Paying the forest for electricity: A modelling framework to market forest conservation as payment for ecosystem services benefiting hydropower generation

Abstract

Published in PESC Special issue: Payments for ecosystem services in conservation: performance and prospectsThe operation and longevity of hydropower dams are often negatively impacted by sedimentation. Forest conservation can reduce soil erosion, and therefore efforts to maintain upstream forest cover within a watershed contribute to the economic life span of a hydropower facility. The cost of forest conservation can be viewed as an investment in hydropower and be financed via a payment for ecosystem services (PES) scheme. A novel modelling framework is used to estimate payments for forest conservation consisting of: (1) land-use change projection; (2)watershed erosion modelling; (3) reservoir sedimentation estimation; (4) power generation loss calculation; and (5) PES scheme design. The framework was applied to a proposed dam in Cambodia (Pursat 1). The estimated net present value of forest conservation was US$4.7 million when using average annual climate values over 100 years, or US$ 6.4 million when considering droughts every eight years. This can be remunerated with annual payments ofUS$4.26ha-1 or US$ 5.78ha-1, respectively, covering forest protection costs estimated at US$ 0.9 ha-1 yr-1. The application of this type of PES represents a rational option that allows for conservation and development of hydropower watersheds susceptible to erosion and sedimentation