China Warns Severe Heat Means Another Summer of Power Risks

(Bloomberg) -- Asia’s brutally hot weather is expected to hit China this summer, threatening a new round of power shortages that last year disrupted global supply chains of everything from cars to solar panels. 

The electricity supply situation will be tight across the entire nation this summer, state-run China Energy News reported, citing the State Grid Energy Research Institute. Central, eastern, and southwestern provinces are likely to experience shortages during periods of peak demand, according to the institute.

A heat wave is already scorching parts of Asia even before the official start of the northern hemisphere summer, sending temperatures to a record 44.2C (112F) in Vietnam, shutting schools early in the Philippines and putting India on alert for blackouts. Climate change is exacerbating the frequency of extreme weather incidents, according to scientists at research groups like World Weather Attribution.

How Extreme Heat and Humidity Test Survival Limits: QuickTake

In China, temperatures in most parts of the nation will be relatively high this summer, with several regions forecast to experience periodic heat waves, according the China Meteorological Administration. More frequent droughts and flood-inducing rainstorms are also expected.

Last year, extreme heat and a lack of rain dried up the Yangtze River, with water reaching the lowest level on record in some stretches. That caused severe power shortages in areas dependent on hydroelectricity, such as Sichuan and Yunnan provinces, with officials curtailing supply to factories to ensure people could run air conditioners at home. Toyota Motor Corp. and Honda Motor Co. were among impacted companies.

In Yunnan, a key aluminum hub, power rationing began anew last month after another severe drought. Despite that, Shanghai Metals Market said output of the metal from southern China increased in April from the month before, as smelters restarted after upgrades, and should rise further in May.

Extreme weather is also affecting crops from rubber to peanuts, potentially requiring more imports to fill the gap and roiling global trade flows. 

Beijing has prepared by ramping up production of coal, still its most important source of electricity even as utilities add record amounts of new wind and solar. Approvals have also been granted for a massive expansion of power plants using the fuel, many of which are intended to only be fully utilized at times of stress on power supply.

Current high coal inventories mean a nationwide power crisis is unlikely, according to Nannan Kou, an analyst at BloombergNEF.

The Week’s Diary

(All times Beijing unless otherwise shown.)

Wednesday, May 10:

• CCTD’s weekly online briefing on Chinese coal, 15:00
• SMM’s International New Energy Summit in Changsha, Hunan, day 3

Thursday, May 11:

• China’s inflation data for April, 09:30

Friday, May 12:

• China’s monthly CASDE crop supply-demand report
• Chalco earnings webinar, 14:00
• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30

On the Wire

China will keep expanding policy support to encourage the construction of large-scale renewable energy projects in an effort to boost the country’s clean power fleet and reach its ambitious climate targets.

China’s increasingly heated car price war is exacting a heavy toll on automakers. Steep discounts have failed to reverse a slide in sales for most manufacturers, and earnings have taken a hit.   

Some $2.3 million in tax incentives to help Jinko Solar Co. expand a plant in Jacksonville, Florida are in limbo after federal authorities executed a warrant to search the facility.

(Updates with note from Shanghai Metals Market in 6th paragraph.)

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