AECOM Tecsult Inc., a large consulting firm with specialty in hydroelectric project development, prepared a detailed prefeasibility study of the Tasersiaq Lake site concluding that the site could support a hydroelectric power station with an estimated generating potential of 500 MW. The Government of Greenland has made that prefeasibility report available on their website. [2] The estimates presented in that study, adjusted for inflation through 2023, are used as a starting point in estimating the costs of this 2,250MW project concept. The estimates presented in that study are also used to show the advantages of using a graded terrace system to expand the capacity of the Tasersiaq Lake site to produce 2250 MW of electricity.
This webpage will discuss the basic configuration of the 2250 MW Hydroelectric Project including the dams, penstock, turbines, graded terrace network, and powerline to Maniitsoq. This page will also discuss usage of the electrical output to power an aluminum smelter at the coast near Maniitsoq. Cost estimates are provided for each component of the project.
A financial analysis of the expected returns from the project are included. This analysis predicts an Internal Rate of Return (IRR) of 17.9% for the project. Average Return on average Capital Employed (ARoaCE) is estimated to be 15.7%.
Dams for 2,250 MW Project
This project concept proposes two rock-fill dams to form a reservoir. The locations are the same as described in the AECOM Tecsult report. [2} The preferred approach will include a dam near the western end of Tasersiaq Lake. It will be approximately 1200 m in length, with a height of approximately 77 m, sufficient to impound water to an elevation of 752 m to its east. A second dam will be to the south of the lake approximately 10 km southeast of the first dam. It will be approximately 1,200 m in length, with a height of approximately 72 m, sufficient to impound water to an elevation of 752 m to its north. The reservoir formed by these two dams will increase the lake’s capacity by an estimated 10 km^3 of water when the water level reaches an elevation of 752 m.
The northeastern end of Tasersiaq Lake is a rock moraine at the terminus of a glacier. The AECOM prefeasibility report states that the moraine is of sufficient height to dam the lake to the design maximum water level of 715 meters, but that additional study of the area is recommended. A close examination of the rock moraine, using a map of the bed topography beneath the Greenland ice sheet, shows that the rock moraine immediately to the east of the north section of Tasersiaq Lake is approximately 845 m above sea level, which is more than sufficient to dam that end of the lake to the design max water level of 752 m. [31] However, additional study of the area is required prior to development of this project.
Most of the ice sheet melting occurs during an approximate 100-day period in the summer. The reservoir allows a large share of the summer melt water to be stored and then used to generate hydroelectric power during the remaining fall, winter, and spring periods.
There are numerous rock moraines near the sites of the two dams. [32] It is probable that these loose rock formations can be used as rock-fill during construction of the dams.
Penstock for 2,250 MW Project
A penstock tunnel will be constructed. It will originate at the lake to the north of the south dam. It will extend toward the southwest, beneath the rock base of the Inland Ice Field that lies to the west of Evighedsfjord and will terminate near sea level at the power station. The power station will be located near sea level at the same location that was chosen in the AECOM Tecsult prefeasibility study. This is a distance of approximately 26.6 km with an elevation drop of approximately 672 m.
Based upon the prefeasibility report provided with the Greenland government tender, a penstock with a 50m^2 cross-sectional area is required for a 500 MW power station at Tasersiaq Lake. In order to maintain a similar head loss for a 2,250 MW power station, based on Manning’s equation for an enclosed penstock, a 14 m diameter penstock will be required for this 2,250 MW project. Tunnel boring machines of this diameter are available and will be used to dig the penstock tunnels.
Turbines for 2,250 MW Project
A power station located near sea level is required to fully utilize the potential energy available from the impounded melt water. The Tasersiaq Lake reservoir expansion will impound an estimated 10 km^3 of water at an average elevation of 720 m. The reservoir will be filled for use in the fall, winter, and spring. An additional 3.5 km^3 will be collected and used for power generation during the melt season.
With a reservoir that provides an average head of 720m the Tasersiaq Lake project requires hydropower generators that provide high efficiency at such high heads. Pelton generators are considered a good choice for high-head installations. It has been reported that Pelton generators have an efficiency of up to 92%. [33][34] Appendix C contains a calculation of the power generating potential of the 13.5 km^3 of yearly melt water that is used to drive the generators.
Graded Terraces
The graded terrace network required to collect melt water for this 2250 MW project is described in the following webpage: Terraced Channels
Aluminum Smelter
The power generated by the 2250 MW hydroelectric plant is sufficient to power a modern aluminum smelter having an annual aluminum output of 1,522,000 tonnes per year.
Project Costs
Terracing Construction and Maintenance Cost for 2,250 MW Project
Construction costs for the Terrace Network include several categories of costs. They include facilities for the storage of construction equipment. Office facilities for company personnel are included. A facility for servicing equipment is required. Construction and service vehicles must be purchased. Construction costs include the estimated manpower levels. Employee costs are evaluated at the same hourly rates, adjusted for inflation, as those used in the AECOM Tecsult prefeasibility study. A breakdown of construction costs is included in Appendix B. The total estimated construction cost during the 5-year effort is $517 million.
Appendix B also lists maintenance costs. Maintenance employee costs are evaluated at the same hourly rates, adjusted for inflation, as those used in the AECOM Tecsult prefeasibility study. Maintenance costs also include maintenance vehicle costs and facility maintenance costs.
During the first 4 years the average annual terrace network maintenance costs are estimated to be $25 million per year. During years 5 through 40 the average annual terrace network maintenance costs are estimated to be $51 million per year. Average terrace maintenance employment during this period is an estimated 405 persons.
Dams, Penstock. & Powerhouse Construction Cost for 2,250 MW Project
This cost estimate for a project that can generate 2250 MW at the powerhouse is based on the estimates originally prepared in 2009 by AECOM Tecsult Inc. as part of the prefeasibility study for a 500 MW hydroelectric project at Tasersiaq Lake. [2] An inflation multiplier of 1.42 has been applied to the costs to reflect the cumulative inflation from 2009 to 2023. Cost multipliers have been applied to reflect the larger size of this project. This 2250 MW project requires a 14 m dia. penstock vs 8m dia. for the original project. This gives a cost multiplier of 1.75 for the tunnel inner wall surface area and a multiplier of 3.1 for the cost of removing the rock to create the tunnel. [35] A multiplier of 3.8 is used to reflect the larger number of turbine generators and is applied to their associated equipment. The dam and spillway multiplier is based on AECOM Tableau 11.1 incremental cost of raising the dam with extrapolation to 752 m, the required dam height for the 2,250 MW capacity. The scaling factor is 8.76 at that height. The following table lists the adjusted costs for the 2,250 MW project.
Estimated Construction Cost for Tasersiaq Lake Site with Graded Terraces sufficient to provide 2250 MW to aluminum smelter year-round
| Tasersiaq Site 7e Cost Est. | AECOM 500 MW in 2023$ | Adjusted Cost for Project with Terraces that Gen. 2250 MW in 2023$ | Size Mult. for size incr. to 2250 MW |
| Harbor site dev | $0.53 MM | $0.53 MM | 1 |
| Port Fac | $5.75 MM | $5.75 MM | 1 |
| Roads Const | $60.03 MM | $60.03 MM | 1 |
| Civil works Powerhouse etc. | |||
| Powerhouse & access | $6.16 MM | $23.4 MM | 3.8 |
| Transformer | $2.19 MM | $8.32 MM | 3.8 |
| Tailrace | $14.55 MM | $27.94 MM | 1.92 |
| Surge chamber | $1.55 MM | $2.98 MM | 1.92 |
| Cable & escape tunnel | $5,02 MM | $5.02 MM | 1 |
| Transformer concrete | $2.64 MM | $10.47 MM | 3.8 |
| Powerhouse I concrete | $5.73 MM | $21.76 MM | 3.8 |
| Powerhouse II concrete | $3.29 MM | $12.49 MM | 3.8 |
| Cable & escape concrete | $1.39 MM | $1.39 MM | 1 |
| Crane install | $0.06 MM | $0.21 MM | 3.8 |
| Roofing | $0.61 MM | $2.31 MM | 3.8 |
| Structural steel | $1.93 MM | $7.35 MM | 3.8 |
| Penstock steel lining | $5.75 MM | $10.06 MM | 1.75 |
| Tunnel plugs | $4.97 MM | $15.42 MM | 3.1 |
| Civil works power tunnel | $106.8 MM | $205.1 MM | 1.92 |
| Access & addit | $15.44 MM | $47.85 MM | 3.1 |
| Intake Excavation | $6.30 MM | $19.52 MM | 3.1 |
| Dam & spillway | $36.83 MM | $322.7 MM | 8.76 |
| Electrical works | $49.89 MM | $189.6 MM | 3.8 |
| Mech + Elect turbines & gates | $166.8 MM | $633.9 MM | 3.8 |
| Archectural works | $7.81 MM | $29.67 MM | 3.8 |
| Total direct costs | $512.0 MM | $1,663.3 MM | |
| Total Indirect Costs | $516.3 MM | $1,652.2 MM | 3.2 |
| Contingency | $102.8 MM | $331.5 MM | |
| Power Line | $146.3 MM | $146.3 MM | 1 |
| Terrace Network Costs | $517.4 MM | ||
| Total Cost 500 MW Tasersiaq Site 7e with power line | $1,277 MM | ||
| Total Cost 2250MW Tasersiaq Site with Terraces and Transmission Line | $4,310.7 MM |
Aluminum Smelter Construction Costs
A report by Wood Mackensie [29] estimates that capital costs for an aluminum smelter are in the range of $3,720 – $4,960 per tonne of annual smelting capacity adjusted for inflation in 2024$. For the project financial analysis that follows, an estimated cost of $4,400 per tonne is used.
Financial Analysis
The financial analysis that follows shows that a project of the type described above can produce superior results. The estimates used in this analysis are documented in the notes and the sources of financial information to which the notes refer.
| Financial Analysis of Combined 1,522,000 tonne/yr. Aluminum Smelter and 2,250 MW Hydro Power Station | |
| Project Size | |
| Hydroelectric Power Capacity (MW) | 2,250 |
| Aluminum Smelter output (tonnes/yr) [Note 1] | 1,522,000 |
| Estimated Internal Rate of Return (IRR) based on assumptions listed below [Note 2] | 17.9% |
| Estimated Average Return on average Capital Employed (ARoaCE) based on assumptions listed below [Note 3] | 15.7% |
| Prior 3 yr. Estimated Direct Costs of Production | |
| Alumina cost ($/tonne aluminum) [Note 4] | $692 |
| Carbon including Anodes ($/tonne alum.) [Note 5] | $391 |
| Electricity cost ($/kWh) [Note 6] | 0.0058 |
| Electricity used (kWh/tonne) [Note 7] | 12,300 |
| Prod. Cost of Elect. ($/tonne aluminum) [Note 8] | $71 |
| Other smelter costs ($/tonne aluminum) [Note 9] | $524 |
| Total direct costs of prod. ($/tonne) | $1,678 |
| Prior 3 yr Mean Aluminum Price | |
| Aluminum price ($/tonne) [Note 10] | $2,712 |
| Gross Margin ($/tonne) | $1,034 |
| Estimated Capital Expenditures | |
| Aluminum Smelter capex ($/tonne) [Note 11] | $4,400 |
| Aluminum Smelter capex ($) | $6,698,195,122 |
| Hydroelectric Plant capex ($) [Note 12] | $4,310,700,000 |
| Total est. capital expenditures | $11,008,895,122 |
| Total capex per tonne aluminum per yr | $7,232/tonne |
| Project Funding | |
| Equity funds (% of capex) | 50.0% |
| Total Equity investment | $5,504,447,561 |
| Borrowed funds (% of capex) | 50.0% |
| Total Borrowed amount ($) | $5,504,447,561 |
| Loans Nominal Interest Rate(%/yr) | 4.93% |
| After-tax Nom. Interest Rate(%/yr) | 3.70% |
| Estimated Inflation Rate(%/yr) | 2.50% |
| Loans Real Interest Rate (%/yr) [Note 13] | 1.20% |
| Year 1 Borrowed Amount ($) | $1,376,111,890 |
| 40 yr term real loan cost ($/yr) [Note 14] | $43,519,599 |
| Year 2 Borrowed Amount ($) | $1,419,631,498 |
| 39 yr term real loan cost ($/yr) | $45,794,630 |
| Year 3 Borrowed Amount ($) | $1,465,426,119 |
| 38 yr term real loan cost ($/yr) | $48,249,318 |
| Year 4 Borrowed Amount ($) | $1,513,675,437 |
| 37 yr term real loan cost ($/yr) | $50,903,085 |
| Estimated Cash Flows | |
| Year 1 [Note 15] | -$1,419,631,489 |
| Year 2 | -$1,465,426,119 |
| Year 3 | -$1,513,675,437 |
| Year 4 | -$1,564,578,521 |
| Year 5 through Year 40 yearly | $1,385,653,369 |
Notes:
1. Assumes combined hydro plant and smelter have a 95% utilization rate. Assumes smelter requires 12,300 kWh/tonne of smelter aluminum per most modern Norsk Hydro and Rio Tinto plants. [20] [21]
2. Internal rate of return (IRR) see definition in reference [22]
3. Average Return on average Capital Employed (ARoaCE) see definition in reference [23]
4. 1.93 tonnes of alumina required per tonne of aluminum produced. World actual mean cost of alumina over most recent 3 yr period with inflation adjustment to 2024$ [24]
5. Mean carbon cost per tonne aluminum, over most recent 3yrs based on relative percentages of total production cost for alumina and carbon as reported by Alcoa in 2024$ [25] [26] [27]
6. Based on direct operation and maintenance expenses of hydro plant. Does not include capex costs of hydro plant. Capex costs are accounted for under Hydroelectric Plant capex costs below.
7. Assumes that smelter requires 12,300 kWh/tonne of smelter aluminum. [20]
8. Direct production cost of electricity per tonne of aluminum.
9. Mean Other operating costs per tonne aluminum, over most recent 3yrs based on relative percentages of total production cost for alumina and other costs as reported by Alcoa in 2024$ [25] [26] [27]
10. 3 yr mean inflation adjusted aluminum price in 2024$ [28].
11. Wood Mackenzie estimate $3720 – 4960/tonne inflation adjusted in 2024$ [29].
12. Includes cost of power line from hydro plant to site of aluminum smelter.
13. The real interest rate for borrowed funds is the nominal interest rate adjusted for the reduction in taxes attributable to loan interest and minus the expected average inflation rate. Rates are taken from the following source. [30]
14. Total borrowed funds borrowed in 4 yearly increments in years 1 through 4. Repayment assumed to be in equal monthly payments payable in years 1 through 40.
15. Estimated cash flows account for loan payments but do not account for taxes, depreciation, or amortization.
Levelized Cost of Electricity (LCOE)
The levelized cost of energy (LCOE) provides a yardstick that allows comparison of the relative costs of energy from different sources. It relies on the level of energy produced, total period of production, capital expenditures, cost of capital, and project maintenance costs. The National Renewable Energy Laboratory (NREL) offers a calculator for the computation of LCOE. [36] For this project the following inputs are used.
This estimate is prepared for the project that produces 2,250 MW of electricity. LCOE estimates are presented for the cost of electricity at the output of the power station and also for electricity delivered via HVDC power lines to Quebec City, Canada.
LCOE for 2,250 MW Project
| Inputs to NREL LCOE Calculator | At Power House with No Power Line Costs Included |
| Project Period (years) | 40 |
| Discount Rate (%) | 5 |
| Capital Cost ($/kW) | 1822 |
| Capacity Factor (%) | .95 |
| Fixed O&M Cost ($/kW-yr) | 48 |
| Simple Levelized Cost of Renewable Energy ($/kWh) | .019 $/kWh |
Citations and Links:
2. Tasersiaq, 7e, Greenland Hydropower, AECOM Tecsult Inc. Prefeasibility report 05-18015 Dec. 2009, Data and reports (hydropower.gl)
20. The world’s most energy-efficient aluminium production technology (hydro.com)
21. AP_Factsheet_AP60-APXe.pdf (ap-technology.com)
22. Internal Rate of Return (IRR): See How Your Investment Performs (tipalti.com)
23. Return on Average Capital Employed (ROACE) Definition & Formula (investopedia.com)
24. Business Analytiq Aluminum oxide (Alumina) price index – businessanalytiq
25. ALCOA Investor Presentation Nov. 2022 PowerPoint Presentation (q4cdn.com)
26. ALCOA Investor Presentation Nov 2023 PowerPoint Presentation (q4cdn.com)
27. ALCOA Investor Presentation May 2024 PowerPoint Presentation (q4cdn.com)
28. Investing.com Aluminium Price Today – Investing.com
29. Edgardo Gelsomino. Research Director Aluminum, Wood Mackenzie Nov. 2018 Investment In New Aluminium Capacity Needed To Avoid Supply Crunch | Wood Mackenzie
30. Leonard N. Stern School of Business, New York University, 2024 Cost of Equity and Capital (US) Cost of Capital (nyu.edu)
31. M. Morlighem, C. N. Williams, E. Rignot, L. An, J. E. Arndt, J. L. Bamber, G. Catania, N. Chauché, J. A. Dowdeswell, B. Dorschel, I. Fenty, K. Hogan, I. Howat, A. Hubbard, M. Jakobsson, T. M. Jordan, K. K. Kjeldsen, R. Millan, L. Mayer, J. Mouginot, B. P. Y. Noël, C. O’Cofaigh, S. Palmer, S. Rysgaard, H. Seroussi, M. J. Siegert, P. Slabon, F. Straneo, M. R. van den Broeke, W. Weinrebe, M. Wood, K. B. Zinglersen, BedMachine v3: Complete bed topography and ocean bathymetry mapping of Greenland from multibeam echo sounding combined with mass conservation. Geophys. Res. Lett. 44 (2017). BedMachine v3: Complete Bed Topography and Ocean Bathymetry Mapping of Greenland From Multibeam Echo Sounding Combined With Mass Conservation – Morlighem – 2017 – Geophysical Research Letters – Wiley Online Library
32. Fritz Loewe, Colin Bull, Jack McCormick and Samuel B. Treves, Reconnaissance of Sukkertoppen Ice Cap and Adjacent Tasersiaq Area, Southwest Greenland, Institute of Polar Studies Report No. 4, Ohio State University, October 1962, Final Section is Preliminary Report on the Geology of the Tasersiaq Area by Samuel B. Treves IPS_Report_4.pdf (osu.edu)
33. Pelton Wheel | Efficiency Formula, Parts, Types | Linquip
34. Bieudron Switzerland Power Station by Grande Dixence SA Completed 1998 Bieudron Hydroelectric Power Station – Wikipedia
35. Andreas Benardos, Chrysothemis Paraskevopoulou, Mark S. Diederichs, Assessing and benchmarking the construction cost of tunnels. Conference: Canadian Geotechnical Symposium GeoMontreal on Geoscience for Sustainability. Montreal, Canada, Oct 2013 (PDF) Assessing and benchmarking the construction cost of tunnels. (researchgate.net)
36. National Renewable Energy Laboratory, US Department of Energy, Levelized Cost of Energy Calculator Levelized Cost of Energy Calculator | Energy Analysis | NREL
Tasersiaq Lake Greenland Hydroelectric Project Concept 