context: Largely unseen since 2021’s power crisis, power shortages have returned in the wake of drought and record temperatures, concentrated in Sichuan and Chongqing. Sichuan is worst affected given its heavy reliance on drought-stricken hydropower. Authorities are hoping shortages will dissipate as the heatwave recedes. Power rationing may affect NEV production, especially as it looks to have now been extended to 25 August 2022.

China’s power system is being tested by the strongest regional heatwave seen since complete meteorological records began in 1961, per a report by Caixin. According to the report

  • high temperatures are putting stress on power systems in Sichuan and Chongqing
    • in Sichuan
      • industrial power usage was paused 15-20 Aug 2022
      • hydropower generation has fallen by over 50 percent
      • power loads have exceeded 60 GW (up 25 percent y-o-y)
    • in Chongqing
      • the highest level of power rationing measures have been implemented 17-24 Aug 2022
    • residents in some locations have complained of power outages
    • Sichuan is a major power provider for eastern China
      • it provided the highest amount of inter-provincial power in 2020
      • it supplies power to Jiangsu, Zhejiang, Shanghai, Chongqing, Hunan and Jiangxi
  • power loads have become more volatile due to shrinking coal-fired power, increasing renewables generation, electrification and more frequent weather events
  • orders to halt production in Sichuan and Chongqing will ripple through industries across the country
  • governments are opting for power rationing to deal with shortages
    • power rationing makes it difficult for the market to find the optimal allocation of resources
  • the power system remains underdeveloped
    • discrepancies exist in local market models, transactions and pricing mechanisms
    • market barriers remain, thwarting interprovincial trading
  • drought has become a problem
    • since July 2022, rainfall in the Yangtze River Basin has been down 40 percent compared to a normal year
    • 783,000 people across Sichuan, Chongqing, Hubei, Hunan, Jiangxi and Anhui require living assistance due to the drought
    • 17.64 million mu (11,760 square kilometres) of crops are affected
  • the heatwave had lasted 28 days as of 17 Aug 2022, with temperatures exceeding 40 degrees celsius in parts of Sichuan, Chongqing, Hunan, Jiangxi and Zhejiang
  • Zhejiang, Hubei, Jiangsu and Anhui are also facing tight power supplies