Understanding economic tradeoffs in the Nam Ngum Basin

As part of a larger program on livelihoods in the Mekong Basin, I worked with researchers at IWMI to conduct a series of hydrological and economic assessments related to understanding the implications of development in the Nam Ngum (a tributary of the Mekong located in Lao PDR). This work explores the costs of uncoordinated development and the extent to which tradeoffs among water uses exist in this catchment.

The Nam Ngum Basin, including current and planned hydropower dams

The Nam Ngum Basin, including current and planned hydropower dams

Main research collaborators:

  • Ryan Bartlett (WWF)
  • Justin Baker (RTI)
  • C.T. Hoanh; Guillaume Lacombe; Sompasith Douangsavanh (IWMI-Vientiane)

Related Publications:

Jeuland, M.; J. Baker; Bartlett, R.; G. Lacombe (2014). “The costs of uncoordinated infrastructure development in river basins” Environmental Research Letters 9(105006). doi:10.1088/1748-9326/9/10/105006..


Though there are surprisingly few estimates of the economic benefits of coordinated infrastructure development and operations in international river basins, there is a widespread belief that improved cooperation is beneficial for managing water scarcity and variability. Hydro-economic optimization models are commonly-used for identifying efficient allocation of water across time and space, but such models typically assume full coordination. In the real world, investment and operational decisions for specific projects are often made without full consideration of potential downstream impacts. This paper describes a tractable methodology for evaluating the economic benefits of infrastructure coordination. We demonstrate its application over a range of water availability scenarios in a catchment of the Mekong located in Lao PDR, the Nam Ngum River Basin. Results from this basin suggest that coordination can improve economic performance of the system by approximately 3-12% (or US$12-53 million/yr) assuming moderate levels of flood control, and that the magnitude of coordination benefits generally increases with the level of water availability and with variability. Similar analyses would be useful for guiding negotiations seeking to improve cooperation over water resources in other locations.

Lacombe, G.; S. Douangsavanh, J. Baker, C.T. Hoanh, R. Bartlett, M. Jeuland; C. Phongpachith (2013). “Hydropower and irrigation in the Nam Ngum sub-basin of the Mekong River: An example of complimentary developments.” Water International 39(5): 649-670.

Abstract: Economic and population growths in Southeast Asia are inducing rising food and energy demands. As a result, hydropower and irrigation development are changing the seasonal distribution of water supply and water demand in the Mekong Basin. Past, current and future river flows are compared to several development stages of irrigation water demands in the Nam Ngum sub-basin which has the potential for significantly enlarged river-fed irrigation and additional upstream hydropower dams. Water supply is assessed from actual flow records or flow simulations by an optimized reservoir system model. Irrigation water demands are estimated from satellite images combined to a simple crop water balance. We show that full hydropower development would increase dry season flow by more than 200% and reduce wet season flow by 20%. In the absence of dam storage, current irrigation water demand would compete with minimum environmental flow requirements during dry years. In contrast, full hydropower development allows current irrigation water demand to triple, to reach the potential levels of development, whilst maintaining environmental flows. The contribution of the Nam Ngum Basin to the Mekong River at Kratie has changed from 5 to 15% in April, since hydropower dams started developing in the Mekong Basin, revealing the rising role of the Nam Ngum Basin in the Mekong’s dry season hydrology. Beyond the effects on water resources, other impacts (on fisheries, sediment, biodiversity, ecosystems, population resettlement, etc…) require further investigations to better understand the environmental and socioeconomic costs and benefits of hydropower and irrigation developments.

Bartlett, R.; J. Baker; G. Lacombe; S. Douangsavanh; M. Jeuland (2012). “Analyzing Economic Tradeoffs of Water Use in the Nam Ngum River Basin, Lao PDR.” Duke Environmental Economics Working Paper Series No. EE 12-10. Durham, USA.

Abstract: This paper develops a hydro‐economic optimization modeling framework to assess the economic consequences and potential trade‐offs of various infrastructure development and policy pathways in the Nam Ngum Basin (Lao PDR). We considered whether large shifts in water resource demands in a relatively water abundant basin could induce meaningful economic trade‐offs among water uses, including hydropower generation, irrigation expansion, flood control, and transboundary water transfer objectives. We constructed a series of sensitivity scenarios under dry, average, and wet hydrologic conditions with varying levels dam development, irrigated agricultural expansion, agricultural returns, flood control storage restrictions, and water diversions to Northeast Thailand. We also considered how flows into the Mekong would be affected by these collective developments. In general, results indicate that tradeoffs between hydropower production, irrigation, and flood control are modest. Hydropower and agricultural expansion are found to be complimentary under high levels of water availability, even with the most ambitious level of irrigation expansion. Allowing for flood control by maintaining reduced storage levels in the reservoir that is largest and furthest downstream on the Nam Ngum (NN1) has a minimal effect on economic output and decreases total system hydropower by less than 1%. However, economic outcomes are highly dependent on water availability and economic returns to irrigated agriculture. System hydropower was greatly reduced, and inter‐basin transfer projects induced large economic costs under dry conditions. These results on seasonal impacts illustrate the importance of accounting for climate variability and potential hydrologic change in cost‐benefit analysis of infrastructure projects, even in watersheds that are relatively water abundant.