  A brisk building boom of hydropower mega-dams is underway from China to
Brazil. Whether benefits of new dams will outweigh costs remains unresolved
despite contentious debates. We investigate this question with the "outside
view" or "reference class forecasting" based on literature on decision-making
under uncertainty in psychology. We find overwhelming evidence that budgets are
systematically biased below actual costs of large hydropower dams - excluding
inflation, substantial debt servicing, environmental, and social costs. Using
the largest and most reliable reference data of its kind and multilevel
statistical techniques applied to large dams for the first time, we were
successful in fitting parsimonious models to predict cost and schedule
overruns. The outside view suggests that in most countries large hydropower
dams will be too costly in absolute terms and take too long to build to deliver
a positive risk-adjusted return unless suitable risk management measures
outlined in this paper can be affordably provided. Policymakers, particularly
in developing countries, are advised to prefer agile energy alternatives that
can be built over shorter time horizons to energy megaprojects.
