China’s energy crisis highlights weaknesses in Xi’s power plans

By Administrator_ India

Capital Sands

China’s energy crisis has highlighted weaknesses in one of President Xi Jinping’s top priorities — energy security — that could have ramifications for the power system for years to come.

To avoid repeats of the chaos ravaging the world’s second biggest economy, the country will probably have to take major steps toward reshaping its grid and power market, building fuel reserves, and adding more renewable and flexible energy sources.

A trigger for the current crisis was power plants shutting down because of heavy losses on buying expensive coal and selling into a highly regulated electricity market. Today’s pricing regime dates only to 2019, when fixed electricity benchmarks were replaced with a hybrid model offering some flexibility, but far short of the free-floating rates seen in parts of Europe and the U.S.

Hunan province is planning to trial a pricing system linked to coal costs from October. Guangdong has raised tariffs to incentivize more supply. And the country is considering raising rates on industrial users. But a major obstacle to more liberalization is the potential hit to downstream users including manufacturers.

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