China is facing another power crisis. But this time might be different

Michael Shi | Moment | beautiful pictures

China cuts power this year According to analysts, it is unlikely to last too far from summer, as the conditions of this year’s power crisis are different from last year.

The distribution of power in China’s regions including parts of the Yangtze region has raised concerns about a A repeat of last year’s power crisis has hurt many of China’s main manufacturing hubs.

In Shanghai, Chinese authorities turned off the lights at the city’s famous waterfront spot, the Bund on Monday and Tuesday. to save electricity.

But analysts say that this time, things were different.

Analysts say this year’s electricity problems are weather-related and will ease as the heatwave eases, while last year’s crisis was caused by long-standing structural problems in the power supply .

“Since China experienced a nationwide power crisis a year ago, there is concern that it could happen again this year,” said Macquarie chief economist Larry Hu.

“In our view, the chances are low, because the cause and scale of the two power ratios are very different.”

The areas of the Yangtze River and southwestern China’s Sichuan province are battling a record heat wave in the midst of a severe drought. The scorching heat has disrupted crop growth and is threatening livestock.

With a decrease in rainfall pouring into the Yangtze River – particularly the Three Gorges Dam – water levels in hydroelectric reservoirs have dropped, limiting energy production.

In Sichuan, power supply to factories has been cut advocate for household electricity use, reminiscent of the nationwide crisis last September and October. At that time, homes and businesses were forced to cut back or delay usage, while public utilities such as traffic lights were turned off to save energy.

People cross the street during hot weather on August 15, 2022 in Guangzhou, China. The country is suffering its worst heatwave in decades, straining its electricity supply.

Anadolu Agency | beautiful pictures

There is a difference between the two crises, Hu said.

This year’s crisis is the result of two factors: “unusually hot weather” and a lack of rainfall, he added.

This year’s heat wave also lasted longer – for 64 days, and the longest since 1961, according to the China Meteorological Administration, according to the China Meteorological Administration.

Fitch Ratings said residential electricity usage in July was 26.8% higher than last year.

Last year, power plants cut output due to high coal costs which they cannot compensate with fixed electricity sales. Factories cannot increase the price of electricity charged to users because they are set at a fixed rate by the Chinese government, Hu said.

Provincial governments, then doing their best to roll back carbon emissions, also restricted electricity use. Hu added.

In the longer term, we expect the country’s ability to meet peak load demand will improve.

Diana Xia

China Chief Economist, Macquarie

“We don’t expect power allocation in the region to last beyond summer as temperatures will drop,” said Fitch Ratings Associate Director Diana Xia.

“On a country basis, we maintain our assumption that China’s power consumption will grow from mid to low single digits by 2022, in line with our latest forecast of 3.7 % of China’s GDP growth.”

“Over the long term, we expect the country’s ability to meet peak load demand will improve.”

The impact of this year’s power outage on the Chinese economy as a whole will also be different from last yearHu predicted.

Last year, power outages contributed to a slowdown in GDP growth in the third quarter of the year, China’s National Bureau of Statistics said. It said the distribution of power in China’s regions had affected “normal manufacturing activity.”

Many of the country’s main manufacturing regions, such as Guangdong in southern China, were affected by power cuts last year.

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Sichuan province has Hu pointed out that the burden of the blackout this time accounted for only 4% of China’s industrial output.

That said, Sichuan’s production will come under pressure as hydropower accounted for 78% of Sichuan’s electricity capacity and 73% of local consumption last year – well above the national average, Fitch Ratings said.

There may also be some disruption to the supply chain of raw materials such as lithium produced by Sichuan around 20% lithium, 5% aluminum and 13% polysilicon in China but the impact will be temporary, Hu speak.

“It could then lead to higher costs of electronic products like electric car batteries,” Hu said, “but its impact will be short-lived.”

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