Hydro-economic risk assessment in the eastern Nile River basin

In 2011, the Ethiopian government announced plans for the construction of the Grand Ethiopian Renaissance Dam (GERD) on the Blue Nile, east of its border with Sudan, at a cost of almost 5 billion USD. The project is expected to generate over 5 TWh of electricity per year and will include a reservoir of more than 60 km3 capacity. This project is part of a larger development scheme, by the Ethiopian government to expand its hydropower capacity; however, the scheme faces strong concerns, mainly from Egypt who are highly dependent on Nile River flows originating in Ethiopia. The Ethiopian government argues that the dam would supply electricity for Ethiopians and neighbouring countries and would generate positive externalities downstream by reducing floods and providing more constant and predictable flows. This study provides an independent analysis of the hydrologic and economic risks faced by downstream countries when the GERD will be online. To achieve this, an integrated, stochastic hydro-economic model of the entire Eastern Nile River basin is used to analyse various development and management scenarios. Results indicate that if riparian countries agree to cooperative management of the basin, and its major infrastructure, the GERD would significantly increase basin-wide benefits, especially in Ethiopia and in Sudan, and would generate positive externalities in Sudan and Egypt during dry years.