Towards A Water & Energy Secure China: Tough choices ahead in power expansion with limited water resources
The report explores strategies towards water and energy security in China as well as to provide an overview of water risk exposure across China’s power landscape.
China’s waterscape is changing. Water risks in China, be they physical, economic or regulatory, have great social-economic impacts and are well recognized, especially those in China’s water-energy nexus. Today, 93% of power generation in China is water-reliant. In short, no water = no power and vice versa as we require power to clean, transport and distribute water.
With 85% of China’s electricity consumption, industry faces a double whammy – direct exposure to water scarcity and pollution & indirect exposure through its use of water-reliant power. There are serious implications for business and investors.
Water also increasingly is interlinked with climate issues and divergent trends in water use and resources indicate a thirstier future. Against this backdrop, China is still hungry for thirsty power with plans to grow its economy as its population continues urbanise. Indeed, China’s per capita power generation installed capacity is still far below that of the G20 average. By 2020, China could add up to 2TW of installed capacity – this is more than the current total installed capacity of the US, UK, France, Germany, Russia and Japan combined.
Can China manage this magnitude of power expansion with limited water resources?
To facilitate understanding of these challenges brought on by China’s changing waterscape, the report highlights key issues within China’s water energy nexus and summarises the multiple strategies that will have to be adopted simultaneously across a broad spectrum of sectors into a broad three-prong approach:
- Balancing power mix by considering trade-offs among water, energy and climate;
- Controlling water use in the agriculture, coal mining and coal-related sectors to ensure food and energy security; and
- Curbing energy demand as saving power means saving water.
China’s power mix is already evolving. Water reliant power is expected to fall to 72% by 2050 with an aggressive add of wind & solar capacity, but China will still add +1.2TW of water-reliant power, equivalent to 4x the total installed capacity of Japan. That said, some types of power require more water to generate electricity than others but what is good for water may be bad for the climate.
Therefore, in addition to the “strategy-prongs”, water risk profiles of China’s power types are also detailed in separate chapters. The report provides an update on the work we did on water risks in power generation and coal in our collaborative reports with HSBC & CLSA respectively. In addition, there are in-depth chapters on water risks across hydropower, nuclear, wind and solar. Planned and forecasted installed capacity across power types, water use in coal mining and power generation as well as water savings scenarios where relevant are all explored in the report. Other prevalent risks are also examined including geopolitical risks brought on by the tapping of transboundary rivers for hydropower; water contamination fears associated with inland nuclear expansion in the densely populated Yangtze River basin; and hidden little talked about toxic water risks brought on by aggressive expansion in wind and solar.