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May 26, 2011

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Power shortages may close department stores

STORES and businesses in parts of Shanghai face being shut down on the hottest days this summer, as the city tries to juggle a tight power supply with spikes in demand.

Most likely to be affected are Pudong, Yangpu, Baoshan, Minhang and Songjiang districts - industrialized areas that do not have large electric substations, Shanghai Electric Power Co said yesterday.

Factories and department stores will be required to close when a potential power shortage occurs, as households will get priority, it said.

"The power limit won't be citywide and residents' consumption will be secured," the company said.

The grid comes under more pressure on the hottest days as sweltering residents crank up their air conditioning.

The maximum power load is estimated at 28.5 gigawatts under extreme hot weather conditions in July and August, while its maximum production capacity is 27.4GW, including 8.7GW brought from other provinces via transmission lines. This means a supply gap of 1.1GW could exist.

Shanghai is among at least 10 provincial grids expected to be hit by a power shortfall this summer, according to the State Grid of China.

The power situation in neighboring Jiangsu and Zhejiang provinces is even more serious than Shanghai, so while in the past they bolstered the city's power supply, this is unlikely to happen this summer.

The State Grid said this week power deficits under its management could total 30GW this summer - or even 40GW if coal supplies worsen, water levels for hydroelectric schemes remain low and there are unusually high temperatures.

This is worse than an earlier forecast by the China Electricity Council, which last month estimated a nationwide shortfall of around 30GW.

The State Grid said it will extend the scale of power rationing to industrial users this summer.

Some Shanghai industrial firms have agreed to suspend or cease operations during peak hours to save power for residents, Shanghai Electric said, freeing at least 2.4GW of capacity during peak hours.

Shanghai's Baosteel is to adjust production during peak consumption periods. Analysts don't expect this to affect the steel producer, as it has its own power generating plants.

China's power shortages this year began in March in some provinces, after surging coal prices eroded generators' profitability, resulting in capacity not being maximized.

Coal-fired plants make up more than 80 percent of China's power generation. Regulated tariffs prevent generators from passing rising coal costs on to consumers.

Armand Cao, senior energy and power consultant at Frost & Sullivan, said shortages could recur if these structural problems remain.

This year's shortages have been also worsened by a serious drought which has hit the country's major hydropower producing regions.


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