Power Crisis Shows China's Transition Bind

Copyright © 2021 Energy Intelligence Group

China’s current widespread power shortages have brought to the fore Beijing’s headache as it faces two competing priorities: energy transition and economic growth. Ministries, provinces and companies grappling with China’s ambitious goal to peak its carbon emissions before 2030 are hitting the breaks as it becomes clear that this lofty aim does not easily fit with keeping China’s economy growing. Surging power demand this year on the back of strong economic growth has collided with lower supplies of cheap domestic coal — which fuels two-thirds of China’s power plants — and sent coal prices to record highs, contributing to shortages in two-thirds of China’s provinces as winter looms. “China is not short of energy. It is short of coal,” former Sinopec Group Chairman Fu Chengyu told the Energy Intelligence Forum this week, as he blamed poor management for shutting down at least 1,000 small mines this year. 2021 is turning out to be a more energy intense year than normal due to the increase in demand for goods relative to services, say Sanford Bernstein analysts, who note the ratio of GDP growth to primary energy growth at 1.8 times compared with a trailing 10-year average of 2.4 times.

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