Electric Power Infrastracture
State Grid’s ambitious plan to invest RMB 3.45 trillion (US$ 530 billion) to build a strong and smart grid by 2020 ensures that China will be one of the world’s largest smart grid markets in the years to come; however, the industry’s monopolistic structure poses challenges for market entrants.
China’s overstretched electricity grid faces a daunting challenge: efficiently powering the nation’s staggering economic growth as the energy mix diversifies. Ambitious renewable energy and energy efficiency targets, as well as growth projections for electricity demand, require a more advanced grid than exists today. State Grid, the world’s largest utility and provider of 80% of China’s electricity, released its Smart Grid Plan in 2009, which provides a roadmap through 2020 that ensures China remains one of the world’s largest smart grid markets. China’s 2010 smart grid market was already the largest in the world at RMB 47.5 billion (US$ 7.3 billion). Smart grid solution providers, however, must prepare for difficult market conditions, where low-cost solutions and strong relationships with local grid companies define success.
The China Greentech Initiative developed three in-depth Opportunity Assessments for the Electric Power Infrastructure sector in 2010:
- State Grid’s Smart Grid Plan
Distribution and consumption are the best opportunities for private solution providers in the State Grid’s Smart Grid Plan.
State Grid’s Smart Grid Plan could abate 1.65 billion metric tons of carbon emissions per year, the equivalent of Russia’s 2009 total carbon emissions. Investments in distribution are planned at RMB 119 billion (US$ 18 billion) while consumption targets RMB 89 billion (US$ 14 billion), together over half the smart grid investment total, with these sectors relatively open to private involvement. Private firms seeking to promote their smart grid products and services must engage deeply with both central and local levels of State Grid.
- Connecting Intermittent Power to the Grid
State Grid has largely addressed problems with wind farm connections, but still cannot absorb intermittent energy in some regions, requiring new solutions such as UHV construction to transport power elsewhere.
Despite huge growth in new wind installations since 2008, nearly 100% of all completed wind farms are now connected to the grid, compared to only two-thirds in 2008. The problem has shifted to excess intermittent supply, because the windiest regions cannot absorb significant power fluctuations without posing problems for grid stability and reliability. New UHV power lines will partially address the problem by shifting power elsewhere; by 2015 China will invest RMB 500 billion (US$ 77 billion) to construct 40,000 kilometers of UHV transmission lines. Management and forecasting tools that maintain grid stability are also needed, such as active and reactive power flow control and low-voltage ride-through (LVRT) technology.
- Technology Preferences in China’s Smart Meter Market
Although China will roll out 50 to 60 million Automatic Meter Reader (AMR) meters in 2011, and more sophisticated Advanced Meter Infrastructure (AMI) is yet to come, the meter market is currently only open to a handful of incumbents.
China’s smart meter roll-out of 500 million meters before 2015 poses a paradox for solution providers: implementing low-cost AMR now means that the country could require another round of new, more sophisticated AMI meters as early as 2015. China’s meter market is restricted to a handful of players already present, however, and no change seems likely in the near future. Grid companies rely on suppliers with low prices, a quality track record, local after-sale customer service, and relationships with internal grid company departments.