China's Guangdong faces severe power shortage

China's manufacturing hub, Guangdong province, will give heavy subsidies to small power producers and speed up the addition of new capacity to tackle a severe power crisis this year, an official said on Thursday.

Li Miaojuan, head of the Guangdong's Development & Reform Commission, said generating stations fuelled by oil and gas previously meant for closure due to their size and high costs would be allowed to operate to help plug an estimated 10 GW shortfall at the peak.

"We face a grave power supply situation this year ... brought by the recent snow disaster since Jan. 24 that cut supplies from the western region," Li told reporters at a provincial session during China's annual parliament meeting.

The shortage exceeded an earlier forecast of 6.5 gigawatts, Li said, as the coldest winter in half a century crippled the already rickety power grids in country's southwestern and central parts, key electricity supplier to Guangdong.

Li said power cuts would first hit sectors that were highly polluting and highly energy-consuming.

"Sectors like small steel plants will have to shut altogether when it's necessary."

Oil traders from Guangdong, the country's largest oil user by region, have said the subsidies are likely to drive up the country's demand for imported fuel oil, a heavy refinery product that are burned by Guangdong's small power plants.

China, worried about fanning inflation already at 11-year high, has ruled out near-term price increases to energy including power, gas and refined fuel.

To battle the crisis, Guangdong will also accelerate building new power plants and distribution lines, said Li, who urged Beijing to speed up approving its newly submitted plans to boost electricity investment. She did not give details.

"We seek strong support from Beijing as we foresee a supply shortage of over 6 GW shortage to last for the next two to three years," she said.

In a separate statement, the governor of western Guizhou province, Lin Shushen, said Guangdong would get an extra 3 gigawatts of power a year from western provinces by 2010.

Lin said a west-to-east power link would have 10 GW capacity by the end of the decade, compared with 7 gigawatts at present.

Much of the supply currently comes from his province, which was badly hit by the storms in January.

Lin said all power networks in his province had now been fully restored.