What’s powering China’s energy crisis

The unfolding energy crisis in China is an eye-opener, with three official reasons being cited for the widespread outages – increased electricity demand, coal price hikes and the decarbonization policy to become carbon neutral by 2060.

But none of the reasons alone fully explains the situation.

It is not the first time China has rationed electricity use. Amid the economic take-off during the reform and opening-up period, it was common for factories in Guangdong to take turns to operate as power plants were unable to generate enough to meet demand.

Households were also affected, but not as much as the factories.

Not this time, though.

The current shortage was first reported in the south in June but few paid serious attention to it locally – let alone the foreign media – since it was believed this could be just another case of history repeating itself in the mainland.

Then the crisis spread to the east and northeast.

After video clips of blackouts across the northeastern region went viral – with traffic and street lights being turned off and residents in high-rise buildings having to climb the stairs – the energy crisis that was known to mainlanders for awhile finally made international headlines.

The UK and some European countries are also facing an energy crisis, but of a different sort. There, it is mainly due to a shortage of lorry drivers to deliver fuel to petrol stations, with the run on fuel exacerbated by panic buying.

And although high fuel costs are also threatening food supplies, energy generation is stable.

By contrast, the energy crisis in China apparently began with high demand for electricity. It then deepened due to soaring fuel costs and was exacerbated by the government’s environmental conservation policies.

As emergence from Covid lockdowns activated economic activities, Guangdong was first to experience the shortage. With 30 percent of its electricity from hydropower plants in Yunnan, an unusually warm summer led to low water levels at reservoirs.

At the same time, aluminum factories that had relocated to Yunnan also competed for the remaining hydropower.

Meanwhile, coal-dependent provinces in the east and northeast faced rising fuel costs to such an extent that power companies reportedly suffered losses for every unit of electricity sold due to a policy cap on prices that has been in force since 2019.

China’s boycott of Australian coal may also have contributed to the increased fuel costs.

Piling on the woes that happened simultaneously was a government audit of provinces’ progress made in decarbonization. It was reported a number of provinces were found to have used more energy than they should have.

Some incredible notices from local authorities followed.

In Jilin, local media cited a government notice reporting that power restrictions were likely to continue until March next year and residents should prepare for water cuts to become normal.

And People’s Daily cautioned that the energy crisis could bring disorder to the economy and society.

As local governments work to cope with the decarbonization directive, could they be trying to push back on the central government to ease the strict policy too?

Maksim

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