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China has extended orders for industries to shut down production for five more days as heatwaves and extreme drought in its southwestern regions have boosted electricity demand while reducing hydropower production in the largest hydropower-generating province.
The heatwave in the Sichuan province and the rest of southwestern China is now in its 11th day of constant alerts from authorities. In scorching temperatures, residential power demand has soared. But the heatwave and the worst drought in six decades have depleted hydropower reservoirs in the major hydro electricity-generating province of Sichuan. As a result, authorities are imposing power curbs and reducing working hours at shopping malls to conserve electricity.
In Sichuan, hydropower generation from the Yangtze River is falling, and factories are closing to ease the pressure on the grids.
The heatwave is reducing water levels on the Yangtze River to the lowest on record for this time of the year, threatening power supply in the Sichuan province, which relies on hydropower generation for a large portion of its electricity supply. Sichuan also typically sells hydropower-generated electricity to other provinces.
Not only is China’s Sichuan province a major hydropower producer, but it also hosts many factories that produce polysilicon and process lithium—two key components of the solar and battery industries, respectively. The power shortages and factory halts will tighten the market for these materials and drive prices higher, analysts say.
The drought and heatwaves are so extreme that the province ordered last week all factories to close for six days in order to help ease the pressure on the power supply.
Initially, the closures had to last until August 20, but the authorities have extended the suspension of power to industries in Sichuan until August 25, business news outlet Caixin reported on Monday. The provincial government in Sichuan issued on Sunday the highest possible emergency alert on a shortfall in power supply, Caixin said.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com