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More power shortages a sure bet in China
( 2003-07-06 13:43) (AFP)

More electricity shortages are a sure bet in power-hungry China as the nation's regulators race to keep pace with the increasing demands of a burgeoning economy, industry experts say.

"Most regions in China are facing shortages of electricity and conditions will worsen during the coming peak season," said Scott Roberts, an analyst with Cambridge Energy Research Associates in Beijing.

"Surging demand, particularly from the booming industrial sector, has put stress on capacity."

China's regional power shortages, which will not be relieved before 2005, can in part be blamed on the sharp fall-off in new plant construction, said Rui Kun, an analyst at Xiangcai Securities.

The power sector was oversupplied in 1996 and 1997, which led to the scrapping of plans to construct new plants, he said.

Since 1998, growth in new plant construction has dropped off to a rate of three to four percent a year, lagging behind China's average gross domestic product growth (GDP) of about seven percent and soaring power consumption, which rose 11.6 percent in 2002.

BNP Paribas analyst Eva Chu said, "The country's slowdown in capacity building has led to increasingly tight power supply, notably in coastal provinces like Shanghai, Zhejiang and Jiangsu."

Increased industrial output, lower prices for high power-consuming appliances such as air-conditioners and computers are causing power shortages in 16 provinces, with the supply in 14 regions under strain, the National Power Network said in a recent report.

It said the risk was that the power shortages could set back the economic development of half of China's provinces in the near future, putting power consumption at 2.09 trillion kilowatts by the end of 2005.

At end-2002, power consumption was put at 1.63 trillion kilowatts.

Against this background, to keep up with demand, the country simply must build new plants.

"It is the only way to solve the shortage problem thoroughly but the construction of a coal-fired power plant which requires the least amount of time takes at least three years," said Rui of Xiangcai Securities.

The Chinese government recently approved the construction of 13 large power plants, which are expected to collectively generate 11.88 million kilowatts a year when they come on stream in 2005.

The massive and controversial Three Gorges hydro-power project will also see two of its 26 generators go on-line in August.

"Without the Three Gorges project, China's power shortage this year would be much worse," said Gu Biquan, a spokesman for Huaneng Power International Company, China's largest power company.

"Supply growth has lagged owing to poor hydro-power conditions, a 'capacity delay' from large hydro-projects still under construction and local developers' concern about new regulatory risks," said Roberts of Cambridge Energy.

"The shortage is a timely reminder that China's ongoing power reforms must prioritise - in addition to the stated goals of lower prices and increased competition - investor sentiment and create incentives for new development," he added.

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