Abstract We evaluate the implications for Ethiopia and Egypt of two dams that could be built upstream of the Grand Ethiopian Renaissance Dam (GERD), in combination with hypothetical Ethiopian irrigation schemes upstream of these Blue Nile hydropower facilities. Two new dams could increase average annual hydropower on the Blue Nile River from Lake Tana to Khartoum and the Main Nile River from Khartoum to Aswan by almost 50% (30.2 TWh yr−1 to 44.7 TWh yr−1). A system-wide analysis of the expected financial benefits of various development scenarios reveals little financial justification for substantial irrigation withdrawals upstream of the GERD. Withdrawing 5 billion cubic meters annually upstream of the GERD without additional hydropower development would reduce total average annual hydropower generation on the Blue and Main Nile River by 10.9% (3.3 TWh yr−1). If two new dams were constructed upstream of the GERD, withdrawing this volume would cause a 15.2% (6.8 TWh yr−1) reduction. 1 and 5 bcm yr−1 of withdrawals upstream of the three dams would also affect water supply downstream, reducing average annual outflow from Sudan’s Merowe Reservoir by 1.1% (0.7 bcm yr−1) and 6.2% (4.1 bcm yr−1), respectively, and by <1% (0.2 bcm yr−1) and 3.3% (1.8 bcm yr−1) at Egypt’s High Aswan Dam (HAD) Reservoir, respectively. Whilst the annual probability of the HAD storage falling below 60 bcm and invoking its current drought management policy is estimated to currently be 0.085, these two scenarios of upstream withdrawals would increase that annual probability to 0.111 and 0.452 respectively.