Daily Management Review

Chinese Growth Curbed By Power Shortage While Europe Faces Gas Shortage


Chinese Growth Curbed By Power Shortage While Europe Faces Gas Shortage
The Chinese economy, the second-largest in the world has already been hit by power shortages which have, in turn, threatened to upend the global supply chains, while it is becoming apparently clear that the gas shortage in Europe will continue in October as no signals of increasing gas exports to the region is available from Russia's Gazprom.
In recent weeks, there has been an increase in prices of coal, oil, and gas which has hammered utilities and consumers from Beijing to Brussels and increased inflationary pressures on economies while upending the global recovery from the Covid-19 pandemic hit.
The enormity of the task ahead for world leaders is underscored by the sweltering market. Policy makers are already under pressure to work out plans and strategies to shift their economies from dependency on fossil fuels in time for the COP26 summit on climate change, which begins on Oct. 31.
So far this year, there has been a 350 per cent rise in benchmark gas price in Europe which imports 35 per cent of its gas from Russia. That has resulted in bankruptcy of a number of European companies that supply gas or electricity to homes and businesses,
Following the halting of supply of another of the country's electricity and gas groups recently, an unusual step has been taken by the Czech Republic's energy regulator asking suppliers to give assurances that they would supply energy to homes and businesses in the country.
In the United Kingdom, a dozen or so suppliers have already gone bankrupt.
Ohm Energy, a power company based in Asia, announced that it had exited the retail electricity market in Singapore, becoming the third company to take that step in recent weeks.
Russia has stated that it is willing to supply more gas to Europe. Despite this, Gazprom, the holds the monopoly for Russian gas pipeline export, has nor displayed any intention to speed up its efforts to secure additional capacity.
Gazprom had booked about a third of the additional gas transit capacity that was available for the Yamal-Europe pipeline via Poland for November, but had not booked any volumes via Ukraine, according to auction results released on Monday.
Russia has been accused by European politicians of trying to take advantage of the current gas crisis in Europe to leverage its position for gaining approval for the Nord Stream 2 gas pipeline to Germany, which is still months away from receiving permits. They are meeting contractual commitments Gazprom and the Kremlin have said and added that no requests to pump more gas have been received by them.
A shortage in supply and rising prices of coal, the most polluting of the fossil fuels, has caused power outages in factories and homes in China even as the country is significantly dependent on the fuel as about 60 per cent of the power generating plants in the country are powered by coal.
Due to the constraints, the economy grew at its slowest pace since the third quarter of 2020, 4.9 per cent, compared to the 7.9 per cent clocked by the economy in the second quarter. A slew of policies aimed at boosting coal supplies have yet to take effect.
Authorities in the country are yet to implement a slew of measures to boost coal supplies. According to calculations based on official data, China's average daily coal output was 11.14 million tonnes in September. China's output for the previous week was 11.2 million tonnes, indicating that it had barely changed, according to official figures released last week.
"The Chinese government is losing the battle to control soaring coal prices," said Alex Whitworth, head of Asia Pacific power and renewables research at Wood Mackenzie.
"Supply chain volatility has intensified globally," said Frans van Houten, the chief executive of Dutch health technology firm Philips (PHG.AS), which trimmed its 2021 outlook. "We expect this headwind to continue in the fourth quarter."