A man stands in front of a wind turbine in Gansu province, where China is building the world's largest wind farm. (Photo by Jason Lee/Reuters.)

 

It’s no secret that China has embraced alternative energy on a massive scale. The Three Gorges Dam in China’s Sichuan Province is the world’s largest electric plant. It has a capacity of 18.3 gigawatts, enough that it could support the entire state of Alabama.

 

Now, in rural Gansu province to the north, the government is building a wind farm slated to generate even more power than the dam.

 

But financing and constructing these mega-projects is only part of the challenge. Getting the electricity to consumers is an equally formidable task, and one that so far hasn’t kept pace.

 

To date, China has only installed 12 percent of the 100 gigawatts of wind power it expects to have in place by 2020. But last year, more than a fifth of its wind power capacity went to waste because the electric grid could not deliver the energy to coastal “load centers” thirsty for energy to fuel the economic boom.

 

“China’s challenge is bringing electricity to the entire population so the standard of living can improve,” says David Mohler, chief technology officer at Duke Energy, one of America’s largest utilities.

 

The government in Beijing is on top of the problem. In August, it announced the construction of a vast “smart grid,” a system that would revolutionize the delivery of electricity across this rugged, crowded country.

 

The RMB 4.5 trillion ($670 billion) smart grid is touted as the world’s most ambitious energy project to date. It is being led by the State Grid Corporation of China, the world’s largest electricity company. The target is to have the new system up and running by 2020, with an initial planning phase to set technical standards, a second phase to install advanced digital monitoring systems and new electrical lines, and a final phase to address consumer energy usage. As the project materializes, some predict that China could become a standard setter in the electricity world.

 

Despite the heady news however, there are big challenges ahead. China still needs to secure the money, develop the technology and consolidate the political will to ensure the plan becomes a success.

 

On the grid

 

Smart grid technology is not only about getting electricity to market. It also increases energy efficiency, by improving transmission to load centers and by giving consumers real time knowledge and control over the energy they are consuming, empowering them to make decisions to reduce their expenditures.

 

To improve transmission, engineers will replace existing lines with new Ultra High Voltage (UHV) electrical lines that transmit a higher voltage. And they will install digital monitors enabling utilities to identify problems before they threaten to interrupt service. This improves the capacity, reliability and efficiency of electric transmission. These upgrades will enable intermittent energy sources, such as wind and solar power, to be used to their full capacity.

 

In a second phase, the smart grid will also motivate consumers to be more energy efficient, by providing them with real-time information about their energy use, by affixing digital meters to their electrical appliances. For example, if consumers know how much electricity their refrigerator uses to make ice and how much more it costs during peak energy usage times, they are more likely to switch to an off-peak time cutting out waste in the country’s energy supply.

 

Big plans take big bucks

 

At this early stage, it’s unclear where all the project funding will come from. So far, State Grid has committed to investing $38 billion. Industry experts expect the company, which is state-owned, to split the rest of the costs with the central and provincial governments.

 

“Some [financing] will come from the sale of debt, but much of the rest will come from the government budget and electricity companies' profits,” says Wang Yue Ping, an energy and power consultant at research firm Frost & Sullivan in Shanghai.

 

Even if the government doesn’t come through with the full amount, finding the remaining money shouldn’t be difficult. China is awash with cash, and the government’s strong backing of the smart grid plan will make the private sector eager to invest.

 

General Electric CEO Jeffrey Immelt has already announced the company will collaborate with State Grid on the project. Intel agreed to let the Chinese government use its servers for grid simulations. IBM even opened a software development center in Beijing to work on smart grid applications.

 

Serving different masters, however, could put the public and private sectors at odds. State Grid executives are beholden to the state, not to shareholders. “The managers at these utility companies are evaluated by their ability to complete the goals of the nation, not to make money,” says Tristan Edmondson, founding partner of clean-tech intelligence firm Mint Research in Beijing.

 

As the smart grid materializes, some predict that China will play a major role in plotting the future of energy innovation. The government plans to spend two years creating smart grid industry standards, as well as communication and technical protocols. This is expected to help drive private investment across the country.

 

“China will have one quarter of the [world’s] market set in a certain direction, so vendors will likely follow whatever China decides.” said M.L. Chan, executive director of the Smart Grid Cooperative Project for the Joint US-China Cooperation on Clean Energy, a non-profit organization made up of senior American and Chinese government officials, businessmen, and academics that is the leading driver behind smart grid development in China.

 

Playing catch up

 

China’s wariness about buying foreign technology may be a major stumbling block to completing such an ambitious project. So far, Chinese companies have developed the technology to upgrade the current grid with digital monitors and better electrical lines, but not the technology that tells consumers how much energy they’re consuming.

 

That technology is already available in other countries, including the U.S., but China may purposefully stall the smart grid implementation process to allow domestic companies to catch up with foreign advancements.

 

Whether China develops the technology or buys it from a foreign company, it still faces a major hurdle: its current monopoly energy market. Under the present state-run system, energy demand is high and supply is low. State Grid is the sole provider to all but five of the country’s 23 provinces. Chinese consumers have no alternative to buying electricity from the government and so there’s no competition — or creativity — in energy pricing.

 

Without monetary incentives to run the washing machine at off-peak times or draw power from private solar panels during peak times, part of the energy efficiency equation is lost. The government is aware of the problem, but the country’s culture and politics aren’t quite up to the task of changing the market approach, experts say.

 

“For smart grid to deliver the full benefits, you are talking about letting the customer play the market,” Chan says. “China has nothing of that kind.”

 

Politics on its side

 

For the most part, China’s smart grid project has politics on its side, unlike the U.S. and Europe, where party infighting and special interest lobbying continues to stall efforts to enact major new energy policies. In China, orders flow down from the top. The fact that the government has publicly announced such an ambitious plan bodes well for the project since officials may worry that failure could damage the country’s global reputation.

 

“This is an opportunity for them to really step up to the plate and lead the world,” Chan says.

 

Despite a top-level decree, however, entrenched interests are not powerless in China. Some experts worry the project could be jeopardized out of concern for other sectors. For example, the smart grid could eventually lead to fast, cheap, reliable Internet access through power lines, cutting out a big money-earner for cable and phone companies.

 

“The government might slow down the smart grid development because they will be worried about how it will affect other industries,” Frost & Sullivan's Wang says. “The telecom companies are worried about people getting Internet from the power company not from them.”

 

Steps forward and back

 

Although the smart grid project could lead to huge leaps in energy efficiency in China, it's not a catch-all solution. Wind power and other renewable energies will still need to be backed by coal-fired power plants — an addiction quickly escalating in China.

 

In 2000, the country used 650 billion tons of coal. By 2020, that number could reach 2.17 trillion tons, a level of potentially environmentally disastrous proportions. But with no uranium resources to sustain nuclear plants and massive coal deposits, China relies on coal for 70 percent of its energy.

 

China has taken some important steps, including implementing a 50 percent rebate for buying energy-efficient light bulbs; mandating energy-saving temperatures in government buildings; and rewriting building code to require new buildings to use half the current energy consumption.

 

Although the long-term success of smart grid technology is uncertain, one thing is for sure: China needs to evaluate every energy-saving option it can to prevent an environmental catastrophe fueled by the country’s unrelenting pursuit of economic growth.
 

http://www.globalpost.com/passport/foreign-desk/091102/grid-leap-forward