Record power shortage hits China

BEIJING/HONG KONG (Reuters) – China is facing its most severe power shortage ever as some plants struggle to secure increasingly costly coal and others shut down capacity rather than rack up losses by selling electricity at low rates.

The rebellion by power plant managers unwilling to generate at a loss is likely to worry policymakers still haunted by the nationwide diesel supply crisis last autumn, when refiners under similar pressure quietly curbed output and forced the government to make an unplanned and unwanted rise in fuel prices.


Beijing is battling high inflation and has promised not to raise energy prices in the short-term, so few analysts expect an immediate hike in power tariffs. But the shortages may prove a tricky test of the central government’s resolve and power.

Brownouts have hit at least 13 provinces, and at its peak nationwide demand outstripped supply by nearly 70 gigawatts, or the equivalent of most of Britain’s generating capacity, the official People’s Daily newspaper reported on Wednesday.

Many plants are being turned off or running at reduced rates as capped electricity tariffs combined with record coal costs demolish profits, traders and industry figures said. About 80 percent of China’s electricity is generated by burning coal.

A crackdown on unsafe mines, high global demand pushing up coal prices and a cold snap that shut roads and downed cables added to the problem, an official from the state regulator said.

But, at its core, analysts said the problem was largely the result of Beijing’s attempts to control inflation and avoid social unrest by controlling the price of some types of energy, like power, while allowing others like coal to be liberalised.

Reuters