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Power cuts put many business in bind
By Zhu Boru (China Business Weekly)
Updated: 2004-07-11 10:05

The nation's most severe power shortage since the 1980s has left Xia Bing almost sleepless in recent days, beset by worries over the rising costs and declining output at his construction materials plant in Guangzhou, South China's Guangdong Province.

"Because of the restricted power supply, workers have three days off a week," he said.

"I have lost quite a few orders, and even so, I have to compensate the workers for their lowered incomes."

Most of China's factory owners in the nation's power-hungry regions are suffering from the same problem during this hot summer, including foreign investors.

This summer is expected to see the nation's most severe power shortage since the 1980s, with the government taking various measures to guarantee power supplies.

The total power shortfall will reach 30 million kilowatts this summer, Zhao Xizheng, general manager of the State Grid Corp, said last month.

And experts estimate that 17 million kilowatts of this shortfall will occur in East China, particularly in Zhejiang and Jiangsu provinces and Shanghai.

Power shortages, first felt last summer, grew to more than 20 million kilowatts last winter, covering two-thirds of the nation.

Statistics released by the State Electricity Regulatory Commission (SERC) indicate more than two-thirds of the nation's provinces, mainly in eastern and southern China, are suffering from power shortage, with East China's Zhejiang Province almost trapped in an "electricity crisis."

North China, including Beijing, has also recently been added to the list. The capital city will have a power shortage of 1.2 million kilowatts this summer.

So far, the National Development and Reform Commission (NDRC), China's top planner, has increased the electricity price in the four regional power grids - South China, East China, Central China and North China, by an average of 2.2 fen (0.27 US cents) per kilowatt hour to ease the shortage.

The NDRC is also likely to take similar moves in the Northeast China and Northwest China grids.

Meanwhile, the NDRC has further widened the gap between electricity prices during the peak hours and those during the downturn, which has been implemented among more industrial users.

China began to adopt different electricity prices for different time periods last year in 12 provincial-level regions, and the measures have proved to be effective.

In general, daytime electricity prices are much higher than those at night, and in summer and winter, prices are higher than those during spring and autumn.

The nation is expanding investment in power plant construction as a way to tackle the shortage.

Power plants with a total installed capacity of more than 80 million kilowatts have been approved since mid-2002, and those with a further 10 million kilowatts of capacity are awaiting for approval, according to NDRC.

The installed capacity of new generators due to start operation this year is estimated at 3.7 million kilowatts, two-thirds of which will go into operation in the latter half this year.

And for this year's fourth quarter, the power shortage will drop to about 10 million kilowatts, experts estimate.

With more power stations constructed, experts agree that the prevailing power shortage will come to an end in two years.

The nation's total power generating capacity will exceed 450 million kilowatts by the end of next year. The figure will rise to 650 million kilowatts in 2010 and 950 kilowatts in 2020, according to NDRC statistics.

Meanwhile, the railway authorities have allocated more transportation capacity to deliver coal. Coal deliveries increased 29.5 per cent during the first five months of this year.

Some power companies, including Beijing-based Datang Power Corp, have even invested in building special railways to transport coal in order to increase fuel supplies.

Thermal power plants account for 70 per cent of China's electricity supply in terms of installed capacity, and coal is mainly produced in inland regions with less developed economies, but the insufficient transportation capacity has increased the power shortfall, creating a bottleneck.

Government bodies including the SERC have drawn up comprehensive plans to deal with possible electricity emergencies, such as the blackout that hit the United States and Canada last winter. The scheme has already been presented for approval to the State Council, China's cabinet.

But SERC Vice-President Shi Yubo warns that power supply this year could still be challenged by very high temperature weather, inadequate fuel supplies and ageing generators.

As the existing generators are all running at full operation, no more spare capacity remains available and little time is left for maintenance. The risks of facilities breaking down are increasing, he explained.

Moreover, relatively power-rich areas, including the Ningxia Hui Autonomous Region and Qinghai Province in West China, Central China's Henan Province and the west of North China's Inner Mongolia Autonomous Region, are witnessing rapid increases in power demand.

That is mainly the result of the transfer of energy-intensive industries from coastal regions to inland China, said Shi.

Since the power shortage has increased production costs, some enterprises in power-hungry regions, in particular those producing steel, iron and nonferrous metals, tend to move their plants to where electricity prices are lower.

So far, 11 enterprises from Guangzhou, including manufacturers and foreign trade companies, have signed contracts to invest in Central China's Hubei Province, attracted by its lower electricity prices.

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