Policy Alert #239 | October 25, 2021
Just as the Rising Powers are gearing up for a post-pandemic economic recovery, China, India and even Japan are finding themselves staring at a huge and unfolding energy crisis, mostly involving coal shortages. Given enormous Chinese demand for coal, authorities are taking extraordinary steps to intervene, ordering coal miners to spare no expense in boosting output. Chinese commentary went on the offensive regarding the country’s predicament, touting how well positioned it was to meet the challenge. China’s willingness to pay whatever it takes for energy supplies is bad news for the rest of Asia and Europe, which will face elevated gas and electricity prices in the winter as they compete with China for supply. On the other hand, some Indian officials sought to downplay the seriousness of the energy crisis as the domestic debate heated up about what went wrong. Further complicating the picture is mounting pressure on governments to accelerate the transition to cleaner energy as world leaders prepare for the 2021 United Nations Climate Change Conference in November.
Who’s blaming whom and what’s the prognosis for Rising Powers?
China
Indicating concern about the possible setback from the energy crisis, Chinese Premier Li Keqiang has vowed that every effort will be taken to maintain economic growth. On October 18, Chinese Vice Premier Han Zheng stressed the Belt and Road Energy Partnership (BREP) at the second Belt and Road Energy Ministerial Conference. Indeed, Beijing is deepening energy cooperation via the Belt and Road Initiative in the nuclear, new energy and smart energy sectors. Zheng declared that more should be done to “promote inclusive energy development and respect the rights of different countries to choose their own energy development strategies.”
- The nationalist Global Times blamed western agencies for creating a negative image for China by “bad-mouthing” China’s economy and raising the alarm about its power rationing: “China’s capacity of power generation is abundant… our ability to control, address and mitigate problems is certainly better than most economies.”
- In an op-ed for South China Morning Post, a Hong Kong-based newspaper, journalist Yujie Xue highlights the balancing act between China’s immediate needs and its ambitious decarbonization targets: “China is still on track to meet its 2025 goal of peak coal consumption… but the short-term reality is that China and many others have little choice but to increase coal consumption to meet power demand.”
- The nationalist Global Times emphasized China’s need to bid farewell to the era of extensive power generation: “The problems caused by recent power curbs in Northeast China should increase the sense of urgency for Chinese society to implement sustainable development and strengthen the coordinating use of electricity.”
India
While governments in five states and the capital of Delhi have undertaken measures to reduce power consumption amid fears of blackouts, Union Power Minister RK Singh refuted reports of coal shortages. The minister blamed Tata Power and Gas Authority of India Limited for causing “unnecessary panic” about power outages. On October 10, the Ministry of Coal released a public statement, clarifying that coal availability is sufficient to meet power plant demands. Coal and Mines Minister Pralhad Joshi assured everyone in a tweet that there is “absolutely no threat of disruption in power supply,” claiming there is “sufficient coal stock of 43 million tons… equivalent to 24 days coal demand.”
There have been conflicting statements from the government about coal stocks. On October 9, the Power Ministry issued a public statement underlining the reasons for the depletion of coal stocks– an unprecedented demand of electricity and heavy rainfall in coal mining areas in September, among others. The situation of coal supply to power plants is likely to improve over the next few days, the ministry had said. However, last week, Union Power Minister RK Singh indicated that coal shortages in India could last six months.
- In an op-ed for the liberal Indian Express, Madan Sabnavis, Chief Economist at CARE Ratings, conveys how the coal shortage can undermine recovery: “The October-December period is crucial because there are expectations of pent-up demand helping to accelerate growth… any disruption in the power supply can push back this process.”
- In an op-ed for the pro-BJP Daily Pioneer, Subhash C Pandey, former Special Secretary, Indian Ministry of Commerce and Industry, tries to make sense of the power crisis debate: “Increased coal/power demand from China has set coal prices soaring high… for import-dependent India, it is costlier to import longer haul Australian coal than shorter haul Indonesian coal, which is getting diverted to China.”
- The left-leaning The Hindu reports that during a public conversation at the Harvard Kennedy School on October 12, Indian Finance Minister Nirmala Sitharaman denied worries of a coal shortage: “There are not going to be any deficiencies which may lead to any shortfall of supply… we are now a power surplus country.”
- In an op-ed for the liberal Hindustan Times, Rahul Tongia, Senior Fellow at the Centre for Social and Economic Progress, argues there is no simple answer about who to blame for India’s coal and power crisis: “We don’t have a proper system to get consumers to reduce their demand, which can be done much faster than supply can increase.”
- In an op-ed for the liberal Indian Express, Partha Bhattacharyya, former chairman of Coal India Ltd, the largest coal producing company in the world, believes that CIL is unfairly made the “fall guy” for the power crisis: “The company has ramped up coal production despite the 1990s policy that took away coal blocks of 28 billion tons of reserves… it is time that the country recognizes the critical role of CIL.”
Japan
For Japan, which imports all but a tiny amount of its energy needs, higher oil, gas and coal prices are bringing back inflation, with wholesale prices at 13-year highs. Elevated electricity prices are also reviving memories of last winter when prices hit record highs and Japan’s grid nearly failed in the worst energy crisis for the country since the Fukushima disaster.
- The Kyodo News reveals that Japanese companies operating in China are significantly worried about a supply shortage that could be triggered by electricity insufficiency: “Should industrial production become sluggish in China against a backdrop… of the power shortfall, Japanese firms would struggle to procure necessary components and be impelled to trim their output outlook.”
- In an op-ed for the progressive Asahi Shimbun, staff writer Junichiro Nagasaki lays out the shortcomings of Japan’s new plan regarding renewable energy sources: “Despite the plan’s ambitious goal, Japan may have still left itself open to foreign criticism because of continued dependence on coal-fired thermal power plants.”
Russia
On October 20, Russian President Vladimir Putin offered an increase in supplies to Europe in a televised government meeting. He also chided the region for canceling many of its long-term gas contracts, saying the Kremlin was ready to negotiate new long-term contracts for gas sales. Russian Foreign Ministry Spokesman Dmitry Peskov denied claims from the West that Russia was purposefully holding back natural gas exports to Europe for political purposes. Nonetheless, Russia’s Deputy Prime Minister Alexander Novak noted that the expected German certification of the controversial Nord Stream 2 pipeline could help cool prices.
Russia is also expected to increase its natural gas exports to not only Europe but also China, which has become a major consumer of Russian natural gas, just as Moscow and Beijing have grown closer in their great-power competition with the United States.
- The government-funded RT purports the benefit of the Nord Stream 2 pipeline, which is awaiting EU certification, in helping Europe overcome its gas shortages: “We can say progress is possible… it is a purely commercial project… we’ve always been very clear that we are against the application of sanctions especially in a strategic territorial perspective.”
