Is the World Bank Pulling out of Large Dams?

Earlier this year, the World Bank announced that it would scale up lending for dam projects “to maximize the strategic value of hydropower”. Yet new figures released yesterday show that in 2009, the Bank’s lending for large hydro has reached its lowest level in ten years. What is happening? Is the World Bank pulling out of large dams?

Since the adoption of a new water sector strategy in 2003, the World Bank has been a strong cheerleader for building more dams. In March 2009 the Bank in a new report committed “to exploit the maximum strategic value of hydropower resources” through increased lending and non-lending services. Lending for large hydropower projects amounted to less than $250 million per year in 2002-04, increased to approximately $500 million per year in 2005-07, and reached $1,007 million in 2008. (Large hydro is defined as more than 10 megawatts, so it also includes medium-sized projects. The Bank’s financial year is from July 1-June 30.)

In a sharp drop, the World Bank’s lending for large hydro declined to $177 million in 2009. This is the lowest figure in ten years. The 2009 portfolio consists of $43 million in direct World Bank lending (probably for the 117 megawatts Shihutang Project in China) and IFC support of $135 million (probably for a series of projects of 6-32 megawatts in Chile and China).

Only two years ago, the World Bank approved more funding for large hydropower than for all renewable energy and energy efficiency projects combined. In 2009, the Bank’s support for efficiency improvements and renewable technologies jumped to more than $3 billion – almost 20 times the lending for large hydro. The portfolio includes solar panels for rural electrification in Bangladesh, biogas digesters in China, and renewable power supply for schools and hospitals in Tanzania. This certainly sounds very positive.

Will this trend continue? Has the house bank of the global dam industry recognized that on social, environmental and long-term economic terms, renewable energy technologies are preferable to large dams? Unfortunately, the 2009 figures look more like a statistical outlier than a new trend. Now that wind energy has become commercially competitive, we can expect sizable World Bank investment in renewable energy to continue simply because governments and private borrowers will ask for it. But the Bank’s support for large dams is bound to pick up again.

Since the end of its 2009 financial year, the World Bank has already approved $85 million in additional support for the Felou Hydropower Project on the Senegal River. And the Bank it has hydropower projects to the tune of $2 billion under preparation. Its current pipeline includes projects such as the large Khudoni Dam in Georgia (which would seriously impact a World Heritage Site), the Adjarala Dam in Togo, the medium-sized Rusumo Falls Project on the border of Rwanda and Tanzania, an extension of the Tarbela hydropower project in Pakistan, and the monstrous Gibe 3 Dam in Ethiopia.

International Rivers will continue to monitor the World Bank’s pipeline of dam projects, and will support partner groups which try to stop destructive projects such as Gibe 3. For now, we applaud the Bank’s increased support for renewable energy and energy efficiency, and appreciate the temporary break in the funding of destructive dams.

Peter Bosshard is the policy director of International Rivers. His blog, Wet, Wild and Wonky, appears at www.internationalrivers.org/en/blog/peter-bosshard