Guangdong’s Energy Crisis Will Continue. What’s Your Plan?

Sunday, March 2, 2008 9:05

Over the last several months, I have been covering what I felt was going to be hard times for energy, and what that would mean for manufacturers operating in the area. My most timely piece in this was the post entitled People May Think I am Overreacting…. (a follow up to Why China’s Recent Drought Matters to YOU) 10 days before the snow storm knocked out power to 17 provinces. In that post, the leaders of Guangdong had just issued a call for help:

issue an “urgent notice” on Wednesday to the country’s power generators, coal companies and railways to address an electricity shortage that has led to rationing in more than a third of China’s provinces in recent weeks.

Little did we know that 10 days later a snow storm would be the the final straw that landed on a broken camel’s back. There have been rail capacity issues for 2 years, the grid is a mess, hydropower has suffered from a drought in 2007, China’s bulk shipping fleet was maxed out, and so on and so on.

Unfortunately, the only thing through all of these problems that can be fixed in a reasonably short timeline, is the damage from the snow storm…. and that means that as long as rail capacity doesn’t improve, rain doesn’t fall, and the boats cannot be retrofitted ASAP, the worst case scenarios will begin to play themselves out.

As this China Daily article suggests.

To date, the impact on the east coast has been kept under wraps, however it is clear that there is something going on in Shanghai. the typically bright skyline is much darker, the bund is not lite up, and I have recently been told that there are areaas in and around Shanghai that are under power rations.

Where this post, and the previous ones are important, are that readers need to begin planning for what could be the worst power stoppages seen in modern China’s machine.

I laid a lot of the issues/ angles out in the post: China’s Power Crisis. What is Happening. What the Impact Is/ Could be. And What You Should Do

With luck, enough rain will fall to fill reservoirs and the logistics infrastructure will find a way to satisfy the need for coal.

But if not, you need to be prepared, and as you know I recently brought together a few people to have an energy roundtable discussion. Look for those notes later this week, and for anyone that has already begun experiencing or planning for energy shortages, please let us know what you are doing about it.

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9 Responses to “Guangdong’s Energy Crisis Will Continue. What’s Your Plan?”

  1. bandaranike says:

    March 2nd, 2008 at 12:08 pm

    Hi Rich

    China has very many big hydropower stations. Nearly half of the words 4 500 biggest hydropower stations are situated in China. And they are building many more to increase production of electricity.

    But there is a huge problem. The power stations need water all year round. Many reservoirs are very much silted up and have little capacity to store water enough to the dry season.

    Many of the reservoirs have become very shallow; they are filled up with huge amounts of sand and mud. The government must face this and start to dredge.

    The Chinese distribution net broke down this winter, snowstorms was one problem but it was also a chain reaction of to little input of electricity distribution net in a time of very cold weather and a big use.

    One way to manage next winter shortage of energy is to rationing the electricity – but it will be a very unpopular decision when the people are freezing- can the government handle that?

  2. jim says:

    March 2nd, 2008 at 7:39 pm

    There was a story just the other day in SH Daily about the lights going back on at night. Apparently the city asked property firms and other companies to switch off power to big signs in the face of the blackouts.

    I read somewhere (and I can’t find the link anymore, sorry) that power lines running from the west to Shanghai were only fully restored sometime last week or the week before.

    In other news, the State Grid has just sold RMB20 billion’s worth of bonds to fund improvements to the electricity grid.

    I’m not sure, other than planning how to manage an imposed brownout/blackout, what companies can do. You can’t really run large-scale manufacturing from generators. If the State Grid decides to cut the power, I’m not sure there’s a whole heck of a lot anyone can do about it.

    Any word out there on tiered pricing plans or premium service level agreements to ensure power availability?

  3. Rich says:

    March 2nd, 2008 at 9:20 pm

    Bandarnike

    As always, you insight into the damn.. sorry.. dam situation is much appreciated. Getting back to an earlier post I wrote, on the Yangtze reaching 140 year lows, that must have played in as well.

    I guess the real question is what does the government view as the worst: power outages, price hikes, or rationing? Facing facts, one of them will occur.

    R

  4. Rich says:

    March 2nd, 2008 at 9:27 pm

    Jim,

    thanks. The story you refer to is about the connection between 3 Gorges and Shanghai, and I need to find that link.

    update: here is link

    In many of the parks that I have spoken with, they will all mention their dual redundant power supply grids that ensure consistent flow, and some offer a dual pricing for guaranteed service… but to be honest, I am not sure what that gets you when the hydro power for the region is below normal and EVERYONE is affected.

    R

  5. jim says:

    March 3rd, 2008 at 6:30 pm

    This just in: http://english.people.com.cn/90001/90776/90884/6365286.html

    South China’s Guangdong Province plans to build the nation’s largest off-shore wind farm, in a bid to quench its power thirst.

    The facility, with a sea area coverage of 240 square kilometers, will be co-sponsored by the Lufeng Municipal Government and Guangdong Baolihua New Energy Stock Co.,Ltd.

    The plan includes a 1.25 million kilowatt wind farm, an 8 million kw supercritical power plant and a dock construction project.

    The facility is expected to “relieve the energy pressure and optimize the energy structure” in the booming province, local government officials said.

    China began to work on its second west-to-east natural gas transmission pipeline last month. It will mainly carry natural gas from the natural resources-rich west to the southeastern Yangtze and southern Pearl River deltas, the country’s two most developed regions.

  6. Rich says:

    March 3rd, 2008 at 9:20 pm

    Jim,

    Thanks for that. Wind is something that we are seeing a lot of investment in, and as you may have seen in the Energy discussion notes, it is one that will receive more attention as it is still quite quick to knock up….

    R

  7. Jay Boyle says:

    March 3rd, 2008 at 10:59 pm

    What’s new is old hat!

    When I first came to China in 96 brownouts and blackouts were very real. The solution was to build a cogen plant on site. These can be diesel or run on natural gas.

    Contrary to popular belief you can get some some serious KVA out of a cogen plant for both primary and emergency back-up. The US Navy has run entire cities off the generation plants of one or two of its ships during crises.

    The plans we had in 96 were for a 1500 KVA primary power plant. Also if you want to get creative you can run a larger water pump through the water jacket and use the cooling fluid to heat your building using radiant heat.

    Jay

  8. Rich says:

    March 4th, 2008 at 12:08 am

    Jay – you old China dog!

    Without the assistance of the US Navy (where were they in New Orleans?), how long and how much does a cogen plan take?

    Weeks, months, a 5 year plan?

    R

  9. Jay Boyle says:

    March 4th, 2008 at 1:43 am

    Hi Rich,

    Woof woof!

    When I priced it back then to import one from the states was under USD 150K for a Turnkey set up plumbed by US electricians and we had Exim bank financing. Note at that time the local power company was going to charge us 300K USD to sell us the transformers.

    The total construction time was about a month or two. Most of the time went into pouring the floor. It took longer to get the approvals from the govt design institute then to build it.

    Today CAT is producing them in China from 906 KVA to 2000 KVA. Cumins is also well represented here. The biggest trick is getting the fuel not the generator.

    Jay