Explained: China’s Electricity Problems

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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