China Bets Big on a $167 Billion Tibetan Dam

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1:46Dan Murtaugh:Earlier this month, China officially started construction on a massive hydropower dam in Tibet.

1:58Dan Murtaugh:The dam, when completed, will be the biggest power plant on the planet.

2:04Menaka Doshi:It's three times bigger than the largest power plant in the world right now. It's more than all of the power plants in Poland combined.

2:11Dan Murtaugh:Dan Mertor covers the energy industry for Bloomberg from Beijing.

2:16Menaka Doshi:The amount of cement they're estimating they'll need, it would be enough to fill more than 50 Hoover dams. And the amount of steel, it would be enough to build 116 Empire State buildings.

2:25Dan Murtaugh:This mega project comes with a mega price tag,$167 billion.

2:33Menaka Doshi:This would be one of the most expensive undertakings for infrastructure in human history, more expensive than the International Space Station. You're looking at, you know, decades-long projects like building the U.S. interstate highway system before you get to comparable amounts of investment.

2:50Dan Murtaugh:China says the dam will provide a major source of clean energy. More importantly, it will boost the country's slowing economy. But the project carries huge engineering and environmental risks and could strain relations with two of its neighbors, India and Bangladesh.

3:10Menaka Doshi:The Indian government has been worried about if China was able to build a dam, they would then be able to use water access as a pain point if there was an eventual conflict between the countries. and there's going to be all of this human activity in a place that's been remote for most of its history. You hope for the best, but human history has not been very kind to the planet Earth and you just have to wonder if they're going to be able to rein in people from not damaging permanently this really unique area.

3:41Dan Murtaugh:This is The Big Take Asia from Bloomberg News. I'm Meena Kadoshi, filling in for one heart. Every week, we take you inside some of the world's biggest and most powerful economies and the markets, tycoons and businesses that drive this ever-shifting region. Today on the show, China bets big on a new mega dam, why the project is raising alarm with its neighbors and what its construction could mean for China's economy and its green energy ambitions.

4:21Dan Murtaugh:When it comes to building hydro dams, China's got plenty of experience. It operates two of the world's largest dams. That includes the world's biggest hydro dam, Three Gorges, which opened in central China in 2009. This new mega dam will be built in Tibet, a mountainous region just north of the border with India.

4:46Menaka Doshi:It's in this bend on the Yarling Tsangbo River that they call like the Medog or Murtog Gorge.

4:52Dan Murtaugh:And Bloomberg Energy reporter Dan Murtog says the dam is in an area that till recently was very difficult to get to.

5:01Menaka Doshi:It is a very, very, very steep drop. The river drops about 2 ,000 meters over a 50 kilometer stretch as it curves and bends through the mountains of the Himalayas. The county that it's at is, up until 2013, didn't even have a highway that connected it. You'd have to walk a day, you know, or take a donkey or a horse to get to the river from the closest highway.

5:25Dan Murtaugh:Most dams, like the Hoover Dam, block the path of a river to create a reservoir. They then release the water, which turns turbines and generates electricity. This Yarlung Sangpo Dam is different.

5:39Menaka Doshi:What they're trying to do here is a little bit more audacious. The idea is to drill a tunnel through the mountains down that steep, steep, steep gradient and then divert some of the water from going around that big bend and instead go basically just vertically straight down the mountain. That steep gradient that this river moves on really allows you to get that water flowing at high enough speeds to be able to run the turbines to generate the electricity.

6:09Dan Murtaugh:At the groundbreaking ceremony earlier this month, Chinese Premier Li Cheong called the Yarlung Sangpo Dam the project of the century. State engineers have said it has the potential to generate as much as 70 gigawatts of electricity. That's enough to power the United Kingdom.

6:31Menaka Doshi:It's three times bigger than the largest power plant in the world right now. It is a national country level type of generating asset. But China's huge. China has about 4 ,000 gigawatts of total generating capacity right now. Its peak demand is about 1 ,450 gigawatts. And so this project isn't going to have a huge world changing impact on China's power sector. But it does do a couple of different things that are going to be really beneficial to China's attempt to clean up its energy sector. and will help China meet its energy transition goals of peaking emissions by 2030 and then reaching net zero emissions by 2060.

7:11Dan Murtaugh:China still relies on coal-powered plants to back up its more sustainable energy sources like solar and wind.

7:21Menaka Doshi:Wind and solar, while cheap and while abundant, only generate when the wind blows. And it doesn't really allow them to replace coal plants because at the end of the day, you still need backup generation to make sure that when there's a period where there's no sun out and the wind stops, that people can still turn on their lights. What hydropower does that wind and solar don't do is it's what we call a dispatchable source. You can use it when it's needed. You can hold it back when it's not. Now, hydropower is not perfectly dispatchable. Like if you're using a fossil fuel power plant, a gas or a coal power plant, you can really just sort of turn it off and on as needed.

8:02Menaka Doshi:Hydropower, there's still some external things, like whether there's a drought, if there's too much water, there's rain, you know, you have to open the floodgates. It's not perfect, but it is a clean power source that allows the grid to be a little bit more flexible in terms of, you know, generating when it's needed and not just when the supply is available.

8:20Dan Murtaugh:That reliability and flexibility are just two of the reasons why building a hydroelectric dam is so expensive. The Yarlung-Sangpo Dam will cost$167 billion, more than the International Space Station did. And Dan says the power it generates will be several times more expensive than any other energy source.

8:48Menaka Doshi:If it ends up being about a segment gigawatt project, as we expect it to be, you're talking about$2.4 million per megawatt. Now, that compares to an onshore wind plant right now that China would spend about$600 ,000 per megawatt on, or a solar power plant that China would spend about$400 ,000 per megawatt on. China infrastructure projects never lack for lenders, but this is not a white elephant. This is going to be a hydropower project that sells a lot of electricity. That electricity has value. And so they're going to be able to go to their lenders and say, listen, over 20, 30 years, we're going to make a ton of money and we're going to have the revenue to pay you back.

9:28Dan Murtaugh:Dan says there's another reason the Chinese government has greenlit the project. And that's the state of China's economy.

9:37Menaka Doshi:The way I think about it is this is less of a hydropower project that's going to provide some economic stimulus and more of an economic stimulus project that at the end of the day will be able to produce some hydropower. We're in this new sort of era where China's economy has been stagnant since COVID. People have been waiting for a kind of stimulus boost to recover it. Sectors like cement, like steel, like construction, those have been particularly hard hurt by the burst of the property bubble. And so you've got this perfect storm here where there's this project that requires a lot of those materials that used to be seen as maybe a little bit risky and costly to do.

10:15Menaka Doshi:But now it kind of fits this dual need of both providing some economic stimulus for some hurting sectors while also eventually providing a really, really large source of clean energy.

10:28Dan Murtaugh:The project is estimated to generate 200 ,000 new jobs and boost China's GDP every year for the next decade.

10:38Menaka Doshi:They've estimated that it's likely bigger than multiple different monetary policy actions that the central bank has taken over the past few years. So it could really help reflate the economy as they try to do their supply side reform over the coming years.

10:56Dan Murtaugh:How China plans to transmit all that clean energy and what the dam's construction means for simmering tensions between Beijing and New Delhi. That's after the break.

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13:22Dan Murtaugh:China has been talking about building a mega dam on the Yarlong-Sangpur River for decades. But construction was approved only in December last year. Bloomberg's Dan Murtagh says that's largely because the challenges to the project are so formidable.

13:40Menaka Doshi:In past conversations I've had with people, they were a little bit iffy on whether it would ever get built, because this is an incredibly remote site. It's very, very far away from any major population centers. And so you have to transport millions of tons of cement and sand and aggregate and tens of thousands of workers up to this remote area.

14:02Dan Murtaugh:The project site is in a seismically active area. That means engineers will need to ensure that the dam is strong enough to withstand earthquakes. And then there's the question of how to get the power generated by the dam to the places that need it. Beijing, Shanghai, Hong Kong, they're all thousands of miles away. Which means this isn't just one massive infrastructure project, it's two.