Balancing Water For Agri & Coal

By China Water Risk 15 April, 2015

China's coal mines lie next to its farmlands. Can China save enough water in agriculture to fuel coal growth?

Agri & coal-related industries are the two largest users of water; China plans to save agri water to fuel coal growth
Provinces projected to have 95% of coal output by 2020 are also home to half of China's sown land
Water savings in coal are greater than irrigation savings but both are needed if the Western Route is to be avoided

China Water Risk Towards A Water & Energy Secure China15 April, 2015 – China Water Risk published report titled “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.

Below is a teaser on the Chapter “Ensuring Food & Energy Security – Control water use in agriculture and coal” from the report.
Click here for the full report. Click here for the overview.

China Water Risk Ensuring food and energy securityChina’s current total water use is at 618 billion m3, of which agriculture and energy are the number one and two largest users of water respectively. Managing water in agriculture and energy is thus key to ensure that China stays within the Red Lines.

According to the ‘Three Red Lines’ (China’s policy in water management to ensure that socio-economic development does not put the environment at risk), China set national water use quotas for 2015, 2020 and 2030 to be 635 billion m3, 670 billion m3 and 700 billion m3 respectively.

Analysis from our report “TOWARDS A WATER & ENERGY SECURE CHINA” (referred to as the report) shows that we are on track to stay within the 2015 target. However, managing water use may be more difficult in the future…

Controlling water in agriculture & coal is key to stay within the Red Lines

The report also examines the forecasted growth in coal output and coal-fired power generation compared to the growth in water use allowed by the national water quota. It is clear from the chart below that agricultural water savings must be made in order to accommodate coal output & coal-fired generation growth which are both rising faster than total water use:

Coal Output & Coal-fired Power Growing Faster than the National Water Quota

Government is looking to transfer water savings from agri to industry including coal …
… pilots are established across 4 Coal Base Provinces

Aggressive water savings across agriculture and industrial sectors are a must as municipal water is also set to grow due to rising urbanization. Indeed the practice of transferring agricultural water savings to coal base projects has been experimented in Water Use Permit Trading pilots along the upper reaches of the Yellow River. Seven provinces have been identified to establish pilot markets for water rights trading, four of them are amongst the Coal Base Provinces. With the water rights trading, irrigation projects could be financed to ensure food security whilst simultaneously ensuring enough water for coal-related projects.

Separately, State Council has indicated a target of 360 billion m3 by 2025; this means a savings of around 30 billion m3 from today. Can China manage this?

In our report we explore the tightness in managing water for both food and energy security. Is there enough water for coal bases in China to expand production to meet the coal cap at 4.2 billion tonnes and at the same time ensure sufficient water for agriculture? We also analyse controlling water use along the coal chain, agricultural water savings as well as alternative solutions such as water diversion from the South to the North.

Almost half of China’s sown land lies in the same 12 provinces as China’s coal bases

14 large coal bases spread across 12 provinces will produce 95% of China’s coal output by 2020 …
… These Coal Base Provinces are home to almost half of China’s sown land

China is consolidating coal production into 14 large coal bases across 12 Coal Base Provinces, which we call “Coal Base Provinces”. They are expected to provide up to 95% of China’s coal production by 2020 compared to 87% in 2010. Six of these 12 Coal Base Provinces are water scarce, three are water stressed and three are water rich, which means nine of them are water challenged.

What makes it even more challenging is that the 12 Coal Base Provinces are also home to 81 million hectares of sown land, close to half of China’s total sown land, which stood at 163 million hectares in 2012. To ensure grain sufficiency, State Council stated in the No.1 Document in 2014 that farmland must be maintained at a minimum of 120 million hectares.

As shown in the report there is no doubt that farmlands and coal bases will be competing for water in the future. In 2012, these 12 Coal Base Provinces used 233 billion m3 of water, of which agricultural water accounted for 73% and 31% was supplied by groundwater. Meanwhile, agricultural water savings are imperative to control water use in these provinces. It is also vital to protect groundwater, which means minimising mining’s impact on water.

Stepping up coal output in regions with more water only means a larger share of coal reserves in water scarce provinces in the future

Not surprisingly, China has been trying to shift coal  output to regions with more water. Our analysis show that China’s coal output from water challenged regions are expected to fall from 84% in 2012 to 78% by 2015.

However, this only means that an increasing share of coal reserves will lie in water scarce provinces in the future. Already this trend is showing in our analysis in the chapter on “Coal & Coal-fired Power” in the report.

Are agricultural water savings enough to ensure water for coal?

The government is promoting agricultural water savings, primarily by improving irrigation efficiency. The State Council has set target irrigation efficiency coefficients at 0.53, 0.55 and 0.60 by 2015, 2020 and 2030, respectively. The water savings from agriculture could supplement the industrial water quota and allow projects such as coal-to-chemical expansion in coal bases.

Analysis show that agricultural water savings are marginal compared to water savings along the coal chain

However, our projections of water savings for two Coal Base Provinces (Henan & Ningxia) in accordance with their irrigation efficiency coefficient targets indicate the difficulty in achieving this.

Moreover, small average farm plot sizes and difficulty accessing finance remain limit such savings. The results show that despite a more aggressive scenario, irrigation water savings may help but are marginal compared to potential water savings along the coal chain.

Coal faces a double whammy in times of droughts … it is not realistic to simply rely on agriculture water savings

In practice, increasing occurrence of droughts wreak havoc on agricultural water use. Droughts bring on more demand on irrigation water negating savings. Coal therefore faces a double whammy with water in times of droughts. Not only is more water required for irrigation, but more power is also required for irrigation.

Therefore it is not realistic to simply rely on agriculture water savings. Lowering water use along the whole coal-value chain is a must to secure water for coal and staying within the national water quota.

Lowering water use along the coal chain

Water is used in almost every step of coal production although the amount differs between extraction, preparation/washing and processing/conversion as shown in the diagram below.
Water Use Along The Coal Chain
As seen from the above, the range of water use by different processes along the coal chain is wide with the thirstiest being coal-fired power. In power generation the range can also fluctuate widely, the numbers in the graphic above are water withdrawals for closed loop cooling but for open loop cooling this can go up to 86m3/MWh. Given the lack of water, most of China’s coal-preparation plants are using closed loop water systems.

However, due to the lack of disclosure, actual water use figures are difficult to obtain. Many studies tried to provide total water demand in coal mining and coal-fried power generation. These discrepancies between studies are explored in our report.

Analysis shows technology choices matter for power plants re water & carbon trade-offs

It is clear from scenario analyses in the report that technology choices matter for power plants, wet cooling (closed loop, once-through) and dry cooling have different implications for water and carbon trade-offs.

Looking ahead to 2020, our Coal Cap & Dry Cooling Combo scenario show that by staying within the 2020 coal consumption cap of 4.2 billion tonnes plus opting for dry cooling technology for new coal-fired power plants in water scarce regions could save up to 2.5 billion m3 of water per annum. But dry cooling does come at a cost of increased CO2 emissions of 42 million tonnes… clearly what is good for water is not good for climate. Tough choices lie ahead.

China will do whatever it takes to ensure water for coal but water diversion should be a last resort

There is no doubt that China will do whatever it takes to guarantee water for coal. The energy bases along the Yellow River are of paramount importance to energy security.

In fact, there is a plan in place to transfer 17 billion m3 of water along the Western Route of the South-to-North Water Diversion Project. According to the report, the planned transfer amount should be more than sufficient to ensure water for coal as it is equivalent to around half the total industrial water use of the Coal Base Provinces.

With water savings from tech improvements in coal mining and coal-fired fleet, the Western Route may not need to be built

However, as per our analysis in the report, water savings from technological improvements across China’s coal-fired power plants could result in 17 billion m3, equivalent to the planned Western Route.

So it may not be necessary to proceed the Western Route; especially since controversy looms over their diversion as it may upset the delicate balance of the upper watershed of the Yangtze, along with long-ranging impacts on the environment. In addition, diversion needs power bringing us back to the water-energy nexus cycle.

With the inevitable rise in demand for food and electricity combined with China’s geographical constraints, it will be challenging for China to balance the nation’s agricultural needs against the ability of large coal & energy bases to provide power.

What China does has global ramifications for the climate and agri & coal trade

China needs to tread lightly within the water-food-energy nexus. What China does matters globally with climate change ramifications. Also, water and energy policies set in China can shape and shift both global agriculture and coal trade. Watch this space closely.

Further Reading

  • Towards Water & Energy Security – China Water Risk published report titled “Towards A Water & Energy Secure China”. Tough choices lie ahead in power expansion with limited water. Find out what strategies are employed and get a comprehensive overview of water risk exposure across China’s power landscape
  • China: Not Ready To Move Away From Coal – Professor Xie Kechang, Vice President of the Chinese Academy of Engineering, on the future role of coal, strategies to ensure energy security & challenges ahead for coal-to-chemicals
  • China’s Pursuit Of Energy Savings – Our report “Towards A Water & Energy Secure China” shows that billions of cubic metres of water can be saved via energy savings. See why China has no choice but to pursue this strategy
  • Wind & Solar: Hidden Water Risks – China is looking at aggressive renewable expansion with wind & solar set to soar. But could this intensify toxic hidden water risks from rare earth mining? Also some solar technologies require more water than coal to generate power. We explore these hidden risks in our report “Towards A Water & Energy Secure China”
  • China Nuclear: The Future is Unclear – Will China’s nuclear ambitions be thwarted by water risks and contamination fears? China Water Risk explores inland nuclear expansion and alternative scenarios for densely populated regions in our report “Towards a Water & Energy Secure China”

To access the chapter on “Ensuring Food & Energy Security” please access the report here.
China Water Risk Towards A Water & Energy Secure China China Water Risk - China's Water & Energy Roadmap

China Water Risk
Author: China Water Risk
We believe regardless of whether we care for the environment that water risks affect us all – as investors, businesses and individuals. Water risks are fundamental to future decision making and growth patterns in global economies. Water scarcity has emerged as a critical sustainability issue for China's economy and since water powers the economy, we aim to highlight these risks inherent in each sector. In addition, we write about current trends in the global water industry, analyze changes occurring both regionally and globally, as well as providing explanations on the new technologies that are revolutionizing this industry.
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