BEIJING (REUTERS) – The southwestern province of Sichuan, China’s biggest hydropower producer, has seen its supply capability slump due to a long drought across the Yangtze basin, stoking fears the country could suffer another devastating power shortage.

Sichuan’s accounts for 30 per cent of China’s total hydroelectric generation and it normally delivers a massive power surplus to the rest of the country. But it is now receiving electricity from other provinces after weeks of minimal rainfall and extreme temperatures in excess of 40 Celsius.

Here is what you need to know about the power crunch.

Why is Sichuan suffering power shortages?

Hydropower is the biggest source of electricity supply in Sichuan, accounting for more than 80 per cent of total power production.

May to October is typically Sichuan’s rainy season, allowing hydropower stations to maximise output to meet peak summer demand.

However, rainfall fell 30 per cent in July and 60 per cent in August compared to the seasonal average, severely curtailing hydropower generation capacity.

Though Sichuan has abundant coal stocks, coal-fired power makes up just 16 per cent of its total power capacity, not enough to meet the supply-demand gap.

The peak power load in Sichuan also surged 25 per cent from a year ago because of high air conditioner use. Meanwhile, consumption from industrial users has also risen in recent years with high-energy intensive industries including aluminium and silicon moving to the region to take advantage of cheaper energy costs.

Sichuan typically exports nearly a third of the electricity it generates via ultra-high voltage (UHV) transmission lines to eastern coastal regions such as Shanghai, Zhejiang and Jiangsu.

Despite local shortages, Sichuan stills needs to fulfil part if not all of its cross-provincial power transmission contracts, which the grid usually treats as a priority.

What was the impact on companies?

Industrial plants in a wide variety of sectors in Sichuan and neighbouring Chongqing – including well-known names like Taiwan’s Foxconn and battery giant CATL – have been ordered to shut down or curb output since mid-August to conserve power for household users.

More than a dozen listed firms have warned that rationing could cause severe delays to cargo delivery and cause billions of yuan of losses.

The rolling blackout eventually hit residential users as the power shortage worsened. Commercial venues were also asked to cut working hours to save electricity.