Contradictions in the World Bank’s approach to hydropower call into question its burgeoning portfolio in this sector. While a September press release states that, “The World Bank considers hydropower, regardless of scale, to be renewable energy,” the Bank no longer counts medium and large dams as renewable energy for reporting purposes.
Nonetheless, Bank publications and planned projects show a continued drive for controversial large hydropower (see Update 66), despite a temporary dip in funding. Lending for large hydropower declined to $177 million in financial year 2009, the lowest level for a decade and far below the $1 billion committed in 2008.
However, projects worth $2 billion are reportedly in preparation. The Bank has taken advantage of other investors’ retreat during the financial crisis to expand its role in hydropower, insisting that it is a vital source of clean energy to mitigate climate change.
Small hydropower dams are more sustainable and economically viable than large hydropower projects.
While accepting the potential for small-scale hydropower to benefit the poor, critics such as NGO International Rivers continue to voice major concerns about the direct social and environmental impacts of large dams, as well as greenhouse gas emissions from reservoirs (see Update 66).
Yet a Bank report released in November 2009, Africa’s Infrastructure: A time for transformation, argues that large dams and regional power trade should play a central role in plugging the energy shortfall that it identifies as Africa’s most important infrastructure challenge. It envisages Ethiopia, Democratic Republic of Congo and Guinea becoming major energy exporters. Sub-Saharan Africa currently receives approximately one third of the Bank’s funding for hydropower.
The capacity of large dams and regional power trade to expand access to energy for the poor and to contribute to economic development has been questioned (see Update 67). For example, it was claimed that the Bujagali dam in Uganda, which received $360 million in loans and guarantees from the World Bank Group, would expand affordable energy. However, spiralling costs have prompted the Bank to recommend a 5 per cent increase in tariffs and a similar rise next year, according to recent news reports. In 2008, the Bank’s Inspection Panel agreed that the dam’s negative effects had not been adequately taken into account and questioned its development benefits (see Update 64).
Frank Muramuzi, of the Ugandan National Association of Professional Environmentalists, states, “The World Bank must focus on alternative renewable energy options …. Small hydropower dams are more sustainable and economically viable than the large hydropower projects as they will not need to transmit energy over long distances. These will also attract industries upcountry as opposed to only to big towns. More importantly, the rural communities will access power.”
Elsewhere, Bank president Robert Zoellick visited Ethiopia in early February to hear officials make the case for $50 million for the massive Gilgel Gibe 3 dam. NGO CounterBalance has argued that the dam violates the Bank’s social and environmental safeguards, as well as national procurement standards.