Uneconomic and outdated, the Three Gorges dam will stunt China's economic growth The tragedy of the Three Gorges dam goes beyond the nearly two million people who will be resettled from their homes, villages, farms, temples, and work places to make way for it, beyond the 1,300 sites of cultural antiquities and the 100,000 hectares of precious farmland that will be submerged forever under the 600 kilometre long reservoir, and beyond the rare species that it will likely render extinct. Ironically, the tragedy created by the Three Gorges will also extend to the economy and its electricity sector - the chief justification for building the dam. The Chinese government must maintain the status quo in the electricity sector to protect the twentieth century's largest state vanity project from market discipline and public oversight. While rapid technological advances in electricity markets around the world will deliver cheaper, cleaner, and more readily available power, Chinese citizens will be forced to buy dirty, expensive, and unreliable power. As a source of electricity, the Three Gorges dam cannot compete with the alternatives. As a symbol, the dam sends out the discouraging signal that in China the central planners are alive and well and at the helm. The Chinese economy and all its citizens will lose if the dam is completed.
THE MAELSTROM OF THREE GORGES We know a great deal about the Three Gorges dam, now under construction on China's Yangtze River which flows past the major cities of Chongqing and Wuhan to the East China Sea at Shanghai. It would be the largest dam in the world, with an installed capacity of 17,680 megawatts, and the most expensive, costing $28 billion according to official sources, $34-36 billion according to industry sources, and $77 billion according to an independent Chinese banker knowledgeable about the project.(1) It would displace more people - 1.98 million according to the latest figures(2) - than any dam in history and flood 13 cities, 140 towns, over a thousand villages, factories, farms, temples, and archeological treasures dating back to 50,000 BC.(3) With 27 submerged spillway bays (each with the average flow of the Missouri River) that are, according to Canadian engineers, 'well beyond proven world experience,'(4) it would be daringly experimental. Without a doubt, it would be the most challenging: the Yangtze River has the fifth highest silt load of any river in the world, and the dam's engineers will be pushed to find a way to flush silt through the reservoir, something that has never been done successfully before.(5) Outside China, the problems besetting the project are well known. No other dam in history has received more ink. Every major daily newspaper from the Wall Street Journal to the Guardian, every major magazine from National Geographic to Time, and every major TV network has dedicated prime space and time to the debate and to the costs that the dam will inflict on the Chinese people, its environment, and its economy. Inside China, the Three Gorges dam also receives wide and regular coverage but only in the form of government public relations packages which claim that the dam will generate electricity, stop life-threatening floods, and increase navigation of ocean-going ships to Chongqing. Criticism of the dam, or even debate in which different sides challenge each other, is strictly forbidden. Books which contain such debates are banned. Experts and journalists who attempt such discussions are harassed, even jailed. While much is known and said about this project - the single largest capital project under construction today - one thing is rarely discussed and little known: there are cheaper, cleaner, and more reliable ways to provide the desperately needed power that the Three Gorges dam is meant to supply.

THE THREE GORGES DAM IS UNCOMPETITIVE

Technological advances, brought about by regulatory changes in the world's energy markets, have turned mega-power projects like the Three Gorges into modern-day dinosaurs. Hydropower, energy analysts conclude, is 'costly' and 'uneconomical' because of high capital investment costs. Nor will nuclear power meet China's energy needs, even if capital costs were to decline by a third. A recent study by United States and Chinese energy research institutes, which compared conventional sources with advanced generating technologies, concluded that 'when you consider the full environmental costs of producing electricity, it's actually more economical to use [these] cleaner alternatives.'(6)

Large, conventional steam turbines (whether their fuel is coal, oil, gas, or nuclear) convert only 30 to 33 per cent 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 breed of smaller gas turbines reliably convert over 40 per cent of their fuel into electricity. Thus, large cost-conscious power consumers around the world are encouraged to install their own gas turbines and reduce environmental damage while boosting economic output. Cogeneration plants generally turn 60 to 80 per cent - sometimes 90 per cent - of their energy into electricity and commercially useful heat.

Gas-fired combined cycle units - in which a gas turbine generates electricity and drives a second electricity-producing steam turbine - achieve energy efficiencies of 50 per cent or higher. Such systems have already replaced aging coal and nuclear plants in Britain and North America and are expected to dominate the market for new power plants in Asia and Latin America into the next century. Combined cycle gas turbines could provide power with lower capital costs and greater reliability than Three Gorges and with far fewer emissions than conventional coal plants.

Combined cycle plants are commonly fuelled with natural gas which burns more thoroughly than solid or liquid fuels, and, unlike coal, contains no heavy metals or sulfur emissions that cause acid rain. Gas-fired combined cycle plants, therefore, produce no particulates or sulfur dioxide, 90 per-cent less nitrous oxide, and 60 per-cent less carbon dioxide emissions than coal-fired plants.

A combined cycle gas turbine costs about $650 per kilowatt, roughly 15 to 40 per cent of the cost per kilowatt for Three Gorges, depending on the dam's final budget (see table 1). If the project was cancelled and the budget invested in combined cycle plants, China could have 43,078 megawatts (MW) to 118,461 MW of new generating capacity, which would provide two to six times the generating capacity and displace two to six times as much coal, about 300 million tons a year, as Three Gorges.(7)

With gas supplies coming on-line, researchers at the Battelle Memorial Institute - a Washington-based energy policy think-tank - the Beijing Energy Efficiency Center, and China's Energy Research Institute predict the cost of electricity from combined cycle plants in southeastern China would be less than 4 cents per kilowatt-hour, compared to 4 to 5 cents for new coal plants, 6 to 7 cents for large hydro, over 7 cents for nuclear power, and at least 8.4 cents for Three Gorges.(8)

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TABLE 1

Capital Cost of Generating Technologies in China per Installed Kilowatt of Capacity

Generating technology	Capital cost per kilowatt	Fuel conversion efficiency (%)
Three Gorges (17,680 MW)	1,584-4,355	-
large hydro	950-1,200	-
nuclear	2,000	30-33
combined cycle gas turbine	450-900	50-60
coal gasification combined cycle	1,325	50-60
micro gas turbines	300-500	30
coal - no polllution control	600	30-37
coal - with pollution control	730-860	30-37
coal-fired cogeneration	480-1200	70-80
wind	1,000	-
small/micro hydro	850	-
fuel cells	3,000	-
photovoltaic cells	4,500	-

SOURCES capital costs: Logan et al, China's Electric Power Options, ix, 33-5, 39; three gorges: project cost estimates compiled by the authors ($28 billion to $77 billion); gas turbines: Gas Turbine World (January-February 1998), 28; and coal fired cogeneration: Fuqiang Yang et al, Cogeneration Development, 57.

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Combined cycle plants can be installed and generating power reliably within nine months to two or three years for the larger units.(9) Three Gorges is scheduled to take 17 years. Fast installation reduces the interest costs and allows plants to repay lenders sooner. While combined cycle plants produce power 85 to 95 per cent of the year, the Three Gorges dam is expected to operate at full capacity for only about half the year.

Another major advantage of combined cycle plants - particulary combined heat and power systems - over Three Gorges is flexibility. Combined cycle plants can be switched on and off as needed and are therefore well suited to satisfying peak or intermittent power demands. Large hydro dams, on the other hand, generate the most power in spring when demand is low. Three Gorges has the added difficulty of operating its 600-kilometre reservoir for flood control and navigation which means that the dam won't always be able to meet power demands. 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. Turbines can be plugged into new or existing transmission systems to suit varied industries, factories, university campuses, commercial buildings, municipal heating systems, apartments, shopping malls, and rural co-operatives.

Although China has abundant gas reserves, it has lagged behind other countries in exploration and development. Natural gas accounts for less than 2 per cent of the country's energy supply. The government has begun to increase natural gas availability, through the construction of major new gas pipelines in Guangdong and Sichuan provinces, a natural gas pipeline that supplies over 300,000 users in Beijing, and a recently signed deal with Russia to transport gas from Siberia to China's eastern coast. The country's huge reserves of coal bed methane, which can be used to fire combined cycle gas turbines, are also being developed. And, the government plans to import liquefied natural gas, which has become more readily available since the Asian financial crisis lowered demand in Japan and South Korea.

Natural gas is critical for China's energy future, according to energy experts such as William Chandler, the director of the Battelle Memorial Institute. He and Chinese researchers 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, then it could rapidly increase the amount of gas available for residential, industrial, and power applications.'(10) Suppliers of combined cycle plants are also expecting a boom within the next five years, once gas supplies are adequate.

China desperately needs more clean, dependable power. In some areas, power cuts and black-outs affect about 40 per cent of industry, and some inland provinces experience chronic electricity shortages. In Fujian, Henan, and Sichuan, for example, combined cycle plants would reduce reliance on drought-prone hydro dams. Where electricity demand is growing rapidly, investors have already built several combined cycle plants and are running them on alternate fuels (diesel, blast furnace gas) until gas is available. In the booming province of Guangdong, bordering Hong Kong, ABB (a Swiss manufacturer of combined cycle plants) has installed three combined cycle plants, all of which run on alternate fuels. ABB's 280-MW Foshan plant, owned by the Shakou Power Plant Company and financed by a group of Hong Kong banks, supplies electricity to Foshan city. Near Shanghai, ABB's 150-MW combined cycle cogeneration plant provides electricity and steam to the Bao Shen Steel Corporation.

The obstacles to cleaner, affordable energy alternatives are not technical, economical, or environmental; they are bureaucratic and political. With every five-year plan, well-entrenched hydro, coal, and nuclear power bureaucracies do battle with one another for expansion funds - despite the growing evidence of poor performance and public opposition. Jeff Logan of Battelle's Advanced International Studies Unit reports that significant barriers exist, including artificially low prices for natural gas, which inhibit further exploration and development of gas supply infrastructure, biased leasing of potential fields, and perverse allocation of gas to favoured industries. 'Foreign technology for both exploration and power generation would help change China's energy future but not without dramatic policy reform,' he predicts.

'Market reform is China's most powerful policy tool,' the Batelle study concludes and recommends 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.'(11)

Researchers at the Lawrence Berkeley Laboratory at the University of California and the Chinese State Planning Commission came to the same conclusion. In a 1996 study of China's cogeneration development and market potential, they found that the primary market barriers for cogeneration were institutional and a direct result of a monopolistic utility sector and regulated heat prices too low to cover production costs. They concluded that China needs an energy policy that allows independent power producers to receive a fair price for their heat and power.(12)

THREE GORGES IS NOT THE BEST WAY TO REDUCE RELIANCE ON COAL

China leads the world in both coal production and consumption. About 40 per cent of its annual consumption is burned in conventional coal plants to generate electricity and 60 per cent in inefficient boilers and furnaces to meet industrial and municipal demands for heat and steam. According to the Battelle study, 'no other major economy relies so heavily on coal to meet its primary energy needs.' The environmental damage across the country is extensive. Energy experts calculate that sulfur dioxide emissions, the main cause of acid rain, cost over $13 billion each year in damage to forests, farms, and public health, and erase two per cent of the country's gross national product. Poor air quality also leads to millions of premature deaths and illnesses.(13)

Proponents claim the Three Gorges dam is the best way to reduce China's reliance on coal. In fact, the dam would reduce coal burning at most by about three per cent and total carbon dioxide emissions from heat and electricity generating facilities by about five per cent (see table 2). Switching from coal to gas, and using either combined cycle gas turbines or cogeneration, would reduce carbon dioxide emissions by more than 60 per cent.

The cheapest way to reduce coal consumption, according to the Lawrence Berkeley researchers, is through cogeneration.(14) The researchers 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. If just one-quarter of the boilers were retrofitted for cogeneration, with the same amount of fuel they could expand electricity supply by 80-90 billion kilowatt-hours annually, equivalent to Three Gorges' expected output, but at a fraction of Three Gorges' cost. They 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 $1200 per kilowatt. In the chemical fertilizer industry, for example, approximately 55 billion kilowatt-hours of electricity could be generated by retrofitting half the existing plants for cogeneration. And if just 500 towns and cities installed small-scale cogeneration systems, they could generate about 50 to 60 billion kilowatt-hours of electricity - about two-thirds the Three Gorges output - which is sufficient to meet their year-round heating and cooling requirements.

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TABLE 2

Effects of fuel type and generating technology on carbon dioxide emissions

Energy source a) for electricity b) for heat	carbon dioxide emissions gener- ating electricity	carbon dioxide emissions generating heat	total carbon dioxide emissions	Percent reduction
1 a) coal-fired steam tur- bines (33% efficiency) b) coal burned in boilers (75% efficiency)	1,000* -	- 880	- 1,880	- -
2 a) 90% supplied from coal-fired steam tur- bines; 10% supplied from Three Gorges** b) coal burned in boilers (75% efficiency)	900 -	- 880	- 1,780	- 5.3
3 a) coal-fired cogenera- tion*** (80%) efficiency (1:2 electricity to heat output) b) heat from a)	1,238 -	- -	- 1,238	- 34
4 a) combined cycle gas turbines (50%) efficiency b) gas burned in boilers (85% efficiency)	330 -	- 388	- 718	- 62
5 a) gas-fired cogenera- tion (85% efficiency, 1:2 electricity to heat output) b) heat from a)	582 -	- -	- 582	- 69

* simplified base scenario: assume 100% of electricity demand is supplied by coal, generatiing 1000 arbitrary units of carbon dioxide emissions; heat load twice electricity load and currently met by coal in boilers with 75% fuel conversion efficiency; coal combustion releases two times as much carbon dioxide as natural gas combustion per unit of energy.
** assume Three Gorges can displace 10% of coal used to generate electricity per year and its reservoir produces zero greenhouse gas emissions.
*** assume new coal and gas cogeneration plants can be built to provide twice as much heat as electricity with a total efficiency of 80% and 85% respectively.
SOURCE: Data compiled using procedure outlined in Norman Rubin, Submissions to Ontario Select Committee on Ontario Hydro Nuclear Affairs Regarding Carbon Dioxide Emissions, Energy Probe, 21 November 1997.

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