Cost-Benefit Analysis of the Nam Che 1 Hydropower Plant, Thathom District, Laos: An Ex-Post Analysis

Abstract

Hydropower construction is accompanied by both biodiversity loss and creation of livelihood opportunities for community members. The Nam Che 1 Hydropower Project (NCH1HP), intended to support the economic development of Laos, was subjected to an initial environmental examination that yielded a feasibility report. This feasibility report focused on financial analysis rather than detailed and comprehensive socio-economic and environmental analysis. However, the project development affected the hydrological landscape, leading to significant environmental and social impacts, and called into question the project’s actual costs and future benefits. Therefore, we conducted an ex-post economic evaluation of the NCH1HP. Specifically, we used cost-benefit analysis to evaluate the NCH1HP, considering the environmental and economic ripple effects of its long-term economic impact. In this study, we found that while the NCH1HP could be beneficial according to the financial analysis only, it may have a negative side effect when considering the environmental impact after the dam construction. However, a comprehensive long-term economic analysis that also took into account the spillover effects of the project showed that the project was beneficial. Policymakers need to be aware of the potential environmental impacts and economic spillovers when evaluating such projects and the NCH1HP should be re-evaluated taking them into account in a comprehensive manner.