China braces for power cuts
May 30, 2011 Category Macro-economy, Weekly
China’s power shortage this summer could be worse than in 2004. State Grid of China expects the 26 provinces and regions under its management to suffer a combined power shortage of 30 gigawatt (GW) in the coming months, or about 3% of the country’s generating capacity. This year’s power shortages began in March, well ahead of the peak summer consumption season, after surging coal prices eroded power generators’ profitability and also due to insufficient generation capacity and transmission problems. The shortfall has reportedly prompted the government to raise on-grid tariffs ― charged by power plants to grid firms ― in several provinces last month to encourage production, although analysts said the hike was too small to restore profitability of many coal-fired plants, which make up more than 80% of China’s power generation. China’s five major state power generating groups lost more than CNY10 billion in the first four months of this year. State Grid said at least 10 regions, including Beijing and Shanghai, will suffer a power shortage, but the company will first ensure supplies to residents, hospitals and schools. In 2004, China suffered its worst power deficit since the beginning of the 1990s as it imposed power cuts or limits in 27 of its 31 administrative areas. “The government regulates the prices of coal only for power generation, but not all types of coal. So the coal companies cut back on or stop selling thermal coal to the power plants because of the low price. As a result, some plants have difficulty purchasing coal for power production,” said Lin Boqiang, Director of the China Center for Energy Economics Research at Xiamen University.
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