ELECTRIC POWER
INFRASTRUCTURE
ELECTRIC POWER INFRASTRUCTURE SECTOR
Sector Definition
Electric Power Infrastructure refers to “smart” electric grids and networks
which deliver power to users on demand in an efficient and reliable way, from
a broad range of generating sources. These grids and networks are usually
supported by IT applications. This definition is derived from the “smart grid”
concept, which emphasizes smart, efficient and reliable functions.
A key objective of China’s Electric Power Infrastructure is to create integrated
grid systems that are environmentally friendly and reliable.
Value Chain
The Electric Power Infrastructure value chain includes generation, transmission,
distribution, service location, storage and IT solutions. Key industry activities
are shown in Figure 1. In addition to the traditional value chain components –
power generation, transmission, distribution and service location – electricity
storage and communications are incorporated into the Initiative’s Electric Power
Infrastructure value chain; these represent additional integral characteristics of
modern electrical grids and networks.
Fig.1: ELECTRIC POWER INDUSTRY SECTOR VALUE CHAIN
ELECTRICITY
TRANSMISSION
Power Generation
ELECTRICITY
DISTRIBUTION
SERVICE LOCATION
Electricity Storage
INFORMATION COMMUNICATION TECHNOLOGY (ICT)
INDUSTRY ACTIVITIES
n
Grid connectivity
n
Improving stability
n
Transformation
(step up, down)
n
Maintenance
n
Relay protection
n
Loss control and
monitoring
n
Dispatching
n
Metering
n
Monitoring
n
Appliance control
n
Relay protection
n
Demand management
n
Step down
n
Anti-theft
ENERGY MANAGEMENT
ENERGY Storage
Distributed generation
Data collection
Data transmission
Analysis & Optimization
Smart Grid
In China, as elsewhere in the world, “Smart Grid” is still an emerging concept1
which is not yet well defined. However, some commonly cited characteristics
include the ability to self-heal from power disturbance events, along with the
capability to enable active participation by consumers in demand behavior and to
operate resiliently against physical and cyber attacks. Smart characteristics include
the concepts of:
n Informatization: high-grade integration, sharing and utilization of real-time and
non-real time information
n Digitization: quantitative description of a grid’s subject, structure, attributes and
state, as well as the precise and effective collection and transmission of different
types of information
n Automation: auto selection of grid control strategies, auto supervision of
operational states and auto recovery of breakdowns
n Interaction: interconnections between power generators, grids and users
The China Greentech Initiative would like to recognize Nicki Fung and Ana Lin T. Chiong as the
lead writers of this chapter, which is based on work completed by the China Greentech Initiative’s
Electric Power Infrastructure sector working team.
搜狐网, 国家电网万亿押宝“智能”刘振亚坚强布“网”[Sohu.com, SGCC Invested Trillion RMB in “Smart”, Liuzhenya Strongly
Deployed “Networks”http://business.sohu.com/accessed on July 18, 2009]
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Market Context
China’s power shortage problem is considered to be a huge challenge in
sustaining the country’s rapid economic development.2 By 2004, the power
shortage problem had spread throughout the nation, with some areas having
to impose power outages because electricity supply was insufficient to meet
demand. Today, the country continues to experience difficulty meeting demand
which is expected to continue growing in the coming years.
The country is also experiencing grid connectivity issues for renewable energy
sources. A significant portion of energy generated from renewable sources is not
utilized because renewable energy facilities are not yet connected to the grid.
Part of this is due to the intermittent nature of electricity generated by renewable
sources such as solar and wind, which is difficult for the current over-burdened
electric power infrastructure to handle.
China is also facing challenges in the management of the grid system and
minimization of energy loss due to inefficiencies. Even though the electricity loss
rate has decreased, absolute electricity loss increased at a CAGR of 11% between
2000 and 2007,3 due to increased growth in overall electricity consumption.
Large and growing electricity demand
China’s growing energy needs, coupled with supply and demand imbalances,
impose pressure on grid operators to resolve grid connectivity issues and improve
efficiency.
From a demand side, China’s electricity consumption grew rapidly with a CAGR
of 11% from 2000 to 2008, and is forecast to grow at an average of 7% per
year through 2020.4,5 This is equivalent to a demand of 7,760 billion kWh by 2020.
Current infrastructure is short on its capacity to deliver energy from western
resource bases (over two-thirds hydroelectric resources) to the eastern load
centers (over two-thirds consumption).6
This geographical separation of electricity supply and demand means that
China must evolve to higher voltage, long distance grid connections. In line with
this, electricity delivery networks are expanding mainly with 220kV and over
500kV high voltage transmission systems.
Grid compatibility with renewable energy
China’s wind power market has been growing particularly fast, doubling the
installed capacity for four consecutive years, reaching 12 GW in 2008.7 However,
sources estimate that only approximately 70%of this was connected to the grid,
effectively losing 30% of the power generated.8 Some analysts further expect that
approximately 5,000 MW of generated wind power, almost equivalent to the total
wind power generated in 2007, is expected to be lost by 2015. This is based
on the assumption that China’s wind power generation will reach 50,000 MW by
2015 with a 90% ratio of wind power grid connectivity.9
Power generated from renewable energy sources (e.g. wind, solar, etc.) also
necessitates greater use of intermittent generation management and storage
solutions compared to power generated from conventional energy sources. An
improved electric power infrastructure is important in order to support China’s
goal of achieving an increased utilization of renewable energy in its energy mix.
Power infrastructure efficiency
It is estimated that China’s 2008 electricity losses cost yuan 300 billion (equivalent
to a loss of over 100 billion kW). Line loss factors include the fact that transformers
Global Energy Network Institute, “China’s power crisis,” http://www.geni.org/ (accessed on September 18, 2009)
National Bureau of Statistics of China, “China Statistical Yearbook, 2008”
Ibid
5
China Greentech Initiative analysis
6
中国电力科学研究院，中国电力“高速路”http://www.epri.ac.cn/， [China Electricity Research Institute, China Electric Power High
Way, accessed on July 18, 2009]
7
Pullen, Angelika et al., Global Wind 2008 Report (Brussels, Belgium: Global Wind Energy Council, 2009), 25
8
中国电力企业联合会，统计与分析 全国电力工业统计快报(2005, 2006,2007,2008), http://tj.cec.org.cn/ [China Electricity Council,
Statistics and Analysis, National Electric Power Industry Statistical Report (2005,2006,2007,2008)]
9
World Wind Energy Report 2008 (Bonn, Germany: World Wind Energy Association, 2009)
2
3
4
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ELECTRIC POWER INFRASTRUCTURE SECTOR
and related equipment are high energy consuming, and that the focus has
been on safety and keeping up with rising consumption rather than focusing
on grid efficiency, automation and economic operating model improvements.
Nevertheless, China’s line loss rate decreased to below 7% in 2008, putting it
closer to global levels.
Future electric grid plans
To address these challenges, China has planned 690 billion yuan of additional
investment by 2010 to accelerate grid development.10 China has also planned to
improve transmission and reduce GHG emissions, including the development of
Ultra High Voltage (UHV) transmission networks to connect key power generation
bases and main load centers.
The delivery capacity of UHV and trans-regional transmission is expected to
reach over 64 gigawatts by 2015, representing 10% of the total power load, and
260 gigawatts by 2020. This will reduce coal transportation by 480 million tons
standard coal/year while also reducing CO2 equivalents by 1.4 billion tons/year;
SO2 equivalents by 10.8 million tons/year and NOx by 1.4 million tons/year. 11, 12
China’s Regulatory Response
Many entities, are involved in the management and regulation of China’s electric
power infrastructure management, as shown in Figure 2. To respond to the
dramatic growth in electricity demand, China’s regulators have taken a number
of concrete steps to promote further development of the country’s electric power
infrastructure. These steps include strategic planning activities and development
targets, policies supporting energy-efficient grid construction and pricing
management.
Equipment and grid standards are also actively being developed by China. In
fact, China is considered a leader in electromagnetic radiation and UHV standards
and has now also started developing smart grid standards.
Fig . 2 : INSTITUTIONAL ARRANGEMENTS FOR ELECTRIC POWER INFRASTRUCTURE
Five Generation Groups
STATE COUNCIL
Other National
Government
Departments *
National
Development
and Reform
Commission
(NDRC)
Central SOEs
Power
Generation
Companies
National
State Electricity
Regulatory
Commission
(SERC)
Local SOEs
Private and Foreign
Invested Companies
Power Grids
Provincial/Local Government
Other Provincial
/ Local
Government
Departments
Provincial/Local
Development
and Reform
Commission
Electricity
Regulatory Bureau
(Northeast, East,
South, Central,
North,
Northwest)**
Principal agency
Direct oversight
Non-principal agency
Indirect oversight
Supervise entities
Supervise
SGC
SGCC
Sub-national
Northwest
Grid
Northeast
Grid
Guangdong
Grid
Central
China
Grid
Guangxi
Grid
East
China
Grid
Guizhou
Grid
North
China
Grid
Yunnan
Grid
Hainan
Grid
Notes: * Other government departments include State-Owned Assets Supervision and Administration of the State Council (SASAC),
State Admininstration for Taxation, Ministry of Finance, Ministry of Environmental Protection, Minister of Housing and Urban-Rural Development.
** They also require local power generation companies.
中国产业竞争情报网，2009年我国电投资规分析 http://www.chinacir.com.cn/，[China cir, 2009 Analysis on China Grid Investment ,
accessed on July 18, 2009 ]
Liu Zhenya, Presented for the 17th Conference of the Electric Power Supply Industry, Oct. 27, 2008 Macao
12
《国家电网》，顺应时代发展的正确选择——特高压交流试验示范工程发展纪略，2009年2月[State Grid, The Correct Choice of
Conforming to Times-UHVAC Demonstration Project Development, Feburary, 2009]
10
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Regulatory Entities
China’s Electric Power Infrastructure is regulated and supervised by the National
Development and Reform Commission (NDRC) and the State Electricity Regulatory
Commission (SERC). As the direct regulatory agency, SERC works with NDRC to
develop policies and standards. Grid companies also play a key role in policy
execution, and their plans and guidelines represent central policies designed to
guide future development in the industry. (See previous page for Figure 2).
Laws and Guidelines
In April 2006, China’s Electric Power Law came into effect governing the country’s
electric power industry. The law applies to activities concerning the construction,
generation, supply and consumption of electric power.
In January 2009, a draft for the Energy Law was submitted to the State Council
Legislative Affairs Office for review.13 The proposed law, which is expected to be
implemented in 2009, is intended to be the basic law that will harmonize other
laws in China’s energy sector. It will cover all forms of primary energy as well as
secondary energy, which includes electricity. It will overlay specific energy laws
such as the Renewable Energy Law, Energy Conservation Law and the Electric
Power Law and their associated regulations and measures.14
Fig.3: CHINA’S REGULATORY RESPONSE TO SELECTED ELECTRIC POWER INFRASTRUCTURE ISSUES
RESPONSE
DESCRIPTION
11th Five-Year Guidelines
(2006-2010)
n
n
n
Create large, highly-efficient and lower-emitting power-generating facilities
Close down small, less-efficient and high-polluting power-generating facilities
Decrease electric grid line loss rate
11th Five-Year Energy Plan
(2004-2009)
n
Continue construction of West-East Electricity Transmission Project focusing
on hydro power transmission
Promote regional grid construction and regional grid interconnection;
resulting in preliminary national interconnected grid by 2010
Upgrade urban and rural power grids to build reliable distribution networks
Promote the coordination and development of secondary and primary
equipment
Adopt advanced grid technologies
n
n
n
n
National Program for Scientific and
Technological Development
(2006-2020)
n
n
n
n
n
n
n
New Energy Revitalization Plan
n
State Grid Corporation of China
n
State Power Grid Corporation
n
n
High capacity and long-distance direct current transmission technologies
and UHVAC technologies and equipment
Grid-connected technologies, transmission and distribution technologies for
intermittent energy
Electric power quality monitoring and control technologies
Safety techniques for large-scale interconnected grids
Key techniques for West-East Electricity Transmission Project
Techniques for power system dispatching automation
Highly-efficient distribution and power supply management information
technologies and systems
Develop wind power, solar energy, biomass energy and other renewable
sources of energy
n Develop technologies to enable cleaner use of conventional energy including
cleaner coal
Implemented “One Ultra, Four Large” plan to develop UHV Transmission to
connect hydro, thermal nuclear and renewable power generation plants
n Developed “Key Techniques Framework for Grids Environmental Protection”
n Issued “Guidelines of Life-cycle Design and Construction of Power
Transmission Project” to promote the adoption of standardized design, new
materials, new technologies and techniques in transmission projects
Implemented line loss reduction management projects
Implemented demand side management projects
China Environmental Law, “China’s Energy Law & 12th Energy Five Year Plan,” http://www.chinaenvironmentallaw.com/ (accessed
on September 18, 2009)
13
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ELECTRIC POWER INFRASTRUCTURE SECTOR
China also has a number of guidelines and programs already in place to address
energy related issues. This includes the 11th Five-Year Energy Plan (2004-2009)
that focuses on grid construction and development of advanced technologies;
the 11th Five-Year Guidelines (2006-2010) which focuses on energy savings
and emissions reductions; the National Program for Scientific and Technological
Development (2006-2020) which mapped out the various government-supported
plans covering key fields of study and research;15 the New Energy Revitalization
Plan which encourages the utilization of renewable energy and better conventional
energy technologies; and the various improvement programs implemented by the
State Grid Corporation of China and the State Power Grid Corporation.
West-East Electricity Transmission Project Case Study
The western region accounts for 80% of China’s water resources, enabling the development of hydroelectric
power generation to meet the increasing demand of eastern and southern China.
The objective of the project was to develop Guizhou, Yunnan, Guangxi, Sichuan, Inner-Mongolia, Shanxi and
Shaanxi power sources in order to meet the electricity needs of Guangdong, Shanghai, Jiangsu, Zhejiang and
other developed eastern regions. The project also sought to make hydroelectric power generation an alternative to
thermal power generation, thereby decreasing overall carbon emissions.
By the end of 2007, the main network of “6 AC, 4 DC” was formed, with a feeding capability above 15 million
kWh. Between 1993 and 2007, the project fed 29 billion kWh, of which 21 billion kw, or 70%, was hydro power
electricity.
Source: 1. China Window, “Western Region Development,” http://www.china-window.com/
2. Xiaoxin Zhou, CEPRI, Power System Development And Nationwide Grid Interconnection in China
3. Xikang Zhao; Lijuan Wang, Centre for Environmental Economics & Policy Research (CEEPR),GDASS, Effects of Carbon Reduction in Cross Regional Energy
Trade: A Case Study on Southern Route of West to East Power Transmission Project
State Grid Strategy Case Study
The State Grid issued the “One Ultra, Four Large” strategy promoting sustainable development of the power industry.
This was to be done through the development of UHV (Ultra-High Voltage) Transmission to connect large hydro,
thermal, nuclear and renewable power plants. This included developing a UHV network of 1000 kV AC and ±800
kV DC transmission, promoting intensive development of a large thermal, hydro, nuclear and renewable energy
base, realizing large-scale, long-distance and efficient transmission and optimizing the power resource allocation
nationwide.
Source: Liu Zhenya, Presented for the 17th Conference of the Electric Power Supply Industry, Oct. 27, 2008 Macao
State Grid Environmental Protection Measures Case Study
State Grid is working to build an environmentally friendly power grid.
Measures include the standardization of grid construction and the promotion of environmentally friendly equipment
and technologies that save energy, land resources and materials at key thresholds of the supply chain (planning,
design, and procurement, etc.). Other measures include the design of a five-year technical renovation plan for the
present grid to increase its transmission capacity, enhance its operational performance and reduce line loss. State
Grid is also attempting to enhance grid dispatching mechanisms, power trade and integration management in order
to promote energy savings and emissions reductions across the power sector while at the same time enhancing
demand side management (DSM) to raise end-user power use efficiency. The promotion of electricity to replace
other energy sources is yet another component of this process.
Source: Liu Zhenya, Presented for the 17th Conference of the Electric Power Supply Industry, Oct. 27, 2008 Macao
Mallesons Stephen Jaques, “A new energy law for China,” http://www.mallesons.com/ (accessed on September 18, 2009)
World Resources Institute, “China: National Medium-and Long-Term (2006-2020) Program Outline for Scientific and Technological
Development,” http://projects.wri.org/ (accessed on September 18, 2009)
14
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Pricing Policies 16, 17, 18
To promote energy savings and environmental protection, China has implemented a
series of different pricing policies which impact prices on all stages of the electrical
power infrastructure value chain, from generation to transmission to distribution.
On the generation side, China’s government sets the grid power prices at
which generators can bid to sell their electricity. Certain generators are granted
subsidized feed-in tariffs in excess of the base grid power prices. For example,
coal power plants compliant with sulfur-dioxide emissions reduction policies are
allowed to increase their prices by 0.015 yuan per kWh. New energy generators,
such as biomass and wind power generators, are also allowed to charge higher
feed-in prices when selling electricity to electrical grids.
For transmission and distribution prices, China uses a cost-plus system. In
addition to the power purchase costs that grid networks pay to generators for
their electricity, the cost-plus system also accounts for transmission costs,
applicable administration, tax and operating costs as well as an acceptable
mark-up approved by the government.
On the distribution side, local governments generally set end user prices. In
China, as elsewhere in the world, the two key approaches used are differential
and time-of-use (TOU) pricing.
In differential pricing, price brackets are defined for different categories of
electricity users. For example, energy intensive industries may be required to pay
between 0.02 yuan and 0.05 yuan extra per kWh over other types of users.
Under TOU pricing, users pay different prices for using electricity at different
times of the day.19 The goal of TOU pricing policies is to moderate peak loads by
shifting demand to off-peak times. Reduced peak loads, in turn, can enable power
companies to decrease the amount of generating capacity they have available to
meet demand. For example, except for Tibet, all other grids have implemented
TOU policies for energy sales. Shanghai, Beijing, Tianjin, Hebei, Jiangxi and
Chongqing have implemented peak time pricing in summer and winter; and
hydropower generation regions have implemented seasonal pricing.
Standards
China is a leader in electromagnetic radiation standards and Ultra High Voltage
(UHV) power transmission and transformation technology. China’s State Grid has
formulated 47 national standards and a complete set of specifications for UHVAC
project design, construction, operation and maintenance. This UHVAC standard
voltage has been recommended as the international standard by the International
Electrotechnical Commission and the International Council on Large Electric Systems.
国家发改委，国家环保总局，燃煤发电机组脱硫电价及脱硫设施运行管理办法 2007年6月11日发布 [NDRC, SEPA, Management
Measures on De-sulfur Pricing for Coal-fired Generating Units and De-sulfur Equipment Operation, issued on June 11, 2007]
国务院办公厅, 转发发展改革委关于完善差别电价政策意见的通知, 2006年9月17日发布 [General Office of State Council, Notice of
Opinion o f NDRC on Differential Pricing, issued on September, 17, 2006]
18
国务院办公厅，可再生能源发电价格和费用分摊管理试行办法，2006年1月4日发布[General Office of State Council, Trial Methods of
Renewable Energy Power Generation Prices and Costs Allocation, issued on January 4, 2006
19
NDRC ,2006/01/27,“十五”经济体制改革回顾之四十六：电价形成机制发生深刻变革 http://www.ndrc.gov.cn/
16
17
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ELECTRIC POWER INFRASTRUCTURE SECTOR
Fig.4: MAIN STANDARDS COMPARISONS
Electromagnetic Radiation
Standards for Power
Transmission and
Transformation
Electrical Field
Strength
(V/m, public)
Magnetic Field
Strength
(μT, public)
International Commission
on Non-ionizing Radiation
Protection (ICNIRP) (1998)
(50Hz)
5,000
100
IEEE95.6 (2002) 0-3kHz
5,000
904
EU Regulations (50Hz)
5,000
100
European Committee for
Standardization
8,330
533
UK
12,000
1,600
Australia
5,000
100
Switzerland
5,000
1
Japan
3,000
-
China
4,000
100
1. 中国南方电网，中国南方电网2008年度企业社会责任报告，48页，2009年5月26日[Southern Grid, SGC
Corporate Social Responsibility Report (2008), page 48, issued on May 26, 2009]
2. 中国电力企业联合会，特高压交流输电标准送审稿审查会在京召开，标准化，http://dls.cec.org.cn/
[China Electricity Council, Review Meeting of UHVAC Standards Held in Beijing, Standardization Column,
accessed on June 20, 2009]
In contrast, China’s research on smart grid standards is still at an early stage.
China takes IEC standards as the reference in building its own, even though smart
grid standards have not been generally well developed on a global basis. Relevant
IEC standards for Smart Grid include IEC 61850 and IEC 61970/61968.20,21
Existing and Emerging Solutions
As China’s energy demands grow rapidly, there is increasing pressure on the
current grid infrastructure to enable access for new energy sources, operate
efficiently and resolve grid connectivity issues. Therefore, China must develop
a smarter and cleaner electric power infrastructure to drive energy efficiency
improvement, enable loss reduction solutions and develop and support energy
storage solutions.
In particular, the Initiative identified four key solution areas and 12 technologies
with varying commercialization potential to address EPI challenges.
Solution Areas
n Efficiency improvement and loss reduction solutions
Although these solutions have a relatively small environmental impact at
the individual unit level, at the aggregate level the overall environmental
impact is much larger. Increases in network efficiency could slow the need
for additional capacity. Moreover, there is an opportunity to commercially market
these solutions.
n Smart grid components
These include solutions with small individual environmental impact potential but
good potential to enable other environmental gains by helping to facilitate the use
of renewable energy or the demand-side reduction of electricity loads. There is
currently a relatively small market for smart grid components.
中国南方电网，中国南方电网2008年度企业社会责任报告，48页，2009年5月26日[Southern Grid, SGC Corporate Social
Responsibility Report (2008), page 48, issued on May 26, 2009]
中国电力企业联合会，特高压交流输电标准送审稿审查会在京召开，标准化，http://dls.cec.org.cn/ [China Electricity Council, Review
Meeting of UHVAC Standards Held in Beijing, Standardization Column, accessed on June 20, 2009]
20
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n Energy storage solutions
These solutions have a very large environment impact potential as well as a large
addressable market size.
n Renewable energy access solutions
These solutions have very large impact potential, but smaller potential market sizes.
Solutions Screening and Priority Solutions
In order to compare solutions, see Figure 5, across these areas, two key criteria
were used: environmental impact potential and overall commercial potential.
Environmental impact potential focuses on operational negative impact
abatement of the primary pollutant (e.g. CO2, SO2, COD, landfill, etc.) or decrease
in resource intensity (e.g. energy, water, raw material, etc.). It is measured on a
Fig.5: ELECTRIC POWER INFRASTRUCTURE SOLUTIONS
Loss reduction
solutions
n Composite Materials Cables
Transmission and distribution line cables made from composite materials that
are specifically engineered to reduce losses
n Transformers with Amorphous Core
Alternative transformers that are more energy-efficient and environmentallyfriendly than conventional
n Ultra High Voltage (UHV) Transmission
Power transmission lines with voltages of 1,000 kV or higher for alternating
current or 800 kV or higher for direct current that allow power to be transmitted
at greater distances with lower losses than lower voltage transmission lines
Smart grid component
solutions
n
n
n
n
n
NaS Battery
Sodium-sulphur battery with high energy density and high efficiency of charge/
discharge that requires high operating temperatures
n Vanadium Redox Battery
Flow battery with deep cycling life that can be mechanically refueled and has
low negative environmental impact
Energy storage
solutions
n
Grid access solutions
n
www.china-greentech.com
Advanced Metering Infrastructure (AMI)
Integrated system that measures, collects, stores and analyzes utility usage, such
as electricity, gas or water usage; is a broader concept than AMR-IP based solution
Digital Substation
Automated and computerized substation that provides greater transparency,
higher reliability and efficiency of operations
IP-Based Automatic Meter Reading (AMR)
Solutions that automatically gather data from energy metering devices and
transmit to a central processing facility where billing is handled and consumption
patterns are analyzed
Real-Information Processing
Solutions that enable real time communication between core nodes in the electric
network, including customer premise, and allow better management of demand,
improved reliability and flexibility of the network
Wide Area Management System (WAMS)
Integrated system that monitors and controls elements of the electrical power
grid to ensure availability and improve reliability and efficiency of the network
Electric Auto Vehicle (EAV) Charging System
System that allows for plug-in electric vehicles to be charged using power from
the grid
n Flexible Alternating Current Transmission (FACTS)
System comprised of static equipment used for the alternating current
transmission that is meant to enhance controllability and increase power transfer
capability of the network
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unit basis (e.g. negative environmental impact abatement achieved in the process
of generating one MW of electricity or delivering one unit of benefit).
Commercialization potential refers to the potential of the solution or technology
to successfully penetrate the market without subsidies or incentives. The
criterion considers technological maturity in short-to medium-term, favorable
economics (i.e. financial benefits greater than costs at net present value) and
large addressable market. Commercialization potential is not influenced by the
regulatory environment or government incentives.
Solution Evaluation Framework
The Solution Evaluation Framework (SEF) was developed to assess solutions in a
comprehensive, consistent, rigorous and flexible manner. It provides a structure in
which to capture relevant available qualitative and quantitative information, apply
judgment in a structured way and compare results both within and across sectors.
The SEF evaluates solutions across four dimensions: unit environmental
impact potential, solution attractiveness, addressable market size and market
accessibility. The last three criteria collectively represent the overall commercial
potential of the solution in China. Solutions were evaluated according to three
time periods: Short (under one year), Medium (1-5 years) and Long (5-10 years).
For more detailed information on the Solution Evaluation Framework, please
refer to the Solutions chapter of this report.
Solution Area Comparison
The two energy storage solutions evaluated, Vanadium Redox and NaS batteries,
were found to have the highest ratings both for unit environmental impact potential
and commercialization potential. While grid access solutions were also found to
have high potential for unit environmental impact due to their ability to unlock
environmental potential in areas such as new energy vehicle transportation and
ELECTRIC POWER INFRASTRUCTURE SOLUTIONS EVALUATION SUMMARY
SOLUTION
Unit Environmental
Impact Potential
0
0
0
SMART GRID COMPONENTS
1
0
0
0
0
ENERGY STORAGE SOLUTIONS
NaS Battery
Vanadium Redox Battery
4
4
0 - 1 Years
10
4
4
1 - 5 Years
5 - 10 Years
Efficiency improvement and loss reduction technologies
Smart grid components
Energy storage solutions
Grid access solutions
Grid access solutions
Electric Auto Vehicle Charging System
Renewable Energy Access - Flexible Alternating Current Transmission
System (FACTS)
Commercialization potential is a product of average addressable
market size, solution attractiveness and market accessibility for all
solutions within each displayed category. More detail on solutions
is included in the Existing and Emerging Solutions chapter and the
Electric Power Infrastructure chapter of the full report.
LOWEST
Advanced Metering Infrastructure
Digital Substation
IP-Based Automatic Meter Reading
Real-Time Information Processing
Wide Area Management System
COMMERCIALIZATION POTENTIAL
Composite Materials Cables
Transformers with Amorphous Core
Ultra High Voltage Transmission
HIGHEST
Efficiency improvement and
loss reduction technologies
Commercialization Potential over Time
Legend
Unit environmental impact potential of solutions:
4 = More than 40% 0 = Less than 10%
THE CHINA GREENTECH REPORT 2009
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COMMERCIALIZATION
LOWEST
0 - 1 YEARS
Digital Subscribers
AMR-IP Based
AMI
Real-Time - ICT
WAMS
1 - 5 YEARS
5 - 10 YEARS
Many different components contribute to transmission and distribution
Bubble size indicates
electricity
loss, and on an individual unit basis, none of the solutions in this
environmental impact
potential ofcategory
the solution investigated by the China Greentech Initiative were found to have a
significant independent environmental impact. The analysis did not incorporate
other benefits such as improved reliability and the potential to enable other future
solutions, nor did it incorporate the aggregate environmental benefits that could
be achieved were China’s existing electrical power infrastructure be significantly
transformed.
LOSS REDUCTION SOLUTIONS
None of the solutions within the group of efficiency improvement and loss
reduction solutions has a high unit environmental impact potential. However,
Amorphous Core Transformers have the highest commercial potential, especially
over the longer term. While the potential addressable market size is US$9 billion
per year, UHV is difficult for foreign companies to access due to localization
requirements. As a substitute to conventional materials, the wide use of composite
materials depends on technical maturity and lower costs. However, with sufficient
amorphous alloy supply, Amorphous Core Transformers are expected to be widely
used to facilitate energy savings.
Fig.6: Efficiency Improvement and Loss
Reduction Technologies Evaluation Dynamics
LOWEST
LOWEST
COMMERCIALIZATION POTENTIAL
COMMERCIALIZATION POTENTIAL
HIGHEST
HIGHEST
Fig.7: Smart Grid Components
Evaluation Dynamics
1 - 5 YEARS
0 - 1 YEARS
5 - 10 YEARS
UHV Transmissions
Bubble size indicates
environmental impact
potential of the solution
Composite Cables
A.C. Transformers
1 - 5 YEARS
5 - 10 YEARS
0 - 1 YEARS
Bubble size indicates
environmental impact
Digital Subscribers
AMR-IP Based
AMI
Real-Time - ICT
WAMS
potential of the solution
1 - 5 YEARS
5 - 10 YEARS
Bubble size indicates
environmental impact
potential of the solution
Smart Grid Components Solutions
None of the solutions within the group of smart grid component solutions has a
high unit environmental impact potential as they all have limited direct functions
for CO2 emission reduction. However, almost all of them are developing greater
commercial potential over time as demand increases and technology matures.
The solutions with the highest commercial potential are Digital Substations,
AMR-IP-based and Real-Time ICT. Digital Substations could be a prototype for
smart grids to enhance grid interoperability. Current AMR deployment will improve
efficiency and reduce theft, while IP based AMR will lay the foundation for twoway communications. ICT solutions act as the nerve centers of the grid network to
enable and maximize technology performance. Other solutions include AMI, which
has the potential, via behavior changes, to reduce emissions (although realization
depends on corresponding policies and incentives) and WAMS, which will need to
address potential safety challenges as China’s grid interconnection is enhanced
and demand increases.
Energy Storage Solutions
Both the Vanadium Redox Battery (VRB) and the NaS Battery, two types of energy
HIGHEST
dox B.
s
renewable power generation, their commercialization potential appears smaller
than other electric power infrastructure solutions over the coming 10 years.
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THE CHINA GREENTECH REPORT 2009
N POTENTIAL
EARS
ELECTRIC POWER INFRASTRUCTURE INDUSTRY SECTOR
11
5 - 10 YEARS
ELECTRIC
POWER INFRASTRUCTURE SECTOR
Fig.9: Renewable Energy Access Solutions
Evaluation Dynamics
Energy Storage Solutions Evaluation
Dynamics
0 - 1 YEARS
Vanadium Redox B.
NaS Batteries
1 - 5 YEARS
5 - 10 YEARS
Bubble size indicates
environmental impact
potential of the solution
HIGHEST
COMMERCIALIZATION POTENTIAL
LOWEST
LOWEST
LOWEST
COMMERCIALIZATION POTENTIAL
COMMERCIALIZATION POTENTIAL
HIGHEST
HIGHEST
ement and loss reduction technologies
onents
Fig.8:
olutions
ions
0 - 1 YEARS
EAV Ch. System
Renewable Access
1 - 5 YEARS
5 - 10 YEARS0 - 1 YEARS
Digital Subscribers
AMR-IP Based
AMI
Real-Time - ICT
WAMS
Bubble size indicates
environmental impact
potential of the solution
B
en
po
storage solutions, have similarly high unit environmental impact potential due to
its ability to reduce CO2 from power generation by enabling renewable energy. It
is expected that these technologies will improve in the coming years driving down
the costs leading to widespread commercialization.
Grid Access Solutions
Both renewable energy access solutions - Electric Vehicle (EV) Charging System
and Flexible Alternative Current Transmission System (FACTS) - have high unit
environmental impact potential. However, over the short- to medium-term (1-5
years), both have limited commercial potential. Over the longer term (5-10 years),
the commercial potential will likely increase slightly. EV Charging Systems are indispensable for clean road transportation, but storage and bulk delivery solutions
are needed first. FACTS facilitates renewable energy grid connectivity and enables delivery networks to act with more flexibility and reliability.
Key Challenges
LOWEST
CATEGORIESCHALLENGES
Lack of incentives to improve efficiency due to grids’ monopolistic
positions in the market
Market
n
Technology
n High costs associated with certain technologies
n Conservative attitude of grid technologies towards adoption of advanced
technologies due to safety concerns
n Intellectual property concerns
Financing
0 - 1 YEARS
Regulatory
EAV Ch. System
Renewable Access
12
HIGHEST
Fig.10: ELECTRIC POWER INFRASTRUCTURE INDUStRY CHALLENGES
COMMERCIALIZATION POTENTIAL
COMMERCIALIZATION POTENTIAL
HIGHEST
The adoption and diffusion of technologies and best practices in China’s EPI
industry is inhibited by a number of key challenges such as limited competition, immature
and expensive technologies, insufficient financing channels and imperfect policy systems.
n
n
Limited investor involvement in financing grid construction
Not fully aligned government incentives, subsidies and tax breaks
LOWEST
1 - 5 YEARS
0 - 1 YEARS
Less
emphasis
on the resources’ economic value when pricing
5 - 10
YEARS
Lack of uniform standards to guide technology adoption
UHV Transmissions
Lack of specific supervisory regulations for the grid sector regulating Composite Cables
Bubble size indicates emissions control
A.C. Transformers
environmental impact
n No uniform system to measure environmental impacts and/or losses directed
potential of the solution
towards the grid
1 - 5 YEARSn
n
n
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Bu
en
po
ELECTRIC POWER INFRASTRUCTURE INDUSTRY SECTOR
Market Challenges
Market challenges include limited competition and a diversified application
environment. Specifically, some of the market segments are dominated by stateowned enterprises and thus lack competition that encourages market efficiency
and innovation. There are also high barriers to entry in some segments and risks in
technology selection due to a diversified environment. Differing technologies will
likely be a challenge when it comes to guaranteeing grid reliability across regions.
Technology Challenges
Technology challenges include the high cost of commercialization as well as
immature key technology. Equipment to scale-up production requires high
initial investments, while skilled and talented workers are needed for technology
commercialization. In addition, some key technologies are still under development.
Technology holders often are reluctant to transfer their more advanced
technologies due to IPR concerns, and grid companies are taking a conservative
attitude towards advanced technologies due to safety concerns.
Financing Challenges
From a financing perspective, challenges include an undefined economic
structure, limited financing channels and an unaligned incentive system. The
economic benefits of various methods will need to be proven through pilot
projects and require short- and long-term financial incentives to get off the
ground. The international community has existing methods that could be
implemented in China through pilot programs, but will need strong financial
stimulus to begin operations. In addition, there is limited investor involvement
to finance grid construction. Most investments in the grid come solely from
the Chinese government and in the form of loans and bonds. A few traditional
investment methods, such as public private partnerships, are used in current
grid development as well. Finally, government incentives, such as subsidies and
tax breaks, are not fully aligned with industry development.
Regulatory Challenges
From a regulatory perspective, challenges remain, ranging from standardized
pricing policies, insufficient standards and policies, and insufficient incentives in
place to support industry development (e.g. the storage industry receives less
attention and incentives than the renewable generation industry).
Government guided prices sometimes do not reflect the economic value of
resources and imperfect on-peak and off-peak pricing hinders effective demandside management implementation. Although Time-of-Use (TOU) pricing has
been implemented nationwide, it faces challenges in mechanism design and
enforcement. One mechanism design issue is that TOU favors distribution
companies. Currently, supply companies purchase electricity based on fixed
prices, then sell it based on flexible prices. This results in revenue risks for supply
companies. There is also inflexibility in the system, and an inability to reflect the
dynamic changes of the power loads.
There are also no specific supervisory regulations for regulating emissions
controls, no unified system to measure environmental impact and/or losses
due to the grid and no clear definitions or standards for smart grids.
Finally, there are only a few government incentives available (e.g. grants and
tax breaks for smart grid development) and limited policies addressing incentives
for greentech. Policies for integrating renewable energy solutions into electric
power integration systems also still need to be implemented as some areas lack
uniform and reasonable planning for renewable energy power generation and grid
integration.
Opportunities to Accelerate Market Development
What can stakeholders do to overcome the challenges facing the commercializing
of greentech solutions which accelerate the sustainable development of China’s
Electric Power Infrastructure sector? The China Greentech Initiative posed
this question to its partners and advisors, who helped developed the set of
www.china-greentech.com
THE CHINA GREENTECH REPORT 2009
13
ELECTRIC POWER INFRASTRUCTURE SECTOR
opportunities outlined below. These opportunities are not meant to be explicit
recommendations, but rather suggestions of concrete steps different stakeholder
groups may take to accelerate greentech markets and enable China’s further
evolution to a sustainable economy.
Stakeholder Groups
Key stakeholders may take immediate steps to accelerate the development of
China’s integrated electric power infrastructure sector.
Fig.11: ELECTRIC POWER INFRASTRUCTURE INDUSTRY OPPORTUNITIES
CATEGORIES
CHALLENGES
Solution Adopters
n
n
n
Solution Providers
n
Financial Investors
n
Government Regulators
n Push forward electricity pricing reform, promote direct power supply and
encourage large customer pilot projects
n Issue “Smart Grid” policies and corresponding incentives
n Encourage further reform in grid companies and introduce more
competition on the distribution side
n Promote innovation and enhance IPR protection
n Set up technology transferring platforms and funding systems
Other Stakeholders
n
Develop clean technology roadmap based on smart grid concepts
Promote uniform standards
Focus on updating transmission while planning distribution networks to
transform in advance
n Encourage, introduce and adopt international technologies
n Gradually separate internal functions of transmission and distribution
Consider practical ways to develop technologies while simultaneously
educating grid companies and end users
n Widen collaborations with grid companies and enablers to formulate
industrial standards
n Follow renewable energy connection technologies and storage solutions
closely
n Localize products and solve IP-related issues
Work with other stakeholders to identify potential financing channels
and new business models
n Educate grid companies to leverage CDM
n Work with other stakeholders to build financing mechanisms
n Work with regulators to initiate pilot Public /Private Partnerships (“PPP”) projects
n
n
n
n
Collaborate with research institutes, universities and energy
departments to develop energy efficiency for China’s smart grid
Promote industrial and national standardization
Educate households on electricity-saving technologies and habits
Educate grid companies on emerging technologies adoption
Lobby the government to open financing channels
Solution Adopters
Adopters (e.g. grid companies at the national, regional, provincial, municipal
and county level) have many opportunities to accelerate market development
as they take an active role in China’s transition from traditional distribution and
transmission to smart grids. They have the ability to initiate and promote uniform
smart grid standards as well as direct the path that the country will take in their
adoption of clean technologies, specifically smart grids. Adopters could also
take this period of transition from conventional distribution to smart grids as an
opportunity to adopt international best practices and technologies.
Solution Providers
Besides providing advanced solutions, providers (e.g. technology providers,
system integrators) need to cooperate with other stakeholders to implement
smart grid solutions. Providers will need to work with grid companies, systems
14
THE CHINA GREENTECH REPORT 2009
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ELECTRIC POWER INFRASTRUCTURE INDUSTRY SECTOR
integrators, as well as upstream and downstream companies in order to
create technologies that take into account local requirements and future
developments. Providers also need to take the initiative to educate the public
in order to change consumption behaviors while they work on commercializing
more cost-efficient solutions.
Financial Investors
Investors (e.g. local and international capital providers, excluding governments)
may develop innovative financing mechanisms and help regulators develop
appropriate funding systems. Investors may help to promote international
technology transfer worldwide as well as promote successful experiences and
cases. Other ways in which investors can help include leveraging international
mechanisms and policies to reduce energy loss in the grid sector as well as
assisting the government to develop related policies to support PPP.
Government Regulators
Ongoing regulatory development by the government (e.g. China’s central,
provincial and local government regulators) is a crucial component in the
development of smart and efficient grids in China.
Other Stakeholders
Other key stakeholders (e.g. international organizations, NGOs, research
institutions) can contribute knowledge and expertise to assist China in developing
comprehensive and appropriate grid standards.
Path Forward
This chapter provides an overall picture of China’s greentech markets,
challenges and opportunities related to the Electric Power Infrastructure as of the
middle of 2009. Intended to be a starting point that defines and frames market
issues and opportunities, the Initiative recognizes that the chapter doesn’t answer
every question that market participants have. Given the complexity of the Electric
Power Infrastructure sector and the intense speed at which regulatory, end user,
competitive and technology markets are changing, certain aspects of this chapter
will become dated relatively quickly. Moreover, important questions remain to be
answered at more detailed levels than has been possible in this chapter.
Readers of The China Greentech Report 2009 are invited to join the conversation
by visiting www.china-greentech.com. The Initiative’s website allows people to:
n
n
n
n
Download electronic copies of the Executive Overview, full report and
individual sector chapters
Order printed versions of the report
Access additional content created by the Initiative
Participate in interactive discussion forums to create, uncover and promote
greentech solutions for an environmentally sustainable China and the world.
The China Greentech Initiative looks forward to welcoming readers to its extended community.
Suggestions on improving the content in this report are also welcome at feedback@china-greentech.com.
www.china-greentech.com
THE CHINA GREENTECH REPORT 2009
15
SOURCES
The following sources are applicable to the Electric Power Infrastructure chapter of the Report.
Additional sector-specific sources are included in the full version of the Report.
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