China’s Power Crisis Deepens as Coal Supply Dwindles (Update1)

By Wang Ying

July 29 (Bloomberg) — China, the world’s second-biggest energy consumer, is facing a deepening summer power crisis that may persist into the winter months, the nation’s dominant electricity distributor said.

State Grid Corp. of China, which more than 1 billion people rely on for power, said electricity shortages have worsened because of inadequate coal supplies. Forty-six percent of the power stations connected to the distributor’s grid have coal stockpiles below the “caution line,” or seven days of consumption, data from the company showed today.

China, facing its sixth year of electricity shortages, mothballed at least 2.9 percent of its coal-fired generating capacity as of July 25 as fuel supplies dwindled, State Grid said. Coal shortfalls may worsen in winter as power demand stays high and hydropower output falls to a seasonal low, it said.

“We will monitor coal supplies on a daily basis and make coordinated arrangements with local governments to address the shortages,” the power distributor said in a statement today.

State Grid’s coal inventories dropped to 31.55 million metric tons as of yesterday from 34.64 million tons three weeks ago, the company said. China’s closure of small mines to cut pollution before the Beijing Olympics next month also tightened supply of the fuel.

December’s power output will match July’s 330 billion kilowatt-hours and coal-fired generation may increase by 10 percent to 290 billion kilowatt-hours that month, the grid operator said.

Electricity Rationing

The distributor was rationing electricity supplies in seven provinces in northern and central China as of yesterday. The nation will continue to limit power supplies to heavy users, the Beijing-based company said.

Coal deficits will persist “in the long term” in central China because of limited transportation capacities and resources, State Grid said. Asia’s second-largest economy generates almost 80 percent of its power from coal.

Typhoons in the summer may disrupt deliveries of coal to power plants on the eastern coast, potentially exacerbating the fuel shortage, the grid operator said.

The Chinese authorities have evacuated more than 338,000 people in the southeast in recent days as Typhoon Fung-Wong struck Fujian province with wind speeds reaching 119 kilometers (74 miles) an hour. The eye of the typhoon made landfall at Fuqing at 10 p.m. local time yesterday and has since been downgraded to a tropical storm.

To conserve energy, Premier Wen Jiabao has ordered the nation to cut back on summer air-conditioning and drive less, the Chinese government said in a statement on July 23.

To contact the reporter on this story: Wang Ying in Beijing at wang30 [Email address: wang30 #AT# bloomberg.net - replace #AT# with @ ].

Last Updated: July 29, 2008 05:49 EDT

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