China & Coal:China's tight coal supply could further limit power
25 Feb, 2008, 1252 hrs IST, REUTERS
BEIJING: China's shortage of thermal coal could lead to a serious power shortage this year unless additional measures are taken, state media reported on Monday, citing an official from the China Electricity Council.
A coal shortage and the soaring cost of the fuel had shut more than 10 gigawatts (GW), or some 6 per cent of generating capacity in regions covered by China Southern Grid Corp in early January, creating a deficit of some 6 GW in its coverage areas alone. A surprising cold snap later disrupted coal transportation in many parts of China, leaving 40 GW, or 6 per cent of the country's total generating capacity offstream and another 11 per cent running with stocks below levels needed to cover three days of generation.
An urgent effort by the State Council to boost coal stocks at power plants since late January had yielded some results, but coal supply remained one of the key factors affecting power production, the China Securities Journal reported.
"Without a mechanism to solve problems including coal volumes, prices and transportation, a grim outlook for power market will emerge," Wang Yonggan, general secretary of the electricity council, was quoted as saying. He did not explain what kind of mechanism is needed.
More than 80 per cent of China's power output came from coal-fired generators in 2007. Wang said that with new generators coming on line, coal demand from power plants had increased 107 million tonnes this year while the expansion in coal transport capacity had failed to catch up with that. Coal demand from new generators in central Chinese regions and eastern Shandong province have far exceeded the volumes in term contracts that have already been signed, which will leave them short of coal throughout the year, Wang was quoted as saying.
He said power plants were also overburdened by soaring coal costs, but he did not appeal for a hike in power prices. Thermal coal prices surged more than 10 percent this year after a similar increase a year earlier. Using a so-called coal-power linkage mechanism, that would typically have justified hikes in power tariffs. But the government has not followed the formula, ruling out any such increase at least in the near term, because it is worried that move would further fuel inflation, which is already running at an 11-year high, and spark social discontent.
As a result, power firms' incentive to store the black hydrocarbon has decreased because they have not been able to pass rising costs on to power users.