China’s electricity problem explained in the 🧵 below, do ‘re-tweet’ & help us educate more investors
China has orders some industries to shut down & some to operate 2-4 days a week, as power cuts become a daily routine (1/12)
(Q) How big is China’s electricity problem?
(Ans) While power cuts are normal, this is more than that
(A) Industrial Problem
– The three main industrial Chinese provinces- Jiangsu, Zhejiang & Guangdong that account for around a 1/3 of economy of China, r facing power cuts (2/12)
– In Jiangsu, steel mills & streetlights are shut
– In Zhejiang, 160 industrial units had to be shut down
– China has to shut down everything from aluminum smelters to textiles, & even food processing units like soybean plants. (3/12)
(B) Residential Problem
– Half of china’s region has missed energy consumption targets (they consume more than the target) & are facing pressure to reduce power usage
– Traffic lights are turned off in some areas (4/12)
– Infact, Guangdong province has been advising residents to cut down on air conditioner usage & to rely on natural light instead of using home lighting appliances.
– Liaoning, Jilin and Heilongjiang all suffered blackouts over the weekend (5/12)
– Power restrictions are likely to continue until March next year, and also water cuts to become normal
– Office workers to use stairs for the first three floors, shopping malls to keep advertising signs on fewer hours (6/12)
(Q) Why is china failing to produce electricity?
(Ans) Coal shortage
-China is the biggest coal consumer in the world. 70% of China’s electricity is generated using coal
-China wants to reduce pollution & meet carbon neutrality by 2060 & has capped growth of coal mining (7/12)
-China’s coal production grew by 6% this calendar year but power output surged 14%, leading to coal short fall
-Power plants are also not willing to produce more as coal prices are rising and electricity prices are government controlled (8/12)
(Q) Why dint the government ask coal mines to dig more?
-Mines find it difficult to meet the tighter environmental standards newly implemented
-Financial institutions have also stopped funding coal miners as china wants 2 reduce usage of coal in over all energy production(9/12)
(Q) Why cant China import?
-Last year, China imposed an unofficial ban on Australian coal because of political differences
-Import from Indonesia helped but the demand for energy went up in China & hence an over all short fall (10/12)
– Mongolio also sold less due to stricter border control because of COVID
Also winters are severe in china & hence the electricity consumption increases & hence china is also trying to reduce usage now to have enough in the upcoming winter season (11/12)
(Q) What does this lead too?
– Focus on renewable power. China plans to ⬆️ its energy derived 4m renewable to 20% (current 15%) by 2025
– This will further worsen the supply chain problem, slow China’s growth, ⬆️ certain commodity prices (aluminum, steel, coal, gas) & inflation
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