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Skyscraper dams in Yunnan: China‘s new electricity regulator should
作者: Grainne Ryder [GGF中国资料] 时间: 2006-05-14
www.greengrants.org.cn
Skyscraper dams in Yunnan: China‘s new electricity regulator should
step in

by Grainne Ryder

Probe International Special Report. 12 May 2006.
http://www.threegorgesprobe.org/tgp/index.cfm?
DSP=content&ContentID=15330

State-backed dam builders are erecting a string of skyscraper-high dams
in earthquake-prone Yunnan province to meet Beijing‘s power production
targets, without the benefit of market discipline or effective
regulatory oversight.

In this special report, Probe International policy director Grainne
Ryder argues that China‘s new electricity regulator should step in to
examine the dam builders‘ projected costs and profits, and review the
economic implications of Beijing‘s west-east hydro policy for China‘s
power consumers and the country‘s power industry modernization goals.

By undertaking an open and impartial economic review of the west-east
hydro policy, the State Electricity Regulatory Commission would bring
much-needed financial transparency to the dam builders‘ plans for
Yunnan before any more investment decisions are made. A SERC review
would also help refocus the government‘s attention on market reform
versus more centrally planned expansion.

Just outside Kunming, the capital of southwest China‘s Yunnan province,
a giant billboard advertises Hydrolancang on a blue-sky background. You
wouldn‘t know it from the billboard, but Hydrolancang is the company
building two of the world‘s tallest and most controversial hydro dams
on the Lancang River just a few hundred kilometres to the south.1

When completed in 2012, Xiaowan will be the world‘s tallest arch dam,
with a height (292 metres) equivalent to the 71-storey SEG Plaza in the
coastal city of Shenzhen.2 Next under way is the 254-metre (or
52-storey-high) Nuozhadu dam, which is expected to start generating
power in 2017. Hydrolancang, officially the Yunnan Huaneng Lancang
River Hydropower Company, a subsidiary of one of China‘s "big five"
power generating companies, already has two large hydro dams operating
on the Lancang, and three under construction.3

Hydrolancang is not the only company building skyscraper-high dams in
Yunnan province.

* The Yunnan Huadian Nu River Hydropower Development Company has plans
for 13 high dams along the Nu River, one of only two major rivers in
China that remain free-flowing. The tallest of the planned dams,
located in Tibet, would stand 307 metres high and have an installed
capacity of 4200 MW.4

* Further east along the border with Sichuan province, the Three Gorges
Corporation is pushing ahead with the 278-metre-high Xiluodu dam. With
an installed capacity of 12,600 MW, Xiluodu is part of a nine-dam
cascade on the upper Yangtze (Jinsha), which, if completed, would
produce three times as much power as the Three Gorges dam, the world‘s
largest hydro generation project.5

The pace and scale of this dam-building spree has alarmed China‘s
scientific and environmental communities. One immediate concern is the
frequency with which Yunnan is hit by earthquakes, rock falls and
landslides. Experts have warned that the extra weight of the high dams
and reservoirs could add stress to existing faults, triggering more
earthquakes in a province devastated by a string of major quakes over
the past decade.

Another concern is the ecological damage. The Nu River, which flows
parallel to the Lancang and Jinsha, forms part of Yunnan‘s Three
Parallel Rivers National Park, an area so biologically and culturally
diverse UNESCO designated it a World Heritage Site in 2003. The
projects would also require the forced resettlement of ethnic
minorities living along the rivers. At least 50,000 people will be
displaced by Hydrolancang‘s Xiaowan and Nuozhadu dams alone.

Earlier this year, environmentalists, joined by scientists and
engineers, urged the country‘s top environmental regulator, the State
Environmental Protection Administration, to disclose the dam builders‘
plans and hold public hearings, starting with the Nu River scheme.6
Certainly, SEPA has the legal authority to intervene, in accordance
with the country‘s new laws on environmental impact assessment and
public participation in decision making.

The agency also appears to have high-level support for a careful review
of the plans. In 2004, Premier Wen Jiabao announced that the Nu River
project should be "seriously reviewed and decided scientifically." And
He Shaoling, a senior engineer at the China Institute of Water
Resources and Hydropower Research, was quoted as saying: "The Nu River
dam project must go through an independent and authoritative
investigation before any decision on its future should be made."7
Whether or not SEPA will be able to hold the dam builders to public
account, however, is open to speculation.

Dam building is centrally mandated

Dam building in the southwest is central to Beijing‘s western
development campaign and its plan for tripling the country‘s hydropower
production by 2020.8 To meet that target, the State Council granted
three state power companies exclusive development rights in 2002:9

* Hydrolancang, majority owned by China Huaneng, the largest of the big
five state generating companies, holds development rights to the
Lancang River;

* Yunnan Huadian Nu River Hydropower Development Company, majority
owned by Huadian, another one of the big five state generating
companies, holds rights to the Nu River; and

* The Three Gorges Corporation, which is responsible for the Three
Gorges dam, holds rights to the upper Yangtze (Jinsha) River.

With monopoly privileges in hand, each company is now racing to meet
Beijing‘s production targets, financed mostly with cheap capital from
the central banks. Each parent company has at least one subsidiary
listed on the Chinese stock market in order to raise additional capital
for expansion. With an eye to the capital markets, the new dam-building
subsidiaries now claim to be market-oriented, promising high returns
for would-be investors and low-cost power for consumers.

But as state-owned power companies, the dam builders remain
fundamentally policy-driven, not market-driven, unhinged from market
signals and shielded by the central government from many of the
financial risks and environmental liabilities associated with large
dams. As such, the dam builders‘ multibillion-dollar hydro schemes are
themselves a huge financial liability for the central government. As
Chen Guojie of the Chinese Academy of Sciences puts it: "Driven by the
profit motive, the dam builders are racing ahead with scant regard for
environmental safety in the river valleys or possible changes in the
power market. Such shortsighted and unchecked development could lead to
endless trouble in the future."

In a further carve-up, not only of the nation‘s hydropower resources
but of its power markets, the central government has decreed that the
bulk of the Yunnan dams‘ output will be sold to the rapidly
industrializing eastern province of Guangdong, and the balance to
neighbouring Vietnam and Thailand. All this was laid out in Beijing‘s
10th Five Year Plan (2001-05): Guangdong would import about one-quarter
of its power supply from the southwest by 2005. Additional targets were
set for hydro exports to Vietnam and Thailand.10 Under Beijing‘s 11th
Five Year Plan (2006-10), China Southern Power Grid, the state-owned
transmission company responsible for transmission in the five southern
provinces, plans to spend US$29 billion on infrastructure to increase
west-east power transfers.11

Guangdong province

Meanwhile, one of the designated power purchasers, Guangdong province,
has raised objections to increasing its reliance on hydro imports from
the southwest. According to senior power sector planners and economists
at the Guangdong Techno-Economic Research Development Centre, centrally
mandated hydro imports are "worrisome" to the provincial government for
a number of reasons.

In their 2004 report on Guangdong‘s power industry, the team, led by
Zeng Leming and Zhang Chi, writes: "While the central government has
been turning down [approval of] new power plants in Guangdong and
mandates the Province to import southwestern hydropower instead,
Guangdong fears that the imports are insufficient to either meet the
level of market demand or match the load curve." Between 2001 and 2005,
the Guangdong team reports, the central government banned construction
of power plants in Guangdong in order to make room for western hydro
imports - a directive that contributed to severe power shortages and
discouraged private investment in new generating capacity just when the
province needed it most.

Although the price of hydro imports is "competitive" at the
government-fixed price of 3.8 US cents per kilowatt-hour, reliability
is the biggest concern. The Guangdong team notes "uncertainty and
reliability issues associated with southwestern electricity imports
such as seasonality of southwestern hydropower, compatibility with
planned dispatch and Guangdong load curve, and increase in power demand
within western areas."12 In particular, water shortages have "not been
considered by central government planners when they decide how much
Guangdong‘s demand will be set aside for southwestern hydro imports."
Instead of increasing hydro imports under Beijing‘s directive, and
thereby increasing the risk of future power disruptions and shortages,
the Guangdong experts argue for abolishing what they call "political
dispatch." They call for a new system of economic dispatch and market
rules to promote investment in power plants within Guangdong, and
without political interference.

SERC should step in

Guangdong‘s concerns warrant urgent attention from the new industry
regulator, the State Electricity Regulatory Commission, as they affect
power consumers and the future of the country‘s power industry. Set up
by the State Council in 2002, SERC is responsible for regulating state
power companies and introducing competition in power generation.13
Together with the country‘s top planner, the National Development and
Reform Commission, SERC is a driving force behind the State Council‘s
2002 plan to restructure the state power industry for competition and
develop a new system of regulation.14

As the industry regulator, SERC is responsible for:15

1. Enforcing environmental laws, regulations and standards in
co-ordination with relevant environmental protection agencies;

2. Issuing licences to power producers;

3. Ensuring orderly and fair competition in the market;

4. Regulating the non-competitive parts of the generation business;

5. Reviewing electricity tariffs;

6. Proposing changes to government pricing authorities;

7. Investigating possible violation of laws and regulations by market
participants, and resolving disputes among them; and

8. Organizing implementation of reforms and proposing options for
further reform.

Clearly, SERC has the mandate to assist the State Environmental
Protection Administration with a review of the dam builders‘ costs of
compliance with environmental regulations and standards. In addition to
a full-cost review, however, SERC is the right agency to investigate
Guangdong‘s concerns about the reliability of hydro imports from Yunnan
and the broader economic implications of centrally mandated hydro
development.

Finding the true cost of west-east hydro

Proponents claim that large hydro dams in Yunnan will generate high
returns for investors and low-cost power for distant consumers.16
SERC‘s first job as regulator should be to test the economic validity
of the proponents‘ claims.

Essentially there are four questions SERC should ask on behalf of
ratepayers and potential investors:

1. What are the real costs of west-east hydro exports?

Dam builders in China typically underestimate and shift certain costs
onto other government sectors, thereby inflating the profitability of
their proposals at public expense. Guangdong, for example, buys
hydropower from the southwest for 3.8 US cents per kilowatt-hour, which
is set just less than the average price of power from coal-fired
stations but does not reflect the total cost.17

Prior to 2002, profitability was not an issue for hydro developers. The
price of their output was set by the central government and bore no
relation to actual costs. Today‘s dam-building companies, however, are
promising high returns to attract commercial investors. The regulator‘s
responsibility is to check that profits have not been inflated at
public expense by underestimating costs or externalizing costs onto
riparian communities and power consumers. Take the Three Gorges
Corporation‘s listed subsidiary, Yangtze Power Company, for example,
which reported a 2005 profit of US$417.51 million.18 The company is
selling hydropower from the Three Gorges and Gezhouba dams for 3 US
cents per kilowatt-hour but this price does not include the full cost
of dam construction, resettlement or environmental damages. As such,
its profits warrant economic scrutiny from the regulator.

West-east transmission costs also warrant scrutiny. Without
long-distance transmission lines, the dam builders in Yunnan would not
have access to a big enough market to absorb their dams‘ massive
output. Yet the high cost of long-distance transmission, if included in
the price of hydro imports, could render their hydro-dam investments
uncompetitive compared with smaller-scale modern power plants built in
Guangdong, close to where power is needed. The regulator should
establish what China Southern Power Grid Company‘s actual costs and
projected profits from west-east power transmission are; how the
company plans to recover its costs; and from ratepayers in which
jurisdictions. Under the new market rules, all costs should be
accurately assessed and disclosed to both regulators (SERC and SEPA)
for public review prior to investment decisions.

2. How will the dam builders‘ costs (and profits) affect future
electricity rates?

Not much information is available to potential investors or ratepayers
beyond the dam builders‘ preliminary cost estimates. The regulator
should insist upon financial transparency from the dam builders and
transmission-grid owners in order to determine how the proposed
projects would affect future electricity rates.

3. Who will assume financial responsibility for the hydro dams when
things go wrong?

The regulator should call for disclosure on which parties will be held
financially responsible if the proposed hydro dams cannot recover costs
from ratepayers (for example, due to inadequate demand for their
output, drought, or other natural disasters that either cripple
production or render the dams inoperable). Under the old system of
centrally mandated investments, state companies expected the central
government to protect them from financial failure at any cost.

But in China‘s increasingly competitive and decentralized (and
soon-to-be-oversupplied) power market, this assumption may no longer be
prudent. The near-bankruptcy of the centrally financed Ertan Hydropower
Development Corporation is a strong indication that the central
government, while still prone to interference, may be far less willing
or able to shield its dam builders from future competition from
provincial and municipal power producers.19 To deter costly investment
mistakes, the regulator should review these emerging financial risks
and their potential impact on the cost of service.

4. Are the dam builders‘ costs justified? Or would power consumers be
better served by market reform that promotes investment in commercially
viable generating technologies?

Here, the regulator should seek input from Guangdong‘s power industry
experts, as well as would-be competitors, consumers in affected
jurisdictions, and other parties concerned about the economic and
environmental impacts of large hydro dams. A full-cost review is not
enough. SERC should exercise its mandate and confront the prevailing
monopoly structure that is driving investment in high-risk, high-cost
dams at public expense.

The fundamental policy question is this: should China‘s power consumers
and citizens be forced to pay the true cost of hydro dams in Yunnan,
plus the high cost of long-distance transmission? Or, would consumers
be better served by market reform in terms of reliability and cost of
service?20 And finally, SERC should address the impact of centrally
mandated hydro investments and power transfers on the development of
competitive power markets.

Is SERC up to the job?

Some analysts doubt SERC has the independence to hold state power
companies publicly accountable. They note that SERC chairman Chai
Songyue is a long-time supporter of former premier Li Peng, whose son
runs Huaneng, the majority owner of Hydrolancang and lead dam builder
in Yunnan.21

Also, SERC staff are mostly former employees of the State Power
Corporation, without the proper economic training to advance a
rules-based approach to electricity regulation. The World Bank, a
leading financier of China‘s large hydro dams, reports little progress
in regulating state power companies since SERC‘s creation in 2002.
"SERC is still struggling to establish its authority in the face of
fuzzy ‘ground rules‘ set by the State Council and the counterveiling
authority of long-established and more powerful bodies such as the NDRC
[National Development and Reform Commission], which still has the final
word on electricity tariffs. Lines of responsibility between SERC and
NDRC are not yet clearly demarcated, with the latter seemingly
reluctant to surrender any of its regulatory powers over the sector,
even though it is overstretched. SERC has little autonomy and still
depends upon a budgetary allocation from the Ministry of Finance to
cover its operating costs," the Bank reports.22

Yet SERC has made progress.23 It has established regional offices for
supervising provincial markets. It has announced a new certificate
system for power producers, which, if implemented, would oblige power
companies to submit their business plans, financial reports and
environmental performance records for assessment by SERC in order to be
certified for operation.24 And last year, it ran a trial market in
southern China, in which power producers bid against one another to
supply the grid.25 According to SERC‘s director of power market
regulation, Chang Jianping, investors should expect the new rules for
competition in generation to be finalized within the next five years.26

In the meantime, however, SERC has warned the State Council that
stalled market reform is impeding investment and economic growth. The
separation of state-owned generation from state-owned transmission,
which began in 2002 (as a prerequisite for competition), is far from
complete. The State Power Grid Corporation, the country‘s largest
transmission operator, still controls more than 36,000 MW of generating
capacity and routinely dispatches its own generators before rival power
producers, which has created conflict with private power producers.
Counter to the industry reform plan, the two state grid companies,
China Southern Power Grid and its larger rival, the State Power Grid
Corporation, are busy entrenching their monopoly buyer and distributor
positions by building super high-voltage power lines (1000-kV AC),
which are designed to accommodate huge volumes of power over long
distances.27

SERC should confront the power monopolists. Dissatisfied investors and
the central governments‘ own advisers are openly calling for market
reform as the best way to deliver reliable and affordable power to
consumers while alleviating financial pressure on the central
government. Last year, even the government‘s department of industrial
economists warned that "the most severe problem" in China‘s power
industry is "the government overstepping its role and disturbing the
market mechanism by allocating resources. As a result, [state power]
enterprises are still in a compulsory ‘bind‘, with market supply and
demand signals blocked or cut off."28

By undertaking an open and impartial economic review of Beijing‘s
west-east hydro policy, SERC would bring much-needed financial
transparency to the dam builders‘ plans for Yunnan before any more
investment decisions are made. It would also help refocus the
government‘s attention on market reform versus more centrally planned
expansion. As the Guangdong experts write, "a new reform approach is
badly needed to solve problems the industry faces."

Power consumers stand to benefit from SERC‘s initiative. If consumers
in Guangdong province or elsewhere don‘t want or need to rely on remote
and drought-prone hydro dams in Yunnan, proponents have no valid
economic rationale for building them or expecting ratepayers across the
country to pay their costs. If power consumers would prefer cheaper,
more reliable, and less environmentally damaging generating options,
the new market rules should be introduced to encourage such investments
without further delay. (About one-third of Guangdong‘s existing
generating capacity is oil-fired units under 50 MW, which are
inefficient and polluting, and could be replaced with cleaner and
commercially proven generating technologies, such as cogeneration and
combined-cycle plants.

SERC should exercise its regulatory mandate and assist its
environmental counterpart, SEPA, with a public review of the hydro
developers‘ costs for the environment‘s sake. China‘s power consumers
and the economy would also be well served by SERC‘s review of west-east
hydro development as it affects power consumers and the modernization
of China‘s power industry.

For the full report
http://www.threegorgesprobe.org/tgp/index.cfm?DSP=content&ContentID=15330

来自: Grainne Ryder
编辑: wenbo (共提交2972篇文章)
 
 
 
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