The timing couldn’t have been worse. Just as the State Grid Corporation, China’s biggest electricity transmission company, announced major plans to upgrade power lines across the country, the snow storms hit.
China has an energy problem, but it’s not because of a supply shortage. Indeed, according to research by Fitch Ratings, the country doesn’t actually utilize all of its power-producing capacity. The problem is distribution, not production. The electricity that powers China is carried on six regional networks run by two companies, State Grid and China Southern Power Grid Company. Each network covers several provinces and they are poorly connected. That makes getting electricity from, say, the central grid to the power-hungry south difficult.
When the storms froze transmission lines in southern and central China, causing them to collapse under the added weight – lethally in some cases – officials at the grid companies must have felt their hearts sink. The damage caused by the storms would peg back the companies’ upgrading efforts, an industry analyst said.
The power producers – companies like Huadian and Datang – are still out in the cold, too. A State Council-mandated freeze on energy prices in the short-term means power companies can’t raise electricity tariffs, even as the price of thermal coal rises by as much as 10% year-on-year. The storms, which disrupted trains carrying coal, merely magnified the problems.
China is the world’s second-largest power consumer behind the US, so the challenges facing its power industry are suitably immense. The unexpectedly harsh winter storms have simply underlined the urgency of dealing with those vulnerabilities.