Abstract

http://ssrn.com/abstract=2406852
 


 



Should We Build More Large Dams? The Actual Costs of Hydropower Megaproject Development


Atif Ansar


University of Oxford - Blavatnik School of Government

Bent Flyvbjerg


University of Oxford - Said Business School

Alexander Budzier


University of Oxford - Saïd Business School

Daniel Lunn


University of Oxford - Department of Statistics

March 10, 2014

Energy Policy, March 2014, pp.1-14.

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.

Number of Pages in PDF File: 14

Keywords: Large hydropower dams, Schedule & cost estimates, Cost benefit forecasting, Reference class forecasting, Outside view

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Date posted: March 11, 2014 ; Last revised: March 24, 2014

Suggested Citation

Ansar, Atif and Flyvbjerg, Bent and Budzier, Alexander and Lunn, Daniel, Should We Build More Large Dams? The Actual Costs of Hydropower Megaproject Development (March 10, 2014). Energy Policy, March 2014, pp.1-14.. Available at SSRN: http://ssrn.com/abstract=2406852

Contact Information

Atif Ansar (Contact Author)
University of Oxford - Blavatnik School of Government ( email )
Blavatnik School of Government
10 Merton St
Oxford, OX1 4JJ
United Kingdom
447799330176 (Phone)
Bent Flyvbjerg
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
Alexander Budzier
University of Oxford - Saïd Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 7502 107145 (Phone)
Daniel Lunn
University of Oxford - Department of Statistics ( email )
1 South Parks Road
Oxford OX1 3TG
United Kingdom
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