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DAM-L Three Gorges Probe: February 15, 2001 (fwd)
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Date: Thu, 15 Feb 2001 15:57:29 -0500
From: ProbeInternational@nextcity.com (ProbeInternational)
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To: ProbeInternational <ProbeInternational@nextcity.com>
Subject: Three Gorges Probe: February 15, 2001
THREE GORGES PROBE
February 15, 2001
Team Canada assists China's power monopolists
While Canada partners with China's aging monopolists to
push outdated, money-losing technologies -- Team Canada
is expected to announce another Three Gorges Dam
contract today -- China's newly privatized power companies
are mostly turning to U.S. and European energy know-how.
Grainne Ryder of Probe International reports in Canada's
National Post.
------------------------------------------------------
Team Canada assists China's power monopolists
Team Canada's host in China, Premier Zhu Rongji,
has performed miracles in restructuring much of
China's debt-ridden state sector. Burdened with hundreds of
thousands of decrepit state companies that could neither
repay their debts nor create new jobs, Mr. Zhu shut down
thousands of money-losing coal mines, textile factories, and
steel works, slashing 12 million jobs in the last three years.
He gave the military five months to divest its business
empire of trading companies, luxury hotels, and nightclubs.
He granted cities greater autonomy to run their own affairs -
- a move credited with improving the country's investment
climate and providing new incentives for environmental
cleanup. The Far Eastern Economic Review describes his
reforms as "the largest transfer of industrial property since
Mao Zedong nationalized industry in the 1950s."
But Mr. Zhu's plans to bring competition to the last big
holdout of the monopolists -- China's power industry --
have stalled. China's old guard has decided to make its stand
for central rule in the power sector and it has found an
important Western ally: Canada.
Under Mr. Zhu's plans, the power industry would no longer
be run as a monopoly. State power companies operating
hydro dams and nuclear stations would have to compete
with private power companies for access to customers.
Consumers would need to pay for transmission costs as well
as generation costs, giving local power producers -- who
don't need to ship power a great distance -- a major cost
advantage over distant suppliers.
If Mr. Zhu and his reformers succeed in implementing this
plan, China's multi-billion dollar hydro and nuclear empires -
- long subsidized by Canadian taxpayers -- could face
bankruptcy. Even without these reforms being fully
implemented, the state power industry, a bastion of central
planning, knows that it cannot find willing customers for
power from its hydro dams and nuclear plants.
Chinese officials now openly doubt whether the Three
Gorges dam, backed by Canada's Export Development
Corporation, will be able to sell all its output when it starts
generating power in 2003. The provinces and cities slated to
buy its power either already have enough power, or they
prefer to have the private sector build local power plants to
meet future demand.
Other large government-run hydro projects face the same
predicament. The US$3.5-billion Ertan dam, built with
Canadian grants and World Bank loans, has run at an annual
loss of US$120-million since it came online in 1998. It, too,
can't find enough customers. Its largest prospective
customer, Chongqing municipality, balked at buying its
overpriced power. The newly built US$4-billion Xiaolangdi
dam, again backed by Canada and the World Bank, can't
find customers either. As the retired deputy general manager
of the Three Gorges Project Corporation recently explained
to China Business Times, provincial governments and
municipalities favour local power plants over the central
government's distant hydro dams because local plants
produce lower-cost power and, when they're privately
owned, generate local tax revenue.
Under pressure from residents who are tasting democracy
and making environmental demands, cities are also
switching from coal to cleaner-burning gas -- but rarely with
the help of Canada. The city of Lanzhou, on the World
Health Organization's list of the world's 10 worst-polluted
cities, is working with Siemens of Germany to co-finance
and retrofit its existing coal plant with gas turbines and to
build a new gas-fired plant. Hangzhou city, with Japanese
financing, is building a 100-megawatt, gas-fired co-
generation plant that will save 200,000 tons of coal a year
and eliminate dozens of the city's inefficient industrial
boilers. Already, five major Chinese cities have built their
own natural gas networks to promote private investment in
gas-fired power plants.
While Canada partners with China's aging monopolists to
push outdated, money-losing technologies -- Team Canada
is expected to announce another Three Gorges Dam
contract today -- China's newly privatized power companies
are mostly turning to U.S. and European energy know-how.
"Gas is the quickest way to get a turnaround in pollution
levels," says Brian Anderson, chairman of Shell Companies,
Northeast Asia, who saw China's cities begin the switch
from coal to gas in 1998. With only 2% of China's energy
needs currently met by gas (coal still provides 70%), there is
plenty of room for growth. Last year, China's State Council
approved construction of a US$12-billion, 4,200-kilometre
gas pipeline from Xinjiang to Shanghai, expected to be built
in partnership with Enron and BP Amoco. Royal
Dutch/Shell Group is investing US$3-billion in gas pipelines
and power plants to serve Beijing and neighboring cities.
In the coastal province of Guangdong, where electricity
demand has grown rapidly over the last decade, Swiss-giant
ABB has built several combined-cycle plants, running them
on alternate fuels (diesel, blast furnace gas) until natural gas
comes online. An advanced ABB combined-cycle plant
supplies electricity and steam to China's largest steelmaker,
the newly-privatized Bao Shan Steel Corporation. Shakou
Power Plant Company now supplies electricity to Foshan
city using a 280-megawatt oil-fired combined-cycle plant
financed by Hong Kong banks.
Knowing that large hydro, coal and nuclear cannot compete
with this new breed of cleaner and lower-cost power
producer, the central monopolists are fighting back. To
prop up the uneconomic nuclear plants that Canada and
China's domestic nuclear industry are providing, China's
State Council not only provides a host of subsidies, it wants
to force large power consumers to buy nuclear power. To
prop up the Three Gorges project -- a pariah that no
western government would touch before Canada endorsed it
with subsidies on a previous Team Canada mission -- the
State Economic and Trade Commission announced that
provincial and city authorities will have to buy electricity
from the Three Gorges dam once it starts generating
electricity in 2003. At the same time, the government is
shutting down small power plants, ostensibly for
environmental reasons, and forbidding electricity
distribution authorities in areas served by large hydro dams
to buy power from private suppliers.
But these successes by the old guard at subverting markets
are exceptions. Apart from Canada, the power monopolists
have few friends. Should the power monopolists lose their
grip to Mr. Zhu -- as have other monopolists in China's
economy -- Canada's power industry may find it has few
friends in China.
- END -
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Three Gorges Probe welcomes submissions. However, it is not
a forum for political debate. Rather, Three Gorges Probe is
dedicated to covering the scientific, technical, economic, social,
and environmental ramifications of completing the Three Gorges
Project, as well as the alternatives to the dam.
Publisher: Patricia Adams
Executive Editor: Mu Lan
Assistant Editor: Lisa Peryman
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