Power shortage is back - only this time it's worse

PUBLISHED : Monday, 16 May, 2011, 12:00am
UPDATED : Monday, 16 May, 2011, 12:00am


Mainlanders can be forgiven for having the awful feeling of deja vu as the national media is again ablaze with reports and analysis pieces detailing how the power shortage is sweeping across many provinces.

It is hitting not only the economic powerhouses including Zhejiang, Guangdong, Chongqing, Jiangsu, Hunan and Hubei, but is also spreading to less developed provinces such as Guizhou and Qinghai .

In many parts of Zhejiang, power rationing has been introduced not only to factories but also, increasingly, to residential compounds and office towers. Indeed, the power shortage has become almost an annual ritual in recent years, but this year it is getting much worse. The shortage started last month, well ahead of the normal peak consumption season in summer, and is threatening to bring much more serious disruptions.

State media has warned that much of the mainland is bracing for the worst power shortage since 2004.

It is interesting to note that the power shortage started to kick in at a time when the central government started to report signs of moderation in economic activities as evidenced by the significant slowdown in industrial production from 14.8 per cent in March to 13.4 per cent in April. Naturally, officials have claimed credit for the tightening policies, but some have already speculated that the slowdown was due more to the power shortage.

As usual, the officials attributed the causes to a jump in electricity consumption, insufficient coal stocks at power plants, and lower water levels for hydropower generation. In particular, most media reports focus upon the long-standing issue concerning those coal- or oil-fired power plants, which are losing money and have little incentive to generate power because of the soaring coal and oil prices on the one hand and the government-set low electricity prices on the other. More than 80 per cent of the mainland's power is generated by fossil fuel.

The officials have urged the central government to accelerate its approval of more major power projects, and some analysts said the power shortage was almost certain to bolster arguments for developing nuclear power at a time when leaders are reviewing the mainland's development plan following Japan's nuclear crisis.

Amid the deja vu, however, most media reports and officials have failed to recognise and highlight the most important cause of the power shortage - a significant rebound in investments and production of the so-called high-pollution and high-energy industries. That is too bad because the rebound in the production of those industries including chemicals, steel and iron, non-ferrous metals, and construction materials is a direct damning rebuke to the central government's grand goal of undertaking the radical economic restructuring to transform the way the mainland economy grows - a key target listed for the current five-year plan. Mainland leaders have repeatedly said in recent years that despite the robust economic growth, the mainland's current development model is unco-ordinated, unsustainable and unbalanced, highlighting the high-pollution and high-energy intensive industries as the key culprits exerting too much strain on the energy supply and the environment.

Ironically, to meet energy and emission-reduction targets set by the previous five-year plan ending last year, the central government forced local authorities to shut down most of those industries last year.

As this year marks the start of a new five-year plan, local authorities have quietly reopened those industries, as they provide strong revenue and create jobs.

State media, quoting figures from the National Energy Administration, reported a sharp rebound in energy use by the four high-energy industries - chemicals, construction materials, iron and steel, and non-ferrous metals - which account for 30 per cent of the total energy consumption nationwide.

Another ironic result is that as local authorities are taking steps to ensure those high-energy industries get priority in energy use, private businesses, exporters and service industries - the very sectors the central government has promised to support in its efforts to rebalance the economy - are being hit much harder by receiving a lower ration of electricity. The headline of a story published last week in the mainland business publication Capital Week hit the nail right on the head: 'China's power shortage highlights lies about economic restructuring'.