How is generation expansion planning done for hydropower plants?

This is basically performed in four major steps as listed below:

1) River Basin development

This involves selection of good plant construction sites by evaluating an infinite number of whole
basins that is complete schemes. This is done basing on good topographical sites, minimum installed
capacity per site and reservoir fills up duration. Nevertheless, a cost-benefit index ranks them the best
where the benefit criterion is a function of the additional firm power that a new plant brings to the
system which will naturally depend on the required accuracy and characteristics of the region or a
more detailed simulation of the system operation.
The cost criterion depends on the total capital investment costs, operation and maintenance costs
and a penalty related to lack or surplus peaking capacity.
2) Formulation of expansion plans
Automatic expansion models for predominantly hydroelectric systems are essential for the initial
formulation of an expansion plan which is then subjected to manual fine tuning aided by the detailed
production models.
3) Detailed production analysis
This is divided into energy supply reliability and peak supply reliability. The energy state of reservoirs
in predominantly hydroelectric systems is determined by past history of stream flows, demand
evolution, equipment outages and system operation though equipment outages are not usually
represented in the probabilistic simulation since they do not affect energy supply reliability.
Credible demand trajectories and associated probabilities should be considered and evaluated using
only one demand forecast and performing a sensitivity analysis on the expansion plan. The input for
probabilistic energy supply studies are streamflow sequences and the system operating policy.
Peak reliability supply evaluation is concerned with load shedding owing to lack of power and the
evaluation of peak capacity of a hydroelectric system is directly influenced by the energy state of the
system.
4) Detailed transmission analysis
This is an integrated generation/transmission planning approach very important due to heavy
investments in transmission lines. The transmission reliability evaluation can be performed by Monte
Carlo methods for example based on the sampling of system states from their joint probability
distribution.
A system state affects the unit output capacities of hydroelectric plants and are characterized by
equipment availability load level at each bus and the hydrological system state.
Similarly, a network analysis is performed based on the DC power flow (linearized power flow model)
and optimum pre dispatch algorithm based on linear programming is used to translate line overloads
in terms of load curtailment.

Which special characteristics about these plants are important to consider in expansion planning?
1. They are suitable for increasing the performance and efficiency of a large electric power system. This
is because of their rapid start-up and flexibility for changing power output quickly, in rapid response
to changes in demand.
2. They can offer both an affordable and efficient peak power supply as well as a spinning reserve for 
emergencies.
3. Compared to other options, they are less expensive to operate and maintain, last longer, and have fe
wer outages. On the other hand, the investment costs are usually high.
4. Their production expenses are particularly resistant to potential cost inflation because of their low
total operating costs.
5. The best undeveloped locations are typically far from centers of power consumption, necessitating 
the construction of extensive and expensive high-voltage electrical transmission lines.
6. Unlike thermal plants, their output (of both power and energy) is rather unclear because it depends 
on the unpredictable characteristics of natural river flows.
7. In general, the yearly water input and the size of their reservoir, if any, limit their annual generation.
8. Economies of scale are very high. The marginal cost of adding generating capacity often is quite low,
especially for hydroelectric power systems with huge reservoirs.
9. With a total annual firm energy output limited for hydrological reasons and usually small marginal
cost of capacity, it follows that, at least in combined hydro-thermal systems, the most economic
utilization of hydroelectric power will be obtained for small ratios of annual energy (kW-h) versus
capacity (kW), i.e., for short operation durations (hours) during high demand periods (peaking). In
such circumstances, hydroelectric power is competing with the least efficient steam-electric plants
and with thermal peaking stations, such as gas turbines and diesel generators.
10. In cases where the marginal costs of capacity are exceptionally high, i.e., for schemes with long
penstocks or in predominantly hydro-oriented systems or in decentralized small systems, there is also
economic scope for hydroelectric power plants with long operation times, i.e., base load