Monday, 01 June 2009 00:44

China has begun a massive smart grid project that will transform how the country generates and uses energy.  The power infrastructure will be brought into the digital age in ways that enhance efficiency and secure the entire power grid.

“A smart grid is an inevitable choice for China to address issues in its power industry and develop a lower-carbon economy,” said Jiao Jian, an analyst at SYWG Research and Consulting.  SYWG is the research arm of the Chinese brokerage Shenyin & Wanguo Securities.

Just like their American counterparts, the Chinese will begin by developing standards that can be adopted throughout China.  The goal is to complete the smart grid project in 2020, according to Liu Zhenya, president of the State Grid Corporation of China, the largest power distributor in the country.

The smart grid proposals will certainly increase Chinese investment in its power industry.  For years the sector has suffered from lacklustre funding that resulting in blackouts and the infamous infrastructure collapse during the snow storms in 2008.

The Chinese power grid is currently made up of 1.18 million kilometres of old transmission lines that carry around 3 million gigawatts of electricity throughout the country.  Almost 7 percent of that amount is lost from inefficient power transfer.  At the same time the demand for power in the country is expected to double by the year 2020.

Much of China’s power is generated by dirty coal plants.  The government has stated that it wants to clean up its act by boosting renewable power generation to 15 percent of the total power supply by 2020.

Chinese smart grid proposals call for the integration of renewable power sources, including wind and solar.  The power grid in its current state isn’t able to efficiently integrate intermittent power generation from wind turbines or solar panels.

Industry insiders expect the Chinese government to announce specific details on the proposal next month.  Liu didn’t say how much the government would invest in the smart grid but insiders are certain it will be substantial.

Huang Shouhong, a power industry analyst at Essence Securities, believes that China will have to spend up to 68 billion yuan ($10 billion) annually on smart grid development.  Investments of that magnitude would certainly have a positive effect on Chinese manufacturers of power transmission and automation equipment.  Foreign manufacturers are noticing as well.

GE CEO Jeffrey Immelt visited State Grid’s headquarters in Beijing in May.  At the meeting Immelt said GE would collaborate with State Grid on its smart grid development.

In America, GE has partnered with networking giant Cisco to develop a municipal smart grid in Miami, Florida that will serve as a blueprint for other American cities.  Immelt has stated that GE stands to reap up to $5 billion should 50 to 100 cities adapt the technology that will be installed in Miami.

GE will be providing smart meters while Cisco will design and roll-out a secure network that connects all the nodes of the power grid together and to a central controlling system.

China’s smart grid will be adapted from the infrastructure currently in place.  Big capital investments have already been made in this area because China has long sought to become a world leader in the sector, according to Liu.  “For China’s smart grid, there must first be a strong grid,” he said.

China uses ultra-high voltage (UHV) lines that allow for efficient electrical flow without significant loss.  This type of transmission is especially useful in a country as vast as China where resources are plentiful but unevenly distributed.

China began operating a 640-kilometre UHV line across the central part of the country in January of this year.  State Grid is so happy with how the line has performed that it is now installing two more lines that will each carry power a distance of 2,000 kilometres.  The goal is to link dams in the southwest with the heavily populated eastern coast.

State Grid expects investments in UHV lines to increase significantly and is projecting to spend 300 billion yuan ($43.94 billion) on the effort by 2012.  

Critics of UHV development say the technology only benefits countries with a centrally controlled framework.  Should China make a solid commitment to UHV it will have a hard time breaking up the monopoly that operates the power grid and creating competition will be impossible.

Shenyin & Wanguo Securities
171 Changshu Road
Shanghai, China
http://www.sywg.com.cn

State Grid Corporation of China
No.86 Xichangan Street
Beijing,  100031
http://www.sgcc.com.cn

Essence Securities
http://www.essence.com.cn

General Electric
3135 Easton Turnpike
Fairfield, CT 06828
http://www.ge.com


Cisco Systems, Inc.
170 West Tasman Dr.
San Jose, CA 95134
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