This year, China has been facing rolling power blackouts that are likely to get worse before they get better. According to the China Electricity Council, the country’s supply may lag demand by 30 gigawatts this summer, twice the shortfall that Japan faced after its earthquake in March.
There are several reasons for this problem, but the biggest may be surging demand. Electricity consumption in China grew by 13.2 percent last year, and it has maintained that pace in the first quarter of this year. Electricity prices have not risen to reflect that demand, and China’s capacity to generate power has not been able to keep up.
Even worse, the gap between supply and demand is likely to get bigger. Peak power shortages may reach 50 gigawatts next year, and even exceed 70 gigawatts in 2013.
In addition, alternatives like hydropower are not as reliable as needed. Since the Three Gorges Dam was completed in 2008, it has caused massive social, environmental and geological issues. Yet it supplies only 2 percent of the country’s electricity.
As a result of these problems, Chinese provinces will be forced to continue curtailing electricity supplies to fight the power shortage. This rationing may reduce second-quarter economic growth, and make it more difficult for some energy-dependent companies to meet their revenue and profit targets.
The shortage has also forced Chinese manufacturers to rely on diesel-fueled generators, driving up demand and prices.
The power crunch is also having an impact on other industries. China now consumes the majority of the world’s metallurgical coal, to fuel its booming steel production. But without enough electricity, China will be forced to import more steel. In addition, China will need to import more thermal coal, which generates 80 percent of its electric power. And its domestic stockpiles of coal have fallen to just nine days worth, versus an average of two weeks.
I’m watching the situation closely, and telling subscribers of my Emerging Market Winners service how to take advantage of it.
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For One Billion Dollars, China can have all the power it wants. It could start to get with the first Power Station in place in a few months after the Demo is built in Canada. No fuel needed after start-up.
More economical than Water-, Nuclear-, Wind- or Solar Power. Power at 1 cent per Kilowatt or less.