Energy Insider: Power Shortages Hit Chengdu, New Steel Projects Suspended

In this week's Caixin energy wrap, key developments in China’s climate and energy sectors are explored, covering policy changes, industry trends, significant projects, and more. Highlights include local government initiatives in renewable-energy storage, the impact of extreme weather on Chengdu's power grid, the formation of a hydrogen industry consortium by state energy giants, the suspension of permits for new steel projects, and steps taken by Beijing to green data centers [para. 1][para. 2][para. 3][para. 4][para. 5].

**Local Governments and Energy Storage**

Local governments across China are rapidly expanding energy storage facilities to harness renewable energy, spurred by explosive growth in the industry in 2023. More than two dozen provinces and cities have set ambitious targets for 2025, aiming for a combined capacity of 86.6 gigawatts (GW), significantly higher than the national target of over 40 GW set for 2025, which was achieved by the end of 2023. Since 2021, the industry has seen an investment influx of over 100 billion yuan ($14 billion), supported by a preference for GDP growth and national carbon reduction goals. However, challenges like low utilization rates and poor returns on investment remain [para. 6][para. 7][para. 8][para. 9][para. 10].

**Sichuan's Power Grid and Heat Wave Effects**

Chengdu, the capital of Sichuan province, faced significant power shortages due to an extreme heat wave, affecting factories, offices, and shopping malls. To cope, elevators were turned off, outdoor screens went black, and EV charging pillars were out of service during peak hours. The power grid’s record maximum power load was broken multiple times due to increased air conditioning use. This situation contrasts with previous year's outages, which were caused by a combination of hydropower shortages due to droughts and coal shortages. This year, the blackout resulted from infrastructure failure exacerbated by the heat [para. 11][para. 12][para. 13][para. 14].

**Formation of a Green Hydrogen Consortium**

A new consortium dedicated to advancing China’s green hydrogen industry was formed, led by state-owned behemoths China Petrochemical Corp. (Sinopec) and CHN Energy Investment Group Co. Ltd., with backing from the State-owned Assets Supervision and Administration Commission. The consortium aims for full-chain innovation from basic research to industrialization and to promote vigorous development of the green hydrogen sector. This initiative aligns with China's long-term plan for hydrogen, which outlines specific goals for 2025 and aims to incorporate green hydrogen substantially into the country's energy mix by 2035 [para. 15][para. 16][para. 17][para. 18].

**China’s Suspension of New Steel Projects**

China has announced a suspension of new steel or iron plant approvals to curb severe overcapacity in the industry. Under a revised capacity-exchange program, new capacity is permitted only to replace old capacity. This move hints at tighter regulatory measures to significantly cut down excess capacity, which has been a longstanding issue since the mid-2010s. Excessive capacity in the sector has led to it being the largest carbon emitter within China’s manufacturing industries, accounting for approximately 15% of the nation's total carbon emissions [para. 19][para. 20][para. 21][para. 22].

**Greening Data Centers in Beijing**

In an effort to green data centers, the Chinese central government released guidelines calling for these facilities to run on renewable energy and minimize energy consumption throughout their lifecycle. Alongside promoting low-carbon data centers, the guidelines outline the development of a system to monitor and evaluate carbon emissions and assess the possibility of capping these emissions. This comes after a July mandate requiring all data centers to increase renewable energy use. In 2022, data centers consumed 270 terawatt-hours (TWh) of electricity (3% of national consumption), a figure expected to rise to nearly 400 TWh by 2030, underscoring the urgency of these measures [para. 23][para. 24][para. 25][para. 26].