International Rivers Comments on Chacabuquito Large Hydro Project (Chile)

Thursday, May 9, 2002

Current Status: Registered on 7 July 2007

Comments on the World Bank PCF Project Design Document for the Chacabuquito Large Hydro Project

Submitted to the World Bank Prototype Carbon Fund


International Rivers has concerns regarding the absence of discussion of reservoir emissions, a possible overestimation of the cost of emissions reductions credits, and other procedural issues for the proposed Chile–Chacabuquito Hydroelectric Power Project.

Costs of emissions reductions:

The emissions reduction calculations leave out a discussion of possible emissions from the project’s impoundment. Greenhouse gas emissions have been recorded at all reservoirs where measurements have been taken. The issue of reservoir emissions must be explicitly addressed in any CDM hydroelectric project that includes an impoundment.

A plant factor of 80% is expected from the project. Such a plant factor is very unlikely; according to World Bank data the average hydroelectric plant factor in developing countries is around 49% (1). Hydroelectric output has been consistently overestimated by hydrologists for reasons including insignificant attention to the impacts of droughts. According to the project’s Baseline Study, – [t]he severe drought that gripped Chile from late 1997 until way into 1999 hobbled the country’s electricity sector... Chile is now working to become less reliant on hydropower." Of 63 hydropower dams evaluated by the WCD, 55% generated less power than projected.

Further, estimates of future electricity produced must account for changes in hydrology patterns due to the effects of climate change. A recent paper by two Edinburgh University engineers presented at the Hydropower 01 conference in Norway in June 2001 (G. Harrison and B. Whittington, "Climate change: A storm brewing", International Water Power and Dam Construction, September 2001) states:

"Global warming and changes in precipitation patterns will alter the timing and magnitude of river flows. This will affect the ability of hydropower stations to harness the resource and may reduce production, implying lower revenues and poorer returns."

The paper notes that it is "imperative that project analysis takes account of potential climatic impacts." It also states:

"The techniques of hydropower appraisal are long established. However, the continuing reliance on historic flows to indicate future flow conditions is not prudent given the prospect of climate change."

The general trend of hydropower consultants to overestimate streamflow and hence power production, the high expected plant factor, and the greatly increased hydrological risks due to climate change add to a major risk that the emissions reductions achieved by this project would be less than estimated. Given such uncertainties, a range of expected emission reductions is appropriate for evaluating project attractiveness. Single values such as given in this case are inappropriate and highly misleading. Sensitivity analyses should also be required for the unit costs of power from the project allowing for hydrological risks and the likelihood of significant cost overruns (World Bank analyses show hydropower cost overruns averaging 30% (2); the WCD found average overruns to be 56%).

Lastly, construction emissions were not mentioned in emissions reduction calculations, but certainly should be, especially considering that the project involves the building of bridges and roads as discussed in the Environmental Assessment Executive Summary.

Procedural issues:

World Bank policies specify that alternatives to a project must be considered in the Environmental Impact Assessment (EIA). A comprehensive options assessment is also one of the main Strategic Priorities of the WCD. These Strategic Priorities have been endorsed by the World Bank. In the case of hydroelectric plants, demand side management, the potential for increasing operational efficiency of existing investments, and alternative energy sources should be considered.

Only the Executive Summary of the EIA is disclosed through the PCF web site. The World Bank mandates that the EIA must be disclosed in full. Transparency in project planning, including the full disclosure of EIAs, is also one of the key recommendations of the WCD. We also request that the Power Purchase Agreement be made publicly available.

We would also like to raise a question about the additionality of the project. In the PDD it is stated that "since 1982 this project has been in the planning stage", that a final design was created in 1997, but that the project was not built then because of a fall in energy prices. It would therefore be likely that if energy prices increased in the future, that this project could be funded without the help of PCF or CDM funds. This leads us to believe that energy prices should be monitored and the project should not receive ERs if energy prices increase.

Barbara Haya
Research Associate
International Rivers, Climate Program

1 Besant–Jones, The Future of Hydropower, p. 14
2 Besant–Jones "A View of Multilateral Financing from a Funding Agency", in Financing Hydro Power Projects "94, Conference Proceedings