The Las Cruces hydroelectric project in Mexico might lead to a negative outcome for the Mexican if built. A natural and social capital accounting method has been used to assess the project's impact, which can support stakeholders engagement and decision making for this project, but also more widely showcase the potential of such methodology to drive a sustainable development.
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The San Pedro river is one of the last free flowing river of Mexico located in the state of Najarit, in the North West of Mexico City along the Pacific coast. It connects a mountainous region upstream to an agriculture fertile plain before ending its course within one of the biggest wetlands in Mexico, the Marismas Nationales, along the Pacific coast. The landscape is sublim.
Within its plan to expand electricity production in Mexico, to answer to an increasing demand but also to fulfil its commitment to the Paris agreement, the Mexican government (through its electricity company) is studying the construction of a hydroelectric dam on the San Pedro river. This dam would produce 750MWh of electricity each year and cost 639 million USD to build only. The electricity produced would avoid 305'000 tonnes of CO2-eq according to the government.
For many years, and still now for many persons, hydroelectricity is a renewable energy that is critical to support a sustainable transition of our society. However, more and more researchers, NGOs and other organizations are starting to realize the negative effects that dams can have for our society and the ecosystems. The dam built will have three direct major effects:
Flood a reservoir equivalent to 5'493ha (7'700 soccer fields).
Affect the hydrology of the San Pedro river downstream, by reducing the wet season flow and leading to a reduced flooded area including both agriculture and wetlands surfaces.
Reduce greatly the sediment transportation downstream by the river by trapping it in the reservoir, leading to changes in the wetlands dynamics and generating coastal erosion.
We used natural and social capital accounting methods, derived from the Social and Natural Capital Protocols as well as the Social Return On Investment method to assess the costs and benefits of the construction of the Las Cruces dam. Benefits are mostly linked to jobs created and electricity generated.
Although most of the impacts are negative, ranging from coastal erosion, loss of agricultural productivity through reduced flooding, greenhouse gases emissions (GHGs) from the reservoir and materials used for the construction of the dam, GHGs released from the reduction in size of the mangroves and wetlands areas linked to the reduced flooding during the wet season, impact on fisheries productivity, displaced population and flooding of scared sites, loss of ecosystem services provided by the ecosystem flooded by the reservoir and so on.
Overall, our model showed that the net societal cost of the Las Cruces dam is negative, leading to a negative cost over 25 years of 931 million USD. Looking at the financial results and accounting for the recent fact that the Mexican electricity market has been liberalized, reducing market prices, the project would create an accumulated loss of 279 million USD. All those costs would need to be covered by the Mexicans in a way or another.
Even the estimation done by the national electricity company on the GHGs avoided is largely over-estimated, as it did not accounted for the land use change (wetlands and mangroves) and direct emissions from the reservoir, leading to GHGs avoided of only 17% of the expected amount. The electricity produced by the dam would generate as much CO2 as an efficient natural gas power plant.
Using the same methodology to account for the societal impact of a project or activity, we compared the Las Cruces dam to other sources of electricity, as illustrated in the figure below. We integrated an average scenario (most likely events) and a minimum and maximum scenarios, accounting for the worse and best cases (in orange on the graph and in yellow the average electricity mix of Mexico). The Las Cruces dam societal cost is far above other renewables such as wind or other more sustainable types of hydroelectricity. However, it is still better than more polluting sources of electricity such as coal and oil. Although the maximum scenario shows that he could be as bad as those latter potentially.
It is clearly a project with an unfavourable outcome, leading to a net negative societal cost. This methodology allows to bring light to a complex project with many dynamic interactions with communities, the economy and the nature. This type of analysis is crucial to support stakeholders engagement and support decision making around similar projects.
The report published (Full version in English, Executive Summary available in English and Spanish version available on demand) will hopefully contribute to the local debates on the project in Mexico, but also showcase the potential of natural and social capital accounting as a tool to drive a sustainable development.