Home Impact producer EXPLAINER-The power crisis in China’s Sichuan and why it matters

EXPLAINER-The power crisis in China’s Sichuan and why it matters

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August 26 (Reuters)The southwestern province of Sichuan, China’s largest hydropower producer, has seen its supply capacity collapse due to a long drought in the Yangtze basin, fueling fears the country could suffer another devastating electricity shortage.

Sichuan accounts for 30% of China’s total hydropower generation and normally supplies a huge surplus of electricity to the rest of the country. But it is now receiving power from other provinces after weeks of minimal rainfall and extreme temperatures exceeding 40 degrees Celsius (104 degrees Fahrenheit).

Here’s what you need to know about the power crisis.

WHY DOES SICHUAN SUFFER FROM ELECTRICITY SHORTAGES?

Hydropower is Sichuan’s largest source of electricity supply, accounting for more than 80% of total electricity generation.

May through October is typically Sichuan’s rainy season, allowing hydropower plants to maximize production to meet peak summer demand.

However, rainfall fell by 30% in July and 60% in August compared to the seasonal average, sharply reducing hydroelectric generation capacity.

Although Sichuan has abundant coal stocks, coal-fired power accounts for only 16% of its total power capacity, which is not enough to bridge the gap between supply and demand.

Peak electric load in Sichuan also rose 25 percent from a year ago due to heavy use of air conditioners. Meanwhile, consumption by industrial users has also increased in recent years, with energy-intensive industries, including aluminum and silicon, moving to the region to take advantage of lower energy costs.

Sichuan typically exports nearly a third of the electricity it generates via ultra-high voltage (UHV) transmission lines to eastern coastal regions such as Shanghai, Zhejiang and Jiangsu.

Despite local shortages, Sichuan has yet to fulfill some if not all of its inter-provincial power transmission contracts, which the grid typically treats as a priority.

WHAT WAS THE IMPACT ON BUSINESS?

Industrial plants in a wide variety of areas in Sichuan and neighboring Chongqing – including household names like Taiwan’s Foxconn and battery giant CATL – have been ordered to close or cut production since mid- August to save energy for home users.

More than a dozen listed companies have warned that rationing could lead to serious delays in the delivery of goods and result in billions of yuan in losses.

The continued power outage finally hit residential users as the power shortage worsened. Commercial sites have also been asked to reduce working hours to save electricity.

HOW LARGE IS THE IMPACT AND HOW LONG WILL IT LAST?

Several regions in central and eastern China have also warned against restricted power supply and introduced power rationing for industrial users.

But analysts say the electricity crisis this year will be less severe than that of last September and October, when high coal prices and supply shortages hit more than 27 provinces and regions. Regional electricity rationing is expected to ease in September and October as temperatures drop.

Electric utilities have ramped up production, and grid companies are delivering power from the northeast and northwest regions to Sichuan and eastern China. The State Grid Corporation said on Wednesday it was delivering 130 million kilowatt hours of electricity per day to Sichuan.

However, analysts have also warned that the risk of power shortages is still high over the coming winter when the power load will increase again, due to heating needs.

WHAT DOES THIS MEAN FOR THE NATIONAL ELECTRICITY SYSTEM?

China’s National Energy Administration (NEA) has started to adjust its power development plans for 2021-2025 in response to power shortages. The authority will speed up the construction of new hydropower plants as well as the approval of nuclear power plants and electricity transmission projects.

China’s major power-exporting regions, including Yunnan and Guizhou as well as Sichuan, mainly get their electricity from hydropower, which is becoming more volatile due to climate change.

Grid-connected utilities in Sichuan province have already reduced their electricity exports by 10% in 2021 from a year earlier, although state-level grid-connected power plants have maintained the same. transmission level.

Greater grid flexibility is also needed as China tries to develop an electricity market to help provinces respond more quickly to changes in supply and demand. Experts say bigger, smarter networks should be a priority.

Rapidly growing renewables also require the grid to invest more in energy storage and upgrade its system to accommodate the intermittency of solar and wind power.

Meanwhile, coal is still expected to play a central role, making it harder for China to phase out fossil fuels from its energy system and meet its low-carbon targets.

Sichuan Power Generation Capacityhttps://tmsnrt.rs/3KkNIOD

(Reporting by Muyu Xu in Singapore and David Stanway in Shanghai; Editing by Lincoln Feast.)

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