Step 3. Calculate the value of Hydropower.
This is the simple multiplication of step 1 and step 2. For each alternative, multiply the
capacity value times the estimated firm capacity and the energy value times the annual energy
produced.
Step 4. Calculate the average annual equivalent value (benefits).
Discount to the base year the future hydropower values using the Federal discount rate.
Sum the discounted values for energy and capacity. Amortize this sum over the period of analysis
using the Federal discount rate. Total annual benefits should also include benefits during
construction.
Step 5. Calculate the annual cost of each alternative.
Show a schedule of cost over the period of analysis for each alternative. Discount the
expenditures to the base year and amortize the present worth of the estimated cost over the period
of analysis using the Federal discount rate. For each alternative these costs should include
operation and maintenance, emergency repairs, interest during construction and scheduled
rehabilitation.
Step 6. Compare the benefits and cost and rank the alternatives.
Provide a table showing the annual benefits, cost, benefit-to-cost ratio and the net benefits
for each alternative.
Note: The treatment of capacity values and benefits when considering hydropower rehabilitation
for reliability is unsettled. In general, you must be able to demonstrate that the power grid does
not have sufficient flexibility to adapt to the reduced reliability of the project and that the
continuation of the base condition would result in the capital investment of a thermal facility to
replace the capacity lost due to unreliability. A small project will have a more difficult time
satisfying this criteria than a large project.
E-3. Navigation Analysis. The basic economic benefit of a navigation project is the reduction in
the value of resources (cost) required to transport commodities.
Step 1. Identify the commodities currently flowing through the waterway and those
expected to flow through the waterway over the period of analysis. This should be done for each
commodity, by origin and destination for all alternatives.
Step 2. Forecast the quantity of each commodity expected to pass through the waterway
by year for the planning period.
Step 3. Identify the current fleet using the waterway and forecast the future fleet. Identify
current and future fleet operating cost.
Step 4. Using the forecasted commodity flows and the future fleet analysis, estimate the
average annual cost of transporting the forecasted flow of commodities passing through the
waterway for each alternative.
Step 5. Estimate the average annual cost of transporting the forecasted flow of
commodities by the least cost alternative route.
E-2
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