A new report by research company Bloomberg New Energy Finance shows that China’s “Big Five” power utilities are heavily exposed to water supply disruptions given the huge quantities of water they use and their locations in climate affected portions of the country.
We have covered the possible water shortages in China before — both specifically looking at the potential for renewable industries to benefit from water shortages and the regional troubles that will result from glacier retreat in the Himalayas.
The reality is, as the massive cluster of glaciers in the Himalayas retreats, so too will the glacier melt running into the rivers that supply the millions of Chinese with their drinking water. On top of that, utility companies which rely on these massive supplies of water will also see themselves under the crunch.
According to Bloomberg New Energy Finance, China’s Big Five — which includes Huaneng, Datang, Huadian, Guodian, and China Power Investment — own and operate more than 500 gigawatts of thermal power plants — primarily coal-fired — in the world’s second largest electrical system. However, these same Five are critically at risk of water supply disruptions due to “the concentration of their portfolios in moderately to severely water-scarce regions, in particular the dry and industrial northeast.”
Bloomberg New Energy Finance conclude that “significantly reducing this exposure, and the power sector’s overall water withdrawals, will require major policy and industrial efforts, cost billions of dollars, and involve the removal of gigawatts of water-inefficient power generation capacity.”
The fine details of reports such as this do not allow for much editorialising. The full press release published by Bloomberg New Energy Finance is available for your perusal here, and outlines three major trade-offs that the Big Five will need to negotiate as they move forward; efficiency, geographic location, and cost.
“Today, 85% of China’s power generation capacity is located in water-scarce regions and 15% of this still relies on water-intensive, once-through cooling technologies,” Maxime Serrano Bardisa, Bloomberg New Energy Finance water analyst and report co-author, said. “But the era of water abundance in China is over, and competition for resource access between business, agriculture, and urban centres is starting to bite.”
“Thermal plants will have to use more efficient technologies – but doing so will drive up both capital and operating expenditure,” added co-author Alasdair Wilson. “We also expect water scarcity to continue driving the installation of wind and solar power in China.”
Here is the important outcome of this report, an outcome that will hopefully influence decision makers in Chinese and international renewable energy markets. There is room for a little shifting of fossil-fuel power generation, but not as much as the entrenched Big Five would like. Either they will have to diversify their renewable portfolios, or other renewable countries — both at home and abroad — will capitalise on the rising costs of fossil-fuel power generation.