A countrywide power supply shortage in China is forcing factories in its energy supply chain to close temporarily or scale back operations drastically, and some of them are pinning the blame on government directives for provinces to curb their energy consumption and carbon emissions.

Sixteen of China’s 34 provinces and regions have announced power cuts and informed factories to operate on power-rationing systems, which means some will be forced to scale back operations from seven days a week to two or three.

In the hardest-hit province of Liaoning, in the north-east, 23 people were sent to hospital suffering from gas poisoning last week after ventilation in a metal-casting factory was shut off due to a power outage, China’ Central TV reported.

Are you missing out on ACCELERATE?
Gain valuable insight into the global oil and gas industry's energy transition from ACCELERATE, the free weekly newsletter from Upstream and Recharge.

The power pinch is unlikely to abate soon and some factories have decided to send workers home, offering them a month of leave.

The outages are also affecting the capital, Beijing, where the municipal government has pulled the plug in some communities, leaving hundreds of families in the dark.

'Scheduled turnaround'

Beijing Power Grid has insisted that there is sufficient power supply and that the cuts were “caused by scheduled turnaround”.

But as the country moves quickly to meet a target of peak carbon emissions in nine years, the central government is getting tougher with local authorities that have failed to meet their energy-reduction targets, squeezing officials not to expand power consumption.

In August, the powerful National Development and Reform Commission blacklisted nine provinces, warning them of the overuse of energy.

China's government has set energy-consumption and CO2 quotas for provinces in line with national emissions-reduction targets, but many local jurisdictions have exceeded the limits this year as export demand rebounded from the coronavirus pandemic.

The provinces have had to reduce energy use for the rest of the year to stay within the government-imposed limits.

Insufficient coal supplies have also been blamed for the outages, as thousands of smaller mines have closed and production caps have been imposed at large mines.

Soaring coal prices are now squeezing margins at power utilities.

Coal currently sells for 1086 yuan ($170) per metric tonne, rising 56% from earlier this year. The national coal inventory has dropped to 10 days of demand, down from the benchmark 20 days.

Yet coal-fired power generation capacity still accounts for 50% of China’s total 2,370 gigawatts power capacity, and the country now consumes about as much coal as the rest of the world combined.

Coal crunch

China holds some of the world’s largest coal reserves and is the world’s top coal producer, with domestic production last year rising 0.9% year on year to 3.84 billion tonnes.

China plans to slash coal consumption to 5% of its energy mix by 2060, from 56.7% now.

Industry activities account for 71% of China’s total power generation, which stood at 5.39 trillion kilowatt hours, up 11.3% year on year, in the first nine months this year, with household consumption representing only 13.6%.

China is now the world’s largest CO2 emitter, churning out 10 billion tonnes per annum, which now accounts for 30% of the world's total.

The latest blackouts highlight China’s struggle to balance economic growth with efforts to rein in pollution.

China's President Xi Jinping made a new pledge to the United Nations General Assembly last week to stop building new coal-fire projects abroad, with potentially huge implications for nations such as Indonesia, Vietnam and the Philippines, with probable knock-on effects for future demand for liquefied natural gas.