World Bank Returns to Big Dams

Peter Bosshard
Thursday, September 5, 2013
A 1990s Washington D.C. protest against the World Bank's role funding Big Dams
A 1990s Washington D.C. protest against the World Bank's role funding Big Dams.

The World Bank, long the world’s most influential supporter of large dam construction in the global south, has announced its return to funding huge hydropower projects. After nearly two decades of caution, the Bank will join countries such as China and Brazil in funding a new generation of mega-dams, focusing especially on projects in the Congo, the Himalayas and the Zambezi Basin.

On July 16, the World Bank adopted a new energy strategy paper that limits future support for coal projects to “rare circumstances,” but proposes to increase lending for large hydropower and gas projects instead. The Bank argues that such projects could "catalyze very large-scale benefits to improve access to infrastructure services" and combat climate change at the same time. The paper singles out the Inga 3 Dam on the Congo River as an example of this approach. 

The World Bank has financed more than 600 large dams in the past 60 years, and currently has about 150 active projects in some way related to the hydropower sector. Just under half of these projects are located in the Africa and South Asia regions. These projects are smaller than the next generation of mega-dams now being considered by the Bank. 

Transformation or Stagnation?

The Inga 1 and 2 dams on the Congo River illustrate the sorry experience with past large dam projects in Africa. After donors have spent billions of dollars on these projects, 85% of the electricity in the Democratic Republic of Congo is used by energy-intensive consumers but less than 10% of the population has access to electricity. Instead of offering a shortcut to prosperity, such projects have become an albatross on Africa's development. Large dams have also helped turn freshwater into the ecosystem most affected by species extinction. 

The World Bank has identified the $12 billion Inga 3 Dam on the Congo River – the most expensive hydropower project ever proposed in Africa – and two other multi-billion dollar schemes on the Zambezi River as key examples of its new approach. All three projects would primarily generate electricity for mining companies and middle-class consumers in Southern Africa.

NGOs working on energy poverty are alarmed at the megaproject approach being taken in one of Africa’s poorest, most corrupt countries. “Projects such as Inga 1 and 2 have not unleashed economic development, but have been major contributors to African countries’ unsustainable debt burden,” states a May 15 letter to World Bank President Jim Kim from 19 civil society organizations and networks from Africa and internationally. “In a period of growing hydrological uncertainty, focusing support on centralized dams will also increase the climate vulnerability of poor countries that are already highly hydro-dependent.”

The Bank claims it has learned how to better handle some of the major drawbacks of big dams, including resettlement issues and environmental aspects. “This is not your grandfather's hydropower,” Julia Bucknall, manager for the World Bank's water practice, told Bloomberg BNA. The Bank indeed routinely commissions numerous environmental assessments and other reports when it prepares new dam projects. But such measures often patch over the serious impacts of new dams rather than resolving them.

The Lom Pangar Dam in Cameroon is an example of the World Bank's recent mid-sized hydropower projects. The project will flood 30,000 hectares of tropical hardwood forest, including part of the Deng Deng national park – a refuge for gorillas, chimpanzees and other threatened species. The project’s electricity is primarily intended for the multinational aluminum industry that is by far Cameroon’s biggest energy user. "Projects like Lom Pangar raise questions about the World Bank's seriousness in meeting the energy needs of the poor as well as its ability to learn from past mistakes," says International Rivers' Rudo Sanyanga.

Power for People

Better solutions are readily available. In the past 10 years, governments and private investors installed more new wind power than hydropower capacity. Last year, even solar power caught up with new hydropower investment. Wind and solar power are not only climate friendly, they are also more effective than big dams in reaching the rural poor in sub-Saharan Africa, most of whom are not connected to the electric grid.

The International Energy Agency (IEA) found that grid-based electrification – including through large hydropower projects – is not cost-effective for much of rural Sub-Saharan Africa because of the continent’s low population density. Decentralized renewable energy solutions such as wind, solar and micro-hydropower projects are more effective at reaching the rural poor. Distributed renewable energy solutions would provide the triple benefits of increasing energy access, strengthening climate resilience and protecting the environment.

The IEA recommends that more than 60% of the funds required to bring about universal access to electricity be invested in such distributed renewable energy projects. Yet so far, funding for bringing these promising technologies to Africa has been woefully lacking. Like other donors, the World Bank is behind the curve on this. In 2007-12, it spent $5.4bn on hydropower, but only $2bn on wind and solar projects combined. A renewed focus on mega-dams would make matters worse.

In addition to pressure from dam-building nations, the Bank’s return to mega-dams is likely being driven by institutional self-interest. A strategy paper leaked from the bank in 2011 recognized that the increase in project size "may seem somewhat at odds with the goal of scaling up activities in areas where many potential projects – such as solar, wind and micro-hydropower ... tend to be small." Yet, the paper argued, the "ratio of preparation and supervision costs to total project size" is bigger for small projects than large, centralized schemes, and so bank managers are "disincentivized" from undertaking small projects.

This business model has harmed World Bank project quality for decades. Beginning in 1992, internal reports have castigated the Bank for its pervasive "pressure to lend." 

For the past 20 years, World Bank presidents have promised to fix these perverse incentives. On July 16, the Bank management once again assured its Board of Directors it would address the issue through a new working group. Yet the energy directions paper published by the Bank that same day clearly focuses on mega-projects.  

“The World Bank is currently focusing on a number of large storage dams in the fragile Himalaya, including some in Nepal whose main purpose will be to export power to India,” says Nepali activist Ratan Bhatari. “The Bank should instead turn to cheaper, sustainable and eco-friendly energy alternatives like, solar, wind, micro-hydro, rather than mega-destructive dams.”

International Rivers and other groups will advocate against a return to mega-dams at the World Bank’s annual meeting in Washington, DC on October 12. Under the motto Power for People, we will call on the institution to shift its lending from destructive megaprojects to energy conservation and decentralized renewable energy projects. As long as the Bank is not prepared to do so, governments should direct their funding to other institutions that are better equipped to reduce energy poverty and protect the environment. Learn more: