Drought worsens China’s power supply crunch

• 12 years ago (2011-05-18)
• David Flin

Asia 846 North America 996

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Much of central China is facing power cuts and rolling blackouts as drought dries rivers, reducing hydroelectric capacity.

Authorities have warned that manufacturers in the industrial regions west of Shanghai may face power rationing when demand surges in the peak summer months while electricity generators curb output due to rising costs for coal and oil. The power crunch comes at a time when worries over inflation make rising energy costs less welcome than ever. Hydroelectricity provides about 20 per cent of China’s power, and the drought has led to a 20 percent fall in hydroelectricity generation, according to UBS analyst Tom Price.

The China Electricity Council has estimated that there will be a power shortfall of 30 GW, representing 3 per cent of China’s total generating capacity. However, the shortages are concentrated in key manufacturing regions such as Zhejiang and Jiangsu, near Shanghai. Last week, the Chinese Government ordered a suspension of diesel exports to help prevent shortages as factories hit by outages increase the use of on-site diesel gen-sets.

These problems stem mainly from a failure of government controlled electricity rates to keep pace with the costs paid by utilities for the coal that fuels about three-quarters of the country’s electricity generation. Power companies are more reluctant to invest in new projects, while many older, heavily polluting thermal plants are being closed down to help meet environmental targets. Hu Zhaoquang, Vice President of the State Grid Energy Research Institute, said that the amount of new installed capacity is due to fall by 10 GW next year compared to this, while demand growth continues to climb at its current rate.

East China Grid estimates that power shortages may reach 19 GW this summer in Shanghai and four other nearby provinces. The worst will be a shortfall of 11 GW, or 16 percent of total demand, in Jiangsu, where drought has caused river water levels to fall to their lowest ever at some points.