International interest in the Chinese hydro sector has generally focused on the Three Gorges dam, which has already become the world’s biggest hydro scheme. Yet faced with growing competition from gas fired power plants, renewed enthusiasm for nuclear power and the massive expansion of the coal fired sector, a string of other dam projects are being developed to maintain the role of hydroelectric power in the generation mix. At the same time, Beijing’s apparent newfound interest in environmental protection could help to improve the financial viability of hydro ventures.
Even putting the controversy over the environmental impact and forced movement of people to one side, it is easy to see why the Three Gorges scheme has attracted such massive publicity. Once the entire project is completed, probably in 2008, it will have generating capacity of 18.2GW, far higher than any other hydro venture. The 26 power generating units, which each have generating capacity of 700MW, are designed to produce a total of 84.7BkWh/year.
The project is also impressive in terms of the financial costs and timescale involved. The scheme, which is located on the River Yangtze in Hubei Province, close to the city of Yichang, has produced a massive man made reservoir that stretches 630km along the valley to a maximum width of 2.3km. Initial construction work began in 1993, so the whole project should be developed within 15 years, relatively quickly for such a grand undertaking, while the government expects the final price tag to reach 180B yuan (US$22.5B).
Yang Ya, accountant in chief with the company in charge of overall project development, the China Three Gorges Project Corporation (CTGPC), argues that recouping this outlay will be relatively straightforward. He said: ‘Electricity produced by the Three Gorges hydro power plant goes on stream at a price of 0.25 yuan per kWh, so we will recover the investment when the project has generated one trillion kWh of electricity, which might occur between 2015 and 2017.’
In October 2006, China Yangtze Electric Power Company, which will manage the generation aspect of the project, announced that all 14 turbines on the left bank of the giant Three Gorges reservoir had been successfully installed. Eight of the 14 were developed by a consortium of ABB, Alstom and Kvaerner, and the remaining six by GE, Siemens and Voith. Work will now begin on the 12 turbines on the right bank, while CTGPC has announced plans for four new turbines to be added to the original design.
According to the director of the Three Gorges hydro power plant, Ma Zhenbo, each turbine now produces electricity worth 4.2M yuan (US$525,000) a day. Now that the reservoir has reached its optimum water depth of 148m, the turbines are able to produce 700,000kWh a day.
While none of the other hydro schemes under construction are as large as the Three Gorges project, they are massive undertakings in their own right. The Yellow River Hydroelectric Development Corporation’s scheme on the Yellow river will become the world’s second biggest hydro scheme with capacity of 15.8GW. Centred on a 250m high dam in Qinghai Province, which will be finished in 2010, the venture will generate 10BkWh of electricity a year.
Construction work on the 12.6GW Xiluodu project on the Jianshajiang river began in December 2005. The scheme has been developed to increase electricity supplies to Yunnan and Sichuan provinces in the west of the country, although new transmission links are planned that will enable surplus electricity to be marketed in the more industrialised east. Development costs are put at 50.34B yuan (US$6.2B), with the first turbine due to be installed by June 2012 and the entire project completed by 2015.
While Xiluodu will make a massive addition to national generation capacity, the scheme has also been designed to increase water storage in the region and to prevent periodic flooding of the Jinsha. It is also hoped that the project will improve navigation on the lower reaches of the river. CTGPC, which is the main project contractor, insists that it has put comprehensive environmental protection measures in place in order to minimise the negative impact of the venture.
Over the past two years, the State Environmental Protection Administration (SEPA) has begun to exert its authority over projects that fail to meet national environmental guidelines. The organisation has halted construction of the Three Gorges dam amongst other projects when rules have been broken. CTGPC general manager Li Yong’an said: ‘The project was launched after three years of preparations in terms of technical planning, environmental protection, water protection, and the relocation of over 7,000 residents in the construction area.’
The Jianshajiang, which is a tributary of the Yangtze and which is also known as the Jinsha, will also host another major hydro project. The 6GW Xiangjiaba venture in the southwest of the country was originally proposed in 1957 and work was scheduled to begin at the end of 2005 but construction did not commence until November 2006. Investment costs are estimated at US$3.68B and around 89,000 people will have to move, as villages and farmland will be lost to make way for the project’s reservoir. Xiangjiaba, which is also being developed by CTGPC, is scheduled for completion in 2015 and production is expected to reach 31BkWh a year.
Wei Xikan, the deputy director of CTGPC’s planning and development department, has revealed that apart from the Xiangjiaba and Xiluodu projects, twelve other hydro schemes are planned for the middle and upper reaches of the Jianshajiang before 2020, including the Wudongde and Baihetan projects. Total additional generating capacity from the twelve is estimated at 58GW. Indeed, Chinese media sources insist that 100 new hydro schemes will be built on the upper reaches of the Yangtze and its tributaries in the long term. If these various ventures are actually put in place, they will make the river one of the most heavily developed in the world.
The big picture
This rapid expansion of the hydro sector is being achieved on the back of a sustained, massive increase in electricity consumption in China. Both total consumption and total generation increased by 60% between 2000 and 2004, while 2005 saw a 15% jump in demand that resulted in power rationing, particularly in the more heavily populated south and east of the country.
This growth in demand will provide a market for hydroelectric production but the hydro sector must still compete with other parts of the generation mix. According to figures from the National Development and Reform Commission (NDRC), China’s total hydroelectric generating capacity stood at 115GW in 2006, before the first phase of the Three Gorges hydro power plant was completed. Once the Three Gorges left bank turbines are thrown into the mix, national capacity must now stand at a minimum of 124.8GW.
Yet this is just over 20% of the 600GW total national power generating capacity, which the China Electricity Council (CEC) says was reached in December 2006. Of the 80GW brought on stream during 2006, 52.8GW was provided by coal fired plants, in comparison with just 6.9GW by the hydro sector. Despite growing concern over pollution and other environmental problems, investment in the coal sector has continued to increase and coal fired plants are likely to continue to make the largest
contribution to new power generating capacity over the next decade.
Gas fired capacity currently makes a relatively small contribution to total generation but is set to grow hugely over the next decade. Domestic gas production, particularly in the north-west, is likely to increase and liquefied natural gas (LNG) import terminals are being developed on the south coast, but the step jump in the consumption of gas as a feedstock will come from imported piped gas. A string of huge pipeline projects are under consideration to import gas from Russia and the Central Asian states of Kazakhstan, Uzbekistan and Turkmenistan. It is likely that some schemes may not be developed or could be combined with other ventures, but it is likely that at least three import pipelines will actually be put in place, each with transport capacity of around 30Bm3. The target deadline for the completion of almost all of the planned pipelines is around 2010.
Some expansion of the country’s nuclear generating capacity is also likely. Reactors providing up to 30GW will be completed by 2020 but the nuclear sector will remain a minor player in the power sector as a whole. The hydro sector therefore faces a number of significant competitors but it is likely to at least maintain its share of the generation mix. According to official government figures, total national hydro generating capacity will reach 270GW by 2020.
A range of different factors should help the hydro sector to continue to grow over the next decade. For example, new impetus was injected into the drive for hydro by a major government sponsored survey of the nation’s hydroelectric potential during 2000-04. An NDRC spokesperson said that the survey indicated higher than previously calculated potential in several areas. Total theoretical hydro potential is 689GW; total technically feasible potential 493GW; and economically feasible potential 395GW. Ma Hongqi, a hydroelectric engineer and member of the Chinese Academy of Engineering, said that the development of new hydro generating capacity will peak during the period of the eleventh Five Year Plan, 2006-2010. He expects that the proportion of China’s economically feasible hydroelectric capacity to be exploited will rise from 24% in 2000 to 40% by 2010. Development will continue to be concentrated in west China.
In addition, the hydro sector should receive a boost from its key role in encouraging transmission sector integration. At present, China lacks a genuine power grid as transmission infrastructure has been developed on a provincial basis. However, the country’s various jumbo hydro schemes require more than a single provincial market to justify their construction and so new interconnectors are being developed from each scheme to transport electricity over large distances. Electricity from the Three Gorges hydro power plant has already been marketed in 15 provinces across the east, centre, south and west of the country.
For example, the new 500kV interconnector between the Three Gorges scheme and Shanghai was completed at a cost of US$894M in 2006. The 1040km transmission line could boost electricity supplies to the city by 16% and should help to end the power rationing that has become a feature of life in Shanghai in recent years. Passing through the provinces of Anhui, Hubei, Jiangsu and Zhejiang, the interconnector can also be used to provide electricity to other cities.
The completion of the Three Gorges-Shanghai line comes hot on the heels of two other transmission links, between the Three Gorges hydro power plant and Guangzhou, capital of southern Guangdong province, and the Jiangsu Province city of Changzhou. By placing hydro schemes at the heart of the emerging transmission network, they will automatically gain an advantage over the coal and gas fired sector. China’s many thermal power plants each make a much smaller contribution to national generating capacity than the largest hydro ventures and so their development does not tend to trigger such massive investment in the transmission sector.
The creation of power companies to manage the new hydroelectric assets is also helping to creating new ambitious firms. In October, China Yangtze Electric Power Company agreed to purchase an 11% stake in a local power company, Guangzhou Development Industry (Holdings), for 1B yuan (US$125M). Yangtze Power announced: ‘The acquisition fits in well with the company’s development blueprint for 2005 to 2010 and will further improve its competitiveness in China’s electricity market.’
Similar expansion is expected by other hydro operators over the next few years. While this may not alter the size of China’s total hydro generating capacity, the increasingly important role of the main hydro companies should help to cement the sector’s position within the overall power sector. Senior analyst at the State Power Economic Research Centre in Beijing, Zhao Jiujing, said: ‘The market change [from shortage to over supply] will bring about very good opportunities to buy local assets which might depreciate by then, and the big power firms are taking action beforehand to establish footholds in local regions.’
Finally, Beijing’s apparent interest in cutting pollution could dampen the increase in coal fired capacity in favour of hydro and renewables. A strategy of maximising economic growth at all costs has been pursued over the past 20 or 30 years but there has been a big price to pay for this in the form of air and water pollution. According to the World Health Organisation (WHO), seven of the world’s ten most polluted cities are in China.
Popular protest against such problems has prompted the government to tighten environmental regulations and more thoroughly impose existing rules over the past two years.
This should translate into yet more enthusiasm for hydro schemes, given the current national reliance on polluting coal fired plants. The Renewable Energy Law, which came into force in January 2006, sets a target of producing 10% of all electricity by renewable means by 2020, but even if that is achieved the hydro sector will continue to account for far more low emission capacity than all solar, wind and biomass projects combined. Moreover, taxes on high sulphur coal have been increased, a measure that could hasten the closure of some of the country’s older thermal power plants.
Beijing also hopes to use the expansion of the hydro sector to support its claim that it is starting to tackle its rising greenhouse gas emissions. Global warming remains a fringe concern in China but the government recognises that pressure for action on emissions from the European Union and other major trading partners is set to increase markedly over the next few years. A change of policy on the issue in the US would also increase the pressure on China to cut emissions. During the 1990s, China’s carbon emissions increased by 111%, making it the world’s second biggest emitter after the US. Yet with Chinese per capita carbon emissions of 0.6 tonnes a year, against a global average of 1.1 tonnes, there is plenty of room for expansion, particularly in such a rapidly growing economy.
Whether or not environmental measures help to make hydro schemes more attractive in comparison with thermal power plants, the hydro sector is set to grow massively over the next few years. China has already overtaken Canada to become the world’s biggest producer of hydroelectricity and the jumbo Three Gorges, Yellow River and Xiluodu projects will reinforce its dominant position still further. Whether this expansion will help to stem the expansion of the coal fired sector remains to be seen, but there is no doubt that Beijing is transforming the country for better or for worse through some of the largest infrastructural projects the world has ever seen.