As all generating units began running Wednesday at Xiaowan Hydropower Station in the southwestern Yunnan Province, China's hydropower capacity became the world's largest.

The new 700,000 kilowatt-unit at Xiaowan sent China's installed hydropower capacity just above 200 million kilowatts and marked the completion of the 4.2 million-kilowatt Xiaowan Hydropower Station project, China's second largest hydropower project after the Three Gorges.

With a total investment of 40 billion yuan (5.86 billion U.S. dollars), Xiaowan can produce 19 billion kWh of electricity every year.

At a ceremony at the station, Liu Qi, deputy director of the National Energy Administration (NEA), hailed it as "a great leap forward" for China's hydropower industry after a century of development.

China's first hydropower station, Shilongba Power Station, was built near Kunming, provincial capital of Yunnan, 100 years ago.

"The rapid development of the hydropower industry is of great significance to optimizing China's energy structure and reducing carbon emissions," Sun Yucai, executive vice chairman of the China Electricity Council, said at the ceremony.

The government promised at the Copenhagen Conference on global climate change last year that China would cut its carbon emissions per unit of gross domestic product (GDP) by 40 to 45 percent by 2020.

China also undertook a commitment to generate 15 percent of its power from non-fossil sources by 2020, up from the current 7.8 percent.

As the most competitive non-fossil energy, hydropower was key for China to realize its emissions reduction goal, Sun said.

China has long relied on coal to fuel its economic growth with about 83 percent of its electricity produced by coal-fired stations, according to the NEA.

To match the installed hydropower capacity of 200 million kilowatts, thermal power plants would have to burn 288 million tonnes of coal equivalent, emit 855 million tonnes of carbon dioxide and 5.4 million tonnes of carbon sulfur dioxide every year, according to China Electricity Council estimates.

Zhang Guobao, director of the NEA, told Xinhua Wednesday that hydro projects with another 70 million kilowatts capacity were under construction, and another 100 million kilowatts of capacity was needed.

"If all the planned hydropower projects begin construction in the next three years, it is still possible to expand the current installed hydropower capacity to 380 million kilowatts by 2020," Zhang said.

"We need careful and detailed planning and imperative approval procedures," he said.

In a separate interview with web portal Sina.com Wednesday, Zhang said China would expand its installed hydropower capacity to 300 million kilowatts by 2015 in an effort to cut carbon emissions.