China's Ambitious Smartgrid Plans

Despite all the attention paid to Chinese energy developments – offshore investments by its NOCs, the establishment of government-mandated efficiency targets, the growth of a renewable energy export industry – the most pressing challenge facing the country is a seemingly simple one: access to the electricity grid. It’s a challenge faced by both consumers and producers of power. Grid capacity in China has fallen woefully behind both demand and generation capacity, and has become perhaps the leading bottleneck for economic growth. Chinese leaders recognize that improving and expanding the power grid is a requirement for robust future economic growth, the key for continued social and political stability. Accordingly, they have begun to rapidly ramp up grid improvement. With massive investments planned, China will soon be a world leader in smartgrid capacity and technology. This will likely put the country in a position to determine standards and regulations for smartgrid components, which will help determine regional, and perhaps worldwide, smartgrid characteristics. Leveraging unique access to government officials and private companies grappling with grid challenges during a recent research trip to China, Garten Rothkopf has gained insights into the development of the Chinese smartgrid, which we share in this week’s GR Outlook.

\

The Imperatives Driving Chinese Smart-Grid Construction

he strategic national imperative for power grid improvement in China is born of a history of chronic underinvestment in grid capacity as compared to generating capacity. Over the last decade, China has rapidly scaled up generating capacity to meet its fast growing demand, but growth in grid capacity for this new power has not kept up with the overall rate of Chinese economic growth. China’s weak grid is a significant factor in the country’s frequent power shortages and brownouts.  Today, however, unprecedented budgetary investments are being made to address the grid shortfall.  As of 2008, China revised its current Five-Year plan to increase targeted spending on grid capacity to $217 billion from 2006 though 2010, nearly tripling the amount spent on the grid in the previous Five-Year plan.Recently, spending on the grid has been growing more rapidly than investments in generation; 2009 marked the first time that China spent significantly more to upgrade the grid than to install new capacity. China’s 2008 stimulus package highlighted grid investment as one of ten priorities and provided $80 billion to improve rural and urban distribution grids. 

Full article here.