Electrical Inefficiency A Dark Spot for China

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.

"Everybody goes for the big plants," said Yan, the Shanghai University expert, who reckons that this problem accounts for one-tenth of the energy wasted in eastern China.

The transmission grid is poorly coordinated and saddled with old technology, with as much as one-tenth of the load disappearing along the way, experts say. While the state has allowed private and foreign investors into the power generation business, the grid remains controlled by two giant state firms.

The worst waste is found in the state-owned distribution companies that carry power to homes and businesses. They have traditionally kept a percentage of their revenues and handed the rest to the local government, limiting their incentive to upgrade.

For the past three summers, this outdated system has lagged behind China's growing needs, forcing local governments to ration power in 24 of 32 provinces. This summer, in Shanghai's industrial suburbs, officials have ordered factories to cease operations for a full week at a time.

"Of course it hurts our business," said Dai Hongdi, the general manager at the Honghua garment factory. "It's impossible for our factory to just stop a whole week, so what we do is work at night and hope the officials don't notice."

Across the river in the Lujiazui district, landlords seethed over the opposite problem: Since 2001, the city government has decreed that 40 skyscrapers in four districts must keep their lights on until 11 o'clock during the summer.

"It's about building Shanghai's image as an international city," said Guo Hua, director of the city's Appearance and Environmental Sanitation Administrative Bureau.

Lighting the skyscrapers along the Bund from 7 to 11 p.m. during the summer months consumes enough energy to power 30,000 home air conditioners during the same period, according to experts. The city pays about one-third the cost of this extra lighting, but landlords complain that is inadequate.

"We have no choice," said an official at Jin Mao Group Co., which owns and manages Shanghai's tallest building, the 88-story Jin Mao Tower, estimating that the cost of the extra lighting runs more than $3,000 a month. "It is a government regulation."

Special correspondents Jason Cai and Eva Woo contributed to this report.