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Summer energy crunch for China?

by Staff Writers
Beijing (UPI) May 17, 2011
China is on course to face its worst power crunch this summer since 2004, China Daily newspaper reports.

Regional power distributor East China Grid Co. Ltd. estimates that the provinces of Jiangsu, Zhejiang, Fujian and Anhui as well as financial hub Shanghai could face combined power shortages of up to 19 million kilowatts this summer.

In the wake of blackouts and power cuts hitting the country since March, the All-China Federation of Industry and Commerce likened the severity of China's electricity crisis to the 2008 global economic meltdown.

"The worst (power shortage) has yet to come," said Xu Shuhui, deputy general manager of Cixi Henghui Chemical Fiber Co. in Zhejiang province, noting that the local power provider told businesses to prepare for more serious electricity cuts during the high energy-consuming summer months.

In addition to soaring coal prices, experts attribute the shortages to increased industrial output of heavy industries with low energy efficiencies.

"The country has yet to properly transfer its economic growth pattern and there is a resurgence of energy-hungry industries," said Fang Sihai, chief economist at Hongyuan Securities.

Yang Jianhua, a researcher at the Zhejiang Academy of Social Sciences, cited a glut of energy-intensive industries bolstered by local governments that, in pursuit of continued growth, have ignored Beijing's call to shut down outdated production capacity.

Wang Tao, chief economist at UBS Securities told China Daily that in the short term, the power shortages would slow growth in the production of cement, non-ferrous metal, iron, steel and chemicals.

The China Electricity Council, a power industry association, expects a drop over the next three years in the growth rate of China's installed capacity, state-owned news agency Xinhua reports.

While newly added installed power capacity is slated to rise 8.2 percent to 85 million kilowatts in 2011, CEC says, that rate of growth could decrease to 7.3 percent in 2012 and 7.6 percent in 2013.

China, the world's biggest consumer of energy, relies on coal for about 80 percent of the country's power generation but the government aims to increase the use of non-fossil energy to 15 percent of its primary energy consumption by 2020.

Tan Rongyao, chief supervisor of China's State Electricity Regulatory Commission, told Xinhua that Beijing should consider raising electricity prices "to stimulate the power generators' enthusiasm for production."

Yet Tan acknowledged that higher electricity prices would likely lead to higher inflation.

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