"Unexpected" Blackouts; Power Company Warns This Is "New Normal"
Just yesterday we warned that a "Power Supply Shock Looms" as the energy crisis gripping Europe - and especially the UK - was set to hammer China, and just a few hours later we see this in practice as residents in three north-east Chinese provinces experienced unannounced power cuts as the electricity shortage which initially hit factories spreads to homes.
People living in Liaoning, Jilin and Heilongjiang provinces complained on social media about the lack of heating, and lifts and traffic lights not working.
Local media in China - which is highly dependent on coal for power - said the cause was a surge in coal prices leading to short supply. As shown in the chart below, Chinese thermal coal futures have more than doubled in price in the past year
There are several reasons for the surge in thermal coal, among them already extremely tight energy supply globally (that's already seen chaos engulf markets in Europe); the sharp economic rebound from COVID lockdowns that has boosted demand from households and businesses; a warm summer which led to extreme air condition consumption across China; the escalating trade spat with Australia which had depressed the coal trade and Chinese power companies ramping up power purchases to ensure winter coal supply.
Then there is Beijing's pursuit of curbing carbon emissions - Xi Jinping wants to ensure blue skies at the Winter Olympics in Beijing next February, showing the international community that he's serious about de-carbonizing the economy - that has led to artificial bottlenecks in the coal supply chain.
The coal price surge prompted the China Electricity Council to publish a statement saying that "to ensure winter coal supply, power companies continue to increase market purchases *regardless of cost* under the situation of substantial losses."
Whatever the reason, it's just getting started: as BBC reported, one power company said it expected the power cuts to last until spring next year, and that unexpected outages would become "the new normal." Its post, however, was later deleted.
At first, the energy shortage affected factories and manufacturers across the country, many of whom have had to curb or stop production in recent weeks. In the city of Dongguan, a major manufacturing hub near Hong Kong, a shoe factory that employs 300 workers rented a generator last week for $10,000 a month to ensure that work could continue. Between the rental costs and the diesel fuel for powering it, electricity is now twice as expensive as when the factory was simply tapping the grid.
“This year is the worst year since we opened the factory nearly 20 years ago,” said Jack Tang, the factory’s general manager. Economists predicted that production interruptions at Chinese factories would make it harder for many stores in the West to restock empty shelves and could contribute to inflation in the coming months.
Three publicly traded Taiwanese electronics companies, including two suppliers to Apple and one to Tesla, issued statements on Sunday night warning that their factories were among those affected. Apple had no immediate comment, while Tesla did not respond to a request for comment.
But over the weekend residents in some cities saw their power cut intermittently as well, with the hashtag "North-east electricity cuts" and other related phrases trending on Twitter-like social media platform Weibo.
The extent of the blackouts is not yet clear, but nearly 100 million people live in the three provinces.
In Liaoning province, a factory where ventilators suddenly stopped working had to send 23 staff to hospital with carbon monoxide poisoning.
There were also reports of some who were taken to hospital after they used stoves in poorly-ventilated rooms for heating, and people living in high-rise buildings who had to climb up and down dozens of flights of stairs as their lifts were not functioning. Some municipal pumping stations have shut down, prompting one town to urge residents to store extra water for the next several months, though it later withdrew the advice.
One video circulating on Chinese media showed cars travelling on one side of a busy highway in Shenyang in complete darkness, as traffic lights and streetlights were switched off. City authorities told The Beijing News outlet that they were seeing a "massive" shortage of power.
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