What’s behind China’s Power Crunch?

Beijing — China is on the verge of a power crisis as coal shortages combined with strong demand for electricity from manufacturers, industries and households have pushed coal prices to record highs, causing widespread restraint in use. It is on the verge.

China’s tightly controlled electricity pricing system prevents generators from passing on soaring coal costs to consumers and has no choice but to incur losses or reduce production.

How long have you had power problems in China?

China often struggles to balance supply and demand, central planners often underestimate demand growth, and many states are at risk of power outages during peak summer and winter consumption seasons. Being exposed.

This year, a complete storm of factors, including coal supply turmoil and surges in industrial and household demand, has caused power shortages across the country. However, the country’s strict pricing system is considered the main cause.

Why is China’s pricing system blamed?

One of China’s worst electricity crisis occurred in the winter of 2010-2011, when heavy storms disrupted coal supplies and damaged transmission infrastructure.

However, fears of profitability have exacerbated the shortage by running out of stockpiles to prolong price negotiations with coal suppliers.

Since then, China has allowed fluctuations in electricity prices when coal costs reach a certain level, but struggling generators still do not have the freedom to raise prices in a timely manner to avoid losses. ..

Some policy makers warned in 2019 that China needs to build more coal-fired power plants to avoid the risk of power shortages between 2021 and 2025, but existing Power capacity is underutilized, suggesting that many power plants lack economic incentives. We will do everything to increase output.

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

The recent shortage has arisen despite Beijing’s efforts to curb the use of electricity in the heavy industry.

Both Inner Mongolia and Guangdong provinces have ordered industries, including energy-intensive aluminum smelters, to reduce electricity usage.

However, as a result of the post-blockage recovery that analysts say analysts are dependent on energy, 10 states and regions, including major coal producers like Inner Mongolia, have existing energy efficiency targets in the first half of the year. It became clear that we could not achieve. Intensive heavy industry.

However, despite the restraint, China’s total electricity generation by August 2021 will be 10.1 percent higher than the same period in 2020 and nearly 15 percent higher than the same slot in 2019, with a surge in utilities across the country. Increased power to accommodate the industry. Request.

How is the region currently limiting the power of certain users?

Electricity distribution is currently taking place in at least nine states and territories. Local governments of major manufacturing hubs such as Zhejiang, Jiangsu and Guangdong are asking factories to limit electricity usage or curb output.

Some utilities send notifications to heavy users to shut down production during peak power periods that can run from 7 am to 11 pm, or to shut down altogether 2-3 days a week. ..

Others, including a soybean processing plant in Tianjin, eastern China, which was closed after September 22, were later notified or told to close until a specific date.

Which industry was affected by the power shortage?

The impact on the industry is broad and includes power-intensive sectors such as aluminum smelting, steelmaking, cement manufacturing and fertilizer production.

At least 15 listed Chinese companies producing a variety of materials and commodities, from aluminum and chemicals to dyes and furniture, have reported production interruptions due to power restrictions.

Epoch Times Photo

Some households in northeastern China have been told to limit the use of water heaters and microwaves to save electricity, and home users have also been hit. Elevators and traffic lights were reportedly affected in some parts of the northeast.

How was Beijing’s reaction to the power crunch?

The National Development and Reform Commission said it would work to resolve the power shortage on Friday, but did not provide specific details on the steps it would take.

One of Beijing’s major short-term challenges is the ongoing trade dispute with Australia, the world’s second-largest coal exporter. A series of accidents.

High-ranking officials from Jilin Province in northeastern China have urged authorities to procure more coal from Mongolia, Russia and Indonesia to address the supply gap.

Epoch Times Photo