iii. Decommissioning

SHPs that are too difficult to retrofit were decommissioned under the condition of guaranteed irrigation and public safety.

The downstream section of the Hongqi SHP area is a popular natural spot. However, due to the improper operation of the project, flows in the trunk stream were delivered to diversion channel, leading to a 2.4-km dry reach and significant damage to the landscape character. After prolonged negotiation, 2.52 million CNY (approximately 60% of the appraisal price of the project considering the installed capacity, electricity production, on-grid tariff, construction time, etc.) was paid as compensation for dismantling the project. The Hongqi project dam was eventually removed, although its power plant was retained as a hydropower museum.

Such practices have been successful in the study region by addressing the occurrence of dry reaches caused by SHPs. It is noted that instead of being dismantled, some powerplants have been converted into museums, cafés, or libraries, thereby providing beneficial public spaces for the neighboring communities. "The government's regulations" and "the obligation and responsibilities for the environment" were all mentioned by the interviewed SHP owners when asked why they finally agreed to implement E-flows or decommission

their projects. Those owners who supported the implementation of E-flows emphasized that to avoid opposition, the governmen<sup>t</sup> ought to fully consider stakeholders' interest. In addition to compensation and subsidies, governmen<sup>t</sup> administrators also attributed the success of these schemes to "constant communication and negotiation between the governmen<sup>t</sup> administrators and the owners" as well as "the long-term publicity towards the importance of ecosystems".

### 3.3.2. Current Economic Incentives

In light of the success of the pilot PES scheme, the Fujian Provincial governmen<sup>t</sup> required all SHPs to be installed with monitoring facilities by the end of 2020 [48]. To facilitate this, SHP owners receive various levels of compensation depending on the nature of the work, i.e., retrofit work, seasonally restricted operation, or decommissioning. The projects requiring retrofitting work are awarded an extra on-grid tariff of 0.02 CNY/kWh; those adopting seasonally restricted operation are subsidized by an extra 0.03 CNY/kWh; and for decommissioned projects, owners can receive 50% of the market price as compensation. By the end of 2019, 1966 projects had already implemented E-flows, and 584 projects had been decommissioned [49]. Because the energy supply in Fujian Province is sufficient, the losses in electricity production resulting from these schemes do not currently have any negative consequences for industrial production or the standard of living.

To date, retrofit works have been widely applied, although the owners of diversiontype projects have suffered relatively higher losses than those of barrier-type projects. Therefore, the fairness of the different PES schemes may become an issue. Based on the questionnaires, SHP owners adopting seasonally restricted operations did not consider the PES subsidy sufficient, with only 39.5% of the owners and 21.8% of the administrators supporting this scheme. Indeed, only approximately 10% of the SHP owners and administrators were satisfied with current economic incentives, while approximately half of these two groups expected incentives to be scaled based on relative economic losses.
