China's Smart Grid Ambitions Could Open Door to US-China Cooperation

China’s largest electric transmission company has announced an ambitious plan to develop a national smart grid by 2020 that would help utilities and their customers transport and use energy more efficiently.

The sheer size of the project raises some intriguing questions. First, about whether China has the capital and technology for such an extensive upgrade. And second, whether the project could provide an opening for U.S.-China cooperation on technological improvements that could benefit both.

There’s little question that the grid upgrade is becoming a necessity for State Grid Corporation of China, which is responsible for delivering power to 80 percent of the population.

Repeated blackouts in China’s coastal metropolises caused by power shortages in recent years, plus pressure to expand electrification to the rural inland and the growth of wind farms, have prompted considerable government investment in supply-side electricity improvements.

Underscoring the current pressure on the Chinese government to address the issue of power equity, Ryan Hodum, a senior associate for clean energy consulting firm David Gardiner & Associates told NEEDigest that while it

“will be critical to develop a ‘clean energy backbone’ across China to deliver electrons derived from clean and efficienct sources,” the Chinese government also “need[s] to focus on rural electrification so that the country not only develops a Smart Grid but…also raises the level of access to energy.”

Private firms and provincial governments across northern and eastern China are already commissioning several 10-gigawatt wind and solar generation bases that will depend on an advanced grid to help China reach its target of 15% energy from renewables by 2020, not to mention the 35% goal SGCC expects to meet.

SGCC general manager Liu Zhenya said the smart grid project would get started this year with the development of technical standards.

Part of the physical foundation is already in the works, such the “West-East Electricity Transfer Project,” an initiative to build three East-West corridors totaling 20 GW in transmission capability. Since January, the State Grid has also been operating a 400 mile long, 1,000 kilovolt ultra-high voltage AC demonstration project, which allows heavy electricity flow with lower transmission loss. It plans break ground on three more UHV AC lines this year, and build roughly 11,000 miles of UHV AC lines by 2012.

More financial and technical details of the smart grid plan are expected to emerge over the next few weeks.

Meanwhile, questions remain about the source of the needed technology.

China’s Localization Push Poses a Challenge for Technology

Though the pilot UHV line was developed entirely in China, building out a smart grid in China will depend on importing key technologies, a fact that was not lost on the over 40 utility data management-related exhibitors that turned out to the third annual MeteringChina Conference, held in Beijing just days after the SGCC announcement.

Nevertheless, China may be as intent to develop domestic smart growth technologies as it has been in promoting a homegrown wind industry by mandating at least 70% domestically produced components in the construction of wind power plants. China Strategies president Louis Schwartz is confident that as with “just about every industry, [China’s] ultimate goal is localization.”

But localization will not come cheap.

Lu Qiang, an academic at the Chinese Academy of Sciences and professor at Tsinghua University, estimates that China will need to spend at least $147 billion yuan to build an international-level quality smart grid. Bloomberg reports suggested capital costs of $10 billion annually from 2011 to 2020, with a total project cost of $590 billion.

Partners in Smart Grid Exploration: China and the U.S.

For these and other reasons, it makes sense that the U.S. and China – which are simultaneously venturing into smart grid planning – should be considering smart grid cooperation.

China and the US face many similar challenges in their power delivery infrastructure.

Like the U.S., China must transmit power across great distances. Moreover, compared with some countries’ systems, which boast only 2-3% annual loss of generated power, China averages roughly 7% loss per year and U.S. losses have reached 9% in recent years.

The U.S. and China’s shared need to address geographically similar demand and excessive power loss explain why smart grid deployment has emerged as a key area for bilateral collaboration.

Four days after SGCC announced their smart grid plans, U.S. House Speaker Nancy Pelosi (D-Calif.) and Senate Foreign Relations Committee Chairman John Kerry (D-Mass.) held a Clean Energy Forum in Beijing. The group reached an agreement on joint clean energy action that included smart grid as one of the key areas for collaboration.

Specific to smart grid planning, the agreement called for knowledge and technology exchange between the two countries, and a sharing of demand side management tools.

On the topic of eliminating barriers, the framework called for a relaxation of import barriers in both countries on clean energy goods and services; lifting U.S. export controls on clean energy technologies, software and services stifling more robust joint research and development; and instituting a joint intellectual property protection program, backed by the full faith and credit of each government.

While the State Grid announcement and subsequent efforts to promote U.S.-China smart grid coordination are a promising first step towards building a smart grid in China, only time will tell whether China, and the U.S., will be able to sort out the extremely complicated nuts and bolts involved in such an initiative.