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Deetken Impact helps finance small run-of-river hydroelectric plants in Peru

 

Run-of-river hydroelectric power, a type of hydroelectric power generation that does not require the storage of significant quantities of water, is a clean, renewable and predictable source of energy. It has great potential not only in countries like Canada where 60% of energy comes from hydroelectric sources, but also in small and remote communities in Latin America that currently lack other sources of energy.

 

How does it work?

In run-of-river schemes, running water is diverted from a flowing river and guided down a channel which leads to a generating house. From there, the force of the moving water spins a turbine and drives a generator. The water is fed back into the main river further downstream. Unlike the large hydroelectric projects, these systems contain a small dam that can store a limited quantity of water, enough for same-day use; it is not possible to store water for future use. Without a dam to store water, there is no stored power. This means that the capacity factor of run-of-river projects can vary from 40%-80%. When you compare this to the 89-90% capacity of a large hydroelectric power plant, it is easy to understand why these projects have only been viable in rivers with large year-round flow rates.

Mini-hydro systems can be used for independent and stand-alone applications in isolated remote areas or connected to a centralized grid that stores the generated power. While maintenance costs are relatively low compared to other technologies, most of the costs are accrued in the building phase. Connecting the run-of-river system to the centralized grid can get expensive if the energy needs to be transmitted over a far distance. However, when the run-of-river projects are used to power small, isolated communities, the costs are significantly lower and can be an economical source of power.

 

What happens if flow rates fluctuate? – The potential of a hydro-solar combination

One aspect to take into consideration is how flow rates may be affected in the future by climate change. Periods of drought might cause the system to operate below capacity at certain times of the year. As a result, we are starting to see innovative projects that combine mini-hydropower and photovoltaics (PV) solar generation.  With the cost of solar electricity declining significantly, this innovation has enabled solar PV to emerge as a cost-effective energy source in many regions across the world, including Latin America, even at small scale generation. Since mini-hydropower can counter power outages and help balance loads during periods of peak demand, this is a highly sought-after source of energy, especially in rural, mountainous areas. Coupling mini-hydropower with solar PV can provide a stable supply of electricity.

Some parts of Central America already offer interesting opportunities for this hydro-solar combination. The region of Honduras close to San Pedro Sula and several rural, mountainous parts of Costa Rica are ideally suited for both hydro and solar generation at a small scale. The combined generation capacity of these combined projects normally ranges from 2 MW to up to 15 MW of clean, renewable energy. This is enough to satisfy the electricity needs of small communities of up to 10,000 people. The run-of-river systems currently established in rural communities of Latin America are showing great success.

What is the environmental footprint of run-of-river?

The environmental footprint on surrounding ecosystems, such as fish habitats, is significantly reduced in these run-of river schemes compared to large hydro plants.  Although the impact is not completely eliminated, new technologies are being developed to reduce this impact even further.

In addition, many countries are investing in research and development to make the technology more cost-effective. A large amount of the current research is focused on improving turbines, as they are the most expensive part of the system. However, there are other ways to reduce the costs of these projects such as through the sale of carbon offsets. Carbon offsets are credits for greenhouse gas reductions achieved by one party that can be purchased and used to compensate the emissions of another party. There are several international brokers, online retailers, and trading platforms where you can buy and sell these carbon offsets. These are beneficial to renewable energy producers as the selling of carbon offsets makes their projects more economically viable. At the same time, carbon offsets buyers benefit by using the carbon offsets to mitigate their greenhouse gas emissions.

One example of a successful run-of-river system is in Central Peru, close to the imposing Andes. This small project generates around 10 MW of clean power and, since it started operations four years ago, has displaced a considerable amount of CO2 emissions. The Swedish government buys carbon offsets from the project, which helps generate additional revenue of around $40,000 annually. Part of those funds are reinvested in the community.  This run-of-river system also produces positive environmental side effects beyond providing the community with clean energy; the water from the system flows downstream to irrigate small plots of agricultural land which benefits the local farmers.

As technological breakthroughs for small hydroelectric turbines and solar panels continue to take place and new ways to reduce the environmental footprint even further are implemented, the opportunities to build these combined mini-hydropower and solar projects in Latin America will increase significantly. At Deetken Asset Management Inc., we expect to continue investing in these combined projects, as they will provide the right triple bottom line results we seek: financial, environmental, and social.

 


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Magali Lamyin, Director of Communications and Development for Deetken Impact

MAGALI LAMYIN

Director of Communications and Development

 

Magali brings extensive market intelligence, business development and marketing experience from her work at the Central Bank of Mexico, the Canadian Institute for Market Intelligence, and the IESE-PWC e-Business Centre in Barcelona. She also co-led national marketing campaigns for businesses in the hospitality and early childhood education sectors for almost a decade before joining Deetken. In her current role, she is responsible for leading Deetken Impact’s communications, marketing and branding strategy. She is also involved in the due diligence process for project selection with an emphasis in Mexico.

Magali holds a BA in Economics from Mexico's ITAM and a Master's degree in Economics from the University of British Columbia.

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Jose Lamyin, Managing Partner Deetken Impact

JOSE LAMYIN

Managing Partner

 

José has extensive experience as a business advisor for clients throughout Canada, Europe and Latin America in mining, telecommunications, and finance. Prior to co-founding The Deetken Group, José worked for Teck Cominco in Peru and Canada and Deutsche Bank in London (UK). José has spearheaded much of the strategic growth of Deetken Asset Management since inception and is currently focused on investment selection.

José received his BS in Engineering from the University of British Columbia and MBA from IESE School of Business (Barcelona). Born in Peru, José is fluent in English and Spanish.

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Alexa Blain, Managing Partner Deetken Impact

ALEXA BLAIN

Managing Partner

 

Alexa is responsible for finance, operations and investor relations at Deetken Impact. She brings over 10 years of experience in financial consulting and asset management, with specific expertise in company and investment analysis, business valuation and securities/corporate finance. Prior to joining Deetken, she spent three years with African Alliance, a pan-African financial services group, where she focused on expanding the firm’s retail financial services operations as well as on the origination and negotiation of new capital. In addition, Alexa has six years of asset management experience with the Canada Pension Plan Investment Board, the Macquarie Group and the Ontario Teachers’ Pension Plan.

Alexa is a CFA Charterholder. She has also completed an MA in Financial Economics and an Honours BA in Economics, both at the University of Toronto.

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Fernando Alvarado, Head of Deetken Impact Sustainable Energy

FERNANDO ALVARADO

CEO

Honduras Renewable Energy Managers (HREM) and Caribbean Renewable Energy Managers (CAREM)

 

Fernando Alvarado leads the General Partner and Investment Advisor of two clean energy and energy efficiency project finance and venture capital funds: Honduras Renewable Energy Financing Facility (H-REFF) and Caribbean Basin Sustainable Energy Fund (CABEF), which he structured and runs with a combined target capitalization of $100m.

Development Investment Banker with 28 years of international credit and investment experience and 18 years of direct experience assessing diversified renewable energy portfolios in Latin America & the Caribbean. He has participated in more than 50 syndicated credit and investment transactions for renewable energy projects in excess of $250 MM. He led the creation, structuring, fundraising, legal closing and portfolio construction of several specialized renewable energy funds.

Costa Rican, based in San Jose, Mr. Alvarado has an MBA in Banking and Finance cum laude from Universidad de Costa Rica.

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Carl Black, Portfolio Manager Deetken Impact

CARL BLACK

Portfolio Manager

 

Carl is a Portfolio Manager with Deetken Impact focused on analyzing and working with MSMEs, social enterprises, and renewable energy developers in Latin America and the Caribbean. His main responsibilities include supporting business development, managing technical assistance projects, leading investment due diligence, and monitoring portfolio performance. Prior to joining Deetken Impact, Carl worked for five years as a consultant, advising public sector clients an non profits in Canada and financial services companies in Latin America. He started his career at the Bank of Canada, where he researched issues related to household and business credit. 

Carl completed an Honours BA in Economics at the University of British Columbia. He also holds an MSc in Economics & Development from the University of Oxford, where he earned distinctions in quantitative and development economics.

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Cristobal Aguirre, Investment Analyst at Deetken Impact

CRISTOBAL AGUIRRE

Investment Analyst

 

Cristobal has over 6 years of experience in the asset management industry, where his responsibilities have ranged from asset allocation and portfolio management to risk analysis and software development. Before relocating to Canada, Cristobal worked as a senior investment analyst in AFP Habitat—Chile’s largest pension fund—where he led the tactical asset allocation and macroeconomic research for emerging markets.

Cristobal is a CFA Charterholder, and completed a BA in Economics at Universidad de Chile.

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Chad Parsons, Senior Investment Analyst at Deetken Impact

CHAD PARSONS

SeniorInvestmentAnalyst

 

Chad has worked as a consultant in business and technology for 20 years – often helping clients with their business transformation initiatives.    He has worked with start-ups, government, and established businesses to further their product and service offerings with a balanced approach.   After pursuing a research degree on leveraging technology for social and economic development; Chad has found a valuable alignment of his background with Deetken’s innovative impact investments. 

Chad completed a BS in Engineering from the University of British Columbia and has a MSc with distinction from the University of Manchester (UK).

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