Saturday, April 15, 2006

Supporting GOSS Policy Statement On Hydroelectric Plants??!

By John A. Akec*

Hydro power has always been hailed as the solution to the increasing world energy needs. But since mid 1980's, the hydro power sector of the energy industry has been plagued with difficulties as political opposition to construction of new dams and allegations of corruption began to mount.

So much that the hydro power sector has acquired the image of high risk, low return sector. Some of image problems include: cost overruns, expensive schedule slippages, inaccuracies in output prediction at design stage, high costs of decommissioning, and political campaigns by those displaced by dam projects and their international supporters, for compensation.

First, a research commissioned by the World Bank showed that in 70 of projects it funded, the final project costs were 27% higher than in original budget. Another survey by the World Bank of some 80 hydro projects completed between 1970 and 1980, revealed that in three-quarters of them, the final construction costs were over the budget. In half of the projects surveyed, the costs were at least 25% over budget. In 30% of the projects, the budget overrun was in excess of 50%. That is, a project budgeted at a cost of $ 2.0 billion could cost $ 3.0 billion to be completed even with inflation adjustment. Only in 25% of the projects surveyed were the final construction cost below the budget.

A good example of costs overrun is 3000 MW Xino dam in Brazil which was built by ABB (of Sweden) at a cost of US$ 3.2 billion; and took some 7 years to complete. The final cost was double the original budget.

According to a former World Bank Economist, John Beasant-Jones, the capital cost of a hydro dam represents 80% of its lifetime cost (excluding the cost of decommissioning). Whereas the capital cost of a coal-fired power station is only 50% of its lifetime cost. That means a 30% costs overrun for a hydro dam is more expensive than the equivalent percentage cost overrun for a coal-fired power station.

Second, the real output of a hydro power plant tends to be lower than the predicted output. This results in lower than expected financial returns and thereby ruins investors' confidence. And in many occasions has led to legal suites being filed against companies involved by the investors. A dam output can be reduced significantly by leakes which are expensive to repair and by variation in rainfalls.

Is hydro the solution to problem of global warming?

Not according to World Bank's environmental findings which say that hydro dams in tropical regions produce more greenhouse gases (carbon dioxide and methane) more than their equivalent coal-fired power plants because of plants rotting in the reservoirs.

Is hydro power option a dead end?
Not necessarily. According to Anil K. Malthorta, World Bank's Regional energy adviser in Asia's Infrastructure Unit of the World Bank:

"Current technology used to generate power can be economic at around 50MW. When projects are small scale, it is easier to secure financing for them; quicker execution is possible; and social and environmental dislocations may be more easily handled. Rather than constructing a single large project, developers may wish to consider building a portfolio of smaller projects in a country or across the region"

Because of the above technical, political, environmental, and economic difficulties associated with hydro dams, the World Bank funding of hydro projects has fallen dramatically from 26 projects per a year between 1970 and 1985, to just 4 projects per a year in 1990s. A World Bank official described the Bank's involvement with dam projects worldwide as "inefficient and painful process".

Therefore, both World Bank and the IMF have been placing increasing funding restrictions on the governments of the developing countries (South Sudan is no exception) regarding construction of dams.

Even a country like Norway, where contracts in hydro projects form a large chunk of its export earnings, is reviewing funding development assistance of energy projects involving the construction of dams. Hence if Fula, Badden, and Kenty were viable in 1970s, they may struggle to find donors ready to commit fund to those projects. Moreover, fresh studies and environmental impact assessment will be needed to restart them.

What are alternative sources of enerygy options for GOSS?

Roughly speaking, it looks as though we will have to build plenty of diesel-fired power stations given availability of oil locally, suplmented by solar, and to a lesser extent, wind in rural areas where demand for energy use is not heavy. I do not know about geothermal or nuclear. There are few technical problems with solar: the high prices of solar pannels and the problem of storage of excess capacity of energy for use in the night or a cloudy day. But the potential of solar is very huge in Southern Sudan. There is also a scope for biomass energy (the burning of plant waste to generate steam for industrial use or to turn turbines).

But one need to look at any availabe data on the projected energy demands in Southern Sudan and to factor in other issues in order to come up with a better analysis regarding choices we can make in regard to energy problem.

There is no altenative, all governments have to put money where their mouth is and fund research or seek advice. Just waving our hands in the air will not do us much good.

In conclusion, instead of rushing to lobby the government of Southern Sudan to push for construction of hydro dams, it is better to first understand the economics, environmental, and social impacts as well viability of alternative energy sources for Southern Sudan. Plenty of research is already in the public domain and there are knowledgeable Southern Sudanese in these fields out there who can be complemented by independent or World Bank experts.

Yap, GOSS is right to have appointed advisers in legal, foreign, economic, and religious affairs. However, it also needs advisers in energy and environment!
Failing that, we will continue to fumble and grope in the dark when it comes to devising the best energy strategy and policies for us.

That is my humble opinion regarding this matter.

*This has been adopeted from posting I made on ssnet and splm-diaspora on 13 April 2006