China’s surging hydropower a boon for its climate goals, energy bills

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SINGAPORE — A surge in hydropower output in China this year, boosted by record-breaking rainfall, is helping the world’s biggest polluter meet green targets as well as cut liquefied natural gas imports (LNG) amid tight global supplies.

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

But slowing demand from China, among the world’s top coal and LNG importers, has put a lid on prices.

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“The situation in China this year is very unique, mainly because the COVID-19 restrictions limited power demand and the fast-growing renewables are able to meet the slow power demand growth,” said Li Shuo, senior adviser with Greenpeace.

A lockdown in Shanghai earlier this year and COVID-19 curbs in dozens of cities crimped business activity, lowering demand for electricity. Plentiful rainfall and fast-growing new capacity for other renewable sources have also cut needs for fossil fuel.

Southern China recorded its heaviest rainfall in 60 years during March to May, topping up the region’s huge dams, and lifting hydropower generation by 18% in the first five months of the year compared with a year earlier.

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Meanwhile, thermal-power production, mostly from coal-fired utilities, dropped 4% in the January-May period.

The jump in hydropower generation is also helping the world’s No. 2 economy avoid the power shortages it experienced last year, partly caused by drought that affected dam water levels.

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

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

Hydropower output in May jumped 27% on year to 121.7 billion kilowatt-hours (kWh), a record for this period. Abundant rain also allows reservoirs to store more water for hydro generation in coming months.

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Though the government has urged miners to step up coal production since last year’s power crunch, China is not actually generating more coal-based power.

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

Its dam-building has triggered criticism from some environmental groups concerned about damage to eco-systems and people’s livelihoods, as well as from neighboring countries that say dams on the Mekong are impacting water levels in the region.

China added about 23 GW of new hydropower capacity in 2021, bringing total hydro capacity to 16% of the power mix. Solar, though much smaller, is growing more rapidly. In the first five months this year, solar power output increased by 13% on year, accounting for 2.7% of total electricity production, a record high.

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“China’s progress on adding new solar capacity has indeed been remarkable this year, with the government expecting a new record of well more than 100 GW added. In that regard, China is well ahead of everyone else,” said Lauri Myllyvirta, lead analyst at Centre for Research on Energy and Clean Air.


Abundant hydropower is also keeping a lid on China’s demand for pricy LNG, helping to cap global prices which hit a record high in March in the wake of the Ukraine crisis.

Imports slid 20% in the first five months from a year earlier, though more gas is coming in via pipelines. The drop in China’s demand could move it down one notch to become the world’s No. 2 importer after Japan this year, analysts said.

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

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Whether renewable power can maintain its share of overall demand consumption remains to be seen, but China looks set to gain from its investment in renewable energy capacity when power consumption picks up as the economy recovers.

China’s 2022 power demand growth is forecast at between 3.5% and 5%, according to four analysts, down from 10% last year.

“It is hard to say if this trend will last as the uncertainties still linger on how fast the power demand will come back and if the incremental demand can be fully met by renewables,” said Li of Greenpeace.

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

(Editing by Jacqueline Wong)



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