AS the temperature drops in Shanghai, many families turn to their air-conditioners for warmth. But when daily demand for electricity rises sharply, "Dian Huang" (power shortage) becomes a word that Shanghainese begin to hear repeatedly.

Actually, last summer, "Dian Huang" made a surprise appearance in Shanghai caused by the record sustained heat wave.

According to Feng Yamin, director of the East China Electric Power Research Institute, a drop in temperature puts more strain on the city's power supply because air-conditioners consume more power in the heating than in the cooling mode. "Winter is not a slack season for power use as many people think," he said.

Energy surplus

From the first implementation of the opening-up policy in 1978 until the middle 1990s, a shortfall in the power supply has existed due to the nation's surging economic development.

But in 1998, the lower demand for electricity resulting from an economic slowdown led to a national surplus of electricity.

The nation called on people to use more electricity. "After all, electricity is 'green energy' with less pollution," Feng said. "But that time was only a short moment of energy surplus during the period of development."

In the following year, the country initiated a temporary policy of suspending approvals for power plant construction, a measure introduced in order to cope with the energy surplus, according to Yan Maosong, an expert on electricity from Shanghai University.

People didn't expect that this "temporary policy" would last three years, during which time no more power plants were built, even though the national economy was developing at a rapid pace, especially in the processing and manufacturing industries in coastal areas.

"We used to expect the peak time for power consumption to come in 2005 but it has already arrived unexpectedly," Yan said.

The nation made an inaccurate prediction about the need to develop the electricity generation industry, admitted a senior electric project engineer who would not reveal his name.

Expert views

"Power use is a barometer of social and economic changes," Feng said. In theory, its development should exceed overall economic development to an appropriate degree, but in practice it is hard to realize this.

Take Shanghai for example. Its shortage of power capacity is 2 million kilowatts this winter. However, it takes three to five years to build a thermal power station. Therefore, to solve "Dian Huang" in the short term seems a difficult job.

According to Yan, at present what Shanghai is facing is a "structural" shortage of electricity - applying only to the peak period of power use. "But the economy keeps rising. If relevant measures aren't taken as soon as possible, in future, it will become a general shortage, which will be much more serious," Yan said.

In 2002, more than 1,000 local enterprises suffered power shortages. This year, to ensure power supply to residents, people will have to make further sacrifices.

Professor Ye Jianhua from Shanghai's University of Electric Power suggested that local residents should be encouraged to use power during non-peak hours. "We should learn from the advanced electric management methods of European countries and try to adjust the charges for electricity between peak and non-peak hours," he said.

"But these steps merely alleviate the symptoms," Yan said. "The radical solution is to carry out reforms of the investment and price systems, which have become urgent tasks."

"Dian Huang" implies that the government monopoly of the electricity market has to come to an end.

Under the centrally planned economic system, the government underwrote all risks in power generation investment, making it difficult to accurately regulate the development of the power system. A market economy prefers a diversity of investors, such as those who have already demonstrated entrepreneurial zeal during this year's severe power shortage crisis. Private enterprises in East China's Zhejiang Province even saw "Dian Huang" as a desirable business opportunity.

Today, China's reform of its power generation system is in a transitional period, between the planned economy and a market system. "The government should make the best use of its role in macro guidance, while at the same time carrying out a top-to-bottom reform," Yan said. "Some of these steps will prove difficult, since the reforms will involve a re-allocation of profits."

World factory

Disputes over dealing with power shortages are generating a lot of heat all over China. Early last month, over 150 experts on power generation gathered in Shanghai, discussing the challenge that the industry was facing.

"But we also should think about the price we have paid on our way to make China a world factory," Feng said. How to balance sustainable economic development and the use of energy, as well as protecting the environment from pollution?

For a long time, China's coastal areas were encouraged to develop fast thanks to their convenient transportation and urban facilities. But China's major energy resources lie in the west where economic development is far behind. This has caused an obviously unbalanced economic structure.

The power shortages have forced many small private enterprises in East China's Zhejiang and Jiangsu provinces to close. Some small enterprises have had to turn to diesel-fuelled power generators.

"This is a very dangerous signal," Feng said. This kind of diesel electricity generation by small private enterprises not only consumes a lot of energy but also causes serious pollution.