BEIJING -

China is looking to boost coal production and raise energy prices to ease shortages, in a bid to overcome an electricity crisis that has alarmed authorities and panicked businesses.

China's State Council has allowed coal-fired electricity prices to rise as much as 20% to stimulate energy production, a jump from the current 10% limit.

Beijing has ordered coal miners to dramatically expand production, contradicting promises of a transition to green energy and a peak in carbon emissions by 2030.

Analysts pointed out that policy confusion and coal supply problems were to blame for the electricity shortage.

The impact of the crisis on the economy

Many Chinese factories cut production for the "National Day" holiday at the beginning of October, while economists are watching whether the shortage of energy will return again with the return of production activity.

The results of the efforts of the Chinese authorities are still unclear, as they are roaming the world to secure energy supplies in an attempt to stabilize the situation, and China continues to aggressively target natural gas imports, and this increases global price pressures.

Economists from the Societe Generale Group said the Chinese government's strong response would soon end "the worst of the energy crisis but not the whole crisis."

China has pledged to cut energy intensity, a measure of energy used per unit of economic growth, by 3 percent in 2021 to meet climate targets.

Energy restrictions on more energy-intensive industries such as steel, aluminum and cement will continue for a few months, and the impact on industrial production has prompted analysts to lower their forecasts for economic growth.

Global financial services group Nomura cut its forecast for full-year growth in China's gross domestic product to 7.7% from 8.2%.

Mitigating the effects of the crisis

The deepening energy crisis has convinced authorities to speed up the boldest energy reform in decades, which will allow coal-fired power plants to charge market-driven electricity prices for some customers.

The National Development and Reform Commission (NDRC) said that all electricity generated from coal-fired plants will be priced through market circulation in an "orderly manner" from 15 October, to help power companies offset the rising costs of coal.

It also ordered commercial and industrial users to buy directly from the market or from agents across the network as quickly as possible.

The reform "is designed to reflect energy demand and consumption, and to some extent ease the operating difficulties of power companies and encourage plants to increase energy supply," said Ping Shaozong, an official with the National Disaster Management Committee, at a press conference.

China also ordered its two largest coal regions to increase production, with Inner Mongolia and Shanxi asking coal miners to raise the combined annual production capacity by more than 160 million tons, and the instructions included more than 170 mines in the two regions.

China has pledged to reduce energy intensity, a measure of energy used per unit of economic growth (Associated Press)

Forecast for a harsh winter

The country has been struggling to balance electricity supply and demand, which has often left many of China's provinces at risk of blackouts.

During peak times of summer and winter energy consumption, the problem becomes especially acute.

The Global Times said service outages occurred weeks ago in four provinces: Guangdong in the south, Heilongjiang, Jilin and Liaoning in the northeast, and there were reports of power outages in other parts of the country.

The government is currently targeting energy-intensive industries, such as steelmaking, aluminum smelting, cement manufacturing and fertilizer production, to reduce energy use during peak demand periods or limit the number of days they operate.

Although the prices of residential and agricultural users will remain fixed and will not be affected by the rise, the challenge is the ability of power plants to provide electricity to areas exposed to very cold temperatures, located in northeastern China, where the temperature in some of them reaches about 45 degrees Celsius below zero.

Meteorologists expect average temperatures in some central and eastern regions to drop by as much as 16 degrees Celsius in the next two or three days, so that some homes and offices in northern China will start using electricity for heating, which is earlier than in previous years, The government will operate central heating in areas north of the Yellow River in mid-November.

It is noteworthy that the growth of the Chinese economy at its slowest pace in a year in the third quarter, affected by electricity shortages, supply chain bottlenecks, major fluctuations in the real estate market, and increasing pressure on policy makers to do more to support the faltering recovery.

According to Reuters, data published today, Monday, showed gross domestic product growth of 4.9% in the period from last July to September compared to its previous level, in the weakest performance since the third quarter of 2020.