Post on 09-Mar-2018
NRSC 616 Project Paper
Power Shortage, its impacts and the Hydropower Sustainability
Assessment Protocol: in the context of South Asia
Submitted by:
Bipin Pokharel
Master of Science Candidate Environmental Assessment Option,
McGill-UNEP Collaborating Centre on Environmental Assessment,
Depart of Natural Resource Sciences,
McGill University, MacDonald Campus,
Montreal, QC, Canada
Submitted to:
Dr. Mark A. Curtis
Dr. Gordon M. Hickey
Dr. Michel A. Bouchard
McGill-UNEP Collaborating Centre for Environmental Assessment,
Depart of Natural Resource Sciences,
McGill University, MacDonald Campus,
Montréal, QC, Canada
December 08, 2010
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Table of Contents
Figures and Tables 3
Abstract 4 Scope of Study 5
Study Method 5
1.0 Electricity in South Asia: An Introduction 7
1.1 South Asian Economic Boom and Electricity 7 1.2 Electricity Situation in South Asia 8 1.3 Power Shortfall in Urban South Asia 10 1.4 Lack of Electricity Access in Rural South Asia 12
2.0 Impacts of South Asian Power Shortage 13
2.1 Economic Impacts 13 2.2 Health Impacts and Other Social Impacts 15 2.3 Environmental Impacts 17 2.4 Hydropower Potential in South Asia 20 2.5 Challenges to Hydropower Development in South Asia 21
3.0 ARUN III Project: A Lost Opportunity for the Region 23
4.0 Safeguard Policies in Multilateral Development Bank 24
5.0 Hydropower Sustainability Assessment Protocol 26
6.0 Climate Negotiation, Energy Security and Hydropower in South Asia 30
7.0 Conclusion 32
Acknowledgements 33
References 33
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Figures and Tables
Figures
Figure 1: GDP Growth Various Regions of Asia in Percentage from 2001 to 2005
Figure 2: Electricity Supply Demand Gap in India, Nepal, Pakistan and Bangladesh in the Year 2007/08
Figure 3: Population in Millions without Access to Electricity in Different Regions of the World
Figure 4: The cost comparison between planned (Load-shedding) versus Unplanned power outages in Sri Lanka for the 2003
Figure 5: Comparision of Mortality from Major Dieases in 2008 with the Mortality from same diseases in 2030
Figure 6: Effect of biomass cooking in Asian BC loading
Figure 7: Investment in Hydropower Project by the World Bank 1990-2008
Figure 8: Major Hydropower Project Decision Points and the HSAP Tools
Figure 9: CO2 Emission Profile for All South Asian Countries from 1960 to 2004
Tables
Table 1: Hydropower Potential and Percent Currently Exploited by South Asian Countries
Table 2: Environmental and social criteria that are assessed and managed by HSAP
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Abstract
In the pursuit of dynamic course of economic growth and modernization, much of South Asia
visions the need to increase its electricity generation capacity through the development of
hydropower projects. This need is further required due to rising electricity demand in urban and
industrial South Asia, and worsening negative environmental and health impacts from use of
biomass as energy sources in its rural parts. The unprecedented economic growth in South Asia
is becoming constrained by significant shortages in power supply, and unless corrective steps
are urgently initiated and implemented, it may be difficult to sustain its industrial development
momentum. Fortunately, South Asia has immense hydropower potential (estimated 232 GW of
hydropower potential combined in Nepal and India alone, only approximately 15% of that has
been exploited). Argued by many, developments of large hydropower projects have adverse
environmental impacts on human population and environmentally important areas. Against this
perspective, Hydropower Sustainability Assessment Protocol (HSAP) can identify environmental
impacts of such projects early and can design mitigatory measures; thus achieving a sound
hydropower development plan that will not have detrimental effects on environment and human
population, both during construction and operation. In other words, HSAP holds potential for
advancing sustainable hydropower.
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Scope of the study
This study seeks to analyze the Hydropower Sustainability Assessment Protocol (HSAP) in the
context of hydropower development project those financed by the Multilateral Development
Banks (MDBs) - specifically in the context of development in South Asia- in achieving
sustainable development of hydropower sector without having tradeoffs with the environmental
and social dimension. The study will examine a case study of a failed hydropower development
projects (e.g. ARUN III discussed by Rai & Schmidt-Vogt, 2004) financed the World Bank. The
analysis seeks to outline the benefits of HSAP in recognizing and managing it social and
environmental issues associated with hydropower project, in turn, saving development funds,
mitigating adverse environmental and social effects, and avoiding unwanted litigations.
Furthermore, the study seeks to underline the importance of HSAP in communicating the
Region‟s large economic growth opportunities associated with development of hydropower
projects. The most important objective of this paper is to draw attention to environmental
and social impacts of power shortage, and crucial role hydropower development projects
can play to alleviate climate (black carbon) and health (indoor air pollution) issues in the
region that must be address urgently. Lastly, suggest the role of hydropower in South Asia in
providing future energy security.
Study Method
This NRSC Master‟s Research Project consists of two parts namely; work conducted during the
NRSC 615 Internship at the United Nations Environment Programme Regional Resource Centre
for Asia and the Pacific, Bangkok, Thailand; and the analysis of the Hydropower Sustainability
Assessment Protocol developed by International Hydropower Association collaborating with
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multi-sector stakeholders. Further, the Research includes analysis of data obtained from the
World Bank Climate Portal.
Part A: Resources from NRSC 615 Internship with UNEP RRC.AP
During my internship term with UNEP RRC.AP, my work involved researching and
maintaining liaison with different NGOs in Nepal , India and Bhutan that are currently working
in energy sector to make modern energy accessible to rural communities. My research, meetings
with various faculty members at the Asian Institute of Technology and NGOs staffs provided
basis for introduction to the topic and analysis of current energy situation in the region.
Literature on ARUN III project is also based on my valuable internship term with the UNEP
RRC.AP. Analysis of ARUN III will further be based on McGill University‟s library resources
and the Work Bank reports on the project.
Part B: Analysis of Hydropower Sustainability Assessment Protocol and library resources
This part of the study includes analysis of the newly developed Hydropower Sustainability
Assessment Protocol. Analysis will be conducted based on McGill University‟s library
resources. The analysis compares past the World Bank‟s environmental assessment of the ARUN
III project with newly developed the HSAP. The analysis also includes graphs and tables adapted
from data gathered from the World Bank Climate Portal and various other journal articles.
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1.0 Electricity in South Asia: An introduction
South Asia, which comprises of seven countries namely, India, Pakistan, Nepal, Bhutan, Sri
Lanka, Maldives and Bangladesh, is home to estimated more than 1.6 billion people or almost
25% of the world‟s population; out of which, 1.2 billion people live in India alone (WHO,
2009),. Approximately one billion South Asian live under US $2 a day; grouping it together with
the poorest regions of the world. In the United Nations‟ extended definition, South Asia
comprises of five more countries, namely Iran, Afghanistan, Myanmar, Tibet and the British
Indian Ocean Territory. For the purpose of this study, the definition includes only core seven
countries mentioned above.
1.1 South Asian Economic Boom and Electricity
Although grouped among the poorest regions in the world, in recent years many South Asian
countries – Bangladesh, Sri Lanka, Pakistan and India- are experiencing vibrant economic
growth. Rates of economic growth – measured as percentage change in gross domestic product
(GDP) at market prices based on constant local currency- major countries in the region (India,
Pakistan, and Bangladesh) exceeded 5.4% in 2005 (Saaez, 2007). The Economic Outlook
Report 2006 published by the Asian Development Bank indicated that the average GDP growth
of South Asia from 2001 to 2005 was the highest among the Asian regions, soaring at 6.7%. It is
higher than Southeast Asia‟s 6.4% and new industrialized economies‟ 4.0% GDP growth (fig 1).
This economic boom will only further widen already alarming supply and demand electricity gap
in South Asia.
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Economic gains of South Asia in the past have been offset by numerous development challenges.
In addition to poor social services, the biggest challenge was weak overall infrastructures. In
recent decades, development growth is resulting from out-sourced manufacturing and IT-related
jobs from the west.
Fig 1: GDP Growth Various Regions of Asia in Percentage from 2001 to 2005
(Source: ADB Economic Outlook South Asia 2006)
However, to sustain this economic growth – which was not impeded by weak infrastructure in
the past – South Asia today needs to invest heavily on infrastructures (Noor & Siddiqi, 2010). If
failed to do so, the region will face an unleapable hurdle to its future long-term economic growth
and human development. Saarez (2007) emphasizes that rising energy needs of the region, if not
addressed immediately by investing on energy infrastructure, will affect the sustainability of
long-term economic growth and human development in the region over the next 30 years.
1.2 Electricity Situation in South Asia
Meeting the growing energy demand in the urban and industrialized parts of South Asia has
become of major challenge for all the South Asian countries‟ governments. The skyrocketing oil
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prices have made this further difficult and consequently are threatening the economic growth of
the region. The South Asia is energy deficient as fossil fuel and natural gas potential of the
region is very limited, thus it relies heavily on fossil fuel imports for energy supply (Hammons,
2007). Most of the countries in the region are also not able to generate sufficient electricity to
meet their demands, despite their large hydropower potential. The gap between the energy
demand and supply is only expected to grow larger (WBGU, 2003). The Energy Sector
Management Program (ESMAP) estimated that energy needs of South Asia will increase three
times in next two decades – mostly as result of growing industrial activities and modernization of
estimated 70% of population that live in rural parts of the region (Hammons, 2007).
Currently, less than 50% of the population in the region have some sort access to electricity.
Even among them, the supply of electricity is sporadic; large city like Kathmandu in Nepal faces
“load-shedding” (planned power-cuts) anywhere from 12 hours to 18 hours every day
(Kanagawa & Nakata, 2008). Another 50% that have no access to electricity heavily rely on
primitive form of energy sources such as cow dungs, crop residues and fuel-woods (Kanagawa &
Nakata, 2008). Burning of these biofuels (cow dungs, crop residue and fuel-woods) have severe
health and environmental impacts. Burning of the biofuels that are source of indoor air pollution
(IAP) is the cause for 1.6 million immature deaths worldwide, making it the fourth largest cause
for death and the largest environmental mortality risk in the World. The IAP is a hard pressing
issue in rural parts of developing countries and a step forward must be taken to construct
hydropower plants, as it is a viable option to solve this issue. Electricity shortage is not only an
economic growth issue in the region but also a pressing social issue that must be solved urgently
(Zahnd, A., & Kimber, H. 2009).
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Energy infrastructure is a key problem across the region. It needs repairs and upgrades after
years of underinvestment, has been damaged by political instability, by unforgiving heavy
monsoon rain, or most importantly non-existence of the infrastructures. In addition, hydropower
theft is exacerbating the situation, with India estimating that it loses about US$ 5.4 million worth
of electricity annually, simply because of inefficiencies and theft.
Pakistan experiences the same problem, as suggested by some energy analysts that the country's
energy infrastructure is the worst in Asia. This problem arguably presents the single largest risk
to the country's longer-term growth and development prospects. Unlike other South Asian
countries, Pakistan has the potential to increase its domestic production of oil and gas
significantly to meet consumption needs; poor infrastructure is one of the problems preventing
this in addition to ongoing political turmoil.
In Nepal, the decade-long Maoist insurgency has damaged the country's infrastructure and
undermined attempts to improve access to electricity. Even at the point where a negotiated
settlement between the Maoists Party (previously a rebel group that led the People‟s Liberation
Movement for more than a decade) and the government is finally secured; Nepal is unlikely to
meet its electricity demand, simply due to lack of investment towards new infrastructures and
maintenance of existing ones.
1.3 Power Shortfall in Urban South Asia
Electricity, the primary source of energy for households and industries in urban areas, is facing
massive shortfall in the region. In 2005, India‟s at the time Ministry of Finance stated, “The
rapid economic growth of the last few years has put heavy stress on India‟s infrastructure
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facilities. The projections for further expansion in key areas could snap the already strained lines
of transportation unless massive programs of expansion and modernization are put in place.
Problems include power demand shortfall, port traffic capacity mismatch, and poor road
conditions” (Reineberg, 2006). This speech highlighted the severity of electricity shortfall in
India, this shortage of electricity will have spill over affects on the entire region.
Fig 2: Electricity Supply Demand Gap in India, Nepal, Pakistan and Bangladesh in the
Year 2007/08 (Source: Adapted from data presented in Karmacharya, 2009; Nepal Electric
Authority; Dhaka Electric Supply Authority; and Government of Pakistan)
Estimates show that every country in South Asia is facing major power shortfall. Largely power
shortfall is experienced in the urban areas, as most of the rural areas lack electricity
infrastructures. In India, annual electricity demand during 2007/08 fiscal year was estimated 110,
000 megawatts and the country was able to meet that demand with only 97,000 megawatts of
electricity, putting nation in 13,000 megawatts of power deficit (fig. 2). Similar, the fig 2
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illustrates other two larger economies of South Asia – Bangladesh and Pakistan- had 1,400
megawatts and 2,600 megawatts of electricity deficit respectively, in the same fiscal year. Nepal,
a country with potential of generating 83,000 megawatts of electricity only supplied 621
megawatts of electricity to its 697 megawatts of demand. Consequently, forcing country‟s the
largest city Kathmandu to face 12 hours to 18 hours of load-shedding every day.
1.4 Lack of Electricity Access in Rural South Asia
Much of the world still lives in dark. Estimates indicate that 1.4 billion people or 20% of world
population still have no access to electricity (IEA, 2010). South Asia has the largest number of
people in the World without access to electricity. The region‟s 612 million people without access
to electricity dwarf all other regions. The number is higher than staggering 585 million people of
the Sub-Sahara Africa (fig 3).
Fig 3: Population in Millions without Access to Electricity in Different Regions of the
World (Source: Adapted from World Energy Outlook 2010 by International Energy
Agency)
More on the regional context, about 50% or 700 million people in South Asian have no access to
electricity. Out of those 700 million people 90% live in rural parts of South Asia, unless major
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development takes place they are expected to continue their lives in darkness until 2030
(IEA,2010).
2.0 Impacts of South Asian Power Shortage
The power shortage disconcerts all three spheres of sustainable development- environment,
economic and social- with its negative impacts. Hence, it can be confirmed that current South
Asian power shortage is a major impediment towards achieving sustainable development in the
region. This section will highlight such negative impacts of power shortage in South Asia.
2.1 Economic Impacts
It is clear from section 1.1 that the negative impacts of power shortage is going to heavily impact
economy of South Asia in future, if the problem persists. However, there are negative economic
impacts that are currently being felt in the region due its power shortage. Although, economic
impact of power shortage in South Asia is the least studied sphere; however, some studies that
were published in past years have significantly quantified its impacts.
(Rao Akkina, 2000) suggests that the power shortage that existed in different states of India
during the period 1970-90 had a significant negative impact on the average rate of growth per
capita income. The results from the study suggest that a 10% shortage of power supply during
1970s had reduced average growth rate of per capita income approximately by 0.1% , whereas
the same 10% shortage in power supplies in the 1980s reduced the average per capita income
growth by 0.5%. A report published in 2003 by United States Agency for International
Development South Asia Regional Initiative for Energy (USAID-SARI/Energy) (applying the
same neoclassical growth model that Rao Akkina (2000) applied) estimated that power shortages
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to the agricultural sector resulted in loss up to 3.1% and 13.3% of the total agricultural sector
value added (GDP) in Haryana and Karnataka, respectively (USAID, 2008). Consistent with the
methodology, there were similar studies conducted in Nepal and Sri Lanka that indicated
significant GDP loss because of power shortage.
(Wijayatunga & Jayalath, 2004) conducted a different study in Sri Lanka, which estimated the
economic loss from 300 hours of power interruption to be approximately in the range of US$ 47-
117 million that was 0.4-0.9% of the country‟s GDP in that year, which was estimated loss of
US$ 12.5 billion. This is a significant loss of GDP for a country in the poorest region of the
world.
Fig 4: The cost comparison between planned (Load shedding) versus unplanned power
outages in Sri Lanka for the 2003 (Source: Wijayatunga & Jayalath, 2004)
Although planned power outages comapred to unplanned outages can significantly reduce the
cost for industries as they can prepare themselves in many ways (for instances, stop production
to damage goods, schedule workers around power outage ); still the cost incured from the
planned outage is significantly highly (fig 4). In 2003, Sri Lanka experienced US $ 0.36 million
per hour on planned outages alone, and additional US $ 0.58 million per hour on unplanned
outages.
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These economic impacts have only analyzed data collected from industries, therefore it can be
assumed that actual economic loss from power shortage is much higher as small bussiness and
rural araes were not taken into consideration in the estimates. The aggreagate economic loss
value from power shortage is very siginifacant for a region with 62% of population living under
$2 per day.
2.2 Health and Other Social Impacts
Predominantely, health and social impacts of power shortage is felt in rural South Asia. Today,
there are approximately 1.4 billion people lacking access to eletricity, largest portion of 1.4
billion people live in rural parts of South Asia. International Energy Agengy on its World
Energy Outlook 2010 report has strongly indicated that if the current trend continues, 1.2 billion
people, or 15% of the world‟s population, will still lack access to electricity in 2030. However,
energy is basic necesity for survial – to cook food, to light house, and to heat room. So how do
these 612 milliom people that have no access to eletricity fullfill this necessity? Answer is
simple, same way our ancestors did thousands of years ago – by burning fuelwood, crop residue
and animal dung. Lack of access to eletricity around the world has become a major roadbloack
in achieving the Millinium Development Goals of eradicating extreme poverty by 2015. The
2010 UN MDG summit highlighted that 395 million more people need to have access to
electricty by 2015 in order to achieve the „goals‟. This is because smoke emited from burning of
biomass has huge impact on human health pushing families in perpetual cycle of extreme
poverty.
Household use of biomass for cooking and heating in a poorly ventilated house is the most
widespread source of Indoor Air Pollution (IAP). It is estimated that 3 billion people, almost half
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of the world, rely on biomass for household energy (Perez-Padilla et. al., 2010). The number of
people using biomass is almost double the number people without access of eletricity. This is
because of two major factors. First is affordability, some people despite having access to eletrcity
are still using biomass (estimated 1.4 billion people) because of extreme poverty they can‟t
afford to buy electricity. Second major factor is poor infrastructure, the access of electricity is
defined as people connected to the grid, however, many those are connected to the grid have no
access to electricity as the grid runs dry. Due to power shortage often rural communities are
hardly supplied with electricity forcing them to step down on “the Energy Ladder” to biomass
burning. Therefore, South Asian countries must invest in electricity infrastructure to tackle the
health impacts from biomass burning. Health impacts resulting from biomass burning is
extremely severe. The World Health Organization estimate show 1.6 million people die
prematurely every year to the IAP. This ranks IAP as the first environmental health risk in the
world, esclipsing even unsafe water and sanitaiton, global climate change and lead exposure
(WHO, 2009). The prevalence of IAP related diseases is higher in women and children than men
simply due to their household roles (Kaplan, 2010).
Fig 5: Comparision of mortality from major dieases in 2008 with the mortality from same
dieases in 2030 (Source: Adapted from IEA World Energy Outlook 2010)
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It is projected that if major policy action are not taken today, number of people dieing from IAP
from biomass burning will be much higher than number people dieing from HIV/AIDS by 2030
(fig 5).
Other indirect social impacts from lack of access to electricity that leads to biomass burning
include rough terrian hazards and wild life hazards during fuelwoods collection in the forest.
There is also risks of fire hazards due to the nature of open pit burning of biomass.
In urban areas, social impacts of power shortage is much different. Increase in crimate rate are
associated with planned and unplanned power outage. In other impacts, closure of educational
institutions, health-care facilities and offices are common, which disrupts everyday life of
millions in South Asia. High level stress and sleep deprivation among people are also observed
in the population as their daily schedule is heavily influenced by planned power outage. The
power shortage in South Asia have became root cause for many social issues that are very hard
to comprehend in the developed world. Post-conflict regions and countries of South Asia (e.g
Nepal) that have just started the peace-building process must urgently deal with the issue of
power shortage to continue on their newly resored peace.
2.3 Environmental Impacts
On the environmental front, the most indirect impact from lack of access to electricity is related
to biomass burning for energy source in rural areas. Whereas, in the urban areas although certain
portion of population still rely on inefficient form of energy source such as fuel-woods, charcoal
and crop residue; but primary source of environmental impacts is from switching to kerosene
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powered or low grade fossil fuel powered generators. It is very common in South Asia for
households and small businesses to have these generators in urban areas, which produce Green
House Gases (GHGs) and pollute both air and sounds in its surrounding areas. Although its
localized impact on air pollution is evident, these impacts of power shortage are unaccounted for
in any studies.
Fig 6: Effect of biomass cooking in Asian BC loading. a. shows the BC loading for 2003-
2004 b. when BC emission from biomass cooking is removed from a. Lighter areas
represent the concentration of Black Carbon. (Source: Ramanathan and Carmichael, 2008)
In rural South Asia, in addition to deforestation, habitat destruction, loss of biodiversity and
cumulative impacts of fuelwood collection from the forest; recently Black Carbon scientists in
the United States identified a very alarming environmental impact from biomass burning.
Biomass burning in rural parts of South Asia and some urban areas for heating and cooking emits
many air pollutants including Black Carbon (BC). Ramanathan and Carmichael (2008) define
Black Carbon (BC) as an important part of the combustion product commonly referred to as soot,
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a major absorber of solar radiant in atmosphere. In addition, this soot is dominant product of
inefficient combustion of biomass as energy source (Ramanathan & Carmichael, 2008). There
are numerous environmental issues associated with the BC – global dimming, atmospheric
warming, weakening monsoon and glaciers melting are few examples. Unlike carbon dioxide,
BC does not remain in the atmosphere for long period; therefore, its effects are for short period.
BC scientists have predicted that if BC from biomass cooking is controlled globally, pace at
which global temperature is rising can be slowed down, giving world more time to adapt to
climate change impacts. Furthermore, due to its short lifetime in atmosphere and potential to
travel long distance, scientific evidence shows that BC from South India has been transported up
to the Himalayan glacier. Once it settles on the glacier, it reduces glacier‟s solar radiation
reflectivity, known as Aledo, which in turn absorbs more solar energy resulting in accelerated
melting of glacier (Yasunari et al., 2010. Many technological intervention projects are being
implemented by NGOs and government agencies in South Asia to improve health and
environmental issues of biomass burning. Among these intervention projects are improved cook-
stove projects, biogas digester projects, and solar PV projects. However, the World Bank has
identified them as gap filling projects in transition from primitive energy source to modern
energy access (Heffner et al., 2010). Furthermore, it is also important to implement power
shortage mitigation projects (e.g. CFLs light distribution), which will increase energy efficiency
but the largest component of solution in developing countries must come from building
hydropower infrastructure capacity.
South Asia is very fortunate to have large hydropower potential. Harnessing this hydropower
potential holds key to solving the problem of South Asian power shortage and its negative
impacts.
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2.4 Hydropower Potential in South Asia
South Asia consists of large river systems: Ganges, Brahmaputra, Meghna, Indus, Godavari,
Mahanadi, and Narmada, these rivers gush down from many of its tributaries, which originate
high in the Himalayans (reported 6000 rivers just in Nepal). Due its fast descend from very steep
mountains to the Indian subcontinent, these rivers enable considerable hydropower potential.
Despite this huge potential, South Asia suffers the worst electricity shortages in the world. As
discussed before, power shortages negatively affect environment, economy and health of the
population in the region. Some of the environmental issues, such as Black Carbon can negatively
affect global climate change. Fortunately, South Asia‟s large hydropower potential offers
solution to these problems.
Table 1: Hydropower potential and percent currently exploited by South Asian countries
(Source: adapted from various Work Bank reports)
Country Estimated
Hydro-power
Potential
Percent
Currently
Exploited
India 149 GW 25%
Nepal 83 GW 1%
Pakistan 41 GW 14%
Bhutan 30 GW 1.5%
Bangladesh 0.76 GW 28%
Sri Lanka 2 GW 60%
Maldives N/A N/A
Total 305.76 GW 6.2%
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The data compiled from the various reports published by the World Bank group indicates that
there is huge hydropower potential in South Asia and much of this is still unexploited (Table 1).
Sustainable –one that takes in consideration both environmental and social dimension along with
economy- planning of hydropower development projects will bring economic prosperity and
solve the issue of power shortage in South Asia (Siddiqi, 2007). Development of hydropower
sector in South Asia also has climate and social co-benefits. Unfortunately, this potential remains
unharnessed mainly due to (A) lack of investment and (B) social and environmental impacts of
large hydropower dams.
2.5 Challenges to Hydropower Development in South Asia
(A) Lack of Investment: Despite numerous benefits to finance sector, developers, and to entire
region of South Asia (infrastructure development, economic growth potential, job creation,
environment and health issue alleviation) the region experiences very slow growth in
hydropower sector (Keong, 2005). In Nepal and Pakistan, political turmoil is one of the major
challenges in attracting foreign direct investments (FDIs) (Thavasi & Ramakrishna, 2009). If
these countries are to benefits from their hydropower potential, step towards betterment of
political situation must be taken immediately.
Hydropower development projects are expensive, require large investment and may entail many
risks. South Asian countries lack proper financial mechanism for domestic investment in any
kind of large projects, leaving Multilateral Development Banks (MDBs) the only source of
finance for major infrastructure development. However, investment risks (political, social and
environmental) have kept MDBs away from investing in the major hydropower projects in the
region. Lengthy and corrupt governmental approval processes and demands from local
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communities that are not related to project make project implementation very costly. A
framework to identify investment risks will assist in cutting unwanted project costs and will
assist in streamlining the government approval process. As a result, will draw investors to
develop urgently needed hydropower infrastructure in the region.
(B) Social and Environmental Impacts: Equally, important challenge in developing hydropower
sector in South Asia is the social and environmental impacts from hydropower dams. The World
Commission on Dams (WCD) has listed many social and environmental impacts: inundation of
terrestrial habitat; modification of hydrology; GHGs emission from reservoir; modification in
aquatic habitats; and fish migration pattern are major environmental concerns. On the social side,
resettlement due to flooding, change in land use pattern, increasing competition on water use and
effects on cultural heritage are major concerns. However, developers and financier along with
top critics of hydropower dam have agreed that these environmental and social issues can be
managed through design and implementation of etiquette management plans. The critics of
hydropower projects for long period have been raising voices for more stringent and legally
binding agreement to address these issues (Goodland, 2010). The WCD was established as a
response to the performance and outputs of large dams (Chintan and Shrestha 2005) (Mr. G S
Chintan led the claim filed against the World Bank on ARUN-III project). Further, Chintan and
Shrestha (2005) argued that main problems are not rooted the impacts of the hydropower dams
but arise from poor compliance, lack of comprehensive implementation, monitoring mechanism
and inadequate assessments of project impacts. The infamous example of poor compliance in
hydropower development project in the region is ARUN III project in eastern Nepal during mid-
90s.
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3.0 ARUN III: A lost opportunity for the region
The ARUN-III was a proposed 402 MW, US$ 1 billion hydropower project to harness the vast
hydropower potential of Nepal, with the goal to solve at the time and future electricity demand
(Dixit & Gyawali, 2010). The project was a step towards the development of Nepal, as exporting
of surplus electricity would have generated large amount of revenue for the Country. Prior to
ARUN-III, the largest hydropower project in Nepal was of less 70MW therefore, this was big
hope for people of the country.
The World Bank and the Asian development Bank, other DFIs, jointly financed the project.
Despite the open project bids, due to lack of capacity of local contractors there were no
qualifying contractors from Nepal or India. As a result, the bid was awarded to an Italian firm
(Bissell, 2003). The geographic location of the project was- the Arun Valley- was very attractive
to hydro engineers, for it had the ability to capture substantial power potential with run-of-the-
river system rather than large reservoir based system (Bissell, 2003). Run-of-the-river meant
reduced environmental and social impacts from the project. Construction of project was
scheduled to start in 1994. However, the Arun Concerned Group (ACG), a citizen advocacy
group, opposed the project raising the environmental and social concerns. Adding to it, the
discrediting of Sardar Sarovar project in the Narmada valley of India in 1990 fueled the negative
perception on large hydro dam in the country. This led to formal claim filed against the World
Bank jointly by ACG and the International Institute for Human Rights, Environment, and
Development (INHURED). The grounds for claims were based on the World Bank‟s five major
safeguard policies violation, which included the adverse environmental and social impacts of the
project (Bissell, 2003). Initially, general counsel of the bank led by Ibrahim Shihata responded
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with an argument that the claim was ineligible. Nevertheless, no formal protest took place from
the Bank; aware of the situation such controversial project cannot be deemed ineligible based on
technicality (Bissell, 2003). After a yearlong complications and inspection, the bank cancelled its
participation in the ARUN-III project by justifying that risks were too great to pursuit.
However, social and environmental assessment protocol tailored for hydropower projects could
have been identified these risks early in project design and managed it adequately. Such
assessment would have avoided undesired litigation that threatened the Bank‟s reputation and
placed Nepal under current power shortage. Although, there was an environmental study and
analysis carried out for the project that was several thousand pages in report, but it lacked
protocol to carry out the assessment study, as a result, failed to report many potential adverse
impacts and alternatives of the project. According to the United Nations University‟s EIA case
study, these include, but are not limited to; the magnitude of resettlement and the alternative road
access to the project with providing higher social benefits to nearby townships (UNU EIA,
2010). Further, the assessment lacked a „Term of Reference‟ and a proper scoping methodology,
which led to minimal level of public and NGOs consultation. Proper protocol would have
brought NGOs and concerned citizen group in consultation with the Bank earlier, in turn
avoiding the situation that the Bank faced. Therefore, MDBs must adopt a hydropower
development projects assessment protocol tailored to avoid such situations.
4.0 Safeguard policies in Multilateral Development Banks and Hydropower Projects
Environmental impact assessment (EIA) was first brought as part of the development aid process
in 1975 because of litigation faced by the USAID to enforce the Environmental Impact
Statements (EIS) on its loans and grants (Coleman, 1999). In subsequent years, numerous such
25 | P a g e
litigations were faced by MDBs and aid agencies. In addition, environmental and social impacts
are major concerns for MDBs as they are mandated to invest in projects that must contribute to
the social and environmental wellbeing of a country, which in turn should decrease poverty and
improve livelihood (Faubert et al., 2010). As a response to this, many such institutions have
formulated environmental and social safeguards policies and have made EIA as integral part of
their operation.
The World Bank Group also has embarked “environmental and social safeguard policy” to
cornerstone sustainable poverty reduction during their operation. The primary objective of this
policy is to “prevent and mitigate undue harm to people and their environment during
development projects” (the World Bank, 2010). The World Bank has eleven safeguard policies
namely, Environmental Assessment, Natural habitats, Forests, Pest Management, Physical
Management, Physical Cultural Resources, Involuntary Resettlement, Dam Safety, International
waterways, Use of Country Systems, and Disputed Areas (the World Bank, 2010). Although,
mostly these policy are triggered in most hydropower development projects and may seem to
prevent and mitigate environmental and social impacts of hydropower projects. However, may
fail to do so because the policy and sourcebooks to follow them are designed to address the
issues arising during any World Bank project. Therefore, often these policies fail to capture and
more importantly fail to evaluate and monitor the implementation of management plans to
prevent and mitigate adverse effects of a project. The WCD and Dr. Thayer Scudder (former
senior World Bank resettlement consultant) have argued that in the past hydropower projects
financed by the Bank had negative environmental and social impacts, therefore, it illustrates that
these risks are yet to be adequately incorporated in the Bank‟s safeguard policy.
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Fig 7: Investment in Hydropower Project by the World Bank 1990-2008. It decreased in
1990s as results of high environmental and social risks; starting 2000, investment started
increasing due to power crisis in developing world (Source: Adapted from the Work Bank
group, 2009).
The Bank has taken initiative to invest in hydropower projects substantially in next few years
observing the rapid rise in electricity demand in the developing world, pressing social and
environmental impacts of power shortages, and attractive climate co-benefits of hydropower
projects (Fig 7). On the other hand, environmental and social impacts of hydropower projects
are alarming and existing the Bank‟s safeguard polices requires revisit to formulate a protocol
that is tailored for hydropower development projects.
5.0 Hydropower Sustainability Assessment Protocol
The Hydropower Sustainability Assessment Protocol (HSAP) is a framework for advancing
sustainable hydropower development and operation. International Hydropower Association
published final HSAP on November 2010. It is a knowledge-based framework developed by
taking in expert knowledge from representatives of developed and developing countries‟
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government, equatorial principles and development banks, social and environmental NGOs
(HSAF, 2010). The knowledge was gathered, discussed, researched, analyzed and negotiated
through the formation of Hydropower Sustainability Assessment Forum (the “Forum”) in March
2008. The Forum went through a rigorous process for 2 and half year to develop HSAP that
intends to adequately prevent and mitigate the environmental and social issues that may arise,
not only, during the development, but also, continuously manage them during operation.
Furthermore, the HSAP was developed to revisit already operational hydropower plants that lack
proper environmental and social management plans. In currently operational plants, HSAP can
design and implement environmental and management plans will prevent and mitigate adverse
impact in future.
Unlike, current category-based impact assessments that are carried out under the Bank‟s policy,
the HSAP have strict numerical grading system that provides unambiguous assessment report.
The report produced from this grading system clearly identifies importance level of project
impact prior to the project commencement, and reflects the performance of management plans
during the operation.
Fig 8: Major hydropower project decision points and the HSAP tools. It is designed to
ensure sustainable development (Source: Adapted from HSAF, 2010).
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The HSAP identifies environmental and social risks, and evaluates and measures performance of
management plans through four distinct tools namely, Early Stage, Preparation, Implementation
and Operation that are applied at major hydropower project decision points (Fig 8).
The Early Stage assessment tool is a preliminary strategic screening tool that identifies
environmental, social and economic risks and opportunities of a potential project. The Early
Stage is a tool that promotes early analysis in a project enabling awareness for knowledge gaps
that may exists in a project. Having an assessment prior to start of the project, also helps
drastically reduce cost for investors. Thus, encouraging investor to finance urgently needed
hydro projects such as those in South Asia.
Table 2: Environmental and social criteria that are assessed and managed by HSAP. In
addition to environmental and social impact assessment and management plans, social and
environmental issues specifically associated with hydropower projects are managed
separately. (Source: Adapted from HSAP, 2010)
ES - Early Stage P - Preparation I - Implementation O - operation ES-7 Social issues and Risks
P1- Communications and Consultation
I1- Communications and Consultation
O1- Communications and Consultation
ES-8 Environmental issues and Risks
P5- EIA and SIA I5- EMP and SMP O5- EMP and SMP
P-7 Hydrological Resource O5- Hydrological Resource
P-14 Resettlement I-10 Resettlement O-10 Resettlement P-15 Indigenous Peoples I-11 Indigenous Peoples O-11 Indigenous Peoples
P-17 Cultural Heritage I-13 Cultural Heritage O-13 Cultural Heritage P-18 Public health I-14 Public health O-14 Public health P-19 Biodiversity and
Invasive Species I-15 Biodiversity and Invasive Species
O-15 Biodiversity and Invasive Species
P-20 Erosion Sediment I-16 Erosion Sediment O-16 Erosion Sediment
P-21 Water Quality I-17 Water Quality O-17 Water Quality I-18 Waste, Noise and Air
Quality
P-22 Reservoir Planning I- Reservoir Preparation and Filling
O-18 Reservoir Management
P-23 Downstream Flow Regimes
I-23 Downstream Flow Regimes
O-19 Downstream Flow Regimes
29 | P a g e
In the Preparation, which follows the commencement of the hydropower project, a detailed
assessment of social and environmental criteria is conducted. Unlike in the past, where EIA and
SIA were conducted without properly defining the scope (as in the case of ARUN III), with
HSAP, scope is clearly defined and management plans are designed based on knowledge from
the assessment, and these plans are strictly implemented, evaluated and monitored. In addition,
environmental and social issues specifically associated with the hydropower project –
resettlement, downstream flow regimes, water quality just to name few- are assessed, designed
and enforced separately (Table 2). Preparation is conducted before awarding construction
contracts to eligible contractors. Contractors must design and implement, if required,
environmental social issues management plans in order for to be awarded with the contracts.
This eradicates any possibility for delayed implementation of management plans.
During Implementation assessment tools assesses the implementation stage of hydropower
project, during which construction, resettlement, environmental and other management plans and
commitments are implemented. This knowledge-based management plans that are designed and
implemented early in the project will prevent and mitigate all adverse impacts that may arise
from hydropower projects.
The important aspect of the HSAP is the Operation assessment tool. Many past hydropower
environmental and social assessments lacked monitoring and evaluation components; as a result,
(despite assessment of issues, design of management plans, and implementing them) sometime
resulted in adverse social and environmental negative impacts. There are of few instances of
prolonged suffering of resettled communities, collapse of fish population and decline in water
quality (Richter et al, 2010). However, the HSAP 2010‟s fourth tool is designed with the view
that the facility is operating on a sustainable basis towards monitoring, compliance and
30 | P a g e
continuous improvement (HSAP, 2010). It is very important to have such tool part of a
hydropower operation as they tend to be in operation for centuries and management plans will
require updating and evaluating, and some even redesigning regularly. The HSAP‟s Operation
tool is designed just to do that.
Currently, both multilateral are reviewing the HSAP and equator principle financiers to evaluate
if the HSAP tools are in line with their environmental and social safeguard policies. If adopted
and endorsed, HSAP has potential to bring electricity to many poor South Asian countries that
are currently bearing the pain of power shortage. It is also expected to promote sustainable
hydropower development as the environmental and social issues arising from hydropower
project as embedded in HSAP through knowledge-based formulation process, which was assisted
by active world class NGOs such as WWF and Oxfam.
6.0 Climate Negotiation, Energy Security and Hydropower in South Asia
India‟s economic growth has certainly put strain on South Asia‟s energy demand. At the same
time, it has also helped India join the group of top five polluters in the World. India‟s rising
carbon dioxide emission is only going to swell in future (Fig 9), consequential of increasing
number of industries and rise of middle-income families (Kone and Buke, 2010). Currently,
India produces only 14% of the electricity from hydropower (the World Bank Climate Portal,
2010). Power shortage that region is facing, added by exhausting hydropower infrastructure and
almost non-existence regional power trade system, the India‟s percentage of electricity generated
from hydropower is only going to shrink to much smaller number in next few years.
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Fig 9: CO2 Emission Profile for All South Asian Countries from 1960 to 2004. Hydropower
can is crucial for India to stabilize its raiding rising CO2 emission. (Source: Adapted from
the World Bank Climate Portal, 2010)
More electricity will be generated by dirty coal that will emit even more carbon dioxide in the
atmosphere. Dilemmatically, India is will not have liberty – with stringent international climate
agreement lurking on the horizon- to release more carbon in the atmosphere.
India is already turning desperate by initiating talks on the Indo-Iran Trans Pakistan and the
Submarine Indo-Qatar oil pipeline, a region India does not see as reliable ally for energy security
(ESMAP, 2008). On the other side of the subcontinent, although Bangladesh sits on vast natural
gas reservoir, it is hard to picture Bangladesh offering India anything substantial; largely due to
their geopolitical history and rising Bangladesh‟s own energy demand.
This leaves India to turn to more renewable energy source such as solar, wind and hydropower.
Although, solar and wind technologies are going to prevail in few decades as a major contributor
to energy supply, till then it is very crucial, in term of continuing economic growth, for India to
meet electricity demand with hydropower. As India is the key economy for the region, it is in
the interest of most South Asian countries to support its economic growth. This makes India a
32 | P a g e
large market for hydropower, which means faster return of investment- an incentive for
financiers.
7.0 Conclusion
One of the most challenging tasks faced by humanity in this generation, in standpoint of
sustainability, is to decouple economic growth from its environmental and social impacts.
Current economic growth in developing South Asia is their only ride out from the extreme
poverty, and vast hydropower potential regions holds is the ticket to that ride for many of these
countries. On one side, all hydropower development projects are perceived as projects that have
detrimental social and environmental impacts. On the other side, 15 years to 20 years delay in
development in hydropower has left the region with the worst power shortage in the world and
crumbling hydropower infrastructure. The delay occurred from an attempt to protect people and
environment from hydropower projects, but ironically same environment is being destroyed and
same people are being pushed deeper into the abyss of poverty due to intended consequences of
such action. Hydropower development project is not a “silver bullet” solution to all social,
environmental and economic problems the region is facing, but it is definitely a major leap
towards it. The newly formulated knowledge-based Hydropower Sustainable Assessment
Protocol has potential to decouple the hydropower development projects from its environmental
and social impacts. The four HSAP assessment tools recognize adverse environmental and social
impacts early in the hydropower project; these tools require contractors to design and implement
management plans early; and promote sustainable hydropower development projects. More
importantly, it will provide the electricity South Asia desperately needs to solve its social and
33 | P a g e
environmental impacts arising from power shortage; continue powering its economic growth,
and provide renewable energy security for future.
Acknowledgements
This project paper originated from an M. Sc. Research project conducted at the McGill-UNEP
Collaborating Centre on Environmental Assessment. The work was completed with assistance
from the faculty members at the centre. The work involved internship with the United Nations‟
Environment Programme Regional Resource Centre for Asia and the Pacific.
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