As the international community curtails the development of fossil fuel resources such as coal in order to achieve "substantially zero" greenhouse gas (GHG) emissions in 2050, soaring prices of coal and natural gas are jeopardizing the power supply of each country. (Photo quoted from Yahoo’s image)
China's power shortage extends to all 31 states, autonomous regions
Recently In China, power outages and power supply restrictions are occurring one after another, mainly in the eastern, southern, and Tohoku regions due to tight power supply and demand, and power shortages are becoming serious. The main reason for this is the decline in the operating rate of thermal power plants due to soaring coal prices, but in order to achieve the carbon dioxide (CO2) emission reduction target set by the Chinese Communist Party. It is also pointed out that power supply restrictions have been implemented due to political speculation.
According to reports from major overseas media, the power shortage in China is remarkable in all 31 provinces including Heilongjiang, Liaoning, Jilin, Shandong, Yunnan, Qinghai, Xinjiang Uygur, Inner Mongolia, and autonomous regions. It seems that some companies have already turned off electricity in the steel industry, which uses a lot of electricity.
Coal is the main source of electricity in China. Coal prices are up more than 30% compared to a year ago. Therefore, the cost of power generation far exceeds the price of electricity. The tight supply and demand of coal in China is largely affected by the coal embargo from Australia, where the conflict is intensifying.
Bankruptcies of energy companies in the UK
On the other hand, it became clear that energy companies were forced into bankruptcy this summer in the UK not because of a coal shortage but because of soaring natural gas prices.
In Europe, where the movement to decoal is accelerating, the natural gas price (the Dutch TTF, which is an index) has recently jumped about five times compared to a year ago, setting a new record high.
In addition to the decrease in natural gas supply from Russia, maintenance and inspection work on gas fields has been significantly delayed, which has spurred price increases in the spot market due to the speculation that natural gas stockpiles are insufficient.
With the liberalization of the energy market, about 70 companies in the UK have newly entered the natural gas business. Some analysts say that if the current high price level continues, more small and medium-sized energy companies will be forced into bankruptcy.
The world economy slowed down due to the spread of the new coronavirus infection, but due to the spread of vaccination, the price of natural gas soared due to the converging corona sickness. Rising fuel costs are a burden on businesses.
The UK regulator, the Gas and Electricity Markets Authority (OFGEM), has recently announced that five companies have abandoned business continuity. The energy minister said there was no problem with the supply and was eager to put out the fire. There are also reports that the British government will provide financial assistance such as loan guarantees.
Japan is no exception to the power crisis
Japan is no exception to the power crisis. The Ministry of Economy, Trade and Industry (METI) have already stated in the 2021 electricity supply and demand outlook that "winter will be the toughest situation in the last few years," and mentions the possibility of a power outage.
The ratio of the reserve capacity to the expected power demand is 3% to keep the frequency of electricity stable. Furthermore, the standard for not causing a power outage is 8 to 10%. The reserve margin forecast for this year is 3.7% in areas other than Hokkaido and Okinawa, and in particular, the reserve reserve margin in the Tokyo area is minus 0.2%, which is a fairly severe forecast.
The background to the decline in the reserve supply ratio is that solar power generation, which is affected by the weather, cannot be expected, and that thermal power plants are being suspended or abolished one after another as a move to decarbonize, and the restart of nuclear power plants.
In Japan, the power crisis became a reality in January this year. A large cold wave struck the Japanese archipelago, and demand for heating surged. The supply and demand of electricity became tight, and the price of electricity soared.
In addition to the days when the usage rate in the electric power jurisdiction, which is the ratio of demand to supply, reached nearly 100%, there were a series of flexible instructions to transmit electricity from other areas to areas where electric power demand could not keep up, leading to great turmoil in the electric power market.
While the economy is recovering from the corona pandemic, there is concern that the power shortage will hinder the world economy. As the crisis of power outages becomes more realistic, there is a need for difficult measures to avoid the risk of power supply and demand disruption while rushing technological development for decarbonization.
Jiro Arihara
Global Commodity Watcher
