An Empirical Application of Probabilistic Cost–benefit Analysis: Three Case Studies on Dams in Malaysia, Nepal and Turkey

An Empirical Application of Probabilistic Cost–benefit Analysis: Three Case Studies on Dams in Malaysia, Nepal and Turkey

R. Morimoto

CERMAS, Toulouse Business School, France.

| |
| | Citation



This paper empirically applies cost–benefit analysis (CBA) to much debated hydropower projects in Malaysia, Nepal and Turkey. The study selects an interesting mixture of cases, as the main characteristics of each dam, the geographical locations of each dam, and the development stage of each country differ. The study brings together all the major issues attached to each hydropower project and estimates the quantitative impacts of these controversial dams. The CBA model in this study takes into account the premature decommissioning of dams and the correlation between the parameters of generation capacity, total construction cost, and construction period. The mean cumulative net present value (NPV) at the 100th year of the analysis with the 5% discount rate for the Sharada-Babai Dam in Nepal shows a positive figure, whereas the mean cumulative NPV after 100 years for both the Bakun Dam in Malaysia and the Ilisu Dam in Turkey are negative. The mean cumulative NPV for Sharada-Babai becomes negative when the pure rate of time preference is larger than 6%; for Bakun and Ilisu, it converges to zero as the pure rate of time preference becomes larger. The sensitivity analysis shows the dominant positive impact of the generation capacity parameter on NPV for Bakun, and the parameter expressing initial expected increase in economic output for Sharada-Babai and lisu.


Bakun Dam, cost–benefit analysis, hydropower development, Ilisu Dam, net present value, sensitivity analysis, Sharada-Babai Dam.


[1] WCD, Dams and Development: A New Framework for Decision-Making, Earthscan: London, 2000.

[2] Morimoto, R. & Hope, C., The CBA model for the Three Gorges Project in China. Impact Assessment and Project Appraisal Journal, 22(3), pp. 205–220, 2004.

[3] Morimoto,R.&Hope,C.,AnextendedCBAmodelofhydroprojectsinSriLanka.International Journal of Global Energy Issues, Special issue on energy and renewable energy with economic development in developing countries, 21(1/2), pp. 47–64, 2004.

[4] Asian Development Bank (ADB), Technical Assistance Report for Nepal, Manila, 2004.

[5] Pokharel, S., Hydropower for energy in Nepal. Mountain Research and Development, 12(1), pp. 4–9, 2001.

[6] Mahapatra, R., Power the people. Appropriate Technology, January–March 2001.

[7] Ilisu Engineering Group (IEG), Ilisu Dam and HEPP Environmental ImpactAssessment Report, April 2001.

[8] Dixon, J.A., Scura, L.F., Carpenter, R.A. & Sherman, P.B., EconomicAnalysis of Environmental Impacts, 2nd edn, The Asian Development Bank and the World Bank; London, 1994.

[9] Carver, M., On archaeological value. Antiquity, 70, pp. 45–56, 1996.

[10] Carman, J., Garnegie, G.D., & Wolnizer, P.W., Is archeological valuation an accounting matter? Antiquity, 73, pp. 143–148, 1999.

[11] Darvill,T.,Saunders,A.&Startin,B.,Aquestionofnationalimportance:approachestotheevaluation of ancient monuments for the monuments protection programme in England Antiquity, 61, pp. 393–408, 1987.

[12] Lipe, W.D., Value and meaning in cultural resources. Approaches to the Archaeological Heritages, ed. H.F. Cleere, Cambridge University Press, pp. 1–11, 1984.

[13] Schaafsma, C.F., Significant until proven otherwise: problems versus representative samples. Archaeological Heritage Management in the Modern World, ed. H. Cleere, Unwin Hyman: London, pp. 38–51, 1989.

[14] Morimoto, R. & Hope, C., Making the case for developing a silent aircraft. Transport Policy, 12(2), pp. 165–174, 2005.

[15] MOF, Energy in China, The Ministry of Energy Press: Beijing, 1990.

[16] McCully, P., Silenced Rivers: The Ecology and Politics of Large Dams, Zed Books: London & New Jersey, 1996.

[17] McCully, P., Taking down bad dams. World Rivers Review, 12(4), August 1997.

[18] Peters, C.M., Gentry,A.H. & Mendelsohn, R.O.,Valuation of anAmazonian rainforest. Nature, 339, pp. 655–656, 1989.

[19] Constanza, R., et al., The value of the world’s ecosystem services and natural capital. Nature, 387, pp. 253–260, 1997.

[20] TNB, Kenyir Hydroelectric Power Plant Project II – Preliminary Works, Progress Report 10, February, 2001.

[21] Battelle, China’s Electric Power Options: An Analysis of Economic and Environmental Costs, Battelle Memorial Institute: Washington, DC, 1998.

[22] Wade, B., Bringing down the dams. The American City & County, Pittsfield, June 1999.

[23] CEB, Environmental impact assessment for the Upper Kotmale Hydro Project, 1994.

[24] Lincoln, K., Subcontinent: the wasted waters; Himalayan plunder; resources and rights; buyer’s market. Far Eastern Economic Review, 2 February 1989.

[25] WRC and SILT, Environmental Impact Assessment Study, Final report, 2001.

[26] NEA, NEA Financial Year 1999/2000: AYear in Review, August 2000.

[27] Bacon,R.W.&Besant-Jones,J.E.,Estimatingconstructioncostsandschedules:experiencewith power generation projects in developing countries. Energy Policy, 26(4), pp. 317–333, 1998.

[28] WorldBank,Resettlementanddevelopment:thebankwidereviewofprojectsinvolvinginvoluntaryresettlement1986–1993,EnvironmentDepartmentPaper32,TheWorldBank:Washington, DC, 1996.

[29] Corner House Research (CHR), et al., Cultural Heritage: Review of the EIA Report for the Ilisu Dam and HEPP, September 2001.