Using decision panels to evaluate hydropower development projects

Abstract

The construction of hydropower plants in Norway is notoriously controversial. They impact rivers, waterfalls and lakes and affect activities such as hunting, angling, skiing and tourism etc. The local community is usually divided on the issues. People appreciate the income from sales of electricity and related taxes, but resent the negative environmental impacts. Usually different stakeholders take quite different stances on the prospects, making the decision process thorny. In addition, central authorities and national organizations also have their say, adding to the complexities of the decision process. The paper describes a controversial case where the object was to recommend whether or not to carry out a planned extension of an existing hydroelectric plant in the scenic Sauda valley on the west coast. A traditional cost-benefit analysis had already been carried out. To complete the picture, we employed decision panels in an extended cost-benefit analysis (ECBA) to identify a range of willingness-to-pay (WTP) for non-market environmental goods. The WTPs were supposed to be representative of important stakeholders in the controversy. They were inferred by constructing multicriteria utility functions for the panels. We also hoped that the rationality of value-focused multicriteria thinking would help mitigate controversies among the stakeholders. Three parallel and independent decision panels were created. The participants included persons from the Ministry of Environment, the Norwegian Water and Electricity Board, the local government, the regional environmental authority and the development agency. The sessions with the decision panels were computer interactive. Six criteria were selected from a list to represent the most crucial environmentally related concerns: submerged areas, river stretches with reduced discharges, new roads, transmission lines, affected cultural sites, reduced fishing and hunting activities. In addition, the costs of development was used as a decision criterion. The panels made trade-off judgments of hypothetical situations described by criteria pairs. Their responses were given on an interval scale and analyzed with regression analysis. The panels performed the trade-off analysis diligently and with high self-confidence. The implicit WTPs were computed and used as a process feedback to the participants. The process revealed systematic preference differences both within and across the panels, the largest one being of the order of 10. The differences were consistent with known stakeholder interests. The WTPs of the local panel were close to the WTPs for the local population which was estimated by contingent valuation in a separate study. This indicates a degree of consistency between the decision analysis results and the sentiments of the population. The ECBA showed that, according to the preferences of the local panel, the extension project should be built. The preferences of the two other panels, however, pointed the other way. The analysis, therefore, served to uncover and explain the roots of the existing controversy. Another conclusion was that the methodology of multicriteria decision making (MCDM) lends itself as a natural tool to systematize and valuate the external (non-market) effects of hydropower development projects. In this way, the MCDM process can be a useful instrument in extended cost-benefit analyses (ECBA).