A power crunch across China has rippled from factory floors to homes and even traffic lights in some places, leading economists to cut their growth forecasts for the world’s second-largest economy.
The shortages mirror tight energy supplies in Europe and elsewhere that have roiled commodity markets, as well.
Part of the problem is that the economic rebound after COVID-19 lockdowns has boosted demand, while lower investment by miners and drillers has constrained production.
But the crisis in China is partially due to its own environmental agenda, as President Xi Jinping’s vision of de-carbonising the economy discouraged the burning of coal, a cheap energy source that subsidised its economic growth for decades.
WHY CAN’T CHINA MEET ITS POWER DEMAND?
Mainly because it is short of coal. Coal-based producers account for more than 70 per cent of the country’s electricity generation, but Xi’s push to reduce greenhouse gas emissions and go “carbon neutral” by 2060 has capped the growth of coal mining.
Demand for power from Chinese factories soared as orders from overseas mounted, but utilities were unable to buy enough fuel after prices surged.
China’s coal production grew by 6 per cent in the first eight months this year, but the power output from coal-fire generators surged 14 per cent in the same period, leading to a decline in coal inventories.
Certain northern areas also need to reserve enough coal for the upcoming winter heating season, which is worsening the current shortage.
WHY DIDN’T THE GOVERNMENT ASK COAL MINES TO DIG MORE?
Actually they did, but it is not that quick or easy. The National Development and Reform Commission, the country’s top economic planning agency, has urged producers to secure supplies.
But any new or reopened mines also have to meet tighter environmental standards and workplace safety rules under Xi’s green push and following a spate of deadly accidents.
Complicating things further is that, since China set goals to lower coal’s share of overall energy production, some financial institutions have stopped funding the business.
WHY DOESN’T CHINA IMPORT MORE COAL?
China traditionally has been a major importer. But it stopped buying the highly energy-efficient Newcastle grade from Australia starting last year amid a political dispute between the once-close trading partners, leading to sporadic shortages.
That tension is not likely to ease as US President Joe Biden seeks to rally allies, including Australia, to counter Beijing’s influence across the Indo-Pacific region.
Rising purchases from Indonesia helped make up for the missing Australian coal this year, but energy demand in Southeast Asia’s biggest economy also soared, and increases from other sources are in doubt.
Mongolia, China’s resource-rich neighbour, sold less coal this year partly due to China’s strict border controls to prevent the spread of COVID-19.
Source: Channel News Asia