Nice article in Caixin Global today about Chinese power rationing. It's paywalled, so I will summarize the key points for the curious with notes in parentheses. (1/15 thread).
caixinglobal.com/2020-12-28/cov…
caixinglobal.com/2020-12-28/cov…
2
Power rationing was implemented in several provinces in China from mid-December. Affected provinces included Hunan (esp. Changsha) and Zhejiang (esp. Yiwu). (Jiangxi is not mentioned but should be true there too according to other reports, with conditions similar to Hunan).
Power rationing was implemented in several provinces in China from mid-December. Affected provinces included Hunan (esp. Changsha) and Zhejiang (esp. Yiwu). (Jiangxi is not mentioned but should be true there too according to other reports, with conditions similar to Hunan).
3
Article first cites overall high consumption as part of post-covid industrial stimulus plan. November 2020 power consumption was up 9.4% YoY and 2.5% YoY overall.
(Does not mention their own reporting from earlier this year about artificial electricity consumption in ZJ).
Article first cites overall high consumption as part of post-covid industrial stimulus plan. November 2020 power consumption was up 9.4% YoY and 2.5% YoY overall.
(Does not mention their own reporting from earlier this year about artificial electricity consumption in ZJ).
4
The article also cites SG Hunan saying provincial power demand from Dec 15-17 was 30% higher than this period last year in Hunan, due to cold weather.
(Accuweather historical data confirms this: daily averages nearly 15 degrees C lower this year in Changsha thru December)
The article also cites SG Hunan saying provincial power demand from Dec 15-17 was 30% higher than this period last year in Hunan, due to cold weather.
(Accuweather historical data confirms this: daily averages nearly 15 degrees C lower this year in Changsha thru December)
5
SG Hunan says Hunan peak load up to 33 million kw, up 10.4% YoY, exceeding local gen capacity by 4 million kw.
(Thus in peak hours, Hunan is a net importer of power. There is one 8 GW UHV line importing power from Gansu to Xiangtan. It has lifetime utilization rate of ~50%).
SG Hunan says Hunan peak load up to 33 million kw, up 10.4% YoY, exceeding local gen capacity by 4 million kw.
(Thus in peak hours, Hunan is a net importer of power. There is one 8 GW UHV line importing power from Gansu to Xiangtan. It has lifetime utilization rate of ~50%).
6
Hunan's power shortages are projected to get even worse as the weather gets colder. Hunan belongs to the Central Grid, which get 30% of its power from hydro. Hydro generation has been weak this year due to water shortages.
Hunan's power shortages are projected to get even worse as the weather gets colder. Hunan belongs to the Central Grid, which get 30% of its power from hydro. Hydro generation has been weak this year due to water shortages.
7
Zhejiang, on the other hand, is rationing power to try to meet pollution control targets by the end of the year. Yiwu issued aggressive orders to limit power consumption and meet annual goals. (Silly, considering they were propping up consumption earlier this yr).
Zhejiang, on the other hand, is rationing power to try to meet pollution control targets by the end of the year. Yiwu issued aggressive orders to limit power consumption and meet annual goals. (Silly, considering they were propping up consumption earlier this yr).
8
Originally the Yiwu power savings edict broadly targeted companies, residential communities, and public facilities, while sparing large industrial users. The provincial government refocused to the latter. Yiwu municipal measures were characterized as "an overreaction".
Originally the Yiwu power savings edict broadly targeted companies, residential communities, and public facilities, while sparing large industrial users. The provincial government refocused to the latter. Yiwu municipal measures were characterized as "an overreaction".
9
The article goes on to discuss the effect of coal supply. Domestic coal supplies are down following mining accidents, a 7-month decline in imports (so not just Aus) and the near deadline for the overall 2020 years-end emissions reduction goals. This has spiked coal prices.
The article goes on to discuss the effect of coal supply. Domestic coal supplies are down following mining accidents, a 7-month decline in imports (so not just Aus) and the near deadline for the overall 2020 years-end emissions reduction goals. This has spiked coal prices.
10
Higher coal prices lead to shorter inventories at coal generators. Coal generators hate to buy expensive fuel, because the rate paid by the grid company for their power doesn't change and they have to eat the loss.
Higher coal prices lead to shorter inventories at coal generators. Coal generators hate to buy expensive fuel, because the rate paid by the grid company for their power doesn't change and they have to eat the loss.
https://twitter.com/pretentiouswhat/status/1298448694715416576?s=20
11
The article goes on to point out the disconnect between coal fuel pricing and on-grid coal tariffs is a big part of why Hunan is reluctant to add more coal generation.
(China's coal pricing mechanism is a fascinating/nerdy topic that I will do a separate thread on someday).
The article goes on to point out the disconnect between coal fuel pricing and on-grid coal tariffs is a big part of why Hunan is reluctant to add more coal generation.
(China's coal pricing mechanism is a fascinating/nerdy topic that I will do a separate thread on someday).
12
(So while it's true that coal supply is not directly responsible for China's power rationing in supply, it's certainly true that the inefficient coal pricing mechanism has disincentivized the addition of local coal capacity that would ease power supply tightness in Hunan).
(So while it's true that coal supply is not directly responsible for China's power rationing in supply, it's certainly true that the inefficient coal pricing mechanism has disincentivized the addition of local coal capacity that would ease power supply tightness in Hunan).
13
Finally, the article discusses solutions. UHV is discussed and Hunan's just-approved UHVAC line from Changsha to Nanchang is mentioned. But this can only help with short-run demand. For long-term, a new UHVDC line is needed, or the existing line needs to up its use rate.
Finally, the article discusses solutions. UHV is discussed and Hunan's just-approved UHVAC line from Changsha to Nanchang is mentioned. But this can only help with short-run demand. For long-term, a new UHVDC line is needed, or the existing line needs to up its use rate.
14
The article concludes by quoting several academics with the other more likely solution: that power sector reform needs to continue in the direction of marketization, with real-time supply and demand power pricing allowing more efficient use of energy.
The article concludes by quoting several academics with the other more likely solution: that power sector reform needs to continue in the direction of marketization, with real-time supply and demand power pricing allowing more efficient use of energy.
15
Mainstream analyst opinion (including me!) is that a combination of increased grid connectivity and *definitely* more liberal power sales (i.e. wholesale power markets) is the correct antidote.
Power markets are the future in China, but this is a thread for another day. 😅
Mainstream analyst opinion (including me!) is that a combination of increased grid connectivity and *definitely* more liberal power sales (i.e. wholesale power markets) is the correct antidote.
Power markets are the future in China, but this is a thread for another day. 😅
If you felt bad about kinda circumventing the paywall by reading my summary, you can consider subscribing to @caixin ...I think it's absolutely worth the money.
https://twitter.com/pretentiouswhat/status/1343782581163061249?s=20
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