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Guest essay by Eric Worrall

h/t Vuk; Xi Jinping’s attempt to force China to hit unrealistic emissions cuts, ahead of the COP26 climate conference, has caused power blackout chaos throughout China, as cities switch off their coal plants rather than risk breaching central government quotas. The electricity supply crisis is affecting US companies which have outsourced some of their manufacturing to China.

China’s electricity crunch causes widespread power outages, hitting homes and closing factories

Global shoppers face possible shortages of smartphones and other goods ahead of Christmas after power cuts to meet official energy use targets forced Chinese factories to shut down and left some households in the dark.

Key points:

  • China is facing widespread power shortages after vowing to cut its energy intensity to meet climate goals
  • Widening power shortages have halted production at numerous factories during one of their busiest seasons 
  • The fallout has prompted some analysts to downgrade their 2021 growth outlook 

In the north-eastern city of Liaoyang, 23 people were hospitalised with gas poisoning after ventilation in a metal casting factory was shut off following a power outage, according to state broadcaster CCTV. No deaths were reported.

Factories were idled to avoid exceeding limits on energy use imposed by Beijing to promote efficiency.

Economists and an environmental group say manufacturers used up this year’s quota faster than planned as export demand rebounded from the coronavirus pandemic.

Fallout expected to impact GDP 

The disruption to China’s vast manufacturing industries during one of their busiest seasons reflects the ruling Communist Party’s struggle to balance economic growth with efforts to rein in pollution and emissions of climate-changing gases.

“Beijing’s unprecedented resolve in enforcing energy consumption limits could result in long-term benefits, but the short-term economic costs are substantial,” Nomura economists Ting Lu, Lisheng Wang and Jing Wang said in a report.

Power pinch unlikely to abate ahead of climate talks 

The crunch comes as global leaders prepare to attend a UN environmental conference by video link on October 12-13 in the south-western city of Kunming.

That increases pressure on President Xi Jinping’s government, as the meeting’s host, to show it is sticking to emissions and energy efficiency targets.

Energy quotas nearing exhaustion

Some provinces used up most of their quotas for energy consumption in the first half of the year and are cutting back to stay under their limits, according to Li Shuo, a climate policy expert at Greenpeace in Beijing.

Utility companies, meanwhile, are being squeezed by soaring coal and gas prices.

That discourages them from increasing output because the government limits their ability to pass on costs to customers, said Mr Li.

Read more: https://www.abc.net.au/news/2021-09-28/china-power-outages-energy-targets-emissions/100497110

The power supply crunch is hitting US firms which outsourced their manufacturing to China, with Tesla and Apple component manufacturers reportedly forced to stop manufacturing due to power cuts.

China rocked by power crunch as Apple and Tesla suppliers suspend work

By Will Feuer

China is grappling with growing power shortages, prompting many factories — including suppliers to Apple, Tesla and other major global companies — to curb or suspend operations. 

The power crunch comes as strict orders from Beijing to cut emissions collide with surging coal and gas prices as well as rising demand for electricity.

Apple supplier Unimicron Technology said that three of its China subsidiaries stopped production from midday Sunday and won’t resume until midnight on Sept. 30 in order to comply with local regulations.

Read more: https://nypost.com/2021/09/27/china-rocked-by-power-crunch-as-apple-tesla-suppliers-suspend-work/

This is not the first time Xi Jinping’s market interventions have caused energy supply chaos in China. In 2017, China’s botched attempt to convert cities from coal to gas led to widespread blackouts during a bitter winter. The reason? Bureaucrats put hitting gas conversion Xi Jinping’s central targets first, ahead of rational considerations, like whether the gas would be available in time to pump through pipelines to their converted home heating systems.

I’m not blaming the bureaucrats. When the boss can have you shot, and when questioning your orders could be a shooting offence, prudence dictates you do what you are told, even if your instructions don’t make sense.

China’s domestic coal price rise, another factor in the power supply crisis, was likely caused by Xi Jinping’s ban on Aussie coal imports – his punishment for Australia for objecting to Chinese expansionism in the South China Sea.

The coal import ban did not stop the flow of Australian coal to China. All it did was force Chinese companies to purchase Australian coal through expensive intermediaries, to disguise the true origin of their coal purchases.

Australian domestic climate policy has not helped the situation. Australian banks and government planning authorities have been obstructing Aussie coal field development, which has exacerbated the supply crunch.

Australia’s Federal Treasurer Josh Frydenberg has been pushing for Australia to embrace more aggressive climate policies, which may be discouraging coal investment. Josh thinks the decline of the Aussie coal industry is a good thing.

China’s Power Regulator has just now ordered utilities to stockpile coal, but this order may have come too late to prevent the current power supply crisis from worsening. Chinese companies currently have low inventories of coal, so it would take days, if not weeks, to repair those inventories, assuming they can find a supply of coal in an already tight market. It seems likely Chinese coal users have been running down their inventories in the hope that Xi Jinping would relax his ban on Aussie coal imports, which would allow them to restock their inventories at a lower price. But so far there is no sign the ban will be relaxed, so the game of paying a premium to intermediaries, so Xi Jinping can pretend on the world stage that China does not need Aussie coal, looks set to continue.

What can I say? If China, the world centre for manufacturing solar panels and wind turbine components, can not switch off their fossil fuel plants without chaos and massive power supply disruption, there is no chance anyone else can make it work.

There is another lesson which China should surely have learned by now. Don’t mess with the free market.

Xi Jinping’s push to assert Communist Party control over the Chinese economy, through more central planning, and through his heavy handed climate policy and import ban directives, is pushing the Chinese economy in the wrong direction.

via Watts Up With That?


September 28, 2021