THREE GORGES PROBE
Thursday, December 16, 1999
(Issue No. 13)
News and Reports on the Three Gorges Dam Project
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The Three Gorges Dam:
A Great Leap Backward For China's Electricity Consumers and Economy
By Patricia Adams and Gráinne Ryder
The tragedy of the Three Gorges dam goes beyond the nearly two million people who will be moved from their homes, villages, farms, temples, and work places to make way for it, beyond the 1,300 cultural and archeological sites and the 100,000 hectares of precious farmland that will be submerged forever under the 600-kilometre long reservoir, and beyond the untold environmental damage it will cause to the Yangtze watershed. The tragedy of the Three Gorges dam extends to the electricity sector and ultimately to the Chinese economy. Rapid technological advances are making big hydrodams obsolete in electricity markets around the world and Three Gorges' power expensive, compared to cleaner and more readily available alternatives. Economic reforms to decentralize power production in China and to allow private power production are placing those alternatives in direct competition with Three Gorges and other big dams. Meanwhile, economic pressures to shut down money-losing state enterprises have reduced electricity demand, making that competition even fiercer. The big dams, conceived in the centrally-planned, Maoist era, will be saved from bankruptcy only if customers can be secured by state decree or with subsidies. All the signs indicate that if the Three Gorges dam is finished it will be the last, the most spectacular, and the most tragic in China's costly big dam era.
The Three Gorges Dam is Uneconomic
Technological advances in power generation have turned mega-power projects such as the Three Gorges into modern-day dinosaurs. Under construction since 1994, the 185-metre high dam is expected to cost at least $30 billion (all figures in US dollars), or $1,650 per installed kilowatt, and to take another 10 years to complete. Because of its large scale, the Three Gorges dam is technically and organizationally complex, experimental, and difficult to finance.1 According to an American executive whose company operates private power plants in China, Three Gorges "is like the U.S. nuclear program; it will take forever, it will cost all the money in China, and it won't make any power for 30 years." He further explains, the final cost could well be at least $2,000 per kilowatt and hence total more than $36 billion, making it "very uncompetitive if you charge any capital costs for the power."2
Large hydrodams, energy analysts conclude, are costly and uneconomic because of their high capital investment costs and poor operating performance.3 A 1998 study by the Battelle Memorial Institute – a Washington-based energy policy think-tank – the Beijing Energy Efficiency Center, and China's Energy Research Institute, calculated that power from China's large hydrodams costs about six to seven cents per kilowatt-hour, compared to less than four cents for gas-fired combined cycle plants, four to five cents for new coal plants, and over seven cents for nuclear power, excluding transmission and distribution costs.4 Three Gorges power is expected to be even more expensive, at 8.4 cents per kilowatt-hour.5 But 8.4 cents per kilowatt-hour still isn't the final cost of Three Gorges power because it doesn't include transmission and distribution costs. Because of Three Gorges' unusually large size, because China's existing power transmission networks are outdated and unreliable, and because the local transmission grids in Sichuan and Hubei provinces are not connected to the country's larger grids, the central government must invest $30 billion over the next three years in a new national transmission grid.6 This will push the cost of Three Gorges' power even higher than 8.4 cents per kilowatt-hour.
Even with a state-of-the-art transmission grid, the dam's output is expected to be erratic. First, managers will have the difficult task of operating the dam for power generation and navigation (keeping the water level high), and flood storage (keeping the water level low in preparation for incoming floodwaters).7 They may face political pressure to forego power production revenues and lower the reservoir to make room for floodwaters. Second, the dam's reservoir is expected to fill up with sediment and gravel, reducing its ability to generate power and hold back floodwaters. The Gezhouba dam, just 40 kilometres downstream from Three Gorges, lost nearly half its storage capacity after only seven years of operation, due to the buildup of sediment in the dam's reservoir.8 Finally, huge variations in output – due to seasonal and annual variations in flow, operating complications, and shutdowns for repairs and maintenance – are expected to compromise Three Gorges' power output, leaving power consumers with power shortages or blackouts.
The Three Gorges Dam Has No Market
Even before the Three Gorges dam starts operating, it faces a more fundamental problem: There is no market for its power. With thousands of state enterprises shutting down, electricity consumption dropped sharply in 1998, and many power plants are running well below capacity.9 In an effort to reform its debt-ridden state sector, the Chinese government has shut down and sold thousands of money-losing state enterprises since 1998 – a privatization drive the Far Eastern Economic Review describes as "the largest transfer of industrial property since Mao Zedong nationalized industry in the 1950s."10 Describing the situation in 1998, the Hong Kong-based South China Morning Post wrote: "The unthinkable has happened on the mainland. For decades industry was crippled by power shortages and consumers were infuriated by constant blackouts, but the country now has a growing surplus of energy."11
Apart from China's economic restructuring, a report by the U.S.-based consultancy, Cambridge Energy Research Associates (CERA), cites over-expanion as another reason for China's electricity glut.12 In the last decade, China has expanded its generating capacity at an astonishing rate – 10,000 MW a year. Meanwhile, demand growth has been slowing since 1995.13 The CERA report adds that the government was supposed to shut down many of its smaller, inefficient power plants as new power plants came on-line, but didn't because "local authorities tend to be reluctant to shutdown government-invested plans and take on responsibility for redundant workers."14
Most industry observers expect the glut to last two to three years, depending on the government's progress in reforming its debt-ridden state sector.15 Because of increased supply and decreased demand, the Gezhouba dam, one of the main sources of funding for construction of Three Gorges, couldn't sell its output in 1998, causing a funding shortfall.16Chinese news sources report that the country's largest hydrodam, Ertan (on a Yangtze tributary upstream of Three Gorges), is running at about half capacity because it too can't find customers. Ertan is expected to lose up to $120 million in 1999 as a result.17 Chongqing municipality – the dam's largest prospective customer serving a population of 30 million – has refused to buy one-third of Ertan's output, as agreed in 1995, saying it only needs 14 percent.18 The reason: Chongqing's leaders believe that the price of Ertan power, about six cents per kilowatt-hour (excluding transmission costs), is too high.19 Chongqing can get cheaper power locally from existing hydrodams and coal plants. Because Chongqing has a new status as a municipality, separate from Sichuan province, and because it can now tax power producers within its jurisdiction, Chongqing has a new financial incentive to favour local producers. A manager at Ertan, quoted in the Financial Times, said he expected the dam's losses to spiral next year after the last two of six turbines are installed for a total generating capacity of 3,300 MW.20
Three Gorges officials say they are confident that their dam will be able to sell its output once the transmission system is upgraded. Says Yuan Guolin, deputy manager of the Three Gorges corporation, "We do not worry about the power market for the Three Gorges Project as China has huge market potential."21 China does indeed have huge market potential for electricity services: About 60 million rural people do not have access to electricity, and the country's annual per capita power consumption is just one-third that of the world's average consumption levels.22 The real threat to Three Gorges is more fundamental: competition from new cheaper, cleaner power producers.
The Three Gorges Dam Will Never Have a Market
By the time the Three Gorges dam is completed in 2009, a new generation of private power producers will be well established in China, offering consumers cheaper, cleaner, and more reliable power. China's electricity market opens for competition on January 1, 2000 – a move that is widely expected to favour the new breed of high-efficiency combined cycle plants that offer fast returns for investors, low emissions, and affordable and reliable service to consumers.23
The economic and environmental advantages of combined cycle plants are many.24 They convert fuel to heat and electricity efficiently, using less fuel than a conventional power plant. Conventional power plants (whether fueled by coal, oil, gas, or nuclear) use steam turbines which convert only 30 to 33 percent of their fuel's heat into electricity. The rest is released as waste heat into the atmosphere or into an adjacent body of water. The new generation of gas turbines, on the other hand, convert over 40 percent of their fuel into electricity. When the heat given off by the gas turbine is used to drive a steam turbine (in what is known as a combined cycle plant) to produce additional electricity, the plant's fuel conversion efficiency is boosted to 50 percent or more. When all remaining waste heat from a combined cycle plant is used in applications requiring steam or hot water, a process known as cogeneration, the plant's fuel conversion efficiencies can reach 60 to 90 percent. Since higher fuel efficiency translates into lower energy bills, large cost-conscious power consumers around the world are installing their own gas turbines to lower their costs, thus reducing harmful emissions while boosting economic output.25
Combined cycle plants are commonly fueled with natural gas which burns more thoroughly than solid or liquid fuels, and, unlike coal, contains no heavy metals or sulfur that cause acid rain. When fired with natural gas, combined cycle plants produce virtually no particulate matter or sulfur dioxide when burned, 90 percent less nitrous oxide, and 60 percent less carbon dioxide emissions than coal-fired plants equipped with the latest pollution control technology.
Flexibility is another important advantage. Combined cycle plants can be switched on and off as needed and are therefore well suited to satisfying peak intermittent power demands and operating profitably in a rapidly fluctuating market. Three Gorges, on the other hand, is expected to operate at full capacity for only about half the year due to the operating conflicts associated with power generation, flood control, and navigation. Combined cycle plants have no such competing demands. The gas turbine can be run independently of the steam turbine, and both can be run either for electricity or for electricity and steam.
Combined cycle plants are also ideally suited to consumers with large electricity and heating or cooling requirements (i.e., steel and paper mills, pharmaceutical industries, sugar refineries, universities, hospitals, and shopping centres). Because they are built on site, they don't require long distance transmission, thus lowering the overall cost of electricity to consumers, and eliminating the energy losses associated with long-distance transmission from huge power projects in sparsely populated areas to distant markets. They can be plugged into existing transmission grids to deliver electricity to a town or to a single unit, such as a factory, apartment building, or hospital. And they are easy to finance because they can be installed and start generating power and revenue within nine months to two years, so lenders get repaid sooner. Large coal plants take five to seven years to build, on average large hydrodams take seven to 10 years, and the Three Gorges dam is expected to take a total of 17 years to build.
Because combined cycle plants can profitably generate electricity on a small scale (1 to 50 MW or 100 to 300 MW), building huge power plants with long-distance transmission lines no longer has any technical or economic advantage. Electricity investments and ownership can be decentralized, distribution losses can be slashed, and communities and factories can generate their own power. With small, standardized combined cycle plants, consumers can increase capacity incrementally as needed, thereby avoiding huge cost overruns and the risk of having excess capacity associated with huge power plants.26
Combined cycle plants have already replaced aging coal and nuclear plants in many parts of the world and are expected to dominate the global market for new power plants into the next century. China doesn't manufacture combined cycle plants domestically yet, but deregulation of the electricity industry since the 1980s has allowed provincial and municipal power consumers to import the technology in partnership with international suppliers and financiers. In the coastal province of Guangdong where electricity demand has grown rapidly over the last decade, private power developers built several combined cycle plants, running them on alternate fuels (diesel, blast furnace gas) until natural gas comes on-line. The Shakou Power Plant Company now supplies electricity to Foshan city using a 280-MW oil-fired combined cycle plant installed by ABB of Switzerland and financed by a group of Hong Kong banks.27 Near Shanghai, China's largest steelmaker, Bao Shan Steel Corporation, gets electricity and steam from a 150-MW combined cycle plant, fueled with blast furnace gas, also supplied by ABB.28 American and Chinese energy experts estimate that by 2020 China could meet up to one-third of its power generation needs with natural gas by manufacturing gas turbines domestically and developing low-cost natural gas sources. The cost would be less than if coal were used. "If China combines new exploration technology with market and regulatory reform," the Batelle study concludes, "then it could rapidly increase the amount of gas available for residential, industrial, and power applications."29 Equipment suppliers, such as ABB, are expecting the market for combined cycle plants to take off once gas supplies are adequate within the next five years.30
Three Gorges is Not the Best Way to Reduce Greenhouse Gas Emissions
Three Gorges proponents claim that the dam is needed to help reduce China's coal-fired pollution. In fact, Three Gorges would reduce coal burning, at most, by about three percent and total carbon dioxide emissions by about five percent. A gas-fired combined cycle cogeneration plant, on the other hand, produces no sulphur dioxide, and cuts nitrous oxide and carbon dioxide emissions by 90 percent and 60 percent respectively. (See Table 1). The most cost-effective way to control greenhouse gas emissions in China's electricity sector, according to the Batelle study, is to install gas-fired combined cycle plants.31 Consider, if the Three Gorges budget of $30 billion were invested in gas-fired combined cycle plants, China could displace at least two and a half times as much coal as Three Gorges could – without the additional costs of resettlement, environmental damage, and long-distance transmission.
Another study, by the University of California's Lawrence Berkeley Laboratory and China's State Planning Commission, recommends cogeneration – capturing waste heat to produce electricity or heat – as the cheapest option for reducing greenhouse gas emissions (See Table 1). Old coal plants and boilers can be retrofitted for cogeneration for about two-thirds of the cost of building new power plants because construction time is shorter and requires less initial capital.32 The Lawrence Berkeley team found that about 400 million tons of coal per year is burned in 450,000 industrial, commercial, and residential-use boilers, or about eight times the amount of coal potentially displaced by Three Gorges.33 So if just one-quarter of the boilers were retrofitted for cogeneration, with the same amount of fuel they could expand electricity supply by 80 billion to 90 billion kilowatt-hours annually – equivalent to Three Gorges' expected annual output – but at a fraction of Three Gorges' cost. The team also found vast untapped potential for cogeneration in the iron and steel, chemical, paper, rubber, textile, and printing and dyeing industries, with capital costs well under $1,200 per kilowatt, compared to Three Gorges' capital costs of at least $1,650 per kilowatt. If just half the country's 1,000 towns and cities installed small-scale cogeneration systems, they could cut emissions and generate about 50 to 60 billion kilowatt-hours of electricity, again, over one-half of Three Gorges' output, enough to meet their year-round heating and cooling requirements.34
The benefits of retrofitting coal-fired power plants, industrial boilers, and furnaces for cogeneration are already well known in China. The Lawrence Berkeley team found that one cogeneration plant installed in Jingzhou province in 1986 not only alleviated power shortages in the area but also eliminated the need for 115 small coal-fired boilers and reduced sulphur dioxide and particulate concentrations by 32 percent and 48 percent respectively.35 Less coal consumption also means that less coal has to be mined and washed, which has the added benefit of reduced soil erosion and water pollution.
In China's northern region, the central government has built about 3,700 MW of cogeneration plants to provide electricity and steam to industrial consumers and space heating for local residents. In the last five years, the giant Huaneng Power Generation Corporation has built three large-scale cogeneration plants in the north and is building a 300-MW cogeneration plant near Beijing. In the country's industrial sector, cogeneration plants over 100 MW are typically found in petroleum refineries, large chemical plants, food processing plants, and district heating systems. Medium-scale plants – between 25 and 100 MW – power sugar mills and industrial parks. Plants producing 25 MW or less are found in the chemical, textile, and paper industries.36
China's Electricity Modernization
Private investors have traditionally been reluctant to invest in cogeneration plants, according to the Lawrence Berkeley study, because regulated electricity and heat prices are too low to cover production costs, conflicts with monopolistic state utilities abound, and the levies on power producers for grid connections, back-up power, and Three Gorges dam construction are high. The researchers concluded that China needs an energy policy that allows independent power producers to receive a fair price for their heat and power.37
The 1998 Batelle report came to a similar conclusion. Significant barriers to private investment in gas-fired combined cycle plants exist, including artificially low prices for natural gas, which inhibit further exploration and development of the gas supply infrastructure, biased leasing of potential fields, and perverse allocation of gas to favoured industries. "Market reform is China's most powerful policy tool," the Batelle study concluded, recommending that the government "take advantage of the current period of restructuring bureaucracies to establish an even more rational and market-based power system. Competition in the power supply sector is becoming more common in many countries because it lowers prices and allocates resources efficiently. China could also begin to consider a pathway to further competition in the generation of electric power."38
China has moved quickly on many of these recommendations to modernize its electricity sector. At an industry conference in 1998, Gao Yan, president of China's State Power Corporation (formerly the Ministry of Electric Power), announced his government's plans to introduce competition starting 2000. He also said that new generating technologies, offering high efficiency and low emissions, are important for modernizing China's power system, which is plagued by "excessive reliance on coal, inefficient energy use, serious environmental problems, and a shortage of commercial energy in rural areas."39
Creating a market for new power plants, the State Power Corporation began shutting down its most inefficient and polluting coal plants in 1998 and plans to shut down all small coal-fired plants built over the last 20 years in the eastern region. China's Economic Daily (Jingji Ribao), reports that a total installed capacity of 3,000 MW was shut down last year, and at least another 2,000 MW will be shut down this year. The corporation has also declared a three-year moratorium on new investments in coal plants.40
To increase the availability of natural gas, the government has restructured its oil and gas industry to promote investment and triple its production capacity by 2010.41 Beijing and Shanghai, the country's largest cities, are already served by gas pipelines, as is Sichuan province and the central Shaanxi-Gansu-Ningxia region.42 The Royal Dutch/Shell Group announced plans this year to invest $3 billion in gas supply development, pipelines, and gas-fired power generation to serve Beijing, Tianjin, Hebei, and Shandong by 2003.43
Decentralization is also helping to accelerate China's switch to cleaner fuel and advanced technologies. City governments have passed laws prohibiting coal-burning within their jurisdictions. Beijing, Shanghai, Lanxhou, Xian and Shenyang, all have plans to phase out coal.44 The city of Lanzhou, listed as one of the 10 worst polluted cities by the World Health Organization, recently signed a deal with Siemens of Germany to co-finance and retrofit its existing coal plant with gas turbines and to build a second new combined cycle plant. This year, Hangzhou city in Zhejiang province announced that it is building a 100-MW cogeneration plant, with financing from Japan's Bank for International Cooperation, to provide the city with a new central heating system that will save 200,000 tons of coal a year, improve the city's environment by reducing harmful emissions, and eliminate dozens of the city's inefficient industrial boilers.45
Under the new rules starting next year, municipal and provincial power companies (formerly power bureaus) will be required to compete with private power producers for access to the state-owned transmission network.46 Transmission companies, which will remain state-owned, will purchase the electricity from the cheapest suppliers and sell it to consumers. No power producer will be allowed to produce more than 20 percent of any one province's electricity supply and each province is to have no less than five or six independent power generators. In the transition phase, provincial companies will be allowed to sign five-year agreements to buy 80 percent of one producers' output at a fixed price. But long term, government-guaranteed contracts between provincial authorities and private power producers, which have encouraged over-expansion and high-priced power deals, will no longer be issued.
To promote competition and bring electricity costs down, the transition to a pricing structure that more accurately reflects real costs, is underway. Under China's new Electric Power Law, power producers will soon be allowed to charge consumers to cover "reasonable costs, reasonable profit, taxes and expenses."47 The government is also planning to charge consumers for transmission costs, separate from generation charges, which will give local power producers another cost advantage over distant suppliers.48
Chinese Authorities Now Justify the Three Gorges Dam as a Flood Control Dam
Without state protection, the Three Gorges dam will have difficulty finding power customers in China's soon-to-be-competitive electricity market. Proponents now rally public support for the dam – uneconomic and outdated as a power project – by exaggerating its ability to reduce flooding downstream. According to the South China Morning Post, the state dam-building industry is "pushing hard to use the floods as a reason to build more dams and hydropower projects."49 In fact, the Three Gorges dam was originally proposed as a flood control dam, but in 1958, after a lengthy debate that included Chairman Mao Zedong, top-level government officials and Soviet experts, the government concluded that flood control alone could not justify the dam's construction, and so planners set about redesigning the dam for hydropower and navigation, as well as flood control.50 Just as Chairman Mao vowed to speed up construction of the Three Gorges dam after the 1954 floods – which killed 30,000 people and left one million homeless – the dam's chief proponent this decade, Li Peng, routinely promotes the dam after every disastrous flood.51 Similarly, Lu Youmei, chairman of the Three Gorges Development Corporation, said that the 1998 floods have "proven that it is correct to have the Three Gorges Project as soon as possible."52
But critics inside and outside China warn that the dam's planners have seriously exaggerated the dam's ability to control floods while downplaying cheaper, more effective strategies for reducing flood damages.53 According to Lu Qinkan, a retired Ministry of Water Resources and Electric Power official, the Three Gorges dam "would be totally useless" for controlling floods downstream caused by six major tributaries along the middle and lower reaches. Upstream, he says that the Three Gorges dam "would increase an already high flood level at Chongqing, because of the storage of flood water and sedimentation in the reservoir." As a result, flood damage in Sichuan province would become even more serious. In either case, the flood diversion areas and lakes along the middle and lower reaches of the Yangtze are far more important than the Three Gorges reservoir for containing floodwaters.54 Indeed, a growing number of Chinese scientists disagree with the state's emphasis on dam-building as a flood control strategy because they believe it doesn't address the real problem: the loss of forest cover in the Yangtze watershed, and the loss of more than 13,000 square kilometres of lakes, which traditionally served as diversion areas in the middle and lower reaches, due to siltation, land reclamation schemes, and uncontrolled development.55 Critics argue that Yangtze valley residents would be best protected from flood hazards by a strategy that includes dyke and channel improvements, designated overflow areas, development zoning, flood proofing, and flood warning systems.56
The Three Gorges Dam in a "Death Spiral"
Under the very best circumstances, electric power from the Three Gorges dam will cost at least two to three times more than power from gas turbines, combined cycle plants, and some renewables. Under more likely circumstances, it will become even more costly as technical problems and operating conflicts plague the dam, crippling its output, encouraging the country's larger power consumers to leave the state-run system for cheaper independent or self-generated power, thus raising electricity prices for remaining consumers. This phenomenon, known as the "death spiral," threatens many utilities world-wide with bankruptcy, as cheaper generating technologies become more readily available.57 Utilities that have built uneconomic nuclear power stations and large hydrodams are now faced with huge "stranded costs" – investment costs that are no longer recoverable from ratepayers – as consumers opt for cheaper suppliers. In fact, the biggest problem for the hydropower and nuclear industry worldwide is what to do with these stranded costs once electricity markets are opened for competition. In the United States alone, analysts estimate that stranded costs in the electricity sector could be as much as $200 billion, and that many utilities operating expensive power plants will go bankrupt in the transition to market pricing and competition.58
Three Gorges officials have yet to say how much they will charge consumers for the dam's power (or its claimed flood and navigation services). Meanwhile, no one knows how the government will apportion the huge cost of building transmission infrastructure to distribute power from Ertan and Three Gorges. The State Power Commission, for its part, has said that the new transmission system would not affect electricity rates. But according to China Daily, spreading the costs of transmission "has become a formidable challenge to the government."59
If the Three Gorges corporation tries to recover all of Three Gorges' costs from ratepayers, a death spiral into bankruptcy is inevitable. To avoid this, the central government will either have to force consumers to buy Three Gorges power by prohibiting competitors and imposing the dam's excessive costs onto ratepayers. Or, the government will have to subsidize the price of Three Gorges power by, for example, off-loading a portion of its debts onto another state agency or financial corporation.60 For example, the Far Eastern Economic Review reports that the government plans to set up special asset-management companies to absorb the bad debts of the four biggest state banks, including the China Construction Bank and the Industrial and Commercial Bank of China, both major lenders to the Three Gorges project.61 This way, China's taxpayers are ultimately burdened with the state's investment mistakes.
No matter who pays for Three Gorges – whether electricity ratepayers or taxpayers – the Chinese economy will suffer if more money is sunk into this costly endeavour. Economists and engineers agree, the Three Gorges dam can and should be cancelled. The Chinese government should protect its economy, and do so.
Table 1: Effects of fuel type and generating technology on carbon dioxide emissions
1. As of 1998, the government was $3 billion short of funding for the dam's second phase of construction (1998 to 2003) and, according to the Xinhua News Agency, the main source of new funding will be from "increased electrical power charges." Associated Press, "Three Gorges project raises 3.5 bln yuan in H1, secures additional funds," August 17, 1999. Chinese power consumers and taxpayers are already paying for the dam in the form of direct allocations of state funds, by transfers of revenues from the Gezhouba dam, by taxes on electricity consumption, and by export credit agency loans for imported equipment (i.e., turbines and generators from Canada and Switzerland, and transmission equipment from Germany). China's State Development Bank is providing $200 million annually, and the Industrial and Commercial Bank of China and Construction Bank of China are each providing loans worth $482 million. South China Morning Post, "Dam project in funding boost," July 27, 1999; China Daily, "ICBC helps Three Gorges dam area," June 29, 1999.
2. Chad Rademan, "Three Gorges befuddles financiers," Institutional Investor, June 1995.
3. Guo Yuan and Jeff Logan et al., China's Electric Power Options: An Analysis of Economic and Environmental Costs (Washington, D.C.: Battelle Memorial Institute, June 1998),vi; Patrick McCully, Silenced Rivers: The Ecology and Politics of Large Dams (London and New Jersey: Zed Books, 1996), 220; Amy Koch, "Playing the electricity market," International Water Power & Dam Construction, December 1996.
4. Guo Yuan and Jeff Logan et al., 82.
5. Jeff Logan of the Batelle Memorial Institute calculated the price of Three Gorges power based on the following assumptions: a capital cost of $30 billion or $1,650 per installed kilowatt, a 9-year construction period, a 12-percent interest rate, a 53-percent capacity factor, and operation and maintenance costs of 0.5 cents per kWh.
6. "China – transmission and distribution market," Financial Times Asia Intelligence Wire, April 23, 1999.
7. Dai Qing, "An Interview with Li Rui," in Patricia Adams and John Thibodeau (eds) Yangtze!Yangtze! (London and Toronto: Earthscan, 1993), 125-8.
8. Ibid., 128.
9. Andrew Taylor, "Power producers get their fingers burned as Asia loses steam," Financial Times, October 1, 1998; James Harding, "Economic slowdown takes steam out of China's once-booming power industry," Financial Times, August 4, 1998.
10. Kathy Wilhelm, "Out of Business," Far Eastern Economic Review, February 18, 1998.
11. "Surplus sparks power problem," South China Morning Post, August 28, 1998.
12. The Cambridge Energy Research Associates (CERA) report, not publicly available, was quoted by Harding in "Economic slowdown."
13. "Sweet power play turns sour," South China Morning Post, October 18, 1999.
14. Harding, "Economic slowdown."
15. Mark O'Neill, "Private power," South China Morning Post, October 18, 1999; Taylor, "Power producers."; Harding, "Economic slowdown."
16. "Power sales will be no problem in China," China Business Information Network, October 22, 1999.
17. "China's ‘power tiger' bows to market law," Xinhua News Agency, September 3, 1999.
18. "China industry: Electricity without a market," The Economist Intelligence Unit, June 23, 1998.
19. "Surplus sparks a problem."
20. James Kynge, "Power project problems at Ertan power station bode ill for giant Three Gorges scheme," Financial Times, October 29, 1999.
21. "Three Gorges dam official sees no problem selling power," Xinhua News Agency, October 21, 1999.
22. "CIGRE: leading the way to the future," Transmission & Distribution World, November 1998; "Three Gorges dam official sees no problem selling power."
23. "China power generation investment and financing market," Financial Times Asia Intelligence Wire, March 15, 1999. The new rules will be phased in province by province starting with Shanghai municipality and the eastern provinces of Shandong, and Zhejiang, followed in April by the northern provinces of Jeilongjiang, Jilin, and Liaoning. "China power sector to allow competition Jan 1," China Online, October 25, 1999; "China to restructure power industry," Agence-France Presse, October 24, 1999.
24. Christopher Flavin and Nicholas Lenssen, Power Surge: Guide to the Coming Energy Revolution (New York and London: W.W. Norton & Company, 1994), 99-101.
25. General Electric, a leading manufacturer of combined cycle plants, has installed 35,000 MW worldwide. For a description of the combined cycle system, see http://www.ge.com/powergeneration
26. Thomas R. Casten, "Electricity generation: smaller is better," The Electricity Journal, December 1995, and "Global warming solutions are close at hand," Knight Ridder Tribune, January 27, 1999.
27. "Foshan: A fast track combined cycle for Guandong," Turbomachinery International, March-April 1995.
28. KA References: Combined Cycle Plants, ABB Power Generation, Switzerland, March 1998.
29. "Batelle report: China needs more energy technology," Batelle Memorial Institute, press release, 1998.
30. Conversation with Martin Hajnoczky, Senior Area Manager, GT and CC Power Plants, ABB Power Generation, Switzerland, June 4, 1998.
31. Guo Yuan and Jeff Logan, et al., 83.
32. Fuqiang Yang, D. Xin, M.D. Levine, and J. Naeb, Cogeneration Development and Market Potential in China (Lawrence Berkeley Laboratory, University of California, and Energy Research Institute, State Planning Commission of China, May 1996), 55.
33. Ibid., 54, 55.
34. Ibid., 54.
35. Ibid., 48.
36. Ibid., 14.
37. Ibid., 5,53, 56.
38. Yuan and Logan, et al., China's Electric Power Options, executive summary.
39. "CIGRE: leading the way to the future."
40. "China power sector to allow competition Jan 1," China Online, October 25, 1999; "Power sector competition," Xinhua News Agency, October 25, 1999; "China: Reform set for power generators, distributors," China Daily, October 24, 1999; Economic Daily (Jingji Ribao), January 25, 1999.
41. "China to build first underground gas storage facility," Xinhua News Agency, October 29, 1999; "China plans massive gas production next century," Xinhua News Agency, October 25, 1999; "China to boost development of natural gas," Xinhua News Agency, October 20, 1999.
42. "China's oil sector surges ahead," Xinhua News Agency, September 10, 1999.
43. "Shell invests $3B for gas development in China," Xinhua News Agency, September 30, 1999.
44. Seth Dunn, "Grip on power," Worldwatch, September/October 1999; "China to speed up development of gas industry," Xinhua News Agency, September 27, 1999.
45. "Siemens to build gas-fired power plants in Gansu," Xinhua News Agency, June 9, 1999; "Japan bank funds CHP Plant in Hangzhou," China Daily, October 20, 1999.
46. "China power sector to allow competition Jan 1," China Online, October 25, 1999; "Power sector competition," Xinhua News Agency, October 25, 1999; "China: Reform set for power generators, distributors," China Daily, October 24, 1999.
47. "Power generation investment and financing market," Financial Times Asia Intelligence Wire, March 15, 1999.
48. "Landmark power line loan," Power in Asia, April 6, 1998.
49. "Surplus sparks power problems."
50. Margaret Barber and Gráinne Ryder, "Damming the Three Gorges: 1920-1993," in Margaret Barber and Gráinne Ryder (eds), Damming the Three Gorges: What Dam Builders Don't Want You To Know (London and Toronto: Earthscan, 1993), 3,4.
51. "Three Gorges founder says dam will prevent flooding," International Water Power & Dam Construction, October 1998.
52. Jasper Becker, "A disaster born of progress," South China Morning Post, August 15, 1998.
53. Philip B. Williams, "Flood Control Analysis," in Barber and Ryder (eds), Damming the Three Gorges, 114.
54. Chen Kexiong, Interview with Lu Qinkan, "The Limited Benefits of Flood Control," in Dai, Yangtze!Yangtze!, 182-8.
55. Becker, "A disaster born of progress."
56. Williams, "Flood Control Analysis," 114.
57. Flavin and Lenssen, "Reshaping the Power Industry," 260.
58. Koch, "Playing the electricity market." 17; Tom Groenfeldt, "Competition sparks consolidation," Energy & Power Risk Management, June 1996, 25.
59. "Power grid unification ‘will not affect prices,'" China Daily, May 23, 1999.
60. Fuqiang Yang at the University of California's Lawrence Berkeley Laboratory notes that China's Ministry of Finance has rescued other debt-ridden state corporations and banks in this manner. The government recently set up a new financial company to absorb the debts of the state-owned Anchang Corporation, China's second largest steel manufacturer.
61. Far Eastern Economic Review, January 28, 1999.
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