Re: Cheap electricity?

["Nestor Miguel Gorojovsky" <gorojovsky@xxxxxxxxxxxxxxx>]

En relación a Re: Cheap electricity?,
el 6 Feb 00, a las 10:45, Patrick Bond dijo:

> > From:          Louis Proyect <lnp3@xxxxxxxxx>
> > The economic justification of the 3,100 MW Yacyretá Dam in Argentina
> > rested on the assumption that Argentinean electricity demand would
> > grow at a rate of 8-10 per cent a year during the 1980s. In fact
> > demand grew by an annual average of just over 2 per cent so that
> > when the first turbines of the $11.5 billion megaproject came
> > on-line in 1994 (eight years behind schedule), the country already
> > had a sizeable surplus of generating capacity.
>
> Funny how they ALWAYS do that. For our old friend the WB, the
> overestimate on anticipated water demand in Jhb from 1986 (when they
> started building the Lesotho dams) to today was 40%. Incompetence, or
> pro-dam-building bias, or both?
>
> Cde Nestor, help us.

Certainly I will. The estimations were based on the performance of
Argentinian economy BEFORE the 1976 coup and its consequences. The
Argentina that was growing at a _moderate_ pace during the 60s and
70s required the amounts of energy expected by the planners. The
counter revolution, which was directly decided to curb down
independent industrial growth, made Argentinian demand curves bend
down. This is the secret. What Louis calls a "surplus of generating
capacity" is, in fact, a "deficit of industrial output", a surplus
relative population which has taken unemployment rates to 14% and
more, and the aggregate total of population with serious labor
troubles to a figure well above 50%. .  NO socialist here can imagine
that socialism will be less energy-consumptive, but more. Not only
because of a development of urban / rural consumption, but also
because a high rise in demand due to industrial reconstruction and
enhancement.

I understand that it is difficult to believe, living in a normal
country. But ours is not.

As to small damming systems, I am absolutely FOR them, and not only
not even basically out of economic reasons. The Chinese experience
may be useful here, in that though the myriad little steel furnaces
were antieconomical they taught the peasant the need for a steel
industry and an industrial proletariat. When people get near to
things, and involved with them, under the adequate social conditions,
they have such a tendency to become materialist!

But I would remind everyone (and I am ashamed to do so with such a
good economist as Patrick) that while First World countries will most
probably benefit with a lowering of energy output after revolution,
Third World ones still starve for energy, and small projects cannot
fill in that gap. Maybe the SA case, where massive mining requires
large amounts of energy that can be redirected, is a different one.
But the Argentinian one, well it is paradigmatic of a "surplus"
generated by counter revolution. EVERY project designed with the
Argentina of the 60s and early 70s in mind is oversized now.

Keep in mind, all these dams like Yacy-Retá, were imagined in the
1920s, and still more ambitious projects were devised.  An
industrialized Argentina cannot pass without them. And a socialist
Argentina cannot pass without industry.

Now, on to the "nuke industry". Patrick says:

The Argentine nuke industry is this month doing
> business plans for Zimbabwe -- where there are currently brownouts due
> to a forex crisis, but also due to bad planning the whole way along
> (since 1956 when the then world's largest dam, Kariba on the Zambezi
> River, was started) and (like South Africa) really bad use of energy
> resources for minerals beneficiation instead of for basic needs -- to
> establish a nuclear power industry there.

There is no "Argentine nuke industry" in the usual sense of the word.
 What there exists is an excellent institution, the INVAP, which is
still state-owned, and has one of the best records in scientific
excellence. There is no comparing INVAP with such monsters as
Westinghouse or Mannessman, since INVAP's only asset is the inherent
safety of their constructions. INVAP and the now defunct National
Commission for Atomic Energy were one of the few developments that
were kept alive after the 1955 coup. They were torpedoed for years,
however, and after 1991 the Commission is undergoing an effort to
privatize it which meets strong opposition from personnel there.

Developments in the CNEA and INVAP have always stressed safety above
any other question. In fact, one of the reasons why the nuclear
generator in Atucha, some 50 miles to the NW of Buenos Aires, has not
been privatized yet, is popular opposition to private companies to
take care of the plant.

I honestly believe that if the Zimbabweans strike a deal with INVAP
they will not be disappointed. Will expand if necessary.


> ***
>
>                     Paying for Southern African Dams
>
>                Socio-Economic-Environmental Financing Gaps
>
>                     A Southern African NGO Submission
>                      to the World Commission on Dams
>
>                                    February 2000
>
>                          EXECUTIVE SUMMARY
>
>      * Too much money has been spent on very large
>      dams in Southern Africa, in relation to other
>      uses of funds a) that are of a more urgent
>      priority to the majority of citizens, b) that
>      would save water and prevent environmental
>      damage, and c) that would result in fairer
>      distributions of water in a region that remains
>      amongst the world's most unequal.
>
>      * Too high a proportion of the costs of large
>      dams are passed to low-income people, who
>      therefore pay the bills for water that is
>      predominantly wasted by inefficient, hedonistic
>      users.
>
>      * Too much emphasis in dam financing is placed
>      upon enhancing the short-term profits of major
>      corporate water or electricity users as
>      justification for dam construction, without
>      considering either the long-term nature of costs
>      borne by government, or the equally vital short-
>      term water and electricity requirements of low-
>      income people who are too often denied access
>      due to affordability.
>
>      * Too much of the money borrowed for large dams
>      has come from "hard-currency" sources, when in
>      fact locally-sourced cement, steel and labour
>      comprise the main cost inputs and should be
>      sourced from local financial markets.
>
>      * Too often, the inappropriate financing of dams
>      has been motivated by geopolitical and
>      multinational corporate interests, which are
>      ultimately hostile to both democracy and the
>      material interests of the majority of the
>      region's citizens.
>
>      * To address these gaps between what is required
>      for sustainable development and what present
>      systems offer, a dramatic reform of dam
>      financing principles and practices is required
>      in Southern Africa, incorporating a) better
>      socio-economic-environmental cost-benefit
>      analysis of dams; b) sensitivity to
>      distributional implications of dam financing; c)
>      more accurate matching of hard-currency inputs
>      and debt liabilities for dam construction and
>      operation; and d) a more democratic, less
>      corrupt relationship between dam financing and
>      politics.
>
> 1. Introduction
>
> 1.1 Technical competence and political values
>
> Have Southern African dams been paid for in a way that
> enhances developmental effectiveness? Large dams in
> Southern Africa have a mixed legacy, one important
> aspect of which is the multifaceted mismatch of
> financing, both of initial construction and subsequent
> operating and maintenance expenses. In this submission
> to the World Commission on Dams, we consider the
> particular problems associated with a) the volume of
> financing available for large dams in view of inadequate
> socio-economic cost-benefit analysis of dams; b) the
> distributional consequences of such financing; c) the
> source of funding, in particular the hard-currency and
> debt-trap implications of dam financing; and d) the
> financing-politics nexus that helps explain the
> profusion of dam-related funding in relation to other
> sources and uses of development finance.
>      Even though there are complex technical arguments
> associated with Southern African dam financing (some of
> which suggest that the agencies responsible lack basic
> professional competence), it is perhaps more appropriate
> for civil society to highlight the objectionable socio-
> environmental-political values involved, and their
> implications for democracy and development. In
> particular, the availability of hard currency from
> international financial markets assures a funding source
> for multinational corporate dam-builders, and in turn
> shifts the relative weight of political and policy power
> towards the dam-building lobby (and large corporate
> constituents who may benefit from hydro-electricity),
> away from ordinary end-users of water (particularly low-
> income people), and others (such as dam displacees) for
> whom large dams do not represent the optimal water-
> supply solution. The role of state bureaucrats in all of
> this is often quite ambiguous, as the line between
> national interest and narrow, private interest is too
> often blurred.
>      In contrast, we argue, self-reliance on local
> financial sources would make a significant difference to
> the ability of governments and civil societies to
> determine what kind of bulk water/hydroelectric
> supply/demand system is socially, economically and
> environmentally most appropriate.
>
> 1.2 South Africa:
> The best case for developmental water finance?
>
> To illustrate the extent of concern, not even long-
> awaited democracy in South Africa in 1994 allowed the
> qualitative and quantitative shift of resources away
> from megadams into more appropriate "demand-side
> management" and water conservation strategies. Although
> adopted in principle by the Department of Water Affairs
> and Forestry, the latter strategies have been
> consistently underfunded. Likewise, poor financial
> design meant that attempts to provide rural water
> through national government rural supply projects
> gathered less than 1% funding via cost-recovery pricing,
> leading to a majority of projects failing.
>      Meanwhile, financing of major dams in the Tugela and
> Mkzomazi basins, the Mzimvubu basin, the Orange River
> and the Western Cape have continued, although estimates
> of the available water that can be drawn from such
> supply enhancements are just three decades' worth under
> existing consumption norms. Billions of South African
> taxpayer and consumer rands were devoted to expanding
> large dams during the late 1990s, in comparison to a few
> hundred million rand of state funding (and several
> hundred million more of foreign donors) for conservation
> schemes like "Working for Water" and a few meagre tens
> of millions for township-oriented demand-management
> strategies.
>      This contemporary record suggests more continuities
> than changes associated with dam financing, from
> apartheid to democracy, than society would accept, were
> there sufficient debate and were the playing field
> leveled. In the interests of such debate, the lines of
> this argument are extended to the Southern African
> region, and more fully explored, in two examples
> involving South Africa, Lesotho, Zimbabwe and Zambia.
>
> 1.3 Two case studies:
> Kariba and the Lesotho Highlands Water Project
>
> The civil society critique of large dam financing in
> Southern Africa can best be made through two detailed
> case studies. Firstly, the Zambezi River's Kariba Dam
> entailed financial calculations reflective of distorted
> colonial-era priorities that in turn suggest flaws in
> economic methodology often associated with dam policy.
> These relate to multinational corporate hydroelectricity
> needs, and to the failure of cost-benefit calculations
> for large, long-term development projects to incorporate
> the development needs of low-income people who have
> shorter timeframes. In addition, hydroelectricity
> generated at Kariba was priced inappropriately at retail
> level, which has prevented the expansion of Zimbabwe's
> electricity system to the country's majority.
>      Secondly, the contemporary case of water drawn from
> the Lesotho Highlands Water Project for Gauteng
> consumption includes several financing controversies:
> financial-sanctions busting, hard-currency loans,
> corruption, World Bank "conditionalities" and pricing
> advice, and the distributional consequences of resulting
> tariffs.
>      These case studies cover most of the controversial
> issues associated with Southern Africa dam financing.
> Many of the problems can be addressed through a review
> of controversies and argumentation, so that
> sophisticated modeling techniques become superfluous.
> Hence these studies seek to draw attention to the issues
> most important to civil society, namely the extent to
> which the financing of the two largest Southern African
> dams have contributed to a variety of other social,
> economic and environmental problems, and vice versa.
>
> (full paper available from pbond@xxxxxxxxxx)





Néstor Miguel Gorojovsky
gorojovsky@xxxxxxxxxxx