The Asian Development Bank (ADB) will help provide cleaner and more reliable energy in northwest China's Gansu Province by lending up to US$50 million to support two medium-sized hydropower projects in the remote, impoverished area near Zhangye City.

ADB's China office said on Tuesday that the loan would help finance construction of a 50.5 megawatt power plant in Erlongshan and a 60 MW power plant in Dagushan, part of the Heihe river hydropower development scheme, which began construction in 1996.

The scheme involves seven medium-sized hydropower plants that together will produce 645.5 MW of hydropower, said the ADB.

Two power plants are already in operation and two more will be in operation by next year, one of which--the 102 MW power plant in Xiaogushan--was funded by ADB.

With more than 80 percent of Gansu's electricity produced by coal-fired power plants, 13 of the province's 14 cities fail to meet air quality standards.

According to the ADB, Lanzhou is on the list of the 50 most polluted Chinese cities. Not only is air pollution in Gansu dire, some parts of the province, such as the Hexi corridor, suffer from chronic power shortages.

"The project, an integral part of the provincial government's plan to expand power generation at low cost, will help alleviate power shortages in Zhangye and the Hexi corridor," says Ashok Bhargava, an ADB Senior Energy Specialist.

On completion, the project will economize about 1 million tons of coal per year. It is expected to be eligible for certified emission reductions under the Clean Development Mechanism, a market-based financial instrument that helps developing countries achieve sustainable development and industrialized countries meet their emission reduction targets.

The Erlongshan project is expected to be one of the first projects eligible for carbon financing through the Asia Pacific Carbon Fund under the recently ADB-approved Carbon Market Initiative.

The total project cost is estimated at US$110 million, of which US$37.86 million will be financed by domestic commercial bank loans, and US$22.14 million by the city government and the Heihe Hydropower Development Company.

(Xinhua News Agency December 20, 2006)