China has more installed small hydro (SH) capacity than the rest of the world combined and the government has massive plans to utilise it for continued rural electrification. As many as 60M rural Chinese people still do not have access to electricity, and it is impractical and uneconomic to serve such widely dispersed communities from central generators via an extended grid.

SH is seen as a key environmentally-sound solution for improving the economic growth rate in China’s vast rural areas, many of which have rich, undeveloped SH resources. The technology is now well-proven and is cost-effective in areas remote from the grid, and so the investment risk for new SH projects is low.

China is perhaps unique in promoting a national policy which places equal importance on hydro and thermal power, and which devotes as much attention to small hydro power as to medium and large scale projects. The World Bank is mindful that China does have vast brown coal reserves at its disposal, and is urging the Chinese government to look to SH and other renewables rather than following the path to massive expansion of thermal capacity. A major World Bank small hydro power programme for China is under development, for implementation in 2001.

The Chinese government’s own five-year plan of 1996-2000 called for 10GW of new SH capacity, requiring around US$12B investment with up to US$3B of foreign capital. The programme after 2000 is scheduled to expand again, with plans to install 1500-2000MW of SH capacity annually in 2001-5, in conjunction with improving water supplies for around 20M people.

Investment framework

The Electric Power Law of 1996 established the framework for foreign investment in Chinese power projects: ‘The State will encourage and introduce domestic and foreign financial sources to invest in exploiting electricity sources and erecting enterprises in this field’. In respect of medium and small hydro power the State also advocates its development to improve electrification in the rural areas. China’s practice and experience has shown that exploitation of medium and small hydro power can give impetus to rural economic and social development. As this experience now has been upgraded to law, it should have a profound effect on the future development of medium and small hydro power in China.

In many respects, the key features of China’s approach to SH development during the past thirty or so years could be a blueprint for SH and rural electrifi-cation in other developing countries. SH implementation is decentralised: local government and local communities take responsibility for construction and management of their plant, and use the electricity. This is achieved by mobilising capital from a number of channels, including all levels of government, the local community, share-holders and private enterprise, and development banks. Nevertheless, the State Govern-ment has certainly assisted SH growth by acknowledging its value as a tool for rural electrification and development and by backing this with partial financial contributions.

This approach to SH development — local action underpinned with assistance from the State — has helped China to develop sound home-grown manu-facturing capabilities for well-proven and cost-effective equipment. However, whilst China undoubtedly has the edge in operational experience and more capacity, its indigenous technology is less advanced than Western equipment, and there is an acknowledged need to improve the management of its SH stations.

Nationwide, the average SH capacity factor remains low (of the order of 35%). This is due in part to reliance on outdated technology, particularly in those installations dating back to the 1950s and 1960s where quality of manufacturing was poor and where there were no facilities for speed or voltage regulation, let alone automatic control. These older installations will be phased out in the near future and will be replaced by more reliable, more efficient, and generally better designed systems.

Although indigenous fabrication quality continues to improve, China is looking to international co-operative efforts to bring components like epicyclic gearboxes, turbine blade seals and generator sets in-line with the quality and efficiency of those manufactured in Europe and North America.

Poor automation and control of SH plant is another area where China hopes to learn from foreign experience. Design capabilities must also be strengthened — in the past systems have been incorrectly specified for the available resource — and there is a general need to reduce power transmission and distribution losses from the present level of around 10%.

International network

The International Network on Small Hydro Power (IN-SHP), was founded in 1994 and is an important organisation in China’s SH development. It serves as a window through which the world can understand the development of medium and small hydro power in China, and promotes international co-operation.

Broader co-operation with the European Union is now being advocated. An important first stage in the development of closer trade links between the two regions will be the first EU-China Small Hydro Industry Conference, which is being organised by IN-SHP and IT Power in the UK. It will be held at IN-SHP’s headquarters in Hangzhou on 19-21 April 1999.

Chinese industry has developed standardised designs and can offer attractive manufacturing costs, while European industry has a reputation for advanced technology with the highest technical standards. This match of capabilities presents excellent oppor-tunities for collaboration, to bring better quality and lower costs to both the Chinese and international markets.