By Bryan Leyland
Consulting engineer
In the 1970s there was a wave of interest in small hydro, driven by oil price rises. In those days, obtaining the necessary approvals and then designing and building a scheme was relatively straightforward and something like 300MW of small hydro power was developed. When oil prices dropped, the enthusiasm waned and now consenting and constructions issues, compounded by lawyers and complicated contractor contracts, have prohibitively pushed up the cost of such projects.
Jim Baird, a local resident of Golden Bay, knew of a 250kW hydro scheme that was built to supply electricity to the Onekaka Ironworks in the 1920s. After the ironworks shut down the old power station kept running for a few years but in the 1950s it was abandoned.
Power shortages in 2001 and 2003 brought higher electricity prices to the region and Jim with myself and two others formed a partnership to redesign the Onekaka scheme using the concrete dam originally built for the Ironworks scheme, the same penstock route and a powerhouse site a bit further downstream – with an output of 940 kW and 3.8 GWh pa.
The hydro scheme was finally commissioned in 2003.
The major construction problem was the penstock line itself. The route led up a steep ridge to a surge pipe. From there about 400 metres of 600mm pipe had to traverse a steep and unstable slope all the way to the dam. The pipe was buried for the whole of its route. The bench formed for the pipeline gave us access to the dam so that we could dig out the silt and debris that had completely filled it. We had to dig this out and cart it away at considerable expense.
As with most projects of this type, the final cost was well above the original estimate and the penstock installation and civil works were the main source of the additional costs.
A major and unforseen cost was that of compliance with requirements imposed on us under the Resource Management Act (RMA). These included an ‘heritage inventory’ that scheduled and sketched every one of the rusty old riveted penstocks that were lying around in the bush; an historical report on the history of the ironworks; and a number of studies into the stream life, which have to be repeated every year.
The RMA consent also involved a safety report for a dam that was built 70 years ago and, but for us, would still be holding back hundreds of tonnes of silt and debris and with no one responsible for it. Renewing our water right for 35 years involved lawyers, environmental scientists and consultants and cost us something like $80,000. On top of this various delays and complications in the construction process, probably cost us $100,000 overall.
During construction, very strict requirements were imposed on us. These included the number of trees we could to chop down for access during penstock installation. Half a dozen saplings, no more than 100mm in diameter, collectively cost us in excess of $10,000 by making it very difficult to excavate and lay the penstock. Without this requirement, we probably would have laid the penstock above ground and not buried it. Supporting the penstock above ground as though it were a steam or oil pipe instead of the conventional civil engineering solution of expansion joints and massive anchor blocks would have saved a lot of money.
Overall, the above requirements probably added $300,000 to the cost of the project. In my view, maybe 10 percent of the sum actually provided a real benefit to the environment. If, instead, we had put $50,000 towards fencing off the river downstream from cattle and providing cattle crossings, I am sure the environment would have been far better off.
Since Onekaka was commissioned, I have been involved in two small schemes for a large organisation that could not contemplate doing what we have done. The project is being built with one contract for the supply of the generating plant, and another for the civil works, penstocks, electrical equipment and plant installation.
We recommended that the plant tender documents should include standard conditions of contract. We prepared the technical specifications incorporating these conditions of contract and wrote a few pages of special conditions to align the documents with New Zealand law and conditions. We were obliged to pass these documents on to the owner’s lawyer who then added more than 40 pages of special conditions.
We warned the lawyers that these conditions were so onerous that few tenders would be received. But to no avail: the documents were issued with only a few changes and, as we predicted, few tenders were received. None of the tenders complied with the conditions of contract. Several tenderers who specialized in small units refused to tender because of the onerous conditions.
As a result of these delays the scheme went back by one year and legal and engineering costs have escalated. The lawyers’ efforts to ‘protect the client’s interests’ have probably cost the owner in excess of $1 million.
Although this is a rather extreme example, I am sure that this sort of thing is becoming more and more frequent.
Simply loading all risks on to the contractor – regardless of his ability to manage them – is not good risk management. But it does give the legal profession lots of work!
Given the regulatory and legal environment now imposed on us, I have little confidence that New Zealand will see very much small hydro development in the near future. Those schemes that go ahead are unlikely to be economic because of the regulatory problems outlined above.
Contractor Vol.34 No.2 March 2010
All articles on this website are copyright to Contrafed Publishing Co. Ltd.
