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China Power Warning: What’s Going On?

Power rationing and production suspension have swept across many China provinces.


According to related reports, there has been a phenomenon in many provinces these days: the power supply is tight, and the double control of energy consumption is superimposed, resulting in power curtailment and production shutdown.


The power supply is under pressure, leading to widespread power curtailment and production shutdown

For example, in at least more than ten provinces, including Jiangsu, Zhejiang, Shandong, Guangdong, Guangxi, Yunnan, etc., several listed companies have simultaneously issued announcements on “power curtailment and production suspension”.


On the surface, there are two core problems with power curtailment and production suspension:

  1. The price of coal is too high

  2. The pressure of dual control of energy consumption


So, what exactly is going on?


How does the price of coal impact the power supply? We all know that many power plants rely on burning coal to generate electricity, so the cost of power generation is closely related to the price of coal.


The price of coal has risen sharply this year, hitting record highs, which has increased the cost of power generation. However, the price of electricity cannot rise arbitrarily. The result is power plants have lost money in power generation, and thermal power plants will lose a dime for every kilowatt-hour of electricity generated. This money situation has been going on for a long time, making it impossible for power plants to expand the power generation supply.


The price of coal has risen sharply this year, which has increased the cost of power generation

The second reason can be explained by the increased energy intensity across a number of provinces. The nine regions of Qinghai, Ningxia, Guangxi, Guangdong, Fujian, Xinjiang, Yunnan, Shaanxi, and Jiangsu increased their energy intensity in the first half of the year. This is a first-level warning.


Nine provinces increased their energy intensity in the first half of the year

In order to achieve the goal of carbon peaking and carbon neutrality, the pressure of dual control of energy consumption in these provinces has become very large. Only electricity can be curtailed, and production stopped. Guangdong Province is not only a first-level warning. In addition, its thermal power generation accounts for about 70% of the province’s power generation structure.


Under the superimposition of these two reasons, power rationing and production suspension have become inevitable.


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