‘Unprecedented’ power cuts in China hits homes, factories

Power outages in northeastern China have plunged millions of homes into darkness, triggered factory shutdowns and threatened to disrupt the water supply in at least one province.

The Global Times tabloid on Tuesday said the “unexpected” and “unprecedented” electricity cuts in the provinces of Jilin, Liaoning and Heilongjiang were caused by power rationing during peak hours.

The rationing began on Thursday amid coal shortages and took place without advanced warning, the Communist Party-owned tabloid said, adding that the lack of power has sparked public anger and shut down traffic lights and 3G mobile phone coverage in some areas.

A utility in Jilin also warned that the power shortages could disrupt water supplies at any time, while state broadcaster CCTV said a factory in Liaoning had to rush 23 workers to hospital due to carbon monoxide poisoning when ventilators suddenly stopped during a blackout.

“Power cuts eight times a day, four days in a row… I’m speechless,” one frustrated user from Liaoning wrote on Weibo, a Chinese microblogging site.

Another complained that malls were shutting early and a convenience store was using candlelight.

“It’s like living in North Korea,” they wrote.

Power cuts threaten growth

The lack of electricity has also affected industrial production in the world’s second-largest economy, halting operations at factories, including some supplying Apple and Tesla.

Apple supplier Unimicron Technology said factories in two regions were told to stop production from midday Sunday through Thursday, in filings with the Taiwan stock exchange on Monday.

Dozens of other companies, including a parts supplier to Tesla, were also told to halt production this week, according to stock exchange filings.

Meanwhile, Goldman Sachs estimated that as much as 44 percent of China’s industrial activity has been affected by power shortages, potentially causing a 1-percentage-point decline in annualised GDP growth in the third quarter, and a 2-percentage-point drop from October to December.

It said in a note published on Tuesday that it was cutting its 2021 GDP growth forecast for China to 7.8 percent, from the previous 8.2 percent.

Nearly 60 percent of the Chinese economy is powered by coal, and the electricity crunch has taken hold amid disruptions to coal supplies due to the pandemic as well as a trade tiff with Australia.

The coal shortages, toughening greenhouse gas emissions standards and strong demand from industry have pushed coal prices to record highs in China.

Adam Ni, an analyst at China Neican, a think-tank, said local authorities had to resort to rationing because electricity prices remain capped in China.

“So with rising input prices but fixed output prices, generating electricity has become less profitable – it may even become a loss-making venture,” he said in a newsletter.

“Since raising electricity prices may lead to more social discontent than rationing electricity, especially among households, the authorities have opted to restrict demand for electricity through rationing.”

The other reason for the restrictions is authorities’ desire to meet provincial targets for reductions in energy consumption, Ni added, noting that China aims to hit peak emissions before 2030 and carbon neutrality by 2060.

‘No energy crisis’

The Global Times said while the power cuts have raised concerns over an energy crisis in China, industry insiders were confident that “China’s energy supply capacity is so far adequate for meeting demand and that China has no energy crisis”.

The China Electricity Council, which represents the country’s power suppliers, said in a note on Monday that coal-fired power companies were now “expanding their procurement channels at any cost” in order to guarantee winter heat and electricity supplies.

It said China needed to increase the production and supply of coal while guaranteeing safety and environmental protection. More medium- and long-term contracts needed to be signed to raise power plant inventories ahead of winter.

But coal traders noted finding new import sources may be easier said than done.

“Russia has to first meet demand from Europe, Japan and South Korea,” one northeast China-based trader told the Reuters news agency. “Indonesia’s export shipments have been curbed by rainy weather the last couple of months and Mongolia’s exports, mostly by trucks, are small.”

 

Andy Mok, a senior research fellow at the Centre for China and Globalisation, described the outages as a “short-term cyclical problem” and said he expected the Chinese government to step in to fix the issue.

“In the northeast of China it can get bitterly cold and as winter comes on, ensuring adequate heat and electricity for the people there is a top priority,” he told Al Jazeera.

“If we look at the COVID-19 pandemic, I think we can glean some insights into how things might proceed, in that what China has done is to put human life first. And of course, this has brought some economic cost and some inconvenience. But this shows the priorities of the government,” he said.

“And we see something similar here – the priority is making sure that people are able to stay safe, to stay warm and then to mitigate as much as possible the short term disruptions.”