China’s power shortages curbed its economic growth in the third quarter of 2021, as factories were forced to cut or even halt production. The world’s second-largest economy expanded just 4.9% in the third quarter, decelerating sharply from the 7.9% growth in the second quarter. China fires up around 60% of its power plants with coal, but the prices have been climbing to a record high recently. As a result, power producers cut output as it is not economical to keep burning coal.
To encourage higher power output, Beijing allowed utilities to hike their prices by up to 20% from a benchmark. However, analysts said it would not be enough to help power providers break even. The government has also ordered miners to boost their coal production. However, domestic output remained stagnant at just above 11 million tons per day. The situation is quickly deteriorating with prices of other power-generating fuels, such as oil and gas, also reaching their multi-year highs.
Meanwhile, Europe’s gas shortages are expected to continue as Gazprom showed no sign of rising exports as it promised previously. The Russian gas company booked just a third of the extra gas transit capacity on the Yamal-Europe pipeline via Poland for November. It also booked no volumes via Ukraine. European politicians have accused Moscow of using the shortage to leverage its cause to secure approval for the Nord Stream 2 pipeline.
In Singapore, Ohm Energy became the third power provider to exit the country’s retail electricity market. In Britain, at least 12 power suppliers have already gone bust. In India, Delhi, Karnataka, Punjab, Tamil Nadu, and Rajasthan warned of depleted coal stocks. More than 130 Indian power producers have fewer than two days worth of coal inventories, far below the recommended level of 15-30 days.
Economists warned of the impact of the energy crisis on the global economic recovery. Soaring oil, gas, and coal prices would be passed down onto electricity users, which could result in inflation burning red hot. This highlights the major challenges faced by global policymakers to balance efforts to maintain growth and wean their economies off fossil fuels.
