The night the lights went out in Guangdong
And then Yunnan, Dongbei, Jiangsu, Zhejiang…with Shanghai and Beijing not spared. But why?
Yo, I don’t know how many energy reporters are reading this, but can I start by asking all y’all to STAHHHP describing every serious blackout as “the perfect storm?”Seriously, I’ve heard every single serious electric outage (you know, the grid-wide ones with power shedding and rolling blackouts) I’ve encountered describing as “the perfect storm” from Texas to Taipei. I might have done it myself. (Oh phew, I didn’t)
It’s always “Well this iguana electrocuted itself on a connection bus which would have been fine except the connection bus was right next to this huge natural gas power plant which would have been fine except the conveyor belt that fed coal into our backup plant caught on fire last week and we haven’t fixed it yet but it still would have been fine except it was a record drought year so we couldn’t use hydro and…”
“The perfect storm.”
Or “see Bob fucked-up when he accidentally pushed his chair into the big red emergency stop button which would have been fine except the cable that we usually use to get power from our neighbor just broke which would have been fine except it we’re having what the call the ‘doldrums’ which means the wind wasn’t blowing which could have been fine except it was the Sixers playing the Sevensers in this sportsball tournament and everybody was watching their televisions and went up to get beer from their fridge at the same time and…”
“The perfect storm”
The truth is, every truly serious power outage event will have multiple causes. This is because the price to the economy of an unplanned interruption of power is so great, that no-one in their right mind would risk it knowingly. There’s always enough margin built in to any single point of failure, but with increasingly complex electrical systems with short, mid and long-term decisions made by stakeholders who perhaps don’t have the whole picture in mind, it is a statistical more and more likely that multiple points of failure will coincide. You can call it the “the perfect storm”, but the exact sequence of events that led up to the failure is really irrelevant. You have to separate the proximate cause that caused the specific incident from the fundamental cause. And the fundamental cause is almost always LACK OF RESERVES.
And that, I would argue, is exactly what happened to China, which is experiencing truly EPIC power outages the likes of which I would have never expected of a planned economy. I mean, this is not exactly the UK or the US with their fetishization of the free market. It was one thing when just industrial users were affected, but residential areas, even in Shanghai and Beijing, were hit with outages!
How did the technocrats of China fail to plan for this? The answer, as it almost always is (see above) is multi-factorial. Not a single one of the following factors CAUSED the rolling train wreck of China’s ongoing power issues, but they all contributed to China’s current woes. It’s the opposite of a perfect storm. It’s called everybody fucked around a little bit, and now the whole country is finding out.
The seven factors I have listed below are all systemic rather than proximate. Floods in Indonesia impacting supply? That’s proximate. Decision not to buy Australian coal, that’s systemic. The first is like your car getting totaled. The second is like whether you have the emergency fund in your bank account to pay for it. It’s bad luck vs bad planning.
Factor #1 Unanticipated breakneck demand — The world economy rebounded super strongly as economies reopened, leading (along with other proximate factors we won’t talk about) to a GLOBAL energy crunch…just look at Europe. (OK UK faced special challenges but let’s just say everything is up everywhere.)
Factor #2 Australian coal ban — Really Not Smart. This RFI editorial posited that in fact China was still importing Australian Coal…just through third countries so they ended up paying extra. It’s true that MOST of Australian coal imported was coking coal, not thermal, but when power is tight that last few percentages count.
Factor #3 China’s green goals — It’s hard to believe, but it was on the 21st of September, just days before the crisis broke hard, that Xi went in front of the United Nations to talk about coal reduction. It’s easy for us to be cynical in the west about China’s carbon-reduction policy, but the policy of “dual control” (能耗雙控) — that is reducing both the peak and total quantity of electricity production was real. Xi’s seriousness, unfortunately, was only proven by his failure. A European Chamber of Commerce briefing puts it better than I can:
This is like “dog ate my homework” level of “planning” but it does show that contrary to western cynicism, China WAS serious about its carbon targets. Unfortunately, that seriousness was not accompanied with realism.
Factor #4 Central/Local miscommunication — It’s obvious that local officials are not happy with being forced to comply with Chairman Xi’s impossible goals. It came out in passive-aggressive notices to users, but did it go up the chain of command in an effective way?
Factor #5 Inability to flex prices — This is being fixed right now…on the double. But for a while, as the price of coal spiked and spiked, power producers were not allowed to raise their prices. So what incentives have they to keep generating? The more they produce the more they lose!
Factor #6 Renewables didn’t show up — But didn’t China invest billions and billions in offshore and onshore wind and photovoltaics. Again, Imma gonna let my homies at the European Chamber of commerce take this one.
Also, even if the wind blew and the sun shine just right, it still wouldn’t have solved China’s problem because there just was not enough:
Factor #7 Nobody knowledgeable was watching the store — Another thing that Xi is famous for is rooting out corruption. Again, we can be cynical about this from afar but the truth is local officials who have had cream on their whiskers for decades from energy were being replaced by corruption hawks sent from Xi’s inner circle, eager to deliver for Chairman’s Goals but probably less knowledgeable about what is actually going on with regards to local power plants and energy needs.
I’ve promised I will not use the “The Perfect Storm” cliche. But China’s situation is more aptly described with a Chinese saying:
“September is gold and October is silver” goes another saying, this is because those are the two months going into Christmas, and the busiest season for the world’s workshop. Well we were hit with the power cuts in September, and according to Taiwanese business media (BTW one of the best sources to watch for granular Chinese business news) is reporting that the chances that electricity supply gets back to normal in October is “remote.”
Winter is coming. And it’s going to be a cold one thanks to La Niña. It’s early October. Just about the time we stop using our air conditioners in Taiwan. But in Heilongjiang and other northern provinces in China, it is already getting super cold. We’re used to thinking that people in China are docile and under total government control. But all bets are off when the mercury drops and your babies and Mee Maws are cold. People rush, and I mean rush by the hundreds, to protest at the local govt. This was Heilongjiang back in February when they had a heating cut:
Have you noticed we’ve basically heard nothing from Xi since the icy spectre of power shortages over the winter closed in on China? Instead, we’re seeing some old faces.
OK that’s actually a file picture of Li Keqiang, but the point is he’s been out and about in an unusually active way to assure everybody that things are going to be alright and the supply chains are not going to break.
And what about this charismatic fellow?
His name is Han Zheng and he is the Senior Vice Premier of the State Council and Politburo Standing Committee member of the Chinese Communist Party. He reportedly had a closed-door meeting with state-owned energy companies to tell them to do whatever it takes to make sure that there are no blackouts this winter.
Of course it would have been awkward to have Xi Jingping deliver this message since he would be contradicting his own policy which is what got us into this mess into the first place. In fact, it is a reminder that even as Xi concentrates more and more power into his own hands, those who are many, many levels beneath him can still find ways to give him distress. “When those on top have measures, those on the bottom have countermeasures.” (上有政策，下有對策). The power company now have what they want, the ability to buy coal and raise prices, not by contradicting Xi, but by carrying out his edicts to their logical conclusions.
In the Taipology tradition, the windup has been long, so let the conclusion be short. China’s mind-boggling power crisis has shown not just the fragility in its grid, but in its top-down system.
I am reminded of an example not from Chinese history but from the French. The 11-year-old child King Louis XIV faced a rebellion known as the Fronde. Though he was not harmed he felt humiliated and threatened in his own bedroom by the frondeurs, which included many members of the aristocracy. When he grew up, he became determined never to let this happen again. He built the great palace of Versailles, and made the nobles abandon their estates to live in crowded misery after a grand fashion because HE, now the Sun King, was the radiant center of all power.
“Under the sovereign’s watchful eye, the nobility could no longer plot against the throne; the great lords were kept in their place in the army or at court, eager to serve and please the King. Intimidating, majestic, kept informed by an army of spies, the king controlled everything. ”
But the nobility could also not tend to their lands and peasants, and the bonds of give and take between the lords of old and their charges, as unacceptable as it would be to us in the modern day under the best of circumstances, were broken. Historians say magnificent as the Sun King’s reign, it also sowed the seeds discontent that lead to the French Revolution.
If Xi Jingping is determined to hold onto power in a unilateral way for a system as complex as China, he can expect to speed run this process and it would not take until his successor’s successor to face the wrath of the people. But if the CCP is capable of learning from this experience, then we can hope to see an adjustment from the inward concentration of power towards a more decentralized technocracy where the bureaucrats are closer to the problems they are meant to solve.
In any case, Xi has already dealt China a palpable hit. There were arguable upsides to his other notable struggles. The Great Cancellation hit mostly an increasingly unpopular class of decadent self-dealing super-rich. The Evergrande crisis was damaging but it was also borne out of an attempt to control runaway property speculation with the three red lines policy. But this was just an L for China, and yet another reason for foreign interests not just to look elsewhere with their money, but with their production facilities.