Explained: Why China is facing a power crunch and what it means

A power crunch across China has rippled from factory floors to homes, crimping growth forecasts for the world’s second-largest economy. The shortages, mirrored in Europe and elsewhere, have roiled commodity markets as well. Part of the problem is that the economic rebound after lockdowns lifted has boosted demand, while lower investment by miners and drillers has constrained fossil fuel production. In China, it’s also due to the green agenda.
 
Why can’t China meet demand?
 
Mainly because it’s short of coal. Coal-based producers account for over 70 per cent of the country’s electricity generation, but Xi Jinping’s push to reduce greenhouse gas emissions and go “carbon neutral” by 2060 has capped the growth of coal mining. China’s coal production grew by 6 per cent in the first eight months this year, but the power output from coal-fired generators surged 14 per cent. 
 
Why didn’t government officials ask coal mines to dig more?
 
Actually they have, but it’s not that quick or easy. Any new or reopened mines also have to meet tighter standards under Xi’s green push. Penalties for violations of workplace safety rules rose from fines to possible jail time in March.
 
Why doesn’t China import more coal?
 
China’s economic planning agency said that the country, traditionally a major buyer in the world market, will increase coal imports “moderately.”
 
But supplies have been tight, due to the global energy crunch, and prices have climbed to record levels. China stopped buying the highly energy-efficient Newcastle grade from Australia last year amid a political dispute. Rising purchases from Indonesia helped make up for the missing Australian coal this year, but energy demand in Southeast Asia’s biggest economy also soared.

Can it use more renewable power?
 
It’s been gradually raising the share of energy derived from carbon-free sources and plans to reach 20 per cent by 2025. But the crunch has exposed some of the disadvantages of relying on renewable sources.
 
Are power plants willing to produce more?
 
A lot aren’t because they are swamped with operating losses. Even some of China’s most efficient power plants are losing money, state-run China Energy News reported.
 
What would higher electricity prices mean for the economy?
 
Millions of producers that relied on cheap and stable power supplies for decades wouldn’t be happy. In the short term, it might further push up factory gate inflation, which reflects the changes in prices producers charge to wholesalers.
 
Will China abandon climate goals?
 
Not likely. Instead The People’s Daily, a Communist Party mouthpiece, blamed poor planning by local governments for the power scarcity.