The State Grid Corporation of China has declared that it may have less electricity to feed the country in 2004. In the first quarter, 24 provincial-level power grids--two more than in 2003--had to be switched off to prevent breakdown. The country is bound to suffer the worst power shortages in years in 2004.

“There will be definitely more provinces suffering from power shortages,” said Anbound analyst Zhang Weibo.

Total electricity consumption is forecast to grow 12 percent this year. So far, most blackout areas are the developed provinces in eastern and southern China.

But the analysts don’t believe that it will have any major impact to the macroeconomic situation, as the nation is calling on users to limit power consumption during peak periods. “But occasional blackouts are likely, ” said Zhang. Street lamps, for example, may be shut off in electricity-thirsty Zhejiang Province.

The nationwide power shortage may be attributed to lower investment in new power plants and a shrinking supply of coal for generation, said Zhou Haiyang, a researcher at the State Power Economic Research Center.

Since 1998, the state has reduced investment in new power generation facilities by a wide margin. Only 8.5 million kilowatts of capacity was added to the country’s power network in 1998. The number slid to 5.8 million kilowatts in 1999, edging back up to only 5.9 million kilowatts in 2003 despite the country’s soaring economic growth in recent years. The investment plunged by 40 percent from the same period in the Seventh Five-year Plan.

“There is a severe shortage of coal supplies. Some power plants only have reserves for one to three days even though the state standard requires a week’s worth. And the coal-to-electricity efficiency is also lower, because of poor-quality coal containing many impurities,” said Zhou. Analysts estimate that the quality is so bad, it takes ten tons to generate the same amount of electricity that five tons used to make.

However, Zhang Weibo believes the main reason for power shortages is an outdated power grid network that lags far behind the power generation facilities.

Limited by grid capacity, many power plants did not generate as much electricity as possible even when two dozen provincial-level power grids were reporting shortages. In worst-hit Jiangsu Province, some local power plants could only operate at 60 percent of capacity.

Such low efficiency normally leads to loss of revenue, but the power plants still remain high on banks’ lists of preferred customers. This indicates that the power plants are still recording high profits.

“That’s why I believe an outdated power grid network should be blamed for the nationwide power shortages and high electricity prices,” said Zhang.

For historical reasons, it is the power generation companies rather than non-profit public service organizations that decide how and when to invest in power grids. As a result, the antiquated power grid network is keeping electricity prices high and capacity utilization rates low while generating fatter profits.

(china.org.cn by Xu Zhiquan, May 2, 2004)