Energy News: Coal Shortage in China=Power Shortages

Chinese endure power shortages as coal runs short

By ELAINE KURTENBACH SHANGHAI, Dec. 20, 2010 (AP Online delivered by Newstex) -- Communities in central and northern China are facing power cuts and rationing as winter coal supplies fall short of surging demand. Cold weather and transport disruptions typically cause shortages most years, but the problem has been complicated by coal producers' unhappiness over price controls that are crimping their profits. China's State Grid, the government power provider, said in reports seen Monday on its websites that recent winter storms had pushed demand higher while worsening traffic bottlenecks, hindering coal deliveries. Phone calls to the State Grid's branches in central China's Henan, Shanxi, Shaanxi, Chongqing and Hubei provinces -- the areas reportedly worst affected -- rang unanswered Monday. China depends on coal for more than three-quarters of its electricity and also to fuel centralized winter heating systems in northern cities. Spates of unusually cold weather often strain supplies, with power rationing not uncommon. About 620,000 households were left without power due to bad weather in Zhejiang, a province west of Shanghai, a report on the State Grid website said. It said power was being restored. Coal suppliers have also held back on shipments to power companies because contract prices for coal are below market prices, a chronic problem in this state-dominated economy. China has had similar troubles in maintaining supplies of gasoline and diesel fuel, as refiners balked at selling at below-market prices. "There are troubles with resources but also with the market," Han Xiaoping, an official at energy information provider China Energy (OOTC:CHGY) Net, said in a report posted on its website. "Costs are rising daily, but coal prices are strictly controlled, so suppliers cannot cover their costs." China's consumer price inflation hit a 28-month high of 5.1 percent in November, prompting the government to tighten controls on prices for some key commodities. The National Development and Reform Commission, the country's planning agency, recently ordered coal suppliers to extend contracts set for 2010 into 2011, without raising prices. It warned companies that fail to fulfill contracts will not be allowed to increase output capacity. Coastal provinces and cities such as Shanghai are able to bridge gaps in supply with imported coal, and have been less affected. The disruptions to supply appear to be worst in major coal producing regions such as Henan, where 40 percent of coal-fired power plants had fuel reserves equivalent to no more than three days of demand, according to a report on the State Grid's website. State-run China National Radio reported the province was imposing power cuts and rationing since it is unable to use about 40 percent of its power generating capacity. Likewise, neighboring Hubei province was stopping some generators, citing an urgent need to conserve coal supplies, it said. The entire region has just over two weeks worth of coal, with many power generators having stockpiles equivalent to less than three days worth of demand. Coal supplies also are being stretched by closures of smaller coal mines as part of a restructuring of the industry aimed at improving safety and increasing efficiency. Meanwhile, unusually dry weather is also hitting hydroelectricity plants, with water levels on average 10 percent below normal. At China's Three Gorges dam, the world's biggest hydroelectric dam, the water flow was 26 percent below normal, the State Grid reports said. With China's economy booming at a rate of about 10 percent, and demand from residential customers surging, electricity consumption has recently hit record highs in eastern China's Jiangsu and Zhejiang provinces, though coal supplies were still sufficient, said the state-run newspaper Oriental Morning Post. Beijing has committed to an ambitious energy efficiency campaign by cutting energy intensity, or energy used per unit of economic output, by 20 percent from 2006 levels by this year. But the official Xinhua News Agency reported Monday that more than half of the buildings constructed in northern China failed to meet energy-saving standards in 2009 because they were not equipped with devices to measure the use of central heating. --__ Associated Press researchers Zhao Liang in Beijing and Ji Chen in Shanghai contributed to this report. Newstex ID: AP-0001-51871388

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