Around December, 30 2010, State Grid Corporation of China (SGCC), the largest electric power transmission and distribution company in the world, plans to announce their plans for overall smart grid implementation in next decade. When I heard this news, I thought of Chinese “Great Wall” construction. Requiring huge resources and efforts by integrating human technologies into the Chinese national power grid already overloaded by a population of 1.3 billion in the 3rd largest country in the world.
The announcement will change and shape the industry structure for Chinese domestic and global markets as well as overall investors and stakeholders’ decision to embrace Chinese smart grid markets. While China has been announcing similar investment plans for smart gird in 2009 and 2010, the announcement is likely to include concrete and comprehensive roadmaps with detailed segments in Smart Grid, as well as Internet of Things services, heath care applications, and smart transportation. Many Chinese news media outlets have reported that China plans to invest CNY 4 trillion (US$601 billion) to develop the smart grid over the next decade.
In fact, China’s commitment to Smart Grid is not a “newly born” or current issue; rather China has been stepping up their roadmap in last few years. In early 2007, China started a feasibility study for smart grid technologies and relevant research. This series of preliminary studies to kick-off smart grid deployment were a foundation to establish the development of China’s own smart grid concept, so called – the building of “China’s Strong Smart Grid”.
In 2009, SGCC launched comprehensive development plans and research scopes in smart grid. In November, the company began the first and unprecedented procurement project for smart meter tender along with standardization for smart meters. In 2010, SGCC initiated smart grid deployment in China with various R&D programs through an actual construction and bidding process to procure more smart meters from 2009 and T&D infrastructure.
Smart grid has started to impact on China. For Chinese stakeholders in the industry, the smart grid will undoubtedly play a leading role in economic development and future growth. Many local governments are competitively unfolding smart grid projects to promote regional economic development. Central governments have been establishing relevant legislations in T&D facilities, construction, and new provision of smart grid. To accelerate its stance, SGCC has been introducing various activities: restructuring organization, planning standards and R&D scopes, and deployment of pilot projects. Further, Chinese equipments and IT software players have been moving forward in the value chains for smart grid to enjoy this huge and untapped opportunities for new revenue stream.
With the smart grid construction proceeding, product scopes adopted in Chinese smart grid structure at all levels have been gradually salient. The following may be the first scope: power facilities and equipment, electric power automation, information and communication systems in power grid, intelligent network operations, and value-added business services. In addition, market participants are starting to pay attention to smart appliances with energy saving features and home energy terminals. With different features against the exiting power grid such as bi-directional communication and integration of IT systems, smart grid construction means that new adoption of communication systems and peripheral equipments. As a result, Chinese market participants are actively seeking partnerships and business cooperation with other players who could fulfill the requirements and technology and functional gaps through down-and up- stream review in smart grid value chains. For instance, software vendors seek equipment and peripheral manufacturers, and industry automation players seek the partnerships with T&D facilities players. In addition, equipment manufacturers are considering extending their business scope to device and terminal fields. By working together, Chinese players are attempting to accelerate product innovation and capture comprehensive solutions in Chinese smart grid space. As time passes by, all of these market dynamics rising in China will build a sound and solid foundation to foster the Chinese smart grid market to lead Chinese power grid capabilities and industry growth for next decade.
What will be the most lucrative fields? Most investment priority in Chinese smart grid deployment in foreseeable future will be lying in T&D upgrades, especially in UHV/UHVDC construction. As a result, China has been scaling up continuously in the tender process to secure infrastructure and equipments in T&D scopes. This will be clear driver to make strong growth in Chinese smart grid market potentials in next few years.
In China, UHV grid refers to 1000 kV AC, whereas UHVDC indicates plus/minus 800 kV DC transmission network which is the backbone of its so called “Strong Smart Grid” with long-distance and large-scale power transmission capacity. In fact, China already became the sole country operating over 1000 kV transmission line as of 2009. Further, China was ranked as another record in this field with the only country operating over UHVDC +/-800 kV in Yunnan-Guangdong provinces recently.
All of four Chinese spearheads for industry innovation and future plans: the Ministry of Industry and Information Technology, Science of Technology, Finance, and State Council of China selected UHV/UHVDC transmission as the next core technology that Chinese domestic manufacturers should achieve the completion of localized productions – “Made in China”. The crucial reason is related with its power imbalance issues. With robust UHV/UHVDC transmission capabilities, China hopes to solve its power imbalance issues and to provide consumers with affluent electric power generation from more than two-thirds of China’s developable hydropower located in the mountainous southwestern region as well as wind and solar resources concentrated in the northwestern regions.
In 2009, SGCC also commented on its short-term level investment plans in which total investment for smart grid will reach CNY 1.2 trillion (US$ 173 billion), accounting for 35% shares (US$ 61 billion) directly for power grid infrastructure advancements from 2009 to 2011.This can be translated into almost $ 20 billion amount per year at least by 2011. Future progress for nationwide scale smart grid in next 10 years is unprecedented cases in global IT industry as well as power grid space records and could be comparable with Great Wall construction built around 2000 years ago.