Desperate factory owners in China are increasingly turning to diesel generators to keep their businesses going during a power crisis that is threatening both the country’s economic growth and its green ambitions.
Power shortages have hobbled industry and left some households without electricity. In an effort to ration fuel, some provinces have ordered factories to shut for a few days each week, with employees told to use the stairs and offices pressured to avoid using air conditioners at low temperatures.
With the winter heating season fast approaching, China has also instructed coal miners to expand production significantly and signalled that it would allow energy producers that had been crippled by high coal costs to raise electricity prices.
The manager of Weifang Yuxing Power Company in Shandong province, who gave her surname as Pan, told the Financial Times that the company had sold out of generators after a rush of orders in September in the wake of the crunch.
“We had a lot of orders coming from southern provinces such as Jiangsu and Guangdong,” Pan said, adding the cost of generator parts had also risen. “I have to tell my clients that it might take 15 to 20 days to deliver a generator, and we also have to wait for key parts to arrive.”
President Xi Jinping has pledged that China will reach peak carbon emissions by 2030 and achieve net zero emissions by 2060. But that promise is under threat by the decision to raise coal production while diesel generators emit soot, carbon monoxide and carbon dioxide.
Investment banks have been downgrading China’s growth prospects in light of the shortages. Late last month, Goldman Sachs cut its 2021 China growth forecast to 7.8 per cent from 8.2 per cent, citing “significant downside pressures” from energy shortages.
Chinese generator companies said they had received a big increase in inquiries. Shandong Huali Electromechanical said it had “recently received many inquiries from new and old customers, most of whom want to know about generators because of the power restrictions”.
In an advertorial posted on the news website NetEase, Shandong Huali advised businesses against installing solar panels. “The installation of solar panels takes a long time and cannot quickly solve immediate difficulties,” the company said.
Analysts said the rollout of renewables and storage in China had not reached a level to replace coal. Extreme weather this year had also disrupted supplies of some renewables, such as hydropower in southern China.
Danny Lau, who runs an aluminium manufacturing factory in Dongguan, said there had been a sudden rise in demand for generator rentals in the industrial city in the Pearl River Delta, a manufacturing hub.
“Demand is huge,” he told The Financial Times. While he was relying on three back-up generators to power his business, one neighbouring factory was now paying Rmb180,000 ($27,900) a month to rent each device, up from Rmb60,000 in June.
Klaus Zenkel, chair of the EU Chamber of Commerce in South China, said some of his members in manufacturing centres in the provinces west of Hong Kong were relying on generators to operate. One member of the chamber who normally used 1,600 kWh of power a day was forced to reduce their daily usage to 640 kWh.
“They need to help themselves but diesel is not good for the environment and it will increase emissions,” Zenkel said.
Additional reporting by Emma Zhou in Beijing and Xueqiao Wang in Shanghai
