Power crunch underscores energy challenge

Updated: 2011-05-27 10:09


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BEIJING - Li Jihong has worked like a starving hunter in the past two months, hounding excess electricity every day from neighboring provinces and municipalities to fill the gap for Zhejiang province, where power has been short for months.

"My job was pretty easy during the past years when the electricity supply was abundant," said Li, an official with Zhejiang Electric Power Corp responsible for dispatching electricity to numerous factories and 54 million people living in the province.

"And unexpectedly, a power shortage comes again," he said.

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The Zhejiang government's electricity authority predicts the province will be short of 3.5 million kW to 5 million kW of electricity this summer.

And it's not just Zhejiang. Such a power crunch will be widespread in the country this summer when demand peaks, warned the world's largest utility, State Grid Corp of China (SGCC), in its forecast on Monday.

The situation in eastern and coastal regions will very likely be worse than that in 2004 when the worst power scarcity hit the country, according to SGCC, China's largest power distributor.

"This year will be the toughest for electricity supply in China," said SGCC deputy general manager, Shuai Junqing. He expects the situation over the next two years to be "even worse," with more deficiencies in broader areas and for a longer time.

According to SGCC, the electricity deficit will total 30 million kW in 26 provinces and municipalities, including Beijing, Tianjin, Shanghai, Hebei, Jiangsu, and Zhejiang this summer, an equivalent to the installed power generating capacity in southwest China's largest municipality of Chongqing, home to 28.8 million people.

However, electricity supply outpaces demand in resources-rich Inner Mongolia in northern China and Xinjiang and Gansu in the northwest. And power generating plants and coal producers are still unable to transport their excess electricity or thermal coal to the eastern and southern regions, which lack natural resources and are desperate for energy.

Shuai blamed a shortfall of thermal coal, insufficient power generating facilities in some areas, and grid transmission problems for the tight power supply in China's economically-developed eastern and coastal areas.

Postponed judgement?

A study of electricity consumption in the provinces of Zhejiang and Jiangsu, however, highlights the challenges China faces amid the power woes, analysts say.

According to the Zhejiang Electric Power Corp, electricity consumption rose 12.6 percent from a year earlier to 94.8 billion kW in Zhejiang during the first four months this year, boosted by the expansion of high energy-consumption and high-pollution industries.

In Zhejiang, the industrial value-added output, which measures the industrial expansion, increased by only 12.9 percent year-on-year in the first quarter, but electricity consumption by non-ferrous metal manufacturers rose much faster -- a rate of 20 percent year-on-year.

"Last year, some local governments took temporary measures such as suspending approval of high energy-consumption projects just to meet the short-term goal of energy-saving and emissions reduction for the 11th Five-year Plan period (2006-2010)," said Wu Zhonghu, secretary-general of the Energy Economy Professional Committee with China Energy Research Society.

Wu said many such postponed projects will begin building this year, thus leading to a surge in electricity demand from industries.

China's existing electricity-generating structure also adds to the pressure of energy supply, as about 85 percent of its electricity comes from thermal power plants in the first quarter, according to the National Energy Administration.

China Energy Net's Chief Information Officer Han Xiaoping said China's electricity shortfall is structural since provinces like Guangdong, Jiangsu and Zhejiang rely too much on energy-intensive industries for economic growth.

"The gross domestic product (GDP) per capita in these province is almost $10,000; they should have restructured their economy and burnt less coal," Han said, adding that he hopes the current power shortage can accelerate the transformation of the economic growth pattern.

Pricing gap

Some observers say power plants are discouraged to generate electricity by the fact that grid companies earn huge profits while they suffer losses.

In China, electricity can reach consumers only after power-generating plants sell electricity to grid companies through an "in-grid" process. Then the grids resell them to consumers for industrial and residential use.

According to the power plants, the cost of generating one kWh of electricity has already exceeded the price they sell to grid companies, so the more electricity they generate, the more money they lose.

Grid companies bought electricity from power plants at an average price of 383.89 yuan ($59.1) for every 1,000 kWh last year, where it was then sold to consumers at an average price of 571.44 yuan, according to data from the State Electricity Regulatory Commission (SERC).

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