Energy

Industry faces rising power cost

By Lan Lan, Du Juan and Chen Jia (China Daily)
Updated: 2011-05-31 09:14

However, the price hike was necessary, said an official who declined to be named.

"Rising energy prices are good for energy conservation and will continue," said the NDRC official.

China cannot sustain a 9 percent GDP growth on the back of 12 percent energy consumption growth, he said.

Other economists and officials also defended the hike.

A number of factors have caused the shortage of electricity, including rising demand, a decline of hydropower and soaring coal prices, Li Ying, chief economist at the State Grid Energy Research Institute, said.

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Li said a number of power companies are facing severe financial losses and the price increase will help them.

Jiang Kejun, a researcher of the Energy Research Institute of the NDRC, said raising electricity prices will help ease power shortages because many coal-fired power plants are losing money due to the high cost of coal.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said the price rise will make high energy-consuming companies reduce production.

Many regions already raised on-grid electricity prices, paid by the grid to power companies, by an average of 0.02 yuan since April 10.

The first quarter saw electricity use rise 12.7 percent year-on-year to 1.09 trillion kilowatt-hours, according to the National Energy Administration.

A total of 17 provinces and regions surpassed the average growth rate. The Xinjiang Uygur autonomous region's electricity use rose 33.9 percent.

Electricity use in high- energy consuming industries, such as battery manufacturing, surged higher than the average level.

"China's central and western areas attracted a lot of transferred industries from the coastal areas after the financial crisis, and many of them consume a lot of energy," said Wu Libo, deputy director of the Center for Energy Economics and Strategic Research at Fudan University in Shanghai.