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OO RUEHCN RUEHGH RUEHVC
DE RUEHGZ #0631/01 1542334
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O 032334Z JUN 07
FM AMCONSUL GUANGZHOU
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6116
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUCPDOC/USDOC WASHDC
RUEAIIA/CIA WASHDC
RUEKJCS/DIA WASHDC
RHHMUNA/HQ USPACOM HONOLULU HI

UNCLAS SECTION 01 OF 02 GUANGZHOU 000631 
 
SIPDIS 
 
STATE FOR EAP/CM AND DRL 
USDOC FOR 4420/ITA/MAC/MCQUEEN 
USPACOM FOR FPA 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ENRG PGOV ECON KTDB CH
SUBJECT: A CLEANER GUANGDONG FACES MORE SEVERE POWER SHORTAGES THIS 
SUMMER 
 
 
 (U) This document is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary:  Guangdong continues to be confronted by severe 
power shortages this summer.  The provincial government's plan to 
lower local air pollution discharges and shut down small power 
stations has been affected by the shortages; rolling blackouts have 
been applied in different areas, many American firms in Shenzhen and 
elsewhere are affected.  End summary. 
 
Guangdong's Power Shortages Intensify 
------------------------------------- 
 
¶2. (U) This is the fourth consecutive summer that Guangdong is short 
of power generating capacity - this summer, the shortage is more 
than 4,000 megawatts (MW) hours.  According to a report from China 
Business News citing the Director of Electricity Energy Division of 
Guangdong Provincial Economic and Trade Commission, Guangdong's 
generating gap was 4,000 MW in April, which is higher than the 
predicted figure of 2,550 to 3,690 MW.  Major industrial cities in 
Guangdong's Pearl River Delta (PRD) are suffering from shortages 
this quarter: Guangzhou is short 400 to 600 MW hours of capacity 
Foshan, 800 MW hours, and Shenzhen, 1,000 MW. 
 
¶3. (SBU) Guangdong officials have pointed out that many of 
Guangdong's new power generation plants are still under 
construction, rainfall for generating hydroelectricity has been low, 
the supply of oil and gas for power stations is insufficient.  At 
the same time, the government is attempting to make good on a much 
earlier commitment to shut down small and inefficient power plants 
to reduce air pollution.  The Government expects the averaged 
generating gap for 2007 will be 2,000 MW hours, with the summer peak 
gap of 4,000 MW. 
 
¶4. (SBU) The Guangdong Government plans to lower the energy 
consumption and sulphur dioxide for each unit of GDP output by 16 
percent and 15 percent respectively as part of the new environmental 
emphasis under the 11th Five-Year Program (2006-2010).  Shutting 
down inefficient and heavily polluting small oil and coal 
generators, which account for 28.4 percent and 16 percent of the 
province's total capacity, is the key part of the Government's 
environment protection effort.  Though the Government plans to 
reduce 2,200 MW of small generating capacity in 2007, it has only 
managed to shut down generators with 227 MW hours of capacity in one 
power plant in Shantou so far.  Elsewhere, including Guangzhou, many 
other inefficient and polluting generators are still operating full 
scale due to the shortages. 
 
IBM Hit by Blackouts for the First Time in Shenzhen 
------------------------ -------------------------- 
 
¶4. (SBU) IBM was notified late on Monday, May 28, that due to power 
shortages in Shenzhen, the local government would impose rolling 
blackouts throughout Shenzhen, starting immediately.  Apparently 
there will be no exceptions, and no exemptions for favored 
industries, including hi-tech and renowned foreign companies such as 
IBM.  This will be an across-the-board blackout.  Shenzhen has been 
divided up into a number of sectors and each day all the businesses 
in that day's sector will have their power cut from 0800 to 2300 
each day.  IBM will lose power on Fridays.  IBM's Shenzhen and 
Beijing offices are contacting Shenzhen Mayor to seek relief.  IBM 
will be one of many companies standing in a long line outside the 
Mayor's office. 
 
¶5. (SBU) IBM's biggest concern is that it has a worldwide call 
center in Shenzhen that operates 24 hours a day, seven days a week. 
Closing the center for one day each week will cause huge problems 
for IBM.  This call center is part of a showcase operation for IBM; 
the company was able to negotiate certain exemptions from the labor 
department on overtime and benefits that have never been granted to 
any other enterprise.  IBM is anxious to keep the call center from a 
potential public relations disaster.  IBM was surprised by the local 
government's tough move to deal with the crisis with no special 
treatment for the "favored" industries and enterprises. 
 
Comment: No End but a Silver Lining for U.S. Energy Firms? 
---------------------------- ---------------------- 
 
¶7. (SBU) Guangdong's power shortage is expected to continue into the 
near future, especially with the Provincial Government's 
determination to lower local air pollution discharges; this has 
become an important criterion of local officials' performance 
evaluations.  Previous attempts to shut down inefficient plants have 
 
GUANGZHOU 00000631  002 OF 002 
 
 
failed because of the power shortages.  An American in the power 
generation business predicted on-going shortages for the foreseeable 
future due to a combination of Guangdong officials' hesitancy to 
approve what they view as excess capacity and Guangdong's rapid 
economic growth.  With the conversion of the PRD economy from labor 
intensive to high-tech, capital intensive industries will only make 
the shortages more intense.  The situation may force local 
governments to pay more attention to power saving campaigns and 
apply more energy saving technologies as they continue to increase 
the number of power plants under construction.  This could be an 
excellent business opportunity for American enterprises in this 
field.  END COMMENT. 
 
GOLDBERG