China facing severe power crisis: Cumulative effect of flawed growth model

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The double digit growth story of China in the 1990s that transformed it into the ‘manufacturing hub’ of the world was inherently contradictory to the principles of sustainable development, especially with regard to energy intensity as well as energy mix. China ended up in the two decades of its breakneck growth as the largest polluter of the world releasing over 10,065 million tons Carbon (CO2).

It contributes more than 30 per cent of the total global carbon emissions as compared to 15 per cent of the US, seven per cent of India, five per cent of Russia and four per cent of Japan. China’s energy intensity and carbon intensity is among the highest in the world, indicating higher use of energy and carbon emission to raise GDP by one unit.

This in turn has made China one of the most climatically vulnerable places with increasing frequency of natural disasters and declining air quality in its industrial centres. Today China is countenancing unprecedented climatic extremes which would have serious adverse repercussions and bearing on both economic growth and health of its citizens.

Worst heat wave in decades…

The country is suffering from its worst heat wave in decades, which has strained power supply. Areas of the Yangtze River and China’s south-western province Sichuan are battling a record-breaking heat wave amid severe droughts. Scorching temperatures have disrupted crop growth and are threatening livestock. Besides, the temperatures soared in the range of 39-42 degree Celsius in eastern Zhejiang province and the city of Shanghai (China’s central coast), Jianxi (southern China) and Fujian (south-eastern China).

The drought has already ‘severely affected’ mid-season rice and summer corn in some southern regions. Chinese Ministry of Water Resources has estimated that rainfall in the Yangtze River basin has declined by roughly 45 per cent compared to the average in recent years and as many as 66 rivers across 34 counties in the south-western region of Chongqing have dried up.

With a reduction in rainfall flowing into the Yangtze River, in particular the Three Gorges Dam, water levels in hydro-electric power reservoirs have dropped, curtailing energy production. China’s Sichuan province, which has 94 million people, ordered all factories in mid-August to shut down for six days in effort to ease power shortages in the region. The shutdowns came after reservoir levels declined and demand for air conditioning spiked amid the heat.

Water bodies and rivers dried up due to high temperatures and heat waves. Ships crept down the middle of the Yangtze in mid-August after China’s driest summer in six decades left one of the mightiest rivers barely half its normal width and set off a scramble to contain the damage to a floundering economy post the Covid in a politically sensitive year.

Factories in Sichuan Province and the adjacent metropolis of Chongqing in the southwest were closed down after reservoirs that supply hydropower fell to half their normal levels and demand for air conditioning surged in scorching temperatures.

River ferries in Chongqing that are usually packed with sightseers were reported empty in the month of August and tied to piers beside mudflats that stretched as much as 50 meters (50 yards) from the normal shoreline to the depleted river’s edge. Smaller ships sailed down the middle of the Yangtze, one of China’s biggest trade channels, but no large cargo ships could be seen.

Power rationing

Against this backdrop, power rationing in parts of China including Yangtze region has sparked concerns and could hurt many of China’s main manufacturing hubs. Power rationing in parts of China has impacted ‘normal production.’ Particularly in Shanghai, Chinese authorities turned off the lights on the city’s famous riverfront spot, i.e. the Bund, to conserve power.  Similarly, in a move to ease power demand, Chongqing municipality announced that opening hours at more than 500 malls and other commercial venues would be shortened from 22 August.

Sichuan province would bear the brunt of the power outages this time as it accounts for four per cent of China’s industrial production. Sichuan’s 78 per cent electricity generation depends upon hydropower and power supplies to factories have been reduced in favour of electricity use by households. Further, homes and businesses have been forced to cut or stagger usage, while public amenities such as traffic lights have been turned off to save energy.

The heat could have a significant impact on China’s economy as the country’s steel, chemical and fertilizer industries are already experiencing a slowdown in production. It is likely to affect big energy-intensive industries that may have a knock-on effect throughout the economy and even to the global supply chain. In July alone, extreme temperatures caused direct economic losses of Yuan 2.73 billion (USD 400 million) and impacted 5.5 million people. In addition to extreme temperatures, factories are demanding more electricity as they rush to fill global orders for Chinese goods.

Power shortages in China may disrupt the supply chains of raw materials like lithium given that Sichuan produces around 20 per cent of lithium, five per cent of aluminium, and 13 per cent of polysilicon in China. It could then translate into higher costs for electronic products such as electric-car batteries. Several plants in Sichuan and Chongqing, including those of top battery maker CATL and the electric vehicle giant BYD, have only been able to partially operate in recent weeks because of power shortages.

The Chinese growth story mostly relied on thermal power which adds far more carbon footprints than renewable and alternative sources of energy. However, China’s speed of developing alternative sources of energy is not keeping pace with demand. Thermal power is roughly 79 per cent of China’s power generation. It seems highly unlikely that China would achieve peak carbon by 2030 and carbon neutrality by 2060 as targeted.

The consumption of electricity in the Chinese provinces including Shandong in eastern China and Henan in central China reached record high in August, primarily driven by the use of air conditioning as heat waves spread across regions north of the Yangtze River. But the Chinese government still focuses on coal-fired electricity. While visiting a thermal power company in the province of Hebei in northern China, Premier Li Keqiang, noted that China must increase coal production capacity to ‘resolutely prevent power outages’.

Other extreme weather

While drought caused by scant rain is one extreme faced by China, flash floods are the other extreme which left tens of people dead and thousands displaced in the south-western province of Sichuan and Gansu (north-central China). In fact, in the month of June and July, a hundred of rivers across the country surged beyond flood warning. In 2021, floods caused an estimated USD 25 billion loss to China.

The new trend is seen in the northern and central provinces in China which initially faced severe heat waves and subsequently saw worst floods in a decade.  Southern region, notably Shaoguan and Guangdong also displayed the same pattern which is a warning signal that climate change is poised to wreck havoc on China, especially due to policy inertia that prohibits China from transforming its energy mix and promoting green energy for industries and households.

At the present speed of power sector reforms, China’s aim to cut energy intensity by 13.5 per cent and carbon intensity by 18 per cent during 2021-25 seems to be an impossible goal. And this would have repercussions not for China alone, but for the word as whole. Beijing needs to be more responsible towards sustainable development.