German Chamber of Commerce

Power Shortages: What’s next?


The German Chamber’s Perspective

Recently, companies had been facing severe power cuts for several weeks. How is the situation as of today? What is next? Here is the German Chamber’s assessment of the situation.


In a Nutshell:

  • Status Quo: power situation stabilized in many locations all over China during the first half of November.
  • Companies’ Short-term Solutions: more internal flexibility, agreeing on individual solution with local governments
  • Companies’ Mid-term Solutions: Installing solar panels; becoming green quicker
  • Local Governments’ Preparations: rather energy-intense companies face restrictions if energy saving necessary, emergency plans in place
  • Accelerated Policymaking: power market liberalization; green policies
  • Outlook: We can expect the situation to be more stable. The forecasted cold winter, however, might very likely invoke the need of further energy savings.
  • What we advocate for: transparent info on energy situation; clarity on green energy usage; support for companies going green; equal treatment of all market players

Status Quo

After having experienced an unstable power supply for several weeks, the situation has been stabilizing in many locations all over China in the first half of November. In some locations, companies are still requested to save energy up between 20 and 30%. In case energy saving measures need to be taken in certain locations, the announcements now come with more lead time.

The supply chains are still affected and impacts on companies’ operations vary, but in many cases are rather influencing operations to a rather limited extent at the time being.


Companies‘ Short-term Solutions

Apart from the ad-hoc measures like buying power generators, a lot of companies have meanwhile increased their internal flexibility, being for instance now more prepared to switching quickly to night shifts. Some also invested in batteries, which can save energy during the night.

Quite some companies have also managed to agree with their local authorities on certain individual models in case further power restrictions come up. This could be for instance a certain power saving schedule or the assurance that a certain machine needs at least a constant power supply while other machines could rather be paused for a while.


Companies’ Mid-term Solutions

Investment into solar panels is the most frequent solution to prepare for the future. However, in some cases it occurred that the roof is not seen as suitable by the industry park. Also, for some companies the question remains which percentage of energy fed into the grids can be used by the company itself and if the company will be exempted from power cuts should they happen again.
Apart from the electricity supply as such, many companies now think ever stronger about how they can move forward quicker in their efforts to becoming green. Some companies consider getting certified as “Green Factory” (The standard exists since 2018). For how to become a green factory, industry parks might also offer their support – at least by providing information but it might be worth to make sure whether there is any financial support or incentives.

Local Governments’ Preparations

Some local officials indicated that more energy savings are about to come during the winter. But if they come, rather companies with high energy consumption and intensity or are likely to face restrictions for certain peak hours.

Vice versa, it has been indicated by governments that those companies with green factory or net-zero factory will have first priority to release from power cut if any.

Others now have emergency plans in place. Once there is a power shortage, the production of key enterprises in the region will still be guaranteed.

Accelerated Policymaking

Even though the topic of energy security is ranking high in the current 14th Five-Year-Plan (right after food security), authorities obviously accelerated their policymaking amid the sudden nationwide power shortages.

As a first reaction we saw the liberalization of China’s power market. Following the State Council executive meeting in early October, NDRC has released a series of policy documents, and local authorities followed suit very quickly: within ten days after NDRC’s announcement at least 10 provinces moved ahead with market reform.

In the first half of October, the floating range of electricity prices, which was between a 10% ceiling and a 15% floor from the benchmark price, has been adjusted to a range of 20% in both directions, excluding high energy-consuming industries. Some provinces quickly saw price increases of nearly 20% above benchmark price. Since mid-October, all electricity generated from coal-fired power is priced through market transactions, and all industry and commercial users should buy electricity at market prices. Only electricity prices for household, agricultural and public services are to be kept stable.

Clearly, also decarbonization and other green policies moved up on the policymaking agenda. After having released the two main documents in relations to the dual carbon goals in the second half of October, policies of all kinds following suit in an unprecedented speed: from green industrial development to clean production and green buildings.


Since daily coal production is making new records, NDRC and other regulators are cracking down on coal hoarding and price speculation, and electricity prices are increasingly liberalized nationwide, we can expect the situation to be more stable and at least the risk of such sudden cuts is lowered.

The forecasted cold winter, however, with a longer central heating season and less power from renewables might very likely invoke the need of further energy savings, but probably in a less arbitrary way.

In addition to the less available energy, requirements to curb pollution during the winter and most certainly ahead of the upcoming Olympics in February, needs the be taken into consideration. Here, especially the Northern Provinces might be subject to production cuts which are rather stemming from “blue sky” requirements than from electricity availability.

The current emphasis on green policies by the government is very likely to continue for better achieving the balance between energy security and the achievements of 30/60 decarbonization goals in time. While German companies have mostly been frontrunners in going green and already contribute much to China’s decarbonization ambitions (see here our Call for Input on companies’ contribution to China’s decarbonization goals, there is still the chance to contribute), they might now benefit from also accelerating their green initiatives. Yet more than ever, companies are striving to understand the bigger picture of how the upcoming months and years look like ahead of these goals, in order to be better able to strategize related investments fit into the plans.


For more indications what the China’s policy advisors have in mind:
Join the AHK-DIHK-Insights Webinar Reading the Planner’s Minds: China’s Path towards Carbon Neutrality in the Energy Sector


What we advocate for

The German Chamber strongly appreciates China’s commitment to carbon neutrality by 2060, and further advocates for:

  • Transparent information how the energy situation will be handled during the upcoming winter and beyond
  • More clarity about green energy usage (if a company is contributing energy to the grid, how much can be used by them, what about future energy saving requirements?)
  • Support for companies for becoming green with transparent information and adequate incentives
  • Appreciating the role German companies play for achieving carbon neutrality as a whole and also for a particular region in China and treating them equally to Chinese companies in all respects.