Limits on power usage now include at least 10 provinces, with many companies cutting output or halting production to keep in line with the rules. The power curbs come as a result of increased demand, controls on consumption, and a high coal price.
Lin Boqiang, director of China Institute for Studies in Energy Policies. Photo from CFP
By XU Ruiyao
Government limits on power use have now extended to more than 10 provinces in China. Many companies have cut output or halted production entirely to keep in line with the rules. Some residential areas in northeastern China are also affected.
According to the National Development and Reform Commission, electricity consumption is up 14 percent last year. LIN Boqiang, director of China Institute for Studies in Energy Policies at Xiamen University, believes the shortage is a result of high demand, the “double control” policy - limits on total volume and intensity of power consumption - and, and the rising coal price. He spoke to Jiemian News about the crisis.
Jiemian News: What are the reasons behind the power shortfall?
Lin: The situation is particularly worse in northeastern China and Guangdong Province, but it is really not so bad in either place. Power outages are not frequent and are restricted by region and industry. China is not short of electricity. We have used only four thousand hours of thermal power while the ceiling is estimated at six thousand hours.
The main reason for the power curbs is that electricity demand is growing too fast. Consumption has increased 12 percent this year by August. Power plants cannot deal with such a sharp increase. The “double control” of total consumption and intensity is another reason. Local governments enforce environmental regulations to reach conservation goals by year-end, as coal prices increase, but electricity prices remain the same. Power plants make little profit then have difficulties in providing electricity.
Jiemian News: How long do you think the power curbs will be with us? Are they going to be more frequent?
Lin: If it’s about “double control,” they may last till the end of the year. Local governments must negotiate with the central government on control targets. If there is no change, then I can’t tell how long it will last. It depends on whether the government will then reduce coal prices or not and to what extent.
But outages will not be frequent. The situation has arisen many times before. It’s cyclical. This time it’s different because consumption increased so sharply. We just need some time to deal with it.
Jiemian News: If power plants aren’t making a profit, does that mean that electricity is too cheap?
Lin: Residential electricity is cheap. According to the supply cost, the residential electricity price should be double. The cost generation, transmission, and fuel determine the price. And one thing is certain: China’s grid and power plants make little or no profit.
If prices do not increase, who will pay for carbon neutrality and how will energy-intensive industries be brought to heel? It is a long-term process that we should take one step at a time, It is necessary to minimize the impact on the economy and quality of life. Increasing electricity price simply because of a short-term problem is not a wise choice.
Jiemian News: China is dependent on coal power and has been for a long time. We became a net coal importer in 2009. What are the difficulties in the transition to clean energy?
Lin: China is not short of coal. Imports make less than 10 percent of the four billion tons of coal we burn each year. It makes very little difference. We import coal to save freight costs. We used to transport coal from the north to the south, but it is cheaper to import from Australia than to send it by train from Shanxi province. Of course, other factors are at play, but they are not the main reason.
Energy transition will be a long process. Nuclear power projects take as much as 12 years to come online, as do hydro projects. Natural gas is very clean but expensive and we depend a lot on imports which are expensive and risky. We have the same problem with fuel oil, about 70 percent comes from overseas. Wind power and photovoltaics, still play insignificant roles in the mix.
Jiemian News: The UN is expecting developed countries to stop using coal power before 2030 and developing countries before 2040. Do you think this will happen?
Lin: The goal is not unrealistic in terms of technology, but it is difficult. Our power industry is still dominated by coal. It will take a long time to replace it with clean energy.
Growth means increased demand. If clean energy cannot meet the need, we have to rely on coal. Unlike the U.S. where commerce is top of the economic structure, China relies on secondary industries which need energy. A reduction in the U.S. has little effect on the economy, but here it means a lot. China is still a developing country and cannot give up on economic growth.
Jiemian News: How then, can we strike a dynamic balance between emission reduction and economic growth?
Lin: Emissions won’t fall overnight. coal-burning power plants cannot be shut down until clear energy plants have full capacity to support the power consumption of China. We have to be flexible. When growth is weak, emission reduction should slow down. When the economy is doing well, the reduction can speed up. This is the so-called “dynamic balance”. We can only take it one step at a time.
Jiemian News: Building new energy projects consume a large amount of energy. Can they really reduce the total energy consumption?
Lin: New energy reduces emissions and saves energy. Efficiency and profitability should be calculated in the long term. New energy produces less, cleaner emissions. It is unquestionably more efficient.