In a landmark move aligning economic ambition with climate strategy, China has commenced construction on the colossal Yarlung Zangbo Hydropower Project worth USD 168 million in Tibet. A massive clean energy initiative, this project is expected to reshape regional energy flows and significantly impact the aluminium industry by shouldering power supply responsibility with Yunnan.
Powering a nation and its aluminium sector
In Nyingchi, Premier Li Qiang announced the "project of the century", highlighting its strategic relevance for the nation. The five-dam complex along the Yarlung Zangbo River is expected to generate 300 terawatt hours (TWh) of power annually by 2035, which is greater than the UK's annual power consumption at present. The scope of this project, with a total estimated cost of 1.2 trillion yuan (USD 168 billion), establishes it as one of the largest hydropower developments in the world.
Hydropower generation is critical for Yunnan province, which is home to a large cluster of aluminium smelters that have previously faced power outages due to persistent droughts. Now that hydropower lakes have refilled after the summer monsoons, Yunnan’s aluminium production is recovering. Notably, China produced a record 3.81 million tonnes of aluminium last month.
Smelters find new life with clean energy
Hydroelectricity is critical for China’s aluminium production due to aluminium’s high energy-intensive nature. Previously, during dry seasons, smelters may have had to downshift, or stop production altogether, risking disruptions to their supply chains and exports. With Yarlung Zangbo, smelters will have a more stable baseload, and their lower reliance on fossil fuels would also be associated with lower emissions towards China’s 2030 peak and 2060 neutrality targets.
Premier Li noted that the project is "critical for coping with global climate change" and said it complements the region's wind and solar projects in Tibet as part of a national plan to build multi-source renewable energy hubs.
The new hydroelectric system will also supply power to mega centres like Guangzhou, with aluminium smelters in the area benefitting by providing a base load.
A balancing act: ecology, economy, and energy
Despite the project’s benefits, environmental experts have raised alarms about its impact on the fragile ecosystems of the Yarlung Zangbo basin, which feeds into India and Bangladesh. Premier Li has instructed engineers to adopt advanced ecological protections and emphasised “special attention to ecological conservation”. Still, transboundary river management remains a geopolitical flashpoint.
The government has promised resettlement support, agricultural modernisation and job creation for local communities, aiming to pair energy development with socio-economic upliftment in Xizang (Tibet).
Aluminium market dynamics signal domestic production shift in China
The hydropower buildout has reached a critical point. The increase in hydropower generation means improved aluminium production supporting China to abide by its pledge to consume more of its domestic metal. Already, the country has started reducing exports as it shipped only 489,000 tonnes in June 2025, down by 10.6 per cent M-o-M and 19.84 per cent Y-o-Y.
Yarlung Zangbo Hydropower Project is thus redefining energy, industry, and aluminium production structure in China, with its success largely dependent on its ecological footprint and geopolitical finesse.
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