Small Hydropower Investment and Financing Models and Risk Assessment Methods

Ruoxing Liu (), Bufeng Ni, Jia Yang and Chenye Gao
Additional contact information
Ruoxing Liu: National Research Institute for Rural Electrification, China-Pakistan “Belt and Road” Joint Laboratory on Small Hydropower Technology, Research Center on Rural Hydropower, MWR
Bufeng Ni: National Research Institute for Rural Electrification
Jia Yang: National Research Institute for Rural Electrification
Chenye Gao: National Research Institute for Rural Electrification

A chapter in Proceedings of the 2026 3rd International Conference on Applied Economics, Management Science and Social Development (AEMSS 2026), 2026, pp 625-631 from Springer

Abstract: Abstract Small hydropower plays a vital role in mountainous power grids and rural revitalization. However, due to their small project scale, significant cash flow fluctuations, and mismatches between financing terms and hydrological risks, traditional financial evaluation methods struggle to accurately reflect the true risks. This study takes representative run-of-river small hydropower projects in Sichuan as its subject, integrating cash flow simulation, weighted average cost of capital, debt service coverage ratio, conditional value at risk, and default probability models to create a comprehensive risk assessment method for small hydropower investment and financing. Through Copula scenario generation and Monte Carlo simulation, the distributions of NPV, IRR, and DSCR, as well as default probabilities, under different investment and financing models are calculated. Sensitivity and stability analyses are conducted under various scenarios, including water inflow, electricity prices, policies, and contract terms. The results show that PPP, green bonds, and hybrid financing offer advantages over highly leveraged traditional loans in terms of risk-adjusted returns and stability in responding to policy interference. This research provides a methodological reference for optimizing the green investment and financing structure of small hydropower and for risk pricing by financial institutions.

Keywords: small hydropower; investment and financing model; risk assessment; Monte Carlo simulation; conditional value at risk; probability of default (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6239-672-2_61

Ordering information: This item can be ordered from
http://www.springer.com/9789462396722

DOI: 10.2991/978-94-6239-672-2_61

Access Statistics for this chapter

More chapters in Advances in Economics, Business and Management Research from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().