Thermal power plants in south China's Yunnan Province reported losses for the first eight months of the year on weak electricity demand and competition from hydropower, according to the provincial arm of the National Development and Reform Commission (NDRC).

Of the 10 largest thermal power plants in Yunnan, nine posted losses worth a combined RMB 1.74 billion ($276.42 million) for the January to August period, the Yunnan NDRC said late last week.

Thermal power plants only worked an average of 2,634 hours in the first eight months of the year, a decline of 683 hours, or 20.59 percent, from the same period in 2011 as power producers took advantage of higher than average rainfall in Yunnan to boost hydropower output.

Electricity produced from hydropower is more than 25 percent cheaper than power from coal-fired plants, power industry analyst Yang Sili told Interfax.

The provincial government also imposed higher environmental protection taxes on thermal power plants, adding to generators' costs, said the NDRC.

Hydro accounts for 67 percent of Yunnan's total installed power capacity and contributes close to half of local power output, according to the provincial NDRC. The province is home to approximately a quarter of China's 402 gigawatts (GW) of exploitable hydropower resources.

Thermal power producers can expect to face more competition in the future as "government policy in Chinese administrative regions, including Yunnan, is to prioritise more environmentally-friendly hydropower over coal," according to Yang.

Under Yunnan's 12th Five-Year Energy Development Plan, the provincial government aims to boost installed hydropower capacity to 58 GW by 2015, up 138 percent from 2010 levels. The province is a net exporter of electricity, sending power to other Chinese regions and Vietnam.

China's hydropower consumption in the first eight months of 2012 rose 20.9 percent year-on-year to 468.5 billion kilowatt hours. Hydropower output in July and August surged 33.9 percent and 45.1 percent year-on-year, respectively, according to State Electricity Regulatory Commission data.

The increase in hydropower production and consumption this year has helped to drag domestic coal prices down, as thermal power plants operated fewer hours and bought less of the fuel.