The year 2006 will see the end of electricity supply shortages, providing an opportunity to deepen reforms towards a more market-based power industry, top-level industry authorities said yesterday.

The generating capacity of China's electricity-producing facilities is expected to reach at least 570 gigawatts by the end of the year, enough to meet the growing power demand driven by the world's fastest-growing major economy, said Zhang Guobao, vice-minister of the country's top economic policy planner, the National Development and Reform Commission.

Zhang, speaking at a power conference hosted by the China Electricity Council (CEC) over the weekend, said that wide-spread brownouts will be unlikely this year.

"This marks a turning point in the electricity supply shortfalls of a few years ago," Zhang said.

Industry leaders said the improved power industry, which is expecting a supply surplus in certain areas within the next few years, provides a "hard-won" opportunity for the sector to deepen reforms in the move towards making the industry more market-based and set it on the track of sustainable development.

Zhang said more facilities fuelled by hydro, nuclear and renewable sources are to be installed, and small, insufficient and air-polluting coal-fired units will be closed.

The power industry's reliance on coal is expected to be reduced to 70.2 percent in 2010, from last year's 75.6 percent, said Wang Jianping, president of China Power Engineering Consulting (Group) Corp.

Zhang said the government will improve the legal system for China's power industry by amending the existing electricity law and coming up with more effective regulations.

Wang Yonggan, secretary-general of CEC, the industry consortium of China's electricity producers, said the government should streamline the electricity pricing mechanism, taking advantage of new opportunities.

"The government should introduce a system that will pass the high fuel costs to end users, otherwise electricity producers will suffer severe losses as fuel prices fluctuate," the secretary-general told a press briefing on Saturday.

Last year, the profit of China's coal produced electricity increased by only 2 percent, even though it generated 12.8 percent more electricity than in 2004. This is because coal prices are kept high while the cost of electricity is capped by the government.

China has suffered from severe power shortages since 2002 as electricity demand has grown by an average 13 per cent annually over the past three and a half years. This is driven by the accelerating growth of many energy-guzzling sectors such as steel and aluminium.

The situation will greatly improve within the next five years, as new power generating facilities are commissioned and government efforts to develop a more energy-efficient society begins to pay off.

New power generation units with a total capacity of at least 70 gigawatts are expected to come on line within the next five years, leading to an assembled generating capacity of 750 gigawatts by 2010, said Wang Yonggan.

On the demand side, power consumption is expected to rise to 3.45 trillion kilowatt-hours in the next five years, an annual growth of 6.75-7.0 percent, much slower than the increase of at least 10 percent during the past five years, said Wang Jianping.

Wang Jianping said the slow-down in power demand originates from the government efforts to curb over-investment in energy-intensive sectors like steel and machinery and encourage the service and high-tech IT industries.

(China Daily February 20, 2006)