China Facing Worst Energy Crisis in Years

China is currently facing its worst energy crisis in years.

It's so bad that their central planners must be having sleepless nights in Beijing worrying if the lights are about to go out and the factories will stop pumping out goods.

Huge swaths of central China, including the financial center, Shanghai, are likely to face power cuts this summer as energy demand peaks.

This is how the state-controlled China Daily newspaper summed up the situation: “Power shortages that gripped many parts of the country in recent months could herald the worst energy crunch in years amid growing concerns that economic growth may suffer.”

Energy demand in China has, of course, increased dramatically over the past few decades as the country rapidly industrialized and became one of the major manufacturing centers of the world.

To help meet that demand and try to create an element of energy security, China invested massively in hydroelectric power with the controversial Three Gorges Dam, its largest development project, which flooded cities and large areas of countryside.

But that dependence on hydroelectric power, which is estimated to currently supply about 20 percent of its energy needs, has become part of the problem.

Droughts are common in China, but they have lasted for extremely long periods in the north and south of the country in the past few years. The droughts have caused terrible damage to the local economy, principally agriculture.

But being dependent on water flow for power as well has only exacerbated the disaster.
At the moment it’s the turn of central China to suffer from drought.

China prides itself on its rapid economic development.

But the sight of ships stranded on dried up riverbeds downstream of  the Three Gorges Dam must be a nightmare for the Chinese authorities.

According to the Chinese government and media, the drought in central China has lowered the level of the Yangtze River to historically low levels.

Water levels around the city of Wuhan have fallen to around 10 feet, forcing ocean-going vessels to avoid the area.

Further up the river, Chinese state media has reported the operators of the Three Gorges Dam have discharged more water to try to alleviate the drought downstream, but so far it seems to have had little effect.

The Xinhua News Agency reported, “In Hubei alone, some 400,000 people suffered from drinking water shortages and 870,000 hectares of crops were affected.”

And the blame game for the drought and its impact is being fought out in the Chinese media.

Wang Jingquan, of the Yangtze River Water Resources Committee, was quoted as saying damming up the river at the Three Gorges Dam has aggravated the drought by diverting water flow to the lower reaches.

But Zheng Shouren, an academician with the Chinese Academy of Engineering and the chief engineer with the same Yangtze River Water Resources Committee, was quoted as saying:

“If there was no Three Gorges Dam, the drought would be worse and the shipping on the Yangtze would be very hazardous,” Zheng said.

The simple answer to the problem would be for it to rain a lot. But the Chinese authorities aren’t even confident that will work.

"Even though heavy rains are expected in coming months, it's possible they won't raise the water level much," the China Daily quoted Wu Heping, director of the Wuhan waterway bureau, as saying.

When you also put into the equation the problems China faces as it tries to wean itself off heavily polluting coal-fired power stations to improve its environmental record while at the same time not being prepared to pay market rates for the electricity being supplied to the state, thus hindering investment, the numbers don’t add up.

The official Xinhua news agency summed up the situation: “Demand is expected to exceed supply by 40 gigawatts this year if the drought continues, rising to 50 gigawatts in 2012.”

The impact is already being felt with some manufacturing plants having to cut production due to power outages.

And the Chinese government has now suspended all diesel exports to ensure supplies as factories switch to using fuel-powered generators.

China is also trying to meet its demand for energy by securing oil supplies from abroad.

According to the independent U.S. Energy Information Administration:

“The Chinese government’s energy policies are dominated by the country’s growing demand for oil and its reliance on oil imports.”

And that is where China’s energy crisis is likely to affect the American consumer the most by driving up gas prices even more.