It has an excess of generation capacity. It has more installed transmission lines in place than the US.

Even so, the vast distance between the resource-rich power generation centres of the country’s west and its key demand markets in the east means maintaining power to the industrial machine remains an immense challenge.

An exhaustive look into the China power sector by Macquarie Bank analysts offers an interesting insight into the situation.

They found the upstream gas sector could be a real beneficiary of the present predicament.

The analysts are expecting China’s power shortage to treble to about 90 gigawatts by 2015.

The forecast also anticipates real problems in the rollout of the ultra-high voltage power lines China needs to connect its power generation capacity to its demand centres.

The complexity of ultra-high voltage transmission planning and implementation, Macquarie says, cannot be overstated given it requires complex economic, political and developmental factors to work in harmony.

Macquarie says key drivers of the decisions depend on the system of property rights, such as the ability to identify preferred routes and then actually obtain them; costs to determine whether land users need compensation; politics influencing whether jurisdictions along the route can agree; development needs affecting the economic case for transmitting power over the route; and safety and security assessing the impact of the line on other lines and power assets.

It is for these reasons China’s planned transmission infrastructure has not come together to date and also why Macquarie does not believe the rollout will come together as planned in the coming years.

Macquarie forecasts just more than half the 130GW in transmission capacity planned for development will be completed by 2015.

It expects technical, economic and political challenges set to conspire against the critical projects.

It will leave the central government in Beijing grappling with a number of possible scenarios. Two of them will have unpleasant consequences and one should make gas producers – both in China and Australia – very happy indeed.

The first of the two unpleasant scenarios involves China doing what it has done in the past when faced with energy shortages, namely cranking up its coal-fired power capacity throughout the power-hungry eastern provinces.

While that method is comparatively straightforward and cheap compared to the alternatives, it does come with a whole lot more pollution. That is a deterrent more than ever for a country that has said it wants to cut its carbon emissions by 40%.

The second unpleasant scenario involves Beijing stepping in and demanding industry and/or residences cut back on their energy use.

It would lead to an exacerbation of the slowdown in economic growth that has so concerned investors in recent months. If it were to apply to households it would bring the horrifying possibility of people freezing over winter.

Keeping homes warm, wallets full and the air as clean as possible are three important tools in the central government’s efforts to maintain social stability, which is why the government is likely to turn to gas to help its efforts.

Macquarie’s modelling suggests gas will either be part of a broad mix of energy sources called upon to help meet the shortfall (their base case scenario) or will be used to meet almost the entirety of the supply gap.

Some 30GW of gas capacity will need to be installed in the former, some 90GW in the latter (which, they admit, is a long shot given the higher costs associated with gas).

The base case scenario envisages additional gas demand of 22 billion cubic metres, or about 9% of Macquarie’s 2015 consumption forecast of 250Bcm.

If China cannot find that extra production domestically, it will have to be wading into the LNG market.

China’s looming power problem on its own is not enough to underwrite the gas price outlook in Asia but when taken with other factors in the region it is another reason to feel positive.

If the scenario plays out as Macquarie predicts, it will be another reminder of the unique ability of gas to meet substantial energy demands quickly and comparatively cleanly.

This article first appeared in ILN's sister publication EnergyNewsBulletin.net.