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DAM-L LS: Serious Financial Troubles Ahead for 3 Gorges Dam (fwd)
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subject: LS: Serious Financial Troubles Ahead for 3 Gorges Dam
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>Stratfor.com's Global Intelligence Update - 27 October 2000
>_________________________________________________
>
>Know your world.
>
>Also on Stratfor.com
>
>Troubles Ahead for China Dam Project
>China's Three Gorges dam project, set to be the largest source of
>hydroelectric power in the world, has a new energy distribution
>plan. The revisions suggest the problematic plan is now headed for
>serious financial setbacks.
>http://www.stratfor.com/asia/default.htm
>
>_________________________________________________
>
>
>Troubles Ahead for China Dam Project
> 0045 GMT, 001027
>
> The management of China's Three Gorges dam project
> has announced a revision of its energy distribution
> plan that suggests the scheme is headed for serious
> financial setbacks.
>
> Three Gorges is expected to be the world's largest
> source of hydroelectric power if it begins operations
> on schedule in 2003. But it's been hampered for years
> by substantial budget problems, mismanagement and
> construction delays. The project was originally
> expected to cost about $11 billion, but recent
> estimates put the cost at more than $24 billion.
>
> Environmental regulators will soon require each
> Chinese province to supply 5.5 percent of its power
> from renewable resources. This is most likely a means
> of subsidizing hydropower stations in the country's
> slow-growing inland provinces, where electricity
> buyers are harder to find. It's also a way to
> redistribute coastal wealth to China's interior and
> help reduce economic disparities between regions of
> the country.
>
> It now seems managers of the Three Gorges project are
> looking for this type of support. The dam is
> projected to generate 18,200 megawatts of power.
> About 2,000 megawatts were to be used by the western
> city of Chongqing, near the dam itself, with another
> 12,000 megawatts destined for provinces in central
> China.
>
> According to the project's deputy director,
> authorities in Chongqing have refused their entire
> allocation of power from the dam, citing an existing
> surplus of generating capacity. Instead, those 2,000
> megawatts--and another 1,000 megawatts turned down by
> two central provinces--will be diverted to
> energy-hungry Guangdong Province, one of China's
> wealthiest regions.
>
> There's no doubt Guangdong needs more power. The
> province is China's export powerhouse, and growth in
> export demand accounts for part of the phenomenal
> 18.6 percent rise in electricity consumption in the
> first six months of 2000. Parts of Guangdong suffered
> shortages in June, when a heat wave raised
> air-conditioning demand.
>
> Much of western China, on the other hand, is
> struggling economically. Officials in Chongqing -
> once part of Sichuan province, but recently given
> "independent municipality" status - have already
> reneged on a pledge to buy large amounts of power
> from the nearby Ertan dam. This suggests Chongqing's
> state-owned industries are still floundering, and
> that electricity demand has grown more slowly than
> expected.
>
> Beijing's leaders must be fuming at the situation's
> irony. Chongqing's political profile was raised as a
> sweetener for local officials, who opposed the Three
> Gorges dam on the grounds it would interfere with the
> city's port traffic. Now that the project is having
> trouble finding buyers for its electricity, the
> promotion has given Chongqing the leverage to walk
> away from an unfavorable marketing arrangement.
>
> Chongqing's successful showdown with the center may
> reflect the newfound clout of western officials, but
> the cost to China may be very high. Sending Three
> Gorges power to Guangdong is probably not a sound
> alternative to selling it locally. Transmission
> losses are bound to be enormous: the distance between
> Guangzhou and the main dam site, near Yichang in
> Hubei province, is some 650 miles.
>
> By contrast, Hong Kong lies just across the border
> from Guangdong and already enjoys a surplus of power,
> thanks to archaic utility regulations that prohibit
> competition between the city's two power companies,
> Hongkong Electric and CLP Holdings.
>
> Regulators require them to maintain separate "reserve
> margins" of generating capacity to meet unexpected
> demand peaks. Guangdong is already buying some of
> Hong Kong's spare power, and a fully liberalized
> electricity market would encourage it to buy even
> more.
>
> But using the Three Gorges as a power source instead
> will mean more revenue for the dam's developers - and
> that could be crucial to making the dam project
> acceptable to local residents.
>
> Efforts to relocate farmers from the area are moving
> very slowly, and there are reports that much of the
> money set aside for compensation payments has been
> skimmed off by corrupt officials. Hidden subsidies to
> the hydropower sector, like last week's "green
> energy" policy, perhaps should be seen not as
> environmental initiatives but as an attempt by the
> central government to prevent public anger from
> boiling over.
>
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