The global runoff of China’s energy supply shortage


China is facing, like many other countries in the world, an energy crisis. Since September, high coal costs and inflexible electricity prices have caused shortages that have forced local governments to implement phased blackouts for energy-intensive industries. However, the ruling party in China has ordered power companies to secure electricity in winter at all costs.

China’s energy crisis prompted the government to extend electricity restrictions to at least 20 provinces and regions as it struggled to cope with the electricity shortage that affected more than 66% of the country’s gross domestic product. country.

Several companies have shut down operations as millions of homes across the country faced a blackout situation. He forced executives to order their mining companies to increase coal production so prices can be reduced, and miners will also be allowed to exceed their annual quota.

Concerns remain as to whether further blackouts will occur and what impact the current situation with supply shortages and supply chain issues could have in the longer term. Justin Floyd, CEO of e-commerce and retail chain company RedCloud, explains the domino effect that a crisis in a country like China has on the world.

Floyd thinks that no one “really paid attention” to the matter, and thinks that the situation “presents a much bigger problem in the world today than climate change does in the world of tomorrow.”

The supply crisis in China

China is currently facing multiple problems, from supply shortages to the electricity crisis, with electricity problems being the third biggest problem, as many of their factories close.

China’s electricity supply shortage is multifaceted, but there are three primary factors: restrictions on the import of Australian coal; Chinese government plans to reduce carbon emissions in adverse weather conditions; and a surge in exports.

John Breen, senior analyst for global risks at Sibylline, said of Australian coal that “the Chinese government imposed an import ban in October 2020 after Canberra backed calls for an investigation into Beijing’s management of the Covid-19 pandemic ”.

He continued, “Beijing has looked to Indonesia to consolidate its coal supply, but logistical and regulatory constraints have hampered sourcing efforts. Meanwhile, a historically cold winter spell across China has boosted demand for coal, while a global surge in commodity prices has seen thermal coal rise by about 40%.

Tianjin gas power station, China
Tianjin Integrated Gasification Combined Cycle Power Plant in China. Credit: Asian Development Bank under CC

According to Floyd, China’s decision to go against the ban on importing and offloading Australian coal was “an incredibly counterproductive decision” as the country pledged to sharply cut emissions. of carbon before 2030.

He explains that there will be quick consequences for “joining the climate control program, for a country so heavily dependent on coal.”

As Floyd further explains, “If you don’t have power, your factories are sort of shut down, and when your factories are down, you don’t produce any goods; what we are seeing is the global impact it has in highlighting how many countries have been and are dependent on China. But aside from the production side of things, there is one aspect that Floyd says shouldn’t be overlooked: the problems the country has faced with Covid-19.

He said, “I suspect the death rate and the infection rate were so much higher than anyone really understood. I think no one will ever really know, but you envision a huge impact on the workforce there and with death to utter incapacity, for a country that is relied on for its huge workforce- manual labor is a problem. ”

Dependence on Chinese exports

There is a domino effect depending on the current degree of consumerism in society; as Floyd explains, “We have consumed far more than we have created for far too long.

China is one of the countries that has been relied on the most for this consumption and like Covid, how it unfolded in “an almost delayed reaction” according to Floyd, the same is true for the crisis in China. electricity and global supply chain shortages.

Breen says, “At the same time, rising global demand is boosting Chinese exports, which rose 25.6% in August year-on-year. As economies reopen in the wake of the Covid-19 pandemic, global demand for Chinese products is stepping up pressure on the country’s already strained energy infrastructure – major industrial centers like Guangdong have already faced challenges. power shortages due to high summer temperatures.

“As a result, China’s state-owned asset regulator has called on grid companies to prioritize energy for residential use during winter, and several provinces, including major industrial centers, have limited their power supply. electricity to factories. ”

While power supply is currently at the forefront of every issue in the world, including China, Floyd insists, “We’ve kind of hit what we’ve actually sold, in a gonna be a dangerous situation.

“Global supply chains have always been extremely fragile. We have lived too long in a just-in-time production environment. We have taken this for granted for too long.

Overcorrection on climate

There seems to be a repeated pattern whenever any official body, in this case governments, realizes that there is an issue that should require their full attention, climate change being one. For example, the UK government has concentrated and invested money to fight climate change – and rightly so.

However, this has caused officials to overlook, forget, or pay less attention to immediate issues. By realizing that mistakes have been made or that they are ignoring a topic that others are focusing on, the automatic response is to overcorrect those mistakes.

Floyd insists that this pattern of overcorrection, or catching up, is also happening in China with their current crisis. He says that after the collapse of the Paris Agreement, especially across Europe, “there was a real focus on how to fix climate change, and the answers were so raised.”

He continues, “The point is, as a world, we’ve been so dependent on things like coal, for example, and how we get gas and how we put electricity together. The lack of investment has started in other areas.

“When you suddenly overcorrect, when you catch up, you have to have a problem. One example, I think, of an overcorrection that has occurred is the response to the pandemic – it was so extreme.

“One thing that surprises me is that everyone is surprised. How did we really not see this coming?

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