December 21, 2010

China Facing Power Cuts, Rationing

Communities in central and northern China are facing power cuts and rationing as winter coal supplies start to drop due to a surging demand.

Cold weather and transport disruptions typically cause shortages most years, but coal producers crimping their profits are complicating the problem.

China's State Grid said in reports on Monday that recent winter storms had pushed demand higher while worsening traffic bottlenecks, hindering coal deliveries.

China depends on coal for over three-quarters of its electricity and also on fuel centralized winter heating systems in northern cities.  Streaks of unusually cold weather often strain supplies, with power rationing not uncommon.

According to a report, about 620,000 households were left without power due to bad weather in Zhejiang. 

Coal suppliers have also held back on shipments to power companies because contract prices for coal are below market value.  China has had similar troubles in maintaining supplies of gasoline and diesel fuel.

"There are troubles with resources but also with the market," Han Xiaoping, an official at energy information provider China Energy Net, said in a report posted on its website. "Costs are rising daily, but coal prices are strictly controlled, so suppliers cannot cover their costs."

China's consumer price inflation hit a 28-month high of 5.1 percent in November, which prompted the government to tighten control on prices for some key commodities.

The National Development and Reform Commission recently ordered coal suppliers to extend contracts set for 2010 and 2011.

It warned companies that if it failed to fulfill contracts then it would not be allowed to increase output capacity.

Coastal provinces and cities like Shanghai are able to bridge gaps in supply with imported coal, and have been less affected.

According to a report on the State Grid's website, the disruptions to supply appear to be worst in major coal producing regions like Henan, where 40 percent of coal-fired power plants had fuel reserves equivalent of no more than three days of demand.

State-run China National Radio reported the province was imposing power cuts and rationing since it is unable to use about 40 percent of its power generating capacity.

It said that neighboring Hubei province was stopping some generators, citing an urgent need to conserve coal supplies.

The State Grid said that at China's Three Gorges dam, the world's biggest hydroelectric dam, the water flow was 26 percent below normal.

The state-run newspaper Oriental Morning Post said that with China's economy booming at a rate of about 10 percent, and demand from residential customers surging, has caused electricity consumption to hit record highs in eastern China's Jiangsu and Zhejiang provinces.

Official Xinhua News Agency reported on Monday that over half of the buildings constructed in northern China failed to meet energy-saving standards in 2009 because they were not equipped with devices to measure the use of central heating.