Chinese energy authorities are burning more coal as severe droughts affect the nation’s ability to generate power through hydroelectric dams.
The Yangtze River, which runs through much of the country and enters the East China Sea near Shanghai, has dried up in parts amid the worst drought in six decades and has caused supply chain disruptions.
As hydroelectricity production fell 50% in the province of Sichuan, which provides 21% of China’s hydropower, Sichuan Coal Industry Group more than doubled its coal production to nearly 15,000 metric tons per day, according to government-run news outlet Sichuan Daily.
Meanwhile, China has directed factories in Sichuan — a critical manufacturing region in which many Tesla suppliers operate — to operate without power until August 25. The American automaker is still recovering from a two-month lockdown in Shanghai that ground activity in the city of 26 million to a halt earlier this year.
Indeed, global supply chains are still grappling with the effects of lockdowns in Asian manufacturing economies that began in the spring of 2020. Low availability of consumer and industrial goods, including semiconductors and computer chips, have since contributed to worldwide inflationary pressures.
Hydropower provided 18% of electricity resources in China in 2018, according to data from Columbia University. The Yangtze River is home to the Three Gorges Dam, the largest hydroelectric power facility in the world, while the Chinese government’s most recent Five-Year Plans have prioritized the development of more hydroelectricity resources.
The Chinese energy crisis occurs as the nation’s economy grapples with a collapse in the real estate market. Developers are defaulting on obligations as Chinese homebuyers, who often pay mortgages before builders finish their homes, are forced to take losses. Over half of household wealth in China is reportedly attributable to real estate.
In June, the World Bank predicted that the Chinese economy will grow 4.3% in 2022 — a 0.8% downward revision from December estimates. “In the short term, China faces the dual challenge of balancing COVID-19 mitigation with supporting economic growth,” the international financial organization explained. “The government has stepped up macroeconomic policy easing with large public spending, tax rebates, policy rate cuts, and a more dovish stance on the property sector.”
Other developed economies are facing crises such as the Russian invasion of Ukraine and resultant disruptions in energy supplies. Germany is experiencing elevated natural gas costs and recently unveiled a winter surcharge of 2.4 euro cents per kilowatt hour, according to state-funded news outlet Deutsche Welle, with Chancellor Olaf Scholz vowing that the nation’s government is “working on a further relief package” and “will leave nobody alone with these increased costs.”
Germany, however, is poised to shutter its three remaining nuclear power plants at the end of the year, as economy minister Robert Habeck said that reversing the planned shutdown would constitute the “wrong decision” given “how little we would save,” as the facilities would only account for 2% of gas use. Former Chancellor Angela Merkel greenlit the gradual closure of the nation’s nuclear plants following the 2011 nuclear meltdown in Fukushima, Japan.
The average price of gasoline in the United States was $2.38 per gallon when President Joe Biden assumed office, according to the Energy Information Administration, and increased to $3.53 per gallon by the start of the Russian invasion of Ukraine. Prices surpassed $5.00 per gallon in early June before subsiding to $3.89 per gallon as of Tuesday, according to AAA.