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China facing electricity shortages

by Staff Writers
Beijing (UPI) May 4, 2011
China is grappling with power shortages in advance of the summer peak consumption season.

For example, the township of Songsha, in east China's Zhejiang Province, home to more than 1,000 umbrella manufacturers, has experienced power blackouts every four days since March.

State-owned news agency Xinhua reported Wednesday that the National Development and Reform Commission, China's top economic planner, said that about 20 provinces, autonomous regions and municipalities have been rationing electricity since the beginning of this year.

Figures from China's National Energy Bureau indicate that the country's electricity consumption in the first quarter of this year rose to 1.09 trillion kilowatts per hour, a 12.72 percent increase from last year.

The China Electricity Council warned that the power supply shortage could rise to 30 million kilowatts this summer, the country's worst shortage since 2004, The Global Times newspaper of China reported Wednesday.

Some experts point to soaring thermal coal prices -- which have been increasing every week since March 17, reaching a record high of $124 a ton by April 20 -- as the underlying explanation for China's blackouts. But state-determined electricity prices haven't increased, so many thermal power stations have had to operate at a loss.

"The problem is not that China produces too little electricity," Nate Taplin an analyst at GaveKal Dragonomics, a financial services firm, told the Financial Times. "The warnings of blackouts are instead best understood as a form of blackmail: power producers want the government to raise the prices they get for electricity."

As rationing increases, Taplin said, private manufacturers may resort to diesel generators for generating electricity.

"Without price hikes to address the structural problem, outages will probably be significant and lead to a bump in diesel demand," he said.

Meanwhile, the CEC said some power plants have temporarily shut down because of coal shortages. The council expects power shortages to continue or possibly become worse around the middle of the country's 12th Five-Year Plan period, which runs 2011-15.

"The current electricity rates are too low and can no longer mitigate the rising cost of power generation," Zhou Dadi, vice chairman of the China Energy Research Society, told the Global Times. "It's time to lift the administrative control on electricity rates to allow it to fluctuate to reflect market demand."

The newspaper said the CEC in a newly released report called for the government to increase electricity rates "appropriately" to address the power shortages.

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