Investment risk analysis for small hydro power plants in the short term market in Brazil

This paper presents an approach of investment risk analysis for small hydro power plants (SHPPs) considering energy trade in the short-term market in Brazil. The Monte Carlo Method, associated with a Cholesky decomposition, is applied to stochastic models to generate synthetic time series for water inflow and short-term electricity price. An economic approach is presented taking into account taxation and financing, providing the probability distribution of the Net Present Value to assist in the decision making process. The used stochastic models proved to be flexible enough to represent the main characteristics of the random variables and accurate enough for energy applications. A case study is carried out for the Northeast region of Brazil, and the results showed that SHPP projects have a good technical-economic performance.