Government Audit Finds Hydropower Aid Doesn’t Benefit the Poor

Fivasenglish, Frontsak, Vannkraft

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Peter Bosshard, policy director at International Rivers

No other industrialized country relies on hydropower for its own power generation as much as Norway. Norwegian companies build hydropower dams around the world, including controversial projects like the Theun Hinboun Dam in Laos. Norwegian development aid actively supports the interests of the hydropower sector. Norway is also promoting hydropower through international initiatives such as Energy Plus and the Hydropower Sustainability Assessment Protocol.

Since the turn of the century, Norway has spent more than NOK 12 billion (approximately $1.5 billion) on development assistance for the energy sector. This aid consists of the following elements:

• Almost half of the assistance supported investments in mid-sized hydropower projects in Chile, the Philippines and other countries through SN Power, a state-owned investment company. The projects in which SN Power has invested include Allain Duhangan in Northern India, a dam that was bitterly opposed by the local population.

• Norwegian aid supports the planning and construction of transmission lines, including a project that would export power from the controversial dams in the rainforest of Sarawak to Indonesia.

• Norway is strengthening the capacity of Southern governments to build hydropower projects, and funds feasibility studies for specific projects. Norway has for example entered a hydropower partnership with Ethiopia, and has funded studies for two large dams on the Blue Nile. Only last month, the Norwegian government canceled this cooperation due to the Ethiopian government’s insistence on uneconomic mega-dams.

• A small portion of Norway’s clean energy aid supports the development of decentralized renewable wind and solar projects.

The Norwegian Ministry of Foreign Affairs was supposed to periodically evaluate its energy assistance, but avoided such scrutiny (as it is standard practice in the hydropower sector). In an unusual step, the government’s Auditor General Office carried out an in-depth assessment of the assistance, which it submitted to parliament on June 25.

The findings of the audit are highly critical. The Auditor General states: “Norwegian assistance to clean energy has not led to a noticeable increase in power generation and has contributed little to improving living conditions for the poor in those countries that have been prioritized for such support.”

More specifically, the audit finds that Norwegian energy assistance is “still primarily directed towards hydropower, although countries have ample opportunities to utilize solar and wind energy resources”. This bias makes recipient countries “more vulnerable to failure in energy supply” than a more balanced approach would have done. The support for transmission lines has created energy access for over 100,000 households, although “primarily the wealthiest households” have benefited from this. The various measures have not spurred private investment in the recipient countries, and their economic viability is weak.

“A stunning 12.26 billion Norwegian kroners has had little effect on electricity production, poverty alleviation and business creation in the prioritized target countries”, FIVAS, a Norwegian environmental organization and long-time partner of International Rivers, commented on the audit findings. “This confirms our view that too much Norwegian support has been tied up in hydropower. “

In his response to the audit, Norway’s Foreign Minister agreed that the rapid advancement of solar, wind and biomass power “will make it possible to expand the breadth of investment in clean energy”, and accepted the recommendation “to strengthen efforts to improve energy access in rural areas with small-scale renewable solutions”. At the same time, the Foreign Minister argued that among all technologies, Norway was still best placed to extend aid for hydropower.

The strong and unambiguous findings of the independent audit offer the government an opportunity to change course. A failure to do so in the interest of the country’s hydropower industry would dent the high credibility of Norway’s development assistance.

Norway is a leading voice in the global dams debate and is often considered a model in development and energy finance. The new audit adds to the growing evidence that large hydropower projects are not effective at reducing poverty, and that better tools for achieving this goal exist. The World Bank, the Green Climate Fund (which receives strong support from Norway and will soon decide on its own energy priorities) and other institutions should take note.