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China Is Facing Its Worst Power ShortageUpdated 0733 GMT (1533 HKT) June 30, 2021
Several Chinese provinces have said they are facing a power crunch in recent weeks, including some of the country's most important engines for economic growth. Guangdong province — a manufacturing center responsible for $1.7 trillion, or more than 10%, of China's annual economic output and a bigger share of its foreign trade — has been rationing power for over a month. The restrictions have forced companies across the province to shut down for a few days per week. Some local authorities are warning that power rationing could last through the end of the year. It's not just Guangdong. At least nine provinces have said they are dealing with similar issues, including Yunnan, Guangxi and the manufacturing hub of Zhejiang, forcing regional authorities to announce power curbs across an area of China the size of the United Kingdom, Germany, France and Japan combined. The power crunch even contributed to a slowdown in factory activity growth in China in June, the country's National Bureau of Statistics acknowledged on Wednesday. This time around, the post-pandemic commodities boom and severe weather are once again forcing coal power plants to curb output, while also hampering hydroelectricity. But there's a key difference: China is also grappling with how to meet President Xi Jinping's push for a carbon neutral China by 2060. That ambitious target for the world's biggest coal consumer has led the country's coal mines to produce less, resulting in higher prices, according to Yao Pei, chief strategist for Chinese brokerage firm Soochow Securities. Shortages could continuePower shortages are likely to continue for at least the next few months, especially as demand stays high in the hot summer months. Qin from Refinitiv said that there are "still significant risks" that southern and central China will need to continue rationing power, especially if the weather is hotter than normal. The government has other options, too. Gloystein suggested that China could remove barriers against Australian coal, although "that would make Beijing look rather weak." And ultimately, authorities may have to think about giving way on some climate targets. He suggested that Beijing could "throw back online" power plants that were shutdown earlier this year to curb excess pollution. Qin said that power shortages are likely to remain a problem "quite often" for at least a while, though. China seems committed to controlling dirty energy, and is trying to up its use of renewable sources and reduce the use of fossil fuels. "The issue facing China's power supply is how to both meet rising electrification needs and decarbonization goal," Qin said, adding that while China is developing a lot of renewable energy sources, those sources aren't yet as stable as ones that use fossil fuels. |
