Demand to continue outpacing growth in capacity next year Power shortages in the mainland are seen worsening next year, with no improvement expected until 2005, as residents turn up the thermostat for the winter and industrial demand pushes daily usage levels to a peak not seen since the summer. The shortages may also delay further the central government's tariff reforms, particularly in eastern provinces where supply is tight, according to industry executives. The dry winter season is exacerbating the shortage problem, reducing electricity output at hydro-power plants. Also, a coal shortage of three million tonnes has cut production at coal-fired plants. The fast-growing coastal provinces of Zhejiang, Jiangsu and Hebei are expected to be hit especially hard, in addition to those which rely heavily on hydro electricity such as Hunan, Jiangxi and Sichuan. Rationing is to be expected. The power shortage is particularly severe in Zhejiang, where supply accounts for just 95 per cent of demand - forcing the province's cement plants to operate at 80 per cent of capacity and causing a 60 to 80 per cent rise in cement prices this year. According to a recent report from State Grid Corp of China, the mainland's total power usage is expected to hit 1.88 trillion kilowatt-hours (kWh) for the year, up 15 per cent from last year. Demand is forecast to rise 11 per cent to 2.09 trillion kWh next year. 'Due to sustained high demand growth and an insufficient addition of new capacity, the overall shortage situation is forecast to worsen next year and more power rationing is expected,' State Power Information Network, which is operated by the State Power Corp, quoted the report as saying. State Grid operates power transmission networks in all but five southern provinces. On the supply side, generation capacity was expected to rise 12 per cent to 466.6 gigawatts (GW) in 2005 and 13 per cent to 528.6 GW in 2006, the report said. The figures imply total capacity will rise 5.9 per cent this year to 374 GW and 11.4 per cent next year to 416.6 GW, based on 21 GW of new capacity expected to be installed this year. But because demand and supply are expected to rise 11 per cent next year, coupled with shortages this year, the under-supply situation will worsen next year before improving in 2005 when supply growth is expected to outpace demand. The report predicted an overall supply and demand balance in 2006. H share Shandong International Power Development company secretary Zhou Lianqing said the tight supply situation could further delay implementation of tariff reforms, particularly in eastern China. The central government has already pushed back the first phase of competitive tariff bidding from January to April, and from April to August in eastern China. Tariffs are now determined by local price bureaus.