It's a given that nobody knows the future; however, making year-ahead predictions about other parts of the power generation industry, particularly the U.S. portion, is relatively easy. In marked contrast, anticipating what will happen in the smart grid realm gets harder every day.
One thing does seem clear: The concept of a smart grid may have been born in the U.S.A., but it's hitting an adolescent growth spurt just about everywhere else first. Meanwhile, in the U.S., both the regulators and companies that see great potential in a smarter grid are realizing that making substantial smart grid progress will first require making both people and policies smarter.
There’s one exception, one piece of the smart grid, that could face fewer obstacles to adoption, and that’s because it offers more obvious and visible benefits to its users: electric vehicles (EVs).
China Courts Vendors
As noted in an earlier article, relatively weak federal policy power (as compared with the power of state public utility commissions, in this case) and the huge number of utility companies in the U.S. combine to make developing a coherent smart grid strategy daunting. Most other developed and developing countries have two advantages: stronger central governments that can provide broad policy support and environmental goals whose attainment requires smarter grids. Last year in our forecast issue, we looked at smart grid activities in a number of countries. This year China is stealing the spotlight.
From renewable generation technology to massive transmission projects to EVs, China is moving fastest and accounting for the largest share of smart grid dollars globally.
State Grid Cooperation of China (SGCC) announced a "Strong and Smart Grid Plan" in mid-2009, whose focus is an ultrahigh-voltage power grid. And though one source claims that China's smart grid exists only on paper, one could argue that China is starting work on a different part of the grid: the long-haul, high-voltage part that has such an impossible chance of getting permitted in the U.S. The same account notes that "China is expected to invest 300 billion yuan [about US$45 billion] in smart grid each year in the following 10 years. On the entering of the overall construction phase in 2011-2015, total investment in smart grid will approximate to 2 trillion yuan [US$0.6 trillion], said [an] insider with the State Grid Corp."
In November, Engineering News-Record published a story from AsiaPulse News stating that China's 2011-2015 smart grid plans will cost nearly $100 billion (620 billion yuan). Whatever the eventual number is, it's big.
Comparing those projections to projected dollars to be spent on smart grid development in the U.S. is difficult given the number of different entities responsible for placing orders and paying the bills. However, GTM Research conveniently made a five-year projection for the same time period and anticipates the U.S. smart grid market growing "from $5.6 billion in 2010 to $9.6 billion in 2015." That’s an order of magnitude less than China plans to spend.
A Chinese press release from October confirmed the emphasis on transmission and said that 5% to 7% of total grid investment in China is focused on making it more intelligent. State Grid Corp. expects that percentage to reach 14% to 15% by 2020. "The major regions receiving investment for smart grid construction include densely populated and economically developed East China, Central China and North China. The aggregate investment in these regions will account for over 85% of the total."
Look for global companies, including U.S.-based ones, to be partnering with China to develop smart grid projects because, as General Electric’s (GE’s) Jeffrey Immelt said at the GridWise Global Forum in September, that’s where the market is. GE has already made good on that prediction. In November, GE and State Grid Corp. of China (SGCC) announced several joint ventures that are “part of GE’s plans to invest US$2B in China through 2012.” The smart grid piece of the pie includes working with Wuhan Nari, a subsidiary of SGCC, “to improve the efficiency and reliability of China’s electric grid by developing and implementing asset optimization technology solutions” that will include grid automation elements. In addition, GE will “work with Electric Power of Shanghai (EPS), controlled by SGCC, to jointly acquire a 77.5 percent controlling stake in Shanghai Tianling Switchgear Co., a Shanghai-based company developing and selling green power distribution equipment.” A goal of that partnership is “to deploy and deliver cleaner and more efficient infrastructure projects, such as high-speed rail and electric vehicle charging,” the GE press release said.
China, the world’s largest market for automobiles, has already been in the news for its EV pilot projects, and more are sure to come. Reuters, for example, reported in October that China is expected to have 1 million EVs by 2020. A pilot program that began last June provides rebates of up to $9,000 to electric and hybrid car buyers.
Automaker Volkswagen plans to begin testing its battery-powered Golf Blue e-motion in China in 2011. The car could be available for sale in China by 2013. (The Volkswagen USA website doesn’t mention anything about EVs, even on its concept cars page.) Nissan Motor Co., General Motors Co., and Daimler AG are also planning to sell EVs in China.
According to Bloomberg Siemens AG was expected to sign a contract in November to supply the Chinese city of Song Xiao with EV charging infrastructure, though the company had not announced a deal as of early December.
Whether lessons learned by these and other global companies in China will translate easily to other markets is an open question. What’s less questionable is that global corporations and China both stand to benefit from their smart grid partnerships.
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