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Published April 23, 2014 08:51 AM

Are Large Dams Economical?

A study of 245 large dams carried out at Oxford University shows that big hydropower is uneconomic. Actual costs are typically double pre-construction estimates - and have not improved over 70 years.

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Researchers at Oxford University have found that planners and policymakers systematically underestimate the costs and time required to implement large dam projects.

The actual costs of large dams were 96% higher than the estimate, on average, and implementation took 44% longer than scheduled. The new report thus explicitly states that large dams are not economical: "We find that even before accounting for negative impacts on human society and environment, the actual construction costs of large dams are too high to yield a positive return."

The study is based on the most comprehensive economic analysis of large dams ever undertaken. "Large dams" refers to dams with a wall height in excess of 15m.

Since 1934, no improvement in economic assessments

The study, which is based on a representative sample of 245 large hydropower dams built in 65 different countries between 1934 and 2007, concludes that cost and time overruns have not improved over time.

"Dam budgets today are as wrong as at any time during the 70 years for which data exist", said Atif Ansar, a co-author of the study. "Dam planners seem to not learn from the past.

"For example, Brazil's" Itaipu dam, built in the 1970s, suffered a +240% cost overrun that impaired the nation's public finances for three decades. Despite producing much-needed electricity, Itaipu will likely never pay back the costs incurred to build it.

"Regardless, Brazil is currently building the controversial Belo Monte hydroelectric project, which has proved non-viable even before opening and awaits a fate like Itaipu's. China, Indonesia, Pakistan and other nations show similar amnesic behaviour regarding the building of dams."

Liars and fools

The study cites two reasons for these immense cost and time overruns: firstly, both experts and laypersons are systematically "too optimistic about the time, costs, and benefits of a decision". Secondly, project promoters deceive the decision-makers and the public with strategic misrepresentations.

Professor Bent Flyvbjerg, also a co-author, commented on the causes of the highly inaccurate budgets for dams: "Experts making forecasts about megaprojects can be usefully grouped into 'fools' or 'liars'.

Continue reading at ENN affiliate, The Ecologist.

Dam image via Shutterstock.

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