China energy crisis: Expert discusses possible ‘social unrest’
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Chinese power outages are impacting many industries and businesses around the world from sheep farmers to technology businesses including Apple. Curtailed production rates threaten to impact supply chains and food prices which has threatened Christmas for many. Express.co.uk speaks to a UK energy industry expert about what power outages across China could mean for the rest of the world and particularly for Britain.
Widespread power outages have been reported across China with the country struggling with a severe shortage of electricity.
Millions of households and businesses have experienced blackouts as a result.
These power cuts are not unusual in China, but this year a number of factors have contributed to making it a perfect storm for electricity suppliers.
The problem has been most intense in China’s northeastern industrial district – and as winter approaches this could have global implications.
Alex Dovey from energy broker firm Professional Energy Services said the country makes up 27.8 percent of the total global output for manufacturing meaning traditionally the nation has struggled to match demand and supply during peak consumption periods.
Mr Dovey told Express.co.uk: “This has been exacerbated as we emerged out of the pandemic with greater demand for products such as tech, paper, wool and food.
“The country still relies on coal for more than 50 percent of its power and yet many of the coal producers are slowing production – as they will incur penalties as a result of Beijing’s attempt to become carbon neutral by 2060.
“In short, supply and demand are further away from equilibrium than in the past.”
Official figures from last month indicate Chinese factory activity shrunk to its lowest level since February 2020 when the Covid lockdown crippled the economy.
Power cuts are not only having an impact on the national economy – but could also have huge ramifications for global investment banks.
Many banks have cut their forecasts for China’s economic growth as a result of these power outages.
Goldman Sachs estimates as much as 44 percent of Beijing’s industrial activity has been impacted by shortages and it expects the world’s largest economy to expand by 7.8 percent instead of its original forecast of 8.2 percent.
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Power issues are also expected to have an impact on supply chains – particularly in the run-up to the peak shopping period of Christmas.
As economies have reopened in the wake of Covid restrictions easing around the world, many retailers have already warned of potential shortages and empty shelves.
Many retailers are facing widespread disruption amid a surge in demand for imports.
Mr Dovey told Express.co.uk: “Despite the National Development and Reform Commission (NDRC) recognising the issue and putting steps in place to ensure supply over winter, there is no guarantee that these measures will work and there is potential for the situation to worsen.
“The NDRC is working with generators on the issue to increase production as well as exploring different avenues of energy procurement.”
Chinese energy issues are having a “dramatic knock-on effect for the rest of the world” according to the energy expert.
Mr Dovey said in particular the UK has been impacted by Chinese power shortages because Britain relies largely on gas imports, wind generation and LNG imports due to a lack of storage capability.s
The closure of the Rough storage site in 2018 means the UK has four to five days’ worth of gas storage for the upcoming winter
This accounts for just one percent of European storage as a whole.
Mr Dovey added: “This means we are more reliant on the LNG imports that seem to be headed towards China.”
Beijing is attempting to boost output to cut down on shortages in the country.
Three major coal-producing provinces pledged to increase production according to Chinese news agency Caixin.
With demand for electricity soaring, North China’s Inner Mongolia region has told more than 70 mines to boost annual output capacity by nearly 100 million tonnes according to Reuters.
The proposed increase in output of 100 million tonnes would equate to three percent of China’s total annual thermal coal consumption.
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