"Small hydropower is unique"

In 2002, at least 42,221 small hydropower (SHP) stations were operating in China, supplying adequate power to more than 300 million people. This achievement is the result of meticulous planning rather than any technological breakthrough. V K DAMODARAN, managing director of China-based International Centre on Small Hydro Power, spoke to SURENDRANATH C on the nitty-gritty of the country's SHP system

By Surendranath C
Published: Saturday 31 January 2004

Is the system of small hydropower (shp) stations centralised?
While the development targets, strategies, standards and policies are decided by the national government, the people and local governments (at the city or county level) take decision about implementing a project or not. Detailed river flow studies, power potential assessment and designing are also done at the local level.

Who owns shp stations?
Out of the 22,700 shp stations in 2001, as much as 58 per cent were owned and managed by the communities. The government controlled only 19.70 per cent. The policy is: "who invests and who owns, benefits".

Who funds shp programmes?
Significant returns are obtained from shp projects' linkages with irrigation, fisheries and local industries. Therefore, funds is not a problem. Bank loans account for 38 per cent of the total investment in shp stations. Majority of the funds are mobilised locally. The state government's investment is small -- around 10 per cent.

How is government promoting shp?
A favourable tax policy exists, charging just six per cent value added tax on shp stations against 17 per cent for large hydropower (lhp). In remote areas, autonomous regions or places where ethnic minorities live, one can get 100 per cent central government subsidy for shp.

In developed areas (such as those located in the eastern part of the country), subsidies are not granted; the projects have to be competitive. In the central region, the subsidy varies from 30 to 70 per cent. In forest-fringe areas near sanctuaries and wildlife parks, as well as the ecofragile upstream regions of the Yellow River, there is a special programme to replace fuelwood with shp. Under this programme, 100 per cent subsidy is granted. The objective is to promote the usage of hydroelectricity for cooking and heating; this eliminates the use of fuelwood and thus saves forests. One kilowatt of shp installed capacity is estimated to save four tonnes of firewood.

How is the power supplied?
There are three different connectivity systems. In the developed eastern part, shp stations are directly connected to the centralised grid. But these account for just 10 per cent of the total shp stations of China.

In the western and central regions, local grids operate in mountainous areas. Nearly 20,400 stations, accounting for around 42 per cent of the total shp stations, are linked to these local grids. They sell power to the central grid when there is surplus and buy from it when faced by scarcity.

There are also stand-alone stations (around 17,840) operating in isolation. Chinese call this complementary coexistence of different systems as "walking on two legs".

What about the technology base?
Every nut and bolt required for shp generation is manufactured within the country. There are over 100 manufacturers, both from the public and private sector. Presently, the manufacturing sector has a capacity to produce equipment for adding 3,000 megawatts of hydropower annually; this is much higher than the 100 megawatts in 1970s.

Furthermore, every province has design institutes that provide with project plans and, at times, even undertake investigation. The local government, or a cooperative/company implements the project.

Is SHP better than LHP?
The Chinese had understood quite early that shp was not a scaled-down version of lhp; it had its own unique advantages and characteristics. Because of this, shp programme has tapped nearly 40 per cent of the total power developable capacity, far higher than the achievement of the lhp segment.

Is shp facing any challenges?
With structural readjustments in the economy, shp units have to compete with larger projects. Earlier, some counties, which could not access the national grid, were allowed to charge higher prices for shp. But this is no longer the case. In the face of such pressures, there is a trend for shps to expand operations. In China the upper limit for the shp installed capacity is already 50 megawatts against the global standard of 10 megawatts. An expansion will mean complexities in designs, growth rates, environmental impacts and financing.

Another challenged faced by shp pertains to ownership rights. As these are not clearly defined, seizure of assets and supply areas by outside agencies are increasing, forcing many owners to shut up shop.

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