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Ration the power supply strictly in China now.

Several Chinese provinces have imposed electricity rationing to critical sectors in recent weeks due to efforts to conserve fuel stocks ahead of the critical winter heating season, high coal and gas prices limiting generation capacity, and tighter energy consumption targets towards the end of the year.

The power rationing has diverted supply to critical industries and residential consumption but has also created an imbalance in the system, forcing other industries to cut capacity and causing blackouts in some cities in northeastern China during the fall season, according to government announcements, state-owned media, market sources and analysts.

China’s power supply situation has been tight for several months as the country’s power consumption surged this year on the back of a strong economic recovery from the pandemic, but power supply failed to catch up. The peak summer demand season is about to end towards late September, and its an unusual time for electricity supply to be cut.

China’s total power consumption increased 13.8% over January-August, while power generation only increased 11.3% over the same period, according to data from the country’s top economic policy maker National Development and Reform Commission.

The power rationing could temporarily reduce industrial energy demand and ease pressure on power utilities, allowing them to increase coal stocks before winter arrives to guarantee supply to residential users during the heating season, several market sources said, adding that if the supply-demand imbalance cannot be resolved “it is better to implement electricity rationing now than in cold winter.”

Guangdong power rationing

Guangdong province recently implemented a new round of power rationing for industrial users, cutting supply to only two or three days a week, while cutting supply to other consumers to four or five days, according to a report by the provincial development and reform commission on Sept. 25.

The heavily industrialized southern province last carried out power rationing for industrial users in May due to power shortages.

Warmer weather since early September has increased the province’s power demand, resulting in a year-on-year growth of 11% in peak load as of Sept. 23, GDRC said, noting that the peak load had broken record highs seven times this month.

Temperatures in Guangdong were at 34-38 degree Celsius, which is 3-4 degrees higher than previous years. For every 1 degree Celsius increase in temperature, the power load increases by 2-3 million kilowatts, according to GDRC.

Guangdong’s power consumption, among the nation’s largest, was 525.27 billion kWh over January-August, up 17.3% year on year, of which 307.7 billion kWh or 59% was consumed by industrial users, up 18.3% year on year, GDRC data showed.

However, power supply in Guangdong has been limited by generation losses and tight coal supply, including coal-fired and gas-fired power plants, GDRC said. The losses occurred despite NDRC approving a 20% increase in retail electricity tariffs during peak demand hours on July 29.

The increase in electricity tariffs has been surpassed by the increase in generation fuel cots — coal and natural gas price have both hit record highs in recent weeks.

Liaoning cuts power

Besides industrial users, residents in northeast China also experienced unexpected power cuts since Sept. 23, state-owned publisher Beijing News reported over the weekend citing a local official with State Grid Corp of China, saying that urgent power rationing that initially hit factories in some northern provinces has now affected residential users.

Emergency power cuts were ordered across 14 cities in the northern province of Liaoning after the grid suffered supply shortfalls, according to other local media.

Liaoning province had carried out three round of level 2 power rationing over Sept. 23-25, but the supply gap persisted, forcing the local grid to cut supply in a bid to prevent the grid from collapsing, state-owned People Net reported over the weekend.

In eastern China, Jiangsu province carried out power rationing for industrial users recently, supplying power on and off for two days at a time, local media reported, while provinces and regions of Zhejiang, Shandong, Fujian, Yunnan and Guangxi also took similar measures.

The power supply shortage situation is expected to last to October, which is estimated to affect China’s demand for some raw materials, including natural gas and iron ore, while the country’s supply of petrochemicals, steel, metals, cement, ceramics, etc. is also expected to be affected due to lower operating rates, according to market sources.

China’s heating season normally lasts from Nov. 15 to March 15 in the northern regions, with coal, power and natural gas being the main heating fuels. The NDRC has issued several policy measures to shore up coal supply including increasing production and signing supply contracts.

But the power rationing is being triggered by a complicated range of issues, many of which are localized, including meeting the government’s energy consumption targets under an NDRC notice issued Aug. 17, asking 10 provinces to curb energy use.

“It has been a very difficult year for many enterprises, with skyrocketing fuel prices as well as controls over energy consumption and carbon emissions,” a Shandong-based trader said.