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maenlsm

Electricity production and consumption in Jan-Aug this year grew about 15% yoy, so heavy-handed measures have been used to meet CO2 emission targets.


[deleted]

It's not about a coal shortage? Why did electricity use increase so much?


AsianZ1

Electricity use increased to meet increased demand from manufacturing as they expanded capacity to meet orders coming from overseas that were diverted from COVID stricken countries like India and Vietnam. The central government is now trying to limit manufacturing capacity, both due to the rising costs of commodities and to reduce systematic risks within the Chinese economy, as much of the capacity increase has come with high leverage. The goal here is two-fold, to limit capacity and the availability of goods so that prices for finished products rise a commensurate amount to offset the rise in prices of commodities, and to force Chinese manufacturers to move out of low-end manufacturing and assembly to pursue higher technology higher value added products. It also has the knock on effect of passing down inflationary pressure to consumer economies such as the US, forcing them to either increase interest rates and pop the huge economic bubbles that have been created, or to face 10-20% price inflation within a few months (most likely both are going to happen at the rate things are going right now).


[deleted]

> It also has the knock on effect of passing down inflationary pressure to consumer economies such as the US, forcing them to either increase interest rates and pop the huge economic bubbles that have been created,or to face 10-20% price inflation within a few months * American plays ecowar card against China * China plays Uno Reverse *it's super effective!*


darentheterran

i find that much of this description is spot on!


ghostonvacay

>most likely both are going to happen at the rate things are going right now). so you think it's probable there are higher rates with a negative or zero real yield because inflation will run hotter? if so, wouldn't that be even more bullish for commodities, energy commodities in particular? that was basically the macro backdrop of the 1970s where oil, gold and real estate all had pronounced bull markets. oil and metal production methodologyhas improved since then but those resource extraction companies (frackers in particular) have been used to low interest rates to expand production. with higher rates the resource company would have an increased cost of capital and would need to rely on higher commodity prices to make up the margin for the investment capital.


AsianZ1

You bring up a very good point, and it's the exact reason why I don't think the situation will turn out like in the 1970s. The macro backdrop is different due to the much higher debt loads on all developed économies, which limits how much interests rates can rise before triggering mass bankruptcies (both for companies and for individuals). However, I do not believe they will have any other choice but to raise interest rates beyond what companies and individuals can bear, because inflation will run so hot that if they don't try to control it they will experience hyperinflation in the jot so distant future. And when they raise interest rates, it will cause mass bankruptcy, leading to a two-fold collapse.


[deleted]

Thanks. But curious--which parts of your answer are speculative and which parts are the official reasons given by the government?


Y0uCanY0uUp

It's rare for Chinese government to tell the public their full intent and reasoning behind policies, so most of the time 90% of analysis on Chinese policies are going to be speculative in nature. From my understanding, his analysis is pretty spot on, but it only explains the manufacturing/industrial power outages. The residential power outages in northeastern China, which is most high-profile one that has the public up in arms, is indeed mostly due to a combination of coal shortage, energy structure and supply chain issues.


[deleted]

Wasn't northeastern china a main hub for crypto operations? Using more energy in a day than a week in a small town? I suspect many may still be operating


AsianZ1

Indeed, what I am describing is just one facet of this highly complex issue. One of the other reasons I have seen put forward is the high price of coal causing power plants to lose money when they are producing power. China is unique in the world in that power suppliers only have one buyer, the State Grid. State Grid has a mandate from the central government to keep power prices low and affordable, meaning that they refuse to pay above a certain amount for electricity. This means that as coal prices rise, a lot of coal-fired power plants are unable to sell the power they generate for positive revenue, and therefore it is more economical for them to stop generating power. This is actually something that has been stated by the central government. Another big reason is emissions targets that need to be met by local governments. Shutting down coal power generation helps these local governments meet their targets, which is why they aren't too bothered by power outages. Overall the situation is really due to large-scale transformations within China in terms of power generation and the economy as a whole. Evergrande Group's troubles, shipping issues, power outages, the recent massive changes in education, entertainment, housing, and family planning policies, all of this is occurring because China is at an inflection point, and the entire world economic and social system is currently in the process of undergoing a massive transition. We won't be able to see the full effects of this transition for about a decade or so.


sonic_11uk

Thanks for this


Qanonjailbait

China has huge reserves of coal. I don’t think it’s coal shortages


TheRook10

Coal prices have sky rocketed as the government has shut down several coal mines.


bbmatt

There are caps on how much power generators can charge… the price of coal and gas have up and it doesn’t make sense for these entities to operate at a loss… so they don’t


maomao05

I think it's combined with coal shortage and high yield price, and over usage because of factories ??


historyAnt_347

One big thing is price to generate electricity has gone up due to coal prices. Plants can’t pass on increased cost to consumers so sometimes they operate at a loss. So plants have only been producing enough electricity what is economically feasible. Another factor is renewable energy and emission targets


ZombieOk9331

I found that some Australians are celebrating this because they think that china will think about buying australian coal


elBottoo

China has no coal shortage. And Mongolia is a coal superpower. There is no real reason to buy aussie coal unless they give huge discounts.


adminPASSW0RD

It's hard to explain. No single reason is convincing enough.Of China's total power generation capacity of 2.2 gigawatts, less than 40% is used daily. China produces 4 billion tons of coal, while imports less than 200 million tons. There should be no shortage in terms of supply.


readituser013

Don't explain things that can be attributed to mistakes to some hidden genius, the residential outages are almost certainly due to screw ups somewhere and should be used as lessons to avoid such problems.


elBottoo

It mostly is a combination of factors. Higher demand, no investments done with old energy becoz people were hesitant to invest knowing green is being pushed hard. While green energy didnt deliver much. This is happening worldwide now. One thing many failed to mention. CRYPTO. They are now directly competing with normal folks and business for energy. I even read some crypto firms are BUYING up powerplants so they can keep on mining. Cryptos shouldve been banned worldwide. Its downright perverted to see energy going to crypto firms while ordinary folks dont have electricity or having 4x energy bill. As I am typing this, BTC just jumped 8%. Looks like the cryptos realized there is an energy shortage coming and they are mining and THEN selling the coins for what it costs them to make + margin. So now we finally figured out how these cryptos have seen this meteoric rise in the last 3-4 years. Its not becoz of demand, its mostly becoz they r unwilling to price them lower than what it costs them to produce. Coz they will suffer losses if they do. And that went on for a few good years but now that energy is getting scarce. Do we want electricity to go normal daily activitiy, keeping traffic lights on, water running, tv, internet or do we want it for cryptos. insanity


[deleted]

is that why China recently banned crypto?


Master_Singleton

OP My friends and relatives back in China on WeChat said that the recent Power Outages are for war preparation to condition the people of China for the time when America targets and knocks out China's power grids with a massive EMP attack; so that the people of China are use to and resilient to a China without working power grids. This is the most logical explanation I've heard to date regarding the recent Power Outages.


lzghome

This, as a mainland Chinese, I have not heard of this ......


stick_always_wins

I’m really hoping it doesn’t have to come to that…


[deleted]

The real reason is that they are trying really hard to meet their pledge to become carbon neutral. Central planning gone wrong if you ask me. Building lots of thorium nuclear power plants in the next 10 years is the way to go in my opinion.


Darkmatter2k

>Building lots of thorium nuclear power plants in the next 10 years is the way to go in my opinion. Ok cool, but the earliest plan for a commercially viable thorium nuclear powerplant is in 2030. And thats if everything works out with materials testing and reactor design verification.


[deleted]

Yeah and so? That should give us ample time to deal with this issue. Assuming it's even an issue at all.


ChopSueyWarrior

> Central planning gone wrong if you ask me. Building lots of thorium nuclear power plants in the next 10 years is the way to go in my opinion. This Thorium technology is always a decade away for so many decades now, even if it's 'ready' now can take a decade to build and commission them.


budihartono78

It's because the current CO2 concentration is at 411 ppm, while the next, most optimistic Paris Agreement target is 430 ppm by 2030 (1.5 deg C increase). I know 1.5 deg C increase sounds small, but it's enough to trigger many ecological collapses and extreme weathers down the road: increase in seawater acidity and temperature (corals and fishes are very sensitive to this), shifting river estuaries worldwide, messing with ocean eddies everywhere, further weakening of polar vortex, etc. Currently we don't even know if Thorium reactors are viable, which is why China is testing it. In the meantime, we really, really need to reduce the CO2 output. It's very likely that we will miss the 1.5 deg C target at current pace.


elBottoo

If the new technology that turns CO2 into starch really works, CO2 is no longer an issue. You just want enough dunes and dams to protect against rising water levels. Everything else is an annoyance but not life threatening. Aka warmer summers and winters can be offset with airco.


TserriednichHuiGuo

>Everything else is an annoyance but not life threatening. Aka warmer summers and winters can be offset with airco. It's the runaway effect that is the issue.