Key assumptions and how the HydroCalculator works

The tool calculates the net present value (NPV - definition and explanation) on a hydroelectric dam investment based on costs and benefits over a 50-year period. Many dams last longer than that, but their NPV is not significantly influenced by cash flows in the distant future. The tool assumes that dams begin operation in the first year after construction is complete. Annual operation and maintenance costs are calculated as 4% of construction costs and there are no significant reinvestment costs included once the dam is operational. Future costs and benefits are discounted at an economic discount rate entered by users.

In this first release of the model, financial and economic prices are assumed to be the same. In other words the financial to economic conversion factors are assumed to be equal to 1. This simplification may bias results substantially if either the prices of inputs or the price of energy is distorted. Future releases will have more precise conversion factors. User suggestions on reliable and country-specific sources for conversion factors are welcome.

The tool calculates carbon dioxide emissions based on global average carbon content for different vegetation types. Carbon dioxide equivalent is calculated using the Biome Carbon Loss model, which considers methane and carbon dioxide emissions from the reservoir's surface. It does not include emissions of methane "gasified" when methane hits turbines and downstream structures. These emissions can be 50% or more of the total but are omitted in the HydroCalculator due to their extreme variability. The model calculates net emissions, equal to the dam's emissions minus greenhouse gases from alternative sources of an equivalent amount of electricity. These sources represent the short-term mix of sources in each of the countries for which we have information. Net emissions can be negative for dams with large powerplants relative to their reservoir size and/or sparse vegetation covering the flooded land. Negative net emissions are also more likely where the alternative source of electricity is a plant burning fossil fuels.

The people displaced and land area flooded per MW is a simple ratio of the user-provided values. More detailed accounting of environmental and social costs is beyond the scope of the model.

Read an abstract of a speech about environmental impacts of hydroelectric dams in the Amazon.
Read an article titled Unlearned Lessons for Hydroelectric Development in Amazonia.