Due to high temperature and little rainfall, severe drought in China’s Yangtze River Basin, the water level in the Ezhou section has reached a new low for the same period since the hydrological record began in 1865, and the operation of important hydropower plants has been affected, which has dealt a blow to China’s fragile economy.
In order to save electricity, big cities such as Shanghai have cut off lights and escalators and limited the amount of air-conditioning. Tesla (TSLA-US) warned that the Shanghai plant may experience supply chain disruption, Toyota, CATL (300750-CN) and other businesses to close factories.
Compared with the nationwide power outages caused by coal shortages last year, this year’s power outages are less severe, but they occurred during a period of economic sluggishness, which means that China has to deal with another challenge in addition to epidemic prevention and control and the housing crisis. The timing of the blackout might not be more embarrassing, as Chinese President Xi Jinping will seek a third term at the 20th National Congress of the Communist Party of China in the fall, and he has vowed to avoid repeating the same mistakes.
Sichuan province, which is highly dependent on hydropower, is arguably the biggest victim of this wave of drought. Local hydropower production has dropped to half its usual level, but electricity demand has increased by a quarter due to the sweltering heat.
Sichuan has a population comparable to Germany’s and is an industrial hub where many of Tesla’s suppliers are located.
Hydropower is China’s largest source of clean energy, accounting for regarding 20% of total electricity generation in 2020.
Hanyang Wei, an analyst at Bloomberg New Energy Finance (BNEF), said the power shortage in Sichuan highlights that the once reliable hydropower is not as stable as coal, raising doubts regarding China’s energy transition.Although China is also actively investing in wind power and solar power, these are more unstable than hydropower.
After a nationwide power cut last year, China began planning to increase coal power generation, which has increased by 11 percent this year.
Greenpeace East Asia analyst Li Shuo compared the power curtailment in Sichuan to the power shortage in Henan at the end of 2020, when cold weather reduced wind power generation, while electricity demand soared for heating and the government approved coal-fired power plants.
“I hope the government has learned a lesson from the last lesson, but they seem to be moving in the direction of adding more coal-fired power plants,” he said.
The blackout, China’s largest since last fall, cut power to many large industrial consumers until Aug. 25. Areas since Sichuan Province have also felt the impact. The Bund in Shanghai turned off lights for two days at night, and Wuhan, Hubei Province suspended the famous Yangtze River light show.
Although Sichuan accounts for only 5% of China’s gross domestic product (GDP), it still challenges the $18 trillion economic giant. Economists have downgraded China’s GDP growth rate this year to less than 4%, well below the The government’s 5.5% target.
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