Energy Crisis in China
February 1, 2008
China’s migrant workers were looking forward to their annual trip home. All year long they slogged on building sites or in kitchens in unfamiliar cities. Now that the working year is over and they could in theory celebrate the Spring Festival with their families, they can’t because snow storms have blocked the transport links.
Hundreds of thousands of workers are stranded in train stations. The Chinese Prime Minister Wen Jiaobao has given the weather situation top priority. He also personally visited stranded workers at the main station in Chang Sha.
“I apologise that everyone hoping to go home has to wait,” he said. “The repair works are underway. First, we’re trying to fix the power network. When the power network is back and running, the trains will be able to run. It won’t be too long till you can all go home and celebrate the Spring Festival with your families.”
Snow alone not to blame
Thousands of people in Hunan Province have not had electricity or water for over five days. But the snow alone is not responsible for power cuts in over half of China’s provinces and cities.
Zhu Hongren is from the national Commission for Development and Reform explained what was going on: “We’ve introduced stricter controls in the coalmines so production in some regions has been suspended. There were high safety risks in some of the mines but others could have continued production. This all means that there are problems with coal deliveries.”
78 percent of China’s electricity is produced from coal and nuclear energy. Only four nuclear reactors are running. 20 percent of electricity comes from hydropower. Renewable energies such as wind and solar power belong to the other 2 percent.
Enough coal but market problems
The state news agency Xinhua has announced that the coal reserves won’t last longer than a week and is blaming the weather but He Zhou from Hong Kong’s City University says this isn’t quite true.
“Many observers agree that there is enough coal being produced and transported,” he explained. “The coal reserves in power stations are running out but there is plenty of brown and black coal elsewhere. The problem is that traders don’t want to sell coal to the power stations at a lower price than the current market price -- last year the prices went up an average 10 to 20 percent per month.”
“The state has different policies towards coal and electricity provision. Coal prices are set by the market whereas electricity prices are state-controlled. The power stations no longer want to co-operate because they have to sell electricity at a fixed price even though production costs are rising.”
Plan versus market
The plan economy is colliding with the market economy. Currently, electricity costs about 10 US cents per kilowatt/hour in the cities.
The price will not rise in the short-term future because the government is keeping prices under control out of fear of inflation.
300 years after the economist Adam Smith said that the market could only function without intervention, China is trying to build a “socialist market economy”, an economy which serves the greater good on the basis of private ownership -- grotesque as this might sound.
In the meantime, the population is getting cold and there are fears a humanitarian crisis could incur if food and water supplies run out.