arXiv (Cornell University)· 2014· Preprint
Should we build more large dams? The actual costs of hydropower megaproject development
- 738citations
- 2014year
Short summary
Large hydropower dams are systematically underestimated in cost and schedule, with budgets biased below actual expenses, making them unlikely to deliver positive risk-adjusted returns in most countries.
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Key points
- Budgets for large hydropower dams are systematically biased below actual costs, excluding inflation, debt servicing, and environmental/social impacts.
- The 'outside view' or 'reference class forecasting' method, applied to dam data for the first time, predicts cost and schedule overruns.
- Most large dams are unlikely to deliver a positive risk-adjusted return without suitable risk management measures.
- Policymakers are advised to prioritize agile energy alternatives over megaprojects, particularly in developing countries.
AI-generated from the title and abstract; the full text is not read.
Abstract
A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. We investigate this question with the "outside view" or "reference class forecasting" based on literature on decision-making under uncertainty in psychology. We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams - excluding inflation, substantial debt servicing, environmental, and social costs. Using the largest and most reliable reference data of its kind and multilevel statistical techniques applied to large dams for the first time, we were successful in fitting parsimonious models to predict cost and schedule overruns. The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects.
The authors' abstract, as published at the source. arXiv (Cornell University), 2014 · DOI ↗
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Field: Ocean Engineering
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