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Hydropower in China: The policy maker’s dilemma

James Wheatcroft

James Wheatcroft is a partner at Macrae Veit Associates, a UK based green power investment consultancy. He works with power companies and investors primarily from China to co-finance renewable power projects and technology. Read more about MVA at www.macraeveit.com or follow @MacraeVeit on twitter

Posted: 
20. August 2013 - 14:38
Hydropower is the greatest weapon in the Chinese arsenal for creating a lower carbon power sector. However, it is an industry which provides critics with ammunition, says James Wheatcroft
The Three Gorges Dam on the Yangtze River in China

In May the Chinese government approved the environmental impact assessment for the Shuangjiangkou dam on the Dadu River in Sichuan. The Dadu flows into the Yangtze, and there are already several dams operating on it. When completed in some 10 years' time, at a predicted cost of more than USD 4bn, Shuangjiangkou will be the world's highest hydroelectric dam. At 314m metres tall, it will be another superlative of the incredible Chinese infrastructure story.

China already has the world's largest hydroelectric capacity, predicted to grow from 220GW to 290GW by 2015 under the current five year plan. It is an industry, however, which provides critics with ammunition. From the mass movement of residents to allegations of mega dams creating earthquakes and the depletion of fish stocks, controversy – whether it is well informed or not – seems never to be far away from Chinese hydropower.

Consider it, though, from the Chinese policy making, and policy delivery perspective. China's GDP is still growing at a rate that any developed country would envy. The current five year plan will essentially attempt to reboot major parts of the economy from a booming export and fixed asset investment leviathan to a more sustainable, consumer-focused one, driven by higher wages.

The huge migration from the countryside to urban centres that has lifted 450 million people out of poverty will continue, with yet more fixed asset investment. Lower value manufacturing will be moved to scores of cities in the interior of China that Westerners have never heard of. All this will be done with GDP growth rates more in line with a maturing economy, and lower CO² emissions per unit of GDP growth.

Electricity demand is forecast to continue to grow at 6.5 per cent to 7 per cent per annum for the next ten years. The total installed capacity of the Chinese power sector is currently roughly 1 Terawatt (1000GW). At 6.5 per cent growth per annum (don't forget the growth is compounded), by 2020 the required operating installed base of the Chinese power sector will be pushing 1700GW. OK, the numbers in China are always mind boggling, and are equally wielded by China's "bull" and "bear" commentators.

The hydro weapon

Hydropower is the greatest weapon in the Chinese arsenal for creating a lower carbon power sector. China already has the world's largest nuclear power programme underway. Chinese policy delivery arms, such as the National Development and Reform Commission, have hydropower pencilled in as the main source of large non-thermal power production.

Studies have shown that China has more than 540GW of exploitable hydropower resources, of which roughly 400GW are economically viable to build out. While more than 80 per cent of viable hydroelectric dams have already been built in the USA, China still has 70 per cent of its economically viable sites available.

On rivers such as the Dadu, you can see why. The high sides of the gorges of Sichuan are ideal for damming. Other provinces such as Tibet and Yunnan are the same.

At the forefront of policy makers' minds will also be the enormous quantities of concrete required to build the Shuangjiangkou dam, and others, for example on Tibet's Nu River. The Three Gorges Dam required more than 27 million cubic metres of concrete, mainly for its 181m dam wall. China uses more than 45 per cent of the world's cement and the manufacture and use of cement and concrete in China is responsible for a large proportion of its carbon emissions.

Balancing hydro

So hydropower and the continued building of mega dams in China is a compromise for the Chinese government. It is not reasonable to deny hundreds of millions of Chinese people electricity as the Chinese economy enters its next phase.

It is certainly unrealistic to attempt such a massive build-out of power using fossil fuels or nuclear when such abundant hydro resources exist. You can't fault the incredible amounts of money China is investing in renewable resources such as wind and solar, but even so, the numbers of Chinese renewable power stations are depressingly small when compared the huge task at hand.

For Chinese policy makers, as with so many aspects of managing such an enormous and rapidly developing economy, it's all about balance. Hydropower, as with nuclear, renewables, and, yes, even more coal fired power stations, is part of that balance. The fact is it will take many more Shuangjiangkou's to meet China's energy demand over the next few years.