including discount rate determination, cost and

benefit analysis methodology, and risk analysis methodology. Furthermore, there are

significant differences between the study and actual performance, notably in terms of

benefit short fall. In terms of future electricity generated, the studies tended to

overestimate the electricity by 53.9% compared to the actual result. Differences also

resulted from study difficulties and limitations, for instance, data limitations and

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Differences in methodology among the studies, Conversion Factor (CF) used to

transform market price to shadow price which could be inconsistent with current

economic conditions, risk analysis which does not reflect reality and the probability of

various risk factors.

Regarding the process study results, the small scale hydropower plant

feasibility analysis process, which involves consultant hiring, study methodology,

feasibility analysis, and project approval, complies with laws and guidelines for

public management efficiency. However, there are difficulties and limitations that

could influence the study, which are the lack of an economic standard or provisional

license, lack of project study scope, differing opinions on study methodology between

the analyst and approval board, and a lack of quality and validity control from

external agencies. These difficulties and limitations in methodology and process could

influence the study’s accuracy and credibility, which could lead to wrong judgment

from the agencies related to project development. These issues could create negative

impacts on natural resources and the environment, as well as national budget

inefficiencies.

Recommendations for small scale hydropower plant feasibility analysis

methodology improvements to solve these difficulties and limitations include: 1)

setting up the study methodology in clear detail in the form of a manual and

standardized case studies so as to get rid of differing methodologies; 2) applying

reference class forecasting and Monte Carlo Simulations, which analyze feasibility by

calculating project costs and benefits as well as probability of risk factors by using the

results from past or present project results to get rid of inconsistencies in the

feasibility analysis. The feasibility and risk indicators to consider are (1) Risk

Acceptable Net Present Value (R-NPV) and (2) Degree of Risk. In terms of feasibility

analysis process development, this study proposes the setup of a provisional standard

for economic professions regarding public project feasibility analysis, a study

accuracy and transparency monitoring process development, a project result

monitoring database development, and private-public joint investment promotion.

These recommendations would lead to public management efficiency as well as

balanced and sustainable national development in the long run.

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ACKNOWLEDGEMENTS

The completion of this doctoral dissertation “The Study of Thailand

Infrastructure Development Feasibility Analysis: Small Scale Hydropower Plant Case

Study” is possible with the support of the major Advisor Associate, Professor Dr.

Montree Socatiyanurak. I would like to express my sincere gratitude for his

consultation, encouragement and guidance in making this dissertation successful.

I would also like to thank the committee Chairperson, Associate Professor

Dr. Wiwatchai Atthakor, and other Committees, Assistant Professor Dr. Visit

Limsombunchai and Assistant Professor Dr. Apirada Chinprateep for their valuable

advice.

Finally, I would like to give special thanks to my family and friends who have

always been supportive through this entire process.

Krit Kongcharoen

October 2018

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TABLE OF CONTENTS

Page

ABSTRACT iii

ACKNOWLEDGEMENTS v

TABLE OF CONTENTS vii

LIST OF TABLES viii

LIST OF FIGURES xii

CHAPTER 1 INTRODUCTION 1

1.1 Statement and Significance of Study 1

1.2 Research Questions 8

1.3 Objectives 8

1.4 Scope of the Study 8

1.5 Definition 9

1.6 Expected Benefit 9

CHAPTER 2 CONCEPT, THEORY AND LITERATURE REVIEW 10

2.1 Concept and Theory Review 10

2.2 Literature Review 32

2.3 Conceptual Framework 42

CHAPTER 3 RESEARCH METHODOLOGY 44

3.1 Research Design 44

3.2 Data and Data Collection 44

3.3 Analysis Tools and Techniques 45

3.4 Study Process 49

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CHAPTER 4 ANALYSIS RESULT 50

4.1 Feasibility Analysis Framework Study 50

4.2 Feasibility Analysis Standard and Guideline 90

Compatibility Study

4.3 Cost Overrun and Benefit Shortfall Study 111

4.4 Feasibility Analysis Problem and Limitation Study 119

4.5 Feasibility Analysis Framework Development 126

CHAPTER 5 SMALL SCALE HYDROPOWER FEASIBILITY 139

ANALYIS

5.1 Assumption Selection 139

5.2 Project Cost Analysis 140

5.3 Project Benefit Analysis 141

5.4 Investment Feasibility Analysis using Reference 143

Class Forecasting and Monte Carlo Simulation

5.5 Feasibility Analysis Result Summary 156

CHAPTER 6 SUMMARY, DISCUSSION, AND RECOMMENDATION 159

6.1 Summary 168

6.2 Discussion 178

6.3 Recommendation 180

BIBLIOGRAPHY 180

APPENDICES 189

Appendix A Small Scale Hydropower Project 190

Appendix B List of Feasibility Study Report 198

Appendix C The World Bank’s Conversion Factor 209

BIOGRAPHY 211

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LIST OF TABLE

Table Page

1.1 Alternative Energy Development Plan (AEDP 2015) Target 4

2.1 Difference between project Economic and Financial Analyses 17

2.2 Study Framework, Content and Related Concept and Theory 31

2.3 Weaknesses of Cost-Benefit Analysis 33

2.4 Problems of Transparency in Study Process and Limitation 36

in Study Mythology

3.1 Feasibility Analysis Framework Study Topics 46

4.1 Detail and Numbers of Studied Reports and Projects 51

4.2 Number of Reports Classified by Project Owner 52

4.3 Percentage of Reports Classified by Project Owner 53

4.4 Number of Reports Classified by Study Agencies 54

4.5 Percentage of Reports Classified by Study Agencies 54

4.6 Number of Reports Classified by Study Year 55

4.7 Percentage of Reports Classified by Study Year 56

4.8 Number of Reports Classified by Type of Analysis 57

4.9 Percentage of Reports Classified by Type of Analysis 57

4.10 Number of Reports Classified by Project Duration 58

4.11 Number of Reports Classified by Discount Rate 59

4.12 Number of Reports Classified by Discount Rate 60

Selection Principle

4.13 Percentage of Reports Classified by Discount Rate Selection 60

Principle

4.14 Discount Rate Selection (Average) from 1963 - 1997 61



4.17 Number of Reports Classified by Number of Cost Items 63

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4.18 Percentage of Reports Classified by Number of Cost Items 64

4.19 Number of Reports Classified by Cost Evaluation Method 65

4.20 Percentage of Reports Classified by Cost Evaluation Method 65

4.21 Number of Reports Classified by Conversion Factor Source 66

4.22 Percentage of Reports Classified by Conversion Factor Source 67

4.23 Number of Reports Classified by Annual Expense Evaluation 68

Method

4.24 Percentage of Reports Classified by Annual Expense 69

Evaluation Method

4.25 Number of Reports Classified by Number of Benefit Items 69

4.26 Percentage of Reports Classified by Number of Benefit Items 70

4.27 Number of Reports Classified by Electricity Benefit 71

Evaluation Method

4.28 Percentage of Reports Classified by Electricity Benefit 72

Evaluation Method

4.29 Number of Reports Classified by Comparison with Cost of 73

Electricity Generation using Other Methods

4.30 Percentage of Reports Classified by Comparison with Cost of 74

Electricity Generation using Other Methods

4.31 Number and Percentage of Reports with Benefit Evaluation 74

from Greenhouse Gas Emissions Reduction

4.32 Number and Percentage of Reports Classified by Method on 75

Benefit Evaluation from Greenhouse Gas Emissions Reduction

4.33 Number of Reports Classified by Number of Feasibility 76

Indices

4.34 Percentage of Reports Classified by Number of Feasibility 77

Indices

4.35 Number of Reports Classified by Feasibility Index 77

4.36 Percentage of Reports Classified by Feasibility Index 78

4.37 Number of Reports Classified by Feasibility Analysis Result 79

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4.38 Percentage of Reports Classified by Feasibility 79

Analysis Result

4.39 Number of Reports Classified by Risk Analysis Method 80

4.40 Percentage of Reports Classified by Risk Analysis Method 81

4.41 Summary of Thai Small Scale Hydropower Project Feasibility 81

Analysis Methodology Framework

4.42 Academic Qualification for Economic Consultant 84

4.43 Objective of Economic Study in Feasibility Analysis 87

4.44 Document Used for Methodology Standard and Guideline 91

Compatibility Analysis

4.45 Project Duration Selection Compatibility Analysis 93

4.46 Discount Rate Selection Compatibility Analysis 94

4.47 Cost Item Selection Compatibility Analysis 95

4.48 Cost Analysis Method Compatibility Analysis 97

4.49 Annual Cost Evaluation Compatibility Analysis 98

4.50 Benefit Item Selection Compatibility Analysis 100

4.51 Benefit Evaluation Method Compatibility Analysis 101

4.52 Feasibility Index Selection Compatibility Selection Analysis 102

4.53 Risk Analysis Compatibility Analysis 104

4.54 Methodology Compatibility Analysis Result 105

4.55 Document Used for Process Standard and Guideline 107


4.56 Consultant Hiring Process Compatibility Analysis 108

4.57 Study Process Compatibility Analysis 109

4.58 Feasibility Consideration and Approval Processes 110


4.59 Process Compatibility Analysis Result 111

4.60 Studied Small Scale Hydropower Projects 112

4.61 Small Scale hydropower Project Cost Overrun 113

4.62 Descriptive Statistics of Cost Overrun Analysis 115

4.63 Descriptive Statistics of Benefit Shortfall Analysis 117

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4.64 Small Scale Hydropower Project Feasibility Analysis 123

Methodology’s Problems and Limitations

4.65 Small Scale Hydropower Project Feasibility Analysis Process 125

Problemss and Limitations

4.66 Summary of Development Guidelines to Solve Problems and 134

Reduce Limitations of Small Scale Hydropower Project

Feasibility Analysis Methodology

4.67 Summary of Development Guidelines to Solve Problems and 137

Reduce Limitations of Small Scale Hydropower Project

Feasibility Analysis Process

5.1 Project Financial and Economic Cost 141

5.2 Small Scale Hydropower Project Cost and Benefit Analysis 145

Table for Case 1


Table for Case 2


Table for Case 3

5.5 Analysis Result of Net Present Value (NPV) 148

5.6 Feasibility Analysis Result using Reference Class Forecasting 156

and Monte Carlo Simulation

5.7 Feasibility Analysis Result Summary for Case 1 157



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LIST OF FIGURES

Figures Page

1.1 Annual Budget Allocations for Fiscal Year 2017 by Expense 2

1.2 Small Scale Hydropower Project Locations 6

1.3 Framework for The Study of Thailand Infrastructure 7

Development Feasibility Analysis: Small Scale Hydropower

Plant Case Study

2.1 Discrete and Continuous Distribution 25

2.2 Types of Event Probability Distribution 26

2.3 Project Feasibility Analysis using Monte Carlo Simulation 29

2.4 Risk Assessment Matrix 30

2.5 Analysis Conceptual Framework using Reference Class 38

Forecasting

2.6 Adjustment of Acceptable Chance of Cost Overrun 39

2.7 Analysis of Project’s Benefit Estimation Inaccuracy 40

2.8 Analysis of Project’s Cost Estimation Inaccuracy 41

2.9 Result of Feasibility Analysis using UNITE-DSS Model 41

Program

2.10 Conceptual Framework 43

3.1 Small Scale Hydropower Plant Feasibility Analysis 46

Framework Study Conceptual Framework

3.2 Small Scale Hydropower Plant Feasibility Analysis Standard 47

and Guideline Compatibility Analysis Conceptual Framework


Inaccuracy, Problems, and Limitations Analysis Conceptual

Framework


Framework Development Analysis Conceptual Framework

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3.5 The Study of Thailand Infrastructure Development Feasibility 49

Analysis: Small Scale Hydropower Plant Case Study Process

4.1 Thai Small Scale Hydropower Plant Project Discount Rate 61

From 1963 - 2016

4.2 Consultant Selection Process 86

4.3 Investment Feasibility Analysis Process 88

4.4 Project Feasibility Consideration and Approval Processes 90

4.5 Frequency Distribution of Cost Overrun 116

4.6 Frequency Distribution of Benefit Shortfall Analysis 117

4.7 Relationship between Benefit Shortfall and Project Study 118

Period

4.8 Relationship between Benefit Shortfall and Project’s Value 119

4.9 Risk Likelihood 131

4.10 Risk Impact 132

4.11 Risk Assessment Matrix 132

4.12 Meaning for Degree of Risk 133

5.1 Net Present Value (NPV) Analysis Result Histogram 148

for Case 1


for Case 2


for Case 3

5.4 Relational Graph between Net Present Value (NPV) 151

and Probability for Case 1





5.7 Criteria for Level of Risk Likelihood 152

5.8 Criteria for Level of Risk Impact 153

5.9 Meaning for Degree of Risk 153

5.10 Evaluation of Degree of Risk for Case 1 154

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1

CHAPTER 1

INTRODUCTION

1.1 Statement and Significance of Study

National development is the public sector’s main responsibility, which

requires setting up a direction and execution for improving overall national socio-

economic conditions. This socio-economic change will affect the citizen both directly

and indirectly, for instance regarding income, well-being and life stability, creating an

impact toward that citizen’s happiness, which is the ultimate outcome of development

administration (Pairote Pathranarakul, 2551, p. 267) and from 4 government economic

functions, namely, 1) a resource allocation function, 2) an income and wealth

distribution function, 3) an economic stabilization function, and 4) an economic

growth and development function (Musgrave, Stiglitz, as cited in Ponlapat Buracom,

2554, p. 4). Therefore, the government’s crucial role is to perform national

development in various dimensions in order to achieve its development goals

according to the mentioned economic functions.

Presently, government has allocated a significant budget for national

development. In 2017, Thailand set a budget up to 2.73 trillion THB, which comprises

personnel 23.1% (0.63 trillion THB), general operations 8.8% (0.24 trillion THB),

investment 16.3% (0.44 trillion THB), subsidies 28.5% (0.78 trillion THB) and others

23.3% (0.63 trillion THB) (Bureau of the Budget, 2017, p. 34) as shown in figure 1.1.

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Figure 1.1 Annual Budget Allocations for Fiscal Year 2017 by Expense

Source: Bureau of the Budget (2017, p. 34).

As for the investment budget, or investment expenses such as durable goods,

lands, installation and related expenses, this is the budget for infrastructure

development, for instance, roads, power plants, irrigation systems, airports and dams,

aimed at developing infrastructure in support of long-term national economic and

social development. This will create both direct and indirect benefits toward socio-

economic conditions, such as increased employment and population spending

stimulation, as well as enhancing future national competitiveness. In the present, the

agencies responsible for development budget determination must conduct a project

feasibility study to consider the project’s development engineering possibility,

environmental impact, social impact, management, marketing, law, and economic and

financial analyses to be used as a basis in making decisions regarding the project’s

development as well as project prioritization and budget planning according to each

agency’s role and responsibility in the future.

Project Feasibility Analysis or Cost-Benefit Analysis (CBA) are tools for

quantitative analysis on public service projects or economic welfare systems which

aim to raise citizen well-being (The Public Debt Management Office, 2015, p. iii) by

comparing the costs and benefits which are expected to result from the project’s

Unit: Million THB

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development. The analysis’ main aim is to assess any impact toward the nation as a

whole, which will differ in each project according to the CBA methodology, resulting

from differences in each project’s distinct features, distinct regulations set by related

agencies, as well as analysis methodology according to the researcher’s opinion and

experience.

At present, due to increasing diversity and volume of projects, a large amount

of public investment feasibility analysis is outsourced to consulting companies. This

approach is beneficial in terms of public management efficiency and study credibility,

which is studied by academics with expertise who can choose the appropriate

methodology for each type of project. However, current feasibility analyses are still

faced with obstacles and weaknesses, which affect study results, accuracy and

credibility. This results from methodology constraints, for instance, selecting

inappropriate analysis tools, data limitations, cost and benefit analysis error,

inconclusive risk factor analysis, incomparable study results from different investment

feasibility analysis techniques, and lack of project understanding among the analysts.

There are also difficulties in the process which result from public sector limitations,

such as lacking academic standard quality controls as well as interference from

interest groups.

These mentioned limitations could cause errors in the investment feasibility

analysis, for instance, under evaluated project costs or over evaluated future benefits,

which could lead to indecision made by the public sector in investment budget

allocations and might result in a loss in actual operations. These problems have been

occurring in large infrastructure projects around the world resulting in both economic

and welfare losses.

Energy infrastructure development is also one of these crucial factors

necessary for economic development and population welfare improvement. Presently,

the ministry of energy has designated the Thailand Integrated Energy Blueprint

(TIEB) with a focus on 3 principles, namely, Security, Economy, and Ecology

(Department of Alternative Energy Development and Efficiency (DEDE), 2015, p. 1).

One of the ministry’s missions for satisfying these 3 principles is renewable and

alternative energy development. To fulfill the mission, DEDE has created the

Alternative Energy Development Plan (AEDP 2015) which prioritizes the promotion

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of renewable energy in the nation to its maximum capacity for communities’ social

and environmental benefit (Department of Alternative Energy Development and

Efficiency, 2015, p. 1).

The Alternative Energy Development Plan (AEDP 2015) has set a target share

of renewable energy in gross final energy consumption at 30% by 2036, or 39,388.67

ktoe (kilo-tons of oil equivalent) which increases from 9,025 MW (megawatts) in

2014. Under this target, the target of renewable energy generation is 5,588.24 ktoe, or

equivalent to 19,684.40 MW, which would be an increase from 4,494.03 MW in

2014, resulting in numerous forms of renewable energy development support, for

instance, solar energy, wind energy, biomass energy and small scale hydropower

energy, with the target of 376.00 MW in 2036 (Department of Alternative Energy

Development and Efficiency, 2015, pp. 9-15) from 172.28 MW in 2014 (Department

of Alternative Energy Development and Efficiency, 2017, p. 33) or as much as 118%

growth compared to 2014 energy generation capacity, as shown in Table 1.1

Table 1.1 Alternative Energy Development Plan (AEDP 2015) Target

Item 2014

Status

2036

Target

Changes

Growth Rate

(%)

Renewable Energy Consumption

(ktoe) 9,025 39,388.67 30,363.67 336%

Electricity Generated from

Renewable Energy (MW) 4,494.03 19,684.40 15,190.37 338%

Electricity Generated from Small

Scale Hydropower (MW) 172.28 376.00 203.72 118%

Source: Department of Alternative Energy Development and Efficiency (2015).

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A small scale hydropower project is the development of a small dam or check

dam to transport water toward a power plant for energy generation (summarized as

small scale hydropower project features in Appendix A) which is considered

environmental friendly since it uses renewable energy that generates low

environmental impact compared to large dam development, for instance in the

reduction of greenhouse gas emission, increase of energy stability for electricity

generation, and the generation and supply of electricity for households outside of the

Provincial Electricity Authority (PEA) service area. These benefits have led to

numerous investments in small scale hydropower projects in various countries,

including Thailand. From 1964 to 2017, DEDE has already developed 25 projects. 3

projects had already been transferred to be operated under the Electricity Generating

Authority of Thailand (EGAT), resulting in 22 projects still under DEDE

responsibility accounting for 49,514 kilowatts (KW) generating 122,413 million

kilowatt-hours annually on average (Department of Alternative Energy Development

and Efficiency, 2017, p. 110). The locations and names of the 22 small scale

hydropower projects under DEDE responsibility are shown in Figure 1.2.

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Figure 1.2 Small Scale Hydropower Project Locations

Source: Department of Alternative Energy Development and Efficiency (2017, p. 11).

The current situation in the public small scale hydropower development

framework has shown the significance and future trend for small scale hydropower

development project investment, leading to small scale hydropower development

projects to meet the Alternative Energy Development Plan’s (AEDP 2015) goal in

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2036. From past to present, DEDE and related agencies have performed a large

amount of feasibility studies for small scale hydropower development projects

covering more than 600 projects. One of the study’s key components is an economic

feasibility analysis for investment decision consideration among related agencies. By

studying the data from these studies, we could reflect on the project feasibility

analysis framework of related agencies, which leads to an analysis of the study’s

limitations or weaknesses, as well as recommendations for further improving the

study framework.

Therefore, this study aims to conduct an in-depth study of small scale

hydropower plant case studies regarding a feasibility analysis framework which is

comprised of the methodology and process for analyzing difficulties and

recommending a small scale hydropower plant feasibility analysis approach which is

academically accurate, with compliance to internationally accepted standards leading

to public management efficiency and national sustainable development. The study’s

approach can be seen in Figure 1.3.

Figure 1.3 Framework for The Study of Thailand Infrastructure Development

Feasibility Analysis: Small Scale Hydropower Plant Case Study

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1.2 Research Questions

1.2.1 Primary Research Question

What is the small scale hydropower plant feasibility analysis framework and

how could it be improved?

1.2.2 Secondary Research Questions

1) What are the small scale hydropower plant feasibility analysis

framework’s specific and general features?

2) Do small scale hydropower plant feasibility analyses comply to

standards and guidelines?

3) Do small scale hydropower plant feasibility analyses have

inaccuracies or face difficulties or limitations?

4) How should a small scale hydropower plant feasibility analysis

framework be developed in the future?

1.3 Objectives

1) To study a small scale hydropower plant feasibility analysis framework.

2) To study the standard and guideline compliance of small scale hydropower

plant feasibility analyses.

3) To study any inaccuracy, difficulty and limitation of small scale

hydropower plant feasibility analyses.

4) To improve the small scale hydropower plant feasibility analysis

framework.

1.4 Scope of the Study

1) To study the feasibility analysis framework of small scale hydropower

plants with a capacity less than 12,000 kilowatts, which covers both small scale

hydropower plants and Pico hydropower plants due to their similar features, including

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projects which generate electricity from other renewable energy sources from the

studies performed from 1987 to 2016.

2) To study the inaccuracies, difficulties and limitations of small scale

hydropower plant feasibility analysis under Department of Alternative Energy

Development and Efficiency responsibility.

1.5 Definitions

1) Feasibility analysis framework means the components of methodology and

processes from related agencies in performing a small scale hydropower plant

feasibility analysis.

2) Feasibility analysis methodology means the principles, thoughts, and

academic theory employed in the study comprised of assumption setting, cost

analysis, benefit analysis, feasibility indicator and risk analysis.

3) Feasibility analysis process means a consultant hiring process format, a

study process format, and small scale hydropower plant project feasibility

consideration and approval format.

1.6 Expected Benefit

Knowledge of the small scale hydropower plant project feasibility analysis

framework, which reflects quality, accuracy, problems and obstacles of study

methodology and public investment considerations in the process leading up to

recommendations for improving Thailand’s small scale hydropower plants and other

infrastructure development projects in order to comply with academic principles and

internationally accepted standards. This will result in public management efficiency

and national sustainable development.

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CHAPTER 2

CONCEPT, THEORY AND LITERATURE REVIEW

The study of Thailand Infrastructure Development Feasibility Analysis: Small

Scale Hydropower Plant Case Study has reviewed the concept, theory and literature to

design a conceptual framework and research methodology, as well as a results

analysis and discussion, as follows:

2.1 Concept and Theory Review

Concept and theory review in this study review is comprised of concepts and

theory from 2 fields of study, namely, public administration, and economics concept

and theory, as follows:

2.1.1 Public Administration Concept and Theory

Public Administration concept and theory is the major concept regarding

organization management which could be applied to public management in terms of

principles, goals and process. The review of public management concept and theory

focuses on concepts and theory related to public management principles and goals,

which is comprised of 1) Governance, 2) New Public Management, and 3)

Sustainable Development to use as a main conceptual framework for the study and

further setting up of the process improvement guidelines of feasibility analysis for

public infrastructure investment. This study’s public administration concept and

theory review can be shown as follows.

2.1.1.1 Governance

Governance is a major concept which influences the development style

of both public and private organizations in the present. Governance could be

considered as both principles and guidelines for operations (Pathan Suwanmongkol,

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2013, p. 5) in public management that are aimed at citizens’ and the nation’s

maximum benefit by adhering to logic and justice as well as prioritizing public

management efficiency. This could be done by improving the operational process

speed, which could save both time and resources (Pathan Suwanmongkol, 2013, p.

28). Public governance can be separated into 3 levels, namely, institutional

governance, organizational and managerial governance, and technical governance

(Kowit Kangsanan, 2009, p. 19), with the following details:

1) Institutional governance is the governance among major

public institutions related to constitutional principles, acting principles and regulations

which are responsible for the structure, decision process and behavior of management

agencies, including public and government justifications. This especially concerns

legislative choices in pushing regulations, management process controls, conflicts and

tension between the executive and legislative branches, dispute and tension resolution

in allocating and controlling resource spending, as well as the relationship between

citizen and public choices in legislative and management policies (Kowit Kangsanan,

2009, pp. 10-12). To recapitulate, institutional governance is that governance

consideration involving the balance of major political institutions responsible for

public management under a democratic system, namely, executive, legislative and

judiciary power.

2) Organizational and managerial governance is the

governance in government executive structures with a focus on the regulation and

control of power usage, the public management process, public management, public

policy, public organizational culture, and management capability of public agencies

(Kowit Kangsanan, 2009, pp. 12-13). In other words, organizational and managerial

governance is the governance consideration involving government or executive

branch work system management, which is comprised of department or division level

agencies as well as other agencies under government control.

3) Technical governance involves the technical core, core

competencies, or primary work concepts of public agencies and organizations. This

relates to operational level staff who follow regulations and apply his/her own

discretion in delivering services to meet citizen and public demand, including

regulations from the executive at various levels to facilitate the service effectively and

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efficiently (Kowit Kangsanan, 2009, p. 13). To summarize, technical governance is

the governance consideration involving the operational process of agencies or

personnel responsible for various missions in satisfying government goals.

Presently, Thailand has concretely adopted governance

principles in public management. The Office of the Public Sector Development

Commission (OPDC) has published a manual for good governance rating among

public agencies which has defined 10 public management governance components

(Office of the Public Sector Development Commission, 2009, pp. 8-9). One of these

key components under the governance principle which is used in public policy

decision making is efficiency, which means public management under good

governance with a designed operational process, adopting appropriate management

techniques and tools for the organization to utilize capital, labor and time for the

utmost benefit in enhancing public operational capacity and satisfying citizen and

stakeholder needs (Office of the Public Sector Development Commission, 2009, p. 8).

2.1.1.2 New Public Management

New Public Management means public management adjustment by

applying private guidelines or management while considering efficiency,

effectiveness and feasibility to grant the private opportunity to deliver public services,

as well as servicing citizens while also prioritizing quality (Boonyakiat Karavekphan

et al., 2017 1st paragraph). New public management’s purpose is to solve the decline

in public systems and lack of governance.

As for Thailand, in 2012 the government agreed on a new public

management principle which is one of the major principles of good governance and

comprising 3 minor principles, namely, 1) Efficiency, 2) Effectiveness, and 3)

Responsiveness. Efficiency under the new public management principle has been

defined as the requirement of public operations to resources efficiently with

productivity, to ensure it’s worth the investment and maximize benefit toward the

majority (Pathan Suwanmongkol, 2013, p. 63).

2.1.1.3 Sustainable Development

Sustainable development is development that meets the needs of the

present without compromising the ability of future generations to meet their own

needs, as defined by the World Commission on Environment and Development.

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Furthermore, its meaning also includes consideration of the impact on future

generations, limited resource allocation, as well as poverty and inequality issues

(Montree Sokatiyanurak, 2017a, p. 372). The major principle of sustainable

development is the establishment of balance among 3 development dimensions, which

are 1) Sustainable economic development dimension, 2) Sustainable social

development dimension, and 3) Sustainable environmental development dimension

(Office of The Permanent Secretary for Ministry of Natural Resources and

Environment, 2013, pp. 10-12).

This is in order to prevent problems of natural resource and

environmental degradation from development and infrastructure projects which lack

an effective monitoring mechanism from limited appropriate environmental impact

assessment (Office of the National Economic and Social Development Board, 2003,

p. 6), Thailand has moved forward on sustainable development by applying a

sufficiency economy principle in the 9th

National Economic and Social Development

Plan and onward, with the purpose of creating a pleasant society with continuous and

sustainable development and growth (Office of The Permanent Secretary for Ministry

of Natural Resources and Environment, 2013, p. 45). There has been a proposal for

adjusting the public decision process to consider positive and negative, both short and

long term, deliberate impacts toward society while discretely maintaining a balance

among economic and environmental dimensions involving social and natural

resources (Office of the National Economic and Social Development Board, 2003, p.

81).

The mentioned Sustainable development principles and guidelines have

led to law, regulation and academic development to use as regulation tools to prevent

negative impacts from various development projects toward natural resources and the

environment, for instance, a requirement for an Environmental Impact Assessment

(EIA) and Environmental Economic Assessment, which will be used as public

decision criteria to make development projects adhere to sustainable development

goals.

2.1.1.4 Public Operation Efficiency and Feasibility

Efficiency means allocating resources efficiently or with maximum

benefit, as can be measured by the ratio between output and input (Tippawan

14

Lorsuwannarat, 2013, pp. 159-160) which relates to feasibility, meaning efficient

limited resource allocation for maximum benefit (King Prajadhipok’s Institute 2004,

as cited in Niyom Ratammarit, 2017, pp. 17-18). Public operations efficiency is one

of the major principles of governance and a new public management principle. In

2003, Thailand declared the Royal Decree on Criteria and Procedures for Good

Governance, B.E. 2546 (2003), which details public management feasibility in section

22, as follows:

Section 22

The Office of National Economic and Social Development Board

andthe Budget Bureau shall jointly evaluate the value of money for missions

carried out by a government agency and report the evaluation to the Council of

Ministers for consideration, within the period as specified thereby, whether

which mission should be carried out or dissolved. This report shall be a

guideline for the making of a request for budget of the government agency

next year.

The category and condition of each mission, feasibility of the mission

or project, benefit to the State and public at large, and expenditure before and

after an implementation of mission shall be taken into consideration for an

evaluation under paragraph one.

Value for money in this Section means social advantage or

disadvantage and other advantages or disadvantages which could not be

calculated in terms of money.

As for goals related to efficiency and feasibility in the public mission,

the Office of the Public Sector Development Commission (OPDC) has stated that

management must compare the resulting input and outcome by performing a cost

benefit analysis to analyze the possibility and feasibility of various plans or projects

and compare the potential received benefit (Office of the Public Sector Development

Commission, 2003, p. 17). Furthermore, it also states that the feasibility analysis must

not only consider monetary benefit or expense, but also any potential benefit that

society could possibly gain from that mission, as well as benefits that cannot be

15

converted to monetary value. Since the public mission is not to seek maximum profit,

but to maximize citizens’ benefit, a one-dimensional measurement will not cover all

public missions. Although some projects might not be monetarily feasible, it is also in

the public duty to maintain social wellness, which must be continuous. Feasibility

analysis, then, is the information for a policy and operational plan setting (Office of

the Public Sector Development Commission, 2003, pp. 51-52).

A public organization efficiency regulation conceptual framework

shows the connection between efficiency and law, regulations and guideline settings,

at various levels. It considers efficient public organization management and feasible

public operations, especially in capital expenditure, which is the budget allocation for

both small and large investment in national development (Montree Sokatiyanurak,

2017b, p. 95). It dictates that the feasibility analysis is needed in order to

acknowledge specific project efficiencies before its initiation. Therefore, it can be

concluded that project efficiency and feasibility are both crucial goals and guidelines

in the consideration of various project investments.

2.1.2 Economic Concept and Theory. Project feasibility analysis is an

economic tool for data analysis in decision making under the premise of utilizing

limited resources for maximum return. This premise is closely related to the concept

of scarcity and choice. The feasibility or cost benefit analysis is the application of

welfare economics (Kieatviboon Chomkhair & Manisri Puntularp, 1983, p. 1), in

other words, positive and negative impact toward a certain entity, either single or

multiple persons, is not the same as impact toward the whole economic system. Cost-

Benefit Analysis is concerned more with the overall economic system, which is the

welfare of that certain society, not only certain parts of society (Kieatviboon

Chomkhair & Manisri Puntularp, 1983, p. 7). This shows the connection between

feasibility analysis on an individual level, especially the investor’s financial analysis,

and feasibility analysis on the economy level, which is known as economic feasibility

analysis.

Economic feasibility analysis is a crucial tool for the public sector in making

decisions regarding a national economic development budget, according to the

Maximum Social Gain Theory, which states that with any goods or services,

16

government should choose only the ones that create more social benefit than cost

(Ponlapat Buracom, 2011, p. 24). In other words, government must conduct a

feasibility analysis in order to choose and prioritize each project. Furthermore,

economic feasibility analysis also relates to Market failure theory, especially

regarding externalities which result from either direct or indirect impacts from a

project toward the economy, society and/or environment, both positive and negative.

This leads to the development of a concept for evaluating the economic value of

goods outside of the market by applying economic methods to analyze the

environmental impact and includes the certain impact in the project’s benefit or cost

(Adis Israngkura na Ayudhya, 2010, p. 11) to ensure that feasibility analysis covers

every impact toward the economy, society and environmental which could lead to the

public sector’s justified decision to invest in development projects.

According to the mentioned economic concept and theory, we could

summarize the study guideline regarding feasibility analysis which consists of Cost-

Benefit Analysis (CBA), Natural Resource and Environmental Economics, and Risk

analysis as follows:

2.1.2.1 Cost-Benefit Analysis (CBA)

Cost-Benefit Analysis (CBA) has 5 major components, which are

1) Project economic and financial analysis 2) Assumption 3) Project cost analysis

4) Project benefit analysis and 5) Project feasibility index, with the following details.

1) Project economic and financial analysis. Cost-Benefit

Analysis (CBA) in public projects mostly consists of Economic analysis and Financial

analysis, with the following details:

(1) Project economic analysis is used for deciding whether

the project is worth allocating the operational budget (Adis Israngkura na Ayudhya,

2010, p. 11) or whether the project invested creates benefit toward the whole society

more than its own expense or national opportunity cost for making the decision to

utilize a limited resource for maximum benefit toward society. The project will be

considered economically sound or profitable if the benefit generated is higher than the

cost, and economically unwise or unprofitable if the benefit is lower, which will

influence the decision of agencies related to project development.

17

(2) Project financial analysis is used mostly for analyzing

private investment since its goal is to find financial return or project profitability as

well as appropriate financial planning, which leads to other financial analyses, for

instance, a profit and loss statement, cash flow statement, balance sheet, budget

planning, private joint venture format as well as foreign financial institution

borrowing. The analysis’s main drawback is that it does not include the project’s

social and economic cost and benefit.

To summarize, the differences between economic and

financial analysis are shown in Table 2.1:

Table 2.1 Differences between Project Economic and Financial Analyses

Topics Economic Analysis Financial Analysis

1. Objective To allocate limited resources for

maximum benefit while considering

value that does not exist in the

market as well

To allocate limited resources for

maximum benefit to generate

maximum investment, accounting

for return while considering only

value that exists in the market

2. Resource value used

in analysis

2.1 Tax and subsidy Use price excluding tax and subsidy Use national market price

2.2 Opportunity cost Considers

resource opportunity cost

Does not consider

resource opportunity cost

2.3 Externality Considers project externalities,

both positive and negative

Does not consider

project externalities,

either positive or negative

3. Discount rate Uses social discount rate Uses private discount rate

Source: Sukhothai Thammathirat Open University (2017).

18

2) Project assumption. Feasibility analysis sets 2 major

assumptions, which are discount rate and project duration, as follows:

(1) Discount rate is the rate for adjusting a project’s future

cost or benefit to value in the previous year (Yuavares Tubpun, 2008, p. 48). In other

words, project feasibility analysis will use the discount rate for adjusting future

money to its present value. In choosing the discount rate for economic analysis,

opportunity cost of capital or social will be considered. Furthermore, the public

project discount rate could be set according to an expected period for receiving

benefit, source of funds or constant price/current price (Adis Israngkura na Ayudhya,

2009, p. 53-54), while project financial analysis will consider a certain organization’s

weighted average cost of capital (WACC).

(2) Project duration is the duration that the project will

generate benefit according to its objective. The duration chosen could be based on 1)

Technical age of any asset which requires a large amount of reinvestment, 2) Market

price of output (Haruthai Meenaphan, 2001, pp. 20-21). However, most projects will

choose its duration according to usage life of major capital assets based on the

engineering life of the project’s major structures.

3) Project cost analysis or expense means the opportunity cost

of a resource or factor of production used in the project, while financial expense

means the monetary value that actually occurs. Project cost can be separated into 3

categories, as follows:

(1) Primary cost is a resource or factor of production usage

value for the project’s investment, operation and maintenance, which considers its

project direct cost to comprise of:

a) Investment cost is the value of the resources used to

create a project’s components or for engineered structures, as well as completing

other components for operation and generating benefit according to the project’s

objective. This cost usually occurs at the beginning of a project’s duration.

b) Operating and maintenance cost is the value of

resources used for operating and maintaining the project in order to function as

normal. This cost usually occurs annually throughout project’s duration.

19

(2) Secondary cost is another cost that results from the

project’s existence other than the primary cost. This cost might result from negative

externalities forcing the project to have costs for prevention, restoration or recovery

from various impacts back to its normal situation.

(3) Intangible cost is an abstract cost that occurs in an

economy, society or environment as a result of the project, for instance, impacts on

aesthetics, mentality, life, or even unemployment.

Cost analysis can be separated into economic costs and

financial costs, as follows:

(1) Economic cost analysis is the analysis of resources or

factors of production in the opportunity cost which covers every cost that has

occurred from the project’s development, both monetary and non-monetary. An

Economic cost analysis of certain types of resources could be evaluated by comparing

the market price and adjusting to the shadow price by using a conversion factor, as

well as evaluating resource value based on the environmental economic concept in

evaluating the out-of market resource cost.

(2) Financial cost analysis is an analysis of the monetary

cost actually paid by the project, which is comprised of investment cost, operating and

maintenance cost, and prevention, restoration or recovery of the project’s impact. The

financial cost analysis will mainly be based on market price.

4) Project benefit analysis: Project benefit or return means the

value of the project’s benefit, covering both output and positive outcome, which can

be separated into 3 types, as follows:

(1) Direct benefit or primary benefit is the output which is

the project’s main target or based on the primary objective.

(2) Indirect benefit or secondary benefit is an output which

results from the project, but is not the primary object, or external project benefits

toward the economy, society, and/or environment as a result of project development.

(3) Intangible benefit is an abstract benefit that occurs to

the economy, society and/or environment as a result of the project, for instance,

impacts toward aesthetics, or citizens’ feelings.

20

Benefit analysis can be separated into economic benefits

and financial benefits as follows:

(1) Economic benefit analysis is the analysis of benefit

value, both according to the project’s objective and benefit from the project’s external

positive impact. The evaluation will use the same concept as economic cost analysis,

for instance, evaluation by comparing the market price or evaluation using the

environmental economic concept.

(2) Financial benefit analysis is the analysis of monetary

return or benefit, which is also known as direct benefit or primary benefit. The

financial benefit analysis will mainly be based on market price.

5) Project feasibility index is the result or value of index

received from comparing the project’s cost and benefit according to assumptions

which will reflect on project feasibility. The major indexes are as follows:

(1) Net Present Value (NPV) shows the net benefit

received throughout a project’s duration which could have positive, negative or zero

value. It is calculated based on present value of the total benefit (PVB) deducted by

present value of the total cost (PVC). The project will be considered feasible if its

NPV is positive. The calculating formula is as follows:

where

t = year

m = project’s duration

r = interest rate or discount rate

Bt = project’s benefit in year t

Ct = project’s cost in year t

k

tt

tm

tt

t

r

C

r

BNPV

11 11

21

The Net Present Value (NPV) analysis advantage is the

consideration of changing the money’s time value in the form of cash flow and being

able to show the investment’s effectiveness in the form of maximum benefit that’s

expected to be received. Its limitation is its complicated methodology and inability to

show efficiency and the time when the project will pay back its cost.

(2) Benefit Cost Ratio (BCR) is the ratio of benefit toward

cost or net present value of total benefit over net present value of total cost. The

project will be considered feasible if its BCR is more than or equal to 1. The

calculating formula is as follows:

where

t = year

r = project’s duration



The advantage of Benefit Cost Ratio (BCR) analysis is the


able to show project efficiency. Its limitations are its complicated method and being

unable to show project effectiveness and the time when the project will pay back its

cost.

(3) Internal Rate of Return (IRR) is the percentage return

of the project, which is equivalent to the discount rate that could make its NPV equal

0. The project will be considered feasible if its IRR is higher than the discount rate.

The calculating formula is as follows:

n

tt

t

n

tt

t

r

C

r

B

BCR

1

1

1

1

22

where

t = year

r = project’s duration



The advantage of Internal Rate of Return (IRR) analysis is the


able to show project efficiency in percentage terms. Its limitations are its complicated

method and inability to show project effectiveness and the time when the project will

pay back its cost.

(4) Payback period or Break-even period is the index used

to consider the duration required for the net accumulated benefit to equate to the

project’s cost, or the time when the project’s accumulated net cash flow becomes

positive, which will show the timing when the project can pay back its investment or

reach the break-even point. The concept is that a project with a shorter payback period

is better than a longer one.

The advantage of payback period analysis is the simple

calculation method. Its limitations are its inability to show both project efficiency and

effectiveness, no consideration of changing the money’s time value, as well as no

definite criteria in judging project feasibility.

2.1.2.2 Natural Resource and Environmental Economics

The socio-economic development of infrastructure development

projects is related to natural resources and the environment, both as a factor of

production and the impact to recipients, both direct and indirect, caused by the

project. The consideration of project impact can be separated into 2 categories, which

are 1) External cost, the negative impact, and 2) External benefit, the positive impact

(Thanwa Jitsanguan, n.d., p. 271). On the other hand, natural resources and the

0

11

n

tt

tt

r

CB

23

environment are considered public goods or social goods, which have the distinct

features of non-excludability and no rival consumption (Ponlapat Buracom, 2011, pp.

107-113) which can’t be perfectly allocated by market mechanisms, leading to

allocation inefficiency and natural resource and environmental degradation.

1) Natural resource and environment allocation. The

sustainable and efficient allocation of natural resources and environment is an

important goal in social management. This could be done by applying economic

principles for resource allocation via the public sector, for instance, the collection of

taxes, fees or penalties for pollution, or a subsidy or tax exemption to encourage

restoration and recovery of natural resources and environment (Somporn Isvilanonda,

1995, p. 66).

The mentioned approaches have already been applied as related

guidelines, law and policy, as well as a feasibility study of projects that requires an

Environmental Impact Assessment (EIA), which is the feasibility analysis of the

project investment with consideration of the project’s advantages and disadvantages.

It is one of the tools that can lead to project decisions based on principles of efficient

and sustainable natural resource allocation and the environment.

2) Environmental economic assessment. Project

environmental economic assessment is one project feasibility step acquired by

combining economic concept and theory with a study of the project’s impact toward

natural resources and the environment. Project environmental economic assessment

focuses on evaluating a project’s impact toward the environment, both external costs

and benefits. In economic valuation of natural resources and environment,

the value can be separated into 3 types, as follows:

(1) Use Value is the benefit from concretely using natural

resources and the environment, which are 1) Direct use value, the direct benefits

gained by society from the use of natural resources and environment, and 2) Indirect

use value, the indirect benefits gained from natural resources and the environment,

which is a natural function of certain natural resources and environments.

(2) Nonuse value is the benefit gained by citizens from

natural resources and the environment in the form of good will when notified that the

environment is in good condition. This includes 1) Existence value, the benefit gained

24

when notified that the environment is in good condition, and 2) Bequest value, the

satisfaction that society wants to maintain for future generations’ benefit.

(3) Option value is the benefit that a citizen does not gain

from natural resources and environment, neither in the form of Use Value or Non-use

value in the present, but there is an opportunity for utilizing the mentioned natural

resource and environment in the future.

The valuation of a project’s impact toward resources and

the environment for information of economic cost or benefit in economic feasibility

analysis consists of 6 methods, as follows:

(1) Market Valuation Method: MVM is the valuation of

change in the consumer’s expenses when the environment has changed, since a

changing environment will mostly affect by changing a consumer’s expenses.

(2) Contingent Valuation Method: CVM uses the data

from direct interviews with citizens. The question is designed to reveal environmental

value, which could assess every kind of economic value depending on the interview

questions to the citizen affected by a changing environment.

(3) Travel Cost Method: TCM is an environmental

valuation based on travel cost or measuring usage value, but it cannot measure non-

use value.

(4) Hedonic Pricing Method: HPM is used to value both

the direct use and indirect use value of the environment by assessing an implicit price

of the physical features that contribute to the overall price of differentiated products in

assessing environmental value.

(5) Environment as Factor Input Method: FIM is a

valuation method specific to the case where the environment is one of the factors of

production by assessing environmental indirect use. This could be performed via a

production and cost function.

(6) Benefit Transfer Method: BTM is a method to transfer

value from the environment from a site that had already been evaluated (study site) to

project site (policy site).

25

2.1.2.3 Risk analysis

Risk analysis is the analysis of likely situations in an uncertain future,

but the probability or expected value can be estimated (Haruthai Meenaphan, 2011,

p. 461). Risk is different from uncertainty (Haruthai Meenaphan, 2011, p. 104) since

risk of a certain event can be shown as a distribution by reflecting the likelihood of an

event ranging from 0 to 1, with 0 meaning no probability of the event and 1 meaning

certainty of the event. The measurement of event probability index could be either in

the form of a discrete or continuous distribution (Haruthai Meenaphan, 2011, p.

462), as shown in Figure 2.1.

Figure 2.1 Discrete and Continuous Distributions

Source: Haruthai Meenaphan (2011, p. 462).

Certain event probability distributions can be used to analyze event risk

based on statistics and past events with the following distribution (Haruthai

Meenaphan, 2011, p. 465):

1) Normal distribution has the shape of a bell curve. The

fluctuation of certain events is equal, which could be more or less than the expected

value (E (x)), mode (M (x)) is equal to E (x). Mode is the index which shows an

event’s maximum probability.

2) Negative exponential distribution has the shape of a convex

curve. M (x) = 0 and M (x) < E (x). Certain event probability equals 0.

3) Gamma distribution has the shape of a concave cure, but is

different from a normal distribution. High probability of an event, but less than

Continuous Distribution

Discrete Distribution

Event Probability

Event Probability

Event Event

26

expected value (M (x) < E (x)) is called skewed to the right in statistics, while (M (x)

< E (x)) is called skewed to the left.

4) Triangular distribution is a distribution in which event

probability consists of two linear functions. Distribution can be either skewed to the

right (M (x) < E (x)) or skewed to the left (M (x) > E (x)).

5) Rectangular distribution shows equal probability of each

event. The distribution is balanced with E (x) in the middle and no value of M (x).

Each probability distribution is shown in Figure 2.2.

Figure 2.2 Types of Event Probability Distribution

Source: Haruthai Meenaphan (2001, p. 464).

The consideration of investment benefit under risk can be

calculated from the probability of receiving benefit (P) and benefit level (%)(r), which

is shown in the following equation (Haruthai Meenaphan, 2011, p. 463):

irP = Probability to receive returns ri

where P is probability to receive return

r is return rate (%)

(4) triangular (5) rectangular

(1) normal (2) negative exponential (3) gamma

27

With the following properties

0rP

and

N

i

irP1

1

With N as Number of returns resulting from the project

1) Project risk analysis. Feasibility analysis of future projects

is the study of projects under dynamic conditions as a result of uncertainty and risk.

Various factors will affect the analysis of cost and benefit, especially those that are

related to future price, both as a factor of production and output price. Project risk

analysis will help reduce probable mistakes (Adis Israngkura na Ayudhya, 2010,

p. 15). The popular approaches of project risk analysis employed in project feasibility

analysis are as follows:

(1) Sensitivity Analysis is the project analysis in a case

study that differs from the base case under situations that are expected to result from

uncertainty in various factors, which could affect future project costs and benefits.

The setting of sensitivity and rate of change in cost and benefit must comply to the

likely uncertain event with a clear origin of assumption.

(2) Scenario analysis is a form of sensitivity analysis

focusing on a certain event that might happen in the future. The analysis steps consist

of 1) Choosing a factor that is crucial to the project’s success to formulate a likely

event that results from change in said factors, 2) Study the value of factors in the

feasibility analysis, which could be separated into 3 cases, namely, Pessimistic or

worst case, Optimistic or improved or best case, and Expected or base case or remain

unchanged case, 3) Calculate the feasibility index under each case, and 4) Decide

whether to invest based on the analysis result calculated from every event, rather than

only the base case (Haruthai Meenaphan, 2001, pp. 476-484).

(3) Simulation will consider the probability of each

various factor that changes simultaneously. The most popular technique is Monte

Carlo simulation, which is a technique for choosing various factor values based on the

probably rule (Haruthai Meenaphan, 2001, pp. 484-489).

28

(4) Switching value analysis is an analysis of testing the

maximum percentage increase in cost, or decrease in benefit, of the project that could

still make the project feasible or worth the investment. The analysis also includes

testing the simultaneous change in both cost and benefit.

2) Monte Carlo Simulation is the mathematical computation

for a desired output by creating a simulation under uncertainty of various factors that

affect the output. The said simulation will draw random numbers of input based on

the law of probability, in other words, the model will draw random numbers of

independent variables based on its probability distribution, which affects the output in

each changing simulation and will be repeated until the output is at an appropriate and

acceptable confidence level. The result can be analyzed via various methods, for

instance, mean, standard deviation, data distribution, probability, cumulative

probability, range that covers 85% confidence level, or any other statistical analysis

based on the study’s objective.

Feasibility analysis using Monte Carlo Simulation is the

application of Monte Carlo Simulation with Cost-Benefit Analysis (CBA) to analyze

project feasibility under risk or probability of the independent variable, which is the

variable that affects the value of the cost and benefit, which will ultimately affect the

project’s feasibility index, for instance, Net Present Value (NPV), Benefit Cost Ratio

(BCR), Internal Rate of Return (IRR) as dependent variables. A feasibility analysis

using Monte Carlo Simulation is shown in Figure 2.3.

29

Figure 2.3 Project Feasibility Analysis using Monte Carlo Simulation

3) Value at risk (VaR) is an analysis for assessing the level of

maximum loss that complies to probability, in other words, an analysis on maximum

value of loss or damage that could occur from investment. Investors might face loss

higher than the risk, but with low probability, which could be used as information for

decision making and setting the limit to contain maximum damage from the

investment (Anya Khanthavit, 2547, p. 100).

VaR calculation has various means, including Monte

Carlo Simulation by creating simulation based on past information to designate the

probability distribution of an event that could affect potential return, and which could

also be used for analyzing project investment VaR. The consideration of VaR is based

on analysis of the lowest Net Present Value (NPV) received from the project

feasibility analysis according to a random number, in other words, analysis result of

VaR of various investments using Monte Carlo simulation will show the value of

potential maximum loss based on a probability of changing factors that affect project

cost and benefit.

Randomized Independent Variable

Result of Dependent Variable Analysis

CBA Based pn number of random

Cost Variable Distribution

Benefit Variable Distribution

Cost-Benefit Analysis

(CBA) Feasibility Index

Distribution

30

2.1.2.4 Risk Assessment

Risk assessment is an analysis of the degree of risk based on 2 topics

from the risk analysis:

1) Risk Likelihood, which could be separated into 5 levels,

namely, 1) Very low or very unlikely, 2) Low or unlikely, 3) Medium or possible, 4)

High or likely, and 5) Very high or very likely.

2) Risk Impact, or the level of damage, which can also be

separated to 5 levels, namely, 1) Very low or insignificant, 2) Low, 3) Medium, 4)

High or significant, and 5) Very high or critical.

The evaluation result of probability and level of impact will be

used in a risk assessment matrix to show the relationship between risk likelihood and

risk impact, as shown in Figure 2.4.

Very

High Medium High

Very

High

Very

High

Very

High

High Low Medium High High Very

High

Medium Very

Low Low Medium High

Very

High

Low Very

Low Low Low Medium High

Very

Low

Very

Low

Very

Low

Very

Low Low Medium

Very

Low Low Medium High

Very

High

Figure 2.4 Risk Assessment Matrix

Risk Impact

31

This concept and theory review has shown that public administration concept

and theory is significant for setting principles and goals for public management. The

governance and new public management concepts set the goals and guidelines for

management, prioritizing on the efficiency and feasibility of public operations, while

the sustainable development principle focuses on public decision making concerning

the impact toward natural resources and the environment. Economic concept and

theory influences the means and tools for public decision-making, prioritizing

Cost-Benefit Analysis (CBA) leading to accurate decisions in following policy or

projects and reaching public management goals.

The connection of public management and economic concept and theory in

this study’s framework can be seen in Table 2.2.

Table 2.2 Study Framework, Content and Related Concept and Theory

Concept and Theory Content Study Framework

Public Administration Concept and Theory

Governance - Principle of efficiency under governance

in public management

Major framework

as goal in developing

feasibility framework format

New Public

Management

- Concept of efficiency and feasibility in

public operations

Sustainable

development

- Public project development under

sustainable development concept

Public efficiency and

feasibility

- Principles and guidelines of public

agencies in operating with efficiency

and feasibility

Economics Concept and Theory

Cost-Benefit Analysis

(CBA)

- Economic/Financial analysis

- Assumption

- Cost analysis

- Benefit analysis

- Project feasibility index

Conceptual framework in

analyzing problems,

limitations and feasibility

analysis framework

development

32

Table 2.2 (Continued)

Concept and Theory Content Study Framework

Natural Resource and

Environmental

Economics

- Natural resource and environment

allocation

- Environmental economic feasibility

analysis


analyzing problems,

limitations and cost and

benefit analysis development

Risk analysis - Project risk analysis

- Monte Carlo Simulation

- Value at Risk analysis

- Risk assessment


solving feasibility analysis

inaccuracy

2.2 Literature Review

The review on literature will focus on the problems, constraints, and

development of Cost-Benefit Analysis (CBA) in terms of both process and

methodology. The review result will be presented on 2 topics, which are literature

related to problems and constraints of CBA, and literature related to development of

CBA, with the following details:

2.2.1 Problems and Constraints of Cost-Benefit Analysis

The literature review has shown that there are mentions of problems and

constraints of feasibility analysis using Cost-Benefit Analysis (CBA) tools in various

dimensions, for instance, a study by Jones, Moura, and Domingos (2014), which

studied weaknesses and the present development guideline of CBA in transportation

projects. It summarized weakness in various topics, for instance, inaccurate

estimations of benefit and cost, lack of consideration in choosing the discount rate, the

project’s appropriate duration, and calculation of project salvage value, as shown in

Table 2.3.

33

Table 2.3 Weaknesses of Cost-Benefit Analysis

Components Weaknesses / Constraints

1. Traffic Forecast - Overestimate from reality by 20% – 60%

2. Cost Estimation - Underestimate from reality by 50% – 100%

3. Discount Rate Selection - Unable to select/forecast suitable discount rate for

long-term project

- High discount rate affect investment in project with

small size or short-term benefit

4. Value of Life Estimation - Unable to clearly estimate

- No conclusion on appropriate estimation method

5. Safety Issue Estimation - Various opinions on estimation methodology

- Difficult to estimate for a developing country

6. Time Value Adjustment - Complicated methodology

7. Regional Impact Assessment - Lack of consideration on network and impact toward

lack of capital in economy

8. Area Impact Assessment - Lack of interaction of land usage

9. Equality Issue Analysis - Lack of consideration on equality

10. Environmental Impact Assessment - Unable to clearly estimate and high uncertainty

11. Salvage Value Estimation - No clear study guideline

Source: Jones, Moura, and Domingos (2014, p. 402-403).

The mentioned study has shown weaknesses in feasibility analysis

methodology coinciding with a study from Beukers, Bertolini, and Te Brömmelstroet

(2012) which stated that Cost-Benefit Analysis (CBA) is a tool with many limitations,

for instance, it can be unambiguous (Black box), difficult to understand, gives low

consideration to risk, and never gives the whole picture. This also coincides with a

recommendation by Salling, (2008) who stated that the weakness of CBA is single

value representation, consideration unambiguity, problem in assessing impact out of a

market system, weakness on analysis transparency which is difficult to understand for

the average citizen, and investment risk resulting from analysis inaccuracy.

34

Furthermore, a study from Shen, Tam, Tam, and Ji (2010) showed framework

of feasibility analysis from various projects in China with up to 87 projects where

there was a higher emphasis on economic issues compared to social and

environmental issues. Also, among various economic topics, the public sector gave a

low priority on the feasibility issue.

The significant problems of Cost-Benefit Analysis (CBA) have negatively

affected present public project management, especially concerning study inaccuracy,

which occurs in large scale infrastructure development feasibility analyses around the

world. In planning and performing a feasibility analysis, analysts tend to

underestimate the cost of construction while overestimating the project’s benefits. A

study by Flyvbjerg, Skamris Holm, and Buhl, (2005, p. 131), compiled by analyzing

210 transportation projects in 14 countries, showed that 9 out of 10 rail transportation

projects had overestimated the passenger numbers up to 106%, while road

transportation projects had inaccurately estimated road usage by more than 20%.

In 2009, there was more reporting from Flyvbjerg (2009), showing that 258

projects in 20 countries around the world, comprising 90% of studied projects, were

faced with cost underestimations by 44.7% of actual cost, while 208 projects from 14

countries, also comprising 90% of studied projects, were faced with benefit

overestimations by 50% - 84% of actual benefit. The study from Flyvbjerg, Holm, and

Buhl (2002) also showed that inaccuracy in project cost underestimation has been a

persistent problem throughout a 70 year period with no solution or decrease, and

further pointed out that in 2005 the estimation accuracy had not declined, even

considering the period for 30 years prior (Flyvbjerg, Holm, & Buhl, 2005, p. 131),

which indicates that study technique development in estimations is not the significant

factor affecting study inaccuracy.

The inaccuracy of project cost and benefit estimation is a factor affecting risk

in public large-scale development projects (Priemus, 2010 & Flyvbjerg, 2006, p. 1)

along with inefficient social resource management (Flyvbjerg, Skamris Holm, &

Buhl, 2005, pp. 131). These problems result from various factors, both

methodological and procedural, for instance, cost estimation inaccuracy from

discontinuous policies, market dynamics, and changes in the project’s scope (Priemus,

2010) and framework (Polat, Okay, & Eray, 2014).

35

The study from Flyvbjerg, (2009) had indicated 3 causes of CBA inaccuracy,

namely, 1) Academic error in analysis, 2) Limitations in analyzing the data, and 3)

Bias of the researcher or analyst. The cause due to analyst bias toward study

inaccuracy is such a crucial one that there are also academics who study the

framework, impacts and solution guidelines for the problem. For instance, Kilkon

(2006) has stated that Korean infrastructure development policy analysts used

personal bias in judging and assigning weight for analyzing factors, leading to

differing analysis results according to the types of project as well as ownership and

responsible parties, which coincides with the study of Flyvbjerg (2006), who had

mentioned that researcher bias resulting from overconfidence in the analysis result

and attempts to fulfill responsible development goals were leading to an inaccurate

CBA on projects.

A review of literature regarding CBA inaccuracy in Thailand has shown that

there are ongoing questions on public large-scale infrastructure development projects,

for instance, the development of the Airport Rail Link by State Railway of Thailand,

which is faced with revenues less than the estimation in a previously conducted study,

leading to significant loss. There are also notices in a study’s credibility in other

project studies, which relates to interference from management or political sections to

push project developments with large budgets without considering damage (Pawin

Siriprapanukul & Yos Vajragupta, 2013). Furthermore, Adis Israngkura na Ayudhya

(2010) stated problems and limitations in Thai feasibility analysis, with the major

findings in Table 2.4.

36

Table 2.4 Problems of Transparency in the Study Process and Limitations in Study

Methodology

Problem /

Limitation Details

Study Process - Some of the mistakes in feasibility analysis do not result from lack of

understanding in feasibility analysis theory, but other causes, for instance,

lack of honesty.

- In certain cases, the analysis lacks prudence and systematic study, leading to

inaccurate results.

- Discount rate selection is one of the tools used in distorting project

feasibility analysis results.

Study Methodology - Feasibility analysis could only be used for project ranking when the projects

are in the same category.

- Feasibility analysis is only one tool, which must be used along with other

tools to make the decision as to whether certain projects should be allowed

to operate.

- Negligence in environmental analysis is the excuse in neglecting a project’s

negative impacts, leading to an overestimated return rate.

Source: Adis Israngkura na Ayudhya (2010).

Meanwhile, the literature review on project risk analysis has

Piyatrapoomi, Kumar, and Setunge (2004) stating that the feasibility analysis under

various risk factors that is popular in various countries, for instance, England, France,

Germany, and Australia, is scenario analysis. However, the study also states the

limitations of scenario analysis, which can only show the analysis result under certain

events, but lacks the probability of each event.

37

2.2.2 Cost-Benefit Analysis Framework Development

The literature review on development of Cost-Benefit Analysis (CBA) (CBA)

is separated to 2 approaches, which are 1) Process development, and 2) Methodology

development, with the following details:

1) Process development approach. The literature review shows that

the major approach is that responsible parties must prioritize on transparency and

accountability for analysts (Flyvbjerg, Skamris Holm, & Buhl, 2005, p. 131).

Furthermore, there are recommendations of reward for analysts with accurate

analyses, and punishment for mistakes, in order to reduce problems from the

researchers’ personal bias and mistakes, which are considered a challenging issue

toward governance development in future public missions. Adis Israngkura na

Ayudhya (2010) has stressed the importance of creating understanding for researchers

in troubling issues, for instance, prioritizing impact assessment rather than output

(Adis Israngkura na Ayudhya, 2010, p. 62) and resulting impacts, to evaluate whether

the said project gives a worthwhile return as a whole (Adis Israngkura na Ayudhya,

2010, p. 27).

In recommending solutions to problems regarding the process, there is

mention of bringing in a process of Public Private Partnership (PPPs) for performing

various infrastructure investments (Priemus, 2010), which could reduce the burden on

the public budget, increase management efficiency, increase private review, and

diversify risk from the public to the private sector (Nutavoot Pongsiri, 2013, p. 2), this

would include utilizing risk insurance via an insurance company, which could reduce

risk from an inaccurate project construction cost estimation (Priemus, 2010). As for

Thailand, Pawin Siriprapanukul and Yos Vajragupta (2556, para. 9) proposed the

solution of establishing a budget analysis agency which would operate independently

from management to review the accuracy and credibility of the feasibility analysis in

various public projects. This approach has been adopted in numerous countries, for

instance, Canada has established a monitoring agency under parliament named the

Parliamentary Budget Officer, the Bureau for economic policy analysis (CPB) in the

Netherlands, and the Congressional Budget Officer (CBO) in the United States.

2) Methodology development approach. The literature review shows

that the most important approaches are the development of methodology in

38

forecasting future information (Flyvbjerg, Skamris Holm, & Buhl, 2005, p. 131), and

prioritizing social and environmental issues to consider them as equal to economic

issues for sustainable development (Shen, Tam, Tam, & Ji, 2010, p. 258). To solve

the analysis inaccuracy issue, the study from Flyvbjerg, (2009) mentioned a solution

for cost overruns from researcher bias called “Insider view” by using a method called

“Outside view”, which is an external review, or using “Reference class forecasting”,

which was developed from concepts and theories of decision making under certainty

by Daniel Kahneman, a 2002 Nobel memorial prize laureate in Economics. This

approach utilizes data analysis of other projects’ chances of cost overruns in term of a

relational graph between cost overrun and probability on various levels, which is used

to compare and adjust for an acceptable chance of cost overrun (Flyvbjerg, 2006), as

shown in the conceptual framework using Reference class forecasting in Figure 2.5,

and shown as an example figure of adjustment of acceptable chance of cost overrun in

Figure 2.6.

Figure 2.5 Analysis Conceptual Framework using Reference class forecasting

Source: Salling (2008).

39

Figure 2.6 Adjustment of Acceptable Chance of Cost Overrun

Source: Flyvbjerg (2006).

Presently, feasibility analysis has been given more importance to

project risk analysis, especially risk analysis based on probability using a Monte Carlo

Simulation. For example, the study of “Applying a Cost-Benefit Analysis Model to

the Three Gorges project in China” by Morimoto and Hope (2004) performed a

feasibility analysis of the Three Gorges Dam in China using a Monte Carlo

Simulation for 10,000 simulations based on various factors affecting uncertainty in

the project’s cost and benefit estimations, including the project’s economic, social and

environmental impacts. The study “An Extended CBA Model of Hydro Projects in Sri

Lanka” by Morimoto, and Hope (1999) analyzed a feasibility analysis in a Sri Lankan

hydropower project using a Monte Carlo Simulation for 10,000 simulations as well.

As for studies in Thailand, there has been usage of Monte Carlo

Simulation in feasibility analysis there as well, for instance, the study “Cost

Estimation of Tunnel and Underground Duct Bank Works Using Monte Carlo

Simulation Technique” (Nirun Lawskool, 2002), which analyzed the project’s cost

using cost estimations from other construction projects, and analyzed probability of

the project’s cost using a Monte Carlo Simulation, the study “An Analysis of Return

on Investment in Cassava Chip Production Business Using Monte Carlo Simulation

Technique” (Navarat Thitinunpong, 2555) performed an analysis on cost and benefit

in setting up tapioca dry fields to choose the most commercially appropriate area for

business, as well as the study “Economics Value Analysis of Project Investment Case

40

Study: PTT Phenol Train II Project of PTT Phenol Company Limited” (Nantapong

Pantaweesak, 2015), which analyzed the project’s feasibility using a Monte Carlo

Simulation in the base case, worst case, and best case, based on 10,000 simulations.

Presently, there have been some academics proposing the tools

needed to reduce analysis inaccuracy. Salling, and Leleur (2006) proposed a

feasibility analysis program in telecommunication projects named CBA-DK. The said

program was developed using a Monte Carlo Simulation for performing a feasibility

analysis under various risk factors. Later, Salling (2013) developed a new approach to

solve study inaccuracy in transportation projects using a program called UNITE

(UNITE DSS Model) which used a Monte Carlo Simulation in feasibility analysis

based on various risk factors which utilized the development of an inaccuracy

database based on the findings of past telecommunication projects in order to create a

probability distribution on the project’s cost and benefit (Figures 2.7 and 2.8). It used

the random process in Monte Carlo Simulation and analyzed the Benefit Cost Ratio

(BCR) by representing it in a relational graph between BCR and probability, the result

is shown below (Figure 2.9).

Figure 2.7 Analysis of Project’s Benefit Estimation Inaccuracy

Source: Salling (2013, p. 473).

41

Figure 2.8 Analysis of Project’s Cost Estimation Inaccuracy


Figure 2.9 Result of Feasibility Analysis using UNITE-DSS Model program


42

From the literature review, the conclusion is that Cost-Benefit Analysis

(CBA) for investment decisions might be one of the factors affecting inaccurate

decisions of various development projects and negatively affecting the goal of

efficient public management and sustainable development coming from 2 crucial

problems, namely, 1) The lack of consideration for every related impact and 2) The

inaccuracy of project CBA which might result from analysis limitation, both in terms

of process and methodology, for instance, lack of clear scope of the study, lack of

analyzing data, and technical limitations of the study, including analyst bias.

The development guideline for solving Cost-Benefit Analysis (CBA)

problems or weaknesses could be separated to 2 approaches, which are 1) a Process

development, approach which would focus on setting more accurate and clearer study

to the scope and approach, developing a study review mechanism with focus on

governance and transparency, as well as utilizing other management styles in

analyzing and making decisions on the project, and 2) a Methodology development

approach, which would focus on developing a methodology under the risk which

results from inaccurate study results, especially using Monte Carlo Simulation in the

feasibility analysis.

2.3 Conceptual Framework

Based on the concept, theory and literature review for the framework of

Thailand infrastructure development feasibility analysis: small scale hydropower plant

project case study, a conceptual framework could be set as follows:

1) The crucial principles and concepts on public management are governance,

new public management, and sustainable development which leads to public

management goals and guidelines that focus on efficiency, feasibility and resource

sustainability.

2) Feasibility analysis on various public development projects is the crucial

decision-making tool for the public sector in maximizing national resource usage to

achieve the goal of efficient, feasible and sustainable public management.

43

The conceptual framework in this study is shown in Figure 2.10.

Figure 2.10 Conceptual Framework

Based on this conceptual framework, this study’s guideline can be separated

into 4 major components, which are 1) The study of feasibility analysis, 2) The study

of standards and guidelines of feasibility analysis, 3) The study of inaccuracies,

problems, and limitations of feasibility analysis, and 4) The development of a

feasibility analysis framework for the case study of Thailand small scale hydropower

plant projects. This study aims to propose a framework and guidelines for developing

a feasibility analysis process to be used as public tools for managing small scale

hydropower plants in an efficient, feasible, and sustainable manner.

Public Management

Process / Tool

Feasibility Analysis

Public Management

Goal and Guideline

- Efficiency and Feasibility

- Resource Sustainability

44

CHAPTER 3

RESEARCH METHODOLOGY

This study has designed a research methodology which is comprised of the

research design, data and data collection, analysis tools and techniques, and study

method, with details as follows:

3.1 Research Design

This study employed a mixed research method by utilizing qualitative research

in this small scale hydropower plant framework study by using descriptive

explanations along with statistical data and comparative analysis to illustrate common

features, distinct features, problems, and limitations of Thai feasibility analysis, while

quantitative analysis was utilized in the risk analysis of feasibility analysis.

3.2 Data and Data Collection

Based on the study framework and guidelines designed in chapter 2, the data

and data collection employed in this study could be summarized as follows:

1) Document collection by collecting documents related to the study of small

scale hydropower plants with a capacity less than 12,000 kilowatts performed

between 1987 and 2016, evaluation of small scale hydropower plants, renewable

energy generation projects, academic papers and manuals of feasibility analysis

conducted by various agencies, both domestics and foreign, as well as feasibility

analysis methodology and process development.

45

2) Interview data collection by conducting in-depth interviews on academics

or consulting company personnel with experience in small scale hydropower plants

and other related projects. The major topics interviewed were feasibility analysis

guidelines, problems and limitations faced during the study, and recommendations for

developing a small scale hydropower plant framework.

3.3 Analysis Tools and Techniques

This study has employed both qualitative and quantitative research tools to

appropriately analyze study data in each topic according to study objectives. The

details are shown as follows:

3.3.1 Tools and Techniques for Analyzing Small Scale Hydropower Plant

Feasibility Analysis

The study of small scale hydropower plant feasibility analysis framework

employed the methodology of content analysis and analytic induction by separate and

group, and compared the data characteristics in each group as well as presented data

using descriptive statistics, for instance, the mean, mode and median, to illustrate

characteristic descriptions of the feasibility analysis framework to reach knowledge

on common and distinct features of small scale hydropower plant feasibility analysis

frameworks on various topics. The conceptual framework for small scale hydropower

plant feasibility analysis framework study is shown in Figure 3.1, with study topics of

feasibility analysis framework in Table 3.1.

46

Figure 3.1 Small Scale Hydropower Plant Feasibility Analysis Framework Study

Conceptual Framework

Table 3.1 Feasibility Analysis Framework Study Topics

Main Topics Subtopics

1) Basic Information - Owner agency

- Study agency or personnel

- Year of study

2) Assumption - Project duration

- Project duration selection principle

- Discount rate

- Project discount rate selection principle

3) Cost Analysis - Cost item

- Cost evaluation method

4) Benefit Analysis - Benefit item

- Benefit evaluation method

5) Feasibility Index - Project feasibility index selection

6) Risk Analysis - Risk analysis method

Small scale hydropower plant

feasibility analysis document

study

Related agencies’ study,

monitor and decision process

Small scale hydropower plant

feasibility analysis research

methodology

In-depth interview / law and

regulation and guideline

study

• Analytic induction

• Statistical data

recording

47


Feasibility Analysis Standards and Guideline Compatibility

The study of small scale hydropower plant feasibility analysis standards and

guideline compatibility was performed by conducting content analysis on the

conclusion of feasibility analysis features comparative to various agencies’ standards,

for instance, Thai regulatory agencies and international organization standards. The

conceptual framework for small scale hydropower plant feasibility analysis standards

and guideline compatibility is shown in Figure 3.2.

Figure 3.2 Small Scale Hydropower Plant Feasibility Analysis Standard and

Guideline Compatibility Analysis Conceptual Framework


Feasibility Analysis Inaccuracies, Problems, and Limitations

The study of inaccuracies, problems, limitations of methodology and process

of cost and benefit analysis was performed by collecting related data and comparing it

between the study results before operation and the results of project evaluation after

operation, in order to analyze the inaccuracy level of the study results, as well as

problems and limitations occurring in the feasibility analysis, including methodology,

processes and impacts resulting from various problems using content analysis, as well

as descriptive statistics.

The conceptual framework for small scale hydropower plant feasibility

analysis inaccuracies, problems, and limitations analysis is shown in Figure 3.3

Methodology standard

and guideline

compatibility

Study process standard

and guideline

compatibility

Comparative study with

standard and guideline of

domestic and international

agencies

Related agencies’

study, monitor and

decision process

Feasibility analysis

research methodology

48

Figure 3.3 Small Scale Hydropower Plant Feasibility Analysis of Inaccuracies,

Problems, and Limitations Analysis Conceptual Framework


Feasibility Analysis Framework Development

The recommendations for small scale hydropower plant feasibility analysis

framework development could be applied to feasibility analysis in other types of

projects by using reference class forecasting and Monte Carlo Simulation as well as

recommendations for development of analysis process management and public sector

feasibility analysis. The framework for small scale hydropower plant feasibility

analysis framework development analysis is shown in Figure 3.4.

Figure 3.4 Small Scale Hydropower Plant Feasibility Analysis Framework

Development Analysis Conceptual Framework

Methodology problems and

limitations

Process problems and

limitations

Small scale hydropower

plant report and operation

study

Inaccuracy level data

Public management

development guideline

Risk reduction /

analysis technique

Various agencies

academic principles /

standard

Study and actual

result comparison

Analytic induction

Related personnel interview

Process development

recommendation

Methodology development

recommendation

• Index development and

inaccuracy / risk reduction

technique

• Study, monitor and decision

process adjustment /

development for project

investment

49

3.4 Study Process

The study process can be separated into 2 major parts, namely, 1) Related data

collection, and 2) Analysis according to 4 study objectives. The results from each step

could be used as data for study in the later step. The study process of the Study of

Thailand Infrastructure Development Feasibility Analysis: Small Scale Hydropower

Plant Case Study can be seen in Figure 3.5.

Figure 3.5 The Study of Thailand Infrastructure Development Feasibility Analysis:

Small Scale Hydropower Plant Case Study Process

Small scale hydropower

plant feasibility analysis

document and study review

Statistical data analysis and

small scale hydropower plant feasibility framework

summary

Small scale hydropower plant feasibility analysis

framework development Inaccuracy/risk reduction

technique, and study, monitoring, and investment

decision process development


standard compatibility and guideline analysis

Related analysts and

academics

in-depth interview

Economic theory

review

Public management

concept and theory review

Various agencies study

documents, manual /

standard


inaccuracy, problems, and limitations analysis


Inaccuracy, problems, and limitations analysis

CHAPTER 4

ANALYSIS RESULTS

Analysis results are comprised of 1) Feasibility analysis framework study

2) Feasibility analysis standards and guideline compatibility study 3) Cost overrun

and benefit shortfall study 4) Feasibility analysis problems and limitations study, and

5) Feasibility analysis framework development study, with details as follows:

4.1 Feasibility Analysis Framework Study

The results of the small scale hydropower plant feasibility analysis

framework study is comprised of 1) Feasibility analysis methodology framework and

2) Feasibility analysis process framework, with details as follows:

4.1.1 Feasibility Analysis Methodology Framework

The study of the methodology framework was performed on 48 small and mini

scale hydropower plant feasibility analysis reports covering 648 projects which could

be separated into 2 groups, namely, 43 small scale hydropower plant feasibility

analysis reports covering 57 projects, and 5 small scale hydropower plant master

plans covering 591 projects.

Furthermore, there was additional study on feasibility analysis documents and

reports in other projects related or similar to small scale hydropower plants, this

included 4 foreign small scale hydropower plant reports and 12 reports on other types

of hydropower plants. There was also further study on 35 documents and reports on

feasibility analysis of renewable energy projects which could be separated into 3

groups, namely, 20 reports on biomass energy and waste-to-energy, 13 reports on

wind energy, and 2 reports on solar energy. In conclusion, there is data analysis from

99 reports covering 766 projects, the report names are shown in Appendix B, while

detail of the studied reports and projects are shown in Table 4.1.

51

Table 4.1 Detail and Numbers of Studied Reports and Projects

Types of

Reports/Projects Detail Report Project

1. Thai small scale hydropower projects 48 648

1.1 Small scale

hydropower project Engineering, environmental

and investment budget feasibility analysis report

43 57

1.2 Small scale

hydropower master

plan

Numerous feasibility analysis reports

to consider potential, priority,

and designate overall plan and budget

5 591

2. Foreign small scale

hydropower projects

Feasibility analysis report of projects

in Cambodia and Laos PDR

with engineering and investment budget details

4 9

3. Other hydropower

projects

Feasibility analysis report of hydropower project

larger than 12,000 kilowatts

with environmental and feasibility analysis details

12 22

4. Other renewable energy projects 35 87

4.1 Biomass energy and

waste-to-energy

project Engineering, environmental,

and investment feasibility analysis reports

20 39

4.2 Wind energy project 13 35

4.3 Solar energy project 2 13

Total 99 766

From the study of all mentioned project study reports, the findings could

be summarized into 6 major topics, which are 1) Basic information, 2) Discount rate

selection, 3) Cost analysis, 4) Benefit analysis, 5) Feasibility index, and 6) Risk

analysis, with the following details:

4.1.1.1 Basic Information

The study of basic information on projects is comprised of 1) Project

owner, 2) Agency performing the study, 3) Study year, and 4) Type of analysis, with

the following details:

52

1) Project Owner. From 48 reports of small scale hydropower

plants studied, the project owners could be classified into 3 groups, namely, public

agencies, state enterprises, and private agencies. 98% of the projects are owned by

public agencies while the other 2% are owned by state enterprises. The public agency

who is the major project owner is the Department of Alternative Energy Development

and Efficiency, Ministry of Energy (DEDE) which has direct responsibility for

developing Thailand’s renewable energy, while the major state enterprise owner is

Provincial Electricity Authority (PEA), which is responsible for securing and

providing electricity for the regional population.

As for the 51 study reports on other related projects, foreign

small scale hydropower plants are owned 50% by public agencies and 50% by private

agencies. The private agencies are companies operating on electricity generation from

small scale hydropower projects in Cambodia and Laos PDR. Other small-scale hydro

power projects are owned 42% by public agencies, 42% by private agencies and 17%

by state enterprises, while other renewable energy projects are wholly owned by

public agencies. as can be seen in number and percentage form in the report classified

by project owners in Table 4.2 and Table 4.3.

Table 4.2 Number of Reports Classified by Project Owner

Types of Report/Project

Project Owner

Public State

Enterprise Private Total

1 Thai small scale hydropower projects 47 1 0 48

1.1 Small scale hydropower projects 42 1 0 43

1.2 Small scale hydropower project master plan 5 0 0 5

2. Foreign small scale hydropower projects 2 0 2 4

3. Other hydropower projects 5 2 5 12

4. Other renewable energy projects 36 0 0 35

4.1 Biomass energy and waste-to-energy

projects 20 0 0 20

4.2 Wind energy projects 14 0 0 13

4.3 Solar energy projects 2 0 0 2

Total 90 3 7 99

53

Table 4.3 Percentage of Reports Classified by Project Owner

Types of Report/Project

Project Owner

Public State

Enterprise Private Total

1. Thai small scale hydropower projects 98% 2% 0% 100%

1.1 Small scale hydropower projects 98% 2% 0% 100%

1.2 Small scale hydropower project master

plans 100% 0% 0% 100%

2. Foreign small scale hydropower projects 50% 0% 50% 100%

3. Other hydropower projects 42% 17% 42% 100%

4. Other renewable energy projects 100% 0% 0% 100%


projects 100% 0% 0% 100%

4.2 Wind energy projects 100% 0% 0% 100%

4.3 Solar energy projects 100% 0% 0% 100%

Total 91% 3% 7% 100%

2) Study Agency. Based on data analysis, the agency

performing feasibility analysis could be classified into 4 groups, namely, consulting

firms, educational institutions, independent agencies or foundations, and public

agencies. 83% of Thai small scale hydropower plant study reports were performed by

external consulting firms, 13% by educational institutions, and 2% by public agencies.

As for foreign small scale hydropower plants, 100% were

performed by external consulting firms. 83% of other hydropower projects were

performed by external consulting firms. 63% of other renewable project were

performed by educational institutions with 20% performed by consulting firms. The

number and percentage of reports classified by study of agency can be seen in Table

4.4 and Table 4.5.

54

Table 4.4 Number of Reports Classified by Study of Agency

Types of Reports/Projects Consulting

Firm

Education

Institution

Independent

Agency /

Foundation

Public Not

Available Total

1. Thai small scale hydropower projects 40 6 0 1 1 48

1.1 Small scale hydropower projects 36 5 0 1 1 43


plans 4 1 0 0 0 5

2. Foreign small scale hydropower projects 4 0 0 0 0 4

3. Other hydropower projects 10 0 0 1 1 12

4. Other renewable energy projects 7 22 2 4 0 35


projects 6 8 2 4 0 20

4.2 Wind energy projects 1 12 0 0 0 13

4.3 Solar energy projects 0 2 0 0 0 2

Total 61 28 2 6 2 99

Table 4.5 Percentage of Reports Classified by Study of Agencies

Types of Reports/Projects Consulting

Firm

Education

Institution

Independent

Agencies

/ Foundation

Public Not

Available Total

1. Thai small scale hydropower projects 83% 13% 0% 2% 2% 100%

1.1 Small scale hydropower projects 84% 12% 0% 2% 2% 100%


plans 80% 20% 0% 0% 0% 100%

2. Foreign small scale hydropower projects 100% 0% 0% 0% 0% 100%

3. Other hydropower projects 83% 0% 0% 8% 8% 100%

4. Other renewable energy projects 20% 63% 6% 11% 0% 100%


projects 30% 40% 10% 20% 0% 100%

4.2 Wind energy projects 8% 92% 0% 0% 0% 100%

4.3 Solar energy projects 0% 100% 0% 0% 0% 100%

Total 62% 28% 2% 6% 2% 100%

55

3) Study Year The data analysis has shown that Thai small

scale hydropower plant study reports had the earliest study year of 1987 and latest

year of 2016 with the majority, 69%, studied during 2008 – 2017, and 23% studied

during 1998 – 2007.

As for foreign small scale hydropower plants, the earliest study

year was 2004 and latest year was 2006, which were wholly studied during the period

of 1998 - 2007. Other hydropower plants had the earliest study year of 1963 and latest

year of 2013, with the majority, 50%, studied during 2008 – 2017, and 25% studied

during 1998 – 2007. Other renewable energy projects had the earliest study year of

1987 and the latest year of 2016 with the majority, 83%, studied during 2008 – 2017.

The number and percentage of reports classified by study year can be seen in Table

4.6 and Table 4.7.

Table 4.6 Number of Reports Classified by Study Year

Types of Reports/Projects

Study Year

Min Max 1957–

1987

1988–

1997

1998–

2007

2008–

2017 Total

1. Thai small scale hydropower projects 1987 2016 1 3 11 33 48

1.1 Small scale hydropower projects 1987 2016 1 2 10 30 43

1.2 Small scale hydropower projects

master plans 1993 2016 0 1 1 3

5

2. Foreign small scale hydropower projects 2004 2006 0 0 4 0 4

3. Other hydropower projects 1963 2013 2 1 3 6 12

4. Other renewable energy projects 1987 2016 1 0 5 29 35

4.1 Biomass energy and waste-to-

energy projects 1987 2016 1 0 5 14

20

4.2 Wind energy projects 2008 2016 0 0 0 13 13

4.3 Solar energy projects 2013 2015 0 0 0 2 2

Total 1963 2016 4 4 23 68 99

56

Table 4.7 Percentage of Reports Classified by Study Year


Study Year

1957–

1987

1988–

1997

1998–

2007

2008–

2017 Total

1. Thai small scale hydropower projects 2% 6% 23% 69% 100%

1.1 Small scale hydropower projects 2% 5% 23% 70% 100%


plans 0% 20% 20% 60% 100%

2. Foreign small scale hydropower projects 0% 0% 100% 0% 100%

3. Other hydropower projects 17% 8% 25% 50% 100%

4. Other renewable energy projects 3% 0% 14% 83% 100%


projects 5% 0% 25% 70% 100%

4.2 Wind energy projects 0% 0% 0% 100% 100%

4.3 Solar energy projects 0% 0% 0% 100% 100%

Total 4% 4% 23% 69% 100%

4) Type of Analysis. Based on data analysis, the type of

analysis was classified into 3 groups, namely, economic study, financial study and

economic and financial study. 48 reports, or 100% of Thai small scale hydropower

plant study reports, had performed feasibility analysis using economic methodology,

with 79% using both methodologies. However, the small scale hydropower plant

master plan only used economic methodology.

As for foreign small scale hydropower plants, 100% had used

financial methodology. 50% of other hydropower projects used economic study, 75%

used financial study, and 25% used both. As for other renewable energy projects, 50%

had economic study, 100% had financial study, and 40% had both economic and

financial study. The number and percentage of reports classified by type of analysis is

shown in Table 4.8 and Table 4.9.

57

Table 4.8 Number of Reports Classified by Type of Analysis

Types of Reports/Projects Total

Projects

Type of Analysis

Economic Financial

Economic

and

Financial

1. Thai small scale hydropower projects 48 48 38 38

1.1 Small scale hydropower project s 43 43 38 38


plans 5 5 0 0





projects 20 10 20 10



Total 99 70 86 57

Table 4.9 Percentage of Reports Classified by Type of Analysis


Type of Analysis

Economic Financial Economic and

Financial

1. Thai small scale hydropower projects 100% 79% 79%

1.1 Small scale hydropower projects 100% 88% 88%


plans 100% 0% 0%

2. Foreign small scale hydropower projects 50% 100% 50%

3. Other hydropower projects 50% 75% 25%

4. Other renewable energy projects 40% 100% 40%


projects 50% 100% 50%

4.2 Wind energy projects 23% 100% 23%

4.3 Solar energy projects 50% 100% 50%

Total 71% 87% 58%

58

4.1.1.2 Assumption Selection

The study of feasibility analysis assumption selection framework is

comprised of 1) Project duration selection and 2) Discount rate selection, with details

as follows:

1) Project Duration Selection. The data analysis shows that

Thai small scale hydropower plants had selected the lowest project duration at 30

years, and highest at 50 years. Most of the study, up to 77%, had selected a project

duration of 30 years. The principle in selecting project duration behind most projects

was based on the useful life of the project’s major components.

As for foreign small scale hydropower plant projects, the

lowest project duration selected was 27 years, and the highest was 50 years. The

lowest duration for other hydropower projects was 25 years while the highest was 50

years. Other renewable energy projects had selected the lowest duration of 10 years

and the highest was 30 years. The number and percentage of reports classified by

project duration is shown in Table 4.10.

Table 4.10 Number of Reports Classified by Project Duration


Project Duration

Min Max Mode Num. of

mode

Percent

of mode

1. Thai small scale hydropower projects 30 50 30 37 77%

1.1 Small scale hydropower projects 30 50 30 32 74%


plans 30 30 30 5 100%

2. Foreign small scale hydropower projects 27 50 27 2 50%

3. Other hydropower projects 25 50 30 6 50%

4. Other renewable energy projects 10 30 20 25 71%


projects 10 30 20 12 60%

4.2 Wind energy projects 20 25 20 12 92%

4.3 Solar energy projects 20 25 20 1 50%

Total 10 50 30 46 46%

59

2) Discount Rate Selections. The data analysis has shown that

Thai small scale hydropower projects had selected the lowest discount rate of 6.0%

and highest rate of 12.0%s with a majority 56% selecting the rate of 8.0% with mean

of 8.8%. A majority 62% of reports had stated that the discount rate was selected

based on principles set by the Office of the National Economic and Social

Development Board (NESDB) which had the range of 9 – 12%. However, some

reports also considered this principle with the government bond interest rate of 8%,

which was lower than NESDB guideline.

As for foreign small hydropower plants, the lowest discount

rate was 6.0% and the highest rate was 10.0%. A majority 50% of reports used an

8.0% rate, with a rate mean of 8.0%. Other hydropower projects used the lowest rate

of 7.3% and highest rate of 12.0%, with a majority 50% of reports using a 10.0% rate

with a rate mean of 9.5%. Other renewable energy projects used the lowest rate of

5.0% and highest rate of 12.0% with a majority 34% of reports using an 8.0% and

10.0% rate with a rate mean of 8.3%, as shown from Tables 4.11 to 4.13.

Table 4.11 Number of Reports Classified by Discount Rate


Discount Rate

max min Avg. Mode Num. of

mode

Percent

of mode

1. Thai small scale hydropower projects 12.0% 6.0% 8.8% 8.0% 27 56%

1.1 Small scale hydropower projects 12.0% 6.0% 8.8% 8.0% 24 56%

1.2 Small scale hydropower projects

master plans

10.0% 8.0% 8.8% 8.0% 3 60%

2. Foreign small scale hydropower projects 10.0% 6.0% 8.0% 8.0% 2 50%

3. Other hydropower projects 12.0% 7.3% 9.5% 10.0% 6 50%

4. Other renewable energy projects 12.0% 5.0% 8.3% 8.0%, 10.0% 12 34%


projects

11.0% 5.0% 8.6% 10.0% 6 30%

4.2 Wind energy projects 12.0% 5.0% 8.1% 7.0%, 2 15%

4.3 Solar energy projects 7.1% 7.1% 7.1% 7.08%, 7.10% 2 100%

Total 12.0% 5.0% 8.7% 8.00% 37 37%

60

Table 4.12 Number of Reports Classified by Discount Rate Selection Principle


Discount Rate Selection Principle

NESDB

Borrowing

interest

rate

Bond WACC Expected

rate

Not

Available Total


1.1 Small scale hydropower project s 29 0 0 1 0 13 43


plans 2 0 0 0 0 3 5





projects 4 1 1 0 0 14 20



Total 38 7 1 1 1 51 99

Table 4.13 Percentage of Reports Classified by Discount Rate Selection Principle


Discount Rate Selection Principle

NESDB Borrowing

interest rate Bond WACC

Expected

rate

Not

Available Total

1. Thai small scale hydropower projects 65% 0% 0% 2% 0% 33% 100%

1.1 Small scale hydropower projects 67% 0% 0% 2% 0% 30% 100%


plans 40% 0% 0% 0% 0% 60% 100%

2. Foreign small scale hydropower projects 0% 0% 0% 0% 0% 100% 100%

3. Other hydropower projects 25% 0% 0% 0% 0% 75% 100%

4. Other renewable energy projects 14% 20% 3% 0% 3% 60% 100%


projects 20% 5% 5% 0% 0% 70% 100%

4.2 Wind energy projects 8% 31% 0% 0% 8% 54% 100%

4.3 Solar energy projects 0% 100% 0% 0% 0% 0% 100%

Total 39% 7% 1% 1% 1% 51% 100%

61

After the consideration of the data on Thai small scale

hydropower plant projects from 1963 - 2016, the mean of the discount rate had a

negative trend, as can be seen in Figure 4.1 and from Tables 4.14 to 4.16.

Figure 4.1 Thai Small Scale Hydropower Plant Project Discount Rate From

1963 – 2016

Table 4.14 Discount Rate Selection (Average) from 1963 - 1997

Types of Reports/Projects Year

1963 1972 1987 1989 1993 1995 1997

1. Thai small scale hydropower projects - - 10.00% 12.00% 10.00% NA -

1.1 Small scale hydropower projects - - 10.00% 12.00% - NA -


plans - - - - 10.00% - -

2. Foreign small scale hydropower projects - - - - - - -

3. Other hydropower projects NA NA - - - - 10.00%

4. Other renewable energy projects - - NA - - - -


projects - - NA - - - -

4.2 Wind energy projects - - - - - - -

4.3 Solar energy projects - - - - - - -

Total NA NA 10.00% 12.00% 10.00% NA 10.00%

62

Table 4.15 Discount Rate Selection (Average) From 2000 - 2009

Types of Reports/Projects Year

2000 2004 2005 2006 2007 2008 2009

1. Thai small scale hydropower projects 12.00% 7.67% - 10.00% - 7.50% 8.75%

1.1 Small scale hydropower projects 12.00% 7.60% - 10.00% - 7.50% 8.64%


plans - 8.00% - - - 10.00%

2. Foreign small scale hydropower projects - 8.00% - 8.00% - - -

3. Other hydropower projects - 8.00% 11.00% - - 10.00% -

4. Other renewable energy projects - - 10.50% 9.50% 5.00% 7.97% 8.40%


projects - - 10.50% 9.50% 5.00% 8.00% 9.08%

4.2 Wind energy projects - - - - - 7.95% 7.73%

4.3 Solar energy projects - - - - - - -

Total 12.00% 7.78% 10.75% 9.38% 5.00% 8.16% 8.63%

Table 4.16 Discount Rate Selection (Average) From 2010 – 2016


Year

2010 2011 2012 2013 2015 2016 Total

1963-2016

1. Thai small scale hydropower projects 8.00% 9.11% 8.00% 8.00% - 8.00% 8.78%

1.1 Small scale hydropower projects 8.00% 9.11% 8.00% 8.00% - 8.00% 8.77%


plans - - - - - 8.00% 8.80%

2. Foreign small scale hydropower projects - - - - - - 8.00%

3. Other hydropower projects 10.00% - 7.63% 10.00% - - 9.53%

4. Other renewable energy projects - 7.52% 10.00% 7.25% 7.08% 9.00% 8.30%


projects - 6.77% 9.00% 7.45% ไม่ระบุ 9.00% 8.58%

4.2 Wind energy projects - 7.77% 12.00% 7.00% - - 8.11%

4.3 Solar energy projects - - - 7.10% 7.08% - 7.09%

Total 8.67% 8.62% 8.75% 7.86% 7.08% 8.40% 8.66%

63

4.1.1.3 Cost Analysis

The study of project cost analysis framework comprises 1) Cost item 2)

Cost evaluation method and 3) Annual expense evaluation, with the following details:

1) Cost Item. The data analysis has shown that Thai small

scale hydropower projects had the lowest number of 1 cost item and the highest of 3

items (excluding annual operating expense). A majority 94% of projects considered 1

cost item, which was the project construction cost, with other considered costs

including environmental cost, deforestation cost, and compensation cost.

As for foreign small scale hydropower projects, all chose 1 item

cost, project construction cost. Other hydropower projects had the lowest number of 1

cost item and the highest of 3 items, while other renewable energy projects all chose 1

item of cost, which was project construction cost. This can be seen in the details in

Table 4.17 and Table 4.18.

Table 4.17 Number of Reports Classified by Number of Cost Items

Types of Reports/Projects Number of cost items

1 2 3 5 Total

1. Thai small scale hydropower projects 45 2 1 0 48

1.1 Small scale hydropower projects 40 2 1 0 43


plans 5 0 0 0 5

2. Foreign small scale hydropower projects 4 0 0 0 4

3. Other hydropower projects 11 0 0 1 12

4. Other renewable energy projects 35 0 0 0 35


projects 20 0 0 0 20

4.2 Wind energy projects 13 0 0 0 13

4.3 Solar energy projects 2 0 0 0 2

Total 95 2 1 1 99

64

Table 4.18 Percentage of Reports Classified by Number of Cost Items

Types of Reports/Projects Number of cost items

1 2 3 5 รวม




plans 100% 0% 0% 0% 100%





projects 100% 0% 0% 0% 100%



Total 96% 2% 1% 1% 100%

2) Cost Evaluation Method. The data analysis separated the

cost evaluation method into 3 groups, those being 1) Construction Cost (CSC), which

was calculated with a Conversion factor (CF) to convert market price into shadow

price (CSC x CF). 2) The usage of project construction cost, by deducting tax from

the market price to reflect the shadow price (CSC – tax), and 3) Direct evaluation

from project construction cost (CSC). The findings show that 85% of Thai small scale

hydropower plant study reports evaluated cost using the project construction cost

adjusted by a Conversion factor (CSC x CF), while 10% used adjustment by directly

deducting tax from the project construction cost (CSC).

As for foreign small scale hydropower projects, a majority 50%

of projects evaluated project construction cost using data of project construction cost

and adjusted by a Conversion factor (CSC x CF). 50% of other hydropower projects

evaluated project construction cost directly (CSC), while 80% of other renewable

energy projects directly evaluated project construction cost (CSC), as can be seen in

the details from Table 4.19 and Table 4.20.

65

Table 4.19 Number of Reports Classified by Cost Evaluation Method

Types of Reports/Projects Cost Evaluation Method

CSC x CF CSC -tax CSC NA Total




plans 5 0 0 0 5








Total 54 5 36 4 99

Note: CSC x CF is the use of construction cost (CSC) combined with conversion factor (CF)

CSC -tax is the use of construction cost (CSC) deducted by tax items out of market price

CSC is the direct evaluation of project construction cost

Table 4.20 Percentage of Reports Classified by Cost Evaluation Method

Types of Reports/Projects Cost Evaluation Method

CSC x CF CSC -tax CSC NA Total




plans 100% 0% 0% 0% 100%





projects 30% 0% 70% 0% 100%



Total 55% 5% 36% 4% 100%

Note: CSC x CF is the use of construction cost (CSC) combined with conversion factor (CF)

CSC –tax is the use of construction cost (CSC) deducted by tax items out of market price

CSC is the direct evaluation of project construction cost

66

After considering the source of the Conversion factor used for

converting market price to shadow price, the source could be organized into 3 groups:

1) Conversion factor set by the World Bank, with reference to “Ahmed, Sadig.

Shadow Prices for Economic Appraisal of Projects : An Application to Thailand.

World Bank Staff Working Paper, No. 609.,1983.”, 2) Conversion factor set by Japan

International Cooperation Agency (JICA), and 3) Conversion factor by the Industrial

Finance Corporation of Thailand (IFCT). The majority, 60% of Thai hydropower

plant projects, used the conversion factor set by World Bank (the detail of the

conversion factor value set by the World Bank is shown in Appendix C) as shown in

Table 4.21 and Table 4.22.

Table 4.21 Number of Reports Classified by Conversion Factor Source

Types of Reports/Projects Conversion Factor Source

World bank JICA IFCT NA Total




plans 3 0 0 2 5








Total 36 2 1 60 99

67

Table 4.22 Percentage of Reports Classified by Conversion Factor Source

Types of Reports/Projects Conversion Factor Source

World bank JICA IFCT NA Total




plans 60% 0% 0% 40% 100%





projects 20% 0% 5% 75% 100%



Total 36% 2% 1% 61% 100%

3) Annual Cost Evaluation Method. The data analysis

organized the annual cost evaluation method into 2 groups, which are 1) Evaluation

using percentage estimation from total expense, and 2) Evaluation using estimation

on expected activities. The majority 81% of Thai small scale hydropower project

study reports evaluated annual expense by using the percentage estimation from total

expense.

As for foreign small scale hydropower projects, all used a

percentage estimation from total expense. 75% of other hydropower projects used a

percentage estimation from total expense, while the other renewable energy projects

used a percentage estimation from total expense and estimation by expected activities

equally at 37%, as shown in Table 4.23 and Table 4.24.

68

Table 4.23 Number of Reports Classified by Annual Expense Evaluation Method


Annual Expense Evaluation Method

Percentage

from total

expense

Estimation

from actual

activities

NA Total




plans 5 0 0 5





projects 5 12 3 20



Total 65 14 20 99

Table 4.24 Percentage of Reports Classified by Annual Expense Evaluation Method


Annual Expense Evaluation Method

Percentage

from total

expense

Estimation

from actual

activities

NA Total




plans 100% 0% 0% 100%





projects 25% 60% 15% 100%



Total 66% 14% 20% 100%

69

4.1.1.4 Benefit Analysis

The study of benefit analysis comprises the 1) Benefit item, and 2)

Benefit evaluation method, with the following details:

1) Benefit Item. The data analysis shows that Thai small scale

hydropower project study reports had set the lowest number of benefit items at 1 item,

and the highest at 4 items. The majority 75% of reports had considered 2 benefit

items, electricity benefit and greenhouse gas emission reduction benefit. Other

considered benefits included a fishery benefit, tourism benefit, and agricultural

benefit, which occurred according to each project’s distinct features.

Every foreign small scale hydropower project used 1 benefit

item, the electricity benefit. Other hydropower projects had the lowest number at 1

benefit item and the highest at 5 items, while other renewable energy projects had the

lowest number at 1 item and the highest at 4 items, as shown in Table 4.25 and Table

4.26.

Table 4.25 Number of Reports Classified by Number of Benefit Items

Types of Reports/Projects Number of Benefit Item

1 2 3 4 5 Total




plans 2 3 0 0 0 5





projects 6 8 5 1 0 20



Total 40 49 6 3 1 99

70

Table 4.26 Percentage of Reports Classified by Number of Benefit Items

Types of Reports/Projects Number of Benefit Items

1 2 3 4 5 Total




plans 40% 60% 0% 0% 0% 100%





projects 30% 40% 25% 5% 0% 100%



Total 40% 49% 6% 3% 1% 100%

2) Benefit Evaluation Method. The data analysis separates the

evaluation of electricity benefit, which is the project’s main benefit, into 5 methods:

1) Comparison with cost of electricity generation using other methods, 2) Comparison

with market price, 3) Evaluation from revenue from electricity sales, 4) Comparison

with electricity willingness to pay, and 5) Comparison with market price and adjusted

using a conversion factor (CF).

The majority, 96% of Thai small scale hydropower project

study reports, evaluated electricity benefit using a comparison with the cost of

electricity generation using other methods, while 50% of foreign small scale

hydropower projects evaluated their revenue from electricity sales. The percentage of

other hydropower projects who evaluated benefit using a comparison with the cost of

electricity generation using other methods and revenue from electricity sales were

equally 42%, while 74% of other renewable energy projects were evaluated from a

comparison with market price, as shown in the details in Table 4.27 and Table 4.28.

71

Table 4.27 Number of Reports Classified by Electricity Benefit Evaluation Method

Types of Reports/Projects Electricity Benefit Evaluation Method*

1 2 3 4 5 6 Total



1.2 Small scale hydropower project

master plans 4 1 0 0 0 0 5





projects 3 16 0 0 1 0 20



Total 57 29 7 1 1 4 99

Note: 1) Comparison with cost of electricity generation using other methods

2) Comparison with market price

3) Revenue from electricity sales

4) Comparison with electricity willingness to pay

5) Comparison with market price and adjusted using a conversion factor

6) Not available

72

Table 4.28 Percentage of Reports Classified by Electricity Benefit Evaluation Method

Types of Reports/Projects Electricity Benefit Evaluation Method*

1 2 3 4 5 6 รวม




master plans 80% 20% 0% 0% 0% 0% 100%

2. Foreign small scale hydropower projects 25% 0% 50% 25% 0% 0% 100%




projects 15% 80% 0% 0% 5% 0% 100%



Total 58% 29% 7% 1% 1% 4% 100%

Note: 1) Comparison with cost of electricity generation using other methods

2) Comparison with market price

3) Revenue from electricity sales

4) Comparison with electricity willingness to pay

5) Comparison with market price and adjusted using a conversion factor

6) Not available

After considering the data of electricity benefit evaluations

using a comparison with the cost of electricity generation using other methods, the

compared energy was separated into 6 types, 1) Diesel, 2) Natural gas, 3) Crude oil,

4) Renewable energy, 5) Fuel oils, and 6) Steam power. The majority, 87% of Thai

small scale hydropower projects, used a comparison with diesel, while 13% compared

with natural gas, as shown in Table 4.29 and Table 4.30.

Furthermore, 87% of Thai small scale hydropower projects

evaluated benefit from greenhouse gas emissions reduction. Among these projects,

84% evaluated benefit using a comparison with the carbon credit price under a project

named Clean Development Mechanism (CDM) by the United Nations Framework

Convention on Climate Change (UNFCCC), while another 16% used a comparison

73

with forestation expense for absorbing greenhouse gas from the global atmosphere, as

shown in Table 4.31 and Table 4.32.

Table 4.29 Number of Reports Classified by Comparison with Cost of Electricity

Generation using Other Methods


Method of Comparison with

Cost of Electricity Generation using Other Methods*

Diesel Natural

Gas

Crude

Oils

Renewable

Energy

Fuel

Oils

Steam

power

Total




master plans 4 0 0 0 0 0 4





projects 1 0 1 0 1 0 3



Total 43 8 2 2 1 1 57

74

Table 4.30 Percentage of Reports Classified by Comparison with Cost of Electricity

Generation using Other Methods


Method of Comparison with

Cost of Electricity Generation using Other Methods*

Diesel Natural

Gas

Crude

Oils

Renewable

Energy

Fuel

Oils

Steam

power

Total




master plans 100% 0% 0% 0% 0% 0% 100%

2. Foreign small scale hydropower project 0% 0% 0% 100% 0% 0% 100%




projects 33% 0% 33% 0% 33% 0% 100%



Total 75% 14% 4% 4% 2% 2% 100%

Table 4.31 Number and Percentage of Reports with Benefit Evaluation from

Greenhouse Gas Emissions Reduction


Benefit Evaluation

from Greenhouse Gas Emissions Reduction

Number Percentage

1. Thai small scale hydropower projects 32 67%

1.1 Small scale hydropower projects 29 67%


plans 3 60%

2. Foreign small scale hydropower projects 0 0%

3. Other hydropower projects 2 17%

4. Other renewable energy projects 8 23%

4.1 Biomass energy and waste-to-energy projects 5 25%

4.2 Wind energy projects 2 15%

4.3 Solar energy projects 1 50%

Total 42 42%

75

Table 4.32 Number and Percentage of Reports Classified by Method on Benefit

Evaluation from Greenhouse Gas Emissions Reduction


Method on Benefit Evaluation from

Greenhouse Gas Emissions Reduction

Carbon credit price Forestation expense

Number Percentage Number Percentage

1. Thai small scale hydropower projects 27 84% 5 16%

1.1 Small scale hydropower projects 24 83% 5 17%

1.2 Small scale hydropower project master plans 3 100% 0 0%

2. Foreign small scale hydropower projects 0 0% 0 0%

3. Other hydropower projects 2 100% 0 0%

4. Other renewable energy projects 8 100% 0 0%

4.1 Biomass energy and waste-to-energy projects 5 100% 0 0%

4.2 Wind energy projects 2 100% 0 0%

4.3 Solar energy projects 1 100% 0 0%

Total 37 88% 5 12%

4.1.1.5 Feasibility Index

The study of project feasibility index selection framework is comprised

of 1) Project feasibility index selection, and 2) Project feasibility analysis result, with

the following details:

1) Project Feasibility Index Selection. The data analysis

shows that Thai small scale hydropower projects had selected the lowest number of

feasibility indexes at 2 indexes and the highest at 5 indexes. There are usually 5

project feasibility indexes used in the study, which are 1) Economic Internal Rate of

Return (EIRR), 2) Net Present Value (NPV), 3) Benefit-Cost Ratio (B/C Ratio), 4)

Average Incremental Cost (AIC), and 5) Payback period.

The majority 77% of reports had selected 4 feasibility indexes,

with the most used index being Benefit-Cost Ratio (B/C Ratio) and then Net Present

Value (NPV), Economic Internal Rate of Return (EIRR), Average Incremental Cost

(AIC), and Payback period, respectively.

The foreign small scale hydropower projects had selected the

lowest number of feasibility index at 2 indexes, and the highest at 4 indexes. Other

76

hydropower projects had selected the lowest number of feasibility index at 2 indexes

and the highest at 5 indexes, while other renewable energy projects had selected the

lowest number of feasibility index at 1 index and the highest at 4 indexes. The least

used feasibility index was the Payback period, as can be seen in the details in Table

4.33 and Table 4.36.

Table 4.33 Number of Reports Classified by the Number of Feasibility Indexes

Types of Reports/Projects Number of Feasibility Indexes

1 2 3 4 5 Total




plans 0 2 0 3 0 5





projects 3 2 10 5 0 20



Total 4 14 21 53 7 99

77

Table 4.34 Percentage of Reports Classified by the Number of Feasibility Indexes

Types of Reports/Projects Number of Feasibility Indexes

1 2 3 4 5 Total




plans 0% 40% 0% 60% 0% 100%





projects 15% 10% 50% 25% 0% 100%



Total 4% 14% 21% 54% 7% 100%

Table 4.35 Number of Reports Classified by Feasibility Index


Feasibility Index

IRR NPV B/C

Ratio AIC

Payback

period




plans 5 3 5 3 0





projects 19 16 10 2 10



Total 92 84 79 58 29

78

Table 4.36 Percentage of Reports Classified by Feasibility Index


Feasibility Index

IRR NPV B/C

Ratio AIC

Payback

period




plans 100% 60% 100% 60% 0%





projects 95% 80% 50% 10% 50%



Total 93% 85% 80% 59% 29%

2) Feasibility Analysis Results. The data analysis shows that

the majority, 73% of Thai small scale hydropower project study reports, stated that

their projects were feasible. The same could be said for 100% of foreign small scale

hydropower projects, 92% of other hydropower projects, and 40% of other renewable

energy projects, as shown in the details from Table 4.37 and Table 4.38.

79

Table 4.37 Number of Reports Classified by Feasibility Analysis Result


Feasibility Analysis Result

Feasible Not

Feasible NA Total




plans 0 0 5 5





projects 9 1 10 20



Total 64 9 26 99

Table 4.38 Percentage of Reports Classified by Feasibility Analysis Result

Types of Reports/Projects Feasibility Analysis Result

Feasible Not Feasible NA Total




plans 0% 0% 100% 100%





projects 45% 5% 50% 100%



Total 65% 9% 26% 100%

80

4.1.1.6 Risk Analysis

The data analysis separated the risk analysis method into 4 groups, 1)

Sensitivity analysis, 2) Switching value analysis, 3) Scenario analysis, and 4) No

analysis. The majority, 44% of Thai small scale hydropower projects, used sensitivity

analysis, 32% used switching value analysis, and 24% had no analysis. Furthermore,

most of the sensitivity analyses were performed by increasing project construction

costs and decreasing project benefits on an incremental level from 5 -15% of cost and

benefit from the base case. There was also consideration of other risk factors that

could affect project benefit, for instance, water runoff, and the electricity buying price

mechanism according to the financial support schemes by public agencies.

The majority, 60% of foreign small scale hydropower projects, used

sensitivity analysis, with 20% using switching value analysis, and another 20% did

not do an analysis. 50% of the other hydropower projects used sensitivity analysis,

with the other 50% doing no risk analysis. As for the other renewable energy projects,

21% used sensitivity analysis, 13% used scenario analysis, 8% used switching value

analysis, and 24% used no analysis, as shown in Table 4.39 and Table 4.40.

Table 4.39 Number of Reports Classified by Risk Analysis Method


Risk Analysis Method

Sensitivity

analysis

Switching

value analysis

Scenario

analysis

No

analysis



1.2 Small scale hydropower project master plan 0 0 0 5





projects 7 3 3 10



Total 48 27 5 46

81

Table 4.40 Percentage of Reports Classified by Risk Analysis Method


Risk Analysis Method

Sensitivity

analysis

Switching

value analysis

Scenario

analysis

No

analysis




plans 0% 0% 0% 100%





projects 30% 13% 13% 43%



Total 38% 21% 4% 37%

From these data analyses, the methodology framework for Thai small

scale hydropower project feasibility analysis in various topics can be summarized in

Table 4.41.

Table 4.41 Summary of Thai Small Scale Hydropower Project Feasibility Analysis

Methodology Framework

Topic Detail

1) General Information

- Project Owner - 98% of projects were owned by the public agency, the Department of

Alternative Energy Development and Efficiency, Ministry of Energy

(DEDE).

- Study Agency - 83% of projects were performed by consulting firms.

- Study Year - The earliest year was 1957 while the latest year was 2016.

- 69% of reports were studied during the period 2008 – 2017.

- Type of Analysis - 100% of reports used economic methodology.

- 79% of reports used economic and financial methodology.

- The master plan study report only used economic methodology.

82


Topic Detail

2) Assumption Selection

- Project Duration

Selection

- The shortest duration was 30 years while the longest duration was 50 years.

- The majority 77% of projects had selected the project duration of 30 years

- Most of the reports had selected a project duration according to the project’s

major components.

- Discount Rate

Selection

- The lowest rate was 6.0% while the highest rate was 12.0%.

- The majority, 56%, selected a discount rate of 8.0%.

- The mean of discount rate was 8.8%.

- A majority 62% of reports stated that the discount rate was selected based.

on principles set by the Office of the National Economic and Social

Development Board (NESDB).

- Some reports selected a discount rate of 8.0% and stated that the rate was the

result of consideration of NESDB principles and the government bond

interest rate.

- There was a declining trend of discount rate from 1987 to 2016.

3) Cost Analysis

- Cost Item - The majority, 94% of reports, considered 1 cost item: project construction

cost.

- Others considered the cost items of environmental cost, forest degradation

cost, and compensation cost.

- Cost Analysis

Method

- The majority, 85% of reports analyzed, projected construction cost by

adjusting construction cost (CSC) by conversion factor (CF).

- The majority, 60% of reports, used the value of a conversion factor set by

the World Bank.

- Annual Expense

Evaluation Method

- The majority, 81% of reports, evaluated annual expense by using a

percentage estimation from total expense.

4) Benefit Analysis

- Benefit Item - The majority 75% of reports considered 2 benefit items, electricity benefit

and greenhouse gas emissions reduction benefit.

- Others considered the benefit items of fishery benefits, tourism benefits, and

agricultural benefits.

83


Topic Detail

- Benefit Analysis

Method

- The majority of 96% of reports evaluated electricity benefit using a

comparison with the cost of electricity generation using other methods. Out

of which, the majority of 87% compared with the cost of electricity

generation using diesel.

- The majority of 87% evaluated greenhouse gas emissions reduction benefit

using a comparison with the carbon credit market price.

5) Feasibility Index

- Feasibility Index

Selection

- The considered indexes were comprised of 1) Economic Internal Rate of

Return (EIRR) 2) Net Present Value (NPV) 3) Benefit-Cost Ratio (B/C

Ratio) 4) Average Incremental Cost (AIC) 5) Payback period.

- 77% of reports selected 4 feasibility indexes.

- The most popular index was the Benefit-Cost Ratio (B/C Ratio), while the

second most popular index was Net Present Value (NPV).

- Analysis Result - 73% of reports stated that the project was feasible for investment.

6) Risk Analysis

- Risk Analysis

Method

- The majority 44% of reports had performed risk analysis using sensitivity

analysis, while 32% used switching value analysis.

- 24% of reports had not performed any risk analysis.

- Sensitivity analysis adjusted the cost increment and benefit decrement at 5 –

15%.

4.1.2 Feasibility Analysis Process Framework

From the review of documents, laws and regulations, related guidelines, and

in-depth interviews with personnel with related experiences, the findings were

summarized into 3 parts: 1) Consultant hiring process framework, 2) Study process

framework, and 3) Project feasibility consideration and approval processes

framework, with the following details:

4.1.2.1 Consultant Hiring Process Framework

The review has shown that 83% of Thai small scale hydropower project

study reports had hired a consulting firm to perform the study, so this study will focus

on the conclusions of the consultant hiring process of the responsible agency in the

84

development of Thai small scale hydropower projects, namely, the Department of

Alternative Energy Development and Efficiency, Ministry of Energy (DEDE). From

the study of regulations and requirements on consultant hiring, the hiring process

could be separated into 3 parts, namely, 1) Consultant qualification specification, 2)

Scope of work and deliverable, and 3) Consultant selection, with details as follows:

1) Consultant Qualification Specification. The regulations and

requirements in consultant hiring indicate the consultant qualifications for certain

positions, for instance, project planning engineer, water resource/hydrology specialist,

structural engineering specialist, cost estimation specialist, environmental specialist,

as well as economic specialist. The requirement for economic specialist is stated as

shown in Table 4.42.

Table 4.42 Academic Qualification for Economic Consultant

Item Detail

Position Economic Specialist

Education Master’s degree on Economics

Experience 15 years experience after graduation with bachelor’s degree

At least 5 years experience in performing economic and financial

feasibility analysis on projects with similar features

Role Study benefits generated from project

Perform project’s economic and financial feasibility analysis

Create budget plan for project development

Study investment framework and organizational structure for investment


As for specifications on the consulting organization, it was

stated that the organization has to be registered as a legal entity according to Thai law

with the Consultant Database Center, Public Debt Management Office. This legal

entity term also covers organizations of ordinary or limited partnership, limited or

public companies, public universities and other legal entities established according to

Thai law having experience in studying similar projects.

85

2) Scope of Work and Deliverables. The term of reference on

consultant hiring states the project’s objective and related scope of work. In terms of

overall scope of work, the main works in the study include engineering study, for

instance, hydrology study, project size and component study, project engineering,

detailed structural design, and other works such as environment and public relations.

As for economic work, the work scope tends to be broad, for example, project

investment feasibility analysis. As an example, the term of reference in hiring a

consultant for Master Plan for Small Scale Hydropower Projects in Southern

provinces on the Andaman Coastline and the Gulf of Thailand (Department of

Alternative Energy Development and Efficiency, 2016) states the scope of work for

economic analysis as follows:

Propose project with potential for development of small scale

hydropower project by performing study on various topics as follows: …

Perform project economic analysis … Select potential project with

engineering and economic feasible while considering project’s advantages and

disadvantages … Prioritize feasibility of minor projects based on the study of

potential for various minor small scale hydropower projects while considering

feasibility on engineering, economics, land use readiness, and community

acceptance to prioritize the minor projects’ feasibility

For deliverables, there is a statement on deliverables in various

forms, both reports and computer information of various analyses based on the phase

of study, for instance, inception reports, progress reports, final draft reports, and final

reports. The whole study process was performed in 1 year.

3) Consultant selection. The regulation on selecting a

consultant states that the consultant enrolled in the selection process must submit a

proposal to the agency separated into 3 parts, which are 1) A document stating the

consultant’s specifications, comprised of certificate of status, copy of commercial

registration, and letter of authority, 2) Technical proposal comprised of personal name

and profile, consulting agency work and experience, conception detail, methodology

86

on each part of work, and implementation plan, and 3) Cost proposal comprised of

details on personal and other expenses.

In the selection process, the hiring agency will first consider the

consulting organization’s qualifications and only qualified organizations will be

considered in terms of technical proposals in the next step. The consideration of

technical proposals can be separated into various topics, for instance, personal

education, skills and experience, consultant work and experience, concept and

methodology, and implementation plan. The technical consideration sets the scoring

criteria for each topic by giving the highest weight on personal education, skills and

experience, then concept and methodology, and setting the minimum score for

proposal to pass the technical criteria. Then the proposal which passes the technical

criteria will get to be considered in the cost proposal.

In the cost proposal consideration, the hiring agency will start

by considering the consultant with the highest technical score and negotiate to a

suitable cost, but not more than the budget received. If the negotiation is not

successful, there will be consideration of cancelling the negotiation and starting

negotiations with the consultant with the second highest technical score with the same

process as the first one until reaching a conclusion with the consultant with

appropriate cost and within the budget, as shown in Figure 4.2.

Figure 4.2 Consultant Selection Process

Consider technical proposal score

Negotiate to suitable cost

Hire consultant

Consultant with the highest score on technical proposal

Arrive at suitable cost according to budget

Does not get the suitable cost

Consultant with the next below score on technical proposal

87

4.1.2.2 Study Process Framework

The study of the study process framework can be separated into 2 parts,

which are 1) the Study process, and 2) Study report acceptance, with details as

follows:

1) Study process. The study of investment feasibility analysis

framework is part of the feasibility analysis or overall feasibility study of small scale

hydropower projects. The study report is comprised of the study on engineering,

environment, socio-economics, public relations and public participation as well as

economics and finance. The study process will start from the study of engineering as

the core study while having other studies in parallel to comply with engineering study.

The role of economic study will be related to the study in

various steps. The process related to economic study is separated into 1) Economic

analysis in the project design and assignment process, and 2) Economic analysis in the

investment feasibility analysis process. The objective of analysis in each process is

shown in Table 4.43.

Table 4.43 Objective of Economic Study in Feasibility Analysis

Economic Analysis

in Each Process Objective

1) Project design and assignment of

details process

Project site selection

Project component specification

Project prioritization

2) Investment feasibility analysis

process

Economic investment feasibility analysis

Financial investment feasibility analysis

Project investment framework specification

Budget plan set up

88

The different roles and objectives of economic study have led to

different study results in each process. The economic study involves a project’s cost

and benefit evaluation based on project construction costs and electricity generation

estimation which results from the engineering study. It could be said that the

economic study must always consider data for cost and benefit evaluation that

complies with the engineering study. Furthermore, it also must consider

environmental and social impact study results to evaluate the project’s indirect costs

and benefit in order to perform investment feasibility analysis completely and

correctly according to academic principles.

The study in each process will always consider investment

feasibility analysis along with the engineering study, especially in cases where the

project is investment infeasible. The consultant team will jointly discuss the related

study results which led to the adjustment of the project’s framework or components to

reach the best study result, as shown in Figure 4.3.

Figure 4.3 Investment Feasibility Analysis Process

Other studies, e.g., environment, and social

Economic study

Review study result and revise engineering

and related works results

Engineering study

Project’s cost and benefits data

Project is investment feasible

Project is investment infeasible

89

2) Study Report Acceptance. The study report acceptance

framework will accept it according to the order of reports delivered ,which was stated

to be delivered in each part of the work. The project owner will set up a study

acceptance and monitoring committee which is comprised of 5 to 7 persons to

evaluate the completeness of work according to the specified scope of work as well as

academic correctness of study in each field.

The committee’s consideration process will consider the report

delivered by the consultant before inviting the consultant to do the present details and

answer to the inquiry. As for economic work, the committee will focus on the study’s

assumption selection, project’s generated electricity evaluation using a comparison

with cost of electricity generation using other means in order to obtain appropriate

compared price, as well as the investment feasibility analysis results. The committee

responsible for economic analysis will consider both the analysis results in the study

report and correctness of the study data in the computer program delivered by the

consultant.

4.1.2.3 Project Feasibility Consideration and Approval Processes

Framework

The study of project feasibility consideration and approval processes

framework by the Department of Alternative Energy Development and Efficiency,

Ministry of Energy, occurs after the committee has accepted the study report, which

involves coordination with other related agencies, for instance, the agency responsible

for environmental impact consideration, which will consider the environmental

impact study, environmental impact mitigation plan set up, as well as checking the

environmental economic study results. In the case of small scale hydropower plant

projects, the related law does not require an environmental impact assessment except

for projects located in forest conservation areas. As for a land owning agency, there

will be consideration for construction approval according to the law. Projects passing

law considerations will be put in the annual plan to be asked for budget approval in

hiring a contractor for project construction in the later process, as shown in Figure 4.4.

90

Figure 4.4 Project Feasibility Consideration and Approval Processes

The project feasibility consideration and approval process by the

Department of Alternative Energy Development and Efficiency has a low tendency of

reviewing or checking feasibility analysis results since small scale hydropower plant

projects have a low investment budget. The consideration was mostly performed

within the agency without repeated checks from other external agencies.

4.2 Feasibility Analysis Standard and Guideline Compatibility Study

The analysis results on the compatibility of feasibility analysis on small scale

hydropower projects with standards and guidelines specified by various agencies is

comprised of 1) Methodology standard and guideline compatibility, and 2) Process

standard and guideline methodology, with details as follows:

Study report accepted by committee

Ask for construction approval according to

related law Put project in department’s plan

to be asked for annual budget approval

Hire contractor for project construction

91

4.2.1 Methodology Standard and Guideline Compatibility

The document used for analysis of small scale hydropower project feasibility

analysis methodology standard and guideline compatibility of other agencies, both

national and international, are shown in Table 4.44.

Table 4.44 Document Used for Methodology Standard and Guideline Compatibility

Analysis

Document Agency Year

- Guidelines for Economic Analysis of Power Sector

Projects: Renewable Energy Projects.

World Bank. 2015

- Guidelines for the Economic Analysis of Projects Asian Development Bank

(ADB)

2017

- Cost-Benefit Analysis for Development: A Practical

Guide

Asian Development Bank

(ADB)

2013

- Introductory Course on Economic Analysis of

Investment Projects (Session 2.4: Sensitivity and

Risk Analysis)

Asian Development Bank

(ADB)

2010

- Guide to Cost-Benefit Analysis of Investment

Projects Economic appraisal tool for Cohesion

Policy 2014-2020

European Commission 2014

- Economic Risk and Sensitivity Analysis for Small-

scale Hydropower Projects

The International Energy

Agency (IEA)

2000

- Revised Manual and Criteria for Feasibility

Analysis, 2012

Office of the National

Economic and Social

Development Board

(NESDB)

2012

- Project Feasibility Analysis for Sufficiency National Institute of

Development Administration

(Adis Israngkura na Ayudhya)

2010

- Guideline on study and analysis of Public-Private

Partnership (PPP)

State Enterprise Policy Office

(SEPO)

2017

92


Document Agency Year

- Manual for Planning and Feasibility Analysis of

Small and Mini Scale Hydropower Project

Department of Alternative

Energy Development and

Efficiency (DEDE)

2015

The methodology standard and guideline compatibility analysis on small scale

hydropower plant project feasibility analysis is separated into topics according to the

methodology, which is comprised of 1) Assumption selection, 2) Cost analysis, 3)

Benefit analysis, 4) Feasibility index, and 6) Risk analysis as followed:

4.2.1.1 Assumption Selection Compatibility

The analysis of compatibility on small scale hydropower assumption

selection with other guidelines is comprised of 1) Project duration selection, and 2)

Discount rate selection with the following details:

1) Project Duration Selection.

The study result has shown that most of the report had selected

a project duration of 30 years with consideration based on the project’s major

component useful life. A comparison with various documents shows that this

complies with the guideline stated in Guidelines for the Economic Analysis of

Projects (2017) by the Asian Development Bank (ADB) and Manual for Planning and

Feasibility Analysis of Small and Mini Scale Hydropower Project by Department of

Alternative Energy Development and Efficiency (DEDE) which set the project

duration between 30 to 50 years. However, other manuals have not stated the criteria

for selecting a project’s duration. The compatibility analysis is summarized in Table

4.45.

93

Table 4.45 Project Duration Selection Compatibility Analysis

Document Standard and Guideline

Stated

Analysis

Result

- Guidelines for the Economic

Analysis of Projects

(ADB, 2017)

Select based on technical life of project

or

number of years which project could

still generate benefits

Compatible

- Manual for Planning and

Feasibility Analysis of Small and

Mini Scale Hydropower Projects

by Department of Alternative


Efficiency (DEDE, 2015)

Set the project duration

30 – 50 years

Compatible

2) Discount Rate Selection. The study results show that most

of the study reports had selected a discount rate of 8.0% with consideration based on

criteria set by the Office of the National Economic and Social Development Board as

well as the government’s bond interest rate. A comparison with various documents

has shown that the discount rate had no compatibility with compared manuals since

most of the documents had selected the discount rate at 9% - 12%. The compatibility

analysis is shown in Table 4.46.

94

Table 4.46 Discount Rate Selection Compatibility Analysis


Stated

Analysis

Result

- Guidelines for Economic

Analysis of Power Sector

Projects: Renewable Energy

Projects. (World Bank, 2015)

Economic opportunity cost of capital Incompatible


Analysis of Projects (ADB,

2017)

Minimum of 9% for standard projects

and 6% for social and environmental

development projects

Incompatible

- Cost-benefit analysis for

development: A practical guide.

(ADB, 2013)

Opportunity cost of capital

(12% in ADB projects),

Incompatible

- Guide to Cost-Benefit Analysis

of Investment Projects

(European Commission, 2014)

Social discount rate of 5%

(European country)

Incompatible

- 2012 Revised Manual and

Criteria for Feasibility Analysis

(NESDB, 2012)

9% – 12% Incompatible

- Project Feasibility Analysis for

Sufficiency (Adis, 2010)

Expectation of benefit claiming period,

source of funds and calculation basis

(Constant/Current price)

Incompatible

- Guideline on study and analysis

of Public-Private Partnership

(SEPO, 2017)

9% – 12% Incompatible


Feasibility Analysis of Small

and Mini Scale Hydropower

Project (DEDE, 2015)

10% Incompatible

95

4.2.1.2 Cost Analysis Compatibility

The analysis of compatibility on small scale hydropower cost analysis

with other guidelines is comprised of 1) Cost item selection, 2) Cost evaluation

method, and 3) Annual cost evaluation, with the following details:

1) Cost Item Selection. The study results show that the

majority of study reports had considered 1 cost item, which was construction cost.

The other costs, for instance, environmental cost, was considered in some of the

reports. A comparison with other documents has shown that the selection of direct

cost, construction cost, was compatible with guidelines stated in every manual.

However, the indirect cost was not analyzed by most of the reports. The compatibility

analysis result is shown in Table 4.47.

Table 4.47 Cost Item Selection Compatibility Analysis


Stated

Analysis

Result

- Guidelines for Economic Analysis

of Power Sector Projects:

Renewable Energy Projects.

(World Bank, 2015)

Construction cost

and externality cost

Partially

compatible


Analysis of Projects (ADB, 2017)

Select direct and indirect cost Partially

compatible



(ADB, 2013)


compatible

- Guide to Cost-Benefit Analysis of

Investment Projects (European

Commission, 2014)


compatible

96



Stated

Analysis

Result

- Economic Risk and Sensitivity

Analysis for Small-scale

Hydropower Projects (IEA, 2000)

Select construction cost item

and annual operating cost

Partially

compatible

- 2012 Revised Manual and Criteria

for Feasibility Analysis (NESDB,

2012)


compatible



Use “With and Without” principle,

environmental cost, and sunk cost

Partially

compatible

- Guideline on study and analysis of

Public-Private Partnership (SEPO,

2017)


compatible



Mini Scale Hydropower Project

(DEDE, 2015)

Select based on construction cost and

environmental cost

Partially

compatible

2) Cost Analysis Method. The study results show that the

majority of reports had estimated construction cost by adjusting the project’s

construction cost with a conversion factor, which is compatible with various manuals

that state the usage of a conversion factor in converting market price to shadow price.

However, the manuals do not state clearly the source of the conversion factor

calculation. As for indirect cost or environmental cost evaluation, the manuals state

the evaluation using the statistical method to appropriately evaluate environmental

impact value, which is compatible with some of the reports which use the

environmental economic technique to assess resulted impact, for instance, forest

degradation cost compared to a tree’s market price or environmental impact

mitigation cost. The compatibility analysis result is shown in Table 4.48.

97

Table 4.48 Cost Analysis Method Compatibility Analysis


Stated

Analysis

Result

- Guidelines for Economic Analysis

of Power Sector Projects :

Renewable Energy Projects. (World

Bank, 2015)

Evaluate shadow price based on

commodity types and use

Standard correction factor (SCF),

Shadow exchange rate (SER)

Partially

compatible


Analysis of Projects (ADB, 2017)

Evaluate shadow price based on

resource opportunity cost which is

calculated by

Conversion factors (CFs),

Shadow exchange rate factor

(SERF)

Partially

compatible



(ADB, 2013)

Evaluate shadow price using

Conversion factors (CFs),

Shadow exchange rate factor

(SERF)

Partially

compatible

- Guide to Cost-Benefit Analysis of

Investment Projects (European

Commission, 2014)

Compare with

various past projects

Incompatible



Hydropower Projects (IEA, 2000)

Directly evaluate using

construction cost

Incompatible

- 2012 Revised Manual and Criteria

for Feasibility Analysis (NESDB,

2012)

Calculate shadow price

using conversion factor

or deduct tax from market price

Compatible



Use statistical method for

appropriate environmental impact

evaluation

Compatible

- Guideline on study and analysis of

Public-Private Partnership (SEPO,

2017)

Calculate shadow price

using conversion factor

or deduct tax from market price

Compatible

98



Stated

Analysis

Result

- Manual for Planning and Feasibility

Analysis of Small and Mini Scale

Hydropower Project (DEDE, 2015)

Deduct tax from market price and

use environment valuation method

Partially

compatible

3) Annual Cost Evaluation. The study results show that the

majority of reports had evaluated annual cost by selecting a proportion from the

construction cost and adjusting with a conversion factor. However, a comparison with

various documents has shown that many manuals recommend the method of

comparison with actual cost of present or past projects, with only one manual

recommending selecting a proportion from construction cost, which is compatible

with the Thai small scale hydropower project study report. The compatibility analysis

is shown in Table 4.49.

Table 4.49 Annual Cost Evaluation Compatibility Analysis


Stated

Analysis

Result


of Investment Projects (European

Commission, 2014)

Compare with

other past projects

Incompatible



2017)

Estimate cost in each item

based on project features

Incompatible



Hydropower Projects (IEA,

2000)

Estimate cost in each item

based on project features

Incompatible



(NESDB, 2012)

Compare with actual cost

of present projects

Incompatible

99



Stated

Analysis

Result



(SEPO, 2017)

Compare with actual cost

of present projects

Incompatible




(DEDE, 2015)

Calculate as a proportion from

construction cost

Compatible

4.2.1.3 Benefit Analysis Compatibility

The analysis of compatibility on small scale hydropower benefit analysis

with other guidelines is comprised of 1) Benefit item selection, and 2) Benefit

evaluation method, with the following details:

1) Benefit Item Selection. The study results show that the

majority of reports considered 2 benefit items, which were electricity benefit and

greenhouse gas emission reduction benefit. Other considered benefits were fishery

benefit, tourism benefit, and agricultural benefit, which occurred according to each

project’s distinct features. A comparison with various documents has shown that the

majority of reports were compatible with manuals in selecting energy benefits which

were of direct benefit, with greenhouse gas emission reduction benefit being the

indirect benefit. However, on other topics, for instance, macro level impact evaluation

or energy security benefit evaluation, it seems that Thai small scale hydropower

projects still did not have an analysis which covers these mentioned topics. The

compatibility analysis result is shown in Table 4.50.

100

Table 4.50 Benefit Item Selection Compatibility Analysis


Stated

Analysis

Result



Projects : Renewable Energy


Electricity benefit and environmental benefit,

e.g., greenhouse gas emission reduction

Compatible



2017)

Energy benefit and other benefits,


Compatible



(ADB, 2013)

Incremental Benefits,

Non-incremental Benefits

Partially

compatible



Commission, 2014)

Energy benefit and other benefits,

e.g., greenhouse gas emission reduction,

energy security

Partially

compatible




2000)

Electricity benefit Compatible



(NESDB, 2012)

Selecting direct benefit and indirect benefit

Macroeconomic impact evaluation

Partially

compatible



Use the “With and Without” principle and

consider benefit at outcome or impact level

Compatible



(SEPO, 2017)

Selecting direct benefit and indirect benefit

Macroeconomic impact evaluation

Partially

compatible




(DEDE, 2015)

Selecting electricity benefit and

environmental benefit,


Compatible

101

2) Benefit Evaluation Method

The study results show that the majority of study reports had

evaluated electricity benefit using a comparison with cost of electricity generation

using other methods, and also evaluated benefit from greenhouse gas emissions

reduction using a comparison with the carbon credit price. A comparison with other

documents has shown that the majority of reports were compatible with the manuals

in comparing energy benefit with cost of electricity generation using other methods.

However, there were differences in their selections of comparing energy. Each

manual recommended different energy types, for instance, comparison with fossil

energy or renewable energy. As for indirect benefit, many manuals state that the

environmental valuation method is mandatory which complies with the Thai small

scale hydropower project study report. The compatibility analysis is shown in Table

4.51.

Table 4.51 Benefit Evaluation Method Compatibility Analysis


Stated

Analysis

Result





Evaluate the generated electricity value

based on cost of electricity generation using fossil

energy and evaluate external impact

using environment valuation techniques

Compatible



2017)


based on reduced cost and environmental impact

value

Compatible


development: A practical

guide. (ADB, 2013)


based on electricity selling price

Incompatible

- Guide to Cost-Benefit

Analysis of Investment

Projects (European

Commission, 2014)

Evaluate external impact


Compatible

102



Stated

Analysis

Result

- Economic Risk and

Sensitivity Analysis for

Small-scale Hydropower

Projects (IEA, 2000)


based on electricity selling price

Incompatible


Feasibility Analysis of Small

and Mini Scale Hydropower

Project (DEDE, 2015)


based on cost of electricity generation

using renewable energy

and evaluate environmental value


Partially

compatible

4.2.1.4 Feasibility Index Compatibility

The study results show that the majority of reports had selected among 4

feasibility indexes, namely, Benefit-Cost Ratio (B/C Ratio), Net Present Value

(NPV), Economic Internal Rate of Return (EIRR), and Average Incremental Cost

(AIC). A comparison with other documents has shown that the Thai small scale

hydropower plant project study report feasibility index selection complied with the

majority of compared manuals. The compatibility analysis is shown in Table 4.52.

Table 4.52 Feasibility Index Selection Compatibility Selection Analysis


Stated

Analysis

Result





NPV, EIRR Compatible



2017)

ENPV, EIRR,

BCR, CER

Partially

compatible

103



Stated

Analysis

Result



(ADB, 2013)


- Introductory Course on

Economic Analysis of

Investment (ADB, 2010)




Commission, 2014)

NPV, EIRR ,B/C Compatible




2000)

NPV Compatible



(NESDB, 2012)

NPV, EIRR , B/C Compatible



NPV Compatible



(SEPO, 2017)

NPV, EIRR, B/C Compatible




(DEDE, 2015)

NPV, EIRR, B/C Compatible

4.2.1.5 Risk Analysis Compatibility

The study result shows that the majority of study reports had performed

risk analysis using sensitivity analysis and switching value analysis, while 24% of the

reports did no risk analysis. A comparison with various documents has shown that

104

every study manual required risk analysis with the method recommended by most of

the manuals being sensitivity analysis, which complies with the Thai small scale

hydropower project study report. However, there were some manuals stating that the

risk analysis must use Monte Carlo Simulation, Probability analysis, and Real option,

which was not found in the Thai small scale hydropower project risk analysis. The

compatibility analysis is shown in Table 4.53.

Table 4.53 Risk Analysis Compatibility Analysis


Stated Result





Sensitivity analysis, Real option,

Scenario analysis

Partially

compatible



2017)

Sensitivity analysis, Switching

value, Monte Carlo Simulation

Partially

compatible



(ADB, 2013)


value, Probability analysis

Partially

compatible

- Introductory Course on

Economic Analysis of

Investment (ADB, 2010)



Partially

compatible



Commission, 2014)


value, Qualitative risk analysis,

Probability analysis (Monte Carlo

Simulation)

Partially

compatible



Hydropower Projects

- (IEA, 2000)

Monte Carlo Simulation,

Probability analysis

Incompatible



(NESDB, 2012)

Sensitivity analysis

Cost &benefit + 5 -20 %

Compatible

105



Stated Result





Compatible



(SEPO, 2017)

Sensitivity analysis

Cost &benefit + 5 -20 %,

Compatible




(DEDE, 2015)

Sensitivity analysis Compatible

The analysis result of methodology standard and guideline compatibility

for small scale hydropower project feasibility analysis is summarized in Table 4.54.

Table 4.54 Methodology Compatibility Analysis Result

Item Analysis Result

1. Assumption Selection

- Project Duration

Selection

- Compatible with Manual for Planning and Feasibility Analysis of Small and

Mini Scale Hydropower Project (DEDE, 2015)

- Discount Rate

Selection

- Discount rate did not comply with guideline stated in various manuals

2. Cost Analysis

- Cost Item

Selection

- Compatible with direct cost item selection guideline (construction cost)

- The majority of reports did not perform indirect cost analysis as stated in the

manuals.

106



- Cost Analysis

Method

- Compatible with the majority of reports stating the use of a Conversion factor

(CF) in adjusting market price to shadow price

- Compatible with manual stating the use of environmental economic methods in

evaluating resulting impact

- Annual cost

evaluation

- Incompatible with a number of manuals stating the method of comparison with

actual cost of other past or present projects

3. Benefit Analysis

- Benefit Item

Selection

- The majority of reports were compatible with manuals in selecting energy and

greenhouse emission reduction benefits

- Lacked macro-impact and energy security benefit analyses

- Benefit

Evaluation

- The majority of reports were compatible with manuals in comparing energy

benefit with cost of electricity generation using other energy

- Compatible with a number of manuals requiring an indirect benefit evaluation

using environmental evaluation techniques

4. Feasibility Index

Selection

- Compatible with the majority of compared study manuals

5. Risk Analysis - Compatible with the majority of manuals recommending sensitivity analysis

- There was no risk analysis using Monte Carlo Simulation, Probability analysis,

and Real option as recommended by some manuals

4.2.2 Process Standard and Guideline Compatibility

The documents used for the analysis of small scale hydropower project

feasibility analysis process, standard and guideline compatibility of other agencies,

both national and international, are shown in Table 4.55.

107

Table 4.55 Documents Used for Process, Standard and Guideline Compatibility

Analysis

Document Agency Published

Year

- 2012 Revised Manual and Criteria for Feasibility

Analysis

Office of the National Economic

and Social Development Board

(NESDB)

2012

- Government Procurement and Supplies

Management Act B.E. 2560

Government Gazette 2017

- Private Investment in State Undertaking Act B.E.

2556

Government Gazette 2013

- Manuals, descriptions and guidelines for the

royal Decree on Criteria and Procedures for

Good Governance, B.E.2546 (2003)

Office of the Public Sector

Development Commission

(OPDC)

2003

- Good Governance Rating Manual Office of the Public Sector

Development Commission

(OPDC)

2009

The process, standard and guideline compatibility analysis on small scale

hydropower plant project feasibility analysis is comprised of a 1) Consultant hiring

process, 2) Study process, and 3) Feasibility consideration and approval processes, as

follows:

4.2.2.1 Consultant Hiring Process

The comparison analysis between the study of consultant qualification,

scope of work, deliverables, and consultant selection within the overall consultant

hiring process has shown compatibility with the guidelines stated in various laws and

manuals, which include the Government Procurement and Supplies Management Act

B.E. 2560, manuals, descriptions and guidelines for the royal Decree on Criteria and

Procedures for Good Governance, B.E.2546 (2003), and the Good Governance Rating

Manual, which prioritizes transparency in operation and consideration of criteria

selection. The compatibility analysis is shown in Table 4.56.

108

Table 4.56 Consultant Hiring Process Compatibility Analysis


Stated

Analysis

Result

- Government Procurement

and Supplies Management

Act B.E. 2560

Consider quality criteria which comprises of

work and experience, management and operation plan,

number of personnel, type of consultant, and cost

proposal by selecting among the ones passing the

quality criteria to choose the one with

the highest aggregate score of quality and price.

Compatible

- Manuals, descriptions and

guidelines for the royal

Decree on Criteria and

Procedures for Good

Governance, B.E.2546

(2003)

The procurement must be operated with openness

and fairness with consideration of social benefits and

cost,

citizens’ burden, quality, objective in the price used,

and public sector long-term benefits,

which does not have to only be the lowest price

Compatible

- Good Governance Rating

Manual (OPDC, 2009)

Based on transparency

and operation efficiency principles

Compatible

4.2.2.2 Study Process

A comparison analysis between the Thai small scale hydropower project

study process with other documents has shown that the study process was compatible

with guidelines stated in various laws and manuals, which include manuals,

descriptions and guidelines for the royal Decree on Criteria and Procedures for Good

Governance, B.E.2546 (2003), as well as the Good Governance Rating Manual, which

prioritizes transparency in operations and is a comparison between input factors and

results from Thai small scale hydropower project investment showing that the study

process is compatible. The compatibility analysis is shown in Table 4.57.

109

Table 4.57 Study Process Compatibility Analysis


Stated

Analysis

Result

- Manuals, descriptions and guidelines

for the royal Decree on Criteria and

Procedures for Good Governance,

B.E.2546 (2003)

Comparative consideration

between input factors and resulting

outcome

Compatible

- Good Governance Rating Manual

(OPDC, 2009)

Consider transparency in operations Compatible

4.2.2.3 Feasibility Consideration and Approval Processes

The comparison analysis between Thai small scale hydropower project

feasibility consideration and approval processes with other documents has shown that

the feasibility consideration and approval processes were compatible with guidelines

stated in various laws and manuals in terms of comparison consideration among input

factors, resulting outcomes and operation efficiency. However, in terms of mandatory

requirements by the Office of the National Economic and Social Development Board

(NESDB), Bureau of the Budget, as well as the State Enterprise Policy Office

(SEPO), the review has shown that small scale hydropower projects were not listed in

the projects required to operate according to the mentioned requirements. The

compatibility analysis is shown in Table 4.58.

110

Table 4.58 Feasibility Consideration and Approval Processes Compatibility

Analysis


Stated

Analysis

Result


Criteria for Feasibility

Analysis (NESDB, 2012)

Projects which required approval of

Office of the National Economic and

Social Development Board (NESDB)

were state enterprise investment projects

as well as financial leasing contracts,

public investment which lead to foreign

loans, and public projects with allowed

private investment

Incompatible since

small scale hydropower

projects do not require


Economic and Social

Development Board

(NESDB) approval

- Private Investment in State

Undertaking Act B.E. 2556

Study result was required to be presented

to State Enterprise Policy Office (SEPO)

and Office of the National Economic and

Social Development Board (NESDB) to

consider before asking for approval from

the cabinet.

Incompatible since

small scale hydropower

project was not required

to follow Private

Investment in State

Undertaking Act B.E.

2556

- Manuals, descriptions and

guidelines for the royal

Decree on Criteria and

Procedures for Good

Governance, B.E.2546

(2003)

Had considered comparison between

input factors and resulting outcome. The

responsibility to gather data and analysis

feasibility fell to the Office of the National

Economic and Social Development Board

(NESDB) and Bureau of Budget

Partially compatible

since small scale

hydropower project was

not required to follow


Economic and Social

Development Board

(NESDB) criteria

- Good Governance Rating

Manual (OPDC, 2009)

Consider transparency and efficiency

in operations

Partially compatible

The analysis result of process, standard and guideline compatibility for

small scale hydropower project feasibility analysis is summarized in Table 4.59.

111

Table 4.59 Process Compatibility Analysis Result


1. Consultant

Hiring Process

- The overall consultant hiring process was compatible with guidelines stated

in laws and manuals which prioritize transparency in operations and

consideration criteria selection principles

2. Study Process - Study process was compatible with guidelines stated in laws and manuals

which prioritize transparency in study result considerations and comparison

between input factors and outcome resulting from investment

3. Feasibility

Consideration

and Approval

Processes

- Feasibility consideration and approval processes were compatible with

guidelines stated in laws and manuals in terms of comparison between input

factors and resulting outcome as well as efficiency in operations

- Small scale hydropower project was not on the list of projects requiring

approval by the Office of the National Economic and Social Development

Board (NESDB) and State Enterprise Policy Office (SEPO)

4.3 Cost Overrun and Benefit Shortfall Study

The study of cost overrun and benefit shortfall was performed by comparing

the results of project feasibility analysis with the actual result according to data from

the Study Report on master plan for the Improvement of Production Performance of

Small Hydropower Projects, and 2 detailed design projects studied by the Department

of Alternative Energy Development and Efficiency in 2015 (Department of

Alternative Energy Development and Efficiency, 2015), including other related

documents covering 21 projects from 22 projects under the Department of Alternative

Energy Development and Efficiency. Responsibility compared actual construction

cost with cost proposed in the report to analyze cost overrun as well as compare actual

electricity generated and electricity proposed in the report to analyze benefit shortfall.

The project’s detail and comparison result is shown in Table 4.60 and Table 4.61.

112

Table 4.60 Studied Small Scale Hydropower Projects

Small Scale Hydropower Project Location

Installed

Capacity

(kilowatt)

Useful

Lives

(Year)

1 Mae Kuem Luang small scale

hydropower project

A.Mae Ai, Chiang Mai 3,200 35

2 Huai Mae Phong small scale

hydropower project

A.Dok Khamtai, Phayao 860 32

3 Ai Ka Po small scale hydropower

project

A.Sukhirin, Narathiwat 200 31

4 Mae Sariang small scale

hydropower project

A.Mae Sariang, Mae Hong Son 1,250 31

5 Khereethan small scale

hydropower project

A.Makham, Chanthaburi 12,200 30

6 Mae Sap small scale hydropower

project

A.Samoeng, Chiang Mai 1,360 28

7 Bo Kaeo small scale hydropower

project

A.Samoeng, Chiang Mai 200 28

8 Mae Mao small scale hydropower

project

A.Fang, Chiang Mai 4,330 16

9 Khlong Lam Plok small scale

hydropower project

A.Yan Ta Khao, Trang 1,182 27

10 Nam Kamuen small scale

hydropower project

A.Nakhon Thai, Phitsanulok 1,030 27

11 Huai Mae Sot small scale

hydropower project

A.Mae Sot, Tak 660 27

12 Mae Had small scale hydropower

project

A.Wiang Haeng, Chiang Mai 818 27

13 Khlong Du Son small scale

hydropower project

A. Khuan Kalong, Satun 680 25

14 Huai Pa Tow small scale

hydropower project

A. Kaeng Khro, Chaiyaphum 4,500 24

15 Kiew Lom small scale hydropower

project

A.Mueang Lampang, Lampang 350 22

113


Small Scale Hydropower Project Location

Installed

Capacity

(kilowatt)

Useful

Lives

(Year)

16 Huai Lam Sin small scale

hydropower project

A.Kong Ra, Phatthalung 958 20

17 Lam Phra Phloeng small scale

hydropower project

A. Pak Thong Chai,

Nakhon Ratchasima

850 18

18 Huai Nam Khun small scale

hydropower project

A.Mae Suai, Chiang Rai 1,700 13

19 Huai Ya Mo small scale

hydropower project

A.Umphang, Tak 1,746 12

20 Mae Hong Son small scale

hydropower project

A.Mueang Mae Hong Son,

Mae Hong Son

850 44

21 Mae Tuen small scale hydropower

project

A.Omkoi, Chiang Mai 250 25

Toal 39,174

Table 4.61 Small Scale hydropower Project Cost Overrun and Benefit Shortfall

Project

Feasibility

Analysis Actual Operation

Inaccuracy

Cost Overrun Benefit Shortfall

Investment

(THB)

Electricity

(kWh/year)

Investment

(THB)

Sold

Electricity

(kWh/yr)

Investment

(THB)

% Electricity

(kWh/yr)

%

1 Mae Kuem Luang small scale

hydropower project

169.92 15.62 169.62 9.76 - 0.30 -0.17% - 5.86 -37.53%

2 Huai Mae Phong small scale

hydropower project

153.07 4.70 153.07 2.24 0 0.00% - 2.46 -52.42%

3 Ai Ka Po small scale

hydropower project

7.02 0.73 6.99 0.13 - 0.03 -0.44% - 0.60 -82.60%

4 Mae Sariang small scale

hydropower project

110.16 5.62 110.16 2.03 0 0.00% - 3.59 -63.84%

5 Khereethan small scale

hydropower project

515.85 27.00 515.85 27.21 0 0.00% 0.21 0.78%

114


Project

Feasibility


Inaccuracy


Investment

(THB)

Electricity

(kWh/year)

Investment

(THB)

Sold

Electricity

(kWh/yr)

Investment

(THB)

% Electricity

(kWh/yr)

%

6 Mae Sap small scale

hydropower project

102.15 4.80 102.15 1.76 0 0.00% - 3.04 -63.42%

7 Bo Kaeo small scale

hydropower project

9.19 1.47 9.19 0.32 0 0.00% - 1.15 -78.32%

8 Mae Mao small scale

hydropower project

407.91 9.18 407.91 6.35 0 0.00% - 2.83 -30.81%

9 Khlong Lam Plok small scale

hydropower project

48.63 5.11 48.63 3.28 0 0.00% - 1.83 -35.80%

10 Nam Kamuen small scale

hydropower project

60.49 5.04 60.49 3.33 0 0.00% - 1.71 -34.00%

11 Huai Mae Sot small scale

hydropower project

67.22 3.12 57.72 1.23 - 9.50 -14.13% - 1.89 -60.46%

12 Mae Had small scale

hydropower project

46.17 6.80 46.17 2.18 0 0.00% - 4.62 -67.91%

13 Khlong Du Son small scale

hydropower project

54.94 4.71 44.75 1.65 - 10.19 -18.55% - 3.06 -64.89%

14 Huai Pa Tow small scale

hydropower project

23.50 18.41 23.50 13.33 0 0.00% - 5.08 -27.57%

15 Kiew Lom small scale

hydropower project

21.28 1.70 21.28 0.64 0 0.00% - 1.06 -62.19%

16 Huai Lam Sin small scale

hydropower project

34.69 7.54 34.69 0.90 0 0.00% - 6.64 -88.10%

17 Lam Phra Phloeng small scale

hydropower project

36.05 3.19 36.05 0.95 0 0.00% - 2.24 -70.28%

18 Huai Nam Khun small scale

hydropower project

132.82 8.99 132.82 6.87 0 0.00% - 2.12 -23.58%

19 Huai Ya Mo small scale

hydropower project

74.73 4.53 74.73 2.19 0 0.00% - 2.34 -51.60%

20 Mae Hong Son small scale

hydropower project

20.20 6.90 20.20 - 0 0.00% - -

115


Project

Feasibility


Inaccuracy


Investment

(THB)

Electricity

(kWh/year)

Investment

(THB)

Sold

Electricity

(kWh/yr)

Investment

(THB)

% Electricity

(kWh/yr)

%

21 Mae Tuen small scale

hydropower project

40.95 1.90 40.95 0.31 0 0.00% - 1.59 -83.54%

Total 2,137 147.1 2,117 86.7 - 20.0

- 53.5

Average 101.76 7.00 100.81 4.33 - 0.91 -1.59% - 2.67 -53.90%

The analysis of small scale hydropower projects could be separated into 2

major topics: 1) Cost overrun, and 2) Benefit shortfall, as follows:

4.3.1 Cost Overrun

The analysis of cost overrun has shown that public small scale hydropower

projects had overestimated construction cost compared to actual cost by 1.59%, with

the project with the highest inaccuracy being Khlong Du Son small scale hydropower

project with -18.55% inaccuracy. The conclusion derived is that small scale

hydropower projects have little cost overrun problems due to the overestimation of

cost estimation compared to actual cost, as shown in the descriptive statistics and

frequency distribution in Table 4.62 and Figure 4.5, respectively.

Table 4.62 Descriptive Statistics of Cost Overrun Analysis

Descriptive Statistics

Mean -1.59%

Standard Deviation 5.0%

Range 18.55%

Minimum -18.55%

Maximum 0.00%

Count 21

116

Figure 4.5 Frequency Distribution of Cost Overrun

Most of the small scale hydropower projects did not have cost overrun

problems since the Department of Alternative Energy Development and Efficiency

uses a bidding / turn-key contract based on a standard price obtained from feasibility

analysis, therefore the cost proposed by the contractor will be equal to or lower than

the designated standard price. Hence, the conclusion is that Thai small scale

hydropower projects do not have cost overrun problems.

4.3.2 Benefit Shortfall

The result of benefit shortfall analysis was obtained from considering

electricity generated, since electricity data is the major factor in evaluating a project’s

benefits. The analysis shows that electricity generated was higher than electricity sold

with a 53.9% difference, with the project with the highest inaccuracy being Huai Lam

Sin small scale hydropower project, with -88.87% inaccuracy. The conclusion derived

is that small scale hydropower projects have significant benefit shortfall problems

since forecasted electricity is higher than the electricity produced that generates real

benefit. The descriptive statistics and frequency distribution is shown in Table 4.63

and Figure 4.6, respectively.

0 1 1

0

19

0 0 0

2

4

6

8

10

12

14

16

18

20

-20% -15% -10% -5% 0% 5% More

Fre

qu

en

cy

117

Table 4.63 Descriptive Statistics of Benefit Shortfall Analysis

Descriptive Statistics

Mean -53.9%

Standard Deviation 23.5%

Range 88.87%

Minimum -88.10%

Maximum 0.78%

Count 20

Figure 4.6 Frequency Distribution of Benefit Shortfall Analysis

The in-depth interviews and research on related documents pointed out 2

major causes of benefit shortfall, which were:

1) Problems During Study Process, which include 1) Limitation of data

used in calculating electricity generated, especially data related to water level at the

project sites, which was a major factor affecting electricity generation capacity, and 2)

Problems in calculating electricity, which is the project’s main benefit and was

calculated based on electricity directly generated from a generator without

considering the difference between electricity generated and electricity sold. Some of

the differences resulted from the usage of electricity generated in other activities

within the project or the model of selling electricity into the system. This created a

1

5

7

6

1

0

1

2

3

4

5

6

7

8

-88% -66% -44% -21% More0.78%

118

difference between electricity generated and electricity that actually generated benefit

according to the project’s objective.

2) Problems During Project Operation. In small scale hydropower

plants’ operational phase, after construction was finished, there were a number of

problems and obstacles which made the project unable to generate electricity

according to the designed production plan, for instance, project technical problems,

lack of personnel in the project’s maintenance and reparation, as well as production

halts to reduce social impact.

Furthermore, the analysis of a project’s benefit shortfall and other factors

has shown that the benefit shortfall level had no significant relationship with the

project’s duration, with a correlation value of -0.06 between these 2 factors, showing

that the benefit shortfall problem did not change according to the project’s study

period. However, the benefit shortfall level did significantly relate to the project’s

value, with a correlation value of 0.758 between both factors, showing that low-value

projects tend to have higher benefit shortfall problems than high-value projects. The

relational graph between the projects’ benefit shortfall with the projects’ study period

and value is shown in Figure 4.7 and Figure 4.8.

Figure 4.7 Relationships between Benefit Shortfall and Project Study Period

-38%

-52%

-83%

-64%

1%

-63%

-78%

-31% -36% -34%

-60% -68% -65%

-28%

-62%

-88%

-70%

-24%

-52%

-84%

35

32 31 31 30 28 28

16

27 27 27 27 25 24

22 20

18

13 12

25

0

5

10

15

20

25

30

35

40

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Benefit Shortfall Project Study Period

119

Figure 4.8 Relationship between Benefit Shortfall and Project’s Value

4.4 Feasibility Analysis Problem and Limitation Study

Based on the study of small scale hydropower project feasibility analysis

framework, related agency standards and guideline compatibility study results, cost

overrun and benefit shortfall study results, as well as in-depth interviews related to the

academic paper review, the small scale hydropower project feasibility analysis’

problems and limitations can be separated into 2 parts, which are 1) Methodology’s

problems and limitations, and 2) Process’ problems and limitations, with the

following details:

4.4.1 Methodology’s Problems and Limitations

The analysis result of small scale hydropower project feasibility analysis

methodology’s problems and limitations is as follows:

1) Data Limitation. Small scale hydropower project feasibility study

process must be performed with other study aspects, especially engineering and

environmental aspects. The study from various study aspects will be considered to

evaluate a project’s cost and benefit. However, the overall limitation of the study has

led to incomplete or inaccurate engineering and environmental study data which has

-38%

-52%

-83%

-64%

1%

-63%

-78%

-31% -36% -34%

-60% -68% -65%

-28%

-62%

-88%

-70%

-24%

-52%

-84%

3,200

860 200

1,250

12,200

1,360

200

4,330

1,182 1,030 660 818 680

4,500

350 958 850

1,700 1,746

250 -

2,000

4,000

6,000

8,000

10,000

12,000

14,000

-100%

-90%

-80%

-70%

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Benefit Shortfall Project’s Value

120

led to an inaccurate feasibility analysis as well. The crucial data that could create

problems or limitations in the feasibility analysis are:

(1) Water Runoff Data for Electricity Generated Estimation. The

inaccuracy of this data led to an inaccurate benefit evaluation throughout the project’s

life time. Presently, this problem is considered significant occurring in Thai small

scale hydropower project investment.

(2) Annual Operation Cost Data. Since the cost evaluation method

is still calculated based on proportional value of total cost without considering the

detail of actual cost that is about to occur, there is a high tendency that this data is

inaccurate and will lead to inaccurate estimated annual cost with respect to reality as

well as budget allocation in the project’s operation in the long run.

(3) Data of Environmental and Social Impact from Project’s

Operation. Since the environmental and socio-economic study aims to evaluate issues

and the level of resulting impacts in case the estimation cannot be clearly shown, this

can result in both positive and negative project impact evaluation by not covering

both the project’s cost and benefit. This limitation in evaluating external impact has

led to mistakes in decision making regarding natural resources and environmental

utilization and an inability to sustainably manage natural resources and the

environment.

2) Methodology Differences. A review of the study report has shown

that each report had selected assumptions, evaluated the project’s cost and benefit,

and analyzed the project’s risk differently. This makes the study unable to be

compared among other study reports for prioritizing or choosing projects directly.

3) Discount Rate Selection. The study has shown that most of the

reports had selected a discount rate differently from the 2012 Revised Manual and

Criteria for Feasibility Analysis set by the Office of the National Economic and Social

Development Board, this affected the study’s credibility and investment decisions by

not complying with standards set by the central agency and could lead to mistakes in

national budget allocation. Furthermore, the findings also show a trend in consistently

selecting a lower discount rate, which could lead to the utilization of natural resources

and environment more than necessary.

121

4) Cost Evaluation Method The cost evaluation method problem is

comprised of 2 major parts, which are 1) Conversion factor selection to convert

market price to shadow price, and 2) Project cost evaluation method, with the

following details:

(1) Conversion Factor Selection (CF) for Converting Market Price

to Shadow Price. Since most of the reports had selected a conversion factor according

to the World Bank, with reference to “Ahmed, Sadig. Shadow Prices for Economic

Appraisal of Projects : An Application to Thailand. World Bank Staff Working Paper,

No. 609.,1983.”, which has been studied ever since for 30 years. This makes the

shadow price analysis not reflect current economic conditions and true opportunity

cost of resources utilized in the operation.

(2) Project Cost Evaluation Method, The difference and variety of a

project’s negative impacts toward natural resources and the environment, as well as

limitations on data completeness and a lack of clear methods or standards stated in the

manuals has led to differences among the methods employed for environmental

evaluations in each report, which affects credibility, correctness and transparency in

performing a feasibility analysis.

5) Benefit Evaluation Method. Problems and limitations in benefit

evaluation methods can be separated into 2 issues, which are 1) Direct benefit

evaluation methods, and 2) Indirect benefit evaluation methods, with the following

details:

(1) Direct Benefit Evaluation Method. The evaluation of direct

benefit or electricity main principle employed in most of the reports and manuals are

to evaluate with a comparison to cost of electricity generation using other methods.

However, in practice, there is still ambiguity in selecting comparable energy types, for

example, most of the study reports selected gas turbine power plants using diesel fuel

by stating that this was the electricity generation method that was closest to

hydropower which was used for electricity in the peaking plant. Moreover, some

study reports had selected extra case studies by comparing with the overall national

cost of electricity generation.

On the contrary, the Manual for Planning and Feasibility Analysis of

Small and Mini Scale Hydropower Project by Department of Alternative Energy

122

Development and Efficiency created by the Department of Alternative Energy

Development and Efficiency (2015) has recommended evaluating electricity benefit

by comparing with the cost of electricity generation using other renewable energy.

The different approach leads to different study results and might pose problems in

comparing the study results among projects, including principal problems in

evaluating actual electricity generated.

(2) Indirect Benefit Evaluation Method. The data limitation and

lack of a clear method or standard has led to differences in environmental benefit

selection among the reports, which could affect credibility, correctness, and

transparency in the feasibility analysis, as well as a lack of evaluation on other

benefits, for instance, energy security benefit, and macro-economic benefit.

6) Risk Analysis. Problems and limitations on project risk analysis are

comprised of 2 topics, which are 1) Lack of risk analysis, and 2) Risk analysis method

selection, with the following details:

(1) Lack of Risk Analysis. 24% of reports did not perform a risk

analysis, which could imply that their analysis results were incomplete and could lead

to wrong decisions.

(2) Risk Analysis Method Selection. Most of the reports performed

risk analysis using sensitivity analysis by adjusting cost and benefit change from 5%

to 15% from their base case. This method has its own limitations, which include a

lack of consideration on risk probability and a cost and benefit adjustment level that

does not reflect reality, which could affect real investment by leading to wrong

decisions.

Small scale hydropower project feasibility analysis methodology’s

problems and limitations can be seen in Table 4.64.

123

Table 4.64 Small Scale Hydropower Project Feasibility Analysis Methodology’s

Problems and Limitations

Topic Problem and Limitation

Details Impact

1) Data

Limitation

- Water runoff data for evaluating electricity

generated

- Annual operating cost data

- Data of environmental and social impact

from project implementation

- Cost overrun and benefit shortfall

- Wrong decision in natural resource

and environment utilization and

unsustainable

2) Methodology

Differences

- Difference in assumption selection, cost

and benefit evaluation method as well as

risk analysis

- Unable to compare study result

among projects

3) Discount

Rate

Selection

- Discount rate selection doesn’t comply

with manual, guideline, and criteria set by

Office of the National Economic and

Social Development Board

- Discount rate has a declining trend

- Affects study result credibility and

mistakes in budget allocation

- Over-investment and over-

utilization of natural resources

4) Cost

Evaluation

Method

- Conversion factor selected doesn’t reflect

current economic status

- Variety and lack of standard in cost

evaluation method

- Doesn’t reflect true opportunity

cost of the resource

- Affects credibility, correctness,

and transparency in feasibility

analysis

5) Benefit

Evaluation

Method

- Ambiguity in selecting energy to be

compared for electricity evaluation

- Variety and lack of standard in indirect

benefit evaluation method

- Lack of energy security benefit and macro-

economic impact

- Unable to compare study result

among projects

- Affects credibility, correctness,

and transparency in feasibility

analysis

- Doesn’t reflect every project

benefit

6) Risk

Analysis

- 24% of reports did not perform risk

analysis

- Lack of consideration on risk probability

- Level of change in cost and benefit did not

reflect reality

- Affects risk in real investment

- Leads to wrong decisions

124

4.4.2 Process Problems and Limitations

The analysis of small scale hydropower project feasibility analysis process’

problems and limitations has the following details:

1) Consultant Qualification Set. The consultant hiring process has set

the qualification of economist responsible for feasibility analysis, but there is no

standard or professional license for this qualification, which is different from an

engineering consultant, which requires the consideration of a license for professional

practice which indicates professional engineering qualifications and capability on

various levels. This could be considered a problem for the whole country, not just

small-scale hydro power project studies, since, presently, Thailand does not require

the economic profession to be a controlled professional occupation or monitored from

a public agency or professional organization.

2) Scope of Work Selection. The scope of work for hiring a consultant

does not clearly indicate the scope of economic work, which could lead to an

analyst’s interpretation that is different from the employer’s intention, as well as lead

to a study result which doesn’t comply with the objective and general analysis

guideline.

3) Study Report Acceptance. In the small scale hydropower project

study report acceptance process, there could be a problem regarding differences

between economic analysis methodology by an analyst and the acceptance

committee’s understanding or opinion, since some processes of study might employ

complicated methodology or a variety of assumption selections. Without attempting

to reach a resolution based on academic correctness, this problem could affect the

study framework and lead to inaccuracies in the study results.

4) Feasibility Analysis Consideration and Approval Process. Currently,

small scale hydropower project feasibility analysis consideration and approval still

lacks control on quality and correctness of the feasibility analysis from an external

agency or neutral organization with no stake in investment decisions, which could

affect investment risk and implementation transparency.

Small scale hydropower project feasibility analysis process’ problems

and limitations are shown in Table 4.65.

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Table 4.65 Small Scale Hydropower Project Feasibility Analysis Process’ Problems

and Limitations

Topic Problem and Limitation

Details Impact

- Consultant

Qualification Set

- Lack of standard or economic

provisional license

- Affects quality and credibility

of study result

- Scope of Work

Selection

- Lack of clear detail on scope of work - Study result might not

comply with objective and

general analysis guideline

- Study Report

Acceptance

- Difference in opinion regarding

methodology between analyst and

acceptance committee

- Affects methodology

selection and correctness of

study result

- Feasibility Analysis

Consideration and

Approval Process

- Lack of quality and correctness control

from external agency

- Affects investment risk and

implementation transparency

The study result of small scale hydropower project feasibility analysis

problems and limitations, both the methodology and process, has shown that small

scale hydropower project feasibility analysis based on Cost-Benefit Analysis (CBA)

still can’t be truly used as a decision tool for policy or investment decisions due to

various limitations, for instance, the evaluation’s inability to completely reflect

impacts, both positive and negative, toward the economy, society, and natural

resources and environment, lack of a clear standard or guideline in selecting

assumptions which can be used as mutual standards in Cost-Benefit Analysis (CBA),

both at the organizational level and project level, as well as analysis inaccuracy from

technical limitations, analyst bias, and lack of study quality control mechanisms.

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4.5 Feasibility Analysis Framework Development

The results of small scale hydropower plant feasibility analysis framework

development analysis can be separated into 2 parts, which are 1) Feasibility analysis

methodology development, and 2) Feasibility analysis process development, with the

following details:

4.5.1 Feasibility Analysis Methodology Development

The problems and limitations study, as well as related study data, could lead to

methodology development guidelines for Thai small scale hydropower project

feasibility analysis, as follows:

1) Development Guideline for Data Limitation Problems are proposed

in 2 parts as follows:

(1) Impact from data limitation, which affects the analysis on

project cost and benefit but could be mitigated via a risk analysis by considering

related risk factors, for instance, electricity generated and annual operating cost.

These risk factors should be used in comparison with projects with similar features,

either in the past or present, by considering compatibility of the project’s scale,

technology and geography. Later on, there should be an analysis on probability for

each level of risk using a Monte Carlo Simulation.

(2) Impact from data limitation which affects economic impact

evaluation could be mitigated by clearly selecting guidelines or standards to evaluate

the impact in each topic which covers real impact that occurs in order to be able to

utilize the data for evaluation and analysis of investment feasibility that reflects reality

as much as possible.

2) Development Guideline for Methodology Difference Solution.

There should be clear guidelines or standards in selecting a methodology in each topic

or base case which every project must analyze in order to be able to compare

feasibility analysis results among projects.

3) Development Guide Line for Discount Rate Selection Problem. The

discount rate selection for small scale hydropower projects should be selected based

on a single standard which selects the minimum amount set by the Office of the

127

National Economic and Social Development Board at 9% – 12% for the benefit of

being able to compare with other projects, either among the department, ministry, and

overall government, in order to make decisions to utilize the national budget in project

development with transparency and fairness, as well as allocating national resource

with efficiency and are suitable in a development context for each period.

4) Development Guideline for Cost Evaluation Method Problems can

be proposed in 2 parts, as follows:

(1) There should be consideration on the method for converting

construction cost from market price to shadow price, which is more accurate and

current than using the conversion factor set by the World Bank in 1983. The proposed

method is to adjust by directly deducting tax from the construction cost, which makes

the resulting project’s construction cost able to reflect resource opportunity cost more

accurately and up to date than using the mentioned conversion factor.

(2) There should be clear guidelines or standards for the cost

analysis method, both the cost item selection and evaluation method themselves,

which covers environmental and social impacts resulting from project development,

for instance, forest degradation, environmental change from storing water, change in

residents’ occupations and lifestyle, as well as development of an evaluation method

suitable for cost items which result from impact on natural resources and

environmentalal change. The selection of an environmental impact evaluation method

should be considered based on academic accuracy and any inaccuracy resulting from

limitations on the data used in the study.

5) Methodology for Benefit Evaluation Method Problems are proposed

in 2 parts as follows:

(1) Project’s Direct Benefit Evaluation.

The evaluation of a project’s direct benefit or electricity by

comparing to the cost of electricity generation using other methods should consider

academic accuracy by analyzing opportunity cost or the true value of electricity of the

base case that the project is replacing. This can be compared in 3 cases, as follows:

a) Case 1: Comparison with overall national cost of electricity

generation with the base assumption that electricity generated by the small scale

hydropower project would be sent into the national electricity grid, therefore it should

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be compared with the average cost of electricity generation from every other energy,

for instance, natural gas, coal, renewable energy or hydropower, including electricity

purchased from neighboring countries.

b) Case 2: Comparison with the cost of electricity generation in

peak load times, with the base assumption that hydropower generation was operated

in the same manner as electricity generated using a gas turbine power plant which

uses diesel fuel, therefore the comparison could be done by comparing it with the cost

of electricity generation using diesel as the comparative price, which will result in

higher electricity value per unit than a comparison with the overall national cost of

electricity generation.

c) Case 3: Comparison with the cost of electricity generated

using other renewable energy with the base assumption that the government has

already selected a policy to generate electricity by renewable energy as mandatory for

national electricity generation, therefore the comparison could be done by comparing

with the cost of electricity generation using other renewable energy, for instance, solar

power.

However, after consideration based on the “with and without”

principle, or a comparison of outcomes between cases had the project occurred or not

occurred, the small scale hydropower project’s direct benefit should be evaluated like

case 1, which is a comparison with the overall national cost of electricity generation

since electricity generated by a small scale hydropower project would be sent into the

national electricity grid and increase or decrease the average cost of electricity

generation depending on the project’s cost of electricity generation.

(2) Project’s Indirect Benefit Evaluation. The indirect benefit, or

benefit toward the economy, society, and environmental evaluation of the

methodology’s guidelines or standards, should be clearly selected, especially in terms

of benefit toward energy security and electricity stability resulting from dependency

on domestic electricity and reduction of risk from power drops or power outages. This

benefit evaluation must be performed in accordance with an engineering study in

order to figure out the quantitative data of risk in lower energy or macro-economic

benefits, which is an indirect benefit of small scale hydropower projects.

129

6) Development Guidelines for Risk Analysis Problems should focus

on the development of the process and new indexes which cover risk factors that

could affect analysis inaccuracy by developing a risk analysis method using a data

base of inaccuracies from analyses in past projects, which is the application of

Reference class forecasting and Monte Carlo Simulation in feasibility analysis. The

analysis result on types of indexes can be separated into 2 groups, as follows:

(1) Investment Decision Indexes are indexes that can be clearly

used as criteria for investment decisions, since there already exists decision criteria

which is internationally accepted or set by a central agency. These indexes are:

a) Average Net Present Value (A-NPV), which is the average

of Net Present Value obtained by a number of randomized analyses using Monte

Carlo Simulation. This analysis has already considered the risk factor and probability

of risk. The preferred feasibility project is the one with an analysis result higher than

0. Furthermore, this approach could also be used with other indicators, for instance,

the Average Internal Rate of Return (A-IRR), Average Benefit Cost Ratio

(A-BCR).

b) Risk Acceptable Net Present Value (R-NPV) is the

consideration of Net Present Value (NPV) with acceptable probability, for instance, a

selected probability at the 95% level and considered NPV at this certain level,

meaning that there is a 95% chance to receive a net income higher than the calculated

level, or there is a 5% chance to receive a net income lower than the calculated level.

The Guidelines for the Economic Analysis of Projects (2017) by the Asian

Development Bank (ADB) states that probability lower than 5% resulting in NPV

lower than 0 is considered very low risk and is an acceptable risk. This analysis could

also be used with other indexes, for instance, Risk Acceptable Internal Rate of Return

(R-IRR) or Risk Acceptable Benefit Cost Ratio (R-BCR).

(2) Decision Support Indexes are indexes that cannot be clearly

used as decision criteria since the decision criteria is still selected based on the

opinion or risk acceptance capability of the investor. These indexes will indicate the

risk data of an investment, which leads to a decision of whether to invest or not by

selecting decision criteria that is suitable to each investor. These indexes are as

follows:

130

a) Probability in which Net Present Value (NPV) equals 0 is

the consideration of probability at the statistical confidence level in which NPV

equals 0, that is, the break-even point for the project or the level where the project

has a present value of benefit equal to that of the cost.

b) Present Value of Value at Risk (VaR) is the consideration

of present value of the highest loss that could occur using the analysis based on Monte

Carlo Simulation, which considers risk that could reduce benefit or increase cost at

the maximum level.

c) Probability of Profit is the consideration of probability or

statistical confidence level which NPV is more than 0 or probability in which project

is investment feasible.

d) Probability of Loss is the consideration of probability or

statistical confidence level in which NPV is lower than 0 or the probability that the

project is not investment feasible.

e) Profit-Loss Probability Ratio (Profit Loss Ratio: PLR) is

the ratio which shows the Risk Likelihood by comparing the ratio of Probability of

Profit and Probability of Loss. The analysis result will be based on the obtained ratio.

PLR equals 1 means that the project has a probability to face loss that equals the

probability to face profit, PLR less than 1 means that the project has a high risk to

face loss since its probability to face loss is higher than its probability to face profit.

On the other hand, PLR higher than 1 means that the project has a low risk to face

loss since the probability to face loss is less than the probability to face profit. The

equation can be shown as follows:

f) Present Value of Average Loss and Present Value of Cost

Ratio (Loss Cost Ratio: LCR) is the ratio showing the impact from a risk event toward

the investor (Risk Impact) by comparing the ratio between present value of average

=

Profit-Lost Probability Ratio (PLR) Probability of Profit

Probability of Lost

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loss, that is the average of net present value with value exclusively lower than 0,

which is the average of loss which might occur with present value of average cost,

which includes construction cost, cost from the project’s impact, and annual projected

cost throughout the project’s duration. If LCR is higher than 1, the project has loss

equal to cost, meaning the investor will lose all investment to the project’s operation.

Furthermore, a higher LCR shows higher risk impact toward the project compared

with lower LCR. The equation can be shown as follows:

g) Degree of Risk is the risk assessment of the project in the

form of a risk assessment matrix which shows the relationship between the probability

of risk event (Risk Likelihood) and the level of impact from the risk event (Risk

Impact). The risk likelihood can be calculated from the Profit Loss Ratio (PLR), while

risk impact can be calculated from the Loss Cost Ratio (LCR). An example of the

calculation and level of separation of risk likelihood and risk impact are shown in

Figure 4.9 and Figure 4.10.

Figure 4.9 Risk Likelihood

=

Present Value of Average Loss

And Present Value of Cost Ratio

(Loss Cost Ratio: LCR)

Present value of average loss

Present value of cost

132

Figure 4.10 Risk Impact

The evaluation of risk likelihood and risk impact will lead to

analysis in the form of a risk assessment matrix which can indicate the degree of risk

that could occur on 5 levels, each of which can be given meaning in Figures 4.11 and

4.12.

Very

High Medium High

Very

High

Very

High

Very

High

High Low Medium High High Very

High

Medium Very

Low Low Medium High

Very

High

Low Very

Low Low Low Medium High

Very

Low

Very

Low

Very

Low

Very

Low Low Medium

Very

Low Low Medium High

Very

High

Figure 4.11 Risk Assessment Matrix

Risk Impact

Risk Likelihood

133

Degree of

Risk Meaning

Very High Not investable since there is very high probability for impact

High Not investable since there is high probability for impact

Medium Not investable The data analysis should be reviewed and further risk

management framework is needed

Low Investable by selecting a higher risk management framework

Very Low Investable

Figure 4.12 Meanings for Degree of Risk

From these 2 groups of indexes, there are 2 crucial indexes that

could be selected and used as criteria for investment decisions, these are 1) Risk

Acceptable Net Present Value (R-NPV), and 2) Degree of Risk. The project that is

feasible for investment should have a study result which passes the criteria of both 2

mentioned indexes, meaning that the project is feasible for investment by having a

risk of loss or impact of loss at the low or very low level. However, decision criteria

for indexes related to the project’s risk could be adjusted to be suitable for project

features, investment policy, or each organization’s risk management.

The development guideline to solve problems and reduce

limitations of small scale hydropower project feasibility analysis methodology can be

seen in Table 4.66.

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Table 4.66 Summary of Development Guidelines to Solve Problems and Reduce

Limitations of Small Scale Hydropower Project Feasibility Analysis

Methodology

Problem

Topic

Details

of Problems and Limitations Development Guideline

1) Data

Limitation

- Water runoff data for evaluating

electricity generated

- Annual operating cost data

- Data of environmental and social

impact from project implementation

- Analyze cost overruns and benefit

shortfalls

- Select guidelines or standards in

evaluating impacts in each topic clearly

and covering real impact

2) Methodology

Differences

- Differences in assumption selection,

cost and benefit evaluation methods,

as well as risk analysis

- Clearly select study guidelines or

standards in evaluating impact in each

topic clearly

3) Discount

Rate

Selection

- Discount rate selection did not

comply with manual, guideline, or

criteria set by Office of the National

Economic and Social Development

Board

- Discount rate had declining trend

- The selected discount rate should be

within the criteria set by the Office of

the National Economic and Social

Development Board, which is between

9% - 12%

4) Cost

Evaluation

Method

- Conversion factor selected did not

reflect current economic status

- Variety and lack of standard in cost

evaluation method

- The adjustment should be done by

directly deducting tax from the

construction cost

- Clearly select guideline or standard in

evaluation which covers real impact

5) Benefit

Evaluation

Method



- Variety and lack of standard in

indirect benefit evaluation method

- Lack of energy security benefit and

macro-economic impact


evaluation which covers real benefit

135


Problem

Topic

Details

of Problems and Limitations Development Guideline

6) Benefit

Evaluation

Method



- Variety and lack of standard in

indirect benefit evaluation method

- Lack of energy security benefit and

macro-economic impact


evaluation which covers real benefit

7) Risk

Analysis

- Some reports did not perform risk

analysis

- Lack of consideration on risk

probability

- Sensitivity analysis used level of

change in cost and benefit which did

not reflect reality


risk analysis

- Apply Reference class forecasting and

Monte Carlo Simulation in feasibility

analysis by further considering risk

index

4.5.2 Feasibility Analysis Process Development

The small scale hydropower project feasibility analysis process development

focuses on developing accuracy and transparency in public agency operations, as well

as support for development related to solution guidelines and reduces feasibility

analysis methodology limitations, with the following details:

1) Development Guideline for Consultant Qualification Problem and

Limitation. Based on the problem of lacking a standard or economic professional

license, there should be assurance of a professional standard for economic academics

in order to control and maintain the quality and standard of the study result. The

standard of qualification for academics should be suitable for the type of studied

project, pass an academic capability test, and determine ethical standard selection as

well as punishment when mistakes or lack of academic standards or ethics is found.

2) Development Guideline for Scope of Work Limitation Problems.

Based on the problem of a lack of clear detail on the scope of work, the details on the

methodology should be clearly stated by considering the study objective and other

136

aspects of the study, for instance, the project’s components, site selection, selection of

cost and benefit items that cover all actual positive and negative impacts. In doing so,

there should be the development of a standard manual with details specific to small

scale hydropower projects. By requiring that the study must include the base case

according to the manual, and performing further study in other cases if required, this

will be beneficial in comparing study results among projects.

3) Development Guideline for Report Acceptance Limitation Problem.

Based on the problem of differences in opinion regarding methodology between the

analyst and acceptance committee, as well as a variety of methodology selections,

there should be development of a standard in feasibility analysis which complies with

a present project development context. Since the small scale hydropower project

feasibility analysis framework selected in the present still lacks a clear method on

many topics, for instance, cost and benefit item selection, and cost and benefit

evaluation method, which affects the problem such that the analysis is different

according to the analyst’s and the acceptance committee’s opinions, there should be

the selection of an academically accurate standard, as well as modern and clear

methods in the guidelines to make the study results credible and beneficial for

decisions.

4) Development Guideline for Feasibility Consideration and Approval

Process Problem.

Based on the problem of lacking quality and accuracy assurance

from an external agency, there are 3 proposals of development.

(1) Development of Mechanism for Checking Accuracy and

Transparency of Study Result.

Since the present small scale hydropower project feasibility analysis

is checked only at the acceptance level, it poses a weakness toward problems

regarding risk in actual operations or operation transparency. There should be extra

external agencies or committees participating in the feasibility analysis acceptance

process before approving an investment budget. This checking process should not

only be performed on the report acceptance process, but should be a whole other

feasibility analysis in order to compare study results.

137

(2) Development of Database for Tracking Operating Result.

Related personnel and agencies should consistently track the operation of the project

already invested in by selecting a list of items with the same standard in every project

by considering the benefit of analyzing, planning, and adjusting implementation of

other projects in the future. The example of recommended items that should be

collected for a base of analysis according to the Reference class forecasting method

includes electricity generated, contractor construction costs, annual operating cost,

data for environmental impact assessment during the construction and operational

phases, and the usage life of project components.

(3) Promotion of Joint Venture between Public and Private Sector.

At present, the Private Investment in State Undertaking Act B.E. 2556, has allowed

the private sector to jointly invest with the public sector, which is one of the

mechanisms to check study result accuracy, since the private sector is more focused

on results of feasibility analysis and risk analysis. Furthermore, joint ventures

between the public and private sectors generate benefit by reducing the burden on

government budgets and increasing efficiency in project management in the long-run.

The development guideline to solve problems and reduce limitations of

the small scale hydropower project feasibility analysis process can be seen in Table

4.67.

Table 4.67 Summary of Development Guidelines to Solve Problems and Reduce

Limitations of the Small Scale Hydropower Project Feasibility Analysis

Process

Problem

Topic

Details

of Problem and Limitation Development Guideline

- Consultant

Qualification Set

- Lack of standard or economic

provisional license

- Assurance of professional

standard for economic academics

- Scope of Work

Selection

- Lack of clear detail on scope of

work

- Clear statement of details on

methodology in the form of

manual and base case study

138


Problem

Topic

Details

of Problem and Limitation Development Guideline

- Study Report

Acceptance

- Difference in opinion regarding

methodology between analyst

and acceptance committee

- Quality selection for feasibility

analysis

- Feasibility Analysis

Consideration and

Approval Process

- Lack of quality and correctness

control from external agency

- Development of mechanism for

checking accuracy and

transparency of study result

- Development of database for

tracking operating result

- Promotion of joint venture

between public and private sector

139

CHAPTER 5

SMALL SCALE HYDROPOWER FEASIBILITY ANALYIS

From the recommendations for small scale hydro-project feasibility analysis

framework development, the example of feasibility analysis according to the

recommended framework using Reference Class Forecasting and Monte Carlo

Simulation to consider a feasibility analysis index can be illusatrated with 3 case

studies, which are

1) Case 1: Project with very high risk

2) Case 2: Project with medium risk

3) Case 3: Project with low risk

In the analysis example for each case, the selected cost and benefit data will

have different values by adjustment based on data of the project from past study

reports, with the following details:

5.1 Assumption Selection

5.1.1 Project Duration Selection

The project duration selected is 30 years (excluding the construction phase of

2 years) based on the usage life of components in small scale hydropower as follows:

1) Civil work 30 years

2) Electronic equipment and machine 25 years

3) Hydrology equipment 20 years

4) Electrical Cable 30 years

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5.1.2 Discount Rate Selection

The discount rate selected is 10% with consideration of criteria set by the

Office of the National Economic and Social Development Board which has stated its

rate of 9% - 12%.

5.2 Project Cost Analysis

5.2.1 Project Cost Item Selection

Small scale hydropower project cost items can be separated into 4 parts, which

are 1) Investment cost 2) Operating and maintenance cost 3) Replacement cost, and 4)

Impact toward forest degradation, with the following details:

1) Investment Cost, which includes site preparation cost, impact

monitoring cost, water diversion cost, hydrology equipment cost, electronic equipment

and machine cost, electric cable cost, consulting and control engineer cost, and

contingency cost.

2) Operating and Maintenance Cost is the cost occurring in the

operational phase which starts in the third year of the project and is the period after

the construction is finished and it’s ready to generate electricity.

3) Replacement Cost is comprised of installation cost for equipment,

which reaches its useful life before the end of the project operation period and

includes hydrology equipment replacement cost, and electronic machine replacement

cost.

4) Impact toward Forest Degradation. The engineering study on site

selection and environmental impact study has shown that project development requires

forest clearing which also incurs indirect costs for the project.

5.2.2 Project Cost Evaluation

From the mentioned hydropower project cost items, the cost evaluation

method could be separated into 2 parts as follows:

1) Direct Cost Evaluation comprises investment cost, operating and

maintenance cost, and replacement cost by deducting value added tax of 7% from

141

each item, and customs duty of 5% for imported electronic equipment and machines,

to convert price to economic price.

2) Indirect Cost Evaluation evaluates the impact from forest

degradation by comparing with the cost of reforestation to replace lost forest area,

which the Royal Forest Department has stated costs 2,875 Baht/rai (Royal Forest

Department, 2016), and comparing that with the carbon and forest nutrition storing

value at 301 Baht/rai (Somchai Nongnuang, Ampai Pornleesangsuwan, Saroj

Wattanasuksakul, Pongsak Chattecha, & Worapoj Khambai, 2017, p. 1).

The direct and indirect cost evaluation leading to the project’s financial

and economic cost in 3 cases is shown in Table 5.1

Table 5.1 Project Financial and Economic Cost

Unit: million baht

Item

Case 1 Case 2 Case 3

Finance Economic Finance Economic Finance Economic

1. Investment Cost 404.40 374.81 444.84 412.29 283.08 262.37

2. Annual operating and maintenance

cost 3.30 3.06 3.63 3.36 2.31 2.14

3. Machine and Equipment

Replacement Cost 206.49 189.85 227.14 208.83 144.54 132.89

4. Value of deforest Degradation in

Project Site - 0.76 - 0.83 - 0.53

5.3 Project Benefit Analysis

5.3.1 Project Benefit Item Selection

The small scale hydropower project benefit item selection can be separated

into 2 parts, which are:

5.3.1.1 Direct Benefit is the electricity generated, which is the

resulting benefit according to the project’s main objective. The detail in each case is

as follows:

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1) Case 1. Project has the installed capacity of 2,952.00

kilowatts and is able to generate annual electricity of 14.30 million units (kilowatt-

hours).



hours).



hours).

5.3.1.2 Indirect Benefit is the greenhouse gas emission reduction,

since electricity generation from a small scale hydropower project does not release

greenhouse gasses that affects global warming, unlike electricity generated from fossil

fuel. Therefore, it could be said that electricity generated by a small scale hydropower

project could replace electricity generated by fossil fuel by reducing greenhouse gas

emissions.

5.3.2 Benefit Evaluation

5.3.2.1 Direct Benefit Evaluation. Electricity evaluation can be

performed by comparison with the overall national cost of electricity generation,

which is calculated using the wholesale price of electricity that the Electricity

Generating Authority of Thailand has sold to the Provincial Electricity Authority and

Metropolitan Electricity Authority. The average price in 2016 was 2.60 Baht per unit

(Metropolitan Electricity Authority, 2017) and, after adjusting to the economic price

using a distortion adjustment factor (0.9918) stated by the Department of Alternative

Energy Development and Efficiency (2017), results in an electricity benefit of 2.58

Baht per unit.

5.3.2.2 Indirect Benefit Evaluation. Evaluation of benefit from the

reduction in greenhouse gas emissions of small scale hydropower projects with a

comparison to other methods of electricity generation uses a comparison with the

carbon credit price traded under the Clean Development Mechanism (CDM) by the

United Nations Framework Convention on Climate Change (UNFCCC). The carbon

credit during 3rd

July to 7th

July 2017 was 0.2 Euros per ton of carbon (Euro exchange

143

rate at 39,98 THB/EUR on 13th

September 2016, Bank of Thailand, 2017).

Furthermore, a summary report of the greenhouse gas emission coefficient in 2010

(Thailand Greenhouse Gas Management Organization, 2011) stated that 1 unit of

electricity generated (average from every type) by the Electricity Generating

Authority of Thailand woild create 0.5113 kilograms of carbon dioxide (CO2). The

computation with Baht value per ton of carbon has shown that 1 unit of electricity

generated by a small scale hydropower project has a benefit value from greenhouse

gas emission reduction of 0.004 Baht, compared with the overall national cost of

electricity generated.

Small scale hydropower project economic benefit evaluation will be

performed with data on the probability of inaccuracy in past analyses of electricity

generated, which is part of using the Reference Class Forecasting and Monte Carlo

Simulation in feasibility analysis.

5.4 Investment Feasibility Analysis using Reference Class Forecasting

and Monte Carlo Simulation

The analysis of feasibility index using Reference Class forecasting and Monte

Carlo Simulation will use data of inaccuracy of past feasibility analyses and analyze

feasibility by randomizing related factors according to a probability distribution over

the selected duration of time. The study of past analysis inaccuracy has shown that

small scale hydropower projects have a high benefit shortfall while having low cost

overrun, which is insignificant in risk analysis. Therefore, this study has chosen to

perform a risk analysis only in the part of the benefit shortfall.

This study’s benefit analysis will calculate project benefit, which is electricity

generated with a random value of benefit shortfall, calculated 10,000 times under a

normal distribution with the mean of shortfall being -53.9% and standard deviation of

23.5%. The generated electricity calculated from each randomization will be used to

calculate the electricity benefit and environmental benefit, which will be used in the

Cost-Benefit Analysis (CBA), 10,000 times. The major considered indexes are as

follows:

144

5.4.1 Investment Decision Indexes were comprised of 1) Average Net

Present Value (A-NPV), and 2) Risk Acceptable Net Present Value (R-NPV) at 95%

probability according to guidelines stated in the Guidelines for the Economic Analysis

of Projects (2017) by the Asian Development Bank (ADB). However, this study also

selected an extra acceptable risk level at 80% probability to clearly illustrate the

example of analysis.

5.4.2 Decision Support Indexes are comprised of 1) Probability of Net

Present Value (NPV) equals to 0, 2) Present value of value at risk (VaR), 3)

Probability of Profit, 4) Probability of Loss, 5) Profit-Loss Probability Ratio or Profit

Loss Ratio (PLR), 6) Present value of average loss and present value of cost ratio, or

Loss Cost Ratio (LCR), and 7) Degree of Risk.

Selecting a table for small scale hydropower project Cost-Benefit Analysis

(CBA) shows the results from Table 5.2 to Table 5.4.

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Table 5.2 Small Scale Hydropower Project Cost and Benefit Analysis Table for Case 1

Installed Capacity 2,952.00 kilowatt Project Economic Cost benefit 20 ขาย

Electricity 14.30 mil. unit / year Construction Cost 374.81 mTHB

Project Duration 30 years Operating and Maintenance Cost 3.06 mTHB/year

Construction Period 2 years Forest Degradation 0.76 mTHB

Project Benefit Economic Analysis Result

National Cost of Electricity Generation 2.58 THB/kWh Discount Rate 10% 11% 12%

Electricity Generation Benefit 36.88 mTHB/year EIRR 6.60% 6.60% 6.60%

Environmental Benefit 0.004 THB/kWh NPV (mTHB) -86.24 -103.60 -118.40

Environmental Benefit Value 0.06 mTHB/year B/C Ratio 0.77 0.72 0.67

ต้นทนุพลงังานไฟฟ้า : (บาท/หน่วย) 3.36 3.61 3.87

mTHB

Year Investment Operation& Forest Total Cost Total Net

Maintenance Degradation Electricity Environment Benefit Benefit

1 254.87 - 0.76 255.63 - - - 255.63-

2 119.94 - - 119.94 - - - 119.94-

3 - 3.06 - 3.06 36.88 0.06 36.94 33.88

4 - 3.06 - 3.06 36.88 0.06 36.94 33.88

5 - 3.06 - 3.06 36.88 0.06 36.94 33.88

6 - 3.06 - 3.06 36.88 0.06 36.94 33.88

7 - 3.06 - 3.06 36.88 0.06 36.94 33.88

8 - 3.06 - 3.06 36.88 0.06 36.94 33.88

9 - 3.06 - 3.06 36.88 0.06 36.94 33.88

10 - 3.06 - 3.06 36.88 0.06 36.94 33.88

11 - 3.06 - 3.06 36.88 0.06 36.94 33.88

12 - 3.06 - 3.06 36.88 0.06 36.94 33.88

13 - 3.06 - 3.06 36.88 0.06 36.94 33.88

14 - 3.06 - 3.06 36.88 0.06 36.94 33.88

15 - 3.06 - 3.06 36.88 0.06 36.94 33.88

16 - 3.06 - 3.06 36.88 0.06 36.94 33.88

17 - 3.06 - 3.06 36.88 0.06 36.94 33.88

18 - 3.06 - 3.06 36.88 0.06 36.94 33.88

19 - 3.06 - 3.06 36.88 0.06 36.94 33.88

20 - 3.06 - 3.06 36.88 0.06 36.94 33.88

21 - 3.06 - 3.06 36.88 0.06 36.94 33.88

22 - 3.06 - 3.06 36.88 0.06 36.94 33.88

23 130.30 3.06 - 133.36 36.88 0.06 36.94 96.42-

24 - 3.06 - 3.06 36.88 0.06 36.94 33.88

25 - 3.06 - 3.06 36.88 0.06 36.94 33.88

26 - 3.06 - 3.06 36.88 0.06 36.94 33.88

27 - 3.06 - 3.06 36.88 0.06 36.94 33.88

28 59.55 3.06 - 62.60 36.88 0.06 36.94 25.67-

29 - 3.06 - 3.06 36.88 0.06 36.94 33.88

30 - 3.06 - 3.06 36.88 0.06 36.94 33.88

31 - 3.06 - 3.06 36.88 0.06 36.94 33.88

32 - 3.06 - 3.06 36.88 0.06 36.94 33.88

SUM 564.66 91.68 0.76 657.09 1106.34 1.75 1108.10 451.00

NPV(10%) 349.50 23.81 0.69 374.00 287.31 0.46 287.77 -86.24

NPV(11%) 341.98 21.56 0.68 364.23 260.22 0.41 260.63 -103.60

NPV(12%) 335.29 19.62 0.68 355.59 236.81 0.38 237.19 -118.40

Benefit

146









Environmental Benefit 0.004 THB/kWh NPV (mTHB) 523.84 446.39 379.72



mTHB



1 280.36 - 0.83 281.19 - - - 281.19-

2 131.93 - - 131.93 - - - 131.93-

3 - 3.36 - 3.36 119.85 0.19 120.04 116.68

4 - 3.36 - 3.36 119.85 0.19 120.04 116.68

5 - 3.36 - 3.36 119.85 0.19 120.04 116.68

6 - 3.36 - 3.36 119.85 0.19 120.04 116.68

7 - 3.36 - 3.36 119.85 0.19 120.04 116.68

8 - 3.36 - 3.36 119.85 0.19 120.04 116.68

9 - 3.36 - 3.36 119.85 0.19 120.04 116.68

10 - 3.36 - 3.36 119.85 0.19 120.04 116.68

11 - 3.36 - 3.36 119.85 0.19 120.04 116.68

12 - 3.36 - 3.36 119.85 0.19 120.04 116.68

13 - 3.36 - 3.36 119.85 0.19 120.04 116.68

14 - 3.36 - 3.36 119.85 0.19 120.04 116.68

15 - 3.36 - 3.36 119.85 0.19 120.04 116.68

16 - 3.36 - 3.36 119.85 0.19 120.04 116.68

17 - 3.36 - 3.36 119.85 0.19 120.04 116.68

18 - 3.36 - 3.36 119.85 0.19 120.04 116.68

19 - 3.36 - 3.36 119.85 0.19 120.04 116.68

20 - 3.36 - 3.36 119.85 0.19 120.04 116.68

21 - 3.36 - 3.36 119.85 0.19 120.04 116.68

22 - 3.36 - 3.36 119.85 0.19 120.04 116.68

23 143.33 3.36 - 146.69 119.85 0.19 120.04 26.65-

24 - 3.36 - 3.36 119.85 0.19 120.04 116.68

25 - 3.36 - 3.36 119.85 0.19 120.04 116.68

26 - 3.36 - 3.36 119.85 0.19 120.04 116.68

27 - 3.36 - 3.36 119.85 0.19 120.04 116.68

28 65.50 3.36 - 68.86 119.85 0.19 120.04 51.18

29 - 3.36 - 3.36 119.85 0.19 120.04 116.68

30 - 3.36 - 3.36 119.85 0.19 120.04 116.68

31 - 3.36 - 3.36 119.85 0.19 120.04 116.68

32 - 3.36 - 3.36 119.85 0.19 120.04 116.68

SUM 621.12 100.85 0.83 722.80 3595.62 5.70 3601.32 2878.52

NPV(10%) 384.46 26.19 0.76 411.40 933.76 1.48 935.24 523.84

NPV(11%) 376.18 23.72 0.75 400.65 845.70 1.34 847.04 446.39

NPV(12%) 368.81 21.59 0.75 391.15 769.65 1.22 770.87 379.72

Benefit

147









Environmental Benefit 0.004 THB/kWh NPV (mTHB) 903.66 800.58 711.71



mTHB



1 178.41 - 0.53 178.94 - - - 178.94-

2 83.96 - - 83.96 - - - 83.96-

3 - 2.14 - 2.14 149.36 0.24 149.59 147.45

4 - 2.14 - 2.14 149.36 0.24 149.59 147.45

5 - 2.14 - 2.14 149.36 0.24 149.59 147.45

6 - 2.14 - 2.14 149.36 0.24 149.59 147.45

7 - 2.14 - 2.14 149.36 0.24 149.59 147.45

8 - 2.14 - 2.14 149.36 0.24 149.59 147.45

9 - 2.14 - 2.14 149.36 0.24 149.59 147.45

10 - 2.14 - 2.14 149.36 0.24 149.59 147.45

11 - 2.14 - 2.14 149.36 0.24 149.59 147.45

12 - 2.14 - 2.14 149.36 0.24 149.59 147.45

13 - 2.14 - 2.14 149.36 0.24 149.59 147.45

14 - 2.14 - 2.14 149.36 0.24 149.59 147.45

15 - 2.14 - 2.14 149.36 0.24 149.59 147.45

16 - 2.14 - 2.14 149.36 0.24 149.59 147.45

17 - 2.14 - 2.14 149.36 0.24 149.59 147.45

18 - 2.14 - 2.14 149.36 0.24 149.59 147.45

19 - 2.14 - 2.14 149.36 0.24 149.59 147.45

20 - 2.14 - 2.14 149.36 0.24 149.59 147.45

21 - 2.14 - 2.14 149.36 0.24 149.59 147.45

22 - 2.14 - 2.14 149.36 0.24 149.59 147.45

23 91.21 2.14 - 93.35 149.36 0.24 149.59 56.24

24 - 2.14 - 2.14 149.36 0.24 149.59 147.45

25 - 2.14 - 2.14 149.36 0.24 149.59 147.45

26 - 2.14 - 2.14 149.36 0.24 149.59 147.45

27 - 2.14 - 2.14 149.36 0.24 149.59 147.45

28 41.68 2.14 - 43.82 149.36 0.24 149.59 105.77

29 - 2.14 - 2.14 149.36 0.24 149.59 147.45

30 - 2.14 - 2.14 149.36 0.24 149.59 147.45

31 - 2.14 - 2.14 149.36 0.24 149.59 147.45

32 - 2.14 - 2.14 149.36 0.24 149.59 147.45

SUM 395.26 64.17 0.53 459.97 4480.70 7.11 4487.80 4027.84

NPV(10%) 244.65 16.67 0.48 261.80 1163.61 1.85 1165.46 903.66

NPV(11%) 239.39 15.09 0.48 254.96 1053.87 1.67 1055.54 800.58

NPV(12%) 234.70 13.74 0.47 248.91 959.10 1.52 960.62 711.71

Benefit

148

From the randomized benefit shortfall of small scale hydropower projects and

Cost-Benefit Analysis (CBA) performed 10,000 times, the statistical value of Net

Present Value (NPV) can be seen in Table 5.5 and a histogram for showing the

distribution of NPV in the 3 cases can be seen from Figures 5.1 to 5.3.

Table 5.5 Analysis Result of Net Present Value (NPV)

Net Present Value (NPV) Case 1 Case 2 Case 3

Mean (million THB) - 242.02 20.02 269.34

Median (million THB) - 241.33 23.37 267.96

Standard Deviation 68.07 223.35 275.68

Minimum (million THB) -518.43 - 845.68 - 825.69

Maximum (million THB) 53.87 922.27 1,265.65

Number of Analysis 10,000 10,000 10,000

Figure 5.1 Net Present Value (NPV) Analysis Result Histogram for Case 1

NPV (mTHB)

Average Net Present Value (A-NPV) - 242.02 mTHB

Present value of value at risk (VaR) 518.43 mTHB

149



NPV (mTHB)

NPV (mTHB)

Average Net Present Value (A-NPV) 20.02 mTHB


Average Net Present Value (A-NPV) 269.34 mTHB


150

Based on the analysis result of statistical value of Net Present Value (NPV)

from 10,000 times of Cost-Benefit Analysis (CBA), the lowest value of Average Net

Present Value (A-NPV) and Present value of value at risk (VaR), or Net Present

Value (NPV), for each case is as follows:

1) Case 1 had Average Net Present Value (A-NPV) of -242.02 million

Baht, equivalent to an Internal Rate of Return (IRR) of -4.21% and Present value of

value at risk (VaR) of -518.43 million Baht.

2) Case 2 had Average Net Present Value (A-NPV) of 20.02 million

Baht equivalent to an Internal Rate of Return (IRR) of 10.65% and Present value of


3) Case 3 had Average Net Present Value (A-NPV) of 269.34 million

Baht equivalent to an Internal Rate of Return (IRR) of 21.70% and Present value of


This data could also be used for analyzing accumulated probability of

Net Present Value (NPV) at each level and shown in a relational graph between NPV

and the probability to actually occur, according to study results and analysis results in

the indexes from Figure 5.3 to Figure 5.6.

The criteria for levels of risk likelihood and risk impact are shown in

Figure 5.7 and Figure 5.8. The meaning for degree of risk and its analysis method

using a risk assessment matrix are also shown, from Figure 5.9 to Figure 5.12.

The result of feasibility index analysis and risk analysis in the 3 cases is

shown in Table 5.6.

151

Figure 5.4 Relational Graph between Net Present Value (NPV) and Probability for Case 1


NPV mTHB

Probability

-349.34

95.00%

0.00 0.02%

99.98%

0.02%

NPV

mTHB

Probability

-330.18

95.00%

56.65%

43.35%

0.00

56.65%

80.00%

-293.72

-150.6

80.00%

152


Figure 5.7 Criteria for Level of Risk Likelihood

NPV mTHB

Probability

-156.46

95.00%

0.00

80.00%

59.11

85.61% 14.39%

85.61%

53.84%

153

Figure 5.8 Criteria for Level of Risk Impact

Degree of

Risk Meaning

Very High Not investable since there is very high probability for impact

High Not investable since there is high probability for impact

Medium Not investable The data analysis should be reviewed and further risk

management framework is needed

Low Investable by selecting a higher risk management framework

Very Low Investable

Figure 5.9 Meanings for Degree of Risk

154

Figure 5.10 Evaluation of Degree of Risk for Case 1


155


156

Table 5.6 Feasibility Analysis Results using Reference Class Forecasting and Monte

Carlo Simulation

Index Analysis Result

Case 1 Case 2 Case 3

1) Investment Decision Index

1.1) Average Net Present Value (A-NPV) (mTHB) - 242.02 20.02 269.34

1.2) Risk Acceptable Net Present Value (R-NPV)

- Net Present Value at 95% Probability (mTHB) - 349.34 - 330.18 -156.46

- Net Present Value at 80% Probability (mTHB) - 293.72 - 150.60 59.11

2) Decision Support Index

2.1) Probability of Net Present Valiue (NPV)

equals or more than 0 (Break-Even Point)

0.02% 56.65% 85.61%

2.2) Present value of value at risk(VaR) (mTHB) - 518.43 -845.68 - 825.69

2.3) Probability of Profit 0.02% 56.65% 85.61%

2.4) Probability of Loss 99.98% 43.35% 14.39%

2.5) Profit Loss Ratio (PLR) 0.00 1.31 5.95

- Level of Profit Loss Ratio (PLR) Very High Medium Very Low

2.6) Loss Cost Ratio (LCR)

- Present value of average loss (mTHB) 242.05 172.02 145.99

- Present value of cost (mTHB) 374.00 411.40 261.80

- Loss Cost Ratio (LCR) 0.65 0.42 0.56

- Level of Loss Cost Ratio (LCR) High Medium Medium

2.7) Degree of Risk Very High Medium Very Low

5.5 Feasibility Analysis Result Summary

From the analysis result using Reference Class Forecasting and Monte Carlo

Simulation done before, the summary of analyses on the major feasibility index

analysis of each case is as follows:

157

5.5.1 Summary of Feasibility Analysis for Case 1

The Risk Acceptable Net Present Value (R-NPV) is less than 0, which does

not pass the feasibility criteria for investment at both 95% and 80% probability. As

for the risk analysis result, the project has very high risk, which means it should not

be invested in since there is very high probability of loss and impact toward the

investor. The analysis result is shown in Table 5.7.

Table 5.7 Feasibility Analysis Result Summary for Case 1

Index Analysis

Result Meaning

1) Risk Acceptable Net Present Value (R-NPV)

Does not pass feasibility

criteria (NPV < 0)

- Net Present Value at 95% Probability (mTHB) - 349.34


2) Degree of Risk Very high

risk

Should not be invested in

since the probability to

create impact is very high


The Risk Acceptable Net Present Value (R-NPV) is less than 0 which does not

pass the feasibility criteria for investment at both 95% and 80% probability. As for the

risk analysis result, the project has medium risk, which means it should not be

invested in yet, but there should be a review in the analysis data, especially in the

issues that affect the project’s risk, for instance, electricity expected to generate, then

the feasibility analysis should be performed and reconsidered before making a

decision. The analysis result is shown in Table 5.8.

158


Index Analysis

Result Meaning


Does not pass feasibility

criteria (NPV < 0)



2) Degree of Risk Medium

risk

Should not be invested in

yet.

Further analysis data review

and risk management

framework are needed


The Risk Acceptable Net Present Value (R-NPV) is less than 0 which does not

pass the feasibility criteria for investment at 95% probability, but passes the criteria at

80% probability. As for the risk analysis result, the project has low risk, which means

it is feasible for investment and has low risk. However, since the project does not pass

the Risk Acceptable Net Present Value at 95% and only passes at 80%, it is the

investor’s role to decide whether this level of risk is acceptable. The analysis result is

shown in Table 5.9.


Index Analysis

Result Meaning


Pass feasibility criteria

(NPV < 0)

At 80% probability

- Net Present Value at 95% Probability (mTHB) -156.46

- Net Present Value at 80% Probability (mTHB) 59.11

2) Degree of Risk Low

Risk

Investable

CHAPTER 6

SUMMARY, DISCUSSION, AND RECOMMENDATIONS

From the data analysis on The Study of Thailand Infrastructure Development

Feasibility Analysis: Small Scale Hydropower Plant Case Study, the research result,

discussion and recommendations can be summarized as follows:

6.1 Summary

The research summary is separated into 4 topics according to the study

objectives with the details on each topic as follows:

6.1.1 Feasibility Analysis Framework Summary

Based on study objective #1) To study a smalls scale hydropower project

feasibility analysis framework, the study result can be summarized into 2 parts,

namely, the 1) Methodology framework, and 2) Process framework, with the

following details:

6.1.1.1 Methodology Framework Study Result Summary

The study result of methodology framework for Thailand small scale

hydropower project feasibility analysis can be summarized as follows:

1) General Information has shown that most of the small

scale hydropower projects were owned by a public agency, the Department of

Alternative Energy Development and Efficiency, Ministry of Energy, Ministry of

Energy (DEDE), who hired a consulting firm to perform the study with every report

conforming to the study according to economic methodology.

2) Assumption Selection shows that the duration selected

was between 30 and 50 years, with 77% of the projects having selected a project

duration of 30 years according to the project’s major components. The discount rates

160

selected were between 6.0% and 12.0% with the majority selecting 8.0%, there was

also a declining trend of discount rate from 1987 to 2016.

3) Cost Analysis shows that the majority of reports selected

1 cost item, which was the project construction cost. However, some reports also

considered other cost items, for instance, environmental cost, forest degradation cost,

and compensation cost. Furthermore, in terms of the economic evaluation method of

construction cost, most of the reports employed the adjustment conversion factor set

by the World Bank and evaluated annual expense by using a percentage estimation

from total expense.

4) Benefit Analysis has shown that the majority of reports

selected 2 benefit items, electricity benefit and greenhouse gas emissions reduction

benefit. In other reports, there was also evaluation on other benefit items, for instance,

fishery benefit, tourism benefit, or agricultural benefit. In terms of evaluation method,

most of the reports evaluated electricity benefit using a comparison with the cost of

electricity generation using diesel fuel and evaluated greenhouse gas emissions

reduction benefit using a comparison with the carbon credit market price.

5) Feasibility Index has shown that the majority of reports

considered 4 feasibility indexes, the Economic Internal Rate of Return (EIRR), Net

Present Value (NPV), Benefit-Cost Ratio (B/C Ratio), and Average Incremental Cost

(AIC).

6) Risk Analysis has shown that the majority of reports had

performed risk analysis using sensitivity analysis, with switching value analysis being

the second-most popular method, 24% of reports had not performed any risk analysis.

6.1.1.2 Process Framework Study Result Summary

The study result of process framework for Thailand small scale

hydropower project feasibility analysis can be summarized as follows:

1) Consultant Hiring Process Framework. The study result

on the consultant hiring process framework is comprised of 3 major parts, as follows:

(1) Consultant Qualification Specification shows that

there was a required qualification for academics performing feasibility analysis to be

economic specialists with a master’s degree on Economics and 15 years of experience

after graduation from their bachelor’s degree, with at least 5 years’ experience in

161

performing economic and financial feasibility analysis on projects with similar

features. As for the organization, it stated that the organization had to be registered

with the Consultant Database Center, Public Debt Management Office and Ministry

of Finance.

(2) Scope of Work and Deliverable Selection shows that

the economic work scope tended to be broad, which was to perform feasibility

analysis. As for deliverables, there was a mention of both report and computer

information delivery.

(3) Consultant Selection shows that consultants enrolling

in the selection process must submit a proposal for the agency which is comprised of

documents stating the consultant’s qualifications, technical proposal, conception

detail, methodology, implementation plan, and cost proposal. The committee will then

consider the consultant’s qualifications, skills and experience, concept and

methodology, and implementation plan. A consultant passing the technical criteria

will then be considered in terms of the cost proposal and negotiated with to reach an

appropriate cost.

2) Study Process Framework The study result on the small

scale hydropower project feasibility analysis process comprises 2 parts, which are as

follows:

(1) Study Process shows that the study of investment

feasibility analysis framework is part of the feasibility analysis with the engineering

study as the core study. The economic study has its role in design of an alternative

analysis, selecting the project’s detail, and investment feasibility analysis. Moreover,

economic study will comply with engineering, environmental and social studies, and

in the case that the project is investment infeasible, there will be joint revision in

every part of the study to reach the best study result.

(2) Study Report Acceptance shows that the study report

acceptance framework will be operated according to the order of reports delivered.

The committee will consider the completeness of work as well as academic

correctness of the study in each field. As for economic work, the focus will be on the

assumption selection, electricity benefit evaluation and investment feasibility analysis

result.

162

3) Project Feasibility Consideration and Approval Process

Framework shows that after the committee has accepted the study, the project will be

put in an annual plan to ask for budget approval in hiring a contractor for project’s

construction as the next process. Mostly, this process will be performed within the

agency without further inspection from other external agencies.

6.1.2 Feasibility Analysis Standard and Guideline Compatibility Study

Summary

Based on study objective #2) to study the standards and guideline

compatibility of small scale hydropower plant feasibility analysis, the study result is

summarized into 2 parts, namely, 1) Methodology standard and guideline

compatibility, and 2) Process standard and guideline compatibility, with the following

details:

6.1.2.1 Methodology Standard and Guideline Compatibility

The study result of feasibility analysis methodology standard and

guideline compatibility can be summarized as follows:

1) Assumption Selection shows that the project durations

selected were compatible with the manual by the Department of Alternative Energy

Development and Efficiency (DEDE). However, the discount rates selected were not

compatible with the manual by the Office of the National Economic and Social

Development Board.

2) Cost Analysis has shown that cost item selection was

compatible with guidelines set by the manuals. For direct cost or construction cost,

the economic cost had been evaluated using a conversion factor, while external

impact evaluation had been evaluated using environmental economics techniques.

However, the annual cost evaluation was not compatible with many manuals, which

had stated analyses using methods of comparison with actual cost of present or past

projects.

3) Benefit Analysis has shown that most of the reports were

compatible with manuals in evaluating electricity benefit by using a comparison with

the cost of electricity generation by other methods and indirect benefit, for instance,

greenhouse gas emissions reduction using environmental evaluation techniques.

163

However, there was still a lack of macro-economic and energy security benefit

evaluations as recommended by many manuals.

4) Feasibility Index has shown that Thailand’s small scale

hydropower projects had performed feasibility index analyses compatible with every

manual compared.

5) Risk Analysis has shown that the majority of Thailand’s

small scale hydropower projects had performed a risk analysis compatible with most

manuals recommending the use of sensitivity analysis. However, the risk analysis

using Monte Carlo Simulation, Probability analysis and Real option recommended by

some manuals could not be found.

6.1.2.2 Process Standard and Guideline Compatibility

The study result of process standard and guideline compatibility

analysis on Thailand’s small scale hydropower project feasibility analyses can be

summarized as follows:

1) Consultant Hiring Process has shown that the overall

process was compatible with guidelines stated in laws and manuals which prioritize

operation transparency and consideration criteria selection.

2) Study Process has shown that the study process was

compatible with guidelines stated in various laws and manuals which prioritize

operation transparency in study result consideration and comparison between input

factors and results from investment.

3) Feasibility Consideration and Approval Process has

shown that the processes were compatible with guidelines stated in various laws and

manuals in terms of comparison consideration among input factors, resulting

outcomes and operation efficiency. However, there was no further study result

inspection from external agencies since the projects were not listed among the

projects required for approval from the Office of the National Economic and Social

Development Board, Bureau of the Budget, as well as the State Enterprise Policy

Office.

164

6.1.3 Inaccuracy, Difficulty and Limitations Summary

Based on study objective #3) to study inaccuracy, difficulty and limitations of

small scale hydropower plant feasibility analysis, the study result can be summarized

into 3 parts, namely, 1) Cost overrun and benefit shortfall study, 2) Methodology’s

problems and limitations, and 3) Process’ problems and limitations, with the

following details:

6.1.3.1 Cost Overrun and Benefit Shortfall Study

The study result of cost overrun and benefit shortfall is comprised of 2

parts as follows:

1) Cost Overrun Analysis Result has shown that small scale

hydropower project cost was overestimated more than actual cost by 1.59% on

average. The conclusion is that the small scale hydropower project study did not have

a problem of cost overrun since during the project development phase, the agency had

the process of the bidding / turn-key contract, in which the contractor proposed cost

based on a standard price designated from the feasibility analysis result.

2) Benefit Shortfall Analysis Result has shown that the

generated electricity evaluated was overestimated more than actual electricity

generated by 53.9% on average. The conclusion is that the small scale hydropower

project had significant benefit shortfall problems. The main cause of the problem was

the limitation of data used in estimating electricity generated, project technical

problems, lack of personnel in the project’s maintenance and reparation, as well as

production halts to reduce social impact. Furthermore, the study also showed that

projects with low investment value tended to have higher benefit shortfall problems

than ones with high investment value.

6.1.3.2 Methodology’s Problems and Limitations

The study result of methodology’s problems and limitations can be


1) Data Limitation comprises water runoff data for

electricity generated, annual operation cost data, and data of environmental and social

impact from the project’s operation, which affects cost overrun and benefit shortfall,

which could lead to wrong decisions in utilizing natural resources and the

environment.

165

2) Methodology Difference comprises differences in

assumption selection, cost and benefit evaluation method, and risk analysis method.

This makes the study unable to be compared with results among other study reports.

3) Discount Rate Selection shows that most of the reports

had selected a discount rate incompatible with the manual by the Office of the

National Economic and Social Development Board, with a consistent downward trend

which affects the study’s credibility and investment decisions, mistakes in national

budget allocation, and overutilization of natural resources.

4) Cost Evaluation Method has shown that most of the

reports had selected a conversion factor calculated in 1983, which did not reflect

current economic conditions or true opportunity cost of resources. Furthermore, there

were also differences and variety in the project cost evaluation methods which

affected credibility, correctness and transparency in performing the feasibility

analysis.

5) Benefit Evaluation Method has shown that each report

had selected an energy type for the electricity value comparison and indirect benefit

evaluation method differently and without a standard. This posed problems in

comparing study results among projects, affecting accuracy and transparency of the

feasibility analysis. Furthermore, many reports also lacked an evaluation on energy

security benefits and macro-economic benefits, making the analysis unable to reflect

every benefit generated by the project.

6) Risk Analysis shows that 24% of the reports did not

perform a risk analysis. Also, the risk analysis, presently, has issues in selecting an

adjusting level of cost and benefit, not reflecting reality and lacking in consideration

of risk probability, which could affect real investment leading to wrong decisions.

6.1.3.3 Process Problems and Limitations

The study result of the process’ problems and limitations can be


1) Consultant Qualification Selection. Presently, Thailand

still lacks a standard or economic provisional license to assure professional work

quality, both academically and ethically, which could affect quality and credibility of

study results.

166

2) Scope of Work Selection. There is no clear detail on the

scope of work for economic study, which could make for noncompliance with

objective and general analysis guidelines.

3) Study Report Acceptance has shown that, in certain

cases, there could be problems regarding differences between economic analysis

methodology by the analyst and the acceptance committee, which could affect study

framework selection and lead to inaccuracy of study results.

4) Feasibility Analysis Consideration and Approval Process

has shown that, currently, small scale hydropower project feasibility analysis

consideration and approval still lacks inspection on quality and correctness from an

external agency, which could affect investment risk and implementation

transparency.

6.1.4 Feasibility Analysis Framework Development

Based on study objective #4) To develop small scale hydropower plant

feasibility analysis framework, the study result could be summarized into 2 parts,

namely, 1) Feasibility analysis methodology development, and 2) Feasibility analysis

process development, with the following details:

6.1.4.1 Feasibility Analysis Methodology Development

The study result of development framework to solve problems and

reduce limitations in small scale hydropower project feasibility analysis methodology

can be summarized as follows:

1) Development Guideline for Data Limitation Problem is

risk analysis using a comparison with projects with similar features, either in the past

or present, and analysis on probability for each level of risk using Reference class

forecasting and Monte Carlo Simulation, as well as clearly selecting guidelines or

standards to evaluate real impact occurred.

2) Development Guideline for Methodology Difference

Problem. There should be clear guidelines or standards in selecting methodology on

each topic or base case, which every project must analyze to be able to compare

feasibility analysis results among projects.

167

3) Development Guideline for Discount Rate Selection

Problem. The discount rate selected should be selected based on a single standard

which complies with the standard set by the Office of the National Economic and

Social Development Board.

4) Development Guideline for Cost Evaluation Method

Problem. The proposed method is adjustment by directly deducting tax from the

construction cost to make resource opportunity cost more accurate and up to date.

There should also be a clear guideline or standard for the cost analysis method.

5) Development Guideline for Benefit Evaluation Method

Problem. There should be consideration of academic accuracy in evaluating energy

benefit by comparing with the overall national cost of electricity generation.

Furthermore, there should be clear selection of a standard in selecting the

methodology for evaluation of indirect benefits or resulting benefits toward the

economy, society and environment.

6) Development Guideline for Risk Analysis Problem. There

should be application using Reference class forecasting and Monte Carlo Simulation

with important indexes being 1) Risk Acceptable Net Present Value (R-NPV), and 2)

Degree of Risk.

6.1.4.2 Feasibility Analysis Process Development

The study result of development guidelines to solve problems and

reduce limitations on small scale hydropower project feasibility analysis is as follows:

1) Development Guideline for Consultant Qualification

Problems and Limitations. There should be assurance of a professional standard

suitable for the type of project, academic capability, ethical standards, as well as

punishment.

2) Development Guideline for Scope of Work Limitation

Problem. There should be clear methodology as well as a standard manual with detail

specific to small scale hydropower projects.

3) Development Guideline for Report Acceptance Limitation

Problem. There should be the selection of academically accurate standards which

comply to the present project development context.

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4) Development Guideline for Feasibility Consideration and

Approval Process Problem. There should be an extra external agency or committee

participating in the feasibility analysis acceptance process before approving the

investment budget and consistent tracking of the operation of projects already

invested in.

5) Promotion of Joint Venture between Public and Private

Sector is to be used as a mechanism to check study result accuracy and reduce the

burden on the government budget while increasing efficiency in project management

in the long-run.

6.2 Discussion

The discussion of study results of The Study of Thailand Infrastructure

Development Feasibility Analysis: Small Scale Hydropower Plant Case Study is

comprised of a 1) Discussion on target selection and public management framework,

2) Discussion on methodology and public management tools, and 3) Discussion on

Thailand’s renewable energy development, with the details as follows:

6.2.1 Discussion on Target Selection and Public Administration

Framework

Based on a conceptual framework on efficiency, feasibility, and resource

sustainability, which is one of the crucial targets and guides for public administration

under the principle and concept of governance, new public management, and

sustainable development, the summary from comparison analysis between the target

and this framework of public administration is as follows:

1) Thailand Public Administration Efficiency. Thailand’s small scale

hydropower feasibility analysis is one of the implantation processes geared toward

efficiency in public administration. Related agencies have performed according to the

necessary laws, namely, the Royal Decree on Criteria and Procedures for Good

Governance, B.E.2546 (2003), which states that the agency must perform a feasibility

analysis in public operations as well as require the feasibility analysis to comply with

169

the 2012 Revised Manual and Criteria for Feasibility Analysis by the Office of the

National Economic and Social Development Board. Furthermore, the agency also

prioritizes feasibility analysis for small scale hydropower by creating the Manual for

Planning and Feasibility Analysis of Small and Mini Scale Hydropower Project,

which states the criteria and methodology for economic feasibility analysis for

operation of the agency and consultant, which complies with the concept of efficiency

under good governance in new public management.

However, Thailand’s small scale hydropower project feasibility

analysis still has some weaknesses or limitations affecting the fulfillment of targets on

efficiency and feasibility in public operations, which is an ambiguity of the Cost-

Benefit Analysis (CBA) methodology, since each project could choose a different

methodology according to the analyst’s or acceptance committee’s opinion.

Furthermore, the investment approval process still lacks an inspection mechanism

from an external agency, which could affect correctness in the methodology selection

or result in inaccuracy, as seen in benefit shortfalls of small scale hydropower project

studies, since the actual electricity generated was only 53.9% of the electricity stated

in the study reports, affecting feasibility in real investment which could cause

problems achieving the target of feasibility and efficiency in their budget utilization.

2) Natural Resource and Environmental Sustainability. From the

principle and guideline of sustainability development, there is a requirement for

public investment to thoroughly consider advantages and disadvantages toward the

economy, society, and environment. Thailand’s small scale hydropower project

feasibility analysis has the study process complying with this guideline, which is to

select an economic analysis method to consider the value of cost and benefit, both

direct and indirect, resulting from the project’s development for feasibility analysis.

However, in practicality detail, there is still a number of impacts not evaluated, or

evaluated with a variety of methods, which could be resulting from limitations on data

or methodology, which complies with a study results from Jones, Moura, and

Domingos (2014, pp. 402-403), which described a weakness of Cost-Benefit Analysis

in the environmental impact assessment issue such that it could not be clearly

evaluated, and thus possessed high uncertainty. Furthermore, this problem could

result from negligence in evaluation by the analyst, which complies with the opinion

170

of Adis Israngkura na Ayudhya (2010, p. 26), who stated that negligence of

environmental impact assessment was an excuse for neglecting a negative impact

calculation, leading to a return rate higher than reality, which could cause the project

analysis to be based on data not reflecting true opportunity cost or benefit, leading to

unsustainable development.

Small scale hydropower project framework development guidelines, to

fulfill a target with efficiency, feasibility in public operations, and sustainable

development, is to select a clear study guideline or pattern and enforce every project

to be studied in the same pattern as the base case for the benefit of comparison among

projects and reduce the use of judgment or personal opinion from analysts or

committees in selecting the methodology, strict regulations or measures in checking a

consultants’ qualifications, and punishment or responsible action for study results in

case of mistake. These guidelines comply with a proposal by Flyvbjerg (2009), which

states that there should be punishment selected for an analysis with mistakes, to

reduce the problem of analyst bias and mistakes, as well as mandatory study result

inspections from other external agencies, which also complies with a proposal by

Pawin Siriprapanukul and Yos Vajragupta (2013, para. 9) proposing the establishment

of a budget analysis agency, independent from management, to inspect for correctness

and credibility of the study results from feasibility analysis in public investment.

6.2.2 Discussion on Methodology and Public Management Tools

Based on the conceptual framework on public method and management

tools using Cost-Benefit Analysis (CBA), Thailand small scale hydropower project

feasibility analysis has, overall, selected methodology in compliance with Cost-

Benefit Analysis following the economic analysis framework which is appropriated

with public decision making in developing projects requiring consideration on impact,

both positive and negative, toward economic, social, and environmental contexts.

However, in terms of methodology details, there are still issues that create trouble or

limitation affecting public decisions in project investment as follows:

1) Discount Rate Selection. Discount rate selection in Thailand small

scale hydropower projects has the problem of differences among projects, as well as

rates that do not comply to criteria set by the Office of the National Economic and

171

Social Development Board. Furthermore, the findings also show that analysis in each

report had a tendency to consistently select a lower discount rate, which could result

from changes in financial opportunity cost in an economy which had declined over

time, or could also be one of the tools to distort the feasibility analysis result (Adis

Israngkura na Ayudhya, 2010, p. 25).

However, the principle in selecting an appropriate discount rate is still

a topic for debate in the academic sector, for instance, consideration of financial

opportunity cost used in investment, consideration of the discount rate according to a

project’s expected period to receive benefit (Adis Israngkura na Ayudhya, 2010,

p. 25), as well as selection of a social discount rate. Furthermore, after considering

this study result, the most used discount rates were 8% while the rate stated by the

Office of the National Economic and Social Development Board was 9 – 12%, which,

with comparison with commercial bank lending interest rates, was higher, for

instance, Bangkok Bank’s MLR, at 19th

January 2018, was 6.25% (Bank of Thailand,

2018).

Since the selected discount rate affects the feasibility analysis result, a

project analysis with a lower discount rate will have higher feasibility than an analysis

with a lower rate, there is a need to have appropriate discount rate selection. A

concrete solution is to clearly select a discount rate specific to each project’s type,

with consideration for the present economic context, enforced as a base case in every

project.

2) Project Cost and Benefit Analysis. Thailand’s small scale

hydropower projects have considered projects’ costs and benefits, both direct and

indirect, by applying environmental economic principle and theory in the evaluation,

which complies with a proposal by Adis Israngkura na Ayudhya (2010, p. 62) stating

that feasibility analysis should measure project impact rather than output. However,

there is a notice that public feasibility analysis tends to focus on evaluating benefits

outside the market system to justify investments which are hard to inspect, this cost

and benefit evaluation also has problems and limitations affecting the fulfillment of a

target on efficiency, feasibility in public operation, and sustainable development,

which, with differences in evaluation techniques used, was an issue on the

completeness of the cost and benefit items evaluated. As well, conversion of the

172

market price to shadow price using a Conversion Factor (CF) did not reflect the

present economic context since the study result shows that most of the reports used

the Conversion Factor by the World Bank, arrived at in 1983, with reference to a

document named Shadow prices for economic appraisal of projects: an application to

Thailand (English). Staff working paper; no. SWP 609. Washington, D.C.: The World

Bank. (S.; EM1; AHMED, S.*EM1., 1983.), as shown in Appendix C, which has been

used for 35 years now without reviewing whether this conversion factor is still

relevant in the present economic context.

The crucial problem found in this study is that small scale hydropower

project studies had a benefit shortfall, since electricity actually generated was only

53.9% of electricity stated in the study report, which complies with the study result

of Flyvbjerg (2009), stating that 208 projects from 14 countries around the world, or

90% of the studied projects, faced the problem of over-evaluating benefit by 50 –

84% of actual benefit. Furthermore, this study also finds that low-value projects tend

to have a benefit shortfall problem more than high-value ones, which reflects a

pattern of public administration that prioritizes the size of the budget, in other words,

projects with large budgets have better management and oversight mechanisms. This

benefit shortfall problem results from various causes, for instance, limitations from

selecting assumptions or data in evaluating project benefit, risk of an event affecting

the project’s actual operation to not be able to generate electricity as planned, or the

analyst’s attempt to increase the project’s productivity or benefit, which could be

either intentional or unintentional. However, this cost overrun problem is not found in

small scale hydropower projects due to the contractor hiring process, since standard

price is the mechanism to transfer risk on the project’s cost to the contractor.

3) Risk Analysis. Regarding the problem of benefit shortfall and

findings on lacking of consideration probability in changing risk factors in the risk

analysis methodology, this study proposes the application of Reference class

forecasting and Monte Carlo Simulation, which complies with a proposal by Salling

(2013) recommending feasibility analysis under various risk factors use Monte Carlo

Simulation. Furthermore, this study also proposes risk analysis under a number of

indexes obtained by considering feasibility probability under risk, which are Risk

Acceptable Net Present Value (R-NPV) and Degree of Risk. These analysis methods

173

and indexes could be applied to investments in every type of project, especially

infrastructure development with similar risk factors and study inaccuracies, this

complies with the feasibility analysis manuals of crucial agencies, for instance, the

World Bank (2015), Asian Development Bank (2017), and European Commission

(2014).

The development of feasibility analysis tools and measurements, as

well as risk analysis, is a crucial topic in achieving the target of public administration

efficiency. Future development guidelines should focus on accuracy and ability to

support the investor’s decisions in the future, especially decisions under the principle

of High risk –High return, in order to prioritize making decisions with a Low risk –

High return feature. Furthermore, there should be the application of risk analysis tools

in other forms to support investment decisions, for instance, Real option analysis

techniques for making decisions on development of projects with step-wise features,

or analyzing investment choices which comply with proposals by the World Bank

(2015) in risk analysis. However, the development of tools or measurements should

consider the tools’ limitations resulting from cost in an analysis employing

complicated methods or large scales of data, making the tools not suitable in actual

operation. The appropriate approach is to develop analysis tools in the form of a

packaged program for the analyst to utilize easily and be able to use on other projects

with similar features.

As for the proposal in using joint-ventures between the public and

private sector for small scale hydropower project development to reduce public risk,

the proposal complies with Priemus (2010), who proposed the use of Public Private

Partnership (PPPs) mechanisms for investment in infrastructure projects, and is

recommended.

6.2.3 Discussion on Thailand Renewable Energy Development

The discussion on Thailand renewable energy development is comprised of 1)

Discussion on policy development, and 2) Discussion on implementation

development to create movement on Thailand renewable energy development that

complies with a framework on public administration, with governance and efficiency,

leading to sustainable development, with the following details:

174

1) Discussion on Policy Development. Policy development for

Thailand’s renewable energy is in need of having a clear strategic goal, especially the

consideration of significant renewable energy development in pushing economic

development as an important factor of production. Significant to commercial

competitive competency in various dimensions are effects toward the cost of

production and transportation. As well, in the renewable energy industry, there is

creating economic added value from products or equipment for producing renewable

energy in response to domestic and international demand. Moreover, renewable

energy is also significant for social and environmental development in terms of

improving citizens’ quality of life in accessing infrastructure for living, development

distribution, work creation, as well as environmentally friendly development.

International factors are also crucial for selecting a Thailand

development framework, for instance, the global direction in developing renewable

energy development which will affect global renewable energy development as a

whole. Renewable energy investment from a country with high economic influence,

for example, development of the solar cell industry in China, has led to a reduction of

solar panel prices on the global market. The direction of change in the global oil

production industry affects fuel price, the major competitor of the renewable energy

sector. Renewable energy development support from international agencies or

organizations provide criteria selection for project investment financial support by

international organizations, for instance, the World Bank or Asian Development Bank

(ADB), as well as environmental conservation trends related to trade-restrictive

measures and selection of mechanisms or measures related to greenhouse gas

emission reduction. Therefore, the selection of a direction and development

framework for Thailand’s renewable energy development framework must consider

compatibility with national strategic goals in every aspect by having a policy selection

system performed under a checks and balances mechanism in public administration

using democratic processes with a focus on public participation and a parliamentary

inspection mechanism to check policy appropriateness in terms of target, process and

budget in order to reach governance in public administration on energy.

The policy selection by public sector to support Thailand renewable

energy development in order to achieve these strategic goals requires a clear selection

175

of support measures, especially consideration of the public sector’s role in selecting

the objective to develop citizen social welfare, especially support for economic

expansion, development distribution, economic equality, energy security, as well as

fair competition promotion in the energy sector. In terms of renewable energy

investment promotion, the public sector could use various tools, for instance,

knowledge support, technology transfer, investment promotion, or a premium in

electricity purchase price.

This study on feasibility analysis framework is specific to economic

feasibility analysis, which is the consideration as to whether the project invested in

will generate benefit for the country more than the cost utilized, and lead to a public

decision as to whether or not to invest in the project. However, besides economic

analysis, there should also be financial feasibility analysis, which is analysis from the

private sector perspective prioritizing profit generated from revenue from electricity

sold, and use the study result from both aspects to select a framework to support

project development according to the analysis result in each case, as follows:

Case 1: Project is feasible both economically and financially, meaning

that the project is beneficial for national development and could be developed under a

commercial competition mechanism in a normal market system. The public sector

action is to encourage the private sector in this investment by reducing the investment

limitations, both legally and by promotion of fair competition.

Case 2: The project is feasible economically, but not financially,

meaning that the project is beneficial for national development, but could not be

developed under commercial competition mechanisms in a normal market system.

The public sector action is to encourage the private sector in this investment using

investment from the public sector or support from the private sector to have

investment feasibility, for instance, investment budget support, or selection of Feed-in

Tariff (FiT) from renewable energy.

Case 3: The project is infeasible, both economically and financially,

meaning that the project is not beneficial for national development and could not be


The public sector action is to support technological development to reduce the cost of

176

production or increase energy generation efficiency to make the project investment

feasible in the future.

Case 4: The project is infeasible economically, but feasible financially,

meaning that the project is not beneficial for national development, but could be


The public sector action is to regulate the business and reduce negative impact toward

the nation by using various measures, for instance, increase of tax, creation of law to

enforce entrepreneurs to have preventive measures for the impact.

2) Discussion on Implementation Development. The crucial issue in

Thailand renewable energy development in terms of implementation is integration

among the implementing agencies since, presently, renewable energy development

has the scope covering energy that could be renewed continuously from nature, such

as solar energy, wind energy, hydropower, with the objective to replace fossil fuel

energy utilization, which is non-renewable energy and creates a negative impact

toward the environment. Therefore, public sector action in renewable energy

development tends to be broad to cover a variety of energy types and production

technologies leading to differences among support and development action

frameworks.

The consideration of a Thailand renewable energy supply chain has

shown a number of relationships with public agencies. The main responsible agency

for renewable energy promotion and development in terms of knowledge

development, promotion and transfer, as well as investment in renewable energy, is

the Department of Alternative Energy Development and Efficiency (DEDE), while

private sector investment promotion measures and the regulation of energy activity

related to electricity producers is performed by the Energy Regulatory Commission

(ERC) who is responsible for regulating 3 groups of electricity producers, 1)

Independent Power Producers (IPP) with generating capacity more than 90 MW 2)

Small Power Producers (SPP) with generating capacity more than 1 MW, but not

more than 90 MW, and 3) Very Small Power Producers (VSPP) with generating

capacity not more than 1 MW. Most renewable energy producers are Small Power

Producers (SPP) and Very Small Power Producers (VSPP) (Energy Regulatory

Commission, 2018).

177

As for renewable energy purchase, this is related to Thailand’s

electricity agencies, which are the Provincial Electricity Authority and the

Metropolitan Electricity Authority as electricity purchasers, while the Thailand

Greenhouse Gas Management Organization is responsible for overseeing the sale of

carbon credits according to the Clean Development Mechanism (CDM) of the United

Nations Framework Convention on Climate Change (UNFCCC). The control and

prevention of a renewable energy plant’s impact is related to the Office of Natural

Resources and Environmental Policy and Planning, if the energy plant has production

capacity higher than 10 MW or falls into the criteria required to perform an

Environmental Impact Assessment (EIA), for example if it’s located in a Forest

Conservation Area.

It can be seen that renewable energy development involves large

numbers of agencies, therefore there is a need for integration of action among these

agencies, as well as using public participation mechanisms to make promotion,

support and development of impact mitigation measures suitable and consistent on

every level. The crucial issues needed to be considered for operation, ordered by their

level of significance, are as follows:

(1) The selection of a feasibility analysis framework suitable for

the project type leading to correct and accurate decision making, for instance,

selection of a cost and benefit evaluation method suitable for projects with different

features, selection of assumptions which comply in a policy, economic and social

context in each period, as well as risk analysis for every project about to be invested

in by considering the study’s inaccuracies and change in other related factors, for

instance, change in economic situation, and technological development.

(2) The selection of a Feed-in Tariff (FiT) must consider support

mechanisms suitable for the type of renewable energy in each period, since each type

of energy has different costs and impacts from technological change, as well as

consideration of the level of support suitable to a degree of risk in investment from

various factors, for instance, risk from the power plant’s location, or risk from change

in natural resources used as a factor of production.

(3) The development of personnel with expertise to have

appropriate qualifications and quantity with national renewable energy development

178

in the future, both in public sector operations and private sector renewable energy

development.

(4) The selection of criteria and framework for creating an

Environmental Impact Assessment (EIA) with speed, transparency, and operation via

public participation of the project’s site residents, as well as inspection and

monitoring to act according to the impact mitigation plan, seriously and continuously.

(5) The solution for problems and limitations related to the

complicated process of selling carbon credit due to long periods of document

preparation, information review and approval, as well as risk from fluctuation of the

carbon credit price in the market, which might affect an entrepreneur’s investment

decision.

6.3 Recommendations

From the results and academic findings in this study, there are recommended

topics of study that should be performed in the next agenda for further knowledge

enhancement leading to the development of an infrastructure development feasibility

analysis framework, as follows:

1) The in-depth study for feasibility analysis methodology development.

This study result has shown that feasibility analysis methodology still has weaknesses

or ambiguous academic issues which lead to loopholes in choosing different

methodologies, therefore there should be a study to solve the problems and limitations

of various issues based on priority, as follows:

(1) A study of the Conversion factor (CF) for Thailand’s feasibility

analysis to be up-to-date and reflect the current economic situation.

(2) A study of the discount rate suitable with Thailand’s economic, social

and environmental development context, and the selection of a discount rate specific

to each type of project.

(3) The development of each project’s impact evaluation in various form,

both goods and resources out of the market system, as well as evaluation of energy

security benefits, and both positive and negative impacts toward macro-economics.

179

(4) The development of a risk analysis technique, especially the selection

of a level of risk acceptable and suitable to projects with differences in energy type,

project location, and project scale.

(5) A study of statistical data on the actual operation of a number of

projects to develop a database classified by energy type, project location, and project

scale for risk analysis.

2) The policy and public administration study for public investment

feasibility analysis process development. Since the goal of public administration is

efficiency and transparency, the first-priority agenda of feasibility analysis study

process development is the study of a checks and balances mechanism in considering

the budget for infrastructure development investment. The next priority is a study of

the approach in selecting suitable punishment in the case of mistakes or non-

transparent operation creating negative impact toward national economic, social

and/or environmental conditions.

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APPENDICES

190

APPENDIX A

Small Scale Hydropower Project

191

Appendix A

A Small Scale Hydropower Project

From a study of the planning and feasibility of small and mini scale

hydropower project manual by the Department of Alternative Energy Development

and Efficiency (2015), and small scale hydropower project data by the Bureau of

Alternative Energy Development, Department of Alternative Energy Development

and Efficiency (2017), the following distinct features of small scale hydropower

projects can be summarized:

Small scale hydropower projects are a development in response to electricity

needs in a rural area to create stability for the distribution system and distribute

electricity to the population in the area not accessible by the distribution system.

Small scale hydropower projects have a generating capacity between 200 and 12,000

kilowatts, and can be seen in Figure 1.

192

Small Scale Hydropower Project (Mae Kum Luang Project), Mae Ai District, Chiang Mai Province

Figure 1 Small Scale Hydropower Project


A small scale hydropower project will construct a weir or small dam to block a

stream and divert water from a weir or small dam using penstock to a power plant.

Water pressure coming along the tubes will rotate a turbine connected to the generator

generating isolate/off grid or parallel/on grid electricity. A small-scale hydropower

project has the development framework and major components as follows:

1) Project’s Location and Potential. The selection of a suitable location for a

small scale hydropower project must consider various components, for instance,

geologic conditions, environmental impacts, and distance between the power plant

and electricity users. The potential in electricity generation or installed generating

capacity will depend on the difference between the height of water head or Net Head

(H) which will be different according to the location’s geographic condition.

2) Weir or Small Dam. A small reservoir will facilitate the continuous use of

stored water for generating electricity. The structure of a weir or small dam is

193

reinforced concrete with a suitable design to block the stream for diverting water or

controlling the water level passing to the end area of intake, which is designed to

safely contain the flow of water in the rainy season. Any overflowed water will be

diverted to an overflow spillway and further flow into the same stream at the tailrace.

The weir or small dam of a small scale hydropower project is shown in Figure 2

Weir (Mae Hong Son Hydropower Project) Reservoir (Sa-Nga Hydropower Project)

Figure 2 Weir and Small Dam of Small Scale Hydropower Projects


3) Intake. The intake is a concrete structured building for receiving water from

the stream in front of the check dam or dam toward the headrace or penstock.

Normally, the intake will be located perpendicular to the water flow direction to

control the amount of water flow to be utilized by installing a gate system using a

trash rack to prevent trash flowing with the water and a sand sluice gate which blocks

sand from flowing with the water and prevents it from getting into the headrace. The

intake could be constructed near the check dam or dam, or separately depending on

geographic conditions. The intake of a small scale hydropower project is shown in

Figure 3.

194

Intake (Huai Nam Khun Hydropower Project)

Figure 3 Intake of a Small Scale Hydropower Project


4) Headrace and Penstock. Water from the intake will be transferred to the

power plant. The headrace could be a canal or a low pressure penstock which has a

low slope. The length of the headrace will depend on the need for height of the water

head in generating electricity, which also depends on geographic conditions.

Furthermore, the headrace will have a sand trap to prevent remaining sand from

getting into the canal or penstock. The sand trap will be constructed between the

intake and the headrace. At the end of the headrace will be a water level control

system by construction of a head tank or fore bay before transferring water to the

penstock. The head tank is selected to be the regulating pond.

195

As for the penstock, it is a system of iron penstock receiving water from the

headrace into a turbine in the power house. Pictures of the headrace and penstock of a

small scale hydropower project are shown in Figure 4.

Headrace

(Huai Nam Khun Hydropower

Project)

Penstock

(Mae Hong Son Hydropower Project)

Figure 4 Headrace and Penstock of a Small Scale Hydropower Project


5) Power House. This is the building installing a turbine and generator with

equipment. The power house building will be located at an appropriate level to

prevent flooding in the rainy season. After the water has passed through the turbine

for electricity generation, it will be released back to the previous stream via a tailrace.

6) Turbine. The water contained in front of the check dam or dam will

accumulate energy in the form of potential energy and, when flowing via the penstock

toward the power house, will be converted to kinetic energy. The turbine is

responsible for converting kinetic energy to mechanical energy to rotate the generator.

The selection of turbine type will depend of the height of the water head. A picture of

a turbine at a small scale hydropower project is shown in Figure 5.

196

Francis Turbine and Generator Kaplan Turbine and Generator

Figure 5 Turbines of a Small Scale Hydropower Project


7) Generator and Equipment. The generator of a hydropower plant has features

similar to other power plants, but the equipment, for example the Controller

equipment, is different since it automatically controls water used for electricity

generation according to the demand of electricity via the controlling equipment.

Equipment of the generator also includes electric transformers, controller and

switchyard. The picture of a generator and its equipment in a small scale hydropower

project is shown in Figure 6.

197

Turbine and Generator with equipment

(Huai Nam Khun Hydropower Project, Chiang Rai Province)

Figure 6 Generator and equipment of a Small Scale Hydropower Project


The major components of small scale hydropower project are shown in

Figure 7.

Figure 7 Major Components of a Small Scale Hydropower Project


198

Appendix B

List of Feasibility Study Report

199

Appendix B

List of Feasibility Study Report

Report Year Number of

projects Project Owner

Thai small scale hydropower project

1 Study of the development plan. Small and very small

hydropower projects in the national park. (In the north and

Thong Pha Phum National Park).

2011 1 Department of Alternative


Efficiency, Ministry of

Energy

2 Study of the development plan. Small and very small

hydropower projects in the national park. (In the north and

Thong Pha Phum National Park) Thong Pha Phum

National Park




Energy

3 Study report on development master plan. Small and very

small hydropower projects in the national park. (In the

north and Thong Pha Phum National Park) Mae Surin

Waterfall National Park




Energy

4 Study report on development master plan, small and very


north and Thong Pha Phum National Park) Mae Yom

National Park




Energy

5 Study report on development master plan, small and very


northern area and Thong Pha Phum National Park), Tat

Mok National Park




Energy

6 Feasibility study on very small hydropower construction

projects

2009 10 Provincial Electricity

Authority

7 Feasibility study and environmental impact,

small hydropower project at Huai Mae Pa Pai




Energy

8 Design and installation of small hydroelectric at Nam Oun

Dam




Energy

200



9 Design and installation of small hydroelectric at Lam Ta

Khong Dam




Energy

10 Design and installation of small hydroelectric at Pra Sae

Dam




Energy

11 Feasibility study of hydroelectric power project

Ranong District, Ranong Province




Energy

12 Hydroelectric power project, Thung Plue Canal, Makham

District, Chantaburi province

1995 1 Department of Energy

Development and Promotion

13 Detailed design of small hydropower project at the 4 dams

and irrigation area: Summary of project detailed design on

small hydropower at Mae Suai Dam




Energy



small hydropower at Nong Pla Lai Dam




Energy



small hydropower at Huai Lang Dam




Energy



small hydropower at Huai Sa Tor Dam




Energy

17 Preliminary study on feasibility and environmental impact

on small hydroelectric power project at Chom Thong

District

Chiangmai Province




Energy

18 Feasibility study and formulation of proposals for joint

ventures in 4 Small Hydropower Projects, Klong Ae Small

hydropower projects, Surat Thani




Energy

201



19 Preliminary environmental impact study on small

hydropower project at Huay Dan Mee, Palian District,

Palian District, Trang Province




Energy

20 Feasibility study and preliminary environmental impact

study on small hydropower project (Huay Sa Duang Yai)




Energy

21 Feasibility study on Chawang canal small hydropower

project



22 Survey report and feasibility study Thung Plue Canal

hydroelectric power plant, Makham District, Chanthaburi

Province

1989 1 National Energy

Administration

23 Preliminary environmental impact study on small

hydropower project, Ae Canal Project, Surat Thani

Province




Energy


ventures in 4 small hydropower projects, Kwai Noi Small

hydropower projects, Phitsanulok Province




Energy

25 Study and design to improve the efficiency of electricity

production, small hydropower project. Detailed design on

Mae Thun Hydropower Project, Chiangmai Province




Energy

26 Study and design to improve the efficiency of electricity

production, small hydropower project. Details design on

Mae Hong Son Hydropower Project, Mae Hong Son

Province




Energy


ventures in 4 Small Hydropower Projects, Huai Klity

small hydropower project, Kanchanaburi Province




Energy


ventures in 4 small hydropower projects, Huai Dan Mee

Small hydropower project, Trang Province




Energy

202



29 Feasibility study and environmental impact on

Nam Mea Ngea small hydropower project




Energy

30 Study of improvement plan for 2 hydropower plants




Energy

31 Environmental impact on Kwai Noi hydropower project,

Nakorn Thai District, Phitsanulok Province




Energy

32 Feasibility study and preliminary environmental impact

study on Mae Obe small hydropower project, Chom

Thong District,Chiangmai Province




Energy

33 Prefeasibility study on Li Pa Yai canal project Koh

Samui District, Surat Thani Province


Administration

34 Detailed design of hydropower project at the irrigation

dam in north eastern area. Summary report of the detailed

design on the Mun Bon dam project, Nakhon Ratchasima

Province




Energy

35 Summary report of the project detailed design. (Detailed

design and tender documents, small hydropower plant,

Mae Pa Pai, Hod District, Chiang Mai Province




Energy

36 Summary report of the project detailed design on Mae

Mok Dam, Lampang Province. (Detailed design of

hydropower project at the irrigation dam)




Energy

37 Summary report of the project detailed design on Lan Ta

Pen Dam, Kanchanaburi Province. (Detailed design





Energy



design on the Lum Nang Long dam project, Buri Ram

Province




Energy

203





design on the Lum Prai Mas dam project, Nakhon

Ratchasima Province




Energy

40 Summary report of the project detailed design on Huai Ta

Pea dam, Sukhothai Province. (Detailed design of





Energy



design on the Huai Loung dam project, Udon Thani

Province




Energy

42 Summary report of the project detailed design on Huai

Khun Keaw Dam, Uthai Thani Province (Detailed design

of hydropower project at the irrigation dam)




Energy

43 Feasibility study, initial environmental examination (IEE)

and detailed design on Pua small hydropower project




Energy

Thai small scale hydropower projects (master plan)

44 Study report on village hydropower development master

plan




Energy

45 Master plan report of small hydropower project

development




Energy

46 Study report on village hydropower development master

plan




Energy

47 Study of small hydropower project development master

plan in upper northern region




Energy

204



48 Study of small hydropower project development master

plan in upper northern provinces




Energy

Foreign small scale hydropower projects

49 Preliminary Study on O Sla Mini Hydropower Project 2004 1 Samart Corporation Plc.

50 Preliminary Study on Stung Sva Slap Mini Hydropower

Project

2004 1 Samart Corporation Plc.

51 Alternative and conservation energy cooperation between

Thailand and Neighboring Countries project

(Feasibility study and detailed design of small hydropower

projects in the Lao People's Democratic Republic)




Energy

52 Feasibility study and detailed design of small hydropower

projects in Cambodia




Energy

Other hydropower projects

53 Environmental impact assessment of Ban Chan Day

hydropower project, Karnchanaburi Province

2013 1 Electricity Generating

Authority of Thailand

54 Feasibility study and environmental impact assessment.

Feasibility study report of the hydropower project, pump

from Srinakarin dam reservoir.



55 Kwae Yai Project, Karnchanaburi Province 1972 1 Electricity Generating

Authority of Thailand

56 Pattani River Development Report, Yala Province 1963 1 National Energy Authority

57 Study on potential of step hydropower on Mekong River 2005 10 Department of Alternative



Energy

58 Preliminary feasibility study and initial environmental

examination study on 2 step weir Mekong river small

hydropower projects, Preliminary feasibility study on Pak

Chom weir and Ban Kum weir hydropower




Energy

59 Preliminary feasibility study on Yat Hee dam hydropower

and Bhumibol dam adding water

2005 1 ITALIAN-THAI

DEVELOPMENT PCL

60 Preliminary Study on Stung Mnam 2 Hydropower Project 2004 1 The royal government of

Cambodia

205



61 Evaluation of Feasibility Report Nam ham 2 Hydropower

Project

2010 1 PEA ENCOM International

Co. ,Ltd

62 Feasibility Study for Nam Ngao Hydropower Project

Bokeo Province, Lao PRD

2012 1 PEA ENCOM International

Co. ,Ltd

63 Feasibility Study for Nam Ngeum Hydropower Project

Xayabury Province, Lao PRD

2012 1 SILVER SAND GROUP

CO.,LTD

64 Feasibility Study on Nam Phoun Hydropower Project

Xayabury Province, Lao PRD

2010 1 S & KX International

Co. ,Ltd

Biomass energy and waste-to-energy projects

65 Design on biomass power plants for demonstrate




Energy

66 A study on guidelines for the promotion of integrated

biomass power plants




Energy

67 Promotion of thermal energy from biomass for the

production in industrial sector




Energy

68 Feasibility study on Distributed-Green-Generation: DGG

(Feasibility study on 15 community biomass power plants)

Community biomass power station, Lahan Sub District,

Chaturus District, Chaiyaphum Province




Energy


(Feasibility study on community biomass power plants,

Mae Fah Luang District, Chiang Rai Province)




Energy

70 Study and preparing information for renewable energy and

energy conservation investment project




Energy

71 Research, Demonstration and Project Supporting on

Three stages gasifier biomass power generation system

project




Energy

206



72 Feasibility study of electricity generation with rice husk

gas from rice mill and sold to the transmission system


Administration

73 Economic analysis of 100 kw gasifier biomass power plant 2011 1 Thaksin University

74 A study of the economic costs of small biomass power

plants for the community

2008 1 National Research Council

of Thailand, Suranaree

University of Technology

75 Design of demonstration power plant from cassava

rhizome




Energy

76 Study on the development of biomass gasification system

for power generation in internal combustion engines




Energy

77 Study and demonstration of electric power generation/

heat power from community waste




Energy

78 Feasibility study of electric power generation using waste

incineration technology. Study and preparing investment

information on renewable energy and energy conservation




Energy

79 Analysis of waste management approach for electric

power generation in Bangkok and vicinity

2009 1 King Mongkut's University

of Technology Thonburi


power generation at Sub District level

2009 1 Naresuan University


power generation at District level

2009 1 Chiang Mai University

82 Feasibility study on utilization of community waste for

electricity generation

2007 1 Development of

Environment and Energy

Foundation

83 Study and preparing information for renewable energy and

energy conservation investment




Energy

207



84 Study of potential energy production from industrial waste




Energy

Wind energy projects

85 Feasibility study on wind turbine power plants along the

southern coast of Thailand.

2008 1 Thaksin University, Prince

of Songkla University,

Walailak University,

Department of Alternative



Energy Provincial

Electricity Authority

86 Research on wind power potential for electricity

generating in the central region of Thailand

2013 3 National Research Council

of Thailand


generating in upper northern region, Phase 2

2009 1 Energy research center

Maejo University


generating in upper northern region

2009 7 Energy research center

Maejo University

89 Research on wind power potential in specific areas




Energy

90 Initial environmental examination study (IEE) on

demonstration project of large-scale wind turbine, Pattani

Province




Energy

91 Feasibility study and initial environmental examination

(IEE) on development of offshore wind turbine




Energy

92 Feasibility study on 2 wind turbine power plants 2011 4 Department of Alternative



Energy

93 Research on wind power potential along the southern coast

of Thailand

2008 17 Thaksin University, Prince

of Songkla University,

Walailak University

208




generation on east coast of Gulf of Thailand to Trat

Province

2008 2 King Mongkut’s University

of Technology North

Bangkok, Burapha

University

95 Feasibility study and initial environmental examination

(IEE) on wind power plant in potential area




Energy

96 Research, development and demonstration prototype of

low wind speed turbine technology




Energy

97 Detail design of wind turbine in the electricity scarcity

area




Energy

Solar energy projects

98 Assessment of technical and economic potential of solar

roof systems in Chulalongkorn University.

2015 10 Chulalongkorn University


(Feasibility study on renewable energy power plant, Ja-na

District, Songkhla Province)




Energy

209

Appendix C

The World Bank’s Conversion Factor

210

Appendix C

The World Bank’s Conversion Factor

Type Factor

Standard Conversion factor (SCF) 0.92

Consumption Goods Conversion Factor (CGCF) 0.95

Intermediate Goods Conversion Factor (IGCF) 0.94

Capital Goods Conversion factor (KGCF) 0.84

Construction Conversion Factor (CCF) 0.88

Electricity Conversion Factor (ECF) 0.90

Transportation Conversion Factor (TCF) 0.87

Labor Conversion Factor (LCF) 0.92

Marginal Productivity of Capital (q) 0.16

Rice Conversion factor (RCF) 1.11

Source: AHMED, S.; EM1; AHMED, S.*EM1 (1983).

211

BIOGRAPHY

NAME Mr. Krit Kongcharoen

ACADEMIC BACKGROUND Bachelor’s Degree with major in Agriculture

Education from Faculty of Education, Kasetsart

University, Bangkok, Thailand in 2002.

Master’s Degree with major in Resource

Management from Graduate School, Kasetsart

University, Bangkok, Thailand in 2005.

PRESENT POSITION Senior planning and analysis officer, Thailand

Institute of Scientific and Technological

Research

EXPERIENCE 2006-2018

Manager, Economic Department,

Panya Consultants Co., Ltd.