European Chamber Stance on China’s Energy Management Measures Go back »

2021-09-30 | All chapters

Background

In May 2021, manufacturers in Guangdong were told by the local authorities to curb energy consumption, leading to many companies having to abruptly shut down operations for several days at a time. In response, the European Chamber sent letters to provincial and municipal government authorities in South China, requesting a meeting. A letter was also sent to the Ministry of Commerce (MOFCOM), along with a list of companies affected. The Chamber eventually received a response, providing a list of reasons for the power cuts, but was also told that there would be no guarantees that neither power shortages would not occur nor limiting measures be implemented again in the future.

In September 2021, power shortages occurred again, this time in a number of other provinces across China. Local governments in Zhejiang, Jiangsu, Yunnan, Guangdong and others have told factories to limit power usage, curb output or even halt production until further notice.

Stance

The European Chamber believes there are several reasons why electricity is suddenly in short supply in China. In mid-August, the National Development and Reform Commission (NDRC) released a notice on provinces’ energy usage in order to enforce China’s ‘dual control’ targets for reducing both energy consumption and energy intensity. The notice highlighted the fact that, during first half of 2021, only 10 out of 30 regions achieved their energy reduction targets. As a result, local governments are now taking extreme measures in order to achieve their targets before the end of the year.

This situation is being further exacerbated due to both the current energy mix and deficient infrastructure: the power supply from new energies (wind and photovoltaic) is unstable, and is not sufficient to make up for the shortfall of thermal power and hydropower generation. In addition, rising prices for coal and gas have sharply increased costs for power producers, who are reluctant to increase supply as they would incur losses.

The European Chamber fully supports China’s goals of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060. However, the Chamber strongly recommends maintaining a balance between energy security and China’s long-term targets, through realistic approaches and sustainable strategies carried out in a coordinated and orderly manner. Recent arbitrary actions taken by local authorities have lacked transparency and consistency, and furthermore have no legal grounds. They are seriously jeopardising companies’ operations in China, creating short-term safety risks—especially in the chemical and healthcare industries—and undermining business confidence in the medium to long-term. Companies are concerned that the situation will worsen during the coming winter period, and therefore require for a clear plan and timeline as soon as possible, providing a detailed explanation as to how the situation will be dealt with in the coming months, to allow them enough time to take mitigating actions.

The European Chamber is actively seeking engagement with the relevant central and local authorities in order to better understand the situation, and to share European solutions and best practices in order to assist China with its decarbonisation goals, and achieve a more sustainable future for all.

The European Chamber respectfully puts forward the following recommendations:

1.       Manage the speed of China’s energy transition to ensure energy security while building up a stable, safe, affordable and low-carbon new power infrastructure.

2.       Avoid local, campaign-style, one-size-fits-all carbon reduction approaches.

3.       Develop a transparent, scientific approach to identifying companies that are already energy-efficient and that use green energy, so that they can be exempted from ad hoc energy-reduction policies.

4.       Release as soon as possible timelines and plans detailing how energy-saving measures will be implemented over the coming months across all affected regions in China, to allow companies to take mitigating actions.

5.       Promote market-orientated reforms of electricity prices, providing market-based solutions to address the problems of power generation and consumption.

6.       Accelerate investment in and the application of innovative technologies in the power system, as well as the upgrading of smart power installations, and encourage digital transformation from both the distribution- and demand-side.

7.       Speed up the development of renewable energy farms, of coal-to-gas transition and of any form of energy storage.

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