A “Power Supply Shock Looms” as the energy crisis gripping Europe – and especially the UK – has hit China. Residents in three north-east Chinese provinces experienced unannounced power cuts as the electricity shortage which initially hit factories spread to homes.
People living in Liaoning, Jilin and Heilongjiang provinces complained on social media about the lack of heating, and lifts and traffic lights not working.
Local media in China – which is highly dependent on coal for power – said the cause was a surge in coal prices leading to short supply. Chinese thermal coal futures have more than doubled in price in the past year.
There are several reasons for the surge in thermal coal, among them already extremely tight energy supply globally that’s already seen chaos engulf markets in Europe. The sharp economic rebound from COVID lockdowns has boosted demand from households and businesses. A warm summer has also led to extreme air condition consumption across China. The escalating trade spat with Australia has further depressed the coal trade and Chinese power companies are ramping up power purchases to ensure winter coal supply.
Then there is Beijing’s pursuit of curbing carbon emissions – Xi Jinping wants to ensure blue skies at the Winter Olympics in Beijing next February, showing the international community that he’s serious about de-carbonizing the economy – that has led to artificial bottlenecks in the coal supply chain.
The coal price surge prompted the China Electricity Council to publish a statement saying that “to ensure winter coal supply, power companies continue to increase market purchases, regardless of cost, under the situation of substantial losses.”
Whatever the reason, it’s just getting started: as BBC reported, one power company said it expected the power cuts to last until spring next year, and that unexpected outages would become “the new normal.” Its post, however, was later deleted. At first, the energy shortage affected factories and manufacturers across the country, many of whom have had to curb or stop production in recent weeks. In the city of Dongguan, a major manufacturing hub near Hong Kong, a shoe factory that employs 300 workers rented a generator last week for $10,000 a month to ensure that work could continue.