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China’s export hub Guangdong disrupted by power crunch, Covid
This image taken on May 23, 2021 shows a general view of Guangzhou, in southern China's Guangdong province. Photo: Noel Celis / AFP.

Southern province is struggling with a big surge in demand for power caused by hot weather and export sector businesses; local officials have been urging companies to operate at night or other off-peak times

(AF) Electricity shortages in China’s southern Guangdong province caused by a surge in air-conditioning demand and the recovery of exports is disrupting the manufacturing of all kinds of products from clothing to kitchenware and wash machines, and putting pressure on the region’s GDP – which is greater than Australia.

The power outages are a double-whammy for manufacturers who have already been forced to lower production due to a recent surge in prices of raw materials such as steel, aluminium, glass and paper.

Some compounds and streets have also been lockdown by a small outbreak of Covid-19, news agencies say. Officials in Guangzhou have stepped up coronavirus prevention and control efforts since the latest wave of cases struck in late May. They have reported 41 locally confirmed cases between May 21 and June 1, with a further six cases in the nearby city Foshan.

Industry professionals expect the power shortages to continue until the weather cools in September. While China is bracing for another historic flood season that may cause chaos to the economy and society, the upside is that a boost in hydropower generation will help relieve the electricity shortages.

Several cities in Guangdong province have asked factories to curb power use by suspending operations for several days each week as high factory use combined with hot weather strain the region’s power system.

“Due to the acceleration of economic activity resumption and persistent high temperatures, electricity consumption has been increasing,” Guangdong provincial energy bureau said, adding that average temperatures in May were 4 degree Celsius above normal, which boosted air conditioner demand.

China’s factories have benefited from coronavirus lockdowns elsewhere in the world, with exports of goods in the first four months soaring 33.8% from the Covid-hit period in 2020, and 24.8% compared with the same period in 2019, which was unaffected by Covid.

Guangdong, an economic and export powerhouse with an annual gross domestic product equivalent to South Korea, has seen its electricity use surge 22.6% in April from a year earlier, and 7.6% from April 2019.

Local power grid firms in cities such as Guangzhou, Foshan, Dongguan and Shantou have issued notices urging factories to halt production for two or three days each week, news website Jiemian said.

While the Chinese factories typically operate seven days a week, the cutbacks have significantly affected their ability to fulfill orders on time. To make up for the lost productivity, some factories have dispatched orders elsewhere, or added more shifts on the days with normal electricity supplies.

The portable generator has become a new fixture along the alleyways of Guangzhou – the heartland of China’s clothing industry.

Coal and climate factors

Besides the surges in electricity demand, soaring coal prices and China’s carbon neutrality pledge are also factors that contributed to the electricity shortages, a report from Security Times said.

Coal prices skyrocketed to historical high in mid-May, which has significantly increased the cost of power grid firms and pushed them to curb electricity use, Security Times said. Thermal power plants running on coal and natural gas supplies account for more than 70% of Guangdong’s total electricity generation.

With China’s goal to be carbon neutral by 2060 and safety concerns, coal miners have also tightened their control of coal production.

Some local governments have introduced incentives for factories to operate at night or purchase their own power generators. The Beijiao town in Foshan city, which houses many of China’s home appliance makers such Midea and Whirlpool, provides a subsidy of 100,000 yuan ($15,670) to each enterprise that moves production to off-peak hours.

Guangdong energy bureau said it was coordinating with neighbouring regions to bring more electricity into the province, while ensuring steady coal and natural gas supplies for its own thermal power plants.

A major external power supplier to Guangzhou is Yunnan province, but it has been suffering from its own power crunch following months of rare drought, which cut hydropower generation, the main source of its electricity.

The rainy season in southern China only started on April 26, 20-days later than normal, according to state media Xinhua News, leading to a 11% fall in hydropower generation in Yunnan in April from pre-Covid levels in 2019.

Some aluminium and zinc smelters in Yunnan have temporarily shut due to power shortages.

Guangdong and Yunnan are among the five regions managed by China Southern Power Grid, China’s second largest grid operator following State Grid, which oversees 75% of the country’s network.

The two grid systems are currently linked by one transmission line, Three-Gorges to Guangdong. Another cross-grid line, from Fujian to Guangdong, is under construction and is expected to start operating in 2022.

In December, provinces in China also experienced planned power outages. In the case of Zhejiang, the outages were ordered as a measure to meet energy consumption targets. Contributing to the other power cuts were an export boom, high demand due to cold weather, outages at hydro plants, and a shortage of coal.

China’s ambition to decarbonise its economy by switching to renewable energy from fossil fuels has exposed it to seasonal influences, Yunhe Hou, an associate professor from the department of electrical and electronic engineering at the University of Hong Kong, said.

For example, Hunan province suffered a power blackout last winter when 45% of electricity produced in the region was from hydropower plants, but there was less water in winter.

“If you curb coal consumption, you need to make sure there are other ways to fuel power, which is still a big problem,” he said.

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Trouble in the World’s Factory

 

Iris Hong

Iris Hong is a senior reporter for the China desk, and has special interests in fintech, e-commerce, AI, and electric vehicles. She began her career in 2006 and worked for Interfax News Agency and for PayPal before joining Asia Financial in July 2020. You can reach out to Iris on Twitter at @Iris23360981

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