Chinese Utilities Face $20 Billion Costs Due to Water, BNEF Says

China’s five largest power utilities are heavily exposed to water supply disruptions and face costs of as much as $20 billion to curb the risk, according to data compiled by Bloomberg.

The companies, which have more than 500 gigawatts in mostly coal thermal capacity, operate most plants in water-scarce regions and are set to exceed China’s 2030 water usage limits by 25 percent, according to a Bloomberg New Energy Finance report. Significantly reducing this risk will require a major policy effort and involve the replacement of gigawatts of capacity, it said.

“The issue of infrastructure resilience is rapidly rising up the agenda, driven by the number of high-profile droughts and floods in recent years, including Hurricane Sandy,” BNEF Chief Executive Michael Liebreich said in the statement. “This report highlights the risk water stress poses to China’s Big Five utilities, but the message holds for many other utilities and corporations around the world.”

China’s five largest utilities comprise Huaneng Power International Inc., Datang International Power Generation Co. Ltd., Huadian Power International Co. Ltd., China Guodian Corp., and China Power Investment Corp.

With some regions already extracting water from aquifers faster than it’s being replenished, increases in power-sector withdrawals could be unsustainable, according to BNEF.

About 85 percent of China’s power capacity is located in water-scarce regions and 15 percent, or more than 100 gigawatts, still relies on water-intensive technologies, according to BNEF. Options to reduce risk include building new plants in the south, far from industrial areas, or retrofitting existing plants.

The replacement of existing plants that use water-intensive once-through cooling technologies would cost $20 billion and cut their capacity by 10 gigawatts due to lower efficiency, it said.

Making up this gap will increase China’s greenhouse gas emissions unless less-polluting technologies such as gas or renewables are used as replacement, BNEF said. Water scarcity will drive the installation of wind and solar power, it said.

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