China's wealthier cities are paying far less for coal to produce power than poorer regions, which are suffering more power shortages, intensifying an income gap that the country's leaders have identified as their top priority, RFA reports.
"The electricity sector over the last 10 years has tended to give preferential treatment to those in some of the big cities, particularly Beijing," Philip Andrews-Speed, China energy specialist at the University of Dundee, said.
He said that until recently people in rural areas had a large number of extra electricity levies imposed on them. "Now... they're being discriminated against again in this other way. So I think Beijing has a potentially important social problem to address."
Under the current two-tier system of subsidized and market pricing for coal, power plants in poor regions have been paying more for coal than producers in richer cities, creating more blackouts for citizens who cannot afford the higher cost.
Power producers and their local governments in poorer provinces often lack the necessary political clout to acquire coal at subsidized prices. This forces them to acquire as much as half their fuel at market rates, which are twice as high.
Energy experts blamed the government's adherence to a fixed-pricing system that kept prices artificially low, often benefiting the richest and most wasteful consumers. "If you look at the shortages of oil, the shortages of coal, the shortages of electricity, even if you have government-fixed prices, a lot of these prices need to rise a significant way," Andrews-Speed told RFA correspondent Michael Lelyveld.
He said this was particularly the case in the cities where rich people used air conditioning too much in summer. "They can afford to pay. They need to pay," he said.
Twenty-two provinces, or more than two-thirds of China's total, were forced to cut power at peak demand periods last year, according to official media. Shanghai is one area identified as having the severest power shortage in the country.
Other analysts agreed that the attempt to keep state-controlled prices was at the heart of China's energy crisis. "The system of regulated prices has caused shortages in every country where it has been practiced, and China is no exception," said William Chandler at the U.S.-based Joint Global Change Research Institute.
"They need to use market prices throughout the power system, throughout the country, fairly and evenly," he said. "Making prices realistic and making consumers responsible for paying their energy costs are the two fundamental reforms that any transition economy has to make, and China had done that. If they're moving away from that, that's a terrible mistake."
Another approach is to trim away at electricity demand, especially through the use of energy-saving incentives and devices. "It's often cheaper and cleaner and faster to reduce demand than to increase supply, whether it be through building new coal plants or natural gas or other sources," Barbara Finamore, senior attorney at the New York-based Natural Resources Defense Council, said.
"Shanghai is trying to take the lead in China in the development of demand-side management programs that help customers reduce their energy use and help them fund investment in new energy-efficient technologies," she said.
She said the Shanghai Economic Commission planned to host a workshop on Mar. 29 for officials from municipal, economic, planning, financial, tax and environmental agencies, as well as utilities, to explain new draft rules for conservation measures, which are known as demand-side management.
The programs include ways to encourage the use of more efficient equipment like energy-saving light bulbs and modern air conditioners. Finamore said that demand-side management programs also include ways to pay for the initial cost of producing energy.