NCPA - National Center for Policy Analysis

Megadam Projects Not Successful

March 27, 2014

Massive hydroelectric dams have a poor track record and developing countries should reconsider pouring their funds into these projects, say Bent Flyvbjerg, professor at University of Oxford's Saïd Business School, and Atif Ansar, lecturer at University of Oxford's Blavatnik School of Government.

A new survey from Oxford University's Said Business School looked at 245 "megadam" projects built since 1934, finding that these projects are routinely over budget and rarely completed on time.

  • In the 1970s, Brazil built its Itaipu Dam at a cost of $20 billion -- 240 percent more than had been projected. The country's public finances suffered for 30 years as a result. While it has provided electricity, the dam is unlikely to pay back its capital and debt costs.
  • Ethiopia began construction on its $4.8 billion Grand Ethiopian Renaissance Dam in 2011. It is projected to finish in 2017 and will likely cost $10 billion. That is one quarter of Ethiopia's gross domestic product, and the single megadam project could overwhelm the nation's economy with debt.
  • On average, large dams nationwide come in at a cost 96 percent higher than budget.

Because these are lengthy projects (they take an average of 8.6 years to build), they do not solve short-term energy crises. At the same time, the projects are vulnerable to a number of factors that plague countries -- political tensions, electricity price swings, drops in water availability, currency volatility and inflation. Nigeria's Kainji Dam has fallen short of its hydroelectricity production goals by 70 percent due to volatile swings in water availability that have caused problems in times of flood and drought.

The Hoover Dam is an example of megadam success, but such success is rare. Smaller hydroelectric projects are a better solution, as they are more flexible, can be built more quickly and can be adapted more easily to emerging problems.

  • For example, Norway produces 99 percent of its electricity from water.
  • At the turn of the century, the government initiated a plan of small hydro development, a shift away from large dams.
  • Today, 1,000 of these plants exist in Norway.

Emerging economies need to rethink the megadam model and develop hydropower alternatives that are more flexible and less risky.

Source: Bent Flyvbjerg and Atif Ansar, "Ending the Flood of Megadams," Wall Street Journal, March 18, 2014.


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