$20B and up for upgrades
Additionally, technology upgrades carry a high price tag.
In a study published this year, Bloomberg New Energy Finance estimated that replacing coal-fired power plants' existing water cooling systems with air-cooled ones -- the most popular water-saving solution in use in China -- will give the country's top five power generators a bill of up to $20 billion.
That only takes into account retrofitting. The costs are higher, considering that an air-cooled system decreases the thermal efficiency of plants, and power generators have to burn more coal in order to maintain the same amount of electricity production.
Perhaps because of those financial downsides, provinces along the Yellow River that produce 95 percent of China's coal are now piloting another approach, known as "water rights trading."
In that practice, businesses are capped for the amount of water they can use, and those that want to use more are required to finance water-saving projects in exchange for new rights.
Water rights trading has annually saved millions of cubic meters of agricultural water that then get transferred to coal industries in Inner Mongolia, where most pilots are taking place.
Yet there are concerns about the plan. Sun Qingwei, an energy and climate campaigner for the Greenpeace China team who recently investigated the water and coal conflict along the Yellow River, said that due to poor supervision, coal industries often use more water than allowed.
And even if coal industries do comply with the rules, Sun said, a common situation is that water-saving projects that companies invest in are close to one stream, while their coal operations get water from another source. So while water rights trading makes sense statistically on the paper, it doesn't actually always bring more water to where it is in need.
"To some degree, water rights trading might even become an excuse of overusing water," Sun added.
Province considers seawater solution
During a phone call to the Yellow River Conservancy Commission of China's Ministry of Water Resources, the government arm that manages water rights trading, an official admitted that the problem could exist because the agency's current focus is to control overall water use. The official only gave his surname Li.
There is also the question of whether water rights trading and other water conservation measures can be adopted fast enough to catch up with China's coal boom.
Here, in Xilinhot, the coal mining city in Inner Mongolia, annual production of coal increased seven times between 2007 and 2012, reaching 55 million tons. The city plans to double this figure within three years. At the same time, coal-fired power plants, coal-to-chemical facilities and coal-to-liquid factories are expected to mushroom.
To support its coal industry, the local authority has proposed a 600-kilometer seawater pipeline that would transfer 340 million liters of water per day from the Bohai Sea in China's east to a desalination plant in Xilinhot. The proposed project also includes miles of rock tunnels cut through several mountain ranges, along with enough pumps and holding ponds to lift the water 1,300 meters above the sea.
Since the multibillion-dollar plan was announced, opponents have blasted its cost, technical feasibility and environmental impacts. But Huo Youguang, a geographer at Xi'an Jiaotong University in Shaanxi province and one of the project's advisers, sees it more as an example of maximizing resources.
According to Huo, the desalination plant would run on waste heat from coal-fired power plants. Part of the purified water would be used for thermal power generation, and the rest would be delivered to nearby coal-to-chemical factories. Salt that is separated from the seawater would become raw material for the local chemical industry.