China Facing Electricity Shortages On Higher Coal Prices

Shortage of coal used for power generation is putting great pressure on electricity generation in China.

China mined about 2.5 billion tons of coal during 2007, according to government statistics, and burning that fuel supplies more than 80 percent of the country’s electricity.

Chinese coal price has been climbing up rapidly since this year. Take the spot price of coal in Qinhuangdao as an example, the growth rate of price is over 60% in this year. If the price could be stable to the end of 2008, the price increase would bring high profit in Chinese coal enterprises.

However, based on reports from Chinadaily in Shanxi, which produces a fourth of China’s total coal, local media reported that power-generating units with a total capacity of 3,665 mW had halted operation because of coal shortage.

Driven by booming demand, many coal companies have increased their production. However, although this year’s coal production in the province will reach 680 million tons, up 9 percent from a year earlier, it still can’t catch up with the development of downstream businesses such as power generation, according to Shanxi Province Electric Power Association (SEPA).

The State Grid Corporation of China (SGCC), which was founded as a pilot state-owned corporation by the State Council and oversees power supply in 26 provinces of the country, said the company would see 10 gW of power shortage in summer. China Southern Power Grid, which is responsible for power systems in five provinces in South China, said it would see 6 gW of shortage in summer.

China will not face major power shortages this summer but some regions may see blackouts, according to the country’s electricity regulatory body.

Despite continued efforts, China has suffered persistent power shortages in industrial centers for more than five years as electricity output has failed to meet the demand from a booming economy. China’s major power companies reported huge losses this year in the face of soaring coal prices. Of the country’s five leading power producers, only China Huaneng Group did not report losses in the first quarter.