# China Power Shortage Problem



## Aussiejeff (31 May 2011)

From Bloomberg News....



> *China Raises Industrial Power Prices in 15 Provinces to Help Ease Shortage*
> 
> *China will raise retail electricity prices starting next month, the first increase in more than a year, to curb demand and boost power generation as the nation battles a shortage that may be the worst in history. *
> 
> ...




http://www.bloomberg.com/news/2011-...es-in-15-provinces-to-help-ease-shortage.html

Excuse me for postulating, but if _the most energy intensive manufacturing and engineering businesses/factories_ are forced to "curb demand" for ESSENTIAL productive electrical power due to these (ongoing) price rises, surely this MUST result in a significant slowdown of Chinese GDP growth and industrial/manufacturing output? 

Presumably this will in turn lead to Chinese labour force layoffs, a significant rise in consumer prices (much more than the piffling +.05% predicted by the obfuscating, inscrutible Chinese officials?) and subsequent downturns in international economies now reliant on a never-ending China Boom (eg, OZ)?

This burgeoning power shortage problem should be right up your alley, Smurf! As much as hydro is helping them to this point, I wonder whether the ongoing drought problem they are facing is not going to throw a big spanner in their works?

aj

PS - More links to this story of China's power woes..... http://www.reuters.com/article/2011/05/30/china-oil-demand-idUSL3E7GU03920110530, http://blogs.forbes.com/gordonchang/2011/05/29/who-turned-out-the-lights-in-china/


----------



## lukeymacca (31 May 2011)

I could see this having a very large flow on effect!
Next question is: How long until they will restore/rebuild power plants and once they have will prices be returned to original or will the stay at the increased rate.
I wonder what the australian government would do in this situation 

China is currently fuelling the Australian mining boom it would be possible that this would reduce the number of resources required by china therefor effecting our mining boom. 

Interesting times ahead!


----------



## VSntchr (31 May 2011)

Why would it slow anything down? All this does is confirm that they can't keep up with demand...they are taking steps to attempt to slow consumption...however demand of electricity will be very hard to curb. Its all short term until they can use more of our stuff, to build more stuff, to produce more stuff...all using our stuff.

So our stuff, will still be in demand.


----------



## lukeymacca (31 May 2011)

Well look at it this way china must slow down consumption otherwise run the risk of pulling excessive currents from power station which will result in power stations being shut down and certain parts of the grid being shut off. And unfortunately grid upgrades and power stations are not built over night. During that time factories and workshops close or cut back on production or what they produces will increase in price to offset the cost of power.


----------



## Glen48 (31 May 2011)

Onr thimg they have lot of is vacant units and they have a severe water shortage as well which would have to affect production.


----------



## Knobby22 (31 May 2011)

All growing countries have problems with power demand.

I remember working in Indonesia where brownouts would occur nearly everyday.

Most big firms had backup generators that they would use when required.  Storm in a teacup. (should be an emoticon for this).


----------



## Tysonboss1 (2 June 2011)

VSntchr said:


> Why would it slow anything down? All this does is confirm that they can't keep up with demand...they are taking steps to attempt to slow consumption...however demand of electricity will be very hard to curb. Its all short term until they can use more of our stuff, to build more stuff, to produce more stuff...all using our stuff.
> 
> So our stuff, will still be in demand.




My Thoughts exactly,

If power is a problem things are growing.

The extra dollars in price are going to be funnelled into more infrastructure which will take more of everything to build, maintain and feed,

More - Steel, cement and copper
more - Trucks, trains and ships
more - labour, more design work 
more- Coal, Gas and uranium

Sounds good for australia to me,


----------



## tothemax6 (2 June 2011)

VSntchr said:


> Why would it slow anything down? All this does is confirm that they can't keep up with demand...they are taking steps to attempt to slow consumption...however demand of electricity will be very hard to curb. Its all short term until they can use more of our stuff, to build more stuff, to produce more stuff...all using our stuff.
> So our stuff, will still be in demand.





Tysonboss1 said:


> If power is a problem things are growing.



The issue is that this indicates economic imbalances. The biggest problem any economy with central planning has is malfunctioning resource distribution. China may be more capitalist than it was, but the government still controls a huge amount of the economy. 
In a free market, power shortages cause enterprising men to throw money at new power stations. Think of the ROE on a new power station supplying an industrial area that is starving for power. 
In a distorted market, these entrepreneurs may find that the resources required to build these are too expensive as they are being funneled elsewhere (read 'high rise housing', 'unused infrastructure'). 

China is a worry.


----------



## Smurf1976 (2 June 2011)

When all else fails, oil is the means of generating electricity.

Coal, nuclear or hydro are cheap to operate but can't be built quickly. Indeed it's not unusual in many countries that they are difficult to build at all due to environmental protests etc.

Gas comes next. Not as cheap as the others but still reasonable and it's not usually the subject of major opposition on environmental grounds (usually...). But, and here's the big one, you have to have gas available since shipping the stuff around is a major exercise in terms of the infrastructure required at the receiving end.

And when all else fails, there's oil. It costs a fortune to run but is fairly cheap and easy to build for either large permanent plants or temporary gas turbine / internal combustion plants. And of course, just about everywhere has access to oil since it is easily transported.

The practical effect of the situation in China is that they will burn more diesel fuel thus putting upward presure on the oil price and also on the spread between diesel and other refined petroluem products.


----------



## drsmith (2 June 2011)

Smurf1976 said:


> The practical effect of the situation in China is that they will burn more diesel fuel thus putting upward presure on the oil price and also on the spread between diesel and other refined petroluem products.



What would that do for their carbon (dioxide) footprint ?


----------



## tothemax6 (3 June 2011)

drsmith said:


> What would that do for their carbon (dioxide) footprint ?



Who cares


----------



## Tysonboss1 (3 June 2011)

tothemax6 said:


> The issue is that this indicates economic imbalances. The biggest problem any economy with central planning has is malfunctioning resource distribution. China may be more capitalist than it was, but the government still controls a huge amount of the economy.
> In a free market, power shortages cause enterprising men to throw money at new power stations. Think of the ROE on a new power station supplying an industrial area that is starving for power.
> In a distorted market, these entrepreneurs may find that the resources required to build these are too expensive as they are being funneled elsewhere (read 'high rise housing', 'unused infrastructure').
> 
> China is a worry.




I wouldn't read between the lines that far,

Every state in Australia has had the same problem at some stage, late 90's queensland had brown outs because of capacity constraints, NSW has had trouble more recently.


----------



## drsmith (3 June 2011)

tothemax6 said:


> Who cares



I was wondering whether it would make it worse, per unit of electricity generated.


----------



## Tysonboss1 (3 June 2011)

drsmith said:


> I was wondering whether it would make it worse, per unit of electricity generated.




Yes it would, Considering the difference will probably be made up as smurf suggested using locally produced diesel fired power. it is less efficient than large scale power plants, especially if every office and warehouse is running their own separate generators just to keep their lights on.


----------



## Aussiejeff (3 June 2011)

Tysonboss1 said:


> I wouldn't read between the lines that far,
> 
> Every state in Australia has had the same problem at some stage, late 90's queensland had brown outs because of capacity constraints, NSW has had trouble more recently.




A _slight_ difference in circumstances though? 

Late 90's QLD economy nor NSW recent economy were/are/will-ever-be growing at 10%+ p.a? 

However, state funded Chinese energy supply rate HAS to grow that fast (or faster) or the rampant government controlled 10%+ growth bubble WILL pop. 

Any means of maintaining supply will do - CO2 targets will be nodded at but in reality, the numbers will mean nothing. Power supply growth MUST be maintained at any cost, or they are in deep trouble.   

imo


----------



## tothemax6 (3 June 2011)

The other issue is, having actually read the article a bit better, is the price fixing.
What the eff. They are fixing electricity prices, and they are wondering why shortages are occurring.
The whole purpose of prices is to clear gluts and shortages. Can't really do that when the price is determined by a beaurocrat 'economic planner' can it?


----------



## Smurf1976 (3 June 2011)

drsmith said:


> I was wondering whether it would make it worse, per unit of electricity generated.



Compared to established hydro, any fossil fuel will emit more CO2. 

Compared to black coal, a large scale oil-fired plant is actually a bit cleaner in terms of CO2 emissions. But for "temporary" plants the efficiency will generally be lower, such that emissions are at least as high as if coal were used. That's assuming we're talking about plants feeding the grid - that is, power stations.

If, on the other hand, it comes to every factory using their own backup generators independently due to actual failures of grid supply (or restrictions on usage) then in practice fuel efficiency will be far lower due to sub-optimal loading of the generators, and consequently emissions will be much higher. That's the worst case scenario and a fairly likely one in my opinion.

In terms of high growth rates, it's worth noting that 7 to 10% annual growth in electricity demand is what used to be "normal" in Australia right up until the late 1980's when the growth rate permanently slumped. It's something that wasn't a problem until it was. We went from a few power stations through to various plans to "dam the lot" (Tas) or set up an endless stream of new coal-fired plants (Vic, NSW, Qld) in a matter of years. Meanwhile SA and WA were seriously worried about actually running out of fuel, such was the rate consumption was increasing.

Not surprisingly, it was these plans which gave birth to the environmental movement in this country - Lake Pedder (Tas, actually built), Newport (Vic, half built to this day) and the Gordon-below-Franklin (Tas, commenced but abandoned) attracted the most attention but there would almost certainly have been oppositon to Driffield (Vic, 2 x 2000MW brown coal plants) if that had ever got anywhere, likewise some of the plans in other states too. Despite massive brown coal reserves, Victoria already had a site set aside for a nuclear plant because they really did think they'd end up using all that coal rather soon. And as if that wasn't enough, there were plans for a huge gas-fired plant as well.

In due course I have no doubt that it will become physically impossible to sustain 10% growth in Chinese energy supply. Sometime prior to that, the consequences of attempting it will become painfully obvious for all to see. I'd guess that this is realistically not as far away as many may think - they're burning coal like there's no tomorrow but Chinese reserves are starting to look rather small relative to surging consumption and a situation where all known reserves are actually in production is within sight already.


----------



## Aussiejeff (4 June 2011)

Smurf1976 said:


> If, on the other hand, it comes to *every factory using their own backup generators independently due to actual failures of grid supply (or restrictions on usage)* then in practice fuel efficiency will be far lower due to sub-optimal loading of the generators, and consequently emissions will be much higher. That's the worst case scenario and a fairly likely one in my opinion.




It seems that scenario is currently playing out on a widening scale across industrialised areas of China. No-one (not even the inscrutible Chinese authorities) will have a clue as to exactly how much extra emissions will be released from all these additional diesel generators firing up over the coming months/years.

Here's a possible medium-term solution that will take years to put in place (ie a web of UHV criss-crossing the whole of China)   



> *Tianjin grid operator warns of power shortage, says UHV lines a solution*
> 
> BEIJING, June 2 (Reuters) - Electricity shortfalls in Tianjin, an industrial city near Beijing, may reach 1.5 gigawatts this summer, or 13 percent of the expected maximum power load, local grid operator warned on Thursday.
> 
> ...




http://af.reuters.com/article/energyOilNews/idAFL3E7H214D20110602


----------



## Smurf1976 (4 June 2011)

A 1.5 GW shortfall isn't massive. That's comparable to the output of Yallourn (Vic, 1.48GW), Gladstone (Qld, 1.68 GW) or Torrens Island (SA, 1.28 GW). That said, that article is referring to only one region in China rather than the whole country.

In terms of the broader implications, it's worth noting that oil price shocks have previousuly occurred as a result of regional shortages of other fuels. For example, in 2008 an electricity shortage and consequent boom in diesl use in China coincided with a surge in the price of diesel relative to other refined petroleum products, and a surge in the price of crude oil as well. 

A similar thing happened a few years earlier when US natural gas production fell short, thus forcing up the price of LPG to match natural gas, and forcing up the price of fuel oil (and crude oil) as well.

I'm thinking that the Chinese could probably make themselves plenty of diesel generators fairly quickly and cheaply (China is pretty well known for manufacturing these days...) so physically getting hold of generators isn't likely to be the constraint. It's getting the fuel to run them that could be a problem...


----------



## Aussiejeff (5 June 2011)

Smurf1976 said:


> I'm thinking that the Chinese could probably make themselves plenty of diesel generators fairly quickly and cheaply (China is pretty well known for manufacturing these days...) so physically getting hold of generators isn't likely to be the constraint. *It's getting the fuel to run them that could be a problem*...




Just as importantly, it's getting the fuel _*at an economically viable cost*_ to run them that could be the double edge of the sword...??

aj


----------



## Smurf1976 (5 June 2011)

Cost is certainly an issue. It's not viable to run a smelter using diesl fuel (for example). But even in countries such as Australia such things do happen from time to time for either practical reasons (tecnical issues temporarily shutting the smelter or a need to meet contracted deliveries) or political reasons. It's not profitable, but it happens and I'd guess that it's even more likely in China.

But for industries where electricity is a relatively small part of total costs it's not such an issue. Diesel isn't profitable to run a smelter, but it's certainly more profitable burning diesel than closing shops or a call centre.

Either way, the bottom line is that hydro in China (or anywhere else) is a primary energy source along with coal, oil, gas, nuclear, wind and biomass (solar, geothermal etc are also primary energy sources but their usage is too trivial to be relevant). 

To the extent that production of hydro in China goes down due to drought, demand for some other energy source goes up. In practice, the workable alternatives are possibly coal (running existng plants harder) or oil (hatily built temporary power stations or portable generators). That's because those two fuels are transportable internationally, there is existing infrastructure and so on. Everything else has too many difficulties with needed infrastructure, lead times, getting enough of it where it's needed etc.


----------



## nukz (6 June 2011)

For anybody interested in looking at investment i found a list of power company's in China on Wiki. The power story in China ia quite similar to India except in India they have a huge portion of the population steal electricity so once the government cracks down on that you could see quite a upside in power stocks in these markets... I believe 8% of China's power produced is stolen and around 37% in India.

B

    Beijing Jingneng Thermal Power

C

    China Datang Corporation
    China Guangdong Nuclear Power Group
    China Guodian Corporation
    China Huadian Corporation
    China Huaneng Group
    China Power International Development
    China Power Investment Corporation
    China Resources Power


C cont.

    China Shenhua Energy Company
    China Southern Power Grid Company
    China Yangtze Power
    CHINT Group Corporation

D

    Datang International Power Generation Company

G

    GD Power Development Company

H

    Huadian Energy Company Limited
    Huadian Power International
    Huaneng Power International


P

    Panjiang Coal and Electric Power Group
    Templateower companies of China
    Templateower grid corporations of China

S

    Shenergy Company
    Shenergy Group
    Shenhua Group
    Shenzhen Energy
    Sinohydro Corporation
    State


----------



## Aussiejeff (6 June 2011)

Smurf1976 said:


> Cost is certainly an issue. It's not viable to run a smelter using diesl fuel (for example). But even in countries such as Australia such things do happen from time to time for either practical reasons (tecnical issues temporarily shutting the smelter or a need to meet contracted deliveries) or political reasons. It's not profitable, but it happens and I'd guess that it's even more likely in China.
> 
> But for industries where electricity is a relatively small part of total costs it's not such an issue. Diesel isn't profitable to run a smelter, but it's certainly more profitable burning diesel than closing shops or a call centre.
> 
> ...




Yes. I note you limit the _workable_ alternatives to coal & oil - not gas. There does appear to be some significant issues currently regarding reliable gas supply as well...



> Gas Power Plants Lacking Supply While China Being in Electricity Shortage
> 
> June 5, 2011
> 
> ...




http://www.glgroup.com/News/Gas-Pow...hina-Being-in-Electricity-Shortage-54250.html

Hmmm. Confucious say...?


----------



## Aussiejeff (6 June 2011)

nukz said:


> For anybody interested in looking at investment i found a list of power company's in China on Wiki. The power story in China ia quite similar to India except *in India they have a huge portion of the population steal electricity so once the government cracks down on that you could see quite a upside in power stocks in these markets... I believe 8% of China's power produced is stolen and around 37% in India.*




Then again, if a huge proportion of the population (mostly the desperately poor?) in India are currently stealing 37% of total electrical power output  surely "cracking down" on them and forcing them to pay for any more power (with what - most have little or no money so maybe in peanuts?) will result in mass unrest across the country?

Hmmm. Mahatma Ghandi say....?


----------



## nukz (6 June 2011)

Aussiejeff said:


> Then again, if a huge proportion of the population (mostly the desperately poor?) in India are currently stealing 37% of total electrical power output  surely "cracking down" on them and forcing them to pay for any more power (with what - most have little or no money so maybe in peanuts?) will result in mass unrest across the country?
> 
> Hmmm. Mahatma Ghandi say....?




If they did it tomorrow your right, but gradually if the whole India superpower story plays out then wealth will slowly trickle down to the poor but deciding when to invest is very hard as what i'm describing might be 50 years away.


----------



## Smurf1976 (6 June 2011)

Aussiejeff said:


> Yes. I note you limit the _workable_ alternatives to coal & oil - not gas. There does appear to be some significant issues currently regarding reliable gas supply as well...



If they already had access to sufficient gas then using that for temporary power stations would be a no brainer really since they're almost as easy to construct as diesel and massively cheaper to operate. But they don't have the gas available to run them it seems...

I guess the key point here is that oil is always the fuel of last resort for power generation. It's by far the most expensive fuel, but it is in practice available anywhere as long as you can get a ship or even trucks in. When all else fails, burn oil...


----------

