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Power shortage is hell in China's heaven on Earth

China will force factories in the capital of a wealthy eastern province to shut for up to four days a week, the latest draconian measure aimed at alleviating a summer power shortfall estimated at 20,000 megawatts.

The city of Hangzhou — known along with nearby Suzhou as heaven on Earth — moved to its highest power alert on Tuesday, a power bureau official said. Hundreds of plants will grind to a halt up to four days a week to keep an overtaxed electricity grid from crashing.

Manufacturing-intensive Zhejiang province, a cradle of private enterprise and thus an important driver for the entire country, has been the worst-hit by a summer power crunch.

Foreign and local firms alike in Hangzhou have been told to suspend output three days a week, while larger ones that operate around the clock must keep within agreed usage quotas. Some state-owned or private plants have been asked to shut down for four days a week, the official said. The cuts appeared to be indefinite.

Some local factories, resigned to heavy-handed measures, said they could take matters into their own hands in the long run. The city's leading steel maker, Hangzhou Iron & Steel (600126.SS), was scrambling to economize energy to meet targets but said it would invest in its own power sources for the future.

"We know we can't depend on the government entirely for our supply," said vice general manager Han Xiaotong. "We've adopted a series of energy-saving measures, and have plans to boost in-house capacity by more than 10 percent a year."

The city is facing a power shortage of 1.3 million kilowatts this summer, state media quoted Hangzhou vice mayor Shen Jian as saying.

To address that, hotels, restaurants, malls, supermarkets, and office buildings in the city had been asked to use just half their air-conditioners, and half of all lights in the downtown area would be switched off daily.

"We've started up our 'E-grade' power consumption scheme, our highest alert level," the power bureau official said.

Nationwide Panic

Zhejiang typifies the desperation now gripping a country facing another summer of crippling shortages, after a heatwave last year that plunged half the nation into rolling brownouts.

Economists say chronic power crunches are shaving one to two percentage points off nationwide economic growth, a situation likely to persist until 2006. Years of under-investment in capacity and transmission — the result of a ponderous bureaucracy and breakneck growth in recent years that took many by surprise — mean the situation may get worse before it gets better, economists say.

Officials are bracing for a 40,000-megawatt power shortfall for the full year, enough to power 40 million homes.

The effects of that are likely to be felt most acutely in the prosperous coastal regions, where a ballooning middle-class is placing unprecedented demands on power via not only air-conditioning but also home appliances.

Shanghai also is hard hit. From Monday, the government forced an extra 400 companies to switch operations to the night, state media said, bringing the number of firms required to work graveyard shifts to 2,100. Landscape lighting along the historic waterfront Bund is turned off every time the temperature exceeds 35 degrees Celsius (95 degrees Fahrenheit).

Last summer's blistering heat forced a slew of Shanghai-based multinationals, including automaker Volkswagen AG and Polaroid, to curtail output.

Hundreds of thousands of workers from 10,000 businesses in Beijing and Shanghai have been told to take staggered one-week holidays for a month starting from mid-July, the official Xinhua News Agency has reported.

Source: Reuters

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