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Dams work as intended, but they work in extremely unintuitive way that isn't clear to most players and it is pretty difficult to find an optimal place to place them. Though I would like to see them make so that dams are easier to use.

Dams generate power base on how fast the water flow is in the reservoir / river behind them, and how tall the dam is in relation to the water level of the side you vent the water. The water on the reservoir side has to fill like 95% of the dam's height before it starts draining.

The base usually shoots out a huge jet of water that is around like 30-40 meters tall, so if you have a dam that is only like 30-60 meter tall then you're going to produce basically no power because the water level on the venting side is as high as your dam. If your dam is like 200 meters taller than the water level of the side that is venting then your damn will produce quite a bit of power.

You can help make dams more efficient by building 2 of them next to each other. Put Dam A behind on slightly higher ground than Dam B. Disable Dam A so you don't have to pay any upkeep. Build some water pumps behind Dam A so it doesn't overflow. Then in between Dam A and Dam B build a bunch of sewage buildings. That way you can generate a strong flow of poo water behind Dam B. Terraform the ground on venting side of Dam B to be low as possible while maintaining a slope so the water level doesn't back flush and rise too high otherwise it will decrease your power generation.

So for example build Dam A so that it is 250 meters tall, build Dam B so that it is 220 meters tall. Terraform the reservoir area in between then so its like 170 tall so that the sewage outlets don't cause the water to overflow Dam B as they exhaust water. Terraform the ground right next to Dam B's vents to like 30 meters high, and then create that slope I mentioned earlier, and terraform the rest of the river to the edge of the map to 0.

Dams in real life get energy from gravity... where the energy is produced from the kinetic energy generated from the water's acceleration from falli. That moving water then spins a turbine that absorbs that energy and converts it into electricity. That is why dams have to extremely taller and much higher than water levels of the side they vent water to.
 
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