Shortage of Electric Power, an Ordeal for China's Economy

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Last updated at: (Beijing Time) Monday, July 28, 2003

Shortage of Electric Power, an Ordeal for China's Economy

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It has been quite hot in south and east China since July, which led to the uprise of electric power consumption. More and more provinces in China had to cut off the power supply to some areas and restrict the consumption of it because of the insufficiency since the later half of the year. So the power supply in summer is very serious. A new round of economic growth in China is faced with an ordeal for the shortage of electricity.

According to the Information from the electric departments in east China, Shanghai, Jiangsu and Zhejiang has successively hit the record in using the electricity and recently Shanghai has temporarily switched off the electric supply in about 1,000 enterprises for power-restricting. Experts forecast that Shanghai's largest power load will exceed 13.5 million kilowatts this summer and there sees a shortage of 10 million kilowatts in the power-using peak-hours. For many years, Guangdong Province has also been confronted with the most rigorous situation of power-supply.

In the first half of this year the power supply basically met the demand but "the situation is a little severe on a whole," Tan Rongyao, spokesman of China Electric Power Regulatory Commission (CEPRC), frankly acknowledged. During the peak-hour in summer, the power supply will be very taut for the grids in east and south China.

The construction of power stations that always take a long time can't help alleviate the present power shortage. So, as required by the State Council, the CEPRC unveils and implements the "Temporary Regulations on Optimization and Control of Trans-regional & provincial Power Supply" before the peak-hour in summer. It is expected to bring the price leverage into play, make full use of the present capacity for power supply and balance the power surplus in wider ranges as well as to make the most of the grids to work in unison. In this way it is to avoid the peak-hours, thereby meeting the requirements for power supply as much as possible. This is an important measure to ease the power shortage at present according to Tan.

Great changes have taken place in China's power demand and supply in recent a few years, varying from "a little surplus" to "on an overall balance" and to "a bit insufficiency as a whole". The supply-demand contradiction appeared for the first time in the year of 2002. According to an "Analytical Report of the Power Market in the spring of 2003" issued by the State Power Company, the provinces suffering power shortage increased from 12 last year to 16 in the first quarter of this year. And more provinces in queue are to suffer from the power insufficiency.

For China's economy, the reappearance of cutting off power supply and restricting its consumption means hopes on the one hand and anguishes on the other. In regard with hopes, the uprise of power consumption has something directly to do with the rapid economic growth in the recent two years and the active market demand for electric household appliance, and the power shortage signals a strong economic growth. In the first half of this year, China accomplished an economic growth of 8.3 percent, and the power consumption of the whole society reached 86.17 billion kilowatts/hours, an increase of 15.43 percent as compared with the same period last year. As for the anguishes, the industrial production in the southeast coastal areas (including Zhejiang, Shanghai, Shandong, Jiangsu, Guangdong and Fujian) will suffer a lot from the power shortage.

All phenomena indicate that China's economy is entering a new round of growth. Generally speaking, the state economy benefits from the fast development of electric power. However, the fact is that the growth of electric power is slow in comparison with the rapid increase of the power demand. Tan points out that the situation of the tight power supply will not be eased in the next three to five years. The power shortage may become more serious in some regions, in some industries or some seasons and some periods of time due to the long-term and huge sums of fund required for the construction of a power station.

Will the power shortage hinder China's economic development? Electricity experts, regulatory commissions and electric enterprises all give an optimistic answer. According to them, the present tense situation of power shortage can be eased to some extent, and the power supply capacity can be increased greatly to meet the requirement of economic development in the long run.

As the deputy director of Industry & Economy Dept. under State Electronic Power Regulatory Commission, Feng Fei says, " if taken the proper measure, the power supply will not affect the growth of this year's GDP. "

Feng Fei holds that we should objectively analyze the present situation of power supply. The power supply is seemingly short of needs, but it is basically balanced in the whole country. The so-called "power shortage" is not in the aggregate but only in the peak-hours. So, among the selective policies, power saving is the most direct measure while the price adjustment is the most effective means.

Recently, the Commission has announced some emergency measures to be taken for ensuring the power supply in the peak-hours of this summer. This includes to adopt the flexible price system in the high and low time of power consumption for unifying the power grids, adjusting the unreasonable power prices and carrying on some favorable policies and improving the rate of utilization and reliability of existing generating units. For this will help strengthen the management on the power demand for a rational power consumption.

As for the above measures, Zhao Xizheng, general manager of State Power Grids, points out that there is really a huge potential to be used in power supply. By using price mechanism and quickening the unification of the national power girds the contradiction in power supply-and- demand can be effectively solved. Along with the constructions of the Three Gorges Project and the unified use of power grids, the trans-regional and provincial inter-linkage of power grids (West-East electricity transmission and South-North mutual supply) has been initially formed. This has created favorable conditions for the most optimized distribution of electric power resources in a wider region.

China has stepped up the development of electric industry while facing the long-term demand of economic development. The Tenth Five-year Plan for electric industry has been adjusted appropriately, and the constructions of power sources and grids will be strengthened. In formulating the Eleventh Five-year Plan, the building and investment scales have been increased. According to the thoughts the development of electric power should be made moderately advanced and so does the construction of electric networks.

Last May, the regular meeting of the State Council approved through discussion the construction projects of 13 power stations raised by the National Development & Reform Commission. The install capacity reaches 11.88 million kilowatt and the total investment is about RMB 51.2 billion yuan. Some experts say that it is the first time in Chinese construction history of electric industry that so many projects are brought forward at one time.

The experts also appeal for speeding up the reform in the system of electric industry, breaking the monopoly and introducing competition, improving the operation efficiency of electric industry by means of the power market in the service of building a well-off society in an all-round way.

The insufficiency in electricity supply has indeed brought about some risks to restructuring the electric industry system, analyzed Feng Fei. But why did power shortage appear in China? It is just because of the strict administrative control. The planning department failed to make a timely decision for speeding up the construction of power sources when the faster economic development began to show, thereby entailing the supply-demand contradiction in 2002.

"So, it is urgent to promote the marketization reform of electric industry." Feng Fei said, "the reform should let loose the control on the market access, and at the same time we should also cautiously handle the issue of power shortage and avoid the rapid increase of the price. For example, we can set a ceiling price for the electricity onto the grids so as to ensure a low-cost platform for the development of national economy."

By PD Online Staff Member Liu Wei

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