China’s Blackouts Break Power Cutoff Pledge – Analysis

By Michael Lelyveld

As China struggles to control the latest surge of power shortages, the government seems to be hoping that the public will have short memories for how it has dealt with similar problems in the past.

After months of downplaying the power crisis and recommending partial fixes, central government authorities belatedly acknowledged the spread of electricity rationing and blackouts in late September, prompting some news media to blame China’s troubles on the United States.

Pressures on generating companies have increased since last year with the government’s push for economic growth and recovery from the COVID-19 pandemic. The demand for more power has sapped power company profits as producers are caught between rising coal prices and regulated electricity rates.

Power providers in Beijing and the surrounding region have been warning since August that they faced bankruptcy due to high summer demand and record coal costs.

“In fact, the power squeeze has been evolving throughout this summer but was noticed by the public when sudden blackouts hit households in the northeastern region,” said a Xinhua report on Oct. 4.

The official news agency confirmed that residents of the industrialized region had suffered shutoffs of traffic lights and elevator service since September.

Power restrictions have been imposed in as many as 20 provinces including coastal Guangdong and Zhejiang, according to The Wall Street Journal and other independent reports.

A XInhua commentary on Sept. 30 sought to minimize the problem, calling the shutdowns “a blip” that posed no threat to the economy or global supply chains.

In an angrier tone, Hu Xigin, editor-in-chief of the daily tabloid Global Times, blamed foreign factors for a series of international shortages including “KFC in the U.S. running out of chicken,” without explaining the connection to China’s woes.

“The root cause is the world lacks cooperation of the U.S. with China. Washington has no sense of responsibility as a superpower,” Hu stormed in a Twitter posting cited by BBC Monitoring.

But policy decisions closer to home are clearer causes of China’s power problems.

While China’s recovery-driven demand for more electricity set the stage for shortages, the central government has contributed to the outages by pressuring provinces over their failures to meet their “dual control” targets for total energy use and energy efficiency in the first half of the year.

In an editorial, the Global Times tried to shift the blame to the provinces for implementing the conflicting orders of the National Development and Reform Commission (NDRC), the government’s top economic planning authority, too rigidly.

“They need to carry out the country’s ‘dual controls’ and ‘dual restrictions’ more prudently, and try to avoid the ‘great leap forward’ or slack at work,” said the editorial, cited by the BBC.

Production increases

Coal-producing provinces have faced further contradictory pressures as a result of NDRC orders to increase production, leading to a rash of fatal accidents. The NDRC has responded by sending teams to the mines for safety inspections, slowing production for as much as two months.

Similarly, the NDRC ordered coal-fired power plants to boost their coal inventories to guard against outages, only to order a reduction in stockpiles weeks later when it realized that the increases were only serving to drive coal prices higher.

Philip Andrews-Speed, a senior principal fellow at the National University of Singapore’s Energy Studies Institute, sees the conflicting policies as a clash between market forces and heavy-handed state planning rules.

“It is a classic case of the unstoppable market meeting the immoveable plan,” said Andrews-Speed.

“The ‘plan/state’ has set limits on energy use, suspended some coal mines, banned coal imports from Australia and limits on power tariffs,” he said by email.

“The market has driven strong economic growth and exports, driven up the price of coal and gas, and fails to incentivize coal-fired power stations to produce electricity,” he said.

On Oct. 8, Premier Li Keqiang and the cabinet-level State Council promised new measures to increase energy supplies for the coming winter.

“Electricity and coal supply is crucial to people’s lives and a stable economic performance. It must be guaranteed,” said Li, according to Xinhua.

Among the new measures, the government ordered coal mines to boost production “as soon as possible.” Mines in Inner Mongolia and Shanxi province were told to increase production capacity by 160 million metric tons.

Power companies will be allowed to raise rates by up to 20 percent to cover their costs, up from the previous limit of 10 percent. While the higher rates could encourage power plants to produce more, it was unclear whether they would be enough to offset the record prices of coal.

The government’s belated measures may help to break the cycle of shortages and price increases. But the contradictory NDRC orders that have complicated the power crisis are reminiscent of its reactions to power shortages in the past.

In late 2010, for example, the NDRC took similar steps that resulted in blackouts for industrial enterprises, homes and even hospitals as the government tried to lower electricity use to meet five-year energy efficiency goals.

The following March, the NDRC issued a rare apology for the arbitrary cutoffs, although it blamed “some local governments” for going too far in carrying out its orders, Xinhua reported at the time.

At a press conference, then-director of the agency, Zhang Ping, “admitted that the NDRC, which is in charge of energy saving and emission cut, is inexperienced in dealing with such a wrong practice, and should be (held) responsible for it.”

“We will not repeat such mistakes,” Zhang said.

Reversing the ban

In December 2017, the government abruptly cancelled a coal ban for 28 northern cities that had been ordered to switch their heating systems to cleaner-burning gas and electricity after discovering that network connections could not be built in time for winter.

Local officials had scrapped coal-fired boilers on orders from the central government, leaving thousands of homes with no heat at all.

The mixup sparked public outrage after China Youth Daily published pictures of children at a primary school in Hebei province sitting outside in the winter sun because their classrooms were too cold.

Such episodes raise the question of whether China’s chronic power shortages and energy crises are the result of internal clashes between economic and environmental factions, or of failures to coordinate planning policies, or perhaps both.

The conflicts broke into the open last January when the government’s Central Environmental Inspection Team (CEIT) released a blistering report blasting the National Energy Administration (NEA) for allowing new coal-fired plants to be built despite President Xi Jinping’s pledge to combat climate change.

The CEIT charged the NEA with failing to carry out Xi’s environmental policies, demanding that a “rectification plan” should be submitted to the Communist Party of China (CPC) Central Committee and the State Council within 30 working days.

While the demand exposed the conflict, the resolution remains unclear.

The government’s list of possible remedies has said nothing about the impact of increased coal and power consumption on climate change plans, suggesting that it has deferred environmental concerns until a later date.

The climate itself appears to be creating conflicting pressures on China’s coal supplies.

As far back as August, the government began calling for more production and ordered previously-closed mines in coal- rich Shanxi and other provinces to restart.

But on Oct. 8, the same day as Premier Li’s meeting with the State Council, heavy rains forced 60 mines in Shanxi to suspend operations, Xinhua said.

On Oct. 12, Xinhua said that most of the mines had resumed production. But a separate report said the province had suffered the strongest autumn floods on record, affecting 1.76 million residents with the collapse or serious damage to 37,700 homes and the suspension of 530 high-voltage power lines.