China’s Power Issues Reveal a Strategic Weakness

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SHANGHAI – A bakery company can’t get all the power it needs for their bakery. The chemical supplier of some of the world’s largest paint manufacturers has announced production cuts. One port city changed electricity rationing rules for generators four times in one day.

China’s electricity shortages fluctuate between factories and industries, testing the country’s status as the world’s capital for reliable production. The famine has prompted authorities to rush to mine and burn more coal nationwide, despite a promise to reduce the emissions that cause emissions. climate change. And the famine questions whether Beijing will be able to deliver the strong economic growth the Chinese people have come to expect in the coming months.

The electricity crisis also revealed one of China’s biggest problems. strategic weaknesses: He is an insatiable and increasingly hungry energy hog.

The world’s #2 economy relies on energy-intensive industries like steel, cement and chemicals to support growth. While many of its new factories are more efficient than their counterparts in the United States, years of government price controls for electricity have pushed other industries and most homeowners to delay improvements.

With the winter heating season coming, which will require China to extract and burn more coal, Beijing must confront whether to allow factories to continue producing industrial materials for global supply chains.

“To ensure that homes have heat and power, they have to sacrifice something,” said Chen Long, co-founder and partner at Beijing economics and politics research firm Plenum. “They have to cut energy-intensive industries.”

Power rationing seems to have eased a bit since the end of last month. widespread power outages and blackouts the factories were shocked. But the winter heating season officially begins in the north-east of the country on Friday and continues in north-central China next month.

China faces difficult choices. It burns more coal than the rest of the world combined and is the #2 consumer of oil after the United States.

Besides natural gas, China is rapidly expanding the use of solar panels, wind turbines and hydroelectric dams. However, China still does not have enough energy to meet the demand. Even the transition to green energy could require significant power – the country’s narrow electricity resources have driven up costs to make solar panels.

Consistently tight supplies could force China to rebuild its economy, just as the high oil prices of the 1970s forced North American and European countries to change. These countries developed more efficient cars, adopted other fuels, found an abundance of new materials, and shifted production overseas, mostly to China. But the process was long, painful and costly.

For now, less than a month before world leaders meet in Glasgow, Scotland to discuss tackling climate change, China is ramping up coal consumption.

regulators announced last week He said the country’s banks should lend to the coal sector to increase production. Despite promising more investment in green energy, Prime Minister Li Keqiang chaired a meeting of the country’s top energy officials on Saturday calling for more coal to be used.

Power outages have gotten worse in some cities this week and eased in others, board members of the European Union Chamber of Commerce in China said on Wednesday. They estimated the electrical problems would last until March.

Until enough power is online, Chinese factories risk unexpected and destabilizing outages. Factories in China consume twice as much electricity as the rest of the country’s economy. Ma Jun, director of the Institute for Public and Environmental Affairs, a Beijing research and advocacy group, said factories in China tend to require 10 to 30 percent more energy than their Western counterparts.

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 China still hasn’t caught up with the West, as it started the century with an inefficient industrial sector, he said.

The impact of power outages is mixed. Car assembly plants in northeastern China were allowed to continue operating, but the tire factories almost stopped working. Wuxi Honghui New Materials Technology, which produces chemicals for the world’s paint manufacturers, announced that power outages have damaged production.

Others describing the challenges include Toly Bread, which owns the national chain of bakeries, and Fujian Haiyuan Composites Technology, a battery case manufacturer for China’s fast-growing electric car industry.

Fred Jacobs, a 57-year-old software marketer in Seattle, ordered two high-performance solid state drives from China at the end of the summer, but was offered a refund a week ago because the lack of electricity would cause factory delays.

“I was surprised because I’ve heard of shipping issues with China but not about power issues or infrastructure issues with Chinese suppliers,” he said. “Now the risk is much higher and I will buy from US sellers even if I have to pay more.”

Power outages took a human toll, which could be exacerbated if homes lose electricity during the winter months. At least 23 workers were hospitalized from carbon monoxide poisoning after a power outage at a major chemical plant in northeastern China late last month.

The government is taking steps to improve efficiency, such as allowing utilities to raise prices for industrial and commercial users by up to 20 percent so they can buy more coal.

China virtually halted new coal investments in 2016, amid growing concerns about the sustainability of the industry. Anti-corruption officials have further deterred investment by launching investigations focusing on some key coal fields in the Inner Mongolia region.

At the end of the summer, many mines were closed for safety inspections. Flooding this fall in Shanxi Province, China’s largest coal mining centre, closed at least 60 mines.

With the increasing demand after the epidemic, prices skyrocketed. Power plants found themselves losing money with every ton of coal they burned, so they operated at about three-fifths capacity.

Chinese authorities hope to replace most coal-fired energy with solar power. But China’s solar panel manufacturing processes require enormous amounts of electricity, mostly from coal.

Ocean Yuan, president of Grape Solar, a solar panel distributor in Eugene, Ore, said the price of Polysilicon, the main raw material for solar panels, has more than tripled recently, with most of the increase in the last few weeks.

The cost of setting up large solar panel farms in China has increased by nearly 25 percent since the beginning of this year.

“We haven’t seen a level like this in years,” said Frank Haugwitz, a Chinese solar panel industry consultant.

China is also trying to improve its steelmaking efficiency. Steel mills use more electricity each year than any home in the country and account for about one-sixth of China’s greenhouse gas emissions.

Chinese steel companies still rely mostly on coal-fired blast furnaces that smelt iron ore to make steel. The West has mostly switched to producing steel in efficient electric arc furnaces that melt a mixture of scrap and iron ore. Chinese energy and commodities consultant Sebastian Lewis said China is trying to improve scrap collection from destroyed buildings, but the transition to electric arc furnaces will be gradual.

For now, China’s concerns are focused on winter. During a severe cold last December, some cities coal has run out restriction of factory operations, turning off streetlights and elevators, and limited heating of offices. Even though the power plants started the winter with coal stocks for a few weeks, problems arose.

According to CQCoal, a Chinese coal data firm, there are only nine to 14 days of storage in China’s largest provinces this year.

“Stocks are low, much lower than they should be,” said Philip Andrews-Speed, a Chinese energy expert at the National University of Singapore. “And they’re panicking for the winter.”

Li You and Claire Fu contributed to the research.

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