China has resorted to power rationing in several regions across the country in the face of a record heatwave coupled with the lowest level of rainfall in history. Analysts say the rationing disrupts production in some sectors but the impact is limited.
Regions that have reportedly started electricity rationing include Sichuan, Zhejiang, Jiangsu, Anhui, where local governments are also requiring industrial enterprises to make adjustments to their power usage.
Among the worst-hit regions is southwest China's Sichuan Province, drought has also caused hydropower generation to drop significantly. The impact was greater as hydropower contributes 85 percent of its power generation, 2020 data showed, much higher than the national level of 17 percent.
In Sichuan's capital Chengdu, as more people relied on air conditioners to cool down, power loads during peak hours have gone up to some 40 percent to 50 percent of the total power load in the entire city, local media reported.
Sinchuan's provincial government this week has issued an emergency notice to some high-capacity enterprises, calling for a production halt from August 14 to 20, and to release about 7 million kilowatts of power for residential use.
The production halt will greatly impact lithium carbonate production, where Sichuan is an important base for. The six-day shutdown will slash output of lithium carbonate by about 1,120 tonnes in the province, researchers at Guotai Junan Securities wrote in a research note on Tuesday. This would account for 3 percent of the entire industry, they said.
Power cut impact limited, say analysts
However, researchers at China International Capital Corporation (CICC) argued that the impact of this round of power cuts would be limited, saying that they are seasonal, temporary and limited to regions affected by extreme heat and lack of rainwater, they said.
"Judging from the announcements of listed companies between August 1 to 17, there were 26 listed companies that issued production limit announcements, accounting for 0.6 percent of the total," the CICC researchers wrote.
They noted that this was an increase from nine companies in July, but lower than the 46 companies that issued similar notices back in September 2021.
Analysts at CICC also expect industrial enterprises to make up for their losses by producing overtime after the six-day power curtailment period ends and the power supply gap is alleviated when temperatures start to drop again.
Data from China's National Climate Center showed that, as of August 15, the country's heatwave lasted for 64 days, the longest duration since 1961. The national average precipitation in July was 96.6 millimeters, 20.6 percent lower from the previous year, hitting the second lowest in the same period in history since 1961, according to data from the China Meteorological Administration.
On Wednesday, Chinese Vice Premier Han Zheng stressed the need to strengthen national coordination, secure power supply for key regions, residents and key industries and firmly prevent power cuts during an inspection visit to China's State Grid Corporation.