Cost-benefit analysis (CBA) is a technique used to evaluate the costs and benefits of hydropower projects. It can help identify relevant benefits and costs, and quantify them in monetary terms. CBA is important for making investment decisions about hydropower projects.
Here are some things to consider when performing a CBA for a hydropower project:
Environmental costs
The benefits of hydropower may be less than the costs if environmental costs are taken into account.
Long-term effects
CBAs can face challenges when treating long-term effects, irreversibilities, risks, and uncertainties.
Social and environmental impacts
It's important to examine both positive and negative externalities that can have long-term economic effects.
Discounting
Future costs and benefits must be discounted to present values.
Measurement variables
Measurement variables for CBA can vary by country based on geography, population, natural resources, technology, and market.
Some other considerations include:
Disaggregation
CBAs can be disaggregated to show the costs and benefits borne by different sections of society.
Opportunity costs
The price paid for power delivered can be a poor representation of true social costs. For example, if power is distributed to new markets via long-distance transmission infrastructure, it could divert exports to other markets. This could increase fossil fuel generation in those markets, which could impose social costs
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