Wednesday, October 27, 2021

What’s Behind China’s Power Crunch?

BEIJING – China is vulnerable to power shortages as dwindling coal supplies as well as strong electricity demand from manufacturers, industry and households have pushed coal prices to record highs and trigger widespread restrictions on use Is.

China’s heavily controlled electricity pricing system prevents its generators from passing the rising cost of coal on to consumers, leaving them with no choice but to suffer losses or reduce production.

Since when is the power supply problem in China?

China has often struggled to balance supply and demand, with central planners often underestimating demand growth, putting many provinces at risk of power cuts during the peak consumption seasons of summer and winter.

This year, a perfect storm of factors – including some coal supply disruptions and increased demand for industries and homes – has caused power shortages across the country. However, the country’s rigid pricing system is seen as the prime culprit.

Why is China’s pricing system being blamed?

One of China’s worst power supply crises occurred in the winter of 2010–2011, when severe blizzards disrupted coal supplies and damaged power transmission infrastructure.

However, the power plants – concerned about their profitability – made the shortage worse by reducing their reserves to lengthen price talks with coal suppliers.

Although China has allowed electricity rates to fluctuate when coal costs reach a certain level, struggling generators are still not free to raise prices in time to avoid losses.

Some policymakers warned in 2019 that China needed to build more coal-fired power plants in the 2021-2025 period to address the risks of power shortages, but little use of existing generation capacity. , suggesting that there is a lack of economic incentives to move to many plants. Every effort is being made to increase production.

What happened to China’s plans to curb industrial electricity use?

Despite Beijing’s efforts to curb the use of heavy industrial electricity, there has been a recent decrease.

Provincial authorities in Inner Mongolia and Guangdong have ordered industries, including energy-intensive aluminum smelters, to reduce electricity use.

However, it turned out that 10 provinces and territories—including major coal producers such as Inner Mongolia—still failed to meet current energy efficiency targets in the first half, largely as a result of the post-lockdown recovery, analysts say. that is dependent on energy-intensive heavy industry.

But despite the restrictions, China’s total electricity generation by August 2021 was 10.1 percent higher than the same period in 2020, and about 15 percent higher than the same slot in 2019, as utilities across the country looked to meet growing industrial growth. Had to crank up the power. Demand.

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How are the fields now limiting power for some users?

Electricity rationing is currently taking place in at least nine provinces and territories. Local governments in major manufacturing hubs such as Zhejiang, Jiangsu and Guangdong provinces have asked factories to limit electricity use or curb production.

Some electricity providers have sent notices to heavy users to either stop production during peak power periods which can run from 7 am to 11 pm, or stop operations completely two to three days a week.

Others have been asked to close until further notice or a specific date, including soybean processing plants in eastern China’s Tianjin, which have been closed since September 22.

Which industries have been affected by power shortage?

The impact on industries is broad and includes power-intensive sectors such as aluminum smelting, steel making, cement manufacturing and fertilizer production.

At least 15 listed Chinese firms, producing a wide variety of materials and goods, from aluminum and chemicals to dyes and furniture, have reported that their production has been hampered by a power outage.

What's Behind China's Power Crunch?

Residential users have also been affected, with homes in parts of northeastern China asked to limit the use of water heaters and microwaves to save electricity. Lifts and traffic lights have also been affected in some parts of the Northeast.

What has been Beijing’s response to the power crunch?

The National Development and Reform Commission on Friday said it would work to address the power shortage, but did not specify what steps it would take.

A major near-term challenge for Beijing is an ongoing trade dispute with Australia, the world’s second-largest coal exporter, which has imposed much curbs on coal shipments to China, as local officials stepped up safety standards. which has slowed production in Chinese coal mines. Series of accidents

A senior official in northeast China’s Jilin province urged officials to try to source more coal from Mongolia, Russia and Indonesia to bridge the supply gap.

Yug Times Photos

What's Behind China's Power Crunch?

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This News Originally From – The Epoch Times

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