Unreliable power supply haunts Chinese industries

In signs of a worsening power crisis in China, the country’s largest provincial economy warned of worsening power shortages despite Beijing’s best efforts to boost coal supply and boost electricity production.

According to analysts, China’s power crisis is expected to last till the end of this year resulting in a 12% drop in industrial power consumption during the fourth quarter following a shortfall in the supply of coal this winter.

China’s Liaoning province issued its second-highest alert for shortages in power for the fifth time in two weeks saying the shortfall could reach nearly 5GW.

Liaoning is China’s largest consumer of power among the three provinces making up China’s rust-belt. Since mid-September the province has been severely affected by the power crisis.

A level-two alert indicates a power shortage equivalent to 10-20% drop in total power demand.

With economies lifting COVID-19 restrictions, the rebound in global economic activity has exposed shortages of fuels in many countries, leaving industries and governments scrambling even as the northern hemisphere heads into winter.

“The biggest power shortage could reach 4.74 gigawatts (GW) on Oct. 11,” said a notice issued by a Chinese department responsible for industry in the province.

Liaoning had also issued level-two alerts for each of the last three days of September, when the daily power shortage touched 5.4GW, forcing factories to suspend production and leaving hundreds of thousands of households without electricity.

According to Chinese news reports, wind farms have been lying idle following slow wind speeds. According to data from the National Statistics Bureau, wind power made up for 8.2% of Liaoning’s power generation in 2020.

China has ordered the expansion in the production of coal mines in the Shanxi province as well as in the Inner Mongolia region, where more than 200 coal mines are located.

However, 60 coal mines in China’s largest coal-mining province, Shanxi, have been forced to close production following heavy rains which caused flooding. Rising coal prices have also added to pressure on Chinese utilities, with China’s thermal coal futures rising by 8% to hit a daily upper trading limit on Monday.

According to analysts from Citi, more than 70% of China’s coal-fired power plants are loss-making units because of the high price of coal.

A report by Moody’s Investors Service reads, “China’s electricity cuts will add to economic stresses, weighing on GDP growth for 2022. And the risks to GDP forecasts could be larger as disruptions to production and supply chains feed through.”

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