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China gets smart on power supply

CHINA has embarked on a 10-year project to build a "smart grid" that will catapult power transmission into the digital age, securing electricity supplies and boosting energy conservation.

The program is expected to be a boon to companies that provide equipment and technology to the power industry.

"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, the research arm of Shenyin & Wangguo Securities, one of China's largest brokerages.

Development of technical standards and other planning concepts will start this year, with the aim of completing the grid in 2020, according to Liu Zhenya, president of the State Grid Corp of China, the country's dominant power transmission firm.

A smart grid delivers electricity from suppliers to consumers using digital technology, such as two-way communications, advanced sensors and specialized computers that save energy, reduce costs and increase reliability.

With such a grid, utility companies can install advanced metering that assists commercial and residential customers in reducing peak-hour energy usage while at the same time allowing utilities to monitor usage to reduce outages.

The proposed new grid will ratchet up China's investment in its power industry, which for years has suffered from underfunding, blackouts and, during the snow storms of 2008 led to the collapse of power lines in the south.

China currently operates about 1.18 million kilometers of mostly older transmission lines. The nation ran about 3 million gigawatt-hours of electricity through its grid in 2008, with 6.6 percent being lost during transmission. China's total power demand is expected to more than double by 2020.

Most of the nation's electricity is produced by coal-fired stations. China has said it wants to clean up the air by boosting the portion of energy that comes from renewable sources to 15 percent by 2020.

The proposed smart grid will be capable of handling alternative energy sources, such as wind and solar power, more effectively. At present, grid operators have shied away from new energy sources because they are intermittent and require elaborate backup energy pools.

Industry analysts said they expect the government to unveil detailed development plans for smart grids next month.

In the United States, the Obama administration is pursuing a similar strategy as part of its economic stimulus package. It recently laid out plans to standardize domestic smart grid developments to ensure that equipment from different manufacturers works in harmony.

State Grid's Liu, speaking at an industry conference in Beijing in May, didn't say how much investment will be poured into China's smart grid, but analysts are predicting it will be substantial.

China may need to spend up to 68 billion yuan (US$10 billion) annually on smart grids, Huang Shouhong, a power analyst at Essence Securities, wrote in a note. Investment on that scale would be positive for domestic makers of power transmission and transformation equipment and automation product manufacturers, including TEBA Co and XJ Electric Co, he said.

Global giants are also casting an eager eye on China's smart grid development.

GE cooperation

General Electric Co Chief Executive Officer Jeffrey Immelt, who visited State Grid's Beijing headquarters last month, agreed to business cooperation that would include the smart grid, according to State Grid.

The US conglomerate, in partnership with networking equipment maker Cisco Systems Inc, has proposed to create a smart grid system in Miami that will serve as a model for other American cities. GE may rake in as much as US$5 billion in revenue if between 50 cities and 100 cities adopt the technology, Immelt was quoted as saying by Bloomberg News.

GE will provide smart meters and Cisco's role is to help design and implement a secure network system that connects the meters, transformers, digital sub-stations and power-generation equipment through a central control system.

China's smart grid will be built based on the existing grid, including ultra-high voltage power transmission lines. That's a sector benefiting from big capital investment because China is seeking to become a world leader in the field, according to Liu.

"For China's smart grid, there must first be a strong grid," he said.

Ultra-high voltage lines allow for heavy electricity flows with lower loss in transmission. They are especially well suited to countries such as China that span vast areas and are hampered by uneven distribution of resources.

Russia, Japan and several other countries have experimented with UHV transmission but none has done it on a commercial scale.

In January, China began operation of a 640km pilot UHV line across central China. State Grid said it's now running in a stable condition and it is laying two additional lines, each spanning more than 2,000km, to link dams in the southwest to users along the eastern coast.

State Grid said it is increasing investment in its UHV projects and is planning to spend 300 billion yuan by 2012, 50 percent more than originally allocated.

Still, critics say UHV works most optimally in countries with a single power regulatory framework, which may hurt China's efforts to break up its monopoly grid and °?introduce more competition in the sector.


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