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Power Sector Needs Investment, Reform

Blackouts and brownouts will return to parts of China over the next two years as the nation continues to grapple with power shortages.


State Development and Reform Commission Vice Minister Zhang Guobao said the country is implementing various measures to ease the crunch, while calling on private and foreign investors to put their money into power generation projects.


Overseas investment in the sector has been welcome since the beginning of the nation’s reform and opening program, while increasing numbers of domestic private enterprises have moved into the power industry.


China’s demand for power has soared since June 2002 and led to limits on electricity use in some places.


“By the end of last year, 21 provincial areas faced power shortages,” Zhang said.


Zhang Guobao attributed the shortages to fast economic development, elevation of living standards and boom times for energy-consuming industries. The restructuring of rural and urban grids and climate factors are also playing a part.


But commission spokesman Cao Yushu said recently that shortages are likely to ease this year as the government busily puts up plants across the nation.


Dozens of new generators with combined capacity of up to 37 million kilowatts will be going on line by the end of this year, he said.


But the National Federation of Electricity Enterprises (NFEE) agreed with the Zhang’s view. It said new capacity this year will total only 35 million kilowatts, below Cao’s prediction of 37 million.


Zhang confirmed that the government has taken such steps as constructing more power plants to deal with the problem, as well as redistributing power supplies between regions and adjusting consumption through price controls.


In the first two months of this year, China’s electricity generation jumped 22 percent year-on-year to 385 million kilowatts, with projects under way to produce 130 million kilowatts.


Meanwhile, the electricity demand will leap to 2.1 trillion kilowatt-hours, up 12 percent from 2003’s 1.9 trillion kilowatt-hours.


“The shortage is likely to be reduced in 2005,” the NFEE said in a recent report.


Zhang Guobao called for greater efforts to improve power production and distribution so as to meet demand.


By the end of 2003, the government had already approved plans for 26 soon-to-be constructed power generators with maximum capacity of 11.4 million kilowatts. A total of 92 projects, with total capacity of 83.9 million kilowatts, are outlined in a feasibility study.


Experts say the power shortage will force systemic reforms. They refer to conflicts between power plants and grid companies, as well as between coal producers and power plants.


Zhang Jianyu, a visiting scholar with Tsinghua University, pointed out that coal prices float according to market demand, but the government continues to control electricity pricing.


Last year, the surging coal price and fixed electricity price resulted in huge losses for many power plants. To resolve the problem, the government increased the price of thermal power at the beginning of 2004.


“Constructing more power generators does not solve all the problems,” said Zhang.


He said the government should have integrated solutions for price reforms.


“Otherwise, I’m afraid that power plants will not be able to operate because of coal supply shortages caused by higher prices.


(China Daily April 2, 2004)

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