Power rationing strikes China
early By Olivia Chung
HONG KONG - China is suffering its worst
power shortage in years, with the industrial
centers of Guangdong and Zhejiang among 20
provinces and municipalities rationing electricity
as economic expansion outpaces power supply.
Businesses, including low-margin exporters, are
having to resort where they can to expensive use
of their own generators.
electricity is not unusual in China as demand in
the fast-growing economy outstrips demand, but
this year shortages have began well ahead of the
summer peak when blackouts usually occur.
Electricity consumption may increase 12%
this year to 4.7 trillion kilowatt hours, the
China Electricity Council says, after a 12.7% gain
in the first quarter compared with a year earlier. Electricity
use in March alone rose 13.4%
year on year, according to the National Energy
Urban fixed-asset investment
increased at around double that pace in the first
quarter, surging 25%. Housing investment jumped
37.4%, official figures show.
Guangdong, south China's manufacturing hub, which
accounts for about 11% of the country's gross
domestic product, electricity use rose 8% in the
three months to March from a year earlier, to 58
million kilowatts. In the present quarter, the
province is expected to be short of 4 million
kilowatts of power each day, above the 3.5 million
kilowatts previously predicted, a local official
In Dongguan, an important production
base in Guangdong and like the rest of the
province home to numerous labor-intensive
factories owned by Hong Kong interests,
electricity has been cut off one in every four
days since April, forcing many businesses to use
their back-up power generators.
price of the diesel power generators costs more
than that of electricity sent by power plants, it
makes life even tougher for businesses that have
been struggling with increasing production cost
and surging inflation," said Stanley Lau Chin-ho,
deputy chairman of the Federation of Hong Kong
Lau blamed the power shortages
on rising power demand, driven by the country's
strong economic growth, and insufficient power
supply from western parts of the country, to where
many manufacturers have moved due to increasing
wages, limited land resources and environmental
concerns in south China.
"In recent weeks,
some small and medium-sized enterprises in
Guangdong have been asked to cut their use of
power every three days," Lau said. "If the
situation becomes worse, such as electricity being
cut off three days in a week, the firms will find
it harder to survive as their production plans
will be suspended." Small enterprises are
considered to have annual output value of less
than 5 million yuan (US$770,000).
province, south of Shanghai, has rationed
electrical power since March and is buying
electricity from other provinces. Zhejiang has
bought "all of the available electricity from
neighboring provinces since a shortage of about 2
to 3 million kilowatts each day since the Spring
Festival [in early February]," China National
Radio reported, citing Dai Yan, deputy director of
the electricity dispatching center at the Zhejiang
branch of the National Grid.
500,000 enterprises in Zhejiang struggled to
survive on a rotating electricity supply schedule
during the first quarter.
controls on electricity charges are exacerbating
the crisis, as thermal power energy companies are
forced to limit what they charge while having to
pay higher prices for coal. The average price of
domestically produced coal rose by 15% between
January and the end of April.
price of electricity is administered by
governments, power plants have no way to make a
profit or finance their development with the
rising cost of coal," said Ye Tan, an independent
economics expert. Lingering drought also has
contributed to the power supply shortage, Ye said.
China's top five thermal power companies,
including Datang International Power Generation,
the biggest publicly traded electricity producer
by market value, and Huaneng Power International,
have incurred combined losses of 60 billion yuan
since 2008, according to a 2010 annual report on
electricity regulation. In 2010 alone, the five
racked up combined losses of 13.7 billion yuan for
their thermal generation businesses, a Datang
"The more electricity we
produce, the more financial losses we bear," the
Datang spokesman told Asia Times Online.
Faced by rising coal coasts, generators in
several provinces have closed, said Yu Yanshan,
vice director of the office of the State
Electricity Regulatory Commission. Last year, 236
of the 436 coal-fired plants the five state-owned
power generation companies operate were in the red
and 85 were on the verge of bankruptcy, he said.
About 80% of China's electricity comes from
coal-fired power plants.
Beijing, having pledged to
rein in inflation this year as the population
struggles with rising food and fuel prices, is
reluctant to lift electricity charges after
raising then twice since 2008. The Consumer Price
Index, the main gauge of inflation, rose 5.3% in
April from a year earlier, just below a 32-month
high in March but exceeding for a fourth month the
government's yearly target of 4%.
The National Development and
Reform Commission, the country's top economic
planning body, said last year that China would see
an increase in power prices. But it did not
come to reality until early April this year when
on-grid coal-fired power tariffs were raised
in 16 provinces.
In 2004, the
government approved a mechanism linking coal and
power prices, under which electricity prices were
to go up incrementally after coal prices rise by
more than 5% over a six-month period.
Olivia Chung is a senior Asia
Times Online reporter.
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