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Environment vs. Economy: the Hydropower Debate in Latin America

Hydropower has been the traditional route for clean power generation in Latin America, but environmental concerns have given rise to public opposition.

Like leaders across Latin America, newly elected Chilean president Michele Bachelet, already faces major decisions about her country’s energy future. Her administration has set a 60-day deadline for deciding onthe controversial HidroAysén hydropower project led by Endesa, the largest private electricity multinational in Latin America, and Chilean power company Colbú. The large-scale hydroelectric project would build five dams on two of Patagonia’s least developed rivers to produce 2.75 gigawatts of electricity, or roughly a quarter of Chile’s peak electricity demand in 2012.

Bachelet has publicly stated her opposition to the project, which has exceeded initial cost estimates, inflamed environmentalists and sparked large-scale protests in Chile’s major cities. Putting a lid on HidroAysén would distance the president from her pro-business predecessor, Sebastián Piñera, and boost her credentials with younger supporters.

However, if the project is scrapped, it is unclear how Chile will build new capacity to meet rising electricity demand. Power consumption is set to double by 2025, with demand from the mining sector expected to grow by almost 70 percent. Health and environmental risks associated with domestically available alternatives – coal or nuclear – make them arguably even less popular than dams. And while renewables like wind, solar, and geothermal doubled their share of electricity generation over the past 15 years, they accounted for a mere 4 percent of the matrix in 2012.

Leaders throughout Latin America face similar dilemmas. The region has traditionally relied on hydroelectricdams for a large share of electricity generation. In Brazil, Colombia and Venezuela, hydropower accounts for 70 percent or more of power generation. As more people move into the middle class, energy consumption is growing rapidly, and hydro provides a relatively cheap source of power for residential and industrial users. In Chile, which imports 97 percent of its fossil fuels, hydro provides a critical source of domestic energy, contributing 42 percent of installed capacity. Many governments expect that new mega-projects like HidroAysén will continue to anchor their electricity generationin the coming decades, even if they hope to transition to renewable energy sources in the long term.

Yet increasing concern about the environmental and social costs of large dams, such as soil erosion and the need to relocate communities, has slowed approval and implementation of hydroelectric projects. Resistance from more affluent and interconnected publics is on the rise. Judges and regulators have also increasingly stepped in to halt or delay new installations in recent years. A Brazilian court, for example, refused to grant permits for the São Luiz do Tapajós reservoir in Brazil – a project that accounts for more than a quarter of the 19 gigawatts ofnew hydroelectric capacity expected to come online in the country by 2025. In addition, recent droughts in Brazil have led to black-outs, raising questions about hydropower as a reliable energy source and forcing the country to rely on expensive imports of liquefied natural gas.

The contradiction between public concern about mega projects and dependence on hydro as a cheap, reliable, low-emissions energy source has become a major quandary for governments across the region. With appropriate policies and oversight, enhanced transparency and robust research to understand and mitigate environmental impacts, hydropower can be produced in a more environmentally and socially friendly way. Stakeholder engagement and sharing the benefits of hydropower projects with local communities can also ease conflicts.

However, such measures will not end the controversy over hydroelectric dams. The trade-offs between environmental protection and energy security have to be addressed. Although there is no easy answer, governments cannot delay the difficult decisions indefinitely waiting for electricity shortages to arrive.

Lisa Viscidi is Energy Program Director and Paul Shortell is Energy Program Assistant at the Inter-American Dialogue. http://www.thedialogue.org/energy

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