Traffic lights gone dark. Factories shut down. What caused China’s power crisis?

SHENYANG, China —

Classroom lights were off at Baita Elementary School. The screen that displays announcements at the front gate had also gone dark. Mothers weren’t sure when China’s energy crisis would end, so children were instead playing outside than learning.

“We’ve never had power cuts like this in Shenyang,” said one mother, wearing a long flowery skirt and permed hair. She refused to identify herself. While blackouts lasting only a few hours were not unbearable, they were still annoying. Suddenly, entire areas of her city lost power for long periods of time.

The woman was most worried about her elderly parents living in an apartment building 33 floors high. The water also went out when the electricity went out. She saw them in darkness, with no electricity, and their phones dead. She stated that people shouldn’t have to live in this way in modern times. At least the government should warn us before it happens.”

China’s nationwide power crunch has caused drastic electricity cuts. The country’s factories have been forced to reduce their schedules or halt operations. This slows down a supply chain already stretched by coronavirus outbreaks and shipping blockages. The crisis, which had been growing throughout the summer, was brought to public attention last week by sudden power cuts in residential areas in China’s northeastern regions.

The shortages are occurring at a time China’s leaders face complaints from a growing middle class concerned about future prospects, education, and housing. Those worries were underscored in recent weeks by news that one of the country’s largest property developers, Evergrande, was $300 billion in debt and facing potential collapse. Analysts believe such problems are indicators of deeper problems in China’s slowing economic growth.

Employees work on a high-voltage transmission tower in China.

Employees worked on a high voltage transmission tower in Yichun, China’s central Jiangxi Province on Sept. 28.

(AFP/Getty Images)

Last weekend, hundreds of cars were stuck in Shenyang after the traffic lights went out. On Sep. 24, twenty-three people in Liaoyang, an hour south of Shenyang, were hospitalized with gas poisoning after power cuts at a steel casting company.

Chinese social media filled with complaints from other northeastern residents of being stuck in elevators, losing water and a case of carbon monoxide poisoning when exhaust systems lost power in the middle of the night. All the factories in a nearby area of manufacturing were closed this week, except Jinbei, which produces car parts. A low, pulsing sound from a generator echoed in the air.

A worker at the factory, who refused to give his name, said that the plant had lost power earlier this week but that the managers had brought the generator in two days prior. Workers were told by most of the businesses along the street to return home in time for the October holiday. The factory was determined that it would complete its orders. He stated, “As long Benz makes cars, we’ll continue making parts.”

The sudden blackouts highlighted the weaknesses in China’s economy and power sector. The shortages were caused by an overreliance on coal and an overemphasis upon growth. This coincided with rising coal prices. Poor coordination between China’s economic and energy policies, as well as structural problems in China’s power sector, are some of the reasons for this shortage.

Coal prices have skyrocketed as the nation struggles to meet rising demands as it spends on heavy industry, real estate and infrastructure construction to spur economic growth and recovery from COVID-19. As China’s manufacturing sector moves to fulfill increased orders, there has been a rebound from the coronavirus outbreak in Europe and the United States. Droughts in southwestern China have led to a decrease in hydropower production and a greater dependence on coal.

An outdoor barbecue stand at night

A vendor cooks barbecue Sept. 30 at the entrance of an industrial park in Houjie in Dongguan, in the southern Chinese province of Guangdong, an area hit by power restrictions.

(Noel Celis / AFP/Getty Images )

” What happened was a repetition of what has always happened whenever there is a negative economy shock in China,” stated Lauri Myllyvirta (lead analyst at the Center for Research on Energy and Clean Air). “The government uses real-estate construction and infrastructure construction to stimulate the economy. That’s what led to this.”

Many mines were shut down this summer after several deadly accidents in the lead-up to the Communist Party’s 100th anniversary. China has been closing down inefficient or high-capacity coal mines to increase energy efficiency. Stockpiles were further reduced when China stopped importing coal from Australia in retaliation for Australia calling for an investigation into the origins of the coronavirus that causes COVID-19.

Environmental concerns have also played a role. The political pressure to ensure smog-free skies in China for the country’s national games (a sporting event held in Shaanxi in September) probably contributed to reductions in coal mining. Calls for blue skies are now shifting to the provinces around Beijing in preparation for the 2022 Winter Olympics.

Despite pledges that China’s carbon emissions will peak by 2030 and that it will be carbon-neutral by 2060, the country is still the world’s biggest coal consumer and has continued to increase coal consumption in pursuit of economic growth. More than 50% of its energy production relies on coal.

The problem is exacerbated by a structural problem within China’s energy sector. Power plants purchase coal at the market price, but they are not permitted to increase electricity rates for customers beyond the small margins established by national planners. Many plants will report maintenance outages when coal becomes too expensive. They then reduce or cease operation, rather than suffering losses.

“Nobody will create power to lose more money, because they know that they are not only burning coal, but also burning money,” stated Li Shuo (senior global policy advisor at Greenpeace East Asia). He said that the disconnect between market-based and regulated coal prices is a sign of China’s old power sector.

A woman prepares food at a restaurant during a blackout.

A woman uses a lightbulb powered by a portable battery as she prepares food at a restaurant during a blackout Sept. 29 in Shenyang.

(Olivia Zhang / Associated Press)

“The challenge in our power system is we are trying to integrate more technologies that belong to the 21st century,” Li said. “But the political economy, the way that we run our power system, still belongs to the 1990s. It is very much command and control.”

This market inflexibility caused northeastern provinces make sudden power cuts in order to prevent a grid failure.

” It’s a huge disaster. Yan Qin, a lead analyst at Refinitiv, said that it just showed they were unprepared. She said that, beyond the price regulation issue, the provincial governments failed to plan for supply security, even though the central government is closing inefficient mines to reduce carbon emissions. This failure to act stems from the fact that provincial governments prioritize gross domestic product growth over other measures of their performance. China’s economic model relies on heavy industry and construction to drive growth. Local officials are rewarded for producing high numbers. This strategy is changing. The National Development and Reform Commission of China, China’s top economic planner has set goals for decreasing energy consumption and increasing efficiency. Many province governments are still not meeting those targets, but they are being urged to correct the situation.

“Provincial government have prioritized industrial production and GDP growth. Yan stated that this is what they have done for years. “Now the central government is changing the mindset.”

Analysts say in the future — despite the coming winter when coal mining and coal imports will increase to meet energy demands — the crisis should reduce China’s dependence on fossil fuels and lead to investment in renewable energy to avoid high fuel prices. “When China talks about energy security it mainly talks about coal,” stated Li. China’s power system is structured around coal plants with the expectation that they can operate 24/7 and provide stability, he said. But what I see in front me just debunked this narrative. Coal is not entirely safe and secure.”

Ziyu Yang of The Times’ Beijing bureau contributed to this report.

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