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Dams ‘not sustainable’ in the developing world

Dams ‘not sustainable’ in the developing world

After The dam that threatens a country’s water supply, here is another story about dam building but from a different standpoint. It’s by the BBC’s Matt McGrath, Environment correspondent and dated 5 November 2018.

Large hydropower dams ‘not sustainable’ in the developing world

 

Problems at the Oroville dam in California in 2017 saw 10,000 people evacuated – Image copyright Getty Images 

 

A new study says that many large-scale hydropower projects in Europe and the US have been disastrous for the environment.

Dozens of these dams are being removed every year, with many considered dangerous and uneconomic.

But the authors fear that the unsustainable nature of these projects has not been recognised in the developing world.

Thousands of new dams are now being planned for rivers in Africa and Asia.

Hydropower is the source of 71% of renewable energy throughout the world and has played a major role in the development of many countries.

But researchers say the building of dams in Europe and the US reached a peak in the 1960s and has been in decline since then, with more now being dismantled than installed. Hydropower only supplies approximately 6% of US electricity.

Dams are now being removed at a rate of more than one a week on both sides of the Atlantic.

The problem, say the authors of this new paper, is that governments were blindsided by the prospect of cheap electricity without taking into account the full environmental and social costs of these installations.

More than 90% of dams built since the 1930s were more expensive than anticipated. They have damaged river ecology, displaced millions of people and have contributed to climate change by releasing greenhouse gases from the decomposition of flooded lands and forests.

The Elwha river dam in Washington State was removed in 2011 Image copyright Getty Images

 

“They make a rosy picture of the benefits, which are not fulfilled and the costs are ignored and passed on to society much later,” lead author Prof Emilio Moran, from Michigan State University, told BBC News.

His report cites the example of two dams on the Madeira river in Brazil, which were finished only five years ago, and are predicted to produce only a fraction of the power expected because of climate change.

In the developing world, an estimated 3,700 dams, large and small, are now in various stages of development.

The authors say their big worry is that many of the bigger projects will do irreparable damage to the major rivers on which they are likely to be built.

On the Congo river, the Grand Inga project is expected to produce more than a third of the total electricity currently being generated in Africa.

However, the new study points out that the main goal for the $80bn installation will be to provide electricity to industry.

“Over 90% of the energy from this project is going to go to South Africa for mining and the people in the Congo will not get that power,” said Prof Moran.

“The people that I study in Brazil, the power line goes over their heads and goes 4,000km from the area and none of the energy is being given to them locally.”

The Hoover dam at Lake Mead in the US has seen water levels decline in recent years  Image copyright Getty Images

 “The nice goal of rural electrification has become completely subverted by large-scale interests who are pushing this technology, and governments are open to being convinced by them that this is the way to go.”

The report points our that the large installations on these great rivers will destroy food sources, with 60 million people who live off the fisheries along the Mekong likely to be impacted with potential loss of livelihoods greater than $2bn. The authors also believe that dams will destroy thousands of species in these biodiversity hotspots.

In Brazil, which gets 67% of its electricity from hydropower, the response to reduced water capacity because of climate change is to build more dams.

With the election of Jair Bolsonaro in Brazil, a temporary halt to building new hydro projects is likely to be overturned. Plans for 60 new dams are already in place.

The authors say that with huge pressure on countries to press ahead with renewable energy developments, a mix of energy sources including hydro is the most sustainable approach.

“Large hydropower doesn’t have a future, that is our blunt conclusion,” said Prof Moran.

“To keep hydropower as part of the mix in the 21st Century we should combine multiple sources of renewable energy,” said Prof Moran.

“There should be more investment in solar, wind and biomass, and hydro when appropriate – as long as we hold them to rigorous standards where the costs and benefits are truly transparent.”

The study has been published in the journal Proceedings of the National Academy of Sciences.

Follow Matt on Twitter @mattmcgrathbbc.

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Thorough Reviews of proposed Capital Projects

Thorough Reviews of proposed Capital Projects

Governments in developing economies often lack the capacity to conduct thorough reviews of proposed capital projects. A streamlined approach can identify those ready for funding. 

By Rima Assi, Nicklas Garemo, and Arno Heinrich studying an issue of vital importance for all developing countries, came up with the following essay.

They addressed the most likely to be affected which are the oil-exporting countries of the MENA region as impacted by the volatility of their earning capacities.  In the recent past, and before 2014, when free-flowing budgets allowed development without such restrictive measures, governments that get about 90 per cent of their revenue from oil exports did not bother about such issues. However plunging oil prices could mean budget cuts for major exporters like the GCC countries, but these are not expected to be large enough to stop growth, hence the need still of what is proposed by Mckinsey’s people here.

How developing economies can get more out of their infrastructure budgets

In developed economies, policies and practices for balancing diverging interests in public infrastructure spending are well established. South Korea, for example, established the Public and Private Infrastructure Investment Management Center in 1999 to conduct feasibility studies on large public investments and expanded its mandate to include appraising and managing public–private infrastructure partnerships in 2005. Since then, the center has reduced project overruns by 82 percentage points. Similar units include the United Kingdom’s Infrastructure and Projects Authority, Germany’s Bundesrechnungshof, and Australia’s Infrastructure Australia.

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But in developing markets, many governments have yet to build a capacity for conducting extended project reviews and feasibility studies, because talent is scarce or internal priorities conflict. As a result, these governments often end up funding ill-prepared, poorly designed capital projects, whose scope often diverges from real demand. Overlaps between projects are not uncommon—and actual project costs often exceed forecasts. In fact, nearly 40 percent of the money devoted to global investments around the world is spent ineffectively as a result of bottlenecks, a failure to innovate, or market failures. In developing economies, these ineffective expenditures amount to over $1 trillion a year.

It may be too much to ask that every proposal get a full-scale, in-depth evaluation that takes months to complete. Even in developed markets, that’s not always possible. But it is possible for finance ministries to conduct more streamlined financial assessments of the preparedness and design of projects in only days or weeks. Indeed, we have seen developing countries in the Middle East and Africa embark on such programs by adapting centralized control units and the required level of governance to their own circumstances.

The initial assessment of project preparedness

As a first step, a government must ensure that all projects have been thought through at a sufficient level of detail. This may sound obvious, but projects that fail to describe their rationale properly, don’t evaluate alternative solutions, or lack detailed budget plans are hardly uncommon. What’s more, implementing ministries often lack strong capabilities in project planning, and rely instead on the private-sector organizations that design and implement such projects to review their own work. The resulting incentive structures, far from optimizing costs, tend to inflate the scope and specifications of these projects. 

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When the finance ministry in one African country reviewed proposals to build new roads, for example, it found a number of them significantly exceeded benchmark costs—often coming from design firms that consistently produced designs with higher costs. When a more thorough evaluation isn’t feasible, a streamlined one- or two-day review can help. Typically, an oversight body would pose a series of straightforward questions assessing how clearly a problem is defined, along with a capacity and demand analysis and a consideration of alternative solutions. This kind of evaluation would examine a proposal’s financial aspects, like planned budgets and cash-flow requirements. It would also probe the operational elements: a realistic implementation plan, compliance with regulatory requirements, and interdependencies and overlaps with other projects. Knowing that it lacks this capability, the government of the country in the example is now setting up an in-house unit to oversee contracts with design companies and challenge their products.

The impact can be considerable. One government in another developing economy took this approach with more than 250 projects in its portfolio and found that only a quarter of them were adequately prepared. Most frequently, project owners failed to quantify the capacity–demand analysis and alternative ways of meeting future demand. As a result, they were granted only enough of their requested budget to conduct studies to increase their preparedness.

A deeper review of project design

Once the initial assessment—often of hundreds of projects—narrows down the pool, finance ministries can conduct a more thorough review of each project’s overall design. That, too, can be streamlined. The finance ministry of the country in the example developed a way to conduct reviews that lasted just two weeks. In that time, it identified opportunities to reduce costs by an average of 20 to 40 percent, without reducing outputs. During the reviews, which will now be a standard part of the annual budgeting process, the cost-review unit of the finance ministry met with owners of projects and tested their design through a series of questions aligned with the initial assessment exercise above. These included the following:

  • ·         Public priorities. Does the scope of a project focus on services and features that people really want? Is there evidence that the project is truly needed and meets the country’s socioeconomic objectives?
  • ·         Capacity and demand. Does capacity match future demand? Are the expectations for demand realistic? Can alternative solutions reduce demand?
  • ·         Costs. Do unit costs reflect benchmark levels? Can costs be cut by adjusting a project’s time frame (to reduce the need for tight deadlines) or by calibrating the schedule to the availability of capital?
  • ·         Productivity. Could existing assets improve operations?
  • ·         Funding. Are the funding requirements realistic? Are there any opportunities for private-sector funding? Will the assets generate revenues that could fund the project? Can implementation be deferred or slowed down to stretch out the need for funding?

These project reviews can be significant: a two-week review of a public convention complex, for example, identified $1.7 billion in potential savings (Exhibit 1). Elsewhere, one ministry of health’s $300 million request for additional beds for intensive-care units (ICUs) was nearly halved after reviewers considered benchmark utilization data. They found that the proposal’s assumptions about the average length of stay per ICU bed were twice as high as the benchmark, mainly because facilities lacked intermediate beds and had nowhere to send discharged patients. As result, the ministry of health was advised to procure lower-cost intermediate beds and fewer ICU ones.

Exhibit 1

A two-week capital-expenditure review of a public convention complex identified $1.7 billion in savings.

 

Or consider a proposal by another country’s housing ministry to develop affordable housing. In-depth reviews found that the proposed design included features—such as skylights, longer driveways, and larger bedrooms—that increased costs but would not necessarily be valued by residents. The optimized design featured more bathrooms, but (unlike the original proposal) with showers instead of tubs; more but smaller bedrooms; and shorter driveways with less internal parking. These homes were better aligned with the expectations of likely residents, but cost 15 percent less—so the ministry could build more homes on its $4 billion total budget.