WEBVTT - Dan Murtaugh on China Power Crisis (Audio)

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<v Speaker 1>Let's get now to Bloomberg Asia Energy reported down Mortel,

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<v Speaker 1>who joins US from Beijing to discuss China's severe drought

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<v Speaker 1>and power crosses factory shutting down as this extreme heat

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<v Speaker 1>wave strains energy grids with Situan hottest hit, I mean,

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<v Speaker 1>this is quite a dire situation down and just really

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<v Speaker 1>adding to China's economic woes. Tell us what we're seeing

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<v Speaker 1>and the impact here to these factories being shut down. Yeah, well, Jules,

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<v Speaker 1>as you know, I lived in Singapore for several years,

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<v Speaker 1>and Central China is putting Singapore's heat to shame. It's

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<v Speaker 1>been above above forty degrees for most of the last

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<v Speaker 1>two months, uh, certainly above thirty five just about every day.

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<v Speaker 1>The heatwave there has dried up the youngs River, one

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<v Speaker 1>of the biggest rivers in the world, to the point

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<v Speaker 1>that riverbanks are exposed for for more than ten meters

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<v Speaker 1>in a lot of places in Wuhan where we visited.

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<v Speaker 1>Uh and that's created two big problems for for China's

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<v Speaker 1>energy system. One is that air conditioning demand has gone

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<v Speaker 1>through the roof in Sichuan Province, like the daily peak

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<v Speaker 1>US has jumped by from just a year ago and

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<v Speaker 1>at the same time, China is the world's biggest hydropower generator.

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<v Speaker 1>Big damn projects like the Three Gorges produce a lot

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<v Speaker 1>of energy, and the river is so low that they're

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<v Speaker 1>producing about fifty less power right now than they were

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<v Speaker 1>just a little while ago. So those two things are

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<v Speaker 1>going in and Sichuan has had to shut basically power

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<v Speaker 1>off to almost all of its industrial users for basically

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<v Speaker 1>the past ten days to be able to keep lights

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<v Speaker 1>and air conditioners on at people's homes, and it's starting

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<v Speaker 1>to spread beyond that too. Uh Shanghai, for example, has

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<v Speaker 1>shut off the lights for its skyscrapers in the bund area,

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<v Speaker 1>so you don't see that beautiful skyline right now. Um Juhan,

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<v Speaker 1>We went to a mall where only half the escalators

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<v Speaker 1>were working. The air conditioner was kept up at a

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<v Speaker 1>much higher rate than normal. So there's lots of little

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<v Speaker 1>conservation efforts hate happening throughout the country. In addition to

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<v Speaker 1>the really severe cuts in in Sichuan, the country also

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<v Speaker 1>has the largest fleet of solar panels and wind turbans.

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<v Speaker 1>I wonder whether or not that has helped has has

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<v Speaker 1>has that been able to replace some of the laws

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<v Speaker 1>supply honestly, not really. So Sichuan has a very unique

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<v Speaker 1>uh power structure in that about eight percent of its

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<v Speaker 1>generation capacity is these hydro power dams. You know. So

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<v Speaker 1>sich One is famously the mute, mountainous and beautiful with

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<v Speaker 1>rivers everywhere, and so they've always been able to rely

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<v Speaker 1>on hydro power dams. They only have a little bit

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<v Speaker 1>of wind and solar, and they only have a little

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<v Speaker 1>bit of cold power plants, so they haven't had much

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<v Speaker 1>to fall back on once this drought really took hold. Uh.

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<v Speaker 1>I think if when you look out into the future,

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<v Speaker 1>China's going to be doing a couple of things to

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<v Speaker 1>try to uh make sure the situation doesn't happen again.

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<v Speaker 1>One thing is that they're gonna try to improve the

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<v Speaker 1>interconnectedness within its power grids within the country so that

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<v Speaker 1>some of these wind and solar um installations all around

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<v Speaker 1>the country that you're talking about can getting into Sichuan

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<v Speaker 1>and relieve the pre sure in the future down. What

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<v Speaker 1>does this have in terms of an impact to China's growth?

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<v Speaker 1>I mean, we're already grappling with the COVID zero policy,

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<v Speaker 1>with the property slowdown. What are economists saying in terms

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<v Speaker 1>of the power outages impacting GDP targets, it's certainly not

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<v Speaker 1>going to help. Most economists say that, you know, we're

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<v Speaker 1>it's basically August fifty have been the really severe power

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<v Speaker 1>cutoffs in Sichuan, and Sichuan accounts for about five percent

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<v Speaker 1>of Chinese GDP. So unless the heat wave lasts longer,

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<v Speaker 1>in the power outages lasts longer, or these ripple on

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<v Speaker 1>effects in the other provinces get worse than it are

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<v Speaker 1>than we're seeing right now, they don't think that there

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<v Speaker 1>will be a noticeable impact on the national GDP. But

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<v Speaker 1>what's happening is several industries have very key supply chain

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<v Speaker 1>hubs in Sichuan. Um sich One is a big producer

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<v Speaker 1>of polysilicon for solar panels, for example, or lithium chemicals

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<v Speaker 1>for e V batteries, and so we're going to see

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<v Speaker 1>ripple effects in those industries. UH continuing down this pledge

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<v Speaker 1>and for the next couple of weeks and maybe even months,

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<v Speaker 1>with hydro power cuts so much that output is it

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<v Speaker 1>likely we're just going to see a lot more coal

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<v Speaker 1>burned in these these days. Yeah. Absolutely. Brand At the

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<v Speaker 1>beginning of this year, the first half of this year,

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<v Speaker 1>China actually burned less cold than last year because it

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<v Speaker 1>was really rainy and hydropower generation surged. It was up

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<v Speaker 1>about over the first six months, but that it has

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<v Speaker 1>just completely reversed. We've seen the in August so far

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<v Speaker 1>coal burning has been up by about fift And you know, frankly,

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<v Speaker 1>this isn't you know once once these heat waves go

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<v Speaker 1>away and air conditioning goes down and the power curves

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<v Speaker 1>end in sich One, this isn't going to be the

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<v Speaker 1>end of the problem because we're going to spend the

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<v Speaker 1>rest of this year. These reservoirs aren't going to get

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<v Speaker 1>repleted right away, and so the hydro power generation is

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<v Speaker 1>going to be pretty low for a while. And that

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<v Speaker 1>means China is going to have to go out and

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<v Speaker 1>import more gas, and import more coal, and mind more

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<v Speaker 1>coal to power its country. That's going to put in

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<v Speaker 1>on a collision course with European nations that are out

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<v Speaker 1>there right now driving up power or driving up prices

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<v Speaker 1>of coal and gas to make sure that they get

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<v Speaker 1>heated for the winter. Just finally and quickly down. What

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<v Speaker 1>does all this mean for for global food supply, because

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<v Speaker 1>as you say, it's not just happening in China, and

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<v Speaker 1>we know what's happening in India and affecting rice planning

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<v Speaker 1>areas too. Yeah, I mean, this is the scary thing

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<v Speaker 1>is we don't really know yet how bad the impact

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<v Speaker 1>on agriculture is going to be. We see pictures of

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<v Speaker 1>crop lands or scorched torch and we're hoping that, you know,

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<v Speaker 1>the farmers are able to maintain crop yields, but so

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<v Speaker 1>far that that's going to be the big thing to

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<v Speaker 1>watch in the coming months is how badly this damages

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<v Speaker 1>crops and you know, the biggest food consuming country in

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<v Speaker 1>the world. All right, terrible news. Thank you. Dan as

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<v Speaker 1>always down at Bertel Bloomberg as Asia Energy reporter with

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<v Speaker 1>us in Beijing. Fascinating piece by the Bloomberg team. They're

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<v Speaker 1>about China's historic drought, spawning this power crisis and being

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<v Speaker 1>a new test for President. She