Mekong River: Pouring Money On Troubled Waters

 

THE MEKONG RIVER rises on the Tibetan plateau, flows through Yunnan as the Lancang river and then on to Myanmar, Laos, Thailand, Cambodia and Vietnam before discharging into the South China Sea.

Some of those countries have been involved in its cooperative management since the 1950s and all six since the mid-1990s. But the vehicle for that, the Mekong River Commission, wasn’t Beijing’s creation and China only held ‘dialogue partner’ status. Cue a standard response from Beijing’s international relations playbook: set up an alternative institution of its own.

The first Lancang-Mekong Cooperation summit has just been held in Sanya, the resort city on southern Hainan island. Premier Li Keqiang made it clear who was paying the piper when he promised the five other Mekong countries $1.5 billion in preferential loans and $10 billion in credits for infrastructure and industrial projects, $200 million in poverty-alleviation aid and $300 million for small and medium-sized cooperation projects.

The largesse was not only to ensure that the China-led summit got off to a well-oiled start. It was also intended to offset some of the regional tensions over the South China Sea, thus defusing the potential appeal of Washington’s ‘Asia pivot’. But most of all, Beijing wanted its generous development aid to provide the wherewithal for the five countries to buy the infrastructure development envisioned under China’s One Belt, One Road’ initiative. 

That is the point where the summit runs directly in the controversial development of the Mekong and its tributaries as a giant generator of hydroelectric power to fuel power-hungry South-east Asia’s industrial expansion, likely at a devastating cost to the river’s sustainability.  Between its headwaters and estuary, 32 dams have been built along the Mekong and its tributaries since the first was commissioned in 1971 — 20 of them since the turn of the century.  At least another dozen are under construction.

China’s stretch accounts for no more than around a seventh of the total length of the river, but its upstream location gives it considerable impact on downstream waters, especially where the river flows along the Thai-Lao border.

China completed its first hydroelectric dam on the Mekong in 1993.  The five it has since built (with two more under construction and another planned) have made it subject to voiciferous downstream criticism for the ecological and riparian damage they cause to the river and to the livelihoods of those living along it.

China regulates the flow of water on grounds of ‘flood control’. The most recent example was the release of water from the Jinghong dam in Yunnan announced on March 10, with further releases planned until April 10, purportedly to help ease drought downstream. 

Their critics say that these releases causes the river’s level to rise and fall between seasons far more rapidly than in the pre-dam era, endangering fisheries. The longer-term concern is that the dam-building will change the river’s hydrology, blocking fish migration and affecting the river’s ecology throughout its length.

One of the outcomes of this month’s summit was an agreement on a water resource centre to manage hydropower development, floods and droughts. The question is whether that will prove to be a way for China to institutionalize its control of the river’s management while allowing the Mekong River Commission to atrophy.

The Lancing-Mekong Cooperation framework makes the management of the river a matter of government-to-government negotiations, to the exclusion of non-governmental and community groups who might question whether large hydropower dams continue to be sustainable development model. By increasing its political sway over its neighbours, Beijing may succeed in keeping domestic political priorities in those countries tilted in favour of meeting their energy needs through hydropower over the interests of sustainable management.

This Bystander recalls a telling incident in the mid-1990s when China held back the Mekong’s waters upstream by filling a dam reservoir. This just happened to coincide with a ceremonial sailing from Thailand to Vietnam to mark the establishment of the Mekong River Commission. The vessel ran aground, so shallow were the river’s waters downstream. Today, Beijing finds it can cause much the same policy effect by controlling the flow of money.

Damming The Mekong

While Myanmar appears to be pressing ahead with dam construction for hydropower plants in the face of environmental concerns, Laos is being more cautious. Or at least giving the appearance of being so. Viraphonh Viravong, the country’s deputy minister for energy and mines, tells the state-run Vientiane Times that Laos will not start building its controversial Xayaburi dam on the Mekong river until it has resolved all concerns about potential impacts.

The measure of Viraphonh’s words, and the environmental impact review being conducted by two sets of international consultants, Poyry from Finland and Companie Nationale du Rhone from France, will be being watched closely by China’s giant state-owned dam builder Sinohydro which is involved in at least eight of 25 dam-building projects in Laos for which Chinese firms are contractors, though Xayaburi is not one of them. Other Chinese companies with a similar interest include China International Water and Electric, China Southern Power Grid, Datang and Gezhouba.

Viraphonh said there are two issues with what at 1,260 MW would be Laos’s  largest hydropower plant. They are fish migration and sediment flow, both, according to environmentalists, critical to sustaining the Mekong’s ecosystem. Four dams exist in the narrow gorges of the Upper Mekong in China but until now there have been none on the slower moving lower reaches of the river. China’s damning has made downstream hydropower plants more economically feasible by smoothing out the seasonal flows of the Mekong.

A report for the intergovernmental Mekong River Commission published in October 2010 said that given the far reaching potential effects on the ecosystem, any construction should be delayed for 10 years to give time to plan for more sustainable hydropower development. However, a multi-billion dollar contract to build Xayaburi was signed in April with Ch. Karnchang, one of Thailand’s leading construction companies. Preliminary work has started regardless of deputy ministerial statements.

Sinohydro Looks To Restart Work On More Myanmar Dams

Sinohydro, the Chinese state-owned contractor for Myanmar’s suspended (for now) Myitsone dam project near the headwaters of the Irrawaddy river and China’s leading dam builder, faces a new environmental and reputational challenge now the government in Naypyidaw has approved construction of the controversial Hatgyi dam on the Salween river.

The isolated Salween is one of the world’s longest free-flowing rivers. It rises on the Tibetan plateau and courses through the canyons and gorges formed when the plates of the Indian subcontinent and Asian mainland met. For much of its 2,800 kilometers, the river flows through Yunnan, where it is called the Nu Jiang. Then it cuts through the eastern edge of Myanmar and marks 120 kilometers of the border with northwestern Thailand, a portion of which is shown in the photo above, before turning back into Myanmar to reach the Andaman Sea at the old teak trading port of Mawlamyaing.

En route, it flows through the watershed known as the Three Parallel Rivers of Yunnan, a UNESCO world heritage site. The river is so environmentally sensitive and biodiverse that local protests forced Beijing in 2004 to cut plans to build 13 hydroelectric dams along its own stretch of the river to four, and then in 2009 to suspended even those pending a still uncompleted environmental review. One of the proposed dams would have been bigger than the Three Gorges dam.

The $1 billion 1,200 MW Hatgyi dam is one of at least five hydropower plants planned for the Myanmar leg of the Salween by a partnership of the Myanmar and Thailand state electric utilities (see map, right, from the environmental group, Salween Watch). Hatgyi’s go-ahead follows the signing of a peace deal between Naypyidaw and ethnic Karen rebels. Sinohydro, which was given the contract to build the dam in 2006 before fighting stopped construction starting, has reportedly been stockpiling equipment and material at the site since mid-April in preparation for a resumption.

Environmental groups are gearing up again to block construction, saying it will destroy traditional village life along the ecologically fragile river, forcibly uprooting local populations and flooding farmland. Periodic local protests against the project have been staged since 2004, the most recent in March.

Sinohydro is also the contractor for another proposed dam on the river that could now go ahead following a peace agreement between Naypyidaw and a different group of ethnic rebels, in this case the Shan. The $6 billion 7,100 MW Tasang dam is planned to be the one of the highest in southeast Asia, taller than the Three Gorges. China’s state-owned Three Gorges Corp., which built and runs the Three Gorges dam, is a sub-contractor to the Tasang dam project. Some 60,000 villagers will have to be relocated to build it. Sinohydro has reportedly started surveying work there. As with Hatgyi, most of the power generated will be sold to Thailand and China.

The Tasang, Hatgyi and Myitsone dams are just three of 56 hydrodam projects in Myanmar proposed, under construction or completed that Chinese companies are involved in, according to a count by International Rivers, a riverine NGO. Sinohydro is involved in at least 17 of them, equivalent to one in eight of all its 132 current dam projects outside China. The international expansion of its business is leading the company to be more environmentally and socially responsive than it was in the past. The extent to which it will need to be in Myanmar may most depend on how rapidly the government in Naypyidaw wants to push ahead with opening the country to rapid development, and how well the economic rationale for projects originally intended to provide export earnings to fund a military dictatorship that has now stepped back from power hold up.

China’s Power Shortages Set To Persist

The drought in southwestern China is now not only leaving farmland parched but it is also starting to hit industry hard. Officials say a lack of water to drive hydroelectric power plants will cause electricity shortages not just this autumn, as has become the seasonal norm, but through the winter .

Water levels in the drought affected areas are down 30-40% from last year, with only limited replenishment from rains expected this autumn. The hydro-caused shortages are been exacerbated by coal-fired power plants also falling short of output goals. Coal prices are rising but utilities can’t raise prices to end-consumers by anything like as much, so they are cutting back production and taking plants off-line for ‘maintenance’ rather than suffer increased losses by generating power.

Difficulties in shipping coal to the power plants has only made matters worse, while the lack of a national grid means that regions with surplus power, notably Inner Mongolia, can’t export it to the rest of the country. Industrial plants in Shanghai and elsewhere on the eastern seaboard have been subject to intermittent power rationing since the summer, as have those in some other parts of the country, such as Guizhou, Qinghai, Gansu and Shanxi. Commercial users have been leaned on to reduce their demand by closing down operations at times of peak demand.

Earlier this year, officials anticipated a nationwide shortage equivalent to a generating capacity of 40 gigaWatts, or 4% of national capacity. The persistent drought in the south and southwest has probably made that number an underestimate. The power shortages are said to be the worse since 2004.

Demand has also been boosted by the boom in sales of white goods over the past couple of years and the property bubble, which has seen badly insulated buildings thrown up by the acre. On some estimates four out of five new homes built since 2008 are thermally inefficient.

With an installed power generation capacity of more than 1,000 GW, China has the largest power system in the world after the U.S. but demand is growing at more than 10% per year. Meeting it requires investment along a rickety supply chain that runs from antiquated coal mines to power plants and on to end-users.

Getting more market based pricing for electricity would go a long way to sorting out the problem. Wholesale electricity prices were raised in parts of the country in May and some commercial and industrial users saw higher tariffs in June, but it is politically difficult to raise prices for residential consumers while consumer price inflation remains so stubbornly high. In truth, China’s energy sector is stuck half way between state and market. As a result, there are incoherent signals about what is the necessary level of supply and investment, and over the incentives for energy saving, despite the much touted development of green energy technologies to make the economy less energy intensive.

China’s Green Leap Forward

China has a goal of meeting 15% of its energy consumption from non-fossil fuels by 2020, and the five-year plan that starts next year calls for a large expansion of hydropower for electricity generation. The World Bank, in a policy note on the Great Green Leap Forward, says China needs to do four things to hit its goal:

Develop hydropower faster. Hydropower rehabilitation and more rapid and environmentally and socially sound development could achieve the target at a lower cost because hydropower is already competitive with coal. Developing hydropower more quickly would allow for increasing the renewable energy target above the envisaged government target without increasing the incremental cost of the program.

Improve the performance of wind power rapidly. China’s experience has been less than optimal in planning wind farm, operational integration and coordination between developers and grid operators. This considerably reduced the performance of the wind program. If not addressed adequately, the high level of inefficiencies could increase the cost to the nation of the envisaged wind program, which could become prohibitive.

Promote trade. With trade, provinces could achieve their mandated targets. Renewable energy transactions would amount to about 360 terawatt-hours, 42 percent of the total of the envisaged government target. And more important, trade would reduce the discounted cost of the envisaged renewable energy target by about 56-72 percent.

Develop green electricity scheme(s). Green electricity has been well studied in China and piloted in Shanghai municipality. Deploying green electricity schemes at the national and regional levels should be considered among the options to pay for the incremental cost resulting from the development of renewable energy.

All in all, an off-to-a-good start report with some could-do-betters, particularly with wind power, where approaching a third of the power generated is off-grid, and much, much still to be done.