Risk Analysis for Operational Stage Small Hydro Power Projects of Uttarakhand: A Stochastic Approach Using Monte Carlo Simulation

Abstract

In this study valuation of operational phase investment related risks in small hydro power project in Uttarakhand state of India is considered. The foremost emphasis of this work is to examine the importance of studying various risk factors related to investment in operational small hydro power project-which is not a common investment practice performed in this particular area. Because of the stochastic nature of variables that compute NPV (net present value)/IRR (internal rate of return), BCR (Benefit cost ratio) it has some uncertainty which cause risk in investment decision. Such external variables are identified based on literature reviews, expert interviews and field survey as follows: capital cost, operational and maintenance, energy generation, environmental hazards, policy changes, social acceptance, etc. The relative importance of these factors are evaluated stochastically and ranked them accordingly. The greatest advantage of this method is that it has simplicity. When dealing with the risk analysis problems, the prevalence of method has been showed: easier and more useful.