China turns back to coal as record heatwave causes power shortages
Hong Kong(CNN Business) China is mining and importing more coal as its worst heatwave and drought in six decades hits hydroelectricity, the nation's second biggest source of power.
The country's crucial Yangtze River has dried up in parts because of extreme heat and scant rainfall. The drought has impacted six provinces along the river, affecting the water supply for tens of thousands of people and forcing the closure of factories in some provinces to preserve electricity supplies.
Sichuan, which is famous for its rich water resources and accounts for 21% of China's hydropower, has seen its hydroelectricity capacity plunge by 50% this month, according to the state grid. The unrelenting heatwave has also resulted in unprecedented power demand, pushing the region's electricity grid to the brink.
Since Sichuan provides electricity for other parts of China, the hydropower shortage has affected multiple cities in the east of the country, including Shanghai.
To ease the power crunch, China has been boosting coal output and imports to generate electricity.
Nationwide, power plants burnt 8.16 million tonnes of thermal coal daily for the first two weeks of August, up 15% from a year ago, according to most recent data from the National Development and Reform Commission. On August 3, daily thermal coal consumption hit a record high of 8.5 million tonnes.
China is now more reliant on coal for power than it was last year. In July, electricity generated from coal increased 22% from June, accounting for 69% of the total. Last year, coal-fired power made up 67.4% of China's electricity supply.
Sichuan Coal Industry Group, the province's largest coal miner, has more than doubled its thermal coal production to nearly 15,000 tonnes per day since mid-August, according to government-owned Sichuan Daily earlier this week.
Sichuan Guang'an Power Generation, the region's biggest coal-fired power plant, has also boosted its electricity generation by 170% this month, compared with the same period last year, according to an article posted Tuesday on the Sichuan government website. The power plant expects August's electricity output to jump 313% from a year earlier.
On Friday, the province also opened its first national coal reserve in Guang'an city. When full, it will be able to supply six million metric tons per year.
Sichuan has ordered most factories to close for 11 days through Thursday in response to the power crunch. The power rationing has roiled supply chains and impacted the production of major companies, such as Toyota, Foxconn, and Tesla in Shanghai.
Coal is "Indispensable"
On Wednesday, Chinese vice-premier Han Zheng said Beijing would provide more support for coal power generation at this "critical moment" to ensure that "there is no accident in power supply."
The country is also buying more coal from other countries, especially Russia, at a time when Western countries are shunning Moscow over its invasion of Ukraine.
Customs statistics released Saturday showed that China brought in 7.42 million tonnes of coal from Russia last month, up 14% from the same period last year. It was also the highest monthly figure since comparable statistics began in 2017.
The current power shortages have proved that coal is "indispensable," said analysts from Guotai Jun'an Securities, a Shanghai-based brokerage firm, in a report earlier this week.
"The slash in hydroelectricty has made [the country] more reliant on coal," they said, expecting more coal power stations to be built if the extreme weather persists in the future.
Analysts from Capital Economics also expect China to boost coal output and increase imports to fill the gaps.
"But it's far from certain that additional supplies will arrive in time," they said in a note late last week.
"If coal inventories continue to decline, it could be a matter of days before officials have to implement power rationing more widely," they added.
CNN's Beijing bureau, Angus Watson, and Akanksha Sharma contributed to this report.
