Energy: What if, What else, and What are the odds

Sunday, February 17, 2008 12:58
Posted in category Uncategorized

A few days prior to our last meeting (see: Inflation: What if, What Else, & What Are the Odds – Results), the news of snow storms knocking out power across China began rolling in, and through my post China’s Power Crisis. What is Happening. What the Impact Is/ Could be. And What You Should Do I looked to address some of the impacts that investors, buyers, NGOs, policymakers, etc should expect to see.

With these shortages manifestating from several issues surrounding energy, transportation, and development, I am bringing the group back together next week to meet on China’s energy issue.

As a basis for discussion, here is a handful of the questions that we will be tackling:

  1. What were the causes of the recent outages in China, and what will be the administrative response to solve the underlying issues on a long term basis
  2. Will the energy law (draft attached) be passed this year, will the events earlier this week catalyze the central party to push it, and what impact on the draft will the outages have?
  3. Is China seeing a natural barrier to economic growth?
  4. Where must the central party invest over next 3-5 years to stabilize its energy infrastructure?
  5. What should multinational firms do to protect themselves?
  6. What are the opportunities for multinational firms should the lights go out?

So, with that, I will ask you the reader to offer your perspectives based on your experiences. Without a doubt, energy will continue to be an issue that planners will continue to struggle with, and this is not the last time we will see headlines of energy shortages, inflation, etc.

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3 Responses to “Energy: What if, What else, and What are the odds”

  1. Will Lewis says:

    February 18th, 2008 at 9:03 am

    1. In the California Energy Crisis of 2000-01, the main culprit was deregulated wholesale energy prices and regulated consumer energy prices. This left the door wide open for market manipulation, and when wholesale price exceeded the consumer price the consumers were left out in the unusually hot weather in California that year. China has a deregulated wholesale coal market and regulated energy prices, and the last sentence of this FT Article suggests that there is some market manipulation going on. The closest one can come to long-term price stability in energy markets seems to be deregulation combined with a robust futures market with sufficient government oversight. A stable supply of energy sources and a lack of severe weather can help, too…

    3. Without an increase in the use of alternatives, this might be a natural barrier for all nations. There’s an interesting article at Carnegie Endowment on financing clean energy projects and how economic growth and energy problems can be solved.

    5. In California, companies were allowed to buy exemptions from blackouts from their energy supplier. Could China offer this on a non-discriminatory basis to domestic and foreign firms?

    6. Does China permit cogeneration?

  2. Rich says:

    February 18th, 2008 at 9:23 am


    Thanks for the comments. I was in CA during that time on a 2 week MBA trip, and we had a few close calls. I read the finance article last night, and it is going into my roundup next week. There are a lot of things that are relatively unknown in the general market, and when I was speaking to an energy NGO today there have been some who have found workarounds.

    Many areas I have worked in, they do offer guaranteed service during peak hours/ seasons for an additional.

    Co-generation.. that is a great question. I hear a couple years back of a group bringing in assets to do this as a service, but i am not sure if they succeed.

    Thanks again for the comments.


  3. Rich says:

    February 24th, 2008 at 3:49 am

    In a related article, Biz China has announced that China Freezes Energy Prices in Attempt to Check Inflation… and so it appears that energy inflation is not only still a concern, but a big one.

    Where I think this is interesting is that part of the problem in the overall energy story may be that prices are actually too low… for say water… power.

    If that is the case, then this would be a case where the short term band-aid may actually make the situation worse over the long term. Any thoughts?