Good and bad press
Renewable and green energies are not without their bad press. Wind farms are eye sores, solar deemed too sluggish a return, bio-thermal too untested a technology and waste-to-energy, dirty, in more sense than one. Yet, when all is totaled up and netted off, the general consensus for wind, solar, bio-thermal, wave, tidal and a roll-call of other renewable energies is that they represent the future. They represent progress and must therefore, in the tradition of advancement, be a ‘good thing’.
Then there is hydroelectricity by way of dams.
When it comes to hydropower gargantuan scale is everywhere – the top four power producing facilities in the world are hydro-electrical and in China alone there are 15 significant hydro-dam projects under construction that when complete would be sufficient to power the whole of Africa. Ethiopia recently green-lighted the Gilbel Gibe II and III, two new sequentially built hydro facilities, which will represent the largest hydro facility in Africa with approximately 2200 MW of generation capacity.
These facilities will transform Ethiopia into an energy exporting nation, a significant achievement, but one that pales alongside the vast spectre of the Grand Inga Dam in the Congo, which although still in proposal stage, will represent a staggering 39,000 MW of installed capacity, dwarfing the Three Gorges Dam in China with capacity to service the whole of Africa single-handedly.
Based on these incredible statistics one would think that the power of hydro dams to produce untold quantums of ‘clean’ energy would make it a standard bearer for the proponents and promoters of renewable energy. A leader energy source for all the other usefully additive, but relatively small scale contributors in the renewable sector? Not a chance, not one large hydro dam project has passed proposal to construction without significant opposition. Why is this? There are many reasons, from the well documented to the lesser known.
Mass displacement – in simple terms the erection of an impermeable surface in the face of a flow of water leads to the creation of an artificial lake or reservoir which covers an area that was previously above the waterline. Given that human population is often focused near water sources such as rivers, the creation of hydro dams inevitably leads to mass displacement of human population. A number of studies during the 1990’s (Thurkal ’92, McCully ’97 and Singh ’97 to name a few) noted that proposals for large scale hydro projects often lacked a thorough study of the real cost of displacement. In India, where the government owns numerous large hydro-dams, there is in fact no official record on the number of people displaced by these large hydro constructions, which makes compensation of displacement very suspect.
Ecological – the ecological impact of dams is far reaching and could barely be covered in a dissertation, but in short the result can be downstream agricultural damage due to river bed deepening, heavily accelerated and costly coastal erosion, decline of important sea fisheries because of changes in sediment flows reaching estuary areas and changes to flooding. It is worth noting on the last point that natural cyclical flooding on undammed rivers has an important role to play in replenishing wetlands and depositing nutrients on agricultural land, however a significant flood backed up behind a dam to an untenable point is a recipe for disaster. The floods in Brisbane, Australia, this year being an excellent, though callous, example.
The lesser discussed
Tectonic destabilization – reasonable proof (Gahalaut, Gahalaut & Panday ’07) exists that a huge increase of weight on the earth’s surface due to reservoir formation can lead to increased earthquake activity. This is of course only the case in locations where reasonably active earthquake activity already exists.
Landslides – instabilities in reservoir slopes is a very real hazard that is mostly associated with the filling process of a reservoir, but can also occur in normal damming operations. In 1963 the most deadly landslide recorded in Europe occurred in Italy as a result of the filling of the Vaiont dam in the southeastern part of the Dolomite Region. Approximately 270 million cubic meters of earth detached from a wall, descended into the reservoir at speeds of up to 30m/sec creating a wave that surged over 250m above the dam and raced into the towns and villages of the valley below killing approximately 2500 people.
Political tension – a good example of this is the Tigris-Euphrates Basin primarily shared between Turkey, Iraq and Syria. Many of the Tigris tributaries originate in Iran and dam construction by Iran (and Syria to an extent) has contributed considerably to political tension that already exists between some of the countries in this region.
A fairly damning indictment throughout if you will excuse the phonetic pun. However, the fact is water flow, as an ostensibly infinite resource, ensures hydro-dams are truly sustainable and renewable sources of energy. This is too great a lure for governments looking to escape energy reliance from finite resources or external suppliers for interests in dams to subside despite the downsides.
Pressure from anti-damming groups has not been a wasted effort though. Compensation has been paid to displaced populations (the extent of this varies from country to country) and clear consideration of ecological impact has put the brakes on some major dam projects in recent years. In addition to this, landslides prove a lesser, mitigated, risk too due to some geological and engineering advancement in this area which were particularly accelerated by extensive studies undertaken during the Three Gorges Dam construction.
So having side-stepped these challenges, wrongly or rightly, we are faced with a secondary set of barriers ‘at point’ – the economic challenges of hydropower. Just as myriad as the environmental and social concerns, economic challenges are also compounded and complicated by the positive impacts of anti-damming lobbying has come to bear.
Personal experience, stemming from work in European based hydro-electrical projects, illustrates that project economic, financing and hydro analysis has to necessarily be more rigorous for hydropower projects then almost all other major infrastructure sectors. This is due to a number of factors, including:
- Lead times can be very lengthy and are often represented by numerous permitting and planning stages with large associated costs before construction even commences.
- Construction periods are usually riddled by delays and unforeseen expenses (e.g. government supported funding delays, geological re-assessments, access to the limited pool of contractors with successful track records etc).
- Displacement and rehabilitation analysis and associated compensation can be exceedingly intricate.
- Silting and build up of other debris at dams must be built into any financial analysis as the impact on project returns are often overlooked and can in fact be considerable.
- Tuning of turbines to full efficiency rarely is achieved within the periods stated by their manufacturers.
Financing likewise lays down a raft of additional challenges which are usually associated once again with the scale of the project and the analysis of complicated club lending deals, government loans, guarantees, numerous reserve accounts for financial tranches and operational rehabilitation, foreign exchange in PPA contracts and foreign lending, hedging and so on.
Finally, once these analytical hazards have been faced and met via extensive due diligence and sensitivity analysis, based on a robust, yet detailed, and extremely flexible financial model, there still remains the problem that the hydrological system is essentially completely out with of human control.
The ‘black swan’ event, (i.e. an event which comes as a surprise and has a major impact) is one too often set aside in the analytical process. The reason for this is because it is considered unreasonable, too far an outlier, or simply of too abstract a concern to be ‘modelled’. However, more regular ‘black swans’ occur in waterflow analysis and may be represented, for example, by a thirty year drought or a lull in precipitation in excess of 80% every seven years across the catchment area of the intended dam. It is imperative to ensure that all attempts are made to capture these events during the analysis process. This can be done through probabilistic and simulation analysis (e.g. Monte Carlo analysis).
Failing to do so and an unexpected drought occurs at the commencement of operations, could easily see financial covenants being breached and force a developer to hand over the keys to the castle as the last stone is being laid. A rather gargantuan analytical oversight that does occur, though perhaps not so surprisingly given that for many large hydro projects a certain level of ‘oversight’ is required just to get past the permitting stage.