Professor Tong Jiandong and Beth Marshall discuss how to address the barriers to the commercial development of clean hydroelectric power in China
China, particularly in the western, rural areas, still suffers from power deficiency and there continues to be a strong reliance on thermal power plants for energy needs. The Chinese government, through its programmes such as ‘Send electricity to the villages’ and ‘Replace fuelwood with electricity’, aims to accelerate the current thrust to utilise hydro power resources as a clean energy alternative to emission polluting power stations and deforestation which occurs through fuelwood gathering for residential energy needs.
China has attracted international attention due to its large scale and rapid development of small hydro, having developed 39% of the worldwide capacity. China has a potential small hydro capacity of approximately 128,000MW, currently only one quarter of this – 28,489MW, between 42,221 stations – has been exploited. Over 300M people are served by the 94.7BkWh of small hydro generated electricity produced. However, considering 10.15M people were still without electricity by the end of 2002, and the considerable remaining economically viable small hydro potential remaining for exploitation, small hydro is likely to continue playing a major role in the electrification process in China.
Small hydro in China is currently being developed at a rate of 3000MW/yr and this is set to rise to 8000MW/yr to meet the target for an installed capacity of 93,000MW by 2020. International bodies and agencies have become involved with some of this development through the International Network on Small Hydropower (IN-SHP), based in Hangzhou, China. In particular, alleviating barriers to private sector financing has been a major focus to help ensure the long-term sustainability of the development of clean hydroelectric power.
The dual goals of both achieving effective commercialisation of environmentally benign renewable energy projects in China and the promotion of clean energy development are objectives addressed by the Synergy programme, sponsored by the EC Commission, and the Xiaogushan project, part funded by the Asian Development Bank (ADB). The latter project has a generating capacity of 98MW, therefore is not a small-scale project, but it is a run-of-the-river development which will have very limited environmental impact on its surrounding area.
CDM small hydro projects
The Clean Development Mechanism (CDM) arising from the Kyoto protocol is one innovative financing methodology, which can encourage the commercialisation of hydroelectric projects. This facility is being developed under the Synergy Programme and the Xiaogushan hydroelectric project to achieve their stated objectives. As a relatively mature technology with demonstrable environmental and socio-economic benefits, small hydro projects are able to meet many of the requirements of the CDM. Of the more than 160 CDM projects identified by a recent OECD/iea study, two thirds involved electricity generation from renewable energy. Hydro power is the most popular project type so far, accounting for 39 projects. However, renewable energy projects only account for 38% of the expected emission reductions generated under the CDM.
In terms of the objectives of the Kyoto protocol and the CDM, small hydro meets important requirements: it is a renewable energy, with minimal environmental impact, and contributes to sustainable development. The CDM also offers small hydro project developers an opportunity to gain crucial financing for projects that may be too small or focused on rural development to attract sufficient private sector investment. China’s small hydro potential, existing capabilities, and government support for small hydro initiatives enhance the opportunities for developing small hydro projects under the CDM. China’s GHG emissions from the energy sector are predicted to increase from 3080Mt CO2 in 2000, to around 4000Mt CO2 in 2010, with coal contributing the major share. To realise its certified emission reduction (CER) potential, China will need a significant number of new power initiatives to be registered as CDM projects, and up to 100 renewable energy (RE) power projects to be in operation by 2006-2007.
Now at the second phase of development, the Synergy project, sponsored by the EU Commission, aims to establish the preliminary activities necessary to commercialise RE projects in China. Phase one of the programme officially started in September 2004 in Beijing. Activities within this project include policy advising to create favourable framework conditions for renewable energy sources in China – from site identification, to the drafting of business plans for concrete projects; from the active involvement of all the main stakeholders, to the training of the future RE production site owners and managers. In the second phase of the programme, currently underway, ten small hydro power projects in China are being developed into project summaries by IN-SHP. Ten other projects are being summarised by another Chinese organisation, CREIA, which will include non-hydro power sources such as wind, solar and biomass. These projects are intended to become concrete examples of methods to create commercially viable means to advance renewable energy. The main focus of these projects is on developing CDM, but other strong investment projects are also under consideration.
The main barrier associated with selecting projects under the Synergy programme has been finding appropriate sites that comply with regulations under the CDM. There is a lack of local knowledge and skills which creates problems for implementing CDM projects in China. Local capacity to identify CDM projects and gather the appropriate information required is limited. Furthermore, there is still a lack of easily accessible information – for example, technical information, particularly in poorer and more isolated regions can be difficult to obtain. In addition, the challenge of demonstrating additionality under the CDM for small hydro projects in conducive policy and commercial environments is particularly evident in China. Chinese government programmes and incentives for the development of small hydro include preferential policies, soft loans and subsidies. However, the ratio of government to private finance in small hydro activities is approximately 1:24, indicating that significant funding must still be sought from private investors and commercial loans. But despite these difficulties, a number of sites have been selected for CDM eligibility.
Yuzaikou small hydro project
One project of particular interest is the Yuzaikou small hydro power station, situated on the lower reaches of the Qijiang river, in Rucheng County, Hunan Province. A project development document (PDD) is currently being compiled for the project, for application for the CDM. This project, being developed by the Liu Yihou Company, will replace the need for the combustion of fuelwood and coal. Local residential use of small hydro generated electricity for heating and lighting will prevent local deforestation, which is currently causing the felling of 25,000m3 of timber per annum. Salient associated problems such as soil erosion will then also be alleviated and the preserved forests can then act as a carbon sink for CO2 emissions.
Environmental protection is a key associated feature of this project. One of the components involves the establishment of an ‘Environmental Protection Unit’ to ensure the adherence to environmental regulations during the construction of the plant. The tasks of the unit relate to water, air and soil quality evaluation. In terms of direct effects for the local economy, the project will generate 32 permanent full time jobs and 400 workers will be employed during the construction of the plant. It is anticipated the project will attract greater investment in small and medium scale industries in the resource rich Rucheng County.
Geological and meteorological aspects of the area lend itself ideally for small hydro installations. The installed capacity of the station will be 15MW, utilising two 7.5MW Francis turbines. There is a 55m net head, with an associated maximum hydraulic capacity of 15.65m3/sec. The annual energy output of the plant will be 66,000GWh. The primary purpose of the project is naturally energy generation but it will have an additional positive effect in that it will help the county better manage the severe flooding which plagues the inhabitants of the local terrain.
Water control will be facilitated by a 67m high dam, which will divert water at a discharge of 2 x 15.65m3/sec. The water will then be diverted along a 384.2m tunnel. Two 2.1m diameter pipes then convey the water to the power house and the two Francis turbines respectively. The estimated construction period of the station is three to four years. The project is anticipated to cost almost US$12M, 7% of which is intended to be financed through the CDM.
Xiaogushan hydro project
Part funded by Asian Development Bank (ADB) loans, the Xiaogushan hydro power plant project is being initiated as a CDM project. One of IN-SHP’s national sub-bases in China, Zhangye base in Gansu Province, which is run by the Heihe Hydropower Development Shareholding, is the project developer for the site. The Xiaogushan hydroelectric power station site lies in Xishui township, Sunan county, 86km from Zhangye City, approximately 600km northwest of the provincial capital, Lanzhou, Gansu Province. The aim of this project is to alleviate the problems of power deficiency in the project area and to ensure the clean sustainable development of the local area. The project is interesting in that it displaces CO2 from the least cost alternative, which would have been a coal-fired plant; consequently, this project reduces greenhouse gas emissions. The project is anticipated to produce an annual GHG abatement of 370,660t CO2 equivalent.
The project is a 98MW run-of-the-river hydro power plant, situated on the Heihe river in the Sunan Yugu Autonomous County of Zhangye City. Although at 98MW this project is not a small hydro station, as it is a run-of-the-river project there will be very minimal environmental impact on the area surrounding the project site. There will be very little alteration to the geography of the site, particularly as there is little foliage to be disturbed in a sparse landscape. Also, there will be little long-term impact to the geography of the area as there is no dam construction.
The Xiaogushan project has been developed to significantly improve the ecological environment of the project area as problems associated with air pollution will be avoided. The main components of the project include a diversion weir with an active storage capacity of 1.3Mm3; an intake power tunnel (9100m) with an intake flow of 105.5 m3/sec, and a rated water head of 117m; a surface power station for three units (2 x 40MW and 1 x 18MW) and a 110kV high voltage switchyard, with 27km of 110kV transmission lines for power evacuation. Total investment in the project is US$83.5M, 50% of which will be ADB loan financing. The project will be constructed over a three-year period.
For further information, contact International Center for Small Hydropower, No 136 Nanshan Road, Hangzhou, P R China. Tel: ++86 571 8707 0070, fax: ++86 571 8702 3353.Email: email@example.com. www.inshp.org.