Orders To Power Down Help China Sidestep Electricity Woe
Friday August 15, 3:42 am ET
By James T. Areddy, Of DOW JONES NEWSWIRES
biz.yahoo.com
SHANGHAI -(Dow Jones)- From factory floors to floodlights on Shanghai's historic Bund, China is responding to its own electricity shortages this year with official orders to power down.
China hasn't experienced the kind of widespread blackouts that plunged much of the northeastern U.S. and neighboring Canada into darkness on Thursday. And part of the reason is the relatively draconian way China's government has ordered hundreds companies - including foreign manufacturers - to conserve power by slowing down their production.
Not every company has been affected, however. In particular, the biggest name multinationals that have created millions of jobs and made China the world's leading recipient of foreign direct investment appear to have been largely spared of any hardship.
But some smaller foreign manufacturers around Shanghai say that they were told when a heat wave struck last month to effectively shut down. One Australian printer, Mark Sensing Australia Pty., was told to cut to 2.5% of normal electricity use as often as two days a week through mid-September.
"On the cost side, it's a big pain and a big expense," said the company's operations manager, Glenn Baldock.
In a symbolic move that Shanghai's government says represents its conservation efforts, the lights that flood the city's showpiece waterfront Bund have been turned off each night since late July.
But more than symbolism is at stake for the over 1,300 companies told to cut their power use in Shanghai, some of which feel the politics explain why not every factory faces cuts.
Shanghai Power Co. cited a need to "mitigate the critical situation" in ordering the Australian printing group to slash the electricity use at its Shanghai factory each Friday and Saturday to just 10 kilowatts from the normal 400.
Right down the street, however, a Chinese furniture maker Ornate Furniture ( Shanghai) Product Co. says everything is normal, while nearby Finland-based UPM- Kymmene Corp.'s label maker Raflatac says it was ordered 20 times in the past month to cut all power use except air conditioners.
"Mei ban fa," said a manager at the company, using a common expression that means "what can you do?"
The government says the shutdown orders are its first since an energy pinch in 1996, and industry analysts doubt the situation will need to be repeated in the future.
One important reason for the confidence is work being done to strengthen the national grid system and pipeline electricity to the industrialized east from the resource-rich west, primarily the Three Gorges Dam's hydroelectric generators, which kicked in last month, and coal mines in Shanxi province.
"I do think this is just an anomaly for this summer. It's sporadic," says Joseph Jacobelli, regional utilities analyst at Merrill Lynch & Co. in Hong Kong.
An official at giant Huaneng Power International Inc. in Beijing said China will have electricity shortages in some parts of the country next year, but they will ease.
She noted that the company's two Shanghai-region plants generated 11% more power in the first seven months of this year from the year before. One of its Shanghai-region facilities produced 4.0 billion kilowatts in the first half and the other 3.4 billion, she said.
Although the peak power pinch for China tends to happen in the hottest summer months, household air conditioner use is probably less of a tipping factor than it appears. And households, even in Shanghai, have remained largely unaffected through a record hot summer.
Industry is the predominant power user in China, representing 60%-70%, against 20% for households. Commercial use at places like shopping centers accounts for the remainder, far less than in developed countries, where the breakdown tends to be a more even one-third split between the three sectors.
China, particularly the southern Guangdong province, was oversupplied with electricity through much of the mid-1990s when power plant construction far outpaced economic growth. But capacity began to tighten later in the decade as a moratorium on new capacity took hold, which later gave way to efforts to restructure the power industry and add capacity again after 2001.
The country's installed capacity was just above 350 gigawatts at the end of 2002 and is rising around 20-25 gigawatts annually. Building one megawatt of capacity in China costs around US$500,000 and getting a power plant built in China is a three- to four-year process.
One million watts equal a megawatt and a billion watts is one gigawatt.
-James T. Areddy; Dow Jones Newswires; (86) 1370 1700 594; james.areddy@dowjones.com
(With Linda Lin, Dow Jones Newswires; djnews.shanghai@dowjones.com)
-Edited by Costas Paris |
