Will China’s new energy plan backfire?

In recent times, we have heard countless news of local and overseas companies investing in new power plants to feed China’s voracious power appetite. In fact, China has plans for two 1000-megawatt nuclear power plants to be built each year for the next 15 year to meet energy needs. However, the State Electricity Regulatory Commission of China has announced a reverse move in expectation of excess electricity being generated.

China, which is aiming to expand its power generation capacity by 15 percent this year, will decelerate the rate of expansion of its utilities in 2008 on concern of possible excess supply in the market. “Power capacity growth will slow down next year,” Sun Yaowei, a deputy director at the State Electricity Regulatory Commission, said. China may add less than 70 gigawatts of capacity next year, compared with this year's projection of as much as 95 gigawatts, he said.

China's power producers are increasing capacity to satisfy electricity demand in the world's fastest-growing major economy, which grew by 10.7 percent last year. The nation's power demand and supply will be equalised this year after four years of power deficiency since 2003.

“Power supply will be improved this year,” Wang Yeping, vice-chairman of the commission, said. “There will be surplus in certain areas of the country due to seasonal changes in demand.”

China's consumption of electricity rose 13.5 percent to 2,834.4 million megawatt hours last year, the commission said in its annual regulatory report. Utilization hours of the nation's power plants dropped by 3.7 percent to 5,221 hours because of the increased capacity, it said.

China's electricity demand growth may decelerate to 13 percent this year and reach an “overall balance” between supply and consumption, the China Electricity Council said Feb. 16.

With China’s population projected to grow rapidly in accordance to the country’s dynamic economic growth, is the Chinese government being realistic with their prediction of China’s energy demands slowing down? Your views.