Power Crunch in Sichuan Adds to Industry’s Woes in China

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(Bloomberg) —

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China’s Sichuan province extended industrial power cuts and activated its highest emergency response on Sunday, adding to manufacturers’ woes in the region as they shut down factories.

Blistering temperatures and scant rainfall since July, along with surging demand for air conditioning, have caused gaps in power supply, the southwestern province said in a statement. Officials extended an order that curtails power supply to some industrial users to Aug. 25 from an original end date of Aug. 20, Caixin reported, citing multiple people who work at the local power grid and factories.

Peak electricity demand in Sichuan has jumped to 65 gigawatts, a 25% increase from this time last year, local authorities and power grid officials said at a press briefing on Saturday. At the same time, daily hydropower generation has plunged by 51%, and reservoir levels are at 1.2 billion cubic meters of water, down by 4 billion from last year, Morgan Stanley analyst Simon Lee said in a Sunday research note.

“Sichuan is now facing the hottest temperatures and the worst drought of the past 60 years,” Lee said.

This is the first time Sichuan initiated a top-level emergency response after it introduced an energy supply contingency plan in January. Measures in the plan include starting emergency generators to first meet power demand of households, important users and regions, and maximizing output of oil, gas and coal.

Sichuan is one of China’s most populous provinces and a key manufacturing hub for electric vehicle batteries and solar panels. Companies including Toyota Motor Corp. and Contemporary Amperex Technology Co. have already closed plants in the region for several days.

The power shortage adds another challenge to companies already contending with the country’s adherence to Covid Zero, which includes sudden lockdowns, constant testing and movement curbs. That has weighed on consumer sentiment and wrought havoc on the manufacturing sector.

Jinko Solar Co., one of the world’s largest solar module manufacturers, said two of its plants in Sichuan have been affected by the power shortage and are running at protective levels. The company said it is unclear when the units could resume full capacity and the limit will have a certain impact on its earnings.

Some office buildings and shopping malls have also adjusted air conditioning, lighting or escalators to save power, according to local media reports. Shanghai suspended landscape lighting for Monday and Tuesday near the Huangpu River, including The Bund waterfront area.

According to Sichuan’s energy contingency plan, a Level 1 emergency response allows it to seek help from the state council to manage the crisis, and increases the frequency of communications between energy suppliers and the provincial government.

Hot weather is expected to persist through at least Wednesday in areas along the Yangtze River, according to Morgan Stanley. Data from the National Meteorological Centre showed Chengdu has had no rain for 15 days this month and Chongqing has suffered 18 days of drought. The cities of Nanjing and Nanchang have had no rain at all this month.

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