Management decisions for sustainable use of dams

Date of Completion

January 2004


Economics, Agricultural




In the last half century, there has been a remarkable expansion in the rate and scale of dam construction worldwide. Many of these dams have been successful in providing various economic benefits. However, reservoir sedimentation decreases useful capacity of dams, shortens their economic life, and increases the need of potential dam development in the future. Also, maintenance of aging dams often involves considerable environmental and social costs to the society. Management of dams requires the study of available options and possible solutions to the problem of reservoir sedimentation and dam removal. ^ This dissertation provides a framework for assessing management strategies to achieve sustainable use of dams. First, an analysis of sediment removal techniques is made to examine their economic performance and the need for actions to conserve storage reservoirs. The case study of the Sefid-Rud reservoir in Iran shows that the technique of sediment-flushing is capable of retaining the useful storage capacity for a wide range of economic parameters and site-specific technical constraints. Innovations that relax some of these constraints could produce significant economic benefits. ^ Second, the framework of analysis is extended to situations involving externalities through sedimentation. Using the data from Mahaweli Cascade, Sri Lanka, it is shown that the total economic return from managing a system of cascading dams is increased when the negative externality from sediment release to downstream reservoirs is controlled. The results also indicate that the imputed external cost of sedimentation is likely to be high for a large-scale reservoir. The estimated external cost can be used to design policies for managing sediment along the river. ^ Lastly, an option-pricing model is developed to help formulate guidelines for dam removal decisions. Key factors that determine the desirability of dam rehabilitation versus removal are identified. For example, lower discount rates and a lower level of uncertainty make dam removal a more attractive option, while high decommissioning cost is likely to delay its timing. The case study of the Pak Mun Dam in Thailand indicates that the threshold level of damage for dam rehabilitation is $5.27M and dam removal should be undertaken when the damage reaches $15.26M. ^