China is likely to face the most severe power shortage in its history this summer, with the electricity shortfall increasing to at least 30 gigawatts (gW) and estimated to peak at 40 gW, officials said.
Power shutdowns reached serious levels in some regions from January to April this year, and some power generation capacity has been shut down because of coal shortages, according to the Xinhua News Agency, citing Tan Rongyao, supervisor of the State Electricity Regulatory Commission.
Tan said the daily maximum power shutdown has reached 9.8 gW, equivalent to the generation capacity of the whole of Chongqing municipality.
Larger areas will suffer power shortages this year than in previous years, and the effect will be more dramatic, said Xue Jing, director of the statistics department of the China Electricity Council (CEC).
She said that if thermal power plant construction is reduced in the coming years because of the ongoing losses, the discrepancy between the power supply and demand will become sharper during the 12th Five-Year Plan period (2011-2015).
According to Chinese media, the National Development and Reform Commission will soon raise the on-grid prices by 0.02 yuan (0.003 cent) a kilowatt-hour in Jiangxi, Hunan and Guizhou provinces because of the serious power shortages in the areas, but Li Dawei, a CEC official, said he has not been officially informed about it.
Many analysts said the rising coal price is the main cause of the power shortage and the government should lower coal prices and raise on-grid electricity prices to solve the problem.
"The government regulates the prices of coal only for power generation, but not all types of coal. So the coal companies cut back on or stop selling thermal coal to the power plants because of the low price. As a result, some plants have difficulty purchasing coal for power production," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.
Lin said the current power shortage is different from previous ones, which resulted from inadequate power generation capacity. The solution to that is simple: Build more power plants. But this power shortage comes at a time when the country has enough generation capacity, pointing to a contradiction between the market-oriented coal pricing mechanism and State-controlled electricity pricing system.