Forbes Magazine: Big, Bad Hydro

Originally published in Forbes magazine 

Chilean Patagonia is renowned for its rugged beauty: windswept Andean peaks, roaring rivers, pristine coastal rainforests. Years ago, those natural wonders inspired architect Peter Hartmann to abandon his native Santiago for Coyhaique, a small regional capital tucked away in a picturesque mountain valley.

"My family used to live near the biggest underground copper mine in the world, on the outskirts of Santiago, so I knew about environmental destruction firsthand," he says. "I came here for the forests, the lakes and the rivers--all untouched."

But the industrial world has caught up to Hartmann, and to Patagonia. To feed Santiago's growing demand for electricity, the Spanish-based energy giant Endesa (nyse: ELE - news - people ) wants to build a series of dams on two major Patagonian rivers. Endesa and the Chilean government say the $4 billion project will provide 2,430 megawatts of much-needed power to the nation's industrial north.

Hartmann and many of his neighbors are fighting the dams, claiming they would damage the southern region's ranching and tourism economies. For Hartmann, the irony is bitter: Endesa would send the power 1,500 miles north to the very mines that he came to Coyhaique to escape--and the whole thing's being done in the name of green power.

These are tough times for Hartmann and other opponents of big hydro. As the world scrambles to embrace green energy, the hydroelectric industry is enjoying a massive resurgence. American hydro is ramping up--projects totaling nearly 9,000 megawatts of capacity, much of it in next-generation wave- and tidal-power projects that convert ocean motion into electricity, are now in the permit pipeline at the Federal Energy Regulatory Commission.

The real action, though, is still in conventional dams, and it is happening abroad, mainly in Asia and Latin America. The high price of oil and surging demand for non-carbon fuels have energy executives dusting off old plans for major dams. "The last four years have been unprecedented in terms of orders for hydropower services and equipment," says Richard Taylor, executive director of the International Hydropower Association. "Our indicators are through the roof."

Here's the rub. As a green energy source, hydro is still far from perfect. In fact, it might not even be green.

The hydropower resurgence would have been unthinkable, or at least unlikely, 10 years ago when hydro was on the ropes. Research about the environmental effects of dams (they often wipe out native fish, rob the water of sediment, produce noxious gases and generally send the whole organic machine haywire), combined with the massive human costs of India's 30-dam Narmada project, which displaced hundreds of thousands of villagers, and China's Three Gorges Dam, which displaced more than a million, to throw dams out of favor.

The sins of big dams were famously exposed in the November 2000 report of the World Commission on Dams, and the World Bank all but stopped lending for big projects. The market played a part, too--hydro's high up-front investment didn't make sense when natural gas was so cheap.

Then came global warming and the current oil crisis--and everything turned around for the dam builders. Hydro found new life as a "green renewable," so carbon-friendly that the Chicago Climate Exchange approved it as a carbon credit source. Cities like Seattle proudly met their Kyoto-cut goals with the help of the Columbia River's clean hydropower system; just eight years ago, the Seattle City Council voted to support removal of some of those same salmon-killing dams.

The hydro industry didn't just get lucky. To its credit, it went proactive after the World Commission on Dams report, establishing sustainability guidelines meant to avoid another Narmada-scale mess. One indicator of success: The World Bank is back in the dam-financing game.

The biggest kicker of all is this: Big hydro may not be so green after all. Philip Fearnside, an ecology professor at Brazil's National Institute for Research in the Amazon, has published groundbreaking studies indicating that large dam reservoirs in tropical climates can produce significant amounts of methane, a greenhouse gas more than 20 times as potent as carbon dioxide. (Decomposing vegetation produces methane, which is released slowly by bubbling up in the reservoir, or quickly when water is run through the turbines and released downstream.) Scientists sponsored by the hydro industry recently fired back with their own studies, throwing doubt on Fearnside's conclusions, and at this point, the two sides are locked in fierce scientific battle.

Danny Cullenward, a researcher with Stanford University's Program on Energy and Sustainable Development, looked over all the relevant studies and came to the conclusion that "Fearnside might be right." The science is still very new, says Cullenward. "We're not sophisticated enough to say: 'Give me the size, depth, and area of a reservoir, and I can tell you the methane emissions,' but in individual instances, those emissions can be pretty significant."

His bottom line? "You don't want to give any hydro project the special status [of carbon-neutral] automatically. It's a mistake to call a project green unless you have data to back it up." In terms of overall global warming, a dam's cost-benefit analysis depends largely on the context.

China's Three Gorges Dam project is probably a carbon-footprint winner, because it's in a temperate climate and displaces the power of 20 coal-fired plants. Brazil's Balbina dam, completed in the late 1980s, is more questionable: Fearnside calculated that in its first three years, it emitted 23 million tons of carbon dioxide and 140,000 tons of methane, four times the greenhouse gas output of a coal-fired plant producing the same amount of power. (The dam's CO2 and methane eventually dissipated, however, decreasing its relative footprint.)

Meanwhile, hydro comes with plenty of other problems. Because of their enormous construction costs, big dams tend to be magnets for corruption. With contracts worth billions of dollars, there's a tendency for money to leak into "well-connected" pockets--a million here, a million there. Argentina's Yacyreta Dam, budgeted in 1983 at $2.5 billion, bloated to $15 billion by the time it was done in 1994, which led then-president Carlos Menem (who knew a thing or two about graft) to declare it "a monument to corruption."

In fact, the Patagonia project exists only because Chile's notorious Gen. Augusto Pinochet, in one of the dictator's last acts of office, gave away Patagonia's water rights to a privatized energy company that was later bought by Endesa. Some anti-dam activists believe Endesa is pushing the project hard now partly out of fear that the Chilean government could wise up, and, like Bolivia, re-nationalize resources like water.

Environmental mitigation, one of the industry's proud new buzz words, is too often a Lothario promise. Companies gain approval and funding by pledging to carry out substantial eco-improvements and mitigation. But once the dam goes up--as is happening right now in Laos, Turkey and Belize--the costly eco-plans are conveniently forgotten.

While the science of methane release gets sorted out, environmental activists in places like Patagonia are left with this unambiguous conclusion: Their beloved landscapes are slated to be drowned and torn asunder in the name of saving spectacular landscapes like those which will be drowned and torn asunder. They want renewable energy, just not this kind.

"We've got incredible potential for clean green energy up and down Chile," says Juan Pablo Orrego, director of the Chilean environmental group Eco-Sistemas. "We could have solar thermal in the Atacama Desert, wind power in Patagonia and tidal energy all along the coast."

That's right: They're ready to embrace hydro in Patagonia--the next generation, that is.