The central government has announced a series of measures and initiatives intended to help mitigate the impact of the nationwide power shortages forecast for 2004 and beyond. The program includes measures intended both to increase the national stock of generating capacity and power station fuel supplies, and to help reduce the burgeoning growth in electricity demand.

The plans include measures to fast-track and help finance the construction of a large amount of greenfield power generation capacity. A large amount of new capacity is currently moving forward to the construction stage (PiA 392/3, 11 December 2003).

Two of the other key measures will be to curb thermal coal exports and, in particular, to raise the prices paid for power station coal to help improve the availability of coal supplies for electricity generators.

Around three quarters of all Chinese power is produced by coal-fired plants with power and heat generation plants officially estimated to have consumed between 825- and 830-mil mt of coal in 2003. And demand for coal from the power and other sectors is expected to surge further this year, reaching 1,890- mil mt in 2004 - some 140-mil mt higher than the country's projected output.

Nor is this trend likely to be reversed. Indeed, research by the country's Coal Industrial Development, Research and Consulting Centre suggests the opposite, with the amount of coal used to generate electricity and heat projected to reach 917-mil mt in 2005, 1,090-mil mt by 2010 and up to 1,510- mil mt by 2020.

To help meet the near and longer term burgeoning growth in demand for power station coal, prices are expected to rise by up to Rmb 12/mt (US$1.45/mt) in 2004, according to the state-controlled Xinhua news agency. This represents an increase of up to 8% over 2003 price levels.

In turn, an increase in the power sales tariffs paid to coal-fired plants is being implemented to help power generators offset the higher cost of fuel supplies as well as to fast-track the construction of new generating capacity. An average increase of Rmb 7/MWh (US$0.85/MWh) has been agreed by the State Development & Reform Commission from Jan 1, with the regional pricing authorities, which come under the Commission, having been mandated to translate this rise into the power sales tariffs paid at local level.

The resultant hike in retail power prices is expected to dampen national electricity demand requirements, especially on the part of energy intensive industrial users including steel and car manufacturing. The retail price for power supplied to industrial consumers increased by Rmb 8/MWh (US$/1MWh) from January.

This story was published in Platts Power in Asia.