ELECTRICITY IN CHINA: PRODUCTION, GRIDS, INEFFICIENCIES AND SHORTAGES

ELECTRICITY IN CHINA

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Electricity output in China more than doubled between 2000 and 2010.”In a little-noticed milestone, the latest data from Beijing and Washington shows that China passed the United States in 2010 as the world’s largest consumer of electricity,” Keith Bradsher wrote in the New York Times. “China’s 700 million rural residents have been on a two-year buying spree of electric devices, purchasing hundreds of millions of air-conditioners and other energy-hungry appliances with government subsidies aimed at narrowing the gap in living standards between cities and rural areas.”

China gets 70 percent of its electricity from coal burning plants (at a cost of $0.0375 to $0.05 per kilowatt hour), 3 percent from natural gas; 20 percent of its electricity from the hydroelectric power (at a cost $0.0125 yo $0.025 per kilowatt hour), 5 percent from petroleum-fired plants and 2 percent from nuclear energy.

China’s consumption of electricity has increased more than tenfold since 1980, when the Communist Party was just beginning to dismantle a Soviet-style command economy, and is second only to that of the United States. Electricity production: 2.732 trillion kWh. Electricity consumption: 2.197 trillion kWh. 2005.

Electricity prices are fixed by the government but the cost of oil and coal are not fixed so when the price of coal and oil rise, the electricity-generating companies lose money because they can not raise their prices to adjust. Although authorities have so far kept residential power prices unchanged, concerns are growing that the hikes may eventually be passed on to consumers.

Huaneng Power International is the largest Chinese power producer. It is based in Beijing and listed on the Hong Kong stock exchange. The State Power Company is the second largest company in China based in revenue. It once dominated the energy industry in China. In 2002, it was broken up into two companies with stakes in the transmission grid and four separate power-producing companies. The theory was competition would make the industry more efficient. Thus far the plan has not worked and some doubt its wisdom.

Electricity Production in China

left China is the world’s second largest electricity producer and consumer after the United States. There are about 7,000 power stations in China but only 129 of them are large enough to generate more than 1 million kilowatts. The average output per plant is 55,000 kilowatts compared to 130,000 kilowatts in Japan. Low-voltage transmission lines are required for so many small power stations, impeding the installation of power supply chains to supply wide areas.

Most electricity comes from coal-burning thermal plants. There were 2,300 coal-fired plants in 2005. China is adding new, mostly coal-fired capacity equivalent to the entire electrical output of France or Canada every two years. Most of it has come from small and medium-size thermal plants, which can be built quickly and cheaply but are inefficient.

Electricity capacity jumped 20.3 percent to 622 gigawatts in 2006 and is expect to rise by 15 percent to 720 gigawatts in 2007. It is estimated that China’s total electricity demand will reach 2,600 gigawatts by 2050. To supply that much energy China has to build the equivalent of four 300-megawatt plants every week for 45 years.

China is exploring every avenue to produce more electricity: biomass, hydro, solar to reduce its reliance on coal and oil. But thus far it has declined to use combined-cycle turbines, the most efficient coal-burning technology even though it has been experimenting with it for more than decade. It is assumed they are not built because they are too expensive and take too long to build. China’s short-sighted decisions not only make matters worse now they will affects the country and the world for the next 40 to 50 years.

State Grid

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State Grid---which operates the vast networks of power distribution lines across 26 of China’s 32 provinces---is one of the world’s largest companies, ranking 24th on the Fortune Global 500, with $133 billion in revenues in 2007. As part of its plan to expand abroad, it signed a 25-year, $3.9 billion contract with Philippines in January 2009.

State Grid has developed a commercial power line that carries 1 million volts as opposed to the United States standard of 764,500 which is used in much of the world. The new “ultrahigh transmission” are regarded as a major breakthrough. They are more efficient over long distances and could help reduce pollution by moving power plants away from populated areas.

The State Grid’s economic research institute predicts that electricity demand will rise 85 percent in China between 2010 and 2020.

Electricity in Remote Areas in China

Some 98 percent of all Chinese household now have electricity. The two percent that don’t are generally in remote mountain villages. In 1995, 120 million Chinese lived without electricity but now only about 25 million or so do .

In remote areas villages near the main roads may have had electricity for 15 years. They have enough energy to power refrigerators, electric stoves, televisions, water filters and washing machines around the clock. A three-hour walk up a river brings one to villages that have had electricity for seven years and receive enough energy to keep appliances running 24 hours day. Two hours further upriver the villages have had electricity for only a couple years and have power supplies from 8:00am and to 12:00 midnight, long enough to extend farming time because many activities formally done during daylight now can be done after dark. Six more hours up river brings one to villages where electricity has been available only for several months and is only on at night from 7:30pm and 10:30pm, long enough for villagers to watch television and read books under electric lights.

In remote villages energy is supplied by coffee-can-size hydro generators that sit on top of some bricks along a riverbank and provides light and television for five hours. Perhaps the profoundest impact of electricity has been the spread of television using satellite broadcasts and the providing lights. In some places villagers no longer have to spend hours collecting pine branches for torches. Refrigerators have allowed farmers to preserve meat without having to salt it and gives them more flexibility when to harvest fruits and vegetables.

Inefficient Electricity Infrastructure in China

left The whole electric power system---from generation to transmission to usage---is very inefficient. Some power plants consume huge amount of coal but are not flexible enough to adjust production with peak and off-peak consumption times

State-run distribution companies do a poor job getting energy to where it s needed when it needs it. The antiquated transmission grid is poorly coordinated and, in many cases, outfit with out of date technology. It cannot automatically reroute power from one region to another as demand and supply rise and fall, which makes it difficult or impossible to move energy from areas with surpluses to areas with shortages.

Because China traditionally has not had the resources to build a nationwide electricity grid it has built power stations as close as possible to users. This strategy is fine except when there is power failure at one station and there is no back up

China limits increases in electricity prices which encourages waste. In 2007 there was some discussion of raising prices to compensate for the higher coal costs.

Heavy industry eats up too much of China’s electricity supply. Steel, nonferrous metals, cement and chemicals consumer 29 percent of China’s electricity.

Electricity consumption has been keeping pace with economic growth, increasing about 10 percent a year since 2000, but the construction of electricity infrastructure and the installation of power transmission lines has lagged behind. the problem is particularly acute in coastal areas where economic activity has created high demand for electricity and power outages have occurred with some regularly since 2002.

Electricity Policy and the Government in China

In August 2010, the Chinese government ordered more than 2,000 companies in high-polluting and energy-intensive plants to close down outdated plants in an effort to meet environmental targets. A total of 2,087 firms in steel, coal, cement, aluminum and glass were affected. Most were not ordered to shut down completely but rather shut down units in their facilities that were particularly bad for wasting energy and generating pollution. Companies that failed to abide by the orders risked being deprived of government funding and loans. Some that were slow to make changes had their energy supplies cut for a month.

In July 2010, China ended preferential power rates for energy-intensive industries, which had deprived the government of $2.2 billion in revenues according to Chinese government figures.

Chinese Utilities Defy Beijing and Cut Electricity Production

Keith Bradsher wrote in the New York Times,”It is a power struggle that is causing a power shortage,”one that has begun to slow China. Balking at the high price of coal that fuels much of China’s electricity grid, the nation’s state-owned utility companies are defying government economic planners by deliberately reducing the amount of electricity they produce. The power companies say they face financial ruin if the government continues to tightly limit the prices they can charge customers, even as strong demand is sending coal prices to record levels. The chairwoman of one giant utility, China Power International, recently warned that one-fifth of China’s 436 coal-fired power plants could face bankruptcy if the utilities cannot raise rates.” [Source: Keith Bradsher, New York Times, May 24, 2011]

“The utilities” go-slow tactics include curtailing the planned expansion and construction of power plants, and running plants for fewer hours a day. And in a notable act of passive defiance, the power companies have scheduled an unusually large number of plants to close for maintenance this summer,”right when air-conditioning season will reach its peak. So far there have been no public confrontations between Beijing officials and utility executives. But the dispute indicates that China’s unique marriage of market competition and government oversight may be starting to fray after three decades of phenomenal economic success.” [Ibid]

“The Chinese electricity companies are firing a shot across the bow, and essentially saying they’re not going to just sit there and take massive losses,” Jeremy C. Carl, a Stanford University researcher on Chinese energy issues, told the New York Times. “It’s almost the equivalent of a corporate sick-out.” [Ibid]

“The idea of recalcitrant utilities balking at Beijing’s dictates might seem to contradict the popular perception of China’s government-guided economy. But while the electric utilities are majority-owned by the government, they are also profit-motivated companies accountable to the other holders of their publicly traded stock. So the power companies’ incentives are not necessarily aligned with those of central planners in Beijing.” [Ibid]

“If Beijing and the utilities can resolve their differences, China plans to build even more coal-powered plants. Doing so would produce another big surge in emissions of greenhouse gases, of which China is already the world’s largest emitter.” [Ibid]

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Electricity Shortages in China

Electricity shortages are a serious problem in China. Black outs, brown outs and shortages occur even though power-generating plants are being built a record pace. Among the hardest hit areas are places where economic growth is very high such the Shenzhen area in Guangdong Province and the Yangtze River Delta, which includes Shanghai and the provinces Zhejiang and Jiangsu.

In the summers of 2003, 2004 and 2005 China was forced to ration energy and limit production in industrial areas even though it had expanded its generating capacity by the equivalent of the energy used in Spain. In the summer of 2005, China’s four major cities and 18 of 27 provinces experiences blackouts. Beijing set a daily record for electricity consumption and generating capacity as air conditioners were cranked up in the high summer heat.

Local governments use phone and text-message systems to send out warnings of impending black outs. When these messages are received generators kick on. Many factories have generators to supply electricity when there are blackouts. Running these generators is expensive. They use a lot diesel fuel. China now is the world’s leading buyer of industrial generators.

The shortages in southern China are expected to continue in the near future at least and be especially severe if problems occur such as generator malfunctions or furl shortages.

Electricity Shortages in China in 2011

Reporting from Yiyang in Hunan Province, Keith Bradsher wrote in the New York Times, “Since March, responding to the power shortages, government officials in six provinces have begun rationing electricity, including here in Hunan province. At least five more provinces are preparing to do so, according to official reports. In Yiyang, a town of 360,000 in south-central China, electricity shortages are so severe this spring that many homes and businesses receive power only one day in three. Even gasoline stations in this region are silent more days than not, because the pumps lack electricity.” [Source: Keith Bradsher, New York Times, May 24, 2011]

“The official Xinhua news agency reported that the country’s main electricity distribution company, the State Grid, had warned that power shortages 2011 could be worse than in 2004, when China had its worst blackouts in decades. That year, the problem involved railroad bottlenecks in getting coal to power plants---an issue largely resolved with the subsequent investments in more rail lines. This time, the impasse between government and industry is not the only cause of China’s electricity shortages. Surging electricity demand is also a factor.” [Ibid]

Blackouts appear to be the worst in smaller towns like Yiyang here in Hunan, one of China’s largest and most populous provinces. The power shortages are threatening to curb the explosive growth the province has experienced since the opening in late 2009 of a high-speed electric train link to prosperous Guangdong province to the south, which helped companies tap Hunan’s cheaper land and labor force.” [Ibid]

In rationing electricity, Hunan officials have given priority to big cities like Changsha, the provincial capital. Even there, though, industrial districts are blacked out one day in three.

In Yiyang, meanwhile, multiday blackouts have ruined a tiny restaurant run by Xu Zhanyun, 48, who now must cook meals over lumps of coal instead of his electric stove. “I have so much food in my refrigerators that all went bad,” he said. There is running water only every other day because the pumping station requires electricity. And so he must haul water from a well---as he did as a boy, before China’s economy surged.

In other cities, factories require employees to work at odd hours when electricity is available.”They shut down the electricity for a day every three days,” said Jin Jianping, manager of an umbrella factory in Ningbo, in east-central China. “We just arrange night shifts for everyone.”

Consequences of Electricity Shortages in China

In some places the electricity is turned off one out of every four days. Electric heaters are banned; hotels turn off the heat; people avoid taking elevators out of fear of being trapped by a blackout. Even in big cities children do their homework by candle light because of rolling blackouts. Some places have even forced to turn off traffic lights.

Energy shortages have forced factories to cut production and ration their energy supplies. In some cases factories operate only a night when demand for energy is low. In other cases they have been forced to shut down completely for more than two weeks. The shortages were particularly hard on industries that need a lot of energy like aluminum, steel and cement and ones with furnaces that need a constant supply f energy or they break.

Factories in Guangdong were told that their power would be cut one day a week, then two days a week, then five days a week, during peak hours. Under these conditions the factories switched production to the night and on weekends of bought their own diesel generators, which increased manufacturing costs by around 5 percent.

In Shanghai there have been runs on power generators and power has been cut to factories while neon lights were allowed to keep blinking on the Bund; decorative lights on skyscrapers are kept on late into the night; and air conditioning is kept on the fancy shopping malls so that everything seems to hunky dory to visitors ib Shanghai.

Power outages have been a boon for makers of diesel generators of all sizes. General Electric, Siemens and Mitsubishi heavy Industries have won large contracts supplying turbines and other technology for China’s power-generating plants.

Industrial Production in China Slowed by Electricity Shortages in 2011

“Meanwhile, blackouts are starting to slow the nation’s torrid growth of energy-intensive industries like steel, cement and chemicals,” Bradsher wrote. “Unlike garment makers and other small manufacturers, the big factories cannot easily switch to backyard diesel generators. To accommodate businesses that do use diesel back-ups, China last week banned exports of diesel fuel to conserve scarce supplies. The power cuts are a reason the year-on-year growth rate of China’s industrial production dipped last month---to 13.4 percent in April, down from 14.8 percent in March---and seems to be continuing to fall.” [Source: Keith Bradsher, New York Times, May 24, 2011]

“The lower productivity of factories, plus high diesel costs for those using generators, is likely to further raise average prices of American imports from China. Prices of Chinese exports are already up 2.8 percent in the last 12 months, after years of gradual decline that helped restrain inflation in the United States.” [Ibid]

As power-deprived factories in China have less demand for raw materials, the impact has rippled around the world among China’s suppliers as well, contributing to 10 percent declines in global prices for commodities like iron ore and copper. That is impinging on the economies of countries like Australia and Brazil, for which China is a big customer of natural resources.

Causes of Electricity Shortages in China

left Electricity shortages are primarily the result of the booming economy outstripping energy supplies and the inability of the energy producers to keep up with industrial demand. Industries are increasing output; people are buying more energy-consuming appliances; construction and development need energy-hungry industries like steel and cement to keep going.

Energy shortages have been exacerbated by droughts reducing water used in hydroelectric plants, depletion of coal supplies in some areas; closing of coal mines due to worries about mine safety and pollution; slowness in conversion from coal to oil; and the inability to build electric infrastructure fast enough. Bottlenecks hold up the transportation of energy supplies. Railways can not move coal fast enough. Tankers have to wait days in the ports before they can be unloaded because port facilities are not adequate.

The supply of energy is tightly regulated and is still largely controlled by Communist planners who think in terms of five-year plans. These five year plans are largely to blame for China’s energy shortages. Building electricity infrastructure takes advanced planning. In the late 1990s plans for the early 2000s were made after the Asian financial crisis and growth rates were predicted to be around 7 percent. When 10 percent growth rates materialized in the 2000s, not enough power stations had been built, especially in Guangdong, where growth rates of 15 percent materialized. the result: energy shortages,

Power outage in 2008, See Weather

Saving Energy and Addressing Electricity Shortages in China

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Effiicient heating systems
China is busy building power plants, dams and pipeline and upgrading port facilities and railroads but the construction is lagging behind demand. Many aren’t expected to be ready for a couple of years.

To conserve energy, factories are encouraged to operate at off peak hours, shopping centers are encouraged to turn off neon lights and turn down the heat and air conditioning. Many companies give employees time off and shift work schedules to reduce demand for electricity. Some factories stagger their working hours, in some cases shutting down during the week and operating on weekends to keep from using energy during times of peak demand.

China is trying make its factories more energy efficient (they are currently 10 to 50 percent less efficient than factories in developed countries) by improving the efficiency of its coal boilers and electric motors; closing down particularly wasteful factories; constructing houses with more insulation and doubled glazed windows; implementing energy efficiency cars, air conditioner and refrigerators.

The government is encouraging banks to finance energy projects and allowing foreign energy companies to explore for new energy sources. It also taking away money and support of energy-sucking construction and development projects and shut down small coal power stations and stopped the construction of new small power stations. Officials in Shanghai have considered imposing restrictions on air conditioner use to prevent the collapse of the city’s electrical grid.

The five year plan issued in 2006 calls for a reduction of energy use by one fifth. Some progress has been made in making energy through the ending of coal subsides, a shift to market prices for fuels and policies that reduce pollution and encourage conservation. These kinds of improvements have reduced the need to build new power plants but not by much.

In September 2010, AP reported that steel mills and cell phone factories were idled and thousands of homes were forced to go without electricity so that local government could meet their energy-saving targets.

Image Sources: BBC, Environmental News; Westport School; Nolls China website http://www.paulnoll.com/China/index.html ; The Stand, Environmental News; AP; China Daily and Environmental News, Wiki Commons

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated April 2012


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