Power Outages Hit China, Threatening the Economy and Christmas
By Keith Bradsher, 9/27/21, NY Times

DONGGUAN, China — Power cuts & even blackouts have slowed
or closed factories across China in recent days, adding a
new threat to the country’s slowing economy & potentially
further snarling global supply chains ahead of the busy
Christmas shopping season in the West.

The outages have rippled across most of eastern China,
where the bulk of the population lives & works. Some building
managers have turned off elevators. Some municipal pumping
stations have shut down, prompting one town to urge residents
to store extra water for the next several months, though
it later withdrew the advice.

There are several reasons electricity is suddenly in short
supply in much of China. More regions of the world are
reopening after pandemic-induced lockdowns, greatly increasing
demand for China’s electricity-hungry export factories.

Export demand for aluminum, one of the most energy-intensive
products, has been strong. Demand has also been robust for
steel & cement, central to China’s vast construction programs.

As electricity demand has risen, it has also pushed up the
price of coal to generate that electricity. But Chinese
regulators have not let utilities raise rates enough to
cover the rising cost of coal. So the utilities have been
slow to operate their power plants for more hours.

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. Between the rental costs & the diesel
fuel for powering it, electricity is now twice as expensive
as when the factory was simply tapping the grid.

“This year is the worst year since we opened the factory
nearly 20 years ago,” said Jack Tang, the factory’s GM.
Economists predicted that production interruptions at
Chinese factories would make it harder for many stores in
the West to restock empty shelves and could contribute to
inflation in the coming months.

3 publicly traded Taiwanese electronics companies, including
two suppliers to Apple and one to Tesla, issued statements
on Sunday night warning that their factories were among
those affected. Apple had no immediate comment, while Tesla
did not respond to a request for comment.

It isn't clear how long the power crunch will last. Experts
in China predicted that officials would compensate by
steering electricity away from energy-intensive heavy
industries like steel, cement and aluminum, and said that
might fix the problem.

State Grid, the govt-run power distributor, said in a
statement on Monday that it would guarantee supplies “and
resolutely maintain the bottom line of people’s
livelihoods, development and safety.”

Still, nationwide power shortages have prompted economists
to reduce their estimates for China’s growth this year.
Nomura, a Japanese financial institution, cut its forecast
for economic expansion in the last three months of this year
to 3%, from 4.4%.

The electricity shortage is starting to make supply chain
problems worse. The sudden restart of the world economy has
led to shortages of key components like computer chips & has
helped provoke a mix-up in global shipping lines, putting
in the wrong places too many containers and the ships that
carry them.

Power supplies are little different. Compared with last
year, electricity demand is growing this year in China at
nearly twice its usual annual pace. Swelling orders for
the smartphones, appliances, exercise equipment and other
manufactured goods that China’s factories churn out has
driven the rise.

China’s power problems are contributing in some part to
higher prices elsewhere, like in Europe. Experts said a
surge in prices in China had drawn energy distributors to
send ships laden with liquefied natural gas to Chinese
ports, leaving others to scurry for further sources. But
the bulk of China’s power problems are unique to the country.

2/3 of China’s electricity comes from burning coal, which
Beijing is trying to curb to address climate change. Coal
prices have surged along with demand. But because the govt
keeps electricity prices low, particularly in residential
areas, use by homes and businesses has climbed regardless.

Faced with losing more money with each additional ton of
coal they burn, some power plants have closed for maintenance
in recent weeks, saying this was needed for safety reasons.
Many other power plants have been operating below full
capacity, and have been leery of increasing generation when
that would mean losing more money, said Lin Boqiang, dean
of the China Inst. for Energy Policy Studies at Xiamen U.

China’s main economic planning agency, the National Develop-
ment and Reform Commission, also ordered 20 large cities &
provinces in late August to reduce energy consumption for
the rest of the year. The regulators cited a need to make
sure that the cities & provinces met full-year targets set
by Beijing for their CO2 emissions from the burning of
fossil fuels.

Besides coal, hydroelectric dams supply much of the rest
of China’s power, while wind turbines, solar panels and
nuclear power plants play a growing role.

China’s difficulty in keeping the lights on & the faucets
running poses a challenge for Xi Jinping, the country’s
top leader, & the Chinese Communist Party. They have taken
a triumphalist stance this year, emphasizing China’s success
in quickly eliminating outbreaks of the coronavirus & in
winning the release of a senior Huawei executive, Meng
Wanzhou, in a dispute with the United States and Canada.

But Xi risks getting tagged for problems as well as
successes. He has moved strongly to quell any opposition
within the Communist Party and has extended its reach into
more sectors of Chinese life. If people in China begin to
point fingers, there are few others to blame.

China’s economic rebound from the coronavirus has been
driven in large part by heavy investment in infrastructure
as well as the rise in exports. Overall industrial use
consumes 70% of the electricity in China, led by the mostly
state-owned producers of steel, cement and aluminum.

“If those guys produce more, it has a huge impact on
electricity demand,” Professor Lin said, adding that China’s
economic minders would order those three industrial users
to ease back.

Disruptions from power shortages have already been felt in
Dongguan, at the heart of China’s southern manufacturing
belt. Its factories produce everything from electronics &
toys to sweaters.

The local power transmission authority in Houjie, a township
in NW Dongguan, issued an order shutting off electricity to
many factories from Wed thru Sun. On Monday morning, the
suspension in industrial electricity service was extended
at least thru Tues night.

https://www.nytimes.com/2021/09/27/business/economy/china-electricity.html

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