Guangdong Electricity Prices Double as Iran War Chokes LNG Supply

China’s Guangdong province, an industrial hub comparable in size to South Korea, has experienced electricity spot prices nearly double due to constrained natural gas supply from the Middle East, according to Bloomberg. Spot rates climbed to nearly 680 yuan (S$112) per megawatt-hour on April 14 – a three-year high – from an average of around 350 yuan in March, driven in part by the conflict that has choked off shipments from the Persian Gulf.

Market Dynamics and Price Mechanisms

Guangdong’s industrial users have locked in approximately 80 per cent of their electricity needs at far lower prices via annual contracts, according to Sharon Feng, special advisor at Azure International, a green energy consultancy. However, the spot market is a crucial venue for generators to meet fluctuations in daily demand, and tighter gas supply is among the factors dragging prices higher.

“Spot transactions, even as a small portion of total supply, play a critical role in anchoring pricing for monthly and long-term contracts,” Feng said. “Gas-fired generation, while limited in scale, can materially influence system pricing by setting the marginal clearing price when dispatched.”

Firmer industrial demand for power, a warmer-than-normal spring, and seasonal maintenance at coal-fired plants are additional variables contributing to the market’s imbalance, according to analysts.

LNG Supply Constraints and Pricing

Even before the conflict, seaborne liquefied natural gas was a more expensive option for producing electricity. Current LNG deliveries to Guangdong have fallen nearly 40 per cent compared to the same period in 2025, according to ship-tracking data compiled by Kpler. Gas now costs over 60 per cent more than renewable sources, according to the power exchange.

Local power giant Guangdong Energy Group has a 10-year contract to buy LNG from QatarEnergy, a deal that has been suspended since the Strait of Hormuz was effectively blocked to traffic. Gas power accounted for about 22 per cent of the province’s total capacity, according to BloombergNEF.

Infrastructure and Capacity Pressures

Guangdong is home to approximately one-fifth of China’s gas import facilities. Those terminals are increasingly likely to fall idle as the province leans more heavily on coal, the country’s main power source, to meet peak summer demand, said Penny Chen, a senior director at Fitch Ratings.

Electricity consumption in the export-oriented province rose 7.6 per cent in the first quarter, reflecting a recovery in industrial demand and strong growth in the data centres that serve artificial intelligence. This demand surge is testing the local government’s ability to shield the economy from inflation risks arising from the Iran war.

Mitigation Measures and Future Risks

Measures taken so far include capping gas use and replenishing coal stocks. Efforts to accelerate the province’s nuclear buildout should forestall the possibility of blackouts this summer, said Azure’s Feng. The first of two new reactors scheduled in Guangdong this year began operating on April 20.

However, the possibility of a strong El Niño and hotter weather in the summer poses an additional threat to the grid’s stability, at a time when electricity demand usually spikes due to air-conditioning use.