Insights and Analysis

Study Finds Asian Mega Dams Are Not Cost-Efficient Form of Energy

March 19, 2014

By Kourtnii S. Brown

The International Energy Agency states that between 2010 and 2035, increased and new demand for electricity will require worldwide power generation to rise from 5.2 terawatts to 9.3 terawatts, roughly equal to adding four times the electricity that the United States currently generates. In emerging economies, especially throughout the Asia-Pacific region, hydroelectricity is seen as an important source of renewable energy that can help to support their industrial growth while also decreasing their reliance on high-emitting, expensive fossil fuels for providing such power. Damming rivers around urban areas is also seen as a way to reduce risks associated with flood and drought hazards, serve as a conduit for sustainable water management planning, and redirect river flows around rich commerce and population centers.

Mega dam

Hydroelectricity has been integral to agricultural and industrial development over the last 50 years. But dams are also structures that present great risk to upstream-downstream built environments, community livelihoods, and river ecosystems. Photo/Flickr user WorldFish

Hydroelectricity has been integral to agricultural and industrial development over the last 50 years, accounting for about 16 percent of global electricity generation (90 percent of renewables) by 2010, of which 32 percent was produced in Asia. But dams are also structures that present great risk to upstream-downstream built environments, community livelihoods, and river ecosystems. Anti-dam campaigners petition policymakers to include the expenses for responding to these consequences in their total cost-benefit analysis of large-scale projects, often arguing that extensive social and environmental impact assessments will demonstrate that displacement issues and potential for natural disaster make some dams uneconomical. During the past two decades, a lull in dam projects worldwide and the dismantling of dams across developed countries can be attributed to these loud protests, though the recent trend shows emerging economies looking toward this source of energy once again amid the resurgence of the need for renewable energy to mitigate climate change.

Last week, though, Oxford University released a new peer-reviewed study that once more challenges policymakers to reevaluate current and future plans for large river dams. Co-authors from the School of Government and Saïd Business School received a great deal of attention for publishing a report in Energy Policy journal that purports large-scale dam construction to be one of the least efficient economic investments a nation can make when it comes to generating energy – even before factoring in environmental and social costs, inflation, or interest rates on debts. The publication is the first comprehensive analysis conducted since the World Commission on Dams report published 13 years ago stating similar conclusions and garnering parallel sensational reactions about dams and development.

The study covers 245 dam projects in 65 countries over 15 meters high built throughout the developed world and in emerging economies from 1934 to 2007 (for which reliable data exists), of which 25 were considered “mega-dams” at over 150 meters tall. On average, the study concluded that dam projects end up costing twice as much as originally estimated, while eight out of 10 are behind schedule by about seven years. Furthermore, private investors rarely finance dams, so construction costs are paid through public pension funds, taxpayer revenues, or by taking on debt from multilateral financing mechanisms. Instead of obtaining economic and energy independence, emerging economies in Asia risk drowning in liabilities from which construction projects will hardly ever produce positive net returns.

The study illustrated Asia’s current appetite for new dams by discussing the overly optimistic politics concerning hydropower in the region (or purposefully low-balled project price tags in order to garner public support), including that of the Diamer-Bhasha dam in Pakistan, the Jinsha and Yarlung Tsangpo river dams in China, the Myitsone dam in Myanmar, the expansion of 50 dams along the Bakun hydropower project in Sarawak on the island of Borneo, Malaysia, and the Xayaburi dam in Laos. As delays and construction issues continue to occur, each project is making less and less economic sense and some claim it’s not yet too late to halt construction. The largest accusation, though, is from researchers who predict that by the time it is finished, China’s controversial Three Gorges Dam is set to cost an additional $26 billion to deal with environmental impacts over the next 10 years on top of the $59 billion cost of construction.

As we celebrate World Water Day, it is exciting to reignite the discussion about the cost-effectiveness of dams. As climate change brings more irregular rainfall, dams in some regions can become a beneficial way of storing water, controlling water flows, and managing droughts and floods. In terms of generating electricity, however, the study argues that it may be better to address hydropower through smaller, more decentralized projects built along tributaries instead of major waterways that don’t take years and tens of billions of dollars to build. However, many actors have vested interests in building dams in Asia, and analysis should therefore be focused on the larger context in which these projects (no matter how small) are constructed – that is, who loses their livelihoods, who gains from the construction of the dam, and the specific environmental benefits and costs of considering this renewable energy option. As the Oxford study says: “Energy projects that can be quickly built up from standardized components and don’t depend on major earth-moving or imported parts are best, even if they lack the grandeur of a mega-dam.”

Kourtnii S. Brown is a program officer for The Asia Foundation’s Environment Programs in San Francisco. She can be reached at [email protected]. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.


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