So, China’s coal powered electric utilities are price capped and they can’t pass on the rising coal cost? Some are switching to diesel, but that price is rising and may go up even more as India has just announced incentives for diesel usage.
Today, more power problems: China has announced that it is hit with the worst drought in last 50 years and that water levels are so depleted that some hydropower producing regions are at critical levels.
There are other, derivative effects from this. From Nature News:
China has finally admitted that all is not rosy with its Three Gorges Dam, the world’s largest hydroelectric power project… Widely considered the worst drought in 50 years, it has devastated 3 million hectares of farmland, left millions of people and livestock short of drinking water, and threatened wildlife and ecosystems in many rivers and lakes, including the endangered Yangtze finless porpoise.
Pity for the porpoise… and aluminum, steel, pig iron, led: “From July, the whole base metals sector would be affected by power shortages. Aluminum will be hit the hardest as it uses more electricity than other metals,” says analyst at COFCO Futures in Beijing. (Alcoa anyone).
One thing that many coal traders are awaiting is lifting of a price ceiling on electricity so that coal-powered utilities can pass on the cost. This was done in some of the provinces but not everywhere.
China, which relies on coal to produce more than 70 percent of its electricity, may increase imports of the fuel by 1 million metric tons a week as drought conditions cut hydropower output, according to UBS AG… China’s coal supplies are “very tight” because of higher energy consumption growth before the peak summer period, UBS said. While production is expanding at a “robust” rate, the increase may not be enough to fill the gap, according to UBS.
So what’s China to do about power when hydro dams account for 15% of the energy? Like, not switch to coal?