The Most Widely Used Form of Renewable Energy
Hydro power (or hydroelectricity power) is the most widely used form of renewable energy, accounting for 16% of global electricity generation – and is expected to increase about 3.1% each year for the next 25 years. The Asia Pacific region specifically generated 32% of the global hydro power in 2010, and China’s total capacity is 22% higher than any other countries’ install base. Similarly, according to the “Renewables 2012 Global Status Report”, China’s capacity even exceeds that of Brazil, the USA and Canada combined. With this momentum behind it, China’s government targets for continued hydro power installation are equally astounding. By 2015, China’s hydro power installations are targeted to reach around 325 GW, and with a newly revised target of 430 GW (up from 380 GW) by 2020. China’s love affair with this renewable energy source looks set to continue over the next decade as investment in hydro power becomes one of China’s key areas of focus. (Source – New Scientist, Xinhua, China Global Times, Deutsche Bank, own interviews).
To understand who is charged with managing this rapid growth, it is easy to see China’s top 10 players (predominantly State Owned Enterprises) are operating essentially all the installed capacity of hydro power. In terms of the construction of Chinese hydro power facilities, the three dominant market leaders belong to the State Owned Assets Supervision and Administration Commission (SASAC) and the Chinese Armed Police Force.
Source: State Electricity Regulatory Commission (SERC) – China Electricity Council
The chief advantage of hydro power is its considerable cost-effectiveness in comparison with other renewable energy forms, such as wind or solar. Electricity produced by hydro electric power is the most cost-effective and stable form of renewable energy, allowing developers to install hydro electric power without the need for considerable feed in tariffs. Hydro power also benefits from flexibility, with plants being able to adjust their output quickly to adapt to changing energy demands over certain periods.
Hydroelectric plants have long economic lives, with some plants still in service after 50 years. Operating labor cost is also usually low, as plants are automated and have few personnel on site during normal operation.
Although hydro power is the most cost-effective method of creating energy from a renewable source, challenges such as the long development periods, associated social displacement and environmental concerns as well as the increasing difficulty in accessing potential development sites suggest that China’s investment in hydro power will decline after 2020. Social and environmental consequences of large hydro power installations are another inextricable challenge for hydro power. Almost 1.5 million people were displaced due to the construction of the Three Gorges Dam, a level of displacement which, according to analysts, will make future hydro power development more complicated. The enormous reservoir created in the Yangtze River by the Three Gorges Dam project is now plagued by pollution and in 2009, construction on a major hydro power dam project was halted due to environmental objections. (source – International Rivers Organisation) In 2012, China is still experiencing one of the most severe droughts in the past 50 years, affecting water availability and flows, complicating the coordination and integration of hydro power. However, whether or not such issues will severely impact China’s continued investment in hydro power is uncertain.
Three Gorges Dam
China’s Three Gorges Dam spanning the Yangtze River is the world’s largest hydro power station in terms of installed capacity with a maximum capacity of 22.5GW. The dam became fully functional on 4 July 2012 when the last of the 32 main turbines began production. The project is regarded as a historic feat of engineering for China and can be considered a turning point in the development of the domestic hydro power industry. Through the development of the project, the Chinese industry gained valuable technological capabilities through partnering with foreign suppliers.
According to the Chinese Society for Electrical Engineering, the dam was expected to provide 10% of China’s power, however, as electricity demand continued to increase during the lengthy construction period, the dam only supported around 1.7% of electricity demand in China in 2011. The controversial project was expected to be the jewel in the crown of China’s hydro development, but the project has created a number of doubts over the application benefits of large scale hydro power and could serve to complicate the development of similar large scale projects in the future, such as those in the Jinsha and Mekong Rivers.
Hydro Power Summary
Whilst on the surface the Chinese hydro power sector appears to be on a continued trajectory of increased development, the government’s immediate investment plan within the sector masks the fact that hydro power in China is a market past its prime. With an ever shrinking availability of resources and increasing resistance to the social and environmental consequences of hydro power installations, China will need to begin investigating other options away from hydro power towards other renewables, such as wind, biofuels and solar.
Articles in the Series
This article is based on Solidiance‘s recent study about China’s Renewable Energy. The complete report of the study is free to download here. Solidiance is a leading Asia-centric B2B growth strategy advisory firm with full fledged presence across the Asia region.
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