Ex-post Analysis of the Tianhuangping Pumped Hydro Storage Project

David Olusegun Shobowale () and Glenn Jenkins ()
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David Olusegun Shobowale: Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus via Mersin 10, Turkey

No 2020-24, Development Discussion Papers from JDI Executive Programs

Abstract: The Tianhuangping pumped hydro storage project was evaluated for both its financial viability to its project owners. It was also evaluated for its economic benefit from a long-run system-planning perspective. For optimisation of electricity grid, with the Tianhuangping pumped hydro storage plant sourcing its energy from coal plants during the off-peak, the economic analysis combined the required coal plant with the Tianhuangping pumped hydro storage to get an accurate economic comparison against natural gas or HFO-fuelled turbine options. The Tianhuangping project was evaluated to return the owner with $34 million in net present value terms. From the long run systems planning perspective, the implementation of the Tianhuangping pumped hydro storage in combination with the coal plant that was necessary to provide it with the off-peak energy required to pump water into the upper reservoir for storing energy was found to be more cost-effective than either of the gas turbines. This analysis considered the capital cost, fuel cost, O&M cost, and the social cost of carbon for all plants involved. Without the social cost of carbon, the coal and Tianhuangping pumped hydro storage integrated unit was found to be even more competitive than the previous scenario which included the social cost of carbon. With its high capital intensiveness, large projects like these are often feared. This project has shown that despite the high capital cost that came with the pumped storage plant, it was the better alternative economically while being financially profitable. Moreover, it was also shown that if standard practices of project management are followed, a large project like the pumped hydro storage will neither be environmental disasters nor impoverish the nearby region but lead to an increase in the welfare of the people surrounding it.

Keywords: financial analysis; cost-effectiveness; pumped hydro storage (search for similar items in EconPapers)
JEL-codes: D61 H54 O22 Q41 Q42 Q48 (search for similar items in EconPapers)
Pages: 64 Pages
Date: 2025-01-29
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