Analysis | China’s Power Crisis Will Affect Industries Worldwide
upstart writes:
Analysis | China's Power Crisis Will Affect Industries Worldwide:
A villain is emerging in China's efforts to rein in its energy prices: inefficient, power-hungry industry.
With flooding in the coal hub of Shanxi province driving prices up to 1,508 yuan ($234) a metric ton even as the government tries to kickstart extra production, further measures are clearly needed to prevent more generators cutting off their turbines and causing blackouts through the cold of northern China's winter. That means a crackdown on the factories that still consume the lion's share of electricity.
Industry makes up only 25% of grid demand in the U.S., but in China it's fully 59% of the total - more than all the country's homes, offices and retail stores put together. Cheap power has been an essential tool of development, and the government has traditionally encouraged major users with electricity tariffs that get cheaper the more you consume. With about two-thirds of the grid powered by coal, the cost of digging up the black stuff has determined how much industrial users pay for their power.
The problem is that coal isn't getting any cheaper. After a sustained period of deflation prior to 2016, when a glut of dangerous and unregulated mines was closed down, annualized costs jumped 40% in 2017. They didn't really fall again until Covid-19 struck, and they've since rebounded with a 57% increase from 12 months ago in August.
Such increases might be tolerable if end-users were turning this power into high-value goods - but all too often, that's not the case. China now consumes more electricity per capita than the U.K. and Italy, but comes nowhere close in terms of economic output. Determined to hit President Xi Jinping's targets on peaking emissions by 2030 and hitting net zero by 2060, Beijing's policy makers have fixed on so-called dual high" sectors - those whose energy consumption and carbon emissions are both elevated - as the culprits. These are many of the industries that have grown fastest in recent decades, such as cement, steel, base metals, oil refining, chemicals, and glass. They collectively account for more than half of China's emissions.
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