The water-energy nexus has attracted considerable attention both in China and globally in recent years. There is a close link between water and energy: on one hand, water supply and water saving measures may need energy and hence worsen energy shortage; on the other hand, energy production and energy saving measures will also likely consume water, again exacerbating water shortage.
Water risk in energy bases
China’s energy supply is coal-dominated and this is unlikely to change in the long term. Coal reserves lie in the middle and upper reaches of the Yellow River: Shanxi, Shaanxi, Inner Mongolia, Ningxia, Gansu and Qinghai account for 80% of the national coal reserves. These regions will remain China’s primary energy supply base in the future.
Although coal mining itself does not use much water, it has great impact on groundwater. Moreover, the coal washing, cooling process during coal-fired power generation and the coal-to-chemical industry all need water and yet the upper Yellow River is one of the most water scarce regions in China.
So is there enough water to support the development of energy bases in this strategically important region? Some international NGOs have expressed their serious concerns and generated widespread attention & conversation on this topic namely:
Circle of Blue and Wilson Center, two American NGOs, started a join initiative “Choke Point: China” in 2011 to address water scarcity and energy demand. Their research concluded that, given the rapidly growing energy demand and significantly decreasing water resources, there is a catastrophic conflict between water and energy during China’s development, and such conflict has been very significant and will worsen over the next 10 years. According to them, water use in mining, processing and consumption is about 120 billion m3 annually, accounting for the largest part of industrial water use and one-fifth of the total national water consumption. By 2020, China’s coal production will increase by 1 billion tonnes and they question if can China find enough water – nearly an additional 15 billion m3 per year – for the new production levels;
Greenpeace released a report called “Thirsty Coal“ in 2012, which projected that water consumption of China’s 14 energy bases will reach 9.9 billion m3 annually, accounting for a quarter of the Yellow River’s 37 billion m3 available water resources. They express concern that these energy bases will drain the available water resources.
China Water Risk, a Hong Kong-based NGO published a series of articles on water issues in energy bases and was commissioned to write reports for HSBC & CLSA on water risk in the power & coal industry. These also raise concerns that water shortages could be a major threat to the energy bases along the upper Yellow River.
Will water shortages really threaten the development of China’s energy bases? No
There are lots of different opinions about water resource conditions in energy bases, but all point to one question: will water shortages really threaten the development of China’s energy bases?
My answer is no. One thing is clear: the water supply of China’s energy base can be guaranteed.
Water supply in energy base can be guaranteed
Firstly, Circle of Blue, Greenpeace and China Water Risk all over-estimated the water demand from the energy bases in the middle and upper reaches of the Yellow River.
Greenpeace’s projection of water demand is too large and does not correspond to water demand of the upper and middle reaches of the Yellow River. The 14 energy bases include those located in Anhui and Shandong provinces, where water resources are less challenged. Therefore, we cannot simply compare the total water demand of the 14 energy bases with the available water resources of the Yellow River.
Within Greenpeace’s projections of 9.9 billion m3 of water demand by energy bases is 6.6 billion m3 of water use in the mining process. But actually, mining in the upper and middle reaches of the Yellow River only needs 1 billion m3 or less of water. The main reason for the difference is that their calculation didn’t take into account specific provincial water quotas. Greenpeace assumed 1m3 of water for extracting one tonne of coal. However, local standards such as “Water Use Quota in Shanxi” (2008), indicates a water quota for underground mining at 0.35m3/tonne of coal and only 0.1m3/tonne of coal for open-pit mining. Therefore, Greenpeace’s figure is materially greater than that of the actual water quota.
Also, we should be careful not to confuse water use in coal mining with mining drainage. Except for sprinkling of dust and miners’ daily use, coal mining alone does not use too much water. Nevertheless coal mining will change the storage and movement of groundwater, and the mine water yield can be either stored at an abandoned minefield or discharged into a river after treatment. The mine water yield or drainage is not consumed, but only displaced and so it’s not really correct to say that 3m3 of water will be destroyed per tonne of coal mined.
Circle of Blue and Wilson Center’s water demand projections were even larger and more outrageous. Their reports claimed that China’s coal mining and consumption use 120 billion m3 of water, without citing any data source. In fact, in recent years, the total annual industrial water use (in terms of freshwater) is only 150 billion m3. Thermal power generation is the largest user of industrial water, consuming 50 billion m3 of water annually or one third of the total industrial water use.
Of the 50 billion m3 of water use by thermal power generation, southern China (south of the Yangtze River basin) accounts for 44 billion m3 whilst the entire northern China only used 6 billion m3! The reason is because power plants in the South use once-through water cooling to generate power due to relatively abundant water resources; while power plants in the North generally use closed-loop water cooling due to water shortage. Some in the North have started using air cooling, which uses even less water.
Their projected water demand of 44 billion m3 for additional new coal production is also outrageously over-estimated. In the middle and upper reaches of the Yellow River, extracting one ton of coal needs no more than 0.35 m3 of water. If coal production is to increase by their estimate of one billion tonnes, the additional water demand will only be 350 million m3. How did they calculate an additional water demand of 15 billion m3?
China Water Risk made reference to above two reports on their website, but also cited some other inaccurate and misleading data that exaggerate water demand in coal and coal related industries. For example, in an article in 2014, they cited the data from an expert from the National Climate Change Research Center, saying that producing 1,000 m3 of synthetic gas needs 7m3 of water.
According to a recent study(1), China’s plan for coal-to-gas is to reach production capacity of 18 billion m3, 50 billion m3, 100 billion m3 by 2015, 2020 and 2030, respectively; accordingly, the water demand for coal-to-gas (using the number quoted by China Water Risk will be 126 million m3, 350 million m3 and 700 million m3, respectively. However, as per an EIA report for a coal-to-gas project(2), the water quota for coal-to-gas is less than 2.5m3 of water per 10,000m3 of gas. Therefore, to produce 100 billion m3 of gas, it merely needs 25 million m3 of water. Obviously, projections based on this number is many times greater.
MWR estimates the total water demand for energy bases in Shanxi, Shaanxi, Inner Mongolia, Ningxia & Gansu to be no more than 3 billion m3
Secondly, government authorities have carried out detailed studies on water demand by energy bases in the middle and upper reaches of the Yellow River. Specifically, the Ministry of Water Resources (MWR) conducted research to ensure water availability in Integrated Water Resources Planning, Long-term Water Supply & Demand Planning, and the Western Route of South-North Water Transfer Project Planning. According to MWR’s estimation, the total water demand for energy bases in Shanxi, Shaanxi, Inner Mongolia, Ningxia and Gansu is no more than 3 billion m3, given the regional planned production.
Water strategies for energy bases
There are ways to ensure water supply for energy bases: agricultural water savings and inter-basin water transfer.
Agricultural water savings
For this region, agriculture production accounts for 80% and in some provinces even more than 90% of total water use. Implementation of water saving measures can thus result in agricultural water savings which can be transferred to energy bases.
Irrigation water withdrawal can be reduced by 8 billion m3 for Ningxia, Inner Mongolia, Shanxi, Shaanxi & Gansu
In Ningxia, it is estimated that water-savings potential in irrigation can be more than 3 billion m3, and actual agricultural water use can be reduced by about 1.3 billion m3.
For Ningxia, Inner Mongolia, Shanxi, Shaanxi, Gansu along the Yellow River, total irrigation water withdrawal can be reduced by 8 billion m3, and agricultural water use can be reduced by 3 billion m3.
Inter-basin water transfer
If agricultural water savings cannot meet the rising demand in industrial and municipal water use, building the Western Route of the South-North Water Transfer Project (Western Route) can be considered.
Building the Western Route of the South-North Water Transfer Project can be considered …
The key to the success of inter-basin water transfer projects is whether there are water users that could afford the relatively higher cost of ‘transferred water’. The reason why some water diversion projects haven’t commenced as planned is mainly because high project costs result in high water prices and there are currently not enough users who can afford to pay the price. For the Western Route, the energy industry will be the main user and these users can afford to pay the higher water prices.
…energy companies can afford the relatively higher price of ‘transferred water’
Several water rights transfers between agriculture and industry along the upper reaches of the Yellow River have been executed in Ningxia and Inner Mongolia. Industrial enterprises paid for agricultural water saving measures, and in return they received additional water quotas equivalent to the agricultural water savings, which are valid for 25 years. This water rights transfer is currently costing energy companies more than RMB25/m3, which can be translated to RMB2.5/m3 per year. In the meantime, the actual water fee (including water resource fee, water supply cost and wastewater discharge fee) is RMB6/m3. Therefore, it is clear that energy companies can afford the relatively higher price of ‘transferred water’.
Transferable water from the Dadu, Yalong & Tongtian rivers is 22.1 billion m3 …
Moreover, the Western Route actually comprises several smaller-scale water transfer projects which can be implemented through several phases. The water sources of the Western Route include three rivers with total annual runoff of 22.1 billion m3: the Dadu River at an altitude of 2,900m, and the Yalong River & Tongtian River at 3,500-3,600m. According to the preliminary plan, the annual average transferable water from these three rivers is 12-17 billion m3: 3-5 billion m3 from Dadu, 3.5-4 billion m3 from Yalong and 5.5-8 billion m3 from Tongtian.
… actual water demand of energy bases along the middle and upper reaches of the Yellow River will not exceed 3 billion m3
The first phase of the project can be implemented in the three tributaries of the Dadu River, namely Ake River, Ma’er River and Duke River as these lie closer to the Yellow River; about 3-5 billion m3 can be transferred. If the development of the energy bases is really suffering from water shortage, water transfer from the Dadu River of around 4 billion m3 to the Yellow River can be implemented first. Once implemented, it will not only meet water demand from energy bases, but also supply water for industrial and municipal use.
So although Yellow River energy bases may face water challenges, the risk is not as sensational as many reports portrayed
In short, although energy bases along the middle and upper reaches of the Yellow River face water challenges, the risk is not as sensational as many reports portrayed. Future water demand of these energy bases will not reach 10 billion m3 or more. Water supply in the region can be guaranteed. In fact, actual water demand of these energy bases will not exceed 3 billion m3, which can be met by agriculture water savings and inter-basin water transfer. Energy companies can afford the higher price of water transferred to the Yellow River from the Western Route.
Perhaps together, the development of energy bases along the middle and upper reaches of the Yellow River and the construction of the Western Route, can achieve a win-win!
1 Huang Yanhua. 2014. Status and forecast of China’s coal to gas industry (中国的煤制气行业现状及预测). Oil & Gas Observation, 2014(5)
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