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Summerdetail.Pdf SHP in China Framework Design of Incentive Policies for Small Hydropower Development in China Hangzhou Regional Centre (Asia-Pacific) for Small Hydro Power (HRC), Hangzhou, China olicy is an important adminis- and natural gas. In particular, it has with installed capacity of 26.26 mil- P trative measure for promoting better accessibility and affinity to lion kW and annual generation of small hydropower (SHP) develop- local economy in west China. 90,000 odd Gwh, occupying 30% of ment in China. At present, the critical 3. Flexible development. SHP could total consumption in rural electricity topics to be studied and solved ur- be separately developed, could for- market in the country. gently are: to find out questions and mulate local grid and supply electric- Remarkable economic and social reasons that constrain SHP develop- ity dispersedly. The capacity devel- effect has been achieved through de- ment upon investigation and analy- oped could be several, several tens, velopment of SHP. Currently, SHP has sis of policy environment of macro- several hundreds up to several tens acted as vital support for socio-eco- economy and techno-economic indi- of thousand kW according to de- nomic development in hilly areas in ces of SHP development, and to ham- mand. It is capable of providing power central and west China. It drives the mer out the policy framework and op- to household, village, township urbanization and industrialization eration mechanism complying with (town) and county (city) and has very through electrification and also pro- the requirement of market economy, strong adaptability and capability of motes the regulation of economic enabling the sustainable development radiation. In addition SHP is of small structure. Following the prosperity of SHP. scale, needs comparative less capital and continuous development of lo- I Technical-economical feasibility investment, with mature technology, cal economy, steps of poverty alle- analysis for SHP short construction period, fast effec- viation were speeded up, rural energy In China, SHP is defined as sta- tive, easy maintenance and low op- consumption solved, ethnic solidar- tions with installed capacity up to eration cost. It is more technically and ity strengthened and stability of bor- 50MW. SHP technology is mature economically feasible to construct der areas promoted as well. and proven. Its major features are as SHP than to develop large and me- Especially, in providing electric- follows: dium hydro and thermal power in eco- ity to basic public service sector for 1. Rich resources. The exploitable nomically poor regions. It should be people in remote area un-accessible SHP resources in China is 87 mil- pointed out that it is most appropri- to electricity, SHP possesses evident lion kW (as per the general inves- ate for local government to organize advantages and has been consis- tigation of hydraulic resources in the SHP development while the cen- tently playing the un-replaceable role. 1980s) which occupies 23% of to- tral government is focusing capital for The construction of rural 653 hydro- tal hydropower resources in the large power generation projects. based primarily electrified counties whole country and stands top in SHP has attained rapid develop- during “7th, 8th and 9th Five Year Plan” the world. ment in China due to its significant not only solved the electricity sup- 2. Widely spread. The exploitable function in solving rural energy sup- ply to 120 million people not acces- SHP resources are widely spread ply, improving ecological environ- sible to electricity but also widely and over 1,573 counties in the nation. ment, alleviating poverty and promot- greatly increased the rural electricity There are 58.28 million kW in west ing rural economic development. consumption level in the respective China, occupying 67% of the Since 60-70s of last century, the sup- areas. At present, there are still 30 country’s total exploitable one; ply area of rural hydropower has more million people not accessible to 28.72 million kW in central and east gradually expanded to cover nearly electricity, more than half of them are China, 33% of the same. The allo- 1/2 of the whole nation’s territory, distributed in the regions with rich cation of SHP resources is more with 1/4 of the whole nation’s popu- SHP resources. The geological posi- widely dispersed than other energy lation. Number of SHP stations com- tion of these areas is extremely remote, resources such as coal, petroleum pleted is about 40 more thousands with dispersed low load. It is not prac- 2 SHP NEWS, Summer, 2003 SHP in China tical to provide electricity through benefit of its own thus lacks the mecha- lation function of tax and subsidies extension of national grid to these nism of sustainable development. were focused while the disposition areas. Therefore, SHP will continu- For promoting SHP develop- function of capital by the market ele- ously play the important role in the ment, a series of supporting policies ment-price was not fully utilized. The final fortifying storm for resolution of were stipulated by central and local SHP as a public welfare sector, has non-electrified population. government during various develop- actually been drifting with the tide in The ecological effect of SHP is ment period of SHP. According to the tough market competition due to also excellent. Currently the total an- their nature, these could be classified abolition of specified loan, limitation nual generation from SHP in China is into administrative compulsory type of financial subsidies and non-execu- equivalent to 30 million tons of stan- (AC), economic incentive (EI) type tion of 6% value-added tax policy in dard coal. Its ecological effect is and market creation (MC) type. Rel- most regions. SHP will exert even more equivalent to preventing 70 million evant stipulation of SHP in the Law impact in the “separation of plant and tons of emission of greenhouse gas of Electric Power belongs to AC type grid, competitive price for sales to the as CO2 and large amount of flue dust policies. The strategy of “self-con- grid” policy from the reformation of and polluted water. Development of struction, self-management and self- power institutional system, if neces- SHP could create fundamental criteria consumption” for rural SHP formu- sary protective measures were not for replacing fire wood by electricity lated by the state belongs to MC type adopted. In a word, the significant rea- in providing energy for living and for policy. The EI type polices include: sons for the slow development and agricultural processing. Replacing fire- (1) policy of profit of SHP reserved difficult walking of SHP were its di- wood by electricity reduces defores- for further expansion of SHP; (2) per- vorce from policy support of the gov- tation in SHP supply area. Evident re- mission of utilizing nation’s poverty ernment. At present, the SHP devel- sults of hill blocking and forest rais- release capitals for construction of opment urgently needs to gain a foot- ing and returning farmland to forest rural SHP; (3) policy of 6% value- hold on new incentive polices under was attained, as the percentage of for- added tax for SHP; (4) policy of speci- market economy condition. est coverage increased year by year. fied loan for SHP development (dis- III Problems existed in the market- Water resources were reserved and missed). ing operation of SHP soil erosion prevented which caused These prevailing policies takes For SHP development, the inter- the fast recovery and improvement of policy of economic incentive based nal unfavorable factors of itself are: ecological environment. on planning economy as major one, small scale production, consistent in- II Analysis of present status of SHP but rarely related to basic element of crease of capital investment, contra- policy environment market economy, i.e. price and rela- diction of seasonal variation, low level In comparison with exploitable tion of demand and supply. The func- of technical equipment and operation SHP resources in China, the percent- tion of market mechanism has not and management, etc; in the mean- age of exploitation is rather row, only been reflected fundamentally. The AC time, there are also external impact around 30%. Reasons for this slow type policy also did not make any such as difficulties of selling electric- development are resulted from weak- stipulation for qualification and quan- ity, unsmoothness of price mecha- ness of SHP itself and external eco- tification of SHP. Especially, it lacks nism, slow development of market, nomic policy environment, etc. It concrete subsidiary policy and op- constraints of its public welfare char- should be pointed out that the macro erational function relating to the right acter, etc. Within all contradictions, economy policy environment for en- of integration into the grid and vol- the most critical ones are small scale ergy is not favorable to SHP devel- ume to electricity. The MC type generation, difficulties in selling, sea- opment. SHP has been developing policy, though came up rather earlier sonal variation, price mechanism and through a rough and bumpy road and had touched the issue of prop- constraints of its public welfare char- onto the present mainly due to initia- erty right, is much imperfect and could acters. These have directly affected tives of developing local economy hardly be executed under various the economic effect and competitive from local government. This signifies complicated factors of the nation’s capability of SHP and resulted in the its good external economics but could reformation for economic institutional low capital return rate, difficulty of hardly ensure its internal economics and system. In the EI type policy, only regu- financing and lack of capability for SHP NEWS, Summer, 2003 3 SHP in China sound cycle rolling development. ence, enterprise status and under- nal and external economic characters, 1.
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