Dams, Dams and More Dams : Issues in Evaluating Business Cases for Dam Expansion in Australia

Traditional interventions for mitigating flood risk and increasing water security continue to focus mainly on large-scale engineering solutions despite a growing body of evidence showing that large-scale water infrastructure investments can incur large cost overruns and produce significant, negative environmental impacts. Most benefit-cost analyses (BCAs) of large-scale water infrastructure projects systematically favour the “invest” option. We reviewed a preliminary BCA of a proposed AUD2.1 billion investment to enhance water security and mitigate flood risk by upgrading the Wyangala Dam in New South Wales, Australia, to increase its storage capacity by 650 GL, or 53%. Benefit-cost forecasts provided by the preliminary BCA were compared with findings from our own BCA, underpinned by qualitative information from a downstream stakeholder survey. The preliminary BCA favoured the proposed investment, underestimating capital construction expenses and environmental costs; overestimating water security, flood mitigation and irrigated agricultural benefits; and omitting floodplain productivity costs and the cost of potential loss of biodiversity, cultural and spiritual benefits. Our estimates suggest that it is highly unlikely that the dam expansion project will yield a net social benefit. Governments should conduct independent reviews of the business case for large-scale water infrastructure projects. We recommend six ways for rigorously evaluating dam investment