Multilateral Development Banks: Projects to Watch

Zachary Hurwitz

International Rivers has begun a new quarterly blog that highlights dam projects to watch out for in the investment pipelines of the multilateral development banks.

We'll look in detail at available information about projects' designs and financing, potential impacts, and possible controversies.

Let's start things off by taking a look at two large dams in the World Bank's pipeline. The first, the Rusumo Falls Regional Hydropower Project, is proposed for its regional benefits. The second, the Luhri Dam, is proposed to meet a portion of peak energy demand in India's northern Himachal Pradesh region.

Rusumo Falls Regional Hydropower Project (Rwanda, Tanzania, Burundi)

The Rusumo Falls are slated to be destroyed for the Rusumo Falls Multipurpose Hydropower Project
The Rusumo Falls are slated to be destroyed for the Rusumo Falls  Hydropower Project

Project Design
Part of the Nile Basin Initiative, the project foresees hydroelectric power and regional transmission components to connect Burundi, Rwanda and Northwest Tanzania. The design calls for a 15-meter high dam on the Rwanda-Tanzania border of the Kagera River, which would produce an installed capacity of 80 MW under a head of 32 meters. The World Bank claims that Rusumo Falls HPP has been redesigned as a run-of-the-river project with "no reservoir or storage," claiming that there will be 15 kilometers of "permanent shallow inundation" upstream from the dam site. In reality, this is jargon to obscure the fact that large run-of-the-river designs also create harmful reservoirs upstream. In fact, the "permanent shallow inundation" would form a run-of-the-river reservoir of 495,900,000 cubic meters of water, flooding an area of 313 square kilometers that extends into Burundi, Rwanda and northwest Tanzania.

Purported Benefits
The project is expected to contribute to regional power integration through the formation of an electrical transmission backbone between Burundi, Rwanda, and Tanzania, and would interconnect parts of the East African Power Pool and the Southern Africa Power Pool. The transmission lines would export electricity to the three countries' state power utilities: Burundi's Regie de Production et de Distribution d'eau et d'electrcite (REGIDESO), the Rwanda Electricity Corporation (RECO), and Tanzania Electric Supply Company (TANESCO).

According to the World Bank, in addition to demand from the three state power utilities, a number of mining companies have indicated interest in purchasing electricity from the Rusumo Falls HPP. Yet, the project would be located near an area with a history of conflict, genocide, and corruption fueled by conflict minerals. With support for Rusumo Falls, the World Bank is placing a risky bet that benefits from the mineral trade will somehow reach the poor.

Environmental and Social Issues
The Rusumo Falls HPP triggers eight of the Bank's environmental and social safeguards policies. According to the Bank's safeguards information sheet, expected impacts include the flooding of approximately 5,280 hectares of agricultural lands and 20 hectares of built-up lands along the Kagera and Ruvubu Rivers and around Lake Rweru. The total number of project-affected people is expected to be between 5,200 to 6,700 households, or roughly 30,000 to 40,000 people. 

Upstream, Rusumo Falls HPP would significantly flood wetlands marsh habitat around and upstream from Lake Rweru, some of which may be designated wetlands of international significance under the Ramsar Convention. Downstream, Rusumo Falls HPP may alter the flow regime of the Akagera National Park in Rwanda. The transmission line associated with the project, funded by the African Development Bank, may also impact natural habitats. According to the World Bank, close to US$ 32 million has been allocated for mitigation projects, including resettlement and local area development programs.

The environmental impact assessment for the Rusumo Falls HPP includes a section on the project's cumulative impacts and impact interactions relative to other projects in the basin, including other dams, transmission lines, a railway project, and a border post project. Unfortunately, as is too often the case, the scope of the cumulative impacts assessment is too limited. It is mostly concerned with negative impacts on hydropower capacity: how the upstream Nyaborongo I and II dams may limit water availability for the Rusumo Falls HPP, and how it in turn might limit the water available for the downstream Kakono Dam, planned for 2015. There is only passing mention of the cumulative impacts on actual ecosystem functions, such as water quality, sedimentation, and vegetation. Indeed, there is no mention at all of cumulative impacts on indicator species or biodiversity in the basin.

Despite the significant issues with Rusumo Falls HPP, the World Bank has committed to $340 million of the $469 million project cost through an International Develpoment Association (IDA) investment loan. IDA is the World Bank's interest-free fund for the least-developed countries.

On August 6th, 2013, the board of the World Bank approved a US $340 million IDA loan for Rusumo Falls HPP. US $88 million is to be loaned by the African Development Bank (AfDB) through the African Development Fund, which is also interest-free. US $18 million would be loaned by as-of-yet unidentified bilateral agencies.

Luhri Dam (India)

The Luhri Dam is slated for the Satluj River in India, downstream from the rampur Dam, and upstream from the Koldam Dam, both under construction in 2013.
The Luhri Dam is slated for the Satluj River in India, downstream from the Rampur Dam, and upstream from the Koldam Dam, both under construction in 2013.

Project Design
The design calls for an 86-meter high dam on the Satluj river, a major tributary of the Indus basin. It will have an installed capacity of 588 MW, reduced from a proposed 775 MW due to a required minimum discharge as per the norm of the Ministry of Environment and Forests. The Luhri Dam presents explicit cumulative impacts concerns, as the Satluj basin has already been overdeveloped by other projects. The Luhri site is proposed immediately downstream of the Rampur Dam and upstream of the Koldam Dam, both under construction. At capacity, the reservoir is meant to store 35 million cubic meters of water, flooding 1.53 square kilometers. The design calls for one tunnel 38.14 kilometers in length and 10.5 meters wide, which would divert the river water to the underground powerhouse 40 kilometers downstream of the dam site. The water released from the power house will be returned to the Sutlej through a 0.45 km-long tail race tunnel.

The electricity would be sold to India’s Northern grid including a fraction for peaking power, as the project proponents claim that the grid faces power shortages at peak times. Yet, no attempt has been made to do a credible options assessment that would look at all the available options to meet demand, including energy efficiency, demand side management, peak management, and peak generation optimization from existing hydro and solar.

Purported Benefits
The project proponents claim that the Luhri Dam would provide 100 units of free electricity every month for 10 years to the project-affected families, while the state of Himachal Pradesh would reportedly receive a 12% royalty from the power generation in return for the use of its water resources, and a share in dividends as an equity partner in the project. The proponents also claim that revenue from the sale of 1 percent of power would be spent on community development projects. However, a proper environmental impact assessment has never been written. An EIA was written by CISMHE, led by Professor Maharaj Pandi, but it is woefully inadequate; for example, it does not examine the impacts of tunneling on natural springs, the impacts of dumping of debris and excavated material, nor the impacts of road building associated with the project.

Environmental and Social Issues
A proper cumulative impacts assessment and management plan has not been created to assess how the impacts from the Luhri Dam will combine with the impacts from other projects to change ecosystem components in the Sutlej basin. The South Asian Dams, Rivers, and People Network (SANDRP) wrote to the Government of India in January, 2013 to express that the Luhri Dam lacks a comprehensive cumulative impacts assessment and management plan.

Meanwhile, no assessment has been made of the risks of climate variability to the operations and safety of the Luhri Dam. Given the recent disastrous flooding in Uttarakhand, not planning for potentially extreme flood events in the basin will make Luhri Dam a risky investment.

The project is estimated to directly and indirectly impact 2337 families, 37 of whom would be physically displaced. 24 villages are likely to be directly affected, and168 villages indirectly affected. In addition, 183 hectares of forests would be lost.

Finally, geological risks will certainly impact the Luhri Dam. The region is seismically active, and the Sutlej River transports large sediment volumes of the order of 50,000 parts per million during monsoon season, which have previously damaged the upstream Nathpa-Jhakri Dam (1500 MW).

Despite the significant problems with Luhri Dam, the World Bank has committed to $650 million of the total $1150 million project cost, but not through IDA funds. The borrower, SJVN Limited, reportedly committed to $262 million, and the Government of the State of Himachal Pradesh to $83 million, leaving a $155 million funding gap.

As of July 15th, 2013, the Bank's board had yet to approve a loan.

More information: 
  • Multilateral Development Banks' Project Pipelines: A quarterly report on planned dams to watch out for at the the African Development Bank, the Asian Development Bank, the European Investment Bank, the Inter-American Development Bank, the International Finance Corporation, and the World Bank.
Wednesday, July 17, 2013