China’s State Grid Focused on Ensuring Supply Over Green Goals

(Bloomberg) -- State Grid Corp. of China will prioritize preventing blackouts over its longer-term goal of decarbonizing the country’s power mix.

That was the message from Xin Baoan, executive chairman of the world’s largest utility, who spoke on a panel at the the World Economic Forum’s Annual Meeting of the New Champions in Tianjin on Tuesday.  

Faced with the prospect of a sweltering summer that’s already stretching China’s ability to power its shaky economic recovery, the grid operator — which delivers electricity to more than 80% of the country — made it clear that keeping the lights on and factories humming is its main priority.

“We must stick to the direction of green and new energy, but with the prerequisite that we guarantee delivery and ensure stable supply,” Xin said at the conference often described as the Summer Davos.

State Grid’s priorities are aligned with the government’s. President Xi Jinping said late last year that in pursuing an energy transition it was important that China “build the new before discarding the old,” making it clear the country’s emissions-heavy infrastructure would remain in place in the near term at least.

This summer, searing heat and surging air conditioning use are causing electricity demand at peak hours to grow dramatically. In Baotou, a major clean energy manufacturing hub in Inner Mongolia, some solar factories have had to reduce output this week because of power restrictions. Xin warned that there might be more shortages.

“There’s been a drastic increase in power consumption in China,” he said. “In 2023, the overall power requirements will be satisfied, but in certain regions in peak hours there might be some small gaps.”

Even as it works to prevent blackouts, State Grid is also investing in a wide array of technologies to reduce reliance on fossil fuels. These include long-distance power lines, large-scale energy storage stations and electric vehicle charging sites, Xin said. So far it’s worked — China has installed record amounts of renewables in recent years without overloading the grid.

There’s a lot more to do, however. BloombergNEF estimates that spending on the grid will need to average $136 billion a year through 2050 to reach net zero by then. China’s goal is to hit that mark a decade later. Some $75 billion was spent on the grid last year. 

Critics have argued that State Grid and its sister firm China Southern Power Grid Co. need to better connect different regions to help ensure power supply without building more unnecessary coal-fired plants. Xin said his company is taking the task seriously.

“As the largest energy company in China, we are doing our part for the energy transition and building a new type of electricity system in China,” he said.

The Week’s Diary

Tuesday, June 27

• World Economic Forum’s Tianjin summit, day 1
• Offshore wind summit in Tangshan, day 1
• Mining investment forum in Changzhou, day 2

Wednesday, June 28

• China industrial profits for May, 09:30
• CCTD’s weekly online briefing on Chinese coal, 15:00
• Summer coal fair in Shandong, day 1
• World Economic Forum’s Tianjin summit, day 2
• Offshore wind summit in Tangshan, day 2

Thursday, June 29

• Summer coal fair in Shandong, day 2
• World Economic Forum’s Tianjin summit, day 3
• Offshore wind summit in Tangshan, day 3

Friday, June 30

• China’s official PMIs for June, 09:30
• China weekly iron ore port stockpiles
• Shanghai exchange weekly commodities inventory, ~15:30

On the Wire

China banned a prominent finance writer and two of his peers from social media platform Weibo for commenting about the country’s stock market and unemployment rate.

Two giants in China’s oil and refining sector have taken the biggest opposing positions in Middle East crude trading in years, transforming global cargo flows and puzzling oil traders the world over.

China took a further step to slow the slide in the yuan, setting its daily reference rate for the managed currency at a stronger-than-expected level for a second day. 

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