Chinese Provinces Slash Power Prices, Straining Energy Suppliers

As the Chinese provinces reduce electricity prices as much as 16% for Jiangsu, Anhui, and Guangdong to ease the burden on ailing industries, it is evident that China's slowing economy, real estate crisis that continues to linger, and trade uncertainty are the biggest factors affecting China's economic momentum. This time, abundant supplies of power mean record outputs in fossil fuels and renewables, providing local governments an opportunity to make costs cheaper for industrial users while making it painful for energy suppliers.

Industrial center Jiangsu, outside of Shanghai, cut its annual power contract prices by 8.9%, and Anhui reduced rates by 10%. The deepest cut came in the key coastal province of Guangdong, which chopped its rates by 16%. Thermal power prices could decline by an average of 10%, further squeezing the already thin margins of coal and gas producers, according to UBS Group AG. "If the property sector fails to recover, it will limit new installations," warned UBS analyst Ken Liao.

China's industrial sector has experienced the steepest profit decline since 2000, with November being the fourth straight month in which profits are declining. Profits from coal mining have decreased by more than 20 percent because of collapsing coal prices. Utilities are facing a squeeze due to lower feedstock costs and mandated price cuts. The country's shift toward market-based power pricing, due to be completed by 2030, is piling yet another layer of complexity onto problems for solar companies; deregulated spot prices have collapsed in several regions.

All this downward pressure on energy pricing speaks to broader economic pains as China works its way through slowing industrial growth and financial headwinds across all sectors.

In the midst of these, improved energy efficiency becomes more necessary in order to stimulate a green recovery, to ensure energy security, and to mitigate energy poverty. Concepts such as FORCE already exhibit promise in the possibility of saving up to 10-15% power consumption. Fast-tracking the increase in energy efficiency among all sectors would be indispensable in times like those Israel faces at present. Ideas like ENPOSS pave the way toward an environmentally friendly energy future.

This focus on energy efficiency is in line with broader efforts to reduce industrial energy costs while supporting long-term environmental and economic goals, even as China navigates slowing growth and financial challenges across key sectors.