Dam problems - The financial costs

They're dam expensive

Dams are expensive. And their benefits are often over-estimated, while their costs are downplayed.
Many projects suffer from over-optimistic benefit projections, which make them seem more financially attractive than they really are.

At the same time, the potential risks, such as the impacts of climate change and the local political situation, are often under-estimated.

Costs for people indirectly affected also need to be factored in.

For example, downstream communities may lose their income from fisheries or have reduced harvests due to interruptions in the river's flow.

Instead of only looking at the financial return on investment, governments, regulators, and development banks must look at the overall return to society.

Seen in that light, the economics of many dams look doubtful.

Which way to development?

It's clear that many countries, particularly in Africa and South Asia, will need more water infrastructure.

But given the level of expenditure involved, each project requires individual scrutiny and serious attempts to optimize its location, design, and operations. Claims that a dam will alleviate poverty, provide water and energy security, and help a country adapt to climate change, need to be confirmed in a transparent planning and decision-making process, in which different development options are compared.
 / ©: Joerg Hartmann / WWF-Cannon
Dams are expensive. And not all the costs always show up on paper.
© Joerg Hartmann / WWF-Cannon

Fast Facts

  • The World Commission on Dams found the average cost overrun of 81 large dam projects to be 56%.
  • One MW of hydropower costs about US$1.5 million to install.
  • For the same amount of money, 15,000 people could be given access to clean drinking water for the first time.

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