Asian hydropower projects may add to oil reliance

Aug 07, 2006 02:00 AM

Asian plans for a multitude of hydroelectric projects will lead some nations to a greater reliance on dams to meet power demand, potentially triggering costly bouts of extra oil imports in times of drought.
While coal, gas and nuclear power stations will make up the bulk of new regional generation, hydro will take up a growing share in countries such as China and Vietnam as record-high oil costs spur domestic energy production.

Planned hydropower projects across Asia aim to add at least 40,000 MW of generating capacity, mostly by 2012, with more projects proposed. For Laos, a $ 1.2 bn project to build the 1,100 MW Nam Theun 2 dam, 500 km (310 miles) southeast of the capital Vientiane is seen as a key part of a bid to become an 18,000-MW battery for a region hungry for electricity.
The implications of such investment extend far beyond national borders and into the global energy market. Heat waves in Europe and the United States in the past month have boosted power demand and helped lift gas and oil prices, now over $ 75 a barrel.

In China, a shortage of power in 2004 coupled with low hydro rates fuelled a 15 %-leap in oil demand that helped send prices to a then-record above $ 50. This came a year after a nuclear safety scandal in Japan caused a burst in oil imports.
Hydropower consumption in Asia Pacific rose 7 % last year, slightly lagging coal and natural gas, according to BP's Statistical Review. This was still a tenth of energy consumed from coal, and analysts say there are limits to its role. While natural gas and coal are both cheaper fuels for back-up power generation, their illiquid spot markets can make it difficult to get emergency supplies in a hurry; oil, however, is readily available for the highest bidder.

China now leads the way on new hydropower projects as it seeks to boost domestic power output to limit growing oil imports. Hydro makes up a quarter of China's power capacity but it only got 14 % of its electricity supply from hydro in the first half of 2006.
The world needs to spend $ 10 tn for power needs by 2030, the International Energy Agency (IEA) said, over $ 2 tn of that for electricity in China alone.

Its Three Gorges Dam, the world's largest hydropower project that finished in May, will have a capacity of 18 GW by 2009. But this looks small compared to the 75 GW that will be added overall in 2006 to total capacity of over 500 GW.
Critics argue that the cost of such projects -- expected at $ 25 bn for the Three Gorges -- does not include the need to resettle people flooded out of homes and environmental impact. The desire for power may overwhelm such arguments.

New Zealand is the most hydro-reliant Asia-Pacific country with 60 % generation, as it gets ample rain and is looking at other options such as gas for increased power.
The risks from increased reliance on hydro is clear in other countries with over 10 % share of hydro for power, such as Pakistan and Vietnam, which have seasonal monsoons, while there are growing fears that global warming may cause more droughts.

Pakistan is expected to have boosted its fuel oil purchases by a quarter in the financial year just ended after a drop in winter rain and snowfall reservoir water levels. Fuel oil prices have surged 30 % from a year ago.
Vietnam, already reliant on 40 % hydropower, plans to build more plants and import hydro electricity from Laos. But this year it has increased power imports from China fivefold to avoid a supply crunch during the dry season.

Elsewhere projects have led to uprooted communities, violent protests and damaged fish stocks.
In Thailand furore over the Pak Mun Dam that was built over a decade ago has blocked new dams, leaving it hoping for projects in Myanmar and Laos.

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