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The use of hydropower has expanded in recent years in southwest China, playing a key role in the success of China's West-to-East energy strategy. Although installed hydropower capacity has reached a record high, the problem of abandoned water has intensified and has been gradually highlighted by researchers. Abandoned water has resulted in a significant waste of carbon-free and inexpensive renewable energy, which is not conducive to China's goals to reduce emissions to save energy. This waste has seriously affected the development of China's hydropower industry. Therefore, now is the time to analyze the main reasons for the abandoned water problem and to identify the crux of the problem. In this paper, we collected the actual operation data of all the power stations in the case area and established the mathematical model according to the quantity of abandoned water as well as the actual and the theoretical output curve of the power station to quantify the abandoned water into energy loss. We then classified the abandoned water according to three groups of causes, namely, generation-side, line-side, and market-side causes. In 2016, the total energy loss of abandoned water of Sichuan Province was 28.73 × 109 kW h, of which the generation-, line-, and market-side causes account for 7.76%, 11.68%, and 80.56% of the energy loss, respectively. Therefore, the market-side causes are the main cause for the abandoned water problem. Such market-side causes primarily include the imbalance between electricity supply and demand, the provincial barriers of the local government system and its mechanisms, and the hysteresis congestion of the transmission lines. Seizing the favorable opportunity presented by new power system reforms in China, this study proposes several market-oriented measures to improve hydropower consumption capacity. [ABSTRACT FROM AUTHOR]