China is experiencing fast development in the past 30 years, along with a development in the lifestyle of the people. This demands more power and energy than in the past. As per the China Electricity Council (CEC) data, their electricity consumption had grown by 8.12% comparatively over the previous year. Manufacturing and industrial sectors have increased their consumption by 8.45% during the current year. However, investment in the power industry of the country dropped by 8.45%. The country is suffering from a power shortage, and places such as Jiangsu, Hunan, Chongqing, and Zhejian are facing serious problems.
China is currently in the midst of a huge power crisis, the worst in the past seven years. 17 of China's provinces are experiencing brownouts. The Shanghai Daily reports that in the city of Chenzhou with a 4.6 million population, people were left without water and power for six consecutive days. Chinese New Year, being a big holiday of the season, generally puts people on a spending spree. As they were stuck with the power crisis issues, it resulted in people not spending much.
The biggest power crisis of China was during 2004, when supply was insufficient to meet the demand. Power cuts were imposed on 27 out of 31 provinces. During 2010, there was a shortfall in power supply that industries used diesel for power generation. This led to shortages in transport fuel, and retailers had to ration their fuel. The present crisis is feared to increase during the peak of summer, as hydropower capacity is affected by drought. China has to choose between allowing blackouts or face; inflation.
The present issue was foreseen by many economic analysts and is said; could have been avoided. They believe that the lopsided electricity sector of China is starving the producers. They say this might slow down China's booming economic growth by cutting the industrial output by 0.5%, and the GDP by 0.2%. More than 5, 00,000 enterprises in the Zhejiang province are operating with insufficient power supplies. Rapid increase in demand, and reduced hydropower due to a looming drought in the country, are blamed for this. Producers are restricting their outputs to make their ends meet.
The situation is quite complex and is likely to result in an inflation. Governments response to the crisis is to restrict power supplies to big industrial units. It has banned diesel exports, and is importing more gas to enable feedstock for power producers. Plans are chalked by Government officials to build new power lines in the areas worst hit by the power crisis. More electricity is expected from low emissions, and coal fired power will be sent by ultra-high-voltage power lines. This is done with an intention to avoid transport issues that have been bugging the country for long.
More than half of the power plants in China are incurring losses. This is because electricity prices are too low. Some provinces are considering increasing the prices, but still, that would not be enough. Economists feel that the power prices grids pay to power producers must be increased without passing the same cost to consumers, thereby avoiding an impact on the consumer price index. A few others suggest that the prices paid by the end users should also be raised a little, to liberalize the sector, by passing the coal costs to the end users.
China needs to build its power capacity on a more sustainable and balanced basis. Despite all the heated arguments, and charges, ultimate solution for Chinas looming power crisis will be to focus on the root cause.
References:
1) platts.com
2) allroadsleadtochina.com
3) sciencedirect.com
4) english.peopledaily.com.cn
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