China sees largest dip in power output since 2008

China produced 451.1 kilowatt-hours (kWh) of power in March – down 3.7 % from the previous year and is the largest dip since 2008.

Excluding holiday months, the year-on-year decline in power output is the biggest since late 2008, when China’s economy was hit by the global financial crisis, with analysts saying the slowdown was the major driver.

“Beijing’s decision to remove overcapacity from some industrial sectors has shown some effects on power output, but more importantly, electricity demand was capped by sluggish demand,” said Zhou Hao, economist at ANZ Bank in Shanghai.

Economic growth in the first quarter slowed to 7.0 percent year-on-year, its lowest level in six years, with factory output and fixed asset investment also slowing to multi-year lows.

According to China’s National Bureau of Statistics, output from China’s power stations over the first quarter of the year reached 1.31 trillion kWh, down 0.1 percent from the same period of 2014.

The figures also suggest that China’s “war on pollution” is having an impact on coal-fired power generation, with grids taking more power from clean and renewable sources amid slowing demand.

Output from thermal power stations, most of which run on coal, fell 9.4 percent to 349.7 billion kWh in March, amounting to 77.5 percent of the total. Hydropower generation rose 25.3 percent to 67.6 billion kWh, or 15 percent of the total.

The statistics bureau also said in a statement that China’s energy intensity – its consumption per unit of economic growth – fell 5.6 percent year-on-year in the first quarter.

“The large energy intensity reduction is not a surprise – when you have all major energy intensive industries slowing so much, this is what happens,” said Tao Wang, resident scholar at the energy and climate programme of the Carnegie-Tsinghua Center for Global Policy in Beijing.

Power generation growth fell to 3.2 percent last year, the slowest rate since the Asian financial crisis, hit by the slowing economy, milder weather and government efforts to improve energy efficiency.

China last week decided to cut power prices to enterprises by 0.018 yuan per tonne, a move that was expected to ease the burden on highly energy-intensive industries like aluminium smelting.

The country’s cabinet also cut the tariff paid by grids to coal-fired power plants, saying that the savings could be used to increase the prices paid to cleaner power plants.

The China Electricity Council forecast last month that Chinese power consumption would rise 4-5 percent to 5.74-5.8 trillion kWh in 2015, down from 3.8 percent in 2014.

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