CHINA BRACES FOR WORSE POWER SHORTAGES THIS SUMMER


2004.06.23
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Twenty-four of China�s provinces have already experienced brownouts or power outages this year, prompting concerns about even greater problems during the hot summer months�and experts say the government�s bid to cool the economy won�t be enough to prevent it.

�[The cooling measures are] going to have a relatively slow impact and are going to take a long period of time,� Harvard economics professor Dale Jorgenson said in an interview. �Whereas these problems with the power shortage are immediate and are triggered by intense residential demands for cooling with the spread of air conditioning, which is ongoing at a very, very rapid pace.�

�I don�t think that these two things are really going to fit together in the sense that the slowdown of economic growth is going to alleviate the power shortage,� he said.

Official media quoted Zhao Xizheng, general manager of the State Power Grid Co., last week as saying that the country is suffering from a deficit of 30 million kilowatts, compared with a shortfall of just 10 million kilowatts in January.

Power consumption rose by 15.4 percent in 2003, year-on-year, with the economy posting an overall growth rate of 9.1 percent. On June 13, China�s daily power consumption hit a record 5.967 billion kilowatts.

The surge surprised authorities who had expected the peak to come later this summer. Shanghai�s hot weather pushed power consumption beyond the city�s generating capacity of 10.4 million kilowatts during the June 12-13 weekend.

Robert Ebel, director of the energy and national security program at the Center for Strategic and International Studies in Washington, said power shortages are more likely to have the effect of slowing down the economy than the other way around. Blackouts this summer may create an artificial economic constraint.

�I think that we can presume that the power shortages will help cool off the economy, if we can use that term �cool�,� Ebel told RFA. �It will lead to maybe that soft landing that the Chinese had desired for the economy, so the end result might be what is desired, but the way to that result is not necessarily to their liking.�

But Shanghai�s consumption is still expected to jump to 16.7 million kilowatt hours over the course of this year, or 60 percent above the city�s capacity. Shanghai is so desperate that it is experimenting with efforts to create artificial rain, official media reported recently.

The central government has responded by trying to speed up construction of new power plants, but such projects take years. As a last resort, the SDRC approved new increases in electricity prices on June 16. But there are doubts about whether the slight hike of 2.2 fen (U.S $0.27) per kilowatt hour will do much to dampen demand.

In May, the SDRC announced a rate increase of 1.4 fen, but it immediately warned provincial authorities to hold down utility increases because of inflation fears. Now, the government will try charging more for power during peak consumption periods in cities like Shanghai and Beijing.

�I think you have to think of the way the system is administered, and the way that the existing power capacity is used,� Jorgensen said. �And there, I think you have to begin to think about things like peak-load pricing and trying to ration demand during the peak or move industrial consumers to a different peak than residential commercial consumers.�

Others said market forces might also create self-regulation in a market currently still subject to strong government intervention for political reasons.

�If I were a manufacturer, I�d bargain over what sort of contract for receiving power I was going to get,� Ronald McKinnon, professor of international economics at Stanford University, told RFA.

�I think the Chinese authorities should also think carefully about how to draw up these contracts, so that people getting low-cost power ought to find that it�s interruptible, whereas those that are willing to pay a higher rate can get certainty in the amount of power delivered.� #####

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