China’s Power Problems Expose a Strategic Weakness
By Keith Bradsher, 10/13/21, NY Times

BEIJING — A bread company can’t get all the power it needs
for its bakeries. A chemicals supplier for some of the
world’s biggest paint producers announced production cuts.
A port city changed electricity rationing rules for
manufacturers four times in a single day.

China’s electricity shortage is rippling across factories
& industries, testing the nation’s status as the world’s
capital for reliable manufacturing. The shortage prompted
the authorities to announce on Wednesday a national rush
to mine & burn more coal, despite their previous pledges
to curb emissions that cause climate change.

Mines that were closed without authorization have been
ordered to reopen. Coal mines & coal-fired power plants
that were shut for repairs are also to be reopened. Tax
incentives are being drafted for coal-fired power plants.
Regulators have ordered Chinese banks to provide plenty of
loans to the coal sector. Local govts have been warned to
be more cautious about limits on energy use that had been
imposed partly in response to climate change concerns.

“We will make every effort to increase coal production &
supply,” said Zhao Chenxin, the secretary general of the
National Development & Reform Commission, China’s top
economic planning agency, at a news briefing on Wednesday
in Beijing.

Depending on how much coal can be mined & burned soon,
China’s electricity shortage could call into question
whether Beijing can deliver in the coming months the strong
economic growth that China’s people have come to expect.

The electricity crunch has also laid bare one of China’s
strategic weaknesses: It's a voracious, & increasingly
hungry, energy hog. China has also emerged as the world’s
largest emitter of greenhouse gases by a wide margin,
thanks mainly to its already heavy dependence on coal.

The world’s No. 2 economy relies on energy-intensive
industries like steel, cement & chemicals to power growth.
While many of its newer factories are more efficient than
their counterparts in the US, years of govt price controls
for electricity lulled other industries & most homeowners
into putting off improvements.

With the arrival of the winter heating season, which will
require China to dig up & burn still more coal, Beijing
must confront whether to allow factories to continue
running full tilt producing industrial materials for
global supply chains.

“They have to sacrifice something to make sure households
will have heat & power,” said Chen Long, a co-founder &
partner of Plenum, a Beijing economics & politics research
firm. “They have to cut energy-intensive industries.”

Power rationing appears to have eased somewhat since late
last month, when widespread blackouts & power cuts caught
factories by surprise. But the winter heating season
officially begins on Friday in the country’s northeast
& continues into north-central China next month.

China faces tough choices. It burns more coal than the
rest of the world combined & is the No. 2 consumer of
oil after the US.

China has been rapidly expanding its use of natural gas
as well as solar panels, wind turbines & hydroelectric
dams. Yet China still doesn't have enough energy to meet
demand. Even shifting to green energy could take signifi-
cant power — the country’s tight electricity supplies
have raised its costs for making solar panels.

Sustained tight supplies could force China to remake its
economy, much as the high oil prices of the 70s forced
North American & Euro nations to change. Those countries
developed more efficient cars, embraced other fuels,
found plentiful new supplies & shifted manufacturing
overseas, much of it to China. But the process was long,
painful & costly.

For now, China is revving up coal consumption less than
a month before world leaders gather in Glasgow to
discuss confronting climate change.

Board members of the European Union Chamber of Commerce
in China said on Wednesday that electricity shortages
had worsened this week in some cities, & eased in others.
They predicted electricity problems would last until March.

Until enough power comes online, China’s factories risk
unexpected & destabilizing stoppages. Factories in China
consume twice as much electricity as the rest of the
country’s economy. China’s factories tend to require
10-30% more energy than counterparts in the West, said
Ma Jun, the director of the Institute of Public & Enviro
Affairs, a Beijing research & advocacy group.

China has made more gains in energy efficiency in the
past two decades than any other country, said Brian
Motherway, the head of energy efficiency at the Int'l
Energy Agency in Paris. But because China started the
century with an inefficient industrial sector, it still
hasn't caught up with the West, he said.

Zhao said that even with Wednesday’s push for more coal
production, China would continue efforts to become more
energy-efficient. He pointed out that the US has also
been burning more coal this year as the American economy
has begun to rebound from the pandemic.

The impact of the power shortages has been mixed. Car
assembly plants in NE China had been given permission to
keep running, but tire factories nearly stopped running.
Wuxi Honghui New Materials Technology, which makes
chemicals for the world’s paint manufacturers,
disclosed that electricity cuts had hurt production.

Others disclosing difficulties include Toly Bread, with
its national chain of bakeries, & Fujian Haiyuan
Composites Technology, a manufacturer of battery cases
for China’s fast-growing electric car industry.

Fred Jacobs, a 57-year-old software marketer in Seattle,
ordered two high-performance, solid-state drives in late
summer from China, only to be offered a refund a week
ago because a lack of electricity would cause factory
delays.

“I was flabbergasted, because I’ve heard about shipping
issues with China but not power issues or infrastructure
issues with Chinese suppliers,” he said. “Now the risk
is much higher, & I'll buy from U.S. vendors even if I
have to pay more.”

The power outages have taken a human toll, which could
worsen if homes lose power during winter. At least 23
workers were hospitalized in NE China late last month
with carbon monoxide poisoning when the power failed at
a large chemicals factory.

The govt has been taking steps to improve efficiency,
like allowing utilities to raise prices for industrial &
commercial users as much as 20% so that they can buy
more coal.

China practically stopped new coal investments in 2016
as concerns developed about the industry’s sustainability.
Anticorruption officials have launched investigations
focused on some important coal fields in the Inner
Mongolia region, discouraging investment further.
In late summer, many mines were closed for safety reviews.
Flooding this autumn in Shanxi Province, China’s biggest
hub for coal mining, has forced the closing of at least
1/10 of the province’s mines.

With demand rising post-pandemic, prices jumped. Power
plants found themselves losing money with every ton of
coal they burned, so they ran at around 3/5's capacity.

Chinese officials hope to replace much coal-fired power
with solar power. But China’s manufacturing processes for
solar panels require enormous amounts of electricity,
much of it from coal.

Polysilicon, the main raw material for solar panels, has
more than tripled in price recently, with most of the
increase in the past couple weeks, said Ocean Yuan, the
president of Grape Solar, a solar panel distributor in
Eugene, Oregon.

In China, the cost to build large solar panel farms has
jumped about 25 % since the start of this year.

“We haven’t seen such a level in years,” said Frank
Haugwitz, a Chinese solar panel industry consultant.

China is also looking to improve steel-making efficiency.
Its steel mills use more electricity each year than all
the country’s homes and account for about 1/6 of China’s
greenhouse gas emissions.

Chinese steel companies still rely on coal-fired blast
furnaces that melt mostly iron ore to make steel. The
West has mostly switched to producing steel in efficient
electric arc furnaces, which melt a mix of scrap & iron
ore. China is trying to improve scrap collection from
demolished buildings, but switching to electric arc
furnaces will be gradual, said Sebastian Lewis, a
Chinese energy and commodities consultant.

For now, China’s worries are focused on the winter.
During a severe cold snap last December, some cities
ran short of coal and curtailed factory operations,
turned off streetlights and elevators and limited heating
of offices. The problems appeared even though power plants
started the winter with several weeks of coal in stockpiles.

This year, China’s biggest provinces have only
9-14 days’ worth in storage, acc. to CQCoal, a
Chinese coal data firm.