Off The Grid

CNOOC's failed acquisition bid for Unocal has focused attention on China's growing energy needs and efforts to secure oil supplies to feed the increasing demands of a rapidly expanding economy. But it isn't just modernization that is driving demand. According to this article in the Washington Post, China has become one of the world's most inefficient users of power:

By the government's own reckoning, China's economic growth is absorbing energy at a higher rate than many large economies. To produce $1 million in gross domestic product, China needs 2 1/2 times as much energy as the United States, five times that of the European Union, and nearly nine times that of Japan, according to the state Energy Research Institute.

Making steel in China in 2003 consumed 10 percent more energy per unit than in the United States, according to state statistics. China's electrical generators consume one-fifth more energy per unit of output than American plants, said Long Weiding, an expert at Tongji University in Shanghai. Chinese air conditioners -- now the fastest-growing draw on power -- are roughly one-fifth less efficient than the world average, Long said.

The reason for this striking wastefulness is "the hybrid nature of its economy, which is caught between its communist roots and a free-market future, experts say. More and more of the demand for energy comes from companies that operate on market principles, but the majority of the supply is generated by state-owned monopolies forged in the time of central planning and with little incentive to increase efficiency."

As I've commented often in these pages, the Chinese government under Hu and Wen seems to have a genuine interest in dealing with China's massive environmental problems. But in spite of such laudable goals as having 10% of China's energy needs generated by renewable sources by 2020 and calling for automobile emission standards that are tighter than those mandated by the US Government, Hu and Wen have an uphill struggle trying to reform a system that is in many ways constructed to waste power:

The addition of power-conserving lights at office buildings could cut consumption needed for lighting by as much as 80 percent, said Shi Mingrong, a former official at the Shanghai Power Bureau who now serves as a consultant to the local government. Modern machinery at factories could cut energy demand by one-fifth, he said. But Chinese companies -- grappling with fierce competition and tiny profit margins -- tend to view new technology more as a cost today than savings tomorrow.

"Most companies are shortsighted," said Hu Zhaoguang, chief economist at the State Power Economic Research Center in Beijing, a government think tank. "They are reluctant to upgrade their equipment to improve energy efficiency."

Waste also continues to plague the generation and transmission of power, experts say. Power plants operated by municipal and provincial governments face pressures to buy coal from local mines -- even when costs are higher than other sources -- to support jobs and local taxes. Provinces and cities have sunk billions of dollars into new power plants to help alleviate shortages, leaving governments or even individual officials on the hook to pay off loans to state banks.

Guangdong province, a booming industrial territory near Hong Kong, now absorbs roughly one-sixth of China's overall electricity supply. State-owned factories and electricity distributors have been buying from local plants, paying triple the price of electricity that could be brought in from Guizhou and Yunnan provinces, where hydropower is plentiful.

The involvement of provincial governments has also deterred the creation of rational generation and transmission grids, experts say. State officials have erected one white elephant after another -- huge power plants that absorb great quantities of coal -- while neglecting to develop smaller, gas-fired plants that could adjust loads to meet demand more precisely. That has forced the big plants to stay on line even when their full capacity is not needed.

The more I look at contemporary Chinese politics and society, the more it seems to me that conflicts between the central government and provincial and local governments account for events that would otherwise seem contradictory or mysterious. Local control in many if not most areas is a very good thing, I believe. But sorting out China's energy and environmental problems would seem to require the strong hand of a national authority - and an enlightened one at that.