Conventional logic dictates that big problems need big solutions.
The International Energy Agency predicts that the amount of energy the world needs will almost double by 2035 to 9.3TW. The problems don’t come much bigger than that.
Small wonder then that engineers and politicians look at the torrents of water running down river and envision large dams producing millions of watts of electricity.
In the last ten years the number of “mega-dams” being built around the world has increased dramatically. Emerging economies such as Brazil, China, Ethiopia, Indonesia and Pakistan are rushing to build dams with walls higher than 150m, the official classification for “major dams”.
The attractions are obvious. Hydropower offers a renewable energy source with low emissions combined with security of supply and jobs during construction and operation. Dams can also provide flood control, supply water to cities, and assist river navigation. Almost 20% of the world’s current electricity demand is supplied by dams.
But according to academics from Oxford University, the current mania for mega-dams is entirely misplaced. A report published by the Said Business School at Oxford University, that analyses the data from 245 large dams in 65 countries built over the last 70 years, reveals that on average they are 96% over-budget and two and a half years late. Three out of four dams suffer a cost overrun and eight out of ten are completed late. The problems affect all dams, but if you are in an emerging economy the cost overruns and lateness are worse.
Professor Bent Flyvberj is chair of Major Programme Management at the Said Business School, Oxford University and co-authored the report on mega-dams. He says that the primary reason for the global trend for mega-dam construction is simply an increase in the availability of funding for them. “There is money for them at the moment. For a long time there wasn’t, but the World Bank has changed the criteria for funding allocation in favour of dams,” he says.
Mega-dams are being developed across developing economies. Examples include the Belo Monte in Brazil, the Jinsha river dams in China, the Gilgel Gibe III dam in Ethiopia or the Diamer-Bhasa dam in Pakistan. “The main risk is the economic gamble being taken - from the cost engineering to financing the projects,” says Flyvberj. “This risk is higher in emerging economies, such as Brazil and Pakistan, where the impact of a project going wrong is higher.”
(Top) The Belo Monte Dam being built in Brazil; (Middle) View across the Three Gorges Dam in China, the largest power station with its 23GW capacity; (bottom) a runner from one of the giant turbines at the Three Gorges Dam
Construction of the Diamer-Bhasa dam began in Pakistan shortly after the 2010 floods. The dam is planned to be operational by 2021. The estimated cost in 2008 prices is $12.8bn. According to analysis in the report, the actual final cost is most likely to be $25.4bn. Furthermore, the research indicates planners should expect the dam to not be opened until 2027, with a 20% chance of further delays possible. Including inflation the Diamer-Bhasa dam’s total cost will be about 25% of Pakistan’s entire economy. A problem with this one project could easily destabilise the whole country’s economy, the report concludes.
While the scale of the risk is so massive, it’s shocking that awareness of the economic gamble being taken is so low. The validity of these large projects, despite their massive budgets, is not being questioned by academics or engineers. There is a significant paucity of data in this area - the last study into the construction of dams was published in 2000 by the World Commission on Dams. “As a profession, engineers aren’t forecasters. But we have data for the last 80 years of dam construction and not made an improvement with this. The cost engineering has not improved, mainly because there is a lot of pressure to produce certain results,” says Flyvberj.
Costing of projects can be an ethical consideration as well as a competency one. Flyvberj does not mince words when describing the people who advocate the construction of mega-dams, labelling them either “fools” or “liars” and making decisions because of either “delusion” or “deception”.
“Psychologically we are hotwired to be optimistic and sometimes people misrepresent the numbers because they are pitching for scarce resources,” he says. “Experts are just as liable to be over-optimistic as other people.”
Mega-dam projects go wrong for valid technical reasons as well as psychological ones. There are scope changes, problems with geology, bad weather. All are causes that happen in the duration of a project, but there can also be root technical causes common across projects.
There are ways to reduce the risk that a mega-project will overrun and be overbudget, not least better project planning. But the most important action that can be taken, says Flyvberj, is to reduce the planned duration of a project. The construction phase of some dams can be up to 15 years. During this time things like the price of materials and exchange rates can fluctuate dramatically, especially in more unstable emerging economies. A reduction in construction time reduces the exposure the project has to changes that can impact negatively on the cost of a megaproject.
The best solution, he says, is not to go “mega” in the first place. “Emerging economies are very power hungry, a dam in 10 to 15 years is no good when they need the power now. What’s needed is more smaller scale projects.”
“These big projects are often a knee-jerk reaction and based on bad economics. People should consider when big is appropriate. I hope people are warned off them. There is huge scope to improve things.”
Conventional logic may dictate that big is best, but conventional logic can be dammed when applied to the real world with its conflation of over optimism and power-hungry developing economies. As awareness of the risks grows, the decision-making process about the appropriateness of mega-dams can only get better.