Electricity: from shortage to glut – Arthur Kroeber

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arthurkArthur Kroeber
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A familiar pattern in how China tried to reform its electricity industry, but failed to do a decent job, describes Arthur Kroeber in the Financial Times. In less than half a year China changed regular shortages into a glut: under influence of the current crisis, demand has gone down four percent in October. Kroeber paints a partly regulation, of the Big Five electricity generation companies, without addressing the transmission.
China’s regulators will have a hard job in addressing the mess in the electricity industry, they have caused themselves.

The final big job is to erode the power of local governments to control coal mining, power generation and distribution. So long as local governments can give away cheap power to whoever they want, central-level efforts to regulate the industry will be impotent.For now, Beijing does not appear to have a plan. As the economy slows and constraints on coal supply ease, power generators and suppliers are now cursing overcapacity rather than brownouts. But in 4-5 years the pendulum will likely swing back again.

More in the Financial Times.

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Arthur Kroeber is a leading analyst of China’s economic developments. He is also a speaker at the China Speakers Bureau. If you are interested in having him as a speaker, do let us know.

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