China’s emerging hydropower a boon to its climate targets, energy bills

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Water flows over the Zhaoheng Dashiban power station on the Zhougong river near Ya’an in Sichuan province, China, August 4, 2018. REUTERS/Damir Sagolj

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SINGAPORE, July 12 (Reuters) – A surge in hydroelectric power production in China this year, bolstered by record-breaking rainfall, is helping the world’s biggest polluter meet green targets and liquefied natural gas (LNG) imports amid tight global supplies to reduce.

Global coal and LNG prices have hit record highs this year, fueling inflation, as Western sanctions against Russia cut supplies from one of the world’s top energy exporters.

But slowing demand from China, one of the world’s top coal and LNG importers, has held back prices.

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“The situation in China this year is very unique, mainly because the COVID-19 restrictions have limited electricity demand and the fast-growing renewable energies are able to meet the slow increase in electricity demand,” said Li Shuo, Senior Advisor at Greenpeace.

A lockdown in Shanghai earlier this year and COVID-19 restrictions in dozens of cities impacted business activity and lowered demand for electricity. Abundant rainfall and fast-growing new capacity for other renewable sources have also reduced the need for fossil fuels.

South China saw its heaviest rainfall in 60 years from March to May, filling in the region’s giant hydroelectric dams and boosting hydroelectric power generation by 18% year-on-year in the first five months of the year. Continue reading

Meanwhile, thermal power generation, mostly from coal-fired power plants, fell 4% in the January-May period.

The jump in hydroelectric power generation is also helping the world’s second-biggest economy avoid the power shortages it experienced last year, caused in part by drought that affected dam water levels.

This year, southern China’s flood season started two weeks earlier than normal, and average rainfall reached levels not seen since 1961.

China currently relies on coal for about 60% of its electricity generation, up from over 75% in 2010, 3-5% on gas and the rest on renewables.

Hydroelectric power output rose 27% year over year to 121.7 billion kilowatt hours (kWh) in May, a record for the period. The copious rainfall also allows the reservoirs to store more water for hydroelectric power generation in the coming months.

“NOTABLE” PROGRESS

Although the government has urged miners to increase coal production since last year’s power crisis, China isn’t actually generating more electricity from coal.

“Only China is keeping pace with the net-zero hydropower path,” the International Hydropower Association said in a report last month. Over the past five years, global hydropower growth has averaged 22 gigawatts (GW) per year, with more than half coming from China.

Its dam construction has drawn criticism from some environmental groups concerned about damage to ecosystems and people’s livelihoods, as well as from neighboring countries who say dams on the Mekong are affecting water levels in the region.

China added about 23 GW of new hydroelectric capacity in 2021, bringing total hydroelectric capacity to 16% of the electricity mix. Solar, although much smaller, is growing faster. In the first five months of this year, solar power output rose 13% year-on-year and accounted for 2.7% of total power generation, a record high.

“China’s progress in adding new solar capacity this year has indeed been remarkable, with the government expecting a new record of well over 100 GW. In this regard, China is far ahead of everyone else,” said Lauri Myllyvirta, senior analyst at Research Center for Energy and Clean Air.

LAST WAY GAS

Abundant hydropower is also keeping China’s demand for expensive LNG in check, helping to cap global prices, which hit record highs in March after the Ukraine crisis.

Imports fell 20% yoy in the first five months, despite more gas coming in through pipelines. The fall in demand in China could take China down a notch this year to become the world’s second-largest importer after Japan, analysts said.

“Gas will likely only be used as a last resort once other low-cost options have been exhausted,” said Ken Kiat Lee, senior gas analyst at FGE.

Whether renewable energy can maintain its share of total consumption remains to be seen, but China should benefit from its investments in renewable energy capacity as electricity consumption picks up as the economy recovers.

China’s electricity demand growth is forecast at 3.5% to 5% in 2022, up from 10% last year, according to four analysts.

“It is difficult to say whether this trend will continue as there are still uncertainties about how quickly electricity demand will return and whether the additional demand can be fully met by renewable energy,” Greenpeace’s Li said.

“But it is certain that more and more renewable energy is coming into China’s energy system.”

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Editing by Jacqueline Wong

Our standards: The Thomson Reuters Trust Principles.

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