China lacks coal, power plants are locked in because they can’t raise prices

China lacks coal, power plants are locked in because they can’t raise prices

Han Jun, governor of Jilin province, said that China needs to increase imports of more coal from Russia, Indonesia and Mongolia to solve shortages that are crippling many industries.

Many coal-fired power plants in China fell into a stalemate when coal prices hit a record high and there was no way to push prices to power consumers. Photo: AFP

Jilin is one of China’s regions hardest hit by coal shortages. Speaking to local power companies on September 27, the governor of Jilin province said that “multiple channels need to be established” to ensure coal supply, according to content posted on the official WeChat social media account. of this province.

Han Tuan said that Jilin province will also send special working groups to ensure the implementation of coal supply contracts in the vicinity of Inner Mongolia.

Jilin is one of more than 10 provinces affected by limited coal supplies. Thermal power plants here are facing record coal prices, while unable to push the price to electricity consumers. The governor of Jilin province called on power companies to exercise “social responsibility” and “surmount difficulties” caused by high coal prices.

According to David Fishman, China energy policy expert at the economic consulting firm Lantau Group, shortcomings in China’s pricing system are the cause of the current shortage of coal. “This makes it impossible for coal-fired power plants to operate profitably in most cases,” added David Fishman.

“In the short term, the only relief policy that will work right now is to extract more coal from the ground – an idea that is not widely supported – or force the end consumers of electricity to pay for it,” he said. hook more purses”.

According to AFP news agency, financial group Goldman Sachs on September 28 also downgraded China’s economic growth forecast for 2021 as nationwide power cuts affected millions of homes and caused many factories to lose power. , including some factories supplying Apple and Tesla, had to stop production.

Specifically, Goldman Sachs forecasts that China’s economic growth will decrease to 7.8%, compared with the previous forecast of 8.2%.

At least 17 provinces and regions – accounting for 66% of China’s GDP – have announced power cuts in recent months, mainly targeting “households” that use electricity for heavy industrial production, according to Bloomberg Intelligence. .

Coal is responsible for nearly 60% of the value of the Chinese economy. However, the world’s second largest economy is facing a severe shortage of coal because the supply has been disrupted due to the Covid-19 pandemic, plus pressure from the reduction of coal mining and use to achieve the target. greenhouse gas emissions, and falling coal imports amid trade tensions with Australia.

Earlier this month, coal prices in China hit a record high, while electricity demand in the first half of 2021 exceeded pre-pandemic levels, according to China’s National Energy Administration.

Earlier, Nomura Financial Group also lowered its GDP growth forecast for China in 2021 due to the energy crisis.

Nomura chief economist Ting Lu downgraded China’s GDP growth forecast for 2021 to 7.7%, from 8.2% previously, amid many factories in China. closed to meet carbon reduction targets.

According to CNBC, Chinese President Xi Jinping announced in September 2020 that the country will achieve its highest carbon emission reduction target by 2030 and reach carbon neutral status by 2060. activate national and local plans to cut coal production and high-carbon processes.

Chief economist Ting Lu said that there was a move to “reverse the game” in mid-August 2021 when local governments urge swift action after China’s National Development and Reform Commission (NDRC) announced that 20 localities – accounting for about 70% of China’s GDP – have failed to meet their carbon-related targets.