CHINA: THE ELECTRIC POWER PROBLEM

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• Sequence Number: 1
• Publication Date: August 1, 1984
• Content Type: REPORT

,telligence
China:
The Electric Power
Problem
An Intelligence Assessment
Secret
EA 84-10149
August 1984
copy 3't 8
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" `~.>-.Directorate of Secret
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China:
The Electric Power
Problem
Intelligence
This paper was prepared b~ Office of
East Asian Analysis. Comments and queries are
welcome and may be directed to the Chief, China
Division, OEA,
Secret
EA 84-10149
August 1984
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China:
The Electric Power
Problem
Key Judgments Chinese officials have repeatedly cited electric power shortages as the
Information available leading constraint on China's economic growth and development. Chronic
as of l July 1984 power shortages in China grew increasingly serious in 1983 as economic
was used in this report.
policies encouraging accelerated industrial production and the creation of
new power consumers coincided with a slowdown of power capacity
growth. In large measure, the slowdown in added capacity was the result of
ill-conceived Chinese decisions to cut back investment in the early 1980s.
China has nevertheless been able to achieve high industrial growth rates in
the 1980s despite much slower growth in generating capacity. More
efficient use of electricity by consumers and higher utilization rates of
existing power plants have eased the power constraint somewhat. Many of
these are one-time improvements, however, and we believe gains in
hydroplant utilization are particularly vulnerable, possibly reversible. We
expect China's industrial growth rates, now at 11 percent, eventually will
be forced downward, nearer the expected 5- to 8-percent growth rate of
electricity supplies through 1990.
Although electric power capacity grew only 5.9 percent in 1983, the
additions were still the largest since 1979. Power capacity will grow even
more slowly through 1984-85. China's planners increased investment in
electric power last year, but this will not begin to pay off until 1986-87. Ca-
pacity growth in 1988 and beyond will depend on whether China continues
to increase investment in the power sector in 1984-85 and in the Seventh
Five-Year Plan (1986-90).
Delays in the construction of hydro and nuclear plants are likely. China is
just beginning its first two nuclear plants and has suffered incredible
slowdowns in constructing large hydropower projects. Further postpone-
ments in these projects will lead to increased emphasis on coal-fired power
plants in the late 1980s. Use of larger thermal generators and the
construction of mine-mouth power plants will mitigate the continuing
strains on the coal and transport sectors.
Improvements in China's power transmission include first steps to link
regional grids into a national network and emphasis on a greater but off-
grid role for small rural hydrostations, whose sporadic power supplies
create more problems for grids than they solve. Gains from these policies
may be partially offset by problems in getting regional grids to cooperate in
power-sharing situations.
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August 1984
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China's more rational approaches to power supply problems in this decade
have not been complemented with policies to deal with runaway demand.
Without consistent, nationwide rationing policies, power shortages will
worsen and cause more serious disruptions. We have seen no evidence to
date that such policies are under consideration above the local level, where
practices vary widely.
The United States and other foreign suppliers of technology are only now
beginning to play a significant role in China's power development plans:
? China is now building high-power thermal generators using purchased
US technology, is training its power grid technicians in the United
States, and is buying US computers and control equipment for grid
operations.
? Negotiations are under way with foreign suppliers for both nuclear power
plants and high-voltage powerline equipment and technology.
However, we believe these infusions of foreign technology will not have
great impact on China's electric power problem until late it}"this decade.
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Secret
Key Judgments
Prospects for the Short Run 6
Supply Factors 6
Plans for Hydropower Plants 10
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Table 1
Selected Countries: Electric Power
Production and Capacity, 1982
Table 2
Selected Countries: Per Capita
Production of Electricity, 1983
Production
Capacity a
Canada
16,585
(billion kilowatt-
(thousand
United States
10,455
hours)
megawatts)
USSR
5,204
7
United States 2
386
634.8
,
.
Japan
4,896
367.1
USSR 1
276.7
,
Singapore
3,179
Japan 581
1
143.7
.
Brazil
1,140
Canada 384.5
83.8
_
South Korea
1,024
West Germany 366.9
84.9
Mexico
825
China 327.7
69.3
Nicaragua
425
United Kingdom 272
1
71.7
.
Philippines
368
2
France 262
70.8
.
China
325
Italy 183.7
47.3
India
189
Poland 117.6
25.5
Zaire
150
Table 4
China: Electric Power Capacity
and Production by Source, 1983
Table 3
China: Generating Capacity
by Unit Size, 1983
Size
jmegawatts)
Number
of Units a
Installed
Capacity
(megawatts)
Share of
Capacity
(percent)
Over 250
15
3,800
5.0
101-200
100
15,300
20.0
51-100
200
16,400
21.4
6-50
800 to 2,000
20,400
26.6
Under 6
4,500 to 9,000
13,700
17.9
Capacity
Production
Megawatts
Percent
Billion
kilowatt-
hours
Percent
Thermal 52,475
68.5
265.0
75.4
Hydro 24,186
31.5
86.4
24.6
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China:
The Electric Power
ProblemF I
China is one of the world's leading producers of
electric power. As of 1982 it ranked eighth in the
world in generating capacity and sixth in electricity
production (see table 1). By 1990 China could become
the fourth-largest producer of electricity, behind the
United States, the USSR, and Japan. On a per capita
basis, however, China's power output ranks far below
developed countries (table 2). Moreover, because
much of its generating capacity lies in inefficient,
small-scale plants, the electric power sector is far less
modern than those of the developed world.
Almost two-thirds of China's electricity is provided by
generators of 100 megawatts (MW) or less (table 3).
Furthermore, electricity supplies depend critically on
China's overburdened transportation systems. About
60 percent of China's overall power capacity relies on
railroad or boat shipments of coal from mines that
may be hundreds of kilometers away. In recent years,
coal shipment delays and coal quality problems have
reduced operating hours at many thermal power
plants, which provide three-fourths of China's elec-
tricity (table 4).
probably was the worst in over a decade for chronic
power shortages, outages, and rationing:
? In Heilongjiang, power shortages forced over 600
factories in Qiqihar to shut down for three months.
? In Sichuan, what had been local seasonal power
shortages became year-round, provincewide con-
cerns and repeatedly idled the only factory in China
producing certain models of amphibious tanks and
artillery tractors.
? In Qingdao, shortages became so acute that a
railcar factory could not find out until the beginning
of each workday whether it would be supplied with
electricity; the factory often ran at 15-percent ca-
pacity or sat idle.
? Hunan Province's electricity output in the dry sea-
son fell to 54 percent of overall requirements.
? In Jiangxi, a new, large Japanese-built copper
smelter was unable to obtain allocations of electric-
ity and sat idle.
? Yunnan Province cut power to machine-building,
fertilizer, and textile factories to ensure power and
China also does not yet have a national power grid. To
date, the 12 major grids that supply 70 percent of
China's electricity have had little capability to tap
each other for power. Line voltage and capacities have
been chronically inadequate, both in linking grids and
within the grids themselves. The typical voltage on
long-distance transmission lines within the grids is
220 kilovolts (330 kV in the northwest). Only now,
500-kV lines are coming into use in China.
China produced a record 351 billion kilowatt-hours
(kWh) of electric power in 1983, but official state-
ments indicate that the year
water for irrigated farmland.
growth
Reasons for Shortages
China's power shortages in 1983 were the result of
both demand and supply factors. Economic policies
promoting growth and diversification of Chinese in-
dustry led to greater electric power needs just at a
time when earlier cutbacks in power investment and
in equipment production were slowing power supply
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Table 5
China: Selected Economic
Growth Rates, 1976-84
8 January-June.
b Estimated.
Demand Factors. Changes in economic policy in the
post-Mao era caused overall demand for electric
power to grow unexpectedly fast in 1982-83. Read-
justment policies put in place after 1978 deempha-
sized heavy industry; Chinese planners felt too much
of heavy industry's output was either surplus or
obsolete, while needs for light industrial output, espe-
cially consumer goods, went unfilled. Slowdowns in
heavy industry, China's largest consumer of electric-
ity, eased pressure on power supplies in the early
1980s. At the same time, the new emphasis on
developing light industry and reform efforts that
spurred production in collective enterprises created a
new set of power consumers who suddenly had easier
access to electricity
Light industry grew 35 percent in 1980-81, while
output in heavy industry dropped 3.3 percent. The
cutbacks in heavy industry, however, severely de-
pressed the flow of revenues from industry into the
national budget. Successive large deficits in 1980 and
1981 led Beijing to reemphasize the importance of
heavy industry to China's economic well-being.
In 1982 a new campaign to again promote heavy
industrial production quickly restored output in that
sector to previous levels, and in 1983 it continued to
rise. Heavy industry grew 12.1 percent in 1983, more
than triple the 3.9-percent target set by the annual
economic plan. Light industry grew 8.4 percent in
1983, well above its target of 4.1 percent (see table 5).
The competition for electric power between a resurg-
ing heavy industry sector and new light industrial and
residential consumers caused the extreme shortages.
The rapid rise of heavy industrial output was the main
factor. The Chinese estimate that heavy industry on
average uses six times as much electricity as light
industry to produce output of equal value. The excess
of heavy industrial production above its targeted
output in 1983 consumed power equal to about half of
the electricity consumed by all of light industry.
Supply Factors. The readjustment policies that led to
growth in demand for electricity also slowed the
growth of electricity supplies. In the early 1980s,
Chinese investment in electric power projects leveled
out and Beijing stopped producing the generating
equipment needed to add to electric power capacity.
Table 6 shows the effects of readjustment policies on
electric power investment. In the initial years of the
readjustment policies (1979 and 1980), the amount
spent on capital construction in electric power held
steady slightly below the 1978 peak allocation of 4.9
billion yuan, as Beijing struggled to reduce both
budgeted and off-budget investment.' In 1981, howev-
er, efforts to rein in capital construction were more
successful, and overall investment dropped 21 percent.
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Table 6
China: Investment in Electric Power, 1975-83
Total b
2.87
3.22
3.31
4.93
4.78
4.81
4.01
4.62
5.4
Generation
2.29
2.65
2.70
3.99
3.75
3.71
2.80
3.36
NA
Thermal
NA
NA
1.91
1.46
1.82
NA
a Plan.
b Totals may differ due to rounding.
Amounts of investment in distribution for the years 1975-79 were
derived by subtracting investment in generation from total invest-
ment; amounts for the years 1980-82 were supplied by the Chinese.
Although priority sectors suffered proportionally
smaller cuts, the 17-percent reduction in electric
power investment came entirely from allocations to
power plant construction, which fell 25 percent from
1980.
The cutbacks in heavy industry helped eliminate
production of useless goods like low-grade machine
tools and metal products, but production of badly
needed items also fell. Despite a professed need to
develop energy and transport, heavy industry's output
of items required by these sectors dropped sharply.
The production of trucks, tires, tractors, and locomo-
tives declined, as did the production mining equip-
ment, motors and transformers. Power generation
equipment fell particularly sharply, dropping from
6,212 MW in 1979 to 1,395 MW in 1981 (see figure
1).
The results of cutbacks in investment and heavy
industrial production earlier in the decade are now
affecting China's electric power supplies. Additions to
electric power capacity in the 1980s have slowed in
2 The fall in production of these necessary heavy industrial goods
was in part responsible for the subsequent reemphasis on heavy
industry output in 1982 and 1983. Production of power generation
equipment rose to 2.740 MW in 1983, but was still less than half of
both absolute and percentage terms compared with
1977-79 (see table 7). As demand for electricity rose
at ever faster rates, China's additions to electric
power capacity fell to and stayed at their lowest levels
in 10 years.
Power Rationing Schemes in 1983
The shortages of 1983 confronted local and regional
grid authorities with unattractive choices. Without
rationing, complete shutdowns of local grids were
likely. Cutting power to light industry meant meager
power savings for the grid and greater reductions in
industrial output value for the local economy. Cutting
power to state-owned enterprises had more serious
effects on budget revenues and was harder to sell
politically. Cutting household power consumption pro-
vided only marginal relief, and power for on-site
factory housing.often was not easily separated from
power used for production.
In Shanghai in 1983, power officials faced with
rationing gave priority to central city, state-owned
heavy industry and cut supplies to collective industry
and towns in the surrounding countryside.
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Figure 1
China: Production of Electric
Power Equipment
Table 7
China: Growth of New Capacity
Megawatts
(except where noted)
New Capacity
Brought On Line
Total Capacity
at Yearend
Percent
Increase
1972
3,219
27,501
12.2
1973
4,424
33,925
15.0
1974
4,183
38,108
12.3
1975
5,298
43,406
13.9
1976
3,741
47,147
8.6
1977
4,303
51,450
9.1
1978
5,672
57,122
11.0
1979
5,894
63,016
10.3
1980
2,854
65,870
4.5
1981
3,420
69,290
5.2
1982
3,070
72,360
4.4
1983
4,301
76,661
5.9
1984 a
3,200
79,861
4.2
a Planned 2,800 MW additions to capacity plus estimated 400 MW
growth in small hydrostations.
In Yunnan and Jilin Provinces, factories were as-
signed limits for electric power consumption and
faced shutoffs if the limits were exceeded. Other
provinces rotated power among factories, reduced
shifts for industrial consumers from three to two, had
daily "nonenergy" days for different areas in their
jurisdiction, or suspended factory production targets
for days or weeks at a time
Jiangxi Province in 1983 began to allocate power
based on the economic performance of provincial
factories. Enterprises were classified according to
their levels of profit remittances to the state. The
uppermost tier received absolute priority for uninter-
rupted supplies of electricity. A second group of plants
also received special consideration. Other industrial
consumers, including coal mines and defense plants,
had to register with the government in order to receive
power allocations, and most faced substantial cuts.
contributing to the situation, and remedial actions
taken by local power authorities. China may be forced
to evolve a national allocations policy in the mid-
1980s to deal with shortages, conceivably based on the
experiences of these provinces in implementing power
rationing policies.
The Problem in 1984
China's double-digit growth rates in light and heavy
industry in 1983 and 1984 tend to mask the problems
caused by electric power shortages. By straining
electricity supplies, above-target industrial growth
contributes to several serious problems.
First, because of unplanned growth, China's ability to
meet future power needs is threatened. Power projects
under construction are forced to compete with off-
plan projects for construction materials and equip-
ment, as well as for electricity for their own needs.
Table 8 lists power shortage situations observed in a
number of Chinese provinces in 1983, major factors
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Table 8
China: 1983 Power Shortages
Hunan
Drop in hydro output for irrigation needs
Increased power output by thermal plants
Yunnan
Drought
Shutoffs for above quota users. Two shift factories
down to five to nine hours per day. Rotational nightly
blackouts of different areas of Kunming. Cuts in
urban and rural, domestic use. Renovation/mainten-
ance of idle capacity.
Coal shortage, coal quality problems, grid connec-
tions behind schedule, floods (power used to drain
fields)
Power allocated to high-profit firms.
Poor coal supplies, low water levels at Liujiaxia
Heavy industry on three-day week. Plant shutdowns.
Daily rotating outages.
Thermal plant construction behind schedule
600 factories idled three months until power plant
completion.
Factory shutdowns. Production assignments for
April-August only.
Shanghai
Rapid industrial growth
Power cutoffs to collective light industry.
Jilin
Drought
Fixed power rations.
Hebei
Drought
Free off-peak (night) power to spread demand.
Liaoning
Drought
Increased thermal production.
Shandong
Low coal supply, above quota or excess
consumption by users
Consumption restrictions. Daily announcements of
power availability.
Three-day week for steel plants. Industrial plant
operations at half capacity. Rotating rest periods.
China's overall economic plans for the 1980s had
deliberately specified moderate growth, in large meas-
ure to give the energy and transport sectors time to
support more rapid economic growth in the 1990s.
Instead, above-plan industrial output and off-budget
capital construction have drained resources away
from energy and transport development.
Second, above-plan growth in both light and heavy
industry is disrupting planned output of industrial
goods, including defense items. Factories operating
under profit incentives are less willing to observe
power quotas, and their excess demands have report-
edly shut local grids down entirely. Shortages make
state control of industrial output more difficult and
reduce the likelihood of an optimal mix of goods. F
Third, planners realize that the present output of
electric power is not necessarily sustainable. Even
with new coal-fired and hydropower generators sched-
uled to come on line in the 1980s, lengthy droughts in
hydropower areas could make power shortages worse
than they already are. Despite substantial additions to
capacity, low water levels cut hydropower output
twice in the 1970s, by 4.2 percent in 1976 and 6.3
percent in 1978. In 1982, drought in Jilin Province cut
hydropower production by over 50 percent from 1981.
Thermal plants were able to offset only about one-
third of the decline, and overall provincial electricity
generation fell almost 9 percent.
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Table 9
China: Additions to Generating
Capacity, by Five-Year Plan,
1976-87
22,464
3,741
1977
4,303
1978
5,672
1979
5,894
1980
2,854
18,016
1981
3,420
1982
3,070
1983
4,301 a
1984
3,200 a
Seventh Five-Year Plan NA
1986 6,035 a
1987 6,600 a
New power plants and improvements in shipping coal
by rail have allowed the Chinese to maintain 7-
percent growth in electric power output in the first
half of 1984, and reported shortages have dropped
significantly. Nevertheless, we believe a decline in
capacity growth in 1984 and 1985, together with the
economy's surging demand for electricity, will make
any respite short lived. Barring unexpected improve-
ments in output from existing plants, we feel capacity
additions in 1984 and 1985 will allow electric power
supplies to grow only 5 to 6 percent annually in 1984-
86.
Supply Factors
Prospects for power supply growth in the mid-1980s
are not good. Capacity growth in 1984 and 1985 will
be even slower than in 1980-83, and increasing output
from existing power plants will not be easy. Thermal
plants can do little to speed rail deliveries of coal.
Hydropower plants probably are being operated near
their limits, and we suspect that present output is
extremely vulnerable to any decrease in rainfall.F_
Table 10
China: Hydroplant Utilization Rates,
1976-83
Capacity a Pr
(megawatts) (bi
ho
oduction
llion kilowatt-
urs)
Average Hours
per Year
in Operation
1976
13,428 45
.6
3,396
1977
14,655 47
.6
3,248
1978
15,765 44
.6
2,829
1979
17,277 50
.1
2,900
1980
19,110 58
.2
3,046
1981
20,510 65
.6
3,198
1982
21,890 74
.4
3,399
1983
22,960 86
.4
3,763
Capacity Growth. New power plants coming on line in
1984 and 1985 will not provide much relief. Capacity
will continue to grow slowly, reflecting funding and
construction cutbacks in energy projects during the
early 1980s. Capacity growth in 1984-85 will average
4.6 percent, down from 5.2 percent in 1981-83. As a
result, total capacity additions in the Sixth Five-Year
Plan (1981-85) will come to only about 18,000 MW,
down from over 22,000 MW added during the Fifth
Five-Year Plan (1976-80), as shown in table 9.
Hydropower. Beijing claims that both abundant rain-
fall and improved management were responsible for
China's ability to increase hydropower output 48
percent in 1981-83 with only a 20-percent increase in
generation capacity. We believe the former to be more
responsible for these increases than the latter. Tables
10 and 11 show the utilization rates of China's
hydroprojects since 1976. Increases in 1977-82 made
up for earlier declines, but large and medium-size
hydroplants achieved an unprecedented 14-percent
increase in hours of utilization in 1983.
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Table 11
China: Hydroplant Utilization Rates,
by Size, 1982-83
1982
1983
Percent
Change
Large and medium-sized
hydroelectric projects
Capacity (megawatts)
14,250
14,880
4.4
Production
(billion kilowatt-hours)
58.1
69.2
19.1
Utilization rates
(average hours per year)
4,077
4,651
14.1
Small hydrostations
Capacity (megawatts)
7,640
8,080
5.8
Production
(billion kilowatt-hours)
16.3
17.2
5.5
Utilization rates
(average hours per year)
Utilization rates theoretically might be further im-
proved, but maintaining even present rates in dry
years seems unlikely. A reduction in the above-normal
rainfall of the last three years in central or southwest
China could cut sharply into electricity available for
industry. Supplies could be further reduced if dry
conditions force power authorities to divert water for
irrigation and to allocate electricity to agricultural
pumping equipment. Even if rainfall patterns remain
favorable, we expect existing hydroprojects to add
only marginally to growth in electricity production
Thermal Plants. The intensive use of hydropower
plants described above offset a drop in thermal plant
utilization (see table 12). Output of thermal power in
1981-83 rose only 9 percent, even though capacity
increased by 13 percent. China's thermal plants are
run inordinately hard by Western standards, but in
recent years problems with coal shipments have cut
into thermal utilization rates. The Chinese credit
timely coal deliveries to thermal plants for the electric
power growth made so far in 1984, but it is too early
to tell how permanent the supply improvements are.
Table 12
China: Thermal Plant Utilization Rates,
1976-83
Production Capacity a
(megawatts) (billion kilowatt
hours)
Average Hours
per Year
of Operation
1978
212.0 35,686
5,941
1979
231.9 39,845
5,820
1980
242.4 43,906
5,521
1981
243.8 45,360
5,375
1982
253.3 47,400
5,343
1983
265.0 49,400
5,364
Demand Factors
We have seen no falloff in demand for electricity
supplies in any sector of the economy through the first
six months of 1984. Light industry's 11.5-percent
annual growth rate is keeping pace with 11.7-percent
growth in heavy industry. Industrial expansion in
1984 exceeds power supply growth by an even greater
margin than in 1983, leading us to expect similar
shortages to emerge. However, no clear-cut, nation-
wide policy identifies priority considerations for elec-
tricity distribution in shortage situations. Yang Bo,
the Minister of Light Industry, said recently that light
industry still received priority for electric power sup-
plies, but in provincial power allocation schemes we
have observed since 1982, the priorities are much less
clear.
Long-Run Improvements in Power Supplies
Stepped-up investment in electric power begun last
year will lead to faster growth in capacity additions
after 1985, helping to ease the electric power con-
straints facing China in the late 1980s. China's
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Table 13
China: Planned Capacity Growth,
1983-2000
Thousand
Megawatts
Percent
Thousand
Megawatts
Percent
Thousand
Megawatts
Percent
Total a
76.7
100.0
110-120
100
240-260
100
Thermal capacity
52.5
68.5
76-86
69-72
177-197
74-76
Hydro capacity
24.2
31.6
34
28-31
63
24-26
Large and medium-sized
capacity
15.7
20.5
22
18-20
45
17-19
planners have evolved a more rational set of long-run
development plans that will allow for faster growth in
electricity supplies. We believe these plans will begin
to bear fruit late in the 1980s, though most benefits
will be realized much later.
Investment Growth
China's planners in 1983 gave the lion's share of
increases in energy investment to the power industry,
raising its allocation to 5.4 billion yuan, up from 4.6
billion in 1982 and 4 billion in 1981. Planners have
apparently increased planned investment in electric
power for the Sixth Five-Year Plan (1981-85); funding
was scheduled to drop to 20.7 billion yuan, in compar-
ison with outlays of 21.0 billion yuan in the Fifth
Five-Year Plan (1976-80). Funding through 1983
totals over 14 billion yuan, however, and reductions
from 1983's 5.4 billion yuan are unlikely in the last
two years of the plan. We expect China's total
investment in electric power in 1981-85 to exceed 25
billion yuan.
Capacity Expansion
As in other industries, China's modernization plans
for the electric power industry through the end of the
century call for moderate growth in the 1980s and
more rapid growth in the 1990s. Additions to capacity
are expected to grow at a 6.75-percent annual rate by
1990, rising to 9.6 percent by the year 2000. If
attained, these growth rates will provide the Chinese
with about four times their 1980 capacity by the year
2000. Table 13 gives a detailed breakdown of China's
plans for capacity growth and additions to thermal
and hydro capacity.
Targets for the year 2000 appear overblown, but
China probably can achieve its 1990 goal for overall
electric power capacity of 110,000 to 120,000 MW.
The most likely problem is that construction problems
will delay planned additions to hydropower capacity.
If slowdowns become obvious, China could expand or
accelerate thermal plant production as late as 1987
and still reasonably expect to achieve the lower 1990
target (110,000 MW) for overall capacity.
Our estimates of capacity additions through 1987 are
shown in table 14. These projections are based on
power plants now under construction and do not run
beyond 1987, because construction of new thermal
plants that begins in 1984-85 can still bring new
capacity on line as early as 1988. If plants now under
construction are completed on schedule, meeting the
lower 1990 target will require capacity growth of
about 13,500 MW in 1988-90, which should be well
within Chinese capabilities if adequate investment
funds are forthcoming.
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Table 14
China: Planned Capacity Growth
Capacity (megawatts)
Expected,
Additions Needed,
Observed
Expected
Required
1987
1988-90
1980-83
1984-87
1988-90
Hydro
28,516
5,484
6.1
4.2
6.0
Large
18,416
3,584
5.1
4.1
6.1
Small
10,100
1,900
7.9
4.4
5.9
Plans for Thermal Power Plants
China's plans for thermal power for 1984-90 call for
capacity additions of 24,000 to 34,000 MW. Despite
increased priority given to hydropower, the thermal
plant share of overall capacity will rise from 68
percent to 72 percent.
In carrying out this expansion, the Chinese are pursu-
ing several measures that may reduce many of the
difficulties presently associated with China's thermal
power plant operations.
Larger Generators. China claims that a fourth of its
coal-fired capacity consists of small boilers and gener-
ators of 50 MW or less, with an average of 12 MW.
These small, inefficient facilities reportedly consume
almost half of the coal delivered to the electric power
industry. Most of China's planned additions to ther-
mal capacity through the 1980s consist of generators
in the 100- to 300-MW range. Given current known
construction, electric power generators of 200 MW
and above installed in the 1980s, including domesti-
cally built 300- and 600-MW generators of US
design, will double their share of China's overall
electric power capacity.
Because of the greater efficiency of the new large
generators, China's planned increase of 54 percent in
coal-fired capacity by 1990 may increase the power
industry's coal consumption by only 40 percent. If the
12,000 MW of small coal-fired plants also were
replaced with larger units, planned growth would
require only 13 percent more coal than the electric
power industry now uses. Given present low-produc-
tion levels and stated intentions not to increase equip-
ment imports, we feel the Chinese will be hard pressed
simply to meet the equipment requirements of
planned expansion and will not be able to devote
sizable resources to replacing existing small genera-
tors.
Mine-Mouth Power Plants. Higher-voltage power
transmission lines have made it more practical for
China to build large power plants near coal mines and
run powerlines to the cities. This diminishes the need
to use railroads to haul coal to smaller urban plants
that would add to China's severe pollution problems.
Mine-mouth power plants at present account for only
6,881 MW, or 13 percent of China's thermal power
capacity. By 1990 the capacity of mine-mouth plants
on line could more than triple. In 1984-86 over half of
expected thermal power plant capacity additions-
5,650 of 9,930 MW-will be mine-mouth power
plants, a proportion we expect to continue through
this decade.
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We estimate that mine-mouth plants equipped with
generators in the 100- to 300-MW range could allow
China to achieve its planned 54-percent increase in
thermal plant capacity by 1990 with only a 23-percent
increase in railroad shipments of coal. Rail shipments
could actually drop by 5 percent over this period if
larger generators were installed at inefficient small
plants, which are largely rail-served.
is now planned. Past efforts in hydropower develop-
ment, especially in the 1970s, suffered repeated engi-
neering and construction bottlenecks that forced the
Chinese to constantly reevaluate plans and change
priorities for funding and resources. Four of eight
major projects whose funding began in the late 1970s
were shelved for two years or more; two have yet to
begin construction
Plans for Hydropower Plants
China's efforts to exploit its potential hydropower are
likely to take longer, cost more, and deliver less than
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The Role of Small
Hydropower Stations
A tremendous benefit to China's grid improvements
has been the redefinition of the role of small hydro-
power stations-stations with a capacity of 12 MW
or less, often 1 or 2 MW-that typically furnish
about enough power to run a large factory or supply
electricity to a town of 10,000 to 20,000 people.F-
China's small hydro efforts began as a means of
providing communes in remote areas with token
amounts of electric power for lighting and irrigation.
After 1966 when the Cultural Revolution stressed the
role of hydropower, funding shifted to medium- and
small-scale installations linked to local power grids.
As late as 1981, small hydrostations still enjoyed
funding priority, and grids were required to purchase
surplus power from small hydrostations.
As a result, more than a third of China's small
hydrostations linked up with local and regional grids,
but they soon became a net burden. Because they
were usually built in regions also possessing larger
hydroprojects, they added power at times when the
grids had as much as they could handle. Large
projects were sometimes idled while grids were forced
to buy power from small hydrostations at greater
China plans to add about 10,000 MW of hydropower
capacity by 1990; 6,300 MW in larger projects. Past
Chinese experience with hydroconstruction leads us to
believe that these projects will be late in coming on
line. Figure 2 shows those hydropower plants with
cost. Localities with small hydro often tapped the
grids for electricity themselves, as their power needs
exceeded their own output.
By 1983 the Ministry of Water Resources and Elec-
tric Power (MWREP) had redefined the role of small
hydrostations, confining them to supply primarily
rural users with an off grid, sew generated source of
supply. Some small hydrostations were removed from
grids and placed under local control. Grids were at
least partially relieved of their obligations to buy
power from small hydrostations.
In recent policy moves allowing local financing and
operation of off-grid small hydro, Beijing is hoping to
use rural savings rather than state funds to advance
rural electrification. China hopes to add 4,000 MW
of small hydrocapacity by 1990, and 6,000 MW more
by the year 2000. Small hydrocapacity additions
have slowed in recent years, but may accelerate above
planned growth if rural consumers prove eager to buy
their own power facilities.
China's 11 largest reservoirs. Reservoirs are now
nearly useless at Yanguoxia, Qingtongxia, and Yilihe;
these projects are largely restricted to generating
power from existing flow.
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capacity additions scheduled for the 1980s.
Other factors threaten hydroelectric output regardless
of capacity completions. Chronic shortfalls of water
flow in 1965-81 kept hydroelectric power output 10
percent below expectations for China's 46 large and
medium hydroprojects. Silting is also a major prob-
lem, reducing the water storage capacity of reservoirs
behind many of China's major dams and cutting into
their ability to generate electricity in dry seasons.
Chinese power officials estimate that silting has al-
ready taken up 10 billion cubic meters of volume out
of the 37 billion cubic meters of capacity built into
Electric Power Grids
China's power networks present one of the more
promising areas for rapid improvements in ability to
meet power needs. New high-voltage transmission
lines will enable China to make efficient use of both
mine-mouth thermal plants and remote hydropower
resources. Developing a national grid will relieve the
present regional grids of some peak load demands by
sharing surplus power
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Figure 2
Hydropower Projects and Capacity Additions Planned for the 1980s
gxia
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Hydropower Projects With Installed
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^ Hydropower project
^ Hydropower project with
planned capacity addition
o
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Japa
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Figure 3 shows China's power grids in black as they
existed in 1979, with five major regional grids and
seven large provincial grids. The highest line voltage
was 330 kV found only in the northwest. These grids
supplied 70 percent of China's electricity
Major grid improvements since 1979 are shown in
red. China has constructed 20,000 kilometers of
transmission lines of 110 kV and above. The Sichuan
and Guizhou grids have been linked to form China's
sixth regional grid (the Southwest grid), soon to
include Yunnan Province; Shanxi and Hebei have
been tied into the North China grid; Hunan has been
linked into the Central grid, where China's first 500-
kV lines are in operation, supplying the Wuhan area
with electricity from the partially complete Gezhouba
hydropower plant
Additional lines will be built as more power comes on
line at Gezhouba. Other 500-kV lines, using domesti-
cally manufactured equipment, are now in operation
in the north and northeast grids, supplying coastal
cities with power from mine-mouth thermal plants.
China's major power grids now distribute three-
fourths of electricity, up from 70 percent four years
ago.
China's progress to date making new lines operational
suggests that it probably will meet its goals for the
Seventh Five-Year Plan. Beijing has increased fund-
ing for powerlines dramatically through the early
1980s, has brought lines into operation on schedule,
and has succeeded in producing 500-kV AC equip-
ment domestically.
The emergence of a national grid in China will
provide two new problems for China, one technologi-
cal and one bureaucratic. First, power sharing at a
national level, even with planned use of DC transmis-
sion lines, will require more sophisticated methods of
monitoring and distributing electric power supplies.
China has already begun importing computers from
the United States and sending electric power techni-
cians to study at US grid operations centers. In April
of this year, China began the construction of a
computerized control center for the northeast power
grid in Shenyang. This center will use imported
equipment and is scheduled for completion in 1986.
China's ability to absorb the skills and equipment
necessary for such operations will be a key in deter-
mining whether it can take full advantage of new grid
improvements.
Secondly, plans to link regional grids into a national
system also imply a centralization of authority and
need for intergrid cooperation that may be more
difficult than the Chinese realize. While nominally
under the Ministry of Water Resources and Electric
Power, the regional grid authorities have been powers
unto themselves in many aspects of their operations. It
may prove difficult for the central government to
enforce power-sharing arrangements when all partici-
pants are experiencing shortages, or to induce regional
authorities to tailor local improvements to national
directives.
Nuclear Power Plans
By the year 2000 China hopes to build or start a total
of 10 nuclear power plants incorporating 20 reactors.
The Chinese do not see nuclear power as a major
factor in generating electricity in this century, nor do
we. These power plants would only supply 10,000
MW-less than 5 percent of China's planned electric
power generation capacity for the year 2000-and
would be far more expensive than thermal or hydro
plants. Still, the Chinese hope to acquire the technol-
ogy to build plants themselves to serve heavily pollut-
ed urban centers that are far from hydroprojects and
generally derive their electricity from rail-delivered
coal.
At present, the Guangdong Project and the Qinshan
Nuclear Plant (sometimes called the 728 Project) are
the only two nuclear plants to receive investment
funds from the state budget. Site preparation has
begun at both plants, and China's optimistic projec-
tions call for both to be operational before 1990.
Planning officials have indicated that two more plants
probably will begin construction during the Seventh
Five-Year Plan, in east China and Liaoning Province.
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 Transmission Lines as of 1979 8
330 kilovolts
220 kilovolts
Transmission Lines Built Afterl 9798
550 kilovolts
550 kilovolts under construction
- - - 330 kilovolts under construction
220/110 kilovolts
Planned linkage
Figure 3
Major Electric Power Grids
Sichuan
Southwest
Grid
North
Grid
International boundary
Province-level boundary
0 200 400 Kilometers
0 200 400 Miles
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We expect relatively slow growth in electric power
supplies through the 1980s, as capacity growth rises
from 4 or 5 percent annually in 1984-85 to 7 percent
annually in 1986-87. Capacity growth in 1987 and
beyond will be determined by investment funding for
electric power after 1984. The Chinese increased
funding for electric power in 1983, but must continue
to do so to achieve faster capacity growth targets set
for the last part of the decade.
Given our projections for electric power growth
through 1987, we expect industrial growth eventually
will be forced down from its present double-digit
growth rates to expansion at a rate more closely in
line with growth in power supplies. We cannot predict
the onset or the duration of an industrial slowdown, or
even the severity of its impact. All of these elements
depend on Chinese reaction to what we expect to be
an increasingly restrictive power constraint.
The combination of slow electricity growth and un-
checked demand for electric power could create seri-
ous problems for the leadership. The most likely
scenario is a continuation of the ongoing, chronic
shortages that limit rapid growth and wastefully idle
production capacity. However, unregulated competi-
tion for power supplies or poorly coordinated electric-
ity rationing schemes could create more serious power
shortfalls later in the 1980s that threaten state pro-
duction targets. A falloff in hydropower production, a
strong possibility at some point in this decade, could
produce extreme power shortages that force a difficult
recentralization of production decisions. This would
seriously undercut the present reform policies, which
provide factories with profit incentives but also charge
them with responsibilities for losses.
We expect problems would exist in enforcing either
national or local rationing schemes. The leadership
would have to rein in local power grid authorities long
used to autonomy. Many grids lacking more sophisti-
cated distribution equipment would have to rely on
factories to remain on their honor to "throw the big
switch" when their power supply is supposed to be cut.
The key question for China will be whether or not
planners accept the likelihood of a pause in China's
present high rates of growth and take an active role in
determining which sectors of the economy bear the
brunt of the slowdown. A concerted effort to allocate
power to priority industrial sectors or priority enter-
prises within industries would minimize the adverse
impact of power constraints.
Foreign technology will not play a major role in
China's electric power sector until later in the decade.
Furthermore, most of the impact will derive from
smaller scale purchases and technology transfers,
rather than large projects and "big-ticket" items.
China continues to negotiate for nuclear technology
and foreign funding and equipment for large hydro-
projects, but the main benefits China gains from
abroad in the 1980s will stem from purchases of US
technology for thermal generators, and US grid
equipment and grid management training, which will
all contribute substantially to improving and increas-
ing China's electricity supplies in the late 1980s. F_
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