China’s Power Problems Expose a Strategic Weakness

SHANGHAI — A bread company can’t get all the power it needs for its bakeries. A chemicals supplier for some of the world’s biggest paint producers announced production cuts. A port city changed electricity rationing rules for manufacturers four times in a single day.

China’s electricity shortage is rippling across factories and industries, testing the nation’s status as the world’s capital for reliable manufacturing. The shortage has prompted a national rush to mine and burn more coal, despite the authorities’ pledges to curb emissions that cause climate change. And the shortage is calling into question whether Beijing can deliver in the coming months the strong economic growth that China’s people have come to expect.

The electricity crunch has also laid bare one of China’s strategic weaknesses: It is a voracious, and increasingly hungry, energy hog.

The world’s No. 2 economy relies on energy-intensive industries like steel, cement and chemicals to power growth. While many of its newer factories are more efficient than their counterparts in the United States, years of government price controls for electricity lulled other industries and most homeowners into putting off improvements.

As the winter heating season arrives, which will require China to dig up and burn still more coal, Beijing must confront whether to allow factories to continue running full-tilt producing industrial materials for global supply chains.

“They have to sacrifice something to make sure households will have heat and power,” said Chen Long, a co-founder and partner of Plenum, a Beijing economics and politics research firm. “They have to cut energy-intensive industries.”

A gas-fired power plant under construction in Dongguan, China.Credit…Gilles Sabrié for The New York Times

Power rationing appears to have eased somewhat since late last month, when widespread blackouts and power cuts caught factories by surprise. But the winter heating season officially begins on Friday in the country’s northeast and continues into north-central China next month.

China faces tough choices. It burns more coal than the rest of the world combined and is the No. 2 consumer of oil after the United States.

China has been rapidly expanding its use of natural gas as well as solar panels, wind turbines and hydroelectric dams. Yet China still does not have enough energy to meet demand. Even shifting to green energy could take significant power — the country’s tight electricity supplies have raised its costs for making solar panels.

Sustained tight supplies could force China to remake its economy, much as the high oil prices of the 1970s forced North American and European nations to change. Those countries developed more efficient cars, embraced other fuels, found plentiful new supplies and shifted manufacturing overseas, much of it to China. But the process was long, painful and costly.

For now, China is revving up coal consumption less than a month before world leaders gather in Glasgow, Scotland, to discuss confronting climate change.

Regulators announced last week that the country’s banks should lend to the coal sector to expand output. Premier Li Keqiang oversaw a meeting on Saturday of the country’s top energy officials that called for using more coal, although he promised more investments in green energy as well.

Board members of the European Union Chamber of Commerce in China said on Wednesday that electricity shortages had worsened this week in some cities, and eased in others. They predicted electricity problems would last until March.

Until enough power comes online, China’s factories risk unexpected and destabilizing stoppages. Factories in China consume twice as much electricity as the rest of the country’s economy. China’s factories tend to require 10 to 30 percent more energy than counterparts in the West, said Ma Jun, the director of the Institute of Public and Environmental Affairs, a Beijing research and advocacy group.

Hu Jiyan at his workshop in Dongguan that makes small mechanical parts. The workshop has been plagued with power cuts.Credit…Gilles Sabrié for The New York Times

China has made more gains in energy efficiency in the past two decades than any other country, said Brian Motherway, the head of energy efficiency at the International Energy Agency in Paris. But because China started the century with an inefficient industrial sector, it still has not caught up with the West, he said.

The impact of the power shortages has been mixed. Car assembly plants in northeastern China had been given permission to keep running, but tire factories nearly stopped running. Wuxi Honghui New Materials Technology, which makes chemicals for the world’s paint manufacturers, disclosed that electricity cuts had hurt production.

Others disclosing difficulties include Toly Bread, with its national chain of bakeries, and Fujian Haiyuan Composites Technology, a manufacturer of battery cases for China’s fast-growing electric car industry.

Fred Jacobs, a 57-year-old software marketer in Seattle, ordered two high-performance, solid-state drives in late summer from China, only to be offered a refund a week ago because a lack of electricity would cause factory delays.

“I was flabbergasted, because I’ve heard about shipping issues with China but not power issues or infrastructure issues with Chinese suppliers,” he said. “Now the risk is much higher, and I will buy from U.S. vendors even if I have to pay more.”

Fred Jacobs ordered two high-performance solid-state drives from China, only to be offered a refund because a lack of electricity would cause factory delays in making the devices.Credit…Jovelle Tamayo for The New York Times

The power outages have taken a human toll, which could worsen if homes lose power during winter. At least 23 workers were hospitalized in northeast China late last month with carbon monoxide poisoning when the power failed at a large chemicals factory.

The government has been taking steps to improve efficiency, like allowing utilities to raise prices for industrial and commercial users as much as 20 percent so that they can buy more coal.

China practically stopped new coal investments in 2016 as concerns developed about the industry’s sustainability. Anticorruption officials have launched investigations focused on some important coal fields in the Inner Mongolia region, discouraging investment further.

In late summer, many mines were closed for safety reviews. Flooding this autumn in Shanxi Province, China’s biggest hub for coal mining, has forced the closing of at least 60 mines.

With demand rising post-pandemic, prices jumped. Power plants found themselves losing money with every ton of coal they burned, so they ran at around three-fifths capacity.

Chinese officials hope to replace much coal-fired power with solar power. But China’s manufacturing processes for solar panels require enormous amounts of electricity, much of it from coal.

Polysilicon, the main raw material for solar panels, has more than tripled in price recently, with most of the increase in the past couple weeks, said Ocean Yuan, the president of Grape Solar, a solar panel distributor in Eugene, Ore.

In China, the cost to build large solar panel farms has jumped about 25 percent since the start of this year.

“We haven’t seen such a level in years,” said Frank Haugwitz, a Chinese solar panel industry consultant.

China is also looking to improve steelmaking efficiency. Its steel mills use more electricity each year than all the country’s homes and account for about a sixth of China’s greenhouse gas emissions.

Chinese steel companies still rely on coal-fired blast furnaces that melt mostly iron ore to make steel. The West has mostly switched to producing steel in efficient electric arc furnaces, which melt a mix of scrap and iron ore. China is trying to improve scrap collection from demolished buildings, but switching to electric arc furnaces will be gradual, said Sebastian Lewis, a Chinese energy and commodities consultant.

For now, China’s worries are focused on the winter. During a severe cold snap last December, some cities ran short of coal and curtailed factory operations, turned off streetlights and elevators and limited heating of offices. The problems appeared even though power plants started the winter with several weeks of coal in stockpiles.

This year, China’s biggest provinces have only nine to 14 days worth in storage, according to CQCoal, a Chinese coal data firm.

“The stocks are low, much lower than they should be,” said Philip Andrews-Speed, a specialist in Chinese energy at the National University of Singapore. “And they’re panicking for winter.”

Li You and Claire Fu contributed research.

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