A villain is emerging in China\u2019s efforts to rein in its energy prices: inefficient, power-hungry industry.<\/p>\n
With flooding in the coal hub of Shanxi province driving prices up to 1,508 yuan ($234) a metric ton even as the government tries to kickstart extra production, further measures are clearly needed to prevent more generators cutting off their turbines and causing blackouts through the cold of northern China\u2019s winter. That means a crackdown on the factories that still consume the lion\u2019s share of electricity.<\/p>\n
Industry makes up only 25% of grid demand in the U.S., but in China it\u2019s fully 59% of the total \u2014 more than all the country\u2019s homes, offices and retail stores put together. Cheap power has been an essential tool of development, and the government has traditionally encouraged major users with electricity tariffs that get cheaper the more you consume. With about two-thirds of the grid powered by coal, the cost of digging up the black stuff has determined how much industrial users pay for their power.<\/p>\n
The problem is that coal isn\u2019t getting any cheaper. After a sustained period of deflation prior to 2016, when a glut of dangerous and unregulated mines was closed down, annualized costs jumped 40% in 2017. They didn\u2019t really fall again until Covid-19 struck, and they\u2019ve since rebounded with a 57% increase from 12 months ago in August.<\/p>\n
Such increases might be tolerable if end-users were turning this power into high-value goods \u2014 but all too often, that\u2019s not the case. China now consumes more electricity per capita than the U.K. and Italy, but comes nowhere close in terms of economic output. Determined to hit President Xi Jinping\u2019s targets on peaking emissions by 2030 and hitting net zero by 2060, Beijing\u2019s policy makers have fixed on so-called \u201cdual high\u201d sectors \u2014 those whose energy consumption and carbon emissions are both elevated \u2014 as the culprits. These are many of the industries that have grown fastest in recent decades, such as cement, steel, base metals, oil refining, chemicals, and glass. They collectively account for more than half of China\u2019s emissions.<\/p>\n
Under revised rules issued by the economic planners at the National Development and Reform Commission this week, residential and agricultural consumers will still buy power at fixed tariffs and smaller users will see electricity costs fluctuate within a band. \u201cDual high\u201d sectors, on the other hand, will see no guardrails on the prices they pay. As a result, all the cost of balancing utilities\u2019 books will fall on their shoulders. This will reduce the demand pressure on the grid and encourage inefficient users to upgrade to add more value, Wan Jinsong, the NDRC\u2019s director of prices, told a press conference Tuesday.<\/p>\n
This sounds like a neat solution \u2014 but we shouldn\u2019t underestimate the way ripples will spread. In recent decades, the world has become hooked on cheap Chinese power for making a host of its goods. About half of all metal is produced in China and nearly a fifth of all oil is refined there. Energy-hungry products from aluminum to solar panels to Bitcoin depend on the country’s low industrial power tariffs to keep their own prices down. With electricity costs for dual-high industries set to rise, we may not have seen the end of the inflationary pressures flowing through the global economy from those flooded Shanxi mines.<\/p>\n
If Beijing wants to manage this transition without crippling the economy, it\u2019s going to need to release pressure on the supply side of the energy system at the same time as taking measures to reduce demand growth.<\/p>\n
That\u2019s where renewables come in. At the same time that price curbs are being removed from dual-high industries, so capacity curbs are being lifted from zero-carbon power generation. Provinces previously faced absolute limits on the amount of electricity they were allowed to consume, a factor that may have contributed to the most recent cuts. In the future, those bars will be removed for renewable generation, giving governors a strong incentive to switch away from constrained, inflationary coal-fired energy to unlimited, fixed-cost wind and solar.<\/p>\n
With zero-carbon electricity already cheaper than most existing operating coal power plants, those changes may be just the spur to wean China from its addiction to solid fuel. The bulk of generation will be able to move to wind, solar, hydro and nuclear. Thermal power plants will increasingly find themselves ramping up and down to capture daily peaks in demand, with differential pricing through the day giving them the opportunity to make profits after the sun has set and when the wind drops.<\/p>\n
All that\u2019s needed to make this system work more efficiently is for Beijing to unleash the formidable investment appetites of its provincial governments on the banquet of cheap zero-carbon power now available. Until now, China has shied away from the sort of rapid transition that it, and the global climate, needs. The teetering state of its coal-fired power system ought to be just the catalyst to accelerate that shift.<\/p>\n","protected":false},"excerpt":{"rendered":"
A villain is emerging in China\u2019s efforts to rein in its energy prices: inefficient, power-hungry industry. With flooding in the coal hub of Shanxi province driving prices up to 1,508 yuan ($234) a metric ton even as the government tries to kickstart extra production, further measures are clearly needed to prevent more generators cutting off their turbines and causing blackouts through the cold of northern China\u2019s winter. That means a crackdown on the factories that still consume the lion\u2019s share of electricity. Industry makes up only 25% of grid demand in the U.S., but in China it\u2019s fully 59% of […]<\/p>\n","protected":false},"author":39,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[131],"tags":[],"class_list":["post-442722","post","type-post","status-publish","format-standard","hentry","category-coal"],"acf":[],"_links":{"self":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/442722","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/users\/39"}],"replies":[{"embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/comments?post=442722"}],"version-history":[{"count":0,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/posts\/442722\/revisions"}],"wp:attachment":[{"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/media?parent=442722"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/categories?post=442722"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/infralive.com\/web\/wp-json\/wp\/v2\/tags?post=442722"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}