Editor's Note: China will face its most severe power shortage this summer. Some regions are already facing power blackouts even before the peak season for power consumption arrives. What has caused the power shortage? How can the electricity crunch be solved? These questions have aroused discussion to determine the best way to conquer the problem.

CEC officials said the country's demand for electricity this summer will increase by 12 to 14 percent compared to last year. Provinces in the east and central regions of China will face a shortage of electricity, while provinces in the northeast and northwest will have a surplus. [Full story]

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Top 10 electricity shortage provinces this Summer

Jiangsu, Henan, Zhejiang, Guangdong and Hunan provinces will be most susceptible to electricity shortages this summer.

Jiangsu province will face an 11 gigawatts (gW) hole this summer -- 37 percent of the country's total shortage.

Hunan province might be in the worst situation of any province with a 4 gW shortage -- about 30 percent of the province's normal electricity consuming level.

Beijing ranked No six in the top 10 shortage list, followed by Anhui, Jiangxi, Chongqing and Shangdong.

China Electricity Council expected a nation-wide electricity shortage of 30 gW during the summer.

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Unbalanced supply and demand is causing an electricity crunch in China, said Shu Yinbiao, deputy general manager of the State Grid Corporation of China (SGCC).

As a corporation owning 2 trillion yuan ($307.50 billion) in assets, Shu said SGCC's 40 billion yuan in profit is not high when compared to other Chinese State-owned enterprises and other businesses around the world. He was responding to ideas that the high profits from China's national grid deters thermal power companies from generating power. Some people felt that led to power shortages in many places across China. [Full story] 

Thermal coal price rises set to continue

CNCA: Coal production up

China's coal production and traffic volume has maintained double-digit growth, and the national coal reserves stood at 200 million tons by the end of April, helping the nation meet the increasing demand for coal, officials said.

China produced 1.12 billion tons of coal by the end of April, an increase of 11.1 percent year-on-year, according to a report Wednesday by the China National Coal Association (CNCA).

The association said major domestic power generation companies have 16 days of coal reserves, seven to 10 days more than in 2004, when China experienced a severe power shortage. [Full story]

NDRC to raise on-grid power prices

The National Development and Reform Commission (NDRC) plans to raise on-grid power prices by 0.02 yuan per kilowatt-hour (kWh) in the provinces of Jiangxi, Hunan and Guizhou provinces in order to eliminate power shortages and boost local power companies' flagging profits. The provinces of Henan and Hubei will also see price rises of 0.005 yuan per kWh, said an unnamed official familiar with the issue.

A rise in on-grid power prices will improve local power companies' profit margins and reduce power shortages, the official said. [Full story]

State Grid eyes UHV lines amid Zhejiang power shortages

Eastern China's Zhejiang will face increasing power shortages in the next two years, the State Grid Corp of China (SGCC) said in a company newspaper on Wednesday, boosting the case for its ambitious plan to build more ultra-high voltage (UHV) power transmission lines.

Power shortfalls in Zhejiang could increase to over 10 gigawatts (gW) in the next year or two from an expected deficit of 3.5-5 gW this summer, because the province will barely add new generating capacity even as power demand keeps rising. [Full story]

Power crisis forces halt to diesel exports

China will halt diesel exports to guarantee domestic supply of the fuel as electricity outages continue to put pressure on the country's power supplies.

The National Development and Reform Commission also called for increased production of oil byproducts and ordered businesses not to hoard petrochemicals for speculation and price gouging. [Full story]

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Editor's Note: Some people attributed the cause of the power shortage to the fixed electricity pricing system. Rising coal prices make the management at some thermal power plants reluctant to generate power, which partially caused the electricity shortage. According to a China Business News report, several experts expressed their different opinions on whether or not to open the electricity market. 

Zhou Dadi

Former director of energy research center of the National Development and Reform Commission;Vice director of China Energy Research Society

"The price of electricity should be adjusted more frequently, following the volatility of coal's price."

Zhou said it is better to adjust frequently than try to solve the problem at one time when it has become severe.

According to him, since the State Electricity Regulatory Commission has urged the grid companies to raise the purchasing price as a subsidy to the generation company, it should also allow the grid company to raise the energy retail price in order to protect the grid companies from loss.

Zhou said developed countries also adjust their electricity prices frequently based on the performance of the commodity markets.

Yu Fenghui

Columnist of Economic Daily

"Opening the electricity market and allowing the price rising will lead to more severe inflation."

Yu said the high price of electricity and oil is a vicious circle where high oil prices have caused the a rise in coal pricing due to an increase in transportation expenses. A higher electricity price will cause higher oil prices since the production cost rises.

Yu said the government should lower the oil price in order to relieve the energy shortage this summer.

He said it is not a good time to raise the electricity price although it might be reasonable for the industry. He said the macro economy situation should be the first consideration. 

Liu Jipeng

Professor of China University of Political Science and Law; Independent director of Huaneng Power International Inc.

"China should open its electricity market as soon as possible, although there are some problems which might delay a complete opening such as the monopoly of the grid companies. However, it is worth a try to partially open. "

Liu said the electricity price should be decided by market and not the National Development and Reform Commission.

An open market can prevent the loss for electricity generation companies. At the same time, the government could promote direct purchasing; big electricity consumers could negotiate directly with the generation companies to determine a price and make a deal. They could then entrust the grid to pipeline the electricity.

Liu said among the emerging markets, China's electricity price is comparatively low which has caused many problems with economic growth.

Bai Jianhu

"Opening the electricity market is not pragmatic and cannot solve the problems that caused the energy shortage."

Bai said the current energy shortage is mainly regional. Not only because demands from some particular provinces suddenly jumped this year, but also the grids' hardware is not efficient enough to transport the redundant electricity from one province to its neighbor province on time in the case of a shortage.

Bai believes an open market can only solve the short term price troubles, but will leave the hardware problem.

High priced coal has made many power stations stop generating. On the other hand, since the rain season hasn't come, there is little support from the hydro power of rich water source regions. Bai said it will be hard to let grids of different regions work in cooperation if the hardware problem still exists.

Han Xiaoping

Chief information officer of China5e.com

"The electricity prices need to be adjusted since many power stations are not willing to generate now because the more they work, the more they lose. "

The National Development and Reform Commission has raised prices for some districts; some are charged up to 0.26 yuan ($0.04) more for one kilowatt-hour.

Han said the electricity shortage this summer was caused by demands for energy jump from some particular provinces like Jiangsu province, which need 15 percent more energy.

Han said small-pace adjustment cannot help the electricity generation companies since the price of coal grew much faster due to high transportation expenses.

He said the growth of some high energy consuming industries strained the energy supply in the most recent summer. It is better to let the provincial government talk with power companies about the price which may help the government to cut off their outdated production capacities. 

Han Xiaoping

Chief information officer of China5e.com

"A completely opened market may cause the hyperinflation on energy."

Han said China had tried the "coal-electricity price linkage mechanism", which allowed the electricity price follow the growth of coal price. The results came as prices rose.

Han said it is crucial to get local governments involved in the building of regional grids and the price making process.

Because local governments don't invest in the grids now, they don't have the motivation to avoid high energy consuming programs, he said. He also said in developed countries, the electricity price usually is decided by the energy suppliers and consumers.

It needs the central government to give the pricing power to the local governments. Also, it needs to reform the State-owned grid system into a shareholding system. 

Worrying power supply

Chinese power companies are trying hard to make a big fanfare about the urgent need to raise the price of electricity to avoid the country's worst power shortage in decades.

The country's leading power distributor, State Grid Corp, warned on Monday that some 26 provincial regions will suffer combined power shortages of 30 million kilowatts this year.

Should that be the case, enterprises should brace themselves for a long, hot and dark summer since the power distributor has already made it clear that it will prioritize power supplies for residents, hospitals, schools and other public facilities. Nevertheless, should policymakers take such a warning at face value? [Full story]

Is energy sector the in crisis?

China is facing a real challenge, or is it a crisis, in managing the consequences of power shortage in many regions at a time when recent events in neighboring Japan remind us of the interrelationship between nature and our fragile natural resources. There is also concern in China and throughout the world over the effects of global warming.

The specter of dried up riverbeds and advancing deserts has caused much anxiety among the public. But it is not possible to directly link the water shortage along the Yangtze River and the consequent reduction in power produced by hydroelectric plants to this phenomenon. It is a timely reminder, though, that when we draw plans we need to consider the consequences of our actions. [Full story]

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