Zhang Yong, a bright, up-and-coming bureaucrat, thought his financial expertise and Ivy League education would prepare him well for the tricky issues he would face in his job as vice director of economic development in Taizhou, one of the fastest-growing cities in one of China's fastest-growing provinces, Zhejiang. Instead, he found himself tackling a problem that seemed more appropriate for a Third World backwater than a Chinese boomtown: a chronic shortage of electricity. Last year, Taizhou's economy grew at an astounding 15%, but all the gleaming new factories pushed electrical consumption up by 21%. Local power stations are able to provide only about half of the juice demanded by the city and its 5.4 million residents, so even the pampered children of government officials have been forced to do their homework by candlelight, and factories have had to buy diesel generators to produce their own electricity. Last year, during the worst of the blackouts, traffic lights went dark and newspapers ran special sections listing which districts would be affected that day—a situation that is likely to repeat itself in the next few weeks as the mercury rises and air-conditioners are activated. "The people here have worked hard for 20 years to develop the economy," says Zhang, "and all of a sudden they've gone back to what it was like even before the country's market reforms started."
China's economic boom is, quite literally, running out of power. Since 1980, when the nation's economy first began to emerge from the darkness, energy consumption has skyrocketed by more than 150%. But construction of new power plants has not kept pace. Last year, millions of Chinese suffered blackouts when massive power shortages affected two-thirds of the country's 31 provinces and municipalities. Multinational companies operating in China, among them General Motors and Panasonic, were forced to shift their production schedules to off-peak hours, which lost them days of work, while thousands of local companies suspended operations entirely as available energy was funneled to foreign and joint-venture firms to keep their assembly lines humming. The electricity crunch hit China's fastest-developing eastern and southern regions the hardest, as overtaxed power plants simply couldn't keep up with the pressure from energy-intensive industries such as steel and cement. As a result, a province like Zhejiang saw its 2003 economic growth rate come in 1% lower than expected.
This year, the power pinch could be far worse. Chinese officials estimate that the nation will suffer a record shortfall of 30 million kilowatts, twice last year's deficit. In the first quarter, China's electricity demand was 16% higher than in the same period last year, a figure set to surge even more if it's a hot summer. Says Long Weiding, an engineering professor at Shanghai's Tongji University who advises the local government on power issues: "This is China's first major public crisis after SARS."
Municipal authorities in China's big cities are rolling out a variety of measures—some of them seemingly desperate—to try to keep citizens out of the dark. In Beijing, a cheery public relations campaign encourages cool, casual dress, telling yuppies that suits are unnecessary when the temperatures soar. Hotels in Shanghai have been told they must set their thermostats no lower than 26°C, and streetlights have been fitted with energy-saving bulbs. The city of 16 million is even considering seeding clouds on the summer's hottest days to induce cooling rain showers.
All of this means little to Zhu Xuefeng, a 31-year-old sales executive from Hangzhou, a city two hours by car from Shanghai. Zhu has endured many blackouts in his office and home so far this year. Last month, he was about to send a time-sensitive e-mail to a client when the lights flickered off. Zhu was forced to lug his desktop computer to an Internet café in a neighboring district to get the message out in time. When he returned home that night, the power was off, rendering his new flat-screen TV and expensive air-conditioning unit inert. "My TV is just like a painting on the wall with no use," he says. "And I've started using a traditional fan to keep myself cool." One of Hangzhou's most-popular chat rooms now focuses on how to deal with such blackout woes—although these discussions, of course, are limited to people with power for their computers.
The blackouts plaguing China are a rude awakening for those who consider the brightly lit skylines of the country's eastern seaboard a symbol of national progress and prosperity. "China has fallen in love with electricity," says Christopher Choa, an architect who heads the Shanghai branch of American firm HLW. "Blazing lighting and abundantly available power are considered almost sensual experiences, more than just metaphors for modernity." But the affection for dazzling lights has not translated into a commensurate investment in energy infrastructure, notwithstanding China's showpiece $25 billion Three Gorges Dam, the world's largest hydropower project. In 1993, amid a frenzy of bureaucratic belt tightening, China eliminated its Ministry of Energy, leaving power policy scattered among various, largely uncoordinated entities. Then, in 1998, after a brief oversupply of electricity following the Asian financial crisis, Beijing issued a moratorium on the construction of coal-fueled power plants for three years. While demand for power leaped—electricity consumption grew by 10.5% in 2002, up from 2.6% in 1998—increases in electricity-generation capacity slowed from an 8.4% growth rate in 1998 to 4.4% in 2002. "China underestimated its power demand quite dramatically," says Pierre Lau, an analyst for ABN AMRO in Hong Kong. "They realized the problem a couple of years later, but by then it was too late."
To make up for lost time, Beijing has promised an enormous boost in energy infrastructure that, it says, will alleviate the shortfalls by 2006. The nation expects to double its energy capacity by 2010, to 650,000 megawatts. But even that Herculean effort, combined with a much-publicized plan to cool down the economy and relieve pressure on the energy sector, might not be enough. "It's a little hard to believe that if China maintains growth rates of 6-8% that all of a sudden these shortages will disappear overnight in 2006," says Joseph Jacobelli, a Hong Kong-based regional utilities analyst for Merrill Lynch. Moreover, most of China's capacity expansion will come in the form of coal-fired power plants, which, aside from their noxious environmental impact, suffer from crippling supply problems. (The mainland is also aggressively expanding the amount of energy produced by its nuclear power plants from 4,468 megawatts in 2002 to an estimated 36,000 megawatts in 2020, but this energy source is still expected to account for less than 4% of all the electricity produced in China in 2020.) Currently, more than 70% of China's electricity is derived from coal, but the nation's overburdened railways are plagued by bottlenecks, which limit the amount of coal sent to the voracious power plants. Half of the coal available from the western part of Inner Mongolia, for instance, is stuck at the source because of insufficient transportation networks. "Again, it comes down to a lack of planning on basic logistics," says Merrill Lynch's Jacobelli. "In some ways, you'd expect better from a centralized economy."
Although China now allows coal prices to float freely on the market, the government still sets the price electricity companies must pay for coal. This spring, that figure hovered at just two-thirds of the free-market price. This is meant to make electricity cheaper for consumers, but with so many industries gobbling up coal, many coal companies are loath to supply power plants. As a result, coal reserves held by China's electricity sector were down 40% last month compared with the same period the previous year. One major power plant in the eastern province of Jiangsu admitted that it had only three days' worth of coal reserves, according to an energy expert from the West who visited it last month. To cope, the plant is signing under-the-table deals with wildcat coal mines that had been shut down as part of a government campaign to repair the country's atrocious mining-safety record. "The government is turning a blind eye to these illegal mines starting up again," says the expert. "It's the only immediate solution they have to the coal problem."
China's enthusiasm for rapid development has delayed the search for long-term solutions, such as requiring new buildings to be more energy efficient. "China could realize potentially extraordinary benefits by linking power-conservation strategies to its development strategies," says architect Choa. "But it will take deep collaboration between government officials and planners to bring this about." So far, it isn't happening. Shanghai, for example, has trumpeted its "Green Culture" campaign, which has filled the city with grassy parks and perched flower boxes upon highway dividers. But energy-efficient measures have not been a priority of "Green Culture," even though the city this year forecasts a 2 million-kilowatt energy shortfall. Shanghai's skyscraper boom boasts only a handful of green buildings—structures that consume up to 70% less energy than normal, according to the U.S.-based National Resources Defense Council.
Already this month, Shanghai has obliged 500 factories in the city to move their production to off-peak hours. Yet it still requires buildings in the top commercial districts to keep their interior lights on all night to burnish Shanghai's image as an international financial capital. According to one building manager from the Xujiahui district, this requirement has led to doubled electricity consumption, not only from the lights themselves but from the air-conditioning needed during the day to cool the overheated building. All in all, Shanghai's much-vaunted nocturnal skyline—100 times brighter than the Australian capital of Canberra's, crow local urban planners—consumes the same amount of electricity as the city receives from the Three Gorges Dam, now in its first stage of operation. And, as the vanguard of all things cool in China, Shanghai has inspired similarly wasteful lighting schemes in other metropolises such as Tianjin, Nanjing and Kunming. "Shanghai has the opportunity to influence other cities, but right now it's not setting a very good example," says Tongji University's Long.
Those left in the dark are trying to cope as best as they can. Zhou Zhiliang, production-line manager for a 1,400-employee company that makes scaffolding for oil wells, says his factory is being supplied with only enough electricity for three days of work a week. To compensate, the company bought a diesel generator, a purchase repeated by so many factories across the country recently that diesel prices have been driven higher. Zhou says the cost of the generator and the fuel has eaten up the firm's profits. Still, production cannot stop. "We have to keep our customers satisfied, or they will go to another manufacturer," he says. "We hope this is a short-term problem and things will go back to normal soon." Given the number of companies leaning ever more heavily on the country's power plants, normal might be a shade darker than before.