The major hydroelectric dam projects beloved by China, Brazil, Ethiopia, Indonesia and Pakistan are likely to burden their economies in debt rather than drive them forward, concludes new research from the Said Business School, at the University of Oxford.
Academics at the business school conducted a study based on data from 245 large dams in 65 different countries, which showed that the construction costs alone of large dams are on average more than 90% higher than their budgets at the time of approval.
But the final costs – including debt servicing, inflation or cost overruns – are likely to be much higher still. Furthermore, the authors say, dam projects typically have a negative impact on local populations and the environment.
The study concludes that in the vast majority of cases, large dams are not economically viable, and that emerging economies risk “drowning their fragile economies in debt” taken out to build ill-advised dams.
Professor Bent Flyvbjerg, lead author of the study, commented: “Proponents of mega-dams express concern that renewable water resources could be wasted if mega-dams are not built. Our research shows that as a general rule of thumb, many smaller, more flexible projects that can be built and go online quicker, and are more easily adapted to social and environmental concerns, are preferable to high-risk dinosaur projects like conventional mega-dams.”
The study is due to be published on March 10 in the journal Energy Policy.
Emerging economies of Brazil, China, Ethiopia, Indonesia, and Pakistan among others are currently pursuing mega-dam projects.
Mega dams can land struggling economies with huge debts. Photograph: Dennis van Zuijlekom, Flickr
Construction Manager sought comment from engineering consultancy Mott Macdonald, currently involved in dam projects in Pakistan, Albania and Vietnam, and from the Association for Consultancy and Engineering, but neither was able to comment.
The study also found that the magnitude of cost overruns has not declined over time, with dams being built today as likely to go as wrong as at any time during the 70 years for which data exist.
Mega-dams are also long-term projects, spending 8.2 years in construction on average and often more than 10 years, the report says. These long-time horizons mean that dam projects are ineffective in resolving urgent energy crises and vulnerable to currency volatility, hyperinflation, political tensions, swings in water availability and electricity prices.
The report’s authors cite Brazil’s Itaipu dam, built in the 1970s, where a 240% cost overrun impaired the nation’s public finances for three decades. Despite producing much-needed electricity, the report concludes that Itaipu is unlikely to ever pay back the costs incurred to build it. But Brazil is currently building the controversial Belo Monte hydroelectric project.
Dr Atif Ansar, who conducted the research alongside Professor Bent Flyvbjerg, said: “The purported success of the Hoover dam in the USA, for example, is an often-heard argument in favour of building new large dams. Instead of relying on the outcome of just one project, decision makers should consider evidence for the entire population. In the case of large dams, the probability of failure dominates. If leaders of emerging economies are truly interested in the welfare of their citizens, they are better off laying grand visions of mega-dams aside.”
