Hydroelectric dams are particularly vulnerable to cost and schedule overruns, an expert testified Monday at the start of a public inquiry into the Muskrat Falls hydro megaproject in Labrador.
Oxford University economics professor Bent Flyvbjerg, who is described on his faculty page as “the most cited scholar in the world in megaproject planning and management,” took the stand in Happy Valley-Goose Bay, N.L., to outline common mistakes and causes of cost overruns of such projects.
He said hydroelectric projects are particularly risky, seeing average cost overruns of 96 per cent and schedule overruns of 32 per cent, with little change over time since the 1950s.
The massive Labrador dam and powerhouse harnessing the lower Churchill River near Happy Valley-Goose Bay still isn’t complete, but its price tag has climbed to $12.7 billion with the bill going to a province of just 530,000 people.
The independent inquiry, led by provincial Supreme Court Justice Richard LeBlanc, will examine how the project was approved and executed, and why it was exempt from oversight from the Public Utilities Board.
Flyvbjerg, who has also consulted on megaprojects in several European and Asian countries, was commissioned by the inquiry to compile a report giving global context and best practices for success in megaprojects, but not specifically looking at the case of Muskrat Falls.
The report, co-authored by Alexander Budzier, surveyed 274 megaprojects around the world, including over 40 in Canada. Flyvbjerg defines a megaproject as one that costs more than $1 billion.
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Data from the report shows that hydroelectric dams are “riskier than all other projects, except nuclear.”
Flyvbjerg said many projects are affected by underestimated costs, lack of independent oversight and political optimism about a plan’s success – something he called “optimism bias.”
The report recommends outside, independent oversight in the early stages to counter unintentional optimism, as well providing as much transparency as possible from the beginning of the process.
When questioned by co-counsel Barry Learmonth, Flyvbjerg said projects are generally more successful when stakeholders, like Indigenous groups and environmental groups, are engaged in the process early on.