Distributional justice and hydropower development: A case study of Chile's equity tariff scheme

Implementing hydropower projects requires understanding community acceptance, especially regarding equity tariff schemes. This study assesses an equity tariff scheme as a compensation mechanism for accepting new hydropower projects by considering reducing local electricity tariffs while increasing in non-electricity-generating communities. We consider two scenarios involving a small-medium hydropower project (up to 100 MW) in Southern Chile: one in a zone with existing hydropower plants and another without previous hydropower experience but with high potential. Using a discrete choice experiment with 340 respondents, we analyzed the data through mixed logit models. Our results indicate that economic incentives alone cannot counter negative social perceptions of new hydropower projects, even in areas without prior experience. These findings highlight the necessity for an integrative strategy combining adequate monetary compensation with non-monetary approaches, such as community engagement and environmental mitigation measures, to ensure a fair and inclusive hydropower project development.