The Status Quo, Barriers, and Countermeasures to

Small Hydropower Development in Rural

China

Hydropower and Rural Electrification Development Bureau, the Ministry of Water Conservancy

Liu Jinghe

Contents Small Hydropower Resources in

China Achievements Barriers

Internal problems of small hydropower Institutional, market, and policy barriers

Recommendations Prospects

I. The Small Hydropower Resources of China Theoretical potential: 676GW, annual electr

icity generating capacity: 5920TW.h. Technologically exploitable: 378GW, accou

nting for 13.22% of the world total, annual electricity generating capacity: 1920TW.h.

Of which: small hydropower 128GW,annual generating capacity: 640TW.h. Share in China’s hydropower production: 29.7%,ranking No. 1 in the world.

Hydropower Resources of Selected Countries

0

100

200

300

400

Chi na Brazi l Russi a Canada USA

180% 120%

250%210%

Small hydropower 128GW

The Distribution of Small Hydro-power among Different Regions

,东部18. 50%

,中部17. 80%,西部

63. 60%West

East

Central

The Untapped Shares in Different Provinces

0

500

1000

1500

2000

2500

Hebei

Shanxi

InnerMongolia

Liaoning

Jilin

Heilongjiang

Zhejiang

Anhui

Fujian

Jiangxi

Henan

Hubei

Hunan

Guangdong

Guangxi

Hainan

Chongqing

Sichuan

Guizhou

Yunan

Tibet

Shannxi

Gansu

Qinghai

Xinjiang

省份

装机

容量

UntappedExpl oi ted

Province

Inst

alle

d C

apaci

ty

II. China’s Small Hydropower Development Achievements

Development speed: 5% ～ 10% By the end of 2003: there have been 48000 small hydr

opower stations in over 1600 counties, their installed capacity is 31.2GW and annual electricity output 110TW. ｈ , both accounting for 40% of the national total

More than 800 county grids and over 40 regional grids have been built, more than 800 counties mainly rely on small hydropower for electricity supply

Accumulatively, giving electricity supply access to more than 500 million people

Achievements (Contd.) In through phases, 653 rural counties realize pre

liminary electrification; the GDP, fiscal revenue, per capita farmer income, and per capita electricity use are “doubled in 5 years” and “quadrupled in 10 years”

Cultivated thousands of small hydropower experts for 60 countries and regions, participated in the construction of hundreds of small hydropower projects in more than 50 countries

Ecological and environment protection, 100 mt t CO2 of GHG emission reduction

III. Barrier to Small Hydro-power Development in China

1. Inherent problems of small hydropower Small electricity production scale Instable supply: high water seasons and low wat

er seasons, peak and bottom hours Low technology level and efficiency of the gener

ating units Improper operation modes Operation suspension during overhaul and acci

dents

Barriers (Contd.)

2. Institutional, market, and policy barriers The resource administration system is im

perfect, vagueness in responsibility and function division

Electricity sales difficulty– market monopoly

Commonweal nature restriction— policy-based supply is insufficient, without the necessary compensation

Impacts of the Barriers (economic analysis)

Capacity deducted 30%, in some cases even as high as over 50% (Fig.)

The electricity production deduction in 2002 was 41TW.h, in terms of revenue loss, over RMB 10 billion

A comparison of the theoretical and actual electricity Outputof Chinese rural hydropower plants (1998-2002)

0

50

100

150

1998 1999 2000 2001 2002

(Tw.h)

Designed outputActual output

Capacity deductionhigher unit generating capacity construction cost and unit electricity generating costlosses (Fig.)

In 2002, the Chinese small hydropower projects’s actual average generating cost is 0.06 RMB/kW.h higher than the average designed generating cost

Among the 64 small hydropower stations studied: 11 realize some profits; 13 break even; 40 are in the red; namely, 62% of them report losses. The average actual electricity generating cost is 0.05RMB/kW.h higher than the average electricity price

Theoretical and Actual Production Costs of the 64Hydropower stations in 2002

00.10.20.30.40.5

（ RMB/kw.h ）

理论发电成本 实际发电成本Theoretical

generating costsActual generating

costs

The actual costs and sales price of the 64 small hydropower stations

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65

（ RMB/kwh ）

实际电价

单位售电成本

Actual power generating cost

Electricity price

IV. Policy Recommendations

Policy Direction: internalize the positive externality costs of rural hydropower through such macroeconomic measures as administrative laws and regulations, preferential electricity price, tax, subsidy so as to bridge the gap between production costs and social costs (Fig.)

Project cost curve

Policy direction

Market quantity

Optimal quantity

Electricity output （ Tkw.h ）

Recommendations (Contd.)

Eliminate institutional and market barriers Specify and quantify the market share of

small hydropower Giving priority in grid access and require

the grids to purchase all the electricity output of small hydropower plants

Acknowledge its commonweal nature

Recommendations (Contd.)

Optimize the electricity pricing mechanism Offer market price protection to the grid entry

of rural hydropower ; protect them from direct competition with regular energy sources.

On the above basis, establish a grid entry and price control system to stimulate the development of rural hydropower

Recommendations (Contd.)

Strengthen capacity building on small hydropower enterprises Improve adjustability Optimize operating modes Adopt advanced technologies Intensify management, lay off

redundant workers, and increase efficiency

V. Development Prospects of the Chinese Small Hydropower Industry

Market demand Sustained rural economic growth, urbanization, incr

eases in farmer income, huge potential market. 400kW.h

Market supply Abundant resources, low exploitation rate. 128GW-3

1.2GW=96.8 The Renewable Energy Promotion Law– expected. E

normous financing potential: fiscal support, credit, private enterprises, foreign investment (Fig.)

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

1996 1997 1998 1999 2000 2001 2002 2003

Total National investmentDomestic loans Foreign investment

Local fund-raising (province, prefecture,city, county)

Other fund (electricity sales revenue, electricity construction foundation

Therefore, in terms of demand and supply potential, small hydropower projects have very promising market prospects in China.

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