China Power Shortage Problem

[Aussiejeff]

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.

Power prices for industrial users in 15 provinces will increase starting tomorrow and those paid by residential users will remain unchanged, said an official with the National Development and Reform Commission, the top economic planner, who declined to be identified because of internal rules. Li Puming, a spokesman at the NDRC, declined to comment when contacted by Bloomberg News.

China is battling an electricity supply shortfall that may reach as much as 40 gigawatts this summer, surpassing the shortage in 2004, the country’s worst, according to State Grid Corp. of China. The price increase, the first since November 2009, may spur power plants to increase utilization rates after rising coal costs and government caps on electricity tariffs forced some utilities to curtail operations or even shut.

“This will help power producers and give them more incentive to maximize production amid the power shortage,” Zhang Long, a utility analyst at Essence Securities Ltd., said by telephone from Shanghai.

The retail price increase will bring more cost pressure for energy-intensive industries and so curb demand, Dave Dai, regional head of utilities at Dawai Securities Capital Markets, said in an e-mailed note.

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]

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]

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]

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]

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]

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]

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]

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.

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]

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]

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]

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

Who cares

 

[Tysonboss1]

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]

Who cares

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

 

[Tysonboss1]

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]

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]

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]

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]

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.

Tianjin Electrical Power Corp, a unit of State Grid Corp of China (SGCC), the country's dominant power distributor, forecast the maximum power load in Tianjin of 11.4 GW to emerge in late July or early August.

(For a table of China's regional power shortage forecasts, click: [ID:nL3E7H20ZT])

With scarce coal and water resources, Tianjin needed to import more electricity from other regions of the country, Tianjin Electrical Power Corp said in the report on its website (www.tj.sgcc.com.cn).

SGCC planned to build an ultra-high-voltage (UHV) power line passing through Beijing, Tianjin and Jinan in Shandong province by 2012, which would be a key solution to Tianjin's power shortages, the report said.

SGCC has touted its success in UHV technology development and drummed up calls to build long-distance, large-capacity UHV lines in recent weeks amid escalating shortage warnings.

The country should reduce large-scale and long-distance transportation of coal and use UHV technology to better allocate energy resources, an editorial in a company newspaper said on May 24.

On the same day, the National Energy Administration gave approval for SGCC to begin an early-stage study of a UHV direct current line to send power from northwestern Xinjiang region to central Henan province. [ID:nL3E7GR162]

But some industry officials objected to the UHV expansion, especially alternating current UHV lines, citing security, economic viability, competition and pollution concerns. (Reported by Jim Bai and Tom Miles; Editing by Chris Lewis)

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

 

[Smurf1976]

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]

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