As China Slows Down, Power Grids Take Less Strain INSIDE THE MARKETS

It is an ill wind indeed that blows nobody any good. The abrupt slowdown in the global economy and widespread capacity closures in China's aluminum and steel industries have eased pressure on the Chinese power generation system, giving the government time to install capacity and complete a promised long-distance ultra-high- voltage, or UHV, transmission network.

The decision by Aluminum Corp. of China, or Chalco, to close 38 percent of alumina capacity, coupled with an earlier industrywide reduction in aluminum output and widespread cutbacks at steel mills and zinc, copper and nickel smelters, has substantially reduced the load on the electrical grid.

It should ease pressure on overstretched Chinese coal mines and the rail system, enable the country to restore reservoir levels and avert the threat of more power cuts this winter.

China has abundant energy, including big coal reserves and hydroelectric resources. The problem is that energy resources are not in the same places as the modern manufacturing bases.

The problem is compounded by the lack of long-distance infrastructure.

The power transmission system in China remains underdeveloped. There is no national grid; instead, there are six regional ones.

The government plans as many as eight long-distance UHV lines by 2015 and 15 by 2020. In the meantime, the lack of a unified national grid system hampers the efficiency of power generation nationwide and heightens the risk of localized shortages.

What is more, the country's limited internal transport capacity risks being overwhelmed by the need to move record quantities of coal from the coal fields of the north and northeast to power generators in the central, eastern and southern areas.

China relies heavily on rivers and canals to carry about 75 percent of all internal freight (by volume), including a large proportion of the coal delivered to generators. Rail accounts for another 14 percent and highways 12 percent.

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