Shandong, one of China's biggest regional economies, has asked major coal-fired power plants to more than double their coal stocks to meet one month of power generation by the end of May, in an effort to reduce power shortages caused by unstable coal supplies.
Shandong's power industry regards coal stockpiles that meet about 15 days of power generation as a safe level, but recurring power shortages caused by insufficient coal supplies have forced the government to mark up the bottom line, even though some generators are not keen to do so because the move suggests they have to spend more in building coal inventories.
As of April 14, coal stocks in major coal-fired power plants in the province were enough for 12 days of generation, industry data showed.
Shandong's coal demand was rampant due to fast economic development, coal shipments became more difficult as more and more supplies came from farther regions, coal demand in central China grew rapidly because hydropower output dwindled on drought, coal production has yet to recover in major producing provinces due to mine consolidation, all factors pointing to rising coal demand and tight supplies, according to a recent speech by a local government official.
"Outside supplies are uncertain and hard to cope with," said Wang Wanliang, the official in charge of economic operations and power industry with the Shandong Economic and Information Technology Committee.
"Given that coal supplies are tight, quality is unstable and prices are 200 yuan a tonne higher in peak demand season, but supplies are ample, quality is good and prices are lower in slack time, it requires us to change practice."
Nearly 70 per cent of the 145 million tonnes of coal burned by Shandong's power plants last year were shipped in from the rest of the country or abroad.
Shandong was short by some 3 gigawatts of electricity flows, or 8 per cent of its demand, in the recent winter, one of the hardest hit regions in China.
In the summer of 2008 when Beijing hosted the Olympics, power shortages in Shandong amounted to almost a third of its demand, the worst in the country.