China Is About to Get Hit with a Winter Energy Crisis

China Is About to Get Hit with a Winter Energy Crisis
Credit: AP Photo / Andy Wong

What you need to know

The attempts to transition from coal to gas appears to have failed and are the root cause of the current gas shortfall.

Northern China is facing an energy crisis this winter due to shortfalls in heating gas. Since mid-December, reports from Hebei, the province that surrounds Beijing and Tianjin, indicate that schools and residential areas are going without natural gas for heating.

In Quyang county (曲阳县), southwest of Beijing and North of Shijiazhuang, schools have not had heating since November 15—though the average temperature during the day has been close to, or below freezing. These schools were required to remove coal-fired heating ahead of the winter season as part of a larger initiative to reduce smog and CO2 emissions.

In August, the National Development and Reform Commission (NDRC), a powerful government agency, announced that the construction of new coal power plants was going to be postponed through 2020. At the same time, use of coal was going to be essentially replaced in north central China—primarily with natural gas.

As the world’s top consumer and producer of coal, this is no easy task. In fact, China consumes four times as much coal as all of Europe (including Russia) and Central Asia combined.

By contrast, Chinese consumption of natural gas in 2016 was eight times its level in 2000, but China lags behind the U.S., which annually consumes just under four times more of this fuel.

In November Wang Dongfeng (王东峰), Party Secretary of Hebei province demonstrated some awareness of these problems:

“At present, we should pay high attention to ensuring residents have winter heating while accelerating the replacement of coal with electricity or gas to protect the environment.”

The attempts to smoothly transition from coal to gas (“煤改气”) appears to have failed and are the root cause of the current gas shortfall. While manufacturing and coal-burning power stations have periodically been turned off in Hebei and Beijing in advance of major events such as the Olympics or Communist Party Congresses, this more permanent switch is proving to be incredibly disruptive.

Reportedly, across China, the price of liquefied natural gas (LNG) has risen by 300 percent. This is having significant downstream effects and has led to rationing.

The effects of the shortages are spreading. In Baoding, Hebei, the Hebei University Affiliated Hospital sent a request, on Dec. 1, to the Hebei government asking for natural gas to run the hospital. The notice, which quickly went viral on the Chinese Internet, pleaded with the government for additional supplies due to its need to take care of 3,000 patients.

While the central government has acted to redirect natural gas from Xinjiang in the West and Guangdong in the South, the scale of the escalating crisis reveals some important problems with China’s infrastructure and barriers to ambitious environmental and building programs.

Northern China — particularly Beijing and its surrounding provinces — are some of the biggest consumers of gas in the country. According to the Beijing Municipal Development and Reform Commission, Beijing is China’s largest and the world’s second-largest consumer of natural gas. However, the shortages and accompanying spike in prices are manifestations of a larger problem: China’s infrastructure to support a shift to natural gas lags behind the speed with which it is turning off coal-powered plants. As a result, cities in eastern China are now lifting restrictions on coal imports.

The Chinese government has started projects to help alleviate demand. In November, Xinhua reported that massive pipelines are being built to significantly increase the amount of natural gas flowing to Beijing. Begun in July 2016, after their completion, these four “main arteries” will transport an additional 70 million cubic meters of gas per day to meet Beijing’s growing demand.

In the meantime, the Hebei provincial government has allocated 4.65 billion RMB (US$705 million) to subsidize heating costs in rural areas. China’s rural areas lag behind urban areas in education, services, and increasingly jobs. The nationwide sprint to adopt natural gas — which includes eliminating the full range of legacy coal-fired equipment from stoves to power plants — is leaving the countryside without easy replacement for heat or electrical generation capacity.

Abroad, China is investing heavily in natural gas from the Persian Gulf to Russia’s Yamal Peninsula. A recently opened Liquefied Natural Gas (LNG) terminal in Sabetta, Russia, for example, was only made possible through Chinese investments, and will export up to 4 billion cubic meters of natural gas per year to China.

However, acquiring supplies of natural gas from overseas is only one part of the solution to Chinese energy woes — China must first address its infrastructure problems at home. China is right to attempt to wean itself off coal. The levels of pollution from coal-reliant industries has real effects on people’s lifespans and general health problems.

The Chinese Communist Party’s centralized power is not a magic wand — as some foreign observers of China would like to believe. Directives from above frequently leave out considerations of circumstances at lower levels. Just as China’s GDP growth targets gave rise to inflationary reporting (and ultimately harmful policies), a slew of new government priorities across the range of Belt and Road projects to environmental initiatives have similar potential to backfire.

The News Lens has been authorized to republish this article from The Jamestown Foundation’s China Brief. China Brief is a primary source of timely information and cutting-edge analysis for policy-makers, intelligence and military personnel, academics, journalists, and business leaders.

Editor: Morley J Weston