[China announced on Wednesday a
national rush to mine and burn more coal, as the country’s electricity shortage
threatens to damage its image as a reliable manufacturing base.]
China’s electricity shortage is
rippling across factories and 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 and 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 and 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 governments 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 and supply,” Zhao Chenxin, the secretary general of
the National Development and Reform Commission, China’s top economic planning
agency, said at a news briefing on Wednesday in Beijing.
Depending on how much coal can be
mined and 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 is a voracious, and 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 and chemicals to power growth.
While many of its newer factories are more efficient than their counterparts in
the United States, years of government price controls for electricity lulled
other industries and most homeowners into putting off improvements.
As the winter heating season
arrives, which will require China to dig up and 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 and power,” said Chen Long, a co-founder
and partner of Plenum, a Beijing economics and politics research firm. “They
have to cut energy-intensive industries.”
Power rationing appears to have
eased somewhat since late last month, when widespread
blackouts and power cuts caught factories by surprise. But the winter
heating season officially begins on Friday in the country’s northeast and
continues into north-central China next month.
China faces tough choices. It burns
more coal than the rest of the world combined and is the No. 2 consumer of oil
after the United States.
China has been rapidly expanding
its use of natural gas as well as solar panels, wind turbines and hydroelectric
dams. Yet China still does not have enough energy to meet demand. Even shifting
to green energy could take significant 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 1970s
forced North American and European nations to change. Those countries developed
more efficient cars, embraced other fuels, found plentiful new supplies and
shifted manufacturing overseas, much of it to China. But the process was long,
painful and costly.
For now, China is revving up coal
consumption less than a month before world leaders gather in Glasgow, Scotland,
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, and eased in others. They predicted
electricity problems would last until March.
Until enough power comes online,
China’s factories risk unexpected and 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 to 30 percent more energy than
counterparts in the West, said Ma Jun, the director of the Institute of Public
and Environmental Affairs, a Beijing research and 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 International Energy Agency in
Paris. But because China started the century with an inefficient industrial
sector, it still has not caught up with the West, he said.
Mr. 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 United States 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 northeastern 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, and 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, and I
will 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 northeast China late last month with carbon
monoxide poisoning when the power failed at a large chemicals factory.
The government has been taking
steps to improve efficiency, like allowing utilities to raise prices for
industrial and commercial users as much as 20 percent 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 a tenth 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 three-fifths 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, Ore.
In China, the cost to build large
solar panel farms has jumped about 25 percent 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 a sixth 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 and 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 nine to 14 days worth in storage, according to CQCoal, a
Chinese coal data firm.
“The stocks are low, much lower
than they should be,” said Philip Andrews-Speed, a specialist in Chinese energy
at the National University of Singapore. “And they’re panicking for winter.”
Li You and Claire Fu contributed
research.
