Could Large Hydro Sink Renewable Energy Expansion

Could Large Hydro Sink Renewable Energy Expansion?

by Patrick McCully

"Including subsidies for large hydro in renewables initiatives could...dry up funds available to promote new renewables."

- Patrick McCully, RE Insider

Could Large Hydro Sink Renewable Energy Expansion? Twelve Reasons to Exclude Large Hydro from Renewables Initiatives

By Patrick McCully

Eradicating poverty and reducing global warming are two of the world's greatest challenges. The urgent need to address these challenges has led to various international initiatives to promote the use of renewable energies. While the overall aim of these initiatives should be strongly supported, they could be counterproductive if - as the large hydro industry is advocating - they are turned into instruments to promote large-scale hydropower development.

Over two billion people in the developing world, mostly in rural areas, have no access to modern energy services. At the same time, the world faces a climatic catastrophe if present fossil fuel consumption trends continue. Fortunately there are numerous new renewable technologies which can provide clean and affordable energy to the world's poorest, helping to eradicate poverty without major environmental costs. Realizing the potential of these "new renewables" is vital if we are to achieve the UN's Millennium Development Goals of halving extreme poverty and hunger by 2015, reversing environmental degradation of energy production and consumption, and enhancing energy security.

The International Hydropower Association, the World Bank, and other promoters of large hydro are actively lobbying for large hydro to benefit from renewables initiatives. Below are 12 reasons why large hydro must be excluded from initiatives to promote renewables, in particular from the Johannesburg Renewable Energy Coalition, the "Renewables 2004" conference to be held in Bonn in June, and the Kyoto Protocol's Clean Development Mechanism (CDM).

(We define "large hydro" as projects above 10 MW installed capacity, probably the most common definition in use internationally.)

1. Large hydro lacks the poverty reduction benefits of decentralized renewables.
Access to clean and affordable energy services is an essential element of sustainable development. A key advantage of most new renewables is that they can be built as "distributed power" - small, geographically dispersed units built close to the end user. This minimizes transmission costs, power losses and grid reliability concerns, and ensures that local development benefits such as jobs are widely dispersed. Distributed power can be added incrementally in step with rising demand, has low investment requirements and is quick to build. It is often the best option for providing power to low-income rural people in developing countries, where 80% of those without access to modern energy services live. Because large hydro is capital-intensive, slow to build, and centralized, it is particularly inappropriate for meeting the needs of rural areas.

2. Large hydro would crowd out funds for new renewables.
Large hydro plants are among the most expensive infrastructure projects on the planet, with major projects costing in the billions of dollars. Including subsidies for large hydro in renewables initiatives could thus dry up funds available to promote new renewables. For example, the 1,300MW Mphanda Nkuwa dam in Mozambique is proposing to sell seven million tonnes of carbon credits per year under the Clean Development Mechanism. Over 21 years, Mphanda Nkuwa would absorb $441-735 million of emission reduction funding. By comparison the World Bank's Prototype Carbon Fund, the largest single institutional purchaser of carbon credits, has a maximum of $180 million to pay for all of its carbon purchases. Taking the average size of the new renewables schemes now applying for credits under the CDM, Mphanda Nkuwa would consume credits that could otherwise support 206 new renewables projects.

3. Large hydro projects regularly underestimate costs and exaggerate benefits.
The consistent underestimation of costs and exaggeration of benefits of large hydro projects makes economically unviable projects appear viable, and gives an unfair advantage to large hydro when its viability is being compared to that of other generation options. World Bank research published in 1996 found that inflation-adjusted cost overruns on 66 hydropower projects funded by the Bank since the 1960s averaged 27%. This compares with average cost overruns on World Bank thermal power projects of 6%. The numbers of people requiring resettlement or compensation for lost lands, homes, jobs and sources of livelihood have also been regularly underestimated. While costs of all types are commonly far higher than predicted, benefits have been shown to be lower. Of the 63 large dams with a hydropower component reviewed by the WCD, 35 generated less power than predicted. Of the dams that met their generation targets, a quarter were only able to do so at the cost of increasing the planned installed capacity.

4. Large hydro will increase vulnerability to climate change
There is an urgent need to lessen the vulnerability of societies to a changing climate. The most serious consequence of global warming for human society is likely to be the changes in rain and snowfall patterns that a warmer world will bring. Large hydro plants are built on the assumption that past hydrological regimes can be used to accurately predict future power production and the size of floods that could threaten dam safety. This assumption is now invalid. The future will bring extremes of drought and flood outside the historical record, continually worsening as the climate warms, and extremely difficult to predict.

Large hydro developers do not currently take climate change into account in their plans. If they were to do so, dams would have to have much greater capacities to safely pass high floods, and projections of power generation would have to allow for the probability of new extremes of drought. These factors would increase the costs and reduce expected benefits from hydro, thus reducing their expected economic viability.

5. There is no technology transfer benefit from large hydro
A key argument for global renewable funds and carbon trading mechanisms is that these can promote the transfer of new and improved technologies from North to South. This argument does not apply to large hydro as the technology is already well established in Southern countries and there have been no significant technological advances in recent decades and none are expected. Promoters of renewables also argue that government support is needed to help scale up production and bring down the unit costs of new technologies. This also does not apply to large hydro.

6. Large hydro projects have major negative social and ecological impacts.
According to the World Commission on Dams, the benefits derived from dams "have been considerable," yet "in too many cases an unacceptable and often unnecessary price has been paid to secure these benefits." This "unacceptable" price includes:

- 40-80 million people forcibly evicted from their homes to make way for the world's 48,000 large dams. The WCD notes, "those who were resettled rarely had their livelihoods restored." Millions more have lost land, livelihoods and access to natural resources or who suffered ill-health because of indirect impacts of dams.

- 60% of the world's large river systems are highly or moderately fragmented by dams and related water infrastructure. This massive alteration of the world's rivers is a major reason for the rapid loss of freshwater biodiversity.

- Reservoirs flood forests and other ecosystems including irreplaceable habitats for endangered species. Dams alter streamflow; block sediment flows, leading to the erosion of downstream river channels and coastlines; block species' migrations; and reduce the productivity of downstream riparian areas, floodplains and deltas.

7. Efforts to mitigate the impacts of large hydro typically fail.
According to the WCD, even where the impacts of dams are acknowledged by developers and mitigation plans put in place, these plans "typically fail to address adequately the problems caused" by the dam. The WCD notes that even where compensation is provided it often proves inadequate and that even when people are recognized as eligible for resettlement they rarely have their livelihoods restored. The WCD found a similar record on mitigating ecosystem impacts of large dams.

8. Most large hydro developers and funders oppose measures to prevent the construction of destructive projects.

The WCD has developed criteria for water and energy planning processes which could prevent destructive hydropower projects from being built and encourage better alternatives. Since implementing the WCD recommendations would mean building fewer dams, many hydro proponents have lobbied to prevent the recommendations being applied.

The World Bank's response to the WCD has been especially controversial. While some Bank officials have broadly endorsed the report, others have actively encouraged governments and other lenders to oppose it. Unless the WCD's recommendations are followed by dam funders and builders there is no reason to expect future large hydros to be any less damaging and underperforming that those of the past.

9. Large reservoirs can emit significant amounts of greenhouse gases.
Scientists have studied more than 30 reservoirs, and found emissions at all of them. In tropical countries, several of the hydropower plants studied appear to have a much greater impact on global warming than natural gas plants generating equivalent amounts of electricity. The global warming impact of hydropower outside the tropics appears to be significantly lower than that of fossil fuel-generated electricity, but not negligible as has commonly been assumed. Reservoirs emit greenhouse gases due to the rotting of organic matter - the vegetation and soils flooded when the reservoir is created, the plants that grow in the reservoir, and the detritus that flows into the reservoir from upstream. Gases are emitted from the reservoir itself and when water is discharged through turbines and spillways.

10. Large hydro is slow, lumpy, inflexible and getting more expensive.
Large hydro projects take much longer to build than other types of power plants because of their huge scale, the fact that every dam site involves specific design challenges, and the opposition they invariably provoke. Large hydro also usually takes much longer to build than feasibility studies estimate. Forty-nine hydro projects reviewed in a World Bank study published in 1990 took an average of 14 months longer to build than the average pre-construction estimate. While large hydro plants take on average around six years to build, wind turbines and solar panels can start delivering benefits and repaying loans within months of entering construction. Including the planning phase of hydro projects would widen this timing gulf with other power technologies even further.

Large hydro plants by definition add capacity to power grids in large "lumps", while power demand usually grows gradually. "Lumpy" capacity additions can mean power shortages before the new capacity comes on-line, then costly over-capacity once the new plant is available.

Unlike new renewables, whose unit costs are fast declining, large hydro's costs are increasing, at least partly due to "site depletion" - the best sites for hydro have already been used, with those remaining tending to cost more to exploit.

11. Many countries are already over-dependent on hydropower.
Worldwide, large hydro contributes more than half of total electricity supply in 63 countries. Almost all these countries are in the global South and ex-Soviet Union. Many of the hydro-dependent countries are already experiencing energy shortages when drought strikes. Yet it is in the already hydro-dependent countries where the bulk of new large hydro capacity is planned.
The WSSD's call for countries to increase their energy diversification and security will best be met through demand-side management and rapidly increasing the use of new renewables from their currently small proportion of total supplies.

12. Large hydro reservoirs are often rendered non-renewable by sedimentation.
The World Energy Council defines renewables as "forms of energy which are not exhausted by use." Large hydro plants are frequently "exhausted by use" by loss of storage capacity in their reservoirs to sediments. The World Bank has calculated that every year 0.5-1% of global reservoir capacity is lost to sedimentation (meaning that 240-480 new large dams would have to be completed each year to maintain existing capacity).

About the author...

Patrick McCully is Campaigns Director of International Rivers Network, a Berkeley, California based non-profit advocacy organization. He is author of Silenced Rivers: The Ecology and Politics of Large Dams (Zed Books/St Martin's Press 2001). He has played a leading role supporting the struggle against dams on the Narmada River in India and other international dam debacles. A former co-editor of The Ecologist, he is a contributing writer for Multinational Monitor, and an associate of the International Forum on Globalization.

For Further Information:

• International Rivers Network

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