A bread company may not get all the power it needs for its bakeries. A chemicals supplier to some of the world’s largest paint producers announced production cuts. One port city changed electricity-rationing rules for manufacturers four times in a single day.
China’s power shortage is spreading to factories and industries, testing the country’s status as the world’s capital for reliable manufacturing. The shortage prompted officials on Wednesday to announce a national rush to burn more coal, despite previous pledges to curb the emissions that cause climate change.
Mines that were closed without permission have been ordered to be reopened. Coal mines that were closed for repairs and coal-fired power plants are also to be reopened. A draft tax incentive for coal-fired power plants is being drafted. Regulators have ordered Chinese banks to provide substantial credit to the coal sector. Local governments have been warned to be more cautious about energy use limits that were imposed partly in response to climate change concerns.
“We will do everything possible to increase coal production and supply,” Zhao Chenxin, secretary general of China’s top economic planning agency, the National Development and Reform Commission, told a news briefing in Beijing on Wednesday.
Depending on how much coal may soon be mined and burned, China’s power crunch could beg the question of whether Beijing can deliver the strong economic growth that China’s people expect in the coming months. Was.
The power shortage has also exposed one of China’s strategic weaknesses: it is a terrible, and increasingly hungry, energy hog. China has also emerged as the world’s largest emitter of greenhouse gases by a wide margin, largely due to its already heavy reliance on coal.
The world’s No. 2 economy depends on energy-intensive industries such as steel, cement and chemicals for the development of electricity. While many of its new factories are more efficient than their American counterparts, years of government price controls for electricity helped other industries and most homeowners call off the improvements.
As the warm winter season approaches, which will require China to dig and burn more coal, Beijing will be faced with whether factories need to continue producing industrial materials full-tilt for global supply chains. be allowed.
“They have to make some sacrifices to ensure homes have heat and electricity,” said Chen Long, co-founder and partner at Beijing economics and politics research firm Plenum. “They have to cut back on energy-intensive industries.”
Power rationing has eased somewhat since late last month, when widespread blackouts and power cuts caught factories by surprise. But the winter warming season officially begins Friday in the country’s northeast and continues into north-central China next month.
Tough choice facing China It burns more coal than the rest of the world combined and is the No. 2 consumer of oil after the United States.
China is rapidly expanding the use of natural gas as well as solar panels, wind turbines and hydroelectric dams. Yet China still does not have enough energy to meet demand. Even turning to green energy can yield significant power; The country’s tight power supply has raised the cost of making solar panels.
Continued tight supplies could force China to rebuild its economy, as high oil prices in the 1970s forced North American and European countries to turn. Those countries developed more efficient cars, adopted other fuels, found plenty of new supplies and moved manufacturing overseas, giving much of it to China. But the process was long, painful and expensive.
For now, China is disclosing coal consumption less than a month before world leaders gathered in Glasgow, Scotland, to discuss combating climate change.
Board members of the European Union Chamber of Commerce in China said on Wednesday that electricity shortages have increased in some cities this week and reduced in others. He predicted that the power problem would last till March.
Unless enough electricity comes online, China’s factories run the risk of unpredictable and volatile halts. China’s factories consume twice as much electricity as the rest of the country’s economy. China’s factories require 10% to 30% more energy than counterparts in the West, said Ma Jun, director of the Beijing Research and Advocacy Group, Institute of Public and Environmental Affairs.
Brian Motherway, head of energy efficiency at the International Energy Agency in Paris, said China has made more gains in energy efficiency over the past two decades than any other country. But since China started the century with an inefficient industrial sector, it still hasn’t caught up with the West, he said.
Zhao said on Wednesday that despite the emphasis on producing more coal, China would continue efforts to become more energy efficient. He pointed out that the United States is also burning more coal this year as the US economy begins to recover from the pandemic.
The impact of the power shortage was mixed. Car assembly plants in northeastern China were allowed to continue running, but tire factories almost stopped running. Wuxi Honghui New Materials Technology, which manufactures chemicals for the world’s paint makers, revealed that production was hurt by power cuts.
Others reporting difficulties include Tolly Bread, with its own national chain of bakeries, and Fujian Haiyuan Composites Technology, a manufacturer of battery cases for China’s booming electric car industry.
Fred Jacobs, a 57-year-old software marketer in Seattle, ordered two high-performance solid-state drives from China in late summer, only a week before being offered a refund because a power outage would delay the factory.
“I was shocked because I’ve heard about shipping issues with China, but haven’t heard of electricity issues or infrastructure issues with Chinese suppliers,” he said. “Now the risk is too high, and I will buy from US sellers, even if I have to pay more.”
Power cuts have taken a human toll, which can be made worse if homes lose power during the winter. At least 23 workers in northeast China were hospitalized with carbon monoxide poisoning late last month after a power outage at a large chemicals factory.
The government is taking steps to improve efficiency, such as allowing utilities to raise prices by up to 20% for industrial and commercial users so they can buy more coal.
China practically halted new coal investment in 2016 as concerns developed about the stability of the industry. Anti-corruption officials have launched investigations focusing on some important coal fields in the Inner Mongolia region, further discouraging investment.
In late summer, several mines were closed for safety reviews. Floods this autumn in Shanxi province, China’s biggest coal mining hub, have forced the closure of at least a tenth of the province’s mines.
With increased demand following the pandemic, prices jumped. Power plants found themselves losing money with every ton of coal they burned, so they were running at about three-fifths of capacity.
Chinese officials expect coal-fired electricity to be replaced by solar power. But China’s manufacturing processes for solar panels require enormous amounts of electricity, much of it from coal.
Polysilicon, the main raw material for solar panels, has more than tripled in price recently, with most of the increase in the past few weeks, said Ocean Yuan, president of Grape Solar, a solar panel distributor in Eugene, Oregon.
In China, the cost of building large solar panel farms has risen by about 25% since the beginning of this year.
“We haven’t seen a level like this in years,” said Frank Hogwitz, a Chinese solar panel industry consultant.
China also wants to improve steelmaking efficiency. Its steel mills use more electricity each year than all homes in the country and account for about one-sixth of China’s greenhouse gas emissions.
Chinese steel companies still rely on coal-fired blast furnaces that melt most of the iron ore to make steel. The West has mostly switched to producing steel in an efficient electric arc furnace, which melts a mixture of scrap and iron ore. China is trying to improve scrap collection from demolished buildings, but the switch to electric arc furnaces will be gradual, said Sebastian Lewis, a Chinese energy and commodities consultant.
At present, China’s concern is focused on winter. During a severe cold December, some cities ran short of coal and factory operations were cut, street lights and elevators were turned off, and offices were limited in heating. Problems also emerged as power plants began wintering in several weeks’ worth of coal reserves.
China’s largest provinces have only nine to 14 days of storage this year, according to Chinese coal data firm CQCOL.
“The stock is low, much lower than it should be,” said Philip Andrews-Speed, a Chinese energy expert at the National University of Singapore. “And they’re panicking for the winter.”