With the Three Gorges project expected to be completed ahead of schedule, Neil Ford writes that its success may help encourage further hydro developments in China
The success of the Three Gorges project has been underlined by the growing success of the company operating power plants as part of the scheme. Yangtze Electric Power Company, which was set up in March 2002 to handle the power sector side of the venture, announced in January that it had produced 8.2% more electricity in 2005 than in 2004, partly thanks to high water levels. With the second phase of turbines due to be developed over the next two years, China is finally seeing the benefit of this much publicised project.
The scheme has been developed remarkably quickly, particularly in comparison with other dam projects elsewhere in the world, such as the Lesotho Highlands Water Project (LHWP), which is scheduled to take over 20 years to develop. Construction work began on the Three Gorges venture in 1993 and the latest official proclamations indicate that the scheme will be complete by 2008, one year ahead of schedule. There are 26 power generating units, each with generating capacity of 700MW, which should produce an average of 84.7BkWh/yr from 2008 from a total generating capacity of 18.2GW. The latest government figures have put a price tag of 180B yuan (US$21.7B) on the project.
While the speed of construction is remarkable, the facts and figures for the dam – which lies 44km from the city of Yichang in the province of Hubei on the upper reaches of the Yangtze river – are just as impressive. The reservoir is 630km long and an average of 1.3km wide, while the dam wall is 185m high and almost as deep, stretching 2.3km across the valley. It will soon become the biggest hydroelectric generating facility in the world, overtaking the 12,600MW Itaipu installation in South America.
Yangtze Electric Power Company’s success last year was partly due to the speed of progress being made on installing the 14 turbines on the left bank of the reservoir. The first turbines were tested in July 2003, just a month after the reservoir began to fill, and the last of the 14 is expected to be brought on stream towards the end of this year. Contracts for eight of the generating units were awarded to a consortium of ABB, Alstom and Kvaerner, while the remaining six were secured by another foreign consortium of GE, Siemens and Voith. However, Chinese firms Dongfang Electrical Machinery and Harbin Power Equipment also secured major contracts, partly in conjunction with the foreign partners. Once the first tranche has been completed, work will then begin on the 12 generation units on the right bank.
However, in September 2005 a spokesperson for the China Three Gorges Project Corporation (CTGPC) announced that four additional plants would be added within the next 15 years. Speaking at a ceremony to mark the opening of the left bank turbines, the president and general manager of CEGPC, Li Yong’an, announced: ‘We will build the four hydro power plants at Xiluodu, Xiangjiaba, Baiheban and Wudongde, four places along the Jinsha river on the upper reaches of the Yangtze river.’ Two of the new four units are scheduled for completion in 2011 and 2013.
Overcoming opposition
Opponents of the Three Gorges dam raised numerous objections against its development, covering the full spectrum of social, economic and environmental concerns that surround almost any hydro scheme but each of which was greatly magnified by the sheer scale of the project. Indeed, it has been claimed that the new reservoir is so large that it will affect the climate of a wide swathe of China. However, it has been the forced relocation of people living in what was to become the reservoir that has generated most criticism both inside and outside the country.
Opponents claim that those forced out of the area have not been adequately compensated, particularly as the land they lost was highly fertile. Yet the government insists that the scale of its compensation package demonstrates its commitment to helping those affected improve their standard of living. According to Pu Haiqing, director of the Three Gorges Project Construction Committee under the State Council, a total of 1.06M people have been relocated and around 49B yuan (US$6B) has been spent on providing new homes and infrastructure for those forced to move. The government also argues that the project has been developed in order to control flooding, as floods on the Yangtze – which is Asia’s longest river – killed hundreds of thousands of people during the course of the twentieth century.
It is also feared that the dam will prevent the flow of nutritious silt downstream, affecting both agriculture and the performance of the turbines in the longer term. International and national financial institutions were divided over whether or not to back the scheme. The World Bank opted against providing support, largely because some of its environmental concerns were not addressed but most European credit export agencies agreed to back companies bidding for contracts.
Work resumed quickly following a halt in February last year as a result of government fears that environmental impact assessments (EIAs) were being awarded too readily. CTGPC’s Jinshajiang Xiluodu hydroelectric plant was among the Three Gorges facilities caught up in the government crackdown but approval was given for construction to resume within weeks and the development schedule has not been substantively affected. A spokesperson for the State Environmental Protection Administration (SEPA) commented: ‘After communicating with the environmental administration, officials of the Three Gorges Project said they had a more exact and comprehensive understanding of the environmental rule.’
Beijing insists that opposition to the project from both affected people and some local governments has now largely dissipated. The vice-minister of the State Development and Reform Commission, Zhang Guobao, said: ‘Some provinces and regions had seen Three Gorges electricity as an affliction but now they are asking for more electricity when required.’ Changes to the regional allocation of electricity from the project have also helped to calm opposition from some regions, as the reduction in new capacity development during the 1990s made spare generation capacity a valuable commodity. Contracts to supply nine provinces in eastern and central China, including Shanghai, were signed in 2003 and have now come into effect. Electricity from the project is now being used to supply the provinces during the winter.
Another benefit of the project will be improved navigation on the river, allowing vessels to sail from Shanghai up to Chongqing, around 2000km from the sea. It could therefore become an even more important transport artery if sufficient facilities are put in place to integrate cargo transport on the river with major rail and road intersections. The government and companies involved in the development of the Three Gorges dam are also keen to promote the project by developing it as a tourist attraction. While the displacement of hundreds of thousands of people attracted some negative publicity, tour boats now offer trips on the reservoirs in order to allow foreign and domestic tourists to appreciate what are being advertised as ‘lofty gorges projecting peaceful lakes’.
The generation mix
The Three Gorges dam project is making a major contribution to ending the shortfall in electricity supply that has affected many areas, including Zhejiang and Jiangsu provinces, although the lack of a national power transmission grid prevents it from exporting electricity to some of the most power hungry regions. Nevertheless, Li Yong’an has indicated that total electricity production from the Three Gorges project was likely to top 100BkWh by the end of 2005. Bringing the Three Gorges plants on stream helped to increase total national power production by 13.2% during the year to June 2005, although electricity consumption jumped by 13.9% over the same period.
The government originally put tight restrictions on the development of new power plants in the 1990s because of the level of surplus capacity, but rapid economic growth and an accompanying step increase in residential and industrial power consumption has prompted Beijing to begin encouraging new project development again. In particular, demand has been generated by a turnaround in industrial consumption, which fell for a time during the 1990s as the result of the closure of inefficient, loss making, state owned industrial enterprises, but which has now strongly rebounded.
Until relatively recently, the Chinese power sector was organised on a provincial basis and there were relatively few inter-provincial interconnectors. A national power grid is gradually emerging but a truly national power pool is still far from becoming a reality. In the longer term, however, the Three Gorges’ power plants may be able to trade more flexibly and target a greater proportion of the country. In effect, the Three Gorges dam is even more important to the development of the Chinese power sector than its impressive generating capacity may suggest. The transmission lines that are being developed to transport electricity from the project to the rest of the country will help to create a national grid, with the Three Gorges at its heart.
According to the power purchase agreements (PPAs) that have been signed, when all the scheme’s power plants are fully operational, 52% of the electricity generated will be supplied to central China, 16% to Guangdong in the south and 32% to eastern China. A new transmission interconnector is currently being developed to link the Three Gorges dam with Guangdong. According to official sources, all the PPAs include tariffs at an average Chinese rate at about 0.25 yuan (3 US cents) per kWh, plus a transmission charge of 0.07 yuan (0.8 US cents) per kWh.
Despite the fact that the Three Gorges dam venture is substantially bigger than any hydro scheme developed anywhere in the world to date, another project of similar size is also currently under development. The Yellow River Hydroelectric Development Corporation has been set up by a number of provinces to develop a hydro scheme on the Yellow river. A total of 25 units will provide generating capacity of 15.8GW. Construction work also began on the 12,600MW Xiluodu hydro scheme at the end of 2005. The project is being developed on the border of Sichuan and Yunnan provinces and its completion will give China the world’s three biggest hydroelectric schemes by generating capacity.
Although Beijing has encouraged foreign, private sector investment in many industries, including power generation, the social and environmental impact of dam construction means that the hydro sector is likely to remain in Chinese hands. Only Chinese power companies that are backed by provincial governments are likely to have the means to develop such major projects.
More hydro to come
Despite the development of such large scale hydro projects, it is difficult to assess how much further expansion there can be over the next 20 years despite the fact that a rapid expansion of generating capacity is required. A raft of new generating projects has been sanctioned since 2002 but these will obviously take some time to come on stream. In addition, Beijing has begun to compete more aggressively with Japan in an effort to secure access to Russian gas supplies for power sector feedstock and also liquefied natural gas (LNG) from a variety of regional suppliers, including Australia and Indonesia.
Coal fired plants are also expected to remain at the heart of government plans for the generation sector, partly because of the number of people employed in mining and also in order to minimise the country’s reliance on energy imports. In August, the deputy director of the National Development and Reform Commission (NDRC), Zhang Guobao, announced that coal fired capacity would have a bigger role than previously expected. Despite the recent completion of additional reactors, the Chinese nuclear sector has a generating capacity of just 15GW and although further investment is planned, the sector is not likely to provide a large proportion of new capacity over the next ten to 20 years.
However, some additional competition to hydro could come from an unexpected source. The Chinese government has made a commitment to generate 10% of its electricity by renewable means by 2020. Given that national generating capacity is projected to be 600GW in that year, this will obviously be a massive undertaking for a country with a very limited renewables sector at present. It remains to be seen whether small scale hydro projects will play much of a role in achieving this target. At present, most government attention is being paid to wind power but a variety of official commissions are currently assessing the other renewable options open to the country.
Despite such strategies and ambitions, however, there seems to be more than enough room in the generation mix for hydro, particularly as the government is now seriously attempting to tackle the country’s terrible pollution problem by cutting emissions from the power sector and the rest of industry. It is likely that new projects will continue to be developed for a long time to come. Nevertheless, although a great deal of hydro potential remains, the most obviously suitable sites have largely already been developed and most new capacity is likely to come from smaller scale ventures.
Yet according to government figures and unlike in most of the other major hydroelectric powers in the world, the proportion of the Chinese generation mix provided by hydro schemes is expected to increase between 2000 and 2020. Although final figures have not yet been revealed, the hydro sector was expected to account for 22.6% of electricity production in 2005. This is predicted to rise to 23.9% by 2010, with hydro generating capacity of 165GW, followed by a jump to 25.9% in 2020 and capacity of 246GW. This would translate into a tripling of hydro generating capacity from just 83GW in 2003.
While hydro schemes are set to continue providing a significant proportion of new generating capacity, the government hopes to minimise the amount of new capacity required by making industry more energy efficient. At the National People’s Congress and Chinese People’s Political Consultative Conference in January, a government environmental adviser, Wang Weiping, argued that inefficient use of energy was restraining economic development and added: ‘China does not fall short of energy resources, there exists only heavy waste in its energy consumption.’
The hydro sector is also likely to benefit from the rise of Hu Jintao, who became chairman of the Communist party in 2002 and president of China in March last year. The new president has a degree in hydroelectric engineering and worked for many years in the ministry of water conservation and power. His interest and confidence in the sector certainly gives the industry a voice at the very top of national government. With such a powerful friend in high office, it is no wonder that many predict the further expansion of the Chinese hydro sector.
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