China Mulls Market Strategies for Power Shortages

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Last updated at: (Beijing Time) Sunday, August 24, 2003

China Mulls Market Strategies for Power Shortages

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China cannot escape from power shortages this year, and the electricity tension will still be tough in the next two or three years, revealed Chinese experts, who have been reflecting upon China's extensive power crisis this summer.

The State Power Grid Corporation predicted that the country's total electricity consumption would reach 1.84 trillion kilowatt hours this year, 12.3 percent more than in 2002. This implies a domestic power deficiency up to 10 million kilowatt hours this year even taking into account the generating capacities of power projects currently under construction.

Since the end of June, blackouts were imposed in 19 provinces and municipalities, including the prosperous Yangtze River Delta, to lighten the pressure on the overloaded power grids.

Although scorching weather has been widely blamed the sharp rise in electricity consumption, the limping construction of electricity facilities, which lags far behind the pace of the country's economic development, is believed to be the essential cause of the recent energy shortages, said Xu Keda, a State Council official in charge of equipment for the Three Gorges Project.

China's policy-makers are pondering responsive market strategies, hoping to accelerate electricity facility construction and balance power supply and demand by "breaking monopoly and introducing competition."

Following the splitting up of the State Power Corporation at the end of last year, China is planning to create six regional competitive power markets in three years in a determined move to break up the traditional province-based electricity monopolies.

Meanwhile, experts consider that investment reform is also a key to tackling the power shortage problem. Complicated examination and approval procedures have delayed investment, which would otherwise contribute to more constructions of power supply facilities.

Fortunately, open market strategies have been gradually introduced into the investment mechanism. In recent years, China's private enterprises have invested heavily in hydropower stations, once a forbidden zone for non-governmental businesses.

In mid August, the Beijing-based private company, Huarui Group, invested a total of 12 billion yuan (1.45 billion US dollars) to launch the construction of Jin'anqiao Hydropower Station on the upper reaches of the Yangtze River, the largest privately-invested hydroelectric project in China.

In east China's Zhejiang Province, which boasts the country's most developed private sector, many non-state enterprises, like Huiming, Guangxia and Songcheng, have started to invest in southwest China's Guizhou and Sichuan provinces, which are rich in water resources.

Some of these enterprises have even prepared to deliver electricity from their private stations to the country's energy-starved eastern areas, if state policies allow this.

China is also carrying out reform of the electricity price by loosening state control.

The recently-signed contracts for selling and distributing Three Gorges electricity have attracted attention not only because they can help mitigate power shortages, but also because this move marked a key transition in electricity price determination from state-designated to market-regulated.

According to the contracts, electricity from the first group of generating units will be sent to local grids in Shanghai and Chongqing municipalities, and the provinces of Jiangsu, Zhejiang, Henan, Hubei and Hunan, which suffered severe energy shortages this summer.

Two more generating units at the Three Gorges will also go online a month earlier than scheduled for this year, to further increase the generating capacity by about 1 million kilowatts, said Xu Keda.

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