Were the Hydro Dams Financed by the World Bank from 1976 to 2005 Worthwhile?

Omotola Awojobi () and Glenn Jenkins ()
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Omotola Awojobi: Eastern Mediterranean University, North Cyprus

No 2015-04, Development Discussion Papers from JDI Executive Programs

Abstract: Because hydro dams are complex to design and usually involve long-term planning, they are particularly susceptible to cost and time overruns. The controversy surrounding their development remains an unresolved issue in the energy policy debate. This study re-examines the cost issues associated with a portfolio of 58 dams that were financed by the World Bank from 1976 to 2005. Further, an estimate is made of the value of the benefits produced by these investments to determine the magnitude of economic rates of return for the individual projects and the overall portfolio of dams. Even though this portfolio of dams suffered substantially from cost overruns, the net contribution of these dams has been positive and substantial. The ex-post real economic rate of return for the entire portfolio is estimated to be greater than 14 percent. The important policy implication of this study is that each investment in a hydro dam needs to be appraised taking into consideration the distribution and probabilities of costs that might be incurred as well as the potential benefits. Adequate margins must exist of ex-ante benefits over costs to account for the risks of cost overruns.

Keywords: Dams; hydropower; cost overrun; investment appraisal; energy policy; World Bank (search for similar items in EconPapers)
JEL-codes: L94 O19 Q25 Q48 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-04
New Economics Papers: this item is included in nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Journal Article: Were the hydro dams financed by the World Bank from 1976 to 2005 worthwhile? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:dpaper:274

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