Environmental and External Costs of Yali Hydropower Plant and Policy Recommendations in Vietnam

The purpose of this study is to estimate the monetary value of the main environmental and external costs of Yali Hydropower Plant (YHPP) and to incorporate them into the financial viability indices of the plant, namely its net present value and electricity price. The results were found that if the electricity price is kept at its original level of 5.2 US cents/kWh to cover direct costs only, the net present value of the plant would be reduced to about 27% by incorporating environmental and external costs. Alternatively, the electricity price would have to be increased to 5.68 US cents/kWh in order to cover the full costs of YHPP and to maintain the original net present value. The main policy recommendations are: Government regulations should require that the financial analysis and appraisal of all future electricity sources include the full cost of these schemes, including not only direct costs but also environmental and external costs related to preventing or mitigating the environmental impact caused by them. An appropriate financial mechanism should be estab-lished to allocate the revenue from full cost electricity pricing to a fund to cover the environmental protection and compensation costs.


Introduction
The Yali Hydropower Plant (YHPP) ranks second among the electricity sources of Vietnamese unified national electricity system. This is because of its great electricity potential, high financial viability and favorable plant location for cheap electricity in supplying the central and southern part of Vietnam and for ensuring the stability of running the whole electricity network of the country.
The YHPP is located on Sesan River in the western highland of Central Vietnam where the Thuong ethnic minority tribes live. These tribes have low incomes and special customs and habits. The plant has an installed capacity of 720 MW and an electricity generation of 3600 GWh per annum. This is about 10% of the total electricity production forecasts for the country in the year 2010 (Institute of Energy, 1998) [1]. The plant construction began in the year 1993 and was The dam is earth fill, with a crest elevation of 520 m, upstream slope of 1:5 and downstream slope of 1:2. The spillway has an overflow crest elevation of 500 m. Its peak outflow discharge at 1000 years probable flood is 10,500 m 3 /sec and maximum reservoir water level is 527.2 m. The catchment area is 7445 km 2 . The average annual rainfall is 2200 mm per annum and runoff is 8515 million m 3 per annum. The total construction cost was USD 614.78 million. The plant lifespan of YHPP is forecasted to be 48 years .
In order to meet plant-related environmental concerns, the environmental impacts of the plant were fully assessed qualitatively and partially estimated quantitatively in previous environmental studies by the Mekong Secretariat and Ministry of Energy. However, these studies ignored a wide range of environmental protection and compensation costs. Because these were not incorporated into the direct costs of the plant, the full cost of hydropower production was understated.
This study provides a comprehensive assessment of the main environmental protection and compensation costs of YHPP and incorporates them into its net present value (NPV) and electricity price (p).
This study did not attempt a cost-benefit analysis of any of the mitigation measures to see whether it is of benefit to the people and whether the ecosystems are large enough to justify the costs of these measures. Our assumption is simply that the ecosystems should be returned to an approximation of its pre-dam state.
Failing that, compensation should be provided to the people who are directly af-  [7] found that the environmental benefits that the current policies are likely to accomplish could be achieved at well under half the cost in the Mörrum system, and at less than a tenth of the cost in the Ångerman system.
The mathematical models were developed by (Singh & Singal, 2017) [8] for  [13]. More attention must be paid on environmental issues and monitoring of the facilities must be enabled with further laws or regulations (Kucukali, 2009) [14]. Hydropower on a small-scale is in most cases "run-of-river", with no dam or water storage, and is one of the most cost-effective and environmentally benign energy technologies to be considered both for rural electrifica-

Methodologies
Information was first collected from published sources about the physical impacts of YHPP (Francisco and Glover 1999) [18]. In particular, it drew on the impact assessments in the original Environmental and Financial Studies by the Mekong Secretariat and the Vietnamese Ministry of Energy. Beside from the above secondary data, on-site surveys data have been conducted. Twelve (12) impacts are assessed as the following: meteorology, hydrology, water supply, The C dt of YHPP is calculated in the original financial study for the plant, while the C et is valued by this study, considering the twelve environmental factors as follows: in which: C ekt is environmental cost related to the environmental factor k in year t.
We then determined the net present value (NPV) of the plant using two assumptions: with and without incorporating the environmental and external costs into the direct costs of the plant on condition that its direct cost-based price p is kept at the original level of 5.2 US cents/kWh (this electricity price is formally defined by electricity authorities for YHPP).
• Without incorporated YHPP environmental and external costs: • Without incorporated YHPP environmental and external costs: We also explored a scenario in which the NPV was kept at its original value, while the electricity price was increased to a level that would allow incorporation of environmental and external costs. The full cost-based electricity price P' is determined by solving the following equation: Finally, we drew from this analysis some recommendations for full-cost electricity pricing for YHPP and for Vietnam in general.

Meteorology
There is a negligible impact on the climate of the catchment area through the increase in local humidity. The only mitigation measure required is monitoring equipment valued at USD 2000 and disbursed entirely in 1993.

Water Supply
There is no significant harmful effect on water supplies either for domestic consumption or for agriculture in the catchments, so no mitigation measures are required. However, the future growth of demand for irrigation water in the catchments will reduce runoff, and thus the YHPP's energy generation will be reduced by about 2% per annum. This effect is assessed through estimating the foregone revenue caused by the reduction of electricity generation:

Water Quality, Aquatic Life and Fisheries
Due to the small storage and short retention time of the Sesan River water within the YHPP reservoir, there is little danger of oxygen depletion and negligible negative effects on the quality of out-flowing water. At the same time, the change from running river water with low nutrient content to stagnant reservoir water may slightly increase the number of fish species and other fauna.
Environmental and external costs are preventive expenditures for monitoring and managing the water quality through additional instruments to analyze its temperature, pH, oxygen content etc. and for developing new fishing systems after reservoir filling. This cost is allocated as listed below: Fist, additional instruments for analyzing water quality USD 3000; Second, development of new reservoir fishing infrastructure USD 7600; the total is USD10,600.

Reservoir-Induced Seismicity
The environmental and external costs relating to reservoir-induced seismicity are the preventive expenditures for investigating and monitoring the reservoir-induced seismic hazards at the dam site. The costs of an up to date micro-seismic network recommended for YHPP are estimated at USD 64,890 disbursed over 5 years (1993-1997), i.e. USD 12,978 per annum.

Public Health and Water-Borne Diseases
In general, due to the change from running river water to stagnant reservoir wa- (PIDC 1 1994) [21]; (People's Committee of Kontum Province 1994) [22].

Other Effects
In addition, four other effects were investigated. They were found to be of neg-

Results
The major environmental and external costs of Yali Hydropower Plant are summarized and discounted with standardized discount rates of 8%, 10% and 12% for the whole plant lifespan from 1993 to 2040. These values are presented in Table 1 below and analyzed net present value and electricity price with and without environmental and external costs.
The largest single item is compensation and resettlement, which accounts for about one-third of environmental and external costs. Effects on forestry, water supply and public health are also significant, each accounting for about one-fifth of the costs. Together, these account for over 97% of YHPP's environmental and external costs.

Electricity Price with and without Environmental and External Costs
The NPV and the electricity price (P) are the two most important financial criteria that are used for estimating the financial viability of electric power plants in Vietnam. For YHPP, these criteria are considerably influenced by incorporating the environmental and external costs into the direct costs of the plant to determine its full costs. to be increased to price P'= 5.68 US cents (see Table 2).

Conclusions and Policy Recommendations
The results of this study pointed out that if the electricity price is maintained at its original level of 5.2 US cents/kWh to cover direct production costs only, the net present value of the YHPP would be reduced to about 27% by incorporating This study recommends that electricity pricing should be revised, not only to eliminate direct government subsidies, but also to incorporate the environmental and external costs of electricity production. Current pricing policies do not achieve this. Environmental and external costs may not be explicitly recognized, but they are still paid. They come in the form of damages to health and ecosystems, or relocation of affected people, and are most often paid by vulnerable groups and future generations.
Incorporating these costs in the price of electricity would have several advantages. These are: First, it would make environmental and external costs more visible, and thus more pressure will be exerted to minimize them.
Second, it would implement the widely accepted principle of "polluter pays", making it possible to assign the payment of environmental and external costs to the activities that generate these costs.
Third, if applied to all forms of power generation, it would provide appropriate incentives for the generation of environmentally-friendly energy sources.
Fourth, it would provide incentives to reduce energy consumption through demand-side measures, such as reducing transmission losses, adopting energy saving technologies, shifting to less-energy intensive industries, and so on.
Fifth, it would provide revenue with which the environmental mitigation and compensation activities associated with power generation could actually be undertaken.
This study therefore recommends that full-cost electricity pricing-incorporating environmental and external costs-be applied to all forms of energy generation in Vietnam. Studies would be required for each energy source in order to assess their environmental and external costs.
In the case of YHPP, the price increase recommended is from 5.2 to 5.68 US cents/kWh-a 10% increase. This is not an exorbitant amount. Furthermore, it should be emphasized that these costs are already being paid through losses of forest benefits, damages to public health, disruption to the lives of people relocated because of dam construction and so on. Full cost electricity production simply reallocates these costs according to the "polluter pays" principle. In doing so, it makes the costs visible and creates incentives to reduce them.
We therefore make the following specific recommendations: First, full-cost pricing should be applied to all forms of electricity generation in Vietnam; Second, revenue from the additional changes for environmental and external costs should be put into a fund that would be used to pay for the prevention, mi-