Struggling to Keep the Lights On

China seems finally to be emerging from a very cold spell, but not before struggling to cope with the increased energy demands associated with extreme cold. The Chinese press reported rationing of both gas and power in a number of Chinese cities and suggested the problems stemmed from coal shortages after the closure of 1000 coal mines in the past year for safety and environmental reasons.

Coal is linked to shortages in both electric power and gas, because in China gas supplies come not just from natural gas (methane), but also from coal gasification (i.e. using coal to produce various synthetic gases that can be used in cooking and heating). The short supplies in the power sector are partially linked to ongoing push-and-pull between generators and the Chinese government about the price that generators should be able to charge for power. The generating companies’ position is that the price for coal, set at market rates, is rising faster than the government-determined price at which generators are allowed to sell electricity. In part to protest, power generators slowed their coal purchases leaving no buffer for excess demand – a problem that emerged two years ago, as well. In this case the gamble probably hasn’t paid off for the generators, since the price of coal has reportedly risen 25% over the course of the cold snap. China is indeed also importing more coal, and international analysts believe that trend will continue.

Photo by Nick Humphries, courtesy of a Attribution-Non-Commerical-No Derivative Works 2.0 Generic License.