Standby Power Rationale (II)
Solutions for the PRD Power Problem
[Aug 25, 2004] - We have all heard the stories and read the articles about the power shortages in China . In 2004 there are shortages in 24 provinces or municipalities – up from 20 in 2003. Manufacturing facilities were being forced to shut down 2 to 4 days a week this summer. If this continues, these manufactures will be unable to meet Christmas orders which could have severe financial consequences and hurt future business as companies look for other sources for next year’s orders.
How did this happen? Let’s take a look at history. In the early 90’s the China economy was growing in the double digits and there were severe shortages of electricity. The government at the national, provincial and local levels attacked the problem by approving new power generation and attracting foreign investment in the sector with promises of higher tariffs and minimum take quantities. By the late 90’s when this new generation started coming on line the economy had slowed down dramatically – some say 0-2% growths in some years – and there was oversupply. We all heard the story about how circumstances had changed and we can’t expect to get paid what we thought we had been promised. Premier Zhu put a hold on all new power generation development. From 1991-2000 electricity demand grew at an average of 8.8%. In 2002 and 2003 demand grew by 10.5% and 15.4% respectively and we are back to the shortages of the early 90’s. Isn’t central planning great?
One of the worst hit provinces is Guangdong . The shortage is 2300-2700 MW year round and demand is growing at 18.5% per year. The Pearl River Delta accounts for 20% of China ’s GDP and 30% of its exports. The question is can Guangdong solve this problem quickly? Can they build new generation or bring in electricity from neighboring provinces?
Here is the installed capacity of Southern China :
Guangdong 35,880 MW
Hong Kong 11,683
Guangxi 7,520
Guizhou 7,069
Yunnan 8,769
Hainan 1, 780
Guangdong already imports a lot of electricity from the west and is working on bringing in more. By 2005 they plan to import 10,500 MW. The problem is this still will not be enough. Guangdong accounts for 57% of the electricity consumption in the south but has only 10% of the natural resources. Any solution will have to be a regional one. There will have to cooperation among the provinces on transmission line cost and ownership, building the rail lines and rolling stock to transport coal, agreement on pricing of electricity, attracting investment for the new generation and many other things. We all know how independent and protective the provincial governments have been in the past so I don’t think things will change overnight. If I owned one of the manufacturing facilities in Guangdong I wouldn’t be counting on the government to fix the problem quickly. I would be actively looking for a source of generation that I could count on. IPPF members have the knowledge and resources to help and I hope these manufacturers will give us the opportunity to offer solutions.
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