Brightness in Shanghai

In the five years since 2002, China’s total power generating capacity doubled to 700 gigawatts!

HONG KONG: Even until two years ago, Shanghai, the city that Mumbai aspires to be, was in the grip of a confidence-sapping power shortage of the sort that’s had Mumbaikars all hot and sweaty in recent weeks. The neon lights of Shanghai’s signature skyline on the Bund — as much a visual metaphor of the shining city as the Queen’s Necklace is to Mumbai — were switched off to conserve electricity. Air-conditioners at ritzy malls and offices went deafeningly silent.

It wasn’t just Shanghai: practically all of China was reeling under the effect of an energy deficit of monumental scale, triggered by the country’s supercharged, 10%-plus economic growth.

China’s response was characteristically audacious: it undertook a slew of power sector reforms, including large-scale privatisation, and went on an orgy of investments in power generation and transmission.

In the five years since 2002, China’s total power generating capacity doubled to 700 gigawatts!

The fruits of those efforts are now dazzlingly manifest: by the end of next year, China will have an electricity surplus. Shanghai will once more be a ‘switched-on city’.

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“Energy companies in China have been at the forefront of privatisation” in recent years, says KPMG’s Global Energy & Natural Resources practice chairman Roger Munnings. The blackouts of 2004 and 2005 introduced an element of urgency to power projects and the reform process that were already under way: virtually overnight, the country’s power generation capacity was pushed to its limits and a host of immediately operable (even if hugely expensive) new oil-burning capacity was installed. But equally critically, the power crisis led to a far greater utilisation of previously underused hydropower capacity and nuclear power.

Due consideration was also given to putting in place an integrated national electricity grid, although that could take until 2020 to achieve. Earlier this year, Shanghai Electric Power Commpany unveiled an upgraded power system, which, in the event of a blackout, will immediately restore supply with a simple flick of a switch!

Even at the height of the power crisis in 2004, Chinese authorities’ short-term responses to the shortage were illuminating. In Shanghai, for instance, local authorities induced artificial rain through ‘cloud seeding’ in order to ‘cool down’ the city - and obviate the need for millions of homeowners to switch on power-guzzling air-conditioners.
Thousands of enterprises shifted their working hours to nights or weekends in order to ease peak-time power demands. Holidays were enforced in factories on a rotating basis.

The Shanghai Science and Technology Museum too came up with an ingenious power-saving device: every night, when the city’s power consumption was low, it produced tonnes of ice blocks that were used for air-conditioning purposes during the daytime.

Looking ahead, China is placing new-found (and overdue) emphasis on clean energy. The government is drafting an energy law that will regulate the development of the power sector and put greater emphasis on making power generators more environment-friendly and consumers more efficient. It is also likely to detail how private investment can play a greater role in all parts of the industry. The Asian Development Bank further notes that China is experimenting with various innovative energy-saving schemes, such as wet and dry season power tariffs in 11 provinces with either high hydropower generation or large energy demand-supply imbalances.

None of this, of course, means that China’s power problems have been solved forever more. Given the scorching pace of growth of the economy, demand for energy will only continue to grow, and China will need to make huge investments - of money and technology - to keep pace with it. By some estimates, China will need to spend an additional $180 billion on generating capacity over the next 15 years to meet energy demand. China has proved in the past that it can almost will its way out of problems, and in so doing, offer lessons for others.