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Large dams don’t make economic sense, says study

The wave of mega dams being built worldwide is economically unviable, even before taking into account environmental and social costs, argues an Oxford University report

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(Image by Pedro Vásquez Colmenares)

The wave of new mega dams under construction globally is economically unviable, according to Oxford university researchers who have found such projects typically cost nearly twice as much as first estimated and rarely finish on time.

The findings are based on a study of 245 dams built in 65 countries since 1934, making it the most comprehensive analysis since a slew of mega-dam projects began recently, ending a two-decade lull.

Projects under construction, including the Belo Monte dam in Brazil, the cascade on the Jinsha River in China, and the Gibe III dam in Ethiopia, are unprecedented in scale.  

Proponents argue such projects boost renewable energy in countries eager to increase their electricity supplies without burning more fossil fuels. However, they meet with fierce opposition because they displace millions of people, flood swathes of farming land and destroy fragile ecosystems.

This study will provide fresh fodder for campaigners who want to make the economic case against dams as a sustainable energy source. It found large dam construction costs were on average more than 90% higher than initial budgets, while eight out of 10 suffered a schedule over-run. Dam builders and financiers have also failed to learn from mistakes of the past, argue the researchers, since neither cost nor schedule overruns have improved over time.

While projects in poorer regions tend to have longer delays and leave countries saddled with more debt, even in China large projects are “likely to hinder the economic viability of the country as a whole unless risks are mitigated,” claim the researchers.

China is the world’s leading dam builder; half of the world’s 45,000 large dams are in China and Chinese companies are involved in over 300 dam projects in 70 different countries.

More than economics

For China it is not only the direct construction costs that need to be considered. The bulk of the country’s new hydropower will come online in the remote south-western regions and on the Tibetan plateau. Transferring the electricity produced thousands of kilometres to where it will be consumed by industry and growing cities on the east coast will further push up costs.

Mitigating the environmental damage inflicted by hydropower is also costly. Reports in Science estimate it will cost US$26.45 billion will to deal with the environmental impacts of the Three Gorges Dam over the next 10 years. The US – the world’s second most prolific dam builder after China – is now spending huge amounts of time and money dismantling dams across the country to restore river flow.

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