Virus Wave Slowing China’s Efforts to Secure Power for Rebound

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(Bloomberg) — The virus wave sweeping China is delaying efforts to make sure the country’s coal-fired plants can secure all the fuel they need to prevent power shortages when the economy rebounds.

Plans to have mines and electricity generators sign medium- and long-term supply deals are well past an original Nov. 25 deadline, industry media Coal Network Viewpoint reported.

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The National Development and Reform Commission has issued three notices urging parties to speed up the process, the most recent of which came out last Thursday, saying contracted volumes are about 17% short of targets, according to the report.

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The main culprit behind the delays is the surge in Covid-19 infections, Coal Network Viewpoint said. Hundreds of millions of people have contracted the disease since Beijing dismantled Covid Zero last month, pressuring the health system and creating logistical headaches for companies up and down supply chains. 

China still relies on coal for more than 60% of electricity generation, despite investing massively in clean energy. Long-term deals help keep coal prices in check because they’re contracted at what the NDRC considers a reasonable range, while spot deals are allowed to trade at levels closer to sky-high global prices.

The National Energy Administration said in its annual report that it wants about 85% of coal demand from power plants to be met by medium- and long-term contracts.

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Long-term term coal averaged 722 yuan ($106.27) a ton in 2022, compared with 1,300 yuan for spot prices, according to Fengkuang Coal Logistics. 

Beijing has been asking coal miners to produce more and ensure power plants are well-stocked to avoid a repeat of late 2021, when a shortage of the fuel caused crippling industrial power outages. An expected rebound in domestic economic activity, along with increased coal-fired power capacity, will support coal demand in 2023, according to top miner China Shenhua Energy Co. 

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