Benefit Sharing in Hydropower Development: A Model Using Game Theory and Cost–Benefit Analysis

Abstract

Globally, hydropower is one of the most important energy sources, but its development often entails population displacement. Traditional economics cannot fundamentally resolve disputes over relocation compensation. In the present study, we use the game theory to model the relationship between stakeholders. The main issue is the distribution of benefits between hydropower developers and the affected population. To distribute benefits more fairly and rationally, we model the benefits and costs for the developers and the affected people over the full life cycle of the project, consider the affected people as project investors, adjust benefit distribution based on the internal rate of return, and assess the rationality of the resulting plan. Under this benefit-sharing model, hydropower developers and affected people can share benefits and risks, effectively eliminate conflicts, and ensure project success. The model provides guidance for the formulation of compensation for affected people, and a new paradigm for the study of benefit-sharing mechanisms for hydropower development.