China has been one of the fastest growing major economies in the world, and its growth has significantly increased income levels and purchasing power per capita, leading to increasing demand for energy, particularly electricity. The increase of income levels and purchasing power per capita in China has contributed to stronger demand for electronic products such as televisions, refrigerators and air-conditioners, which in turn increases the total electricity consumption level. While increasing, China's per capita consumption of electricity is still low compared to other countries. According to NationMaster, China's consumption of electricity was 2,179.5 kWh per capita in 2006, compared to 7,702.0 kWh per capita for Japan, 9,593.6 kWh per capita for Taiwan and 12,343.1 kWh per capita for the United States. The PRC government has adopted favorable policies to promote the generation and use of clean and renewable energy, including hydroelectric power, which are particularly favorable to small hydroelectric power projects. Hydroelectric power, as a renewable energy, has also been granted the highest priority for power dispatch by the PRC central government. In the dispatch sequence, hydroelectric power comes after solar and before nuclear power, gas-fired power, coal-fired power, and oil-fired power. Local governments in China also promote investment in or acquisition of hydroelectric power projects, particularly small ones. Currently, hydroelectric power producers are paid less than producers of electricity from coal-fired projects. In the future in certain provinces, China is considering paying the same tariff to all electricity producers on the same grid. If this policy goal is achieved, hydroelectric power tariffs in China should be expected to rise to reach the same levels as that of thermal power. Hydroelectric power projects may begin power dispatch immediately upon request from the grid, whereas thermal power projects require a start-up period of up to ninety days to begin generation. As a result, hydroelectric power projects are well suited to supply peak power, which in many provinces commands a higher tariff than off-peak power. China is seeking to significantly reduce its carbon emissions by 2020, in part by reducing its reliance on coal-fired power projects and factories. As the PRC gains in affluence, its people have increasingly focused on environmental issues, so that reduction of emissions now enjoys both government and public support. We believe public and government support for environmental protection will aid the expansion of hydroelectric power and other renewable energy sources in China. China has an abundance of water resources that can be utilized for hydroelectric generation. However, China was utilizing only 19% of its economically exploitable hydropower resources as of 2005, compared to 67% for Canada and 42% for Brazil, according to our calculations based on data provided by the World Energy Council. China also offers low cost and high quality engineering, design, equipment supply and construction capability for the hydroelectric power industry. |
