China’s tightening coal supplies, more stringent energy intensity and environmental restrictions, and soaring industrial power demand have triggered another widespread power crisis.
Blackouts and brownouts have reportedly afflicted numerous provincial jurisdictions across the economic powerhouse this week, most prominently in Guangdong in the south, and Heilongjiang, Jilin, and Liaoning in the northeast, according to state-run newspaper Global Times.
Last week, other parts of Northeast China, including Shenyang, Changchun, and other cities, suffered power rationing for three days after the region’s entire power grid was reportedly “in danger of collapse,” as the state-run People’s Daily reported. “From Sept. 23 to 25, due to the sudden decline in wind power, and for other reasons, the power supply gap [in Liaoning province] rose to the level of severe,” it quoted local authorities as saying.
Compendium of Long-Standing Risks
Observers note that while power cuts are commonplace in parts of the country, a sharp increase in their frequency have triggered widespread alarm. But according to several industry sources, the recent power cuts may stem from a compendium of long-standing risks. Last December, the country faced a similar predicament when power demand outstripped supplies already exacerbated by a coal shortage during an especially harsh winter. In May, Guangdong province in the south, a major manufacturing hub, imposed short-lived power restrictions on industry, owing in part to a rare drought in neighboring Yunnan province in the southwest, which provides a crucial hydro-dependent power supply to the region. Major industrial regions along the east coast have also reportedly suffered consumption restrictions and power cuts.
The implications have been grave for power-intensive sectors in the nation that has depended heavily on industrialization for economic transformation. China today accounts for one-quarter of the world’s total industrial production. While it leads global production of steel, cement, aluminum, chemicals, electronics, and textiles, it produces more than half of all the world’s cement and steel. According to the Wall Street Journal, the power predicament has squeezed the country’s pandemic recovery and resulted in production cuts by major power users. Official figures suggest Chinese factory activity has decreased to its lowest level since February 2020, before lockdowns paralyzed the global economy. Goldman Sachs has estimated that as much as 44% of the country’s industrial activity has been affected by power shortages.
Shifting Environmental Priorities
China’s National Development and Reform Commission (NDRC), its top economic planner, on Sept. 24 said it would work to resolve the power shortages. However, it provided few details on how it will act. According to comments reported in state media this week, China’s State Grid Corp. reiterated ambitions to unify the entire national grid to enable inter-regional and interprovincial delivery of power. Still, it denied that the country is facing an energy crisis. “Energy supply capacity is currently sufficient to meet demand,” the entity said in comments reported by the Global Times.
As POWER has reported, China’s supply profile has shifted in line with new environmental priorities. To meet its September 2020–announced ambitions to become carbon neutral by 2060 and peak coal consumption by 2025, the country’s 14th plan calls for building a series of giant hybrid “clean energy complexes,” with energy storage as a new priority. According to the National Bureau of Statistics, the country is making progress: China boosted its power generation by nearly 15% over the first five months of this year, though that growth rate has fallen compared to the same period last year. Earlier this year, the nation’s National Energy Administration (NEA) set a target to expand its installed renewable power capacity to 934 GW—42.4% of total capacity—by the end of the 14th five-year-plan (2021–2025).
But though China has bulked up on wind, solar, and hydro capacity, hydro generated 17.8% of its total power, while wind only generated about 6% and solar 3.4%. Last year, China relied on coal power for 60.7% of its total generation.
Beijing earlier this year sought to control its emissions by cutting energy consumption per unit of gross domestic product by 3% in 2021. The plan essentially lays an onus on provincial authorities to curb their high-energy consumption activities. As the South China Morning Post reported on Sept. 28, that has prompted a total of 16 of mainland China’s 31 provincial-level jurisdictions to ration electricity as they race to meet Beijing’s annual emissions reduction targets, mainly because they failed to make progress earlier in the year. In August, notably, the NDRC ramped up its pressure on provincial governments when it criticized nine provinces and regions, including industry-heavy Guangdong, Guangxi, Yunnan, and Jiangsu, for their increased energy consumption on an annual basis.
Fate of Existing Infrastructure
While it is unclear how China will address the urgency of the current crisis, the country appears intent on cementing pathways for reaching carbon neutrality in its energy sector. It has also sought international consensus on its emerging strategies. On Wednesday, the International Energy Agency (IEA) released an “energy sector carbon neutrality roadmap” that it said was developed in collaboration with Chinese experts, including government agencies.
The report notably delivers a discussion on the fate of existing energy-related infrastructure—particularly coal-fired power, steel, and cement plants under construction or which have recently been deployed—under China’s carbon neutrality priorities. Nearly 40% of China’s coal plants have been built in the last 10 years, it notes.
“The future energy consumption and emissions of existing infrastructure depends on three main factors: the scope for modifications to assets and their operation regime to lower the amount and [carbon dioxide] intensity of the energy they use; the scope for capturing emissions (i.e. retrofits with carbon capture, utilization, and storage); and the span of their operational lives,” the report says. “For the owners of energy assets, decisions about whether to continue operation (where permitted under the prevailing regulatory framework), modify how they operate, or replace them with lower carbon alternatives will be based predominantly on relative costs and government decisions in relevant areas of policymaking.”
The report concludes that even if China barred investments in new fossil-fueled assets, the decline in emissions from its existing energy system “would take a long time.” A more actionable pathway would be to operate existing fossil-fueled assets “under typical conditions observed in recent years.”
Even if no assets are retired early or modified, “existing energy infrastructure would lead to around 175 Gt CO2 of cumulative emissions between 2020 and 2050—equivalent to around 15 years of CO2 emissions from China’s entire energy sector at the 2020 level. Emissions from existing infrastructure would drop by 30% by 2030 and 95% by 2050.” The bulk of cumulative emissions absent any change in the way they are operated today would come mainly—60%—from the power sector, 8% from steelmaking, and 10% from cement production.
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